-----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, JBrl5uU3VBVk3zQyXMtAmHSeOr50iNeqZGpmTBacyt1675yRFhXRAmPcFMNKT9i9 HBzUm6+rCkwA9GNSZAhTaQ== 0000950131-96-001248.txt : 19981230 0000950131-96-001248.hdr.sgml : 19981230 ACCESSION NUMBER: 0000950131-96-001248 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960326 DATE AS OF CHANGE: 19981228 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRIBUNE CO CENTRAL INDEX KEY: 0000726513 STANDARD INDUSTRIAL CLASSIFICATION: 2711 IRS NUMBER: 361880355 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-08572 FILM NUMBER: 96538607 BUSINESS ADDRESS: STREET 1: 435 N MICHIGAN AVE CITY: CHICAGO STATE: IL ZIP: 60611 BUSINESS PHONE: 3122229100 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1995 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 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered - - ------------------- ------------------------ Common Stock (without par value) New York Stock Exchange Preferred Share Purchase Rights Chicago Stock Exchange Pacific Stock Exchange Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x . No . --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Aggregate market value of the Company's voting stock held by non-affiliates on March 11, 1996, based upon the closing price of the Company's Common Stock as reported on the New York Stock Exchange Composite Transactions list for such date: approximately $3,526,000,000. At March 11, 1996 there were 61,661,593 shares of the Company's Common Stock outstanding. The following documents are incorporated by reference, in part: 1995 Annual Report to Stockholders (Parts I and II, to the extent described therein). Definitive Proxy Statement for the May 7, 1996 Annual Meeting of Stockholders (Part III, to the extent described therein). PART I ITEM 1. BUSINESS. Tribune Company (the "Company") is an information, entertainment and education company. Through its subsidiaries, the Company is engaged in the publishing of newspapers, books, educational reference material and information in print and digital formats and the broadcasting, production and syndication of information and entertainment in metropolitan areas in the United States. The Company was founded in 1847 and incorporated in Illinois in 1861. As a result of a corporate restructuring in 1968, the Company became a holding company incorporated in Delaware. References in this report to "Tribune Company" or "the Company" include Tribune Company and its subsidiaries, unless the context otherwise indicates. The information in this Item 1 should be read in conjunction with the information contained under the heading "Management's Discussion and Analysis of Results of Operations and Financial Condition" in the Company's 1995 Annual Report to Stockholders, which information is incorporated herein by reference. BUSINESS SEGMENTS The Company's operations are divided for reporting purposes into three industry segments: Publishing, Broadcasting and Entertainment, and Education (previously referred to as "New Media/Education"). These segments operate in the United States. The Education segment was established in 1994 and is composed of educational and reference publishing operations. Prior to 1993 the Company also had a segment called Newsprint Operations, which consisted entirely of QUNO Corporation ("QUNO") and operated in Canada. On March 1, 1996, the Company sold all of its holdings in QUNO as part of QUNO's merger with Donohue Inc. QUNO was a wholly owned subsidiary of Tribune until February 1993, when QUNO completed an initial public offering of 9 million shares of common stock. This reduced the Company's ownership to 59% and its voting interest to 49%. In April 1994, the Company reduced its ownership holdings in QUNO to 34% by selling 5.5 million shares of QUNO common stock. The Company began accounting for its investment in QUNO using the equity method in 1993. The Company's financial statements have been restated to reflect earnings from QUNO, interest income from the QUNO convertible debenture and the 1994 gain on the sale of QUNO common shares, net of income tax, as discontinued operations. The following table sets forth operating revenues and profit information for each segment of the Company (in millions).
FISCAL YEAR ENDED DECEMBER ------------------------------ 1995 1994 1993 -------- -------- -------- Operating Revenues (1): Publishing...................... $1,312.8 $1,246.4 $1,163.1 Broadcasting and Entertainment.. 828.8 764.2 727.2 Education....................... 103.1 102.1 21.2 -------- -------- -------- Total Operating Revenues...... $2,244.7 $2,112.7 $1,911.5 -------- -------- -------- Operating Profit (2): Publishing...................... $ 270.1 $ 287.6 $ 253.0 Broadcasting and Entertainment.. 160.6 132.4 125.7 Education....................... 4.6 2.8 2.1 Corporate expenses.............. (30.1) (26.2) (24.4) -------- -------- -------- Total Operating Profit........ $ 405.2 $ 396.6 $ 356.4 -------- -------- -------- - - ------------
(1) Amounts have been restated to conform to the 1995 presentation. (2) Operating profit for each segment excludes interest income and expense, non- operating gains and losses and income taxes. 1 The following table sets forth asset information for each industry segment (in millions).
FISCAL YEAR ENDED DECEMBER ---------------------------- 1995 1994 1993 -------- -------- -------- Assets: Publishing...................... $ 693.9 $ 757.9 $ 880.4 Broadcasting and Entertainment.. 1,405.2 1,321.8 1,155.3 Education....................... 211.5 210.4 108.0 Corporate (1)................... 977.7 495.7 392.7 -------- -------- -------- Total Assets.................. $3,288.3 $2,785.8 $2,536.4 -------- -------- -------- - - ----------
(1) Corporate assets include the investment in and advances to QUNO. The Company's results of operations, when examined on a quarter-by-quarter basis, reflect the seasonality of advertising that affects both publishing and broadcasting operations. Second and fourth quarter advertising revenues are typically higher than first and third quarter revenues. Results for the second quarter usually reflect spring advertising, while the fourth quarter includes advertising related to the holiday season. Fiscal year 1995 comprised 53 weeks, while fiscal years 1994 and 1993 comprised 52 weeks. The effect of the additional week in 1995 is generally not significant. PUBLISHING The publishing segment represented 58% of the Company's consolidated operating revenues for 1995. The twelve-month combined average circulation of the Company's daily newspapers was approximately 1.3 million daily and 2.0 million Sunday. The Company's primary newspapers are the Chicago Tribune, the Fort Lauderdale-based Sun-Sentinel, The Orlando Sentinel and the Newport News, Va. Daily Press. In California, the Company owned two daily newspapers and a weekly newspaper located in suburban areas in the San Diego market that were sold in July 1995 for $16 million in cash. The Company recorded a $7.5 million pretax loss on this sale in 1995. The Company also operated one daily newspaper and several weekly newspapers in Palo Alto, California, which ceased publication in March 1993. The Company recorded a $15.3 million pretax charge in 1992 for the closure of these Palo Alto-based papers. For 1995, the portion of total publishing operating revenues represented by each of the Company's principal newspapers was as follows: Chicago Tribune--54%; Sun-Sentinel--21%; The Orlando Sentinel--17%; and Daily Press--4%. In addition, the Company owns a newspaper syndication and media marketing company, direct mail operations and other publishing-related businesses. Each of the Company's newspapers operates independently to most effectively meet the needs of the area it serves. Editorial policies are established by local management. The Company coordinates certain aspects of operations and resources in order to provide greater operating efficiency and economies of scale. The Company's newspapers compete for readership and advertising in varying degrees with other metropolitan, suburban and national newspapers, as well as with television, radio and other media. Competition for newspaper advertising is based upon circulation levels, readership demographics, price, service and advertiser results, while competition for circulation is based upon the content of the newspaper, service and price. The Company's newspapers are printed in Company-owned production facilities. The principal raw material is newsprint. In 1995, the Company's newspapers utilized approximately 386,000 metric tons of newsprint. Approximately 66% of the newspapers' supply was purchased from QUNO, with the remainder purchased from outside sources. The Company is party to a contract with QUNO expiring in 2007 to supply newsprint based on market prices. Under the contract, the Company has agreed to purchase specified minimum amounts of newsprint each year subject to certain limitations. The specified minimum annual volume is 250,000 metric tons in years 2 1996 to 1999, 225,000, 200,000 and 175,000 metric tons in years 2000 to 2002, respectively, and 150,000 metric tons in each of years 2003 to 2007. See "Discontinued Operations (QUNO Corporation)" for a discussion of the Company's investment in the newsprint manufacturing business. The North American newsprint industry has increased newsprint prices several times since the beginning of 1994 due to higher demand for newsprint in the U.S. and overseas. As a result, average newsprint transaction prices increased 45% in 1995 over 1994. The higher newsprint prices increased newsprint expense at the Company's newspapers by approximately $75 million in 1995. The Company's publishing operations offset most of this increase through cost controls, a decrease in newsprint consumption and revenue increases. Although another price increase was announced for April 1996, all major suppliers have rescinded the increase. QUNO's operating results benefited from the price increases. The following table provides a breakdown of revenues for the publishing segment for the last three years. OPERATING REVENUES (1) (IN THOUSANDS)
FISCAL YEAR ENDED DECEMBER ---------------------------------- 1995 1994 1993 ---------- ---------- ---------- Advertising: Retail................................... $ 450,141 $ 438,235 $ 417,845 General.................................. 130,680 135,742 120,712 Classified............................... 429,961 387,717 337,770 ---------- ---------- ---------- Total................................. 1,010,782 961,694 876,327 Circulation................................ 249,860 242,993 246,178 Other (2).................................. 52,125 41,690 40,611 ---------- ---------- ---------- Total................................. $1,312,767 $1,246,377 $1,163,116 ---------- ---------- ---------- - - -----------
(1) Amounts have been restated to conform to the 1995 presentation. (2) Primarily includes revenues from the syndication of columns, features, information and comics to newspapers, advertising placement services, commercial printing operations, direct mail operations and other publishing-related activities. Total advertising revenues improved in 1995 largely due to rate increases. Retail advertising revenues increased due primarily to improvements in the general merchandise category in Chicago. Classified advertising revenues also rose in 1995 due to help wanted increases at all of the papers and higher real estate advertising in Chicago and Fort Lauderdale. Chicago Tribune Company Founded in 1847, the Chicago Tribune is published daily, including Sunday, and primarily serves an eight-county market in northern Illinois and Indiana. This market ranks third in the United States in number of households. For the six months ended September 1995, the Chicago Tribune ranked 7th in average daily circulation and 4th in average Sunday circulation in the nation, based on ABC averages. Approximately 74% and 55% of the Tribune's daily and Sunday circulation, respectively, is sold through home delivery, with the remainder primarily sold at newsstands and vending boxes. The daily edition's newsstand price increased by $.15 to $.50 in September 1992. The Sunday edition's newsstand price increased by $.25 to $1.75 in October 1995. In June 1995, the Chicago Tribune began to phase in a weekly home delivery price increase of $.10 to $3.90. The following tables set forth selected information for the Chicago Tribune daily newspaper and other related activities. 3
AVERAGES FOR THE TWELVE MONTHS ENDED DECEMBER --------------------------------------------- 1995 1994 1993 ---------- ---------- ---------- Circulation: Daily...................... 683,000 682,000 700,000 Sunday..................... 1,085,000 1,092,000 1,113,000
FISCAL YEAR ENDED DECEMBER --------------------------------------------- 1995 1994 1993 ---------- ---------- ---------- (IN THOUSANDS) Advertising Inches: Full Run (all zones) Retail.................... 1,123 1,211 1,198 General................... 314 338 318 Classified................ 1,339 1,320 1,214 ---------- ---------- ---------- Total.................... 2,776 2,869 2,730 Part Run................... 5,160 5,017 4,672 Preprinted Inserts......... 3,045 2,852 2,437 ---------- ---------- ---------- Total Inches............. 10,981 10,738 9,839 ---------- ---------- ---------- Operating Revenues.......... $ 723,344 $ 678,297 $ 635,596 ---------- ---------- ----------
The 1995 improvement in advertising volume is mainly due to an increase in preprinted inserts as additional targeted zoning options were offered to advertisers, partially offset by lower retail and general full run inches. Based on ABC averages for the six months ended September 1995, the Chicago Tribune had a 40% lead in total daily paid circulation and a 134% lead in Sunday paid circulation over its principal competitor, the Chicago Sun-Times. The Chicago Tribune's total advertising volume and operating revenues are estimated to be substantially greater than those of the Sun-Times. The Chicago Tribune also competes with other city, suburban and national daily newspapers, direct mail operations and other media. In September 1993, the Chicago Tribune began publishing Exito!, a weekly newspaper targeted to Spanish-speaking households. The Chicago Tribune owns Chicago Tribune Direct (formerly AmeriComm), a direct mail operation acquired in 1991. The Chicago Tribune also operates Chicago Online, a local interactive computer service that offers news and entertainment information through a joint venture with America Online, and audiotex services and publications targeted to specific consumer market segments. In January 1995, the Chicago Tribune acquired RELCON, Inc. for approximately $8 million in cash, which publishes free apartment guides and provides apartment rental referral services to prospective renters. Sun-Sentinel Company (Fort Lauderdale) The Sun-Sentinel is published daily, including Sunday, and leads the Fort Lauderdale market in circulation. Approximately 68% and 64% of the Sun- Sentinel's daily and Sunday circulation, respectively, is sold through home delivery, with the remainder sold at newsstands and vending boxes. The paper's principal competition comes from the Miami Herald and national and local publications, as well as other media. The Miami/Fort Lauderdale market ranks 16th in the nation in terms of households. The daily edition's newsstand price increased by $.10 to $.35 in May 1995. The newsstand price of all Sunday editions was increased by $.25 to $1.00 in November 1989. In January 1992, the newsstand price of the Palm Beach Sunday edition increased by $.25 to $1.25. In August 1993, weekly home delivery increased $.15 to $2.60. The following tables set forth selected information for the Sun-Sentinel daily newspaper and other related activities. 4
AVERAGES FOR THE TWELVE MONTHS ENDED DECEMBER ---------------------------------------------- 1995 1994 1993 ------------ ------------ ------------ Circulation: Daily...................... 262,000 266,000 263,000 Sunday..................... 370,000 365,000 362,000
FISCAL YEAR ENDED DECEMBER ---------------------------- 1995 1994 1993 -------- -------- -------- (IN THOUSANDS) Advertising Inches: (1) Full Run (all zones) Retail.................... 1,203 1,237 1,155 General................... 226 237 203 Classified................ 2,451 2,442 2,261 -------- -------- -------- Total.................... 3,880 3,916 3,619 Part Run................... 2,967 2,979 2,831 Preprinted Inserts......... 1,748 1,660 1,564 -------- -------- -------- Total Inches............. 8,595 8,555 8,014 -------- -------- -------- Operating Revenues.......... $284,838 $267,095 $241,621 -------- -------- -------- - - ----------
(1) Excludes inches for Gold Coast Publications. The Sun-Sentinel Company also owns Gold Coast Shopper, a publication located in Deerfield Beach, Florida. The Sun-Sentinel also has a commercial printing operation. In 1991, two weekly publications, XS and Exito!, targeted to young adults and Spanish-speaking households, respectively, were launched and have continued to expand readership. Like the Chicago Tribune, the Sun-Sentinel also operates audiotex services and publications targeted to specific consumer market segments. Sentinel Communications Company (Orlando) The Orlando Sentinel is published daily, including Sunday, and serves primarily a five-county area in Central Florida. It is the only major daily newspaper in the Orlando market, although it competes with other Florida and national newspapers, as well as other media. Approximately 75% of the paper's daily and 68% of its Sunday circulation is sold on a home delivery basis, with the remainder sold at newsstands and vending boxes. In March 1992, the newsstand price of the daily edition increased $.15 to $.50, except for most Thursday editions, which had been priced at $.50 since February 1991. The newsstand price of the Sunday edition was increased to $1.50 from $1.25 at the end of 1990. In October 1995, the weekly home delivery price was increased by $.10 to $3.85. The Orlando/Daytona Beach/Melbourne market ranks 22nd among U.S. markets in terms of households. The following tables set forth selected information for The Orlando Sentinel daily newspaper and other related activities.
AVERAGES FOR THE TWELVE MONTHS ENDED DECEMBER ---------------------------------------------- 1995 1994 1993 ------------ ------------ ------------ Circulation: Daily..................... 268,000 269,000 269,000 Sunday.................... 389,000 390,000 387,000
5
FISCAL YEAR ENDED DECEMBER ---------------------------- 1995 1994 1993 -------- -------- -------- (IN THOUSANDS) Advertising Inches: Full Run (all zones) Retail.................. 930 971 956 General................. 137 99 83 Classified.............. 1,848 1,842 1,665 -------- -------- -------- Total.................. 2,915 2,912 2,704 Part Run.................. 1,506 1,884 1,766 Preprinted Inserts........ 2,787 2,741 2,508 -------- -------- -------- Total Inches........... 7,208 7,537 6,978 -------- -------- -------- Operating Revenues.......... $221,786 $214,125 $202,327 -------- -------- --------
The central Florida economy weakened in 1995. Advertising volume was down overall due to lower transportation, automotive and food and drug advertising, partially offset by increased help wanted. The Orlando Sentinel also publishes US Express, a free weekly entertainment publication that is used to distribute advertising to non-subscribers. US Express is syndicated nationally. In 1995, The Orlando Sentinel purchased Family Journal Publications, a group of four Florida parenting magazines. Daily Press (Newport News, Virginia) In 1986, the Company purchased the Daily Press in Newport News, Virginia. The Daily Press is published every morning including Sunday. The Daily Press constitutes the only major daily newspaper in the market, although it competes with other regional and national newspapers, as well as other media. In addition to Newport News, the Daily Press market includes Hampton, Williamsburg and eight other cities and counties in Virginia. This market area is commonly called the Virginia Peninsula and, together with Norfolk, Portsmouth and Virginia Beach, is the 40th largest U.S. market in terms of households. The newsstand price of the daily edition increased by $.10 to $.35 in October 1990. The Sunday edition newsstand price was increased to $1.50 from $1.25 in October 1995. The weekly home delivery price was increased by $.30 to $3.05 in October 1995. Approximately 80% of the paper's daily and 77% of its Sunday circulation is sold on a home delivery basis, with the remainder sold at newsstands and vending boxes. The following tables set forth selected information for the Newport News Daily Press.
AVERAGES FOR THE TWELVE MONTHS ENDED DECEMBER ---------------------------------------------- 1995 1994 1993 ------------ ------------ ------------ Circulation: Daily..................... 101,000 101,000 101,000 Sunday.................... 126,000 126,000 125,000
6
FISCAL YEAR ENDED DECEMBER ---------------------------------------------- 1995 1994 1993 ------------ ------------ ------------ (IN THOUSANDS) Advertising Inches: Full Run (all zones) Retail.................. 674 728 699 General................. 18 29 26 Classified.............. 887 880 866 ------- ------- ------- Total.................. 1,579 1,637 1,591 Part Run.................. 110 115 92 Preprinted Inserts........ 1,185 1,147 1,078 ------- ------- ------- Total Inches........... 2,874 2,899 2,761 ------- ------- ------- Operating Revenues.......... $51,555 $49,866 $47,575 ------- ------- -------
California Newspapers The Times Advocate, located in Escondido, California, was sold in July 1995 for $16 million in cash. The Times Advocate serves the northern portion of San Diego County. The Times Advocate was published weekday afternoons and Saturday and Sunday mornings until April 1992, when the weekday afternoon edition was converted to a morning edition. In 1988, the Times Advocate acquired several weekly newspaper publications, which complemented the paper's daily coverage with more local news and advertising. In June 1990, one of these weekly publications, The Californian, began publishing six days a week. The sale of the Times Advocate included the sale of The Californian and such other weekly publications. The Palo Alto-based Times Tribune ceased publication in March 1993. Related Businesses The Company is also involved in syndication activities, primarily through Tribune Media Services, Inc. ("TMS"), involving the marketing of columns, features, information and comic strips to newspapers, and other publishing- related activities. TMS is also engaged in advertising placement services for television listings in newspapers and the development of news products and services for electronic and print media. Total operating revenues for these related businesses are shown below, net of intercompany revenues. Amounts have been restated to conform to the 1995 presentation.
RELATED BUSINESS REVENUES ------------------------- (IN THOUSANDS) FISCAL YEAR ENDED DECEMBER ----------------- 1995................. $22,739 1994................. 19,519 1993................. 19,499
7 BROADCASTING AND ENTERTAINMENT The broadcasting and entertainment segment represented 37% of the Company's consolidated operating revenues for 1995. At December 31, 1995, the segment included independent VHF television stations located in New York, Los Angeles, Chicago and Denver, independent UHF television stations located in Philadelphia and Boston, a UHF CBS television affiliate (effective December 1994) in Atlanta, a UHF ABC television affiliate (effective January 1996) in New Orleans and five radio stations in New York, Chicago and Denver (3 stations). The independent television stations are affiliated with The Warner Bros. Television Network ("The WB Network"). In January 1996, the Company acquired independent UHF television station KHTV-Houston for approximately $102 million in cash. In February 1996, the Company acquired the remaining minority interest in WPHL-Philadelphia for approximately $23 million. The Company has also announced an agreement to acquire San Diego television station KTTY for $70.5 million in cash, subject to various regulatory approvals. This acquisition is expected to close in the first half of 1996. In November 1995, the Company swapped its two Sacramento radio stations, KYMX and KCTC, for $3 million in cash and a Denver radio station. The Company acquired independent television station WLVI-Boston in April 1994, for approximately $25 million in cash. In June 1994 the Company acquired Farm Journal Inc., publisher of The Farm Journal, a leading farm magazine, for $17.5 million in cash. Farm Journal results are reported in radio. In January 1993, the Company acquired two Denver radio stations, KOSI-FM and KEZW-AM, for $19.9 million in cash. These acquisitions were accounted for as purchases. In December 1995, the Company invested $70 million in Qwest Broadcasting LLC, a company formed to acquire and operate television and radio stations. The Company's investment in Qwest is composed of a $7 million equity interest (33%) and $63 million in convertible notes. The notes may only be converted when and if the FCC regulations permit such conversion. In December 1995, Qwest acquired television stations in Atlanta (WATL) and New Orleans (WNOL) for a total of approximately $167 million. In entertainment/Chicago Cubs, the Company owns the Chicago Cubs baseball team and produces and syndicates television programming. Cable programming/development includes CLTV News, a Chicago-area news cable channel, and the Company's equity losses from The WB Network and TV Food Network, a basic cable channel specializing in cooking, nutrition and fitness programming. The following table shows sources of revenue for the broadcasting and entertainment segment for the last three years. OPERATING REVENUES (IN THOUSANDS)
FISCAL YEAR ENDED DECEMBER ---------------------------- 1995 1994 1993 -------- -------- -------- Television (1).................. $629,502 $598,532 $536,773 Radio (2)....................... 88,435 68,817 58,740 Entertainment/Chicago Cubs (3).. 103,689 92,080 130,054 Cable Programming/Development... 7,180 4,768 1,646 -------- -------- -------- Total....................... $828,806 $764,197 $727,213 -------- -------- --------
- - ---------- (1) Includes WLVI-Boston since its acquisition in April 1994. (2) Includes Farm Journal Inc. since its acquisition in June 1994. (3) 1995 and 1994 reflects the impact of the Major League baseball strike which began August 12, 1994 and ended in April 1995. 8 Television In 1995, television contributed 76% of broadcasting and entertainment operating revenues. The Company's television stations compete for audience and advertising with other television and radio stations, cable television and other media serving the same markets. Competition for audience and advertising is based upon various interrelated factors including programming content, audience acceptance and price. Selected data for the Company's television stations is shown in the following table.
MARKET (1) MAJOR -------------------- COMMERCIAL EXPIRATION HOUSEHOLDS NATIONAL STATIONS IN OF FCC (000'S) RANK CHANNEL MARKET (2) LICENSE (3) ---------- -------- ------- ----------- ----------- WPIX - New York, New York............ 6,695 1 11-VHF 6 1994 (4) KTLA - Los Angeles, California....... 4,918 2 5-VHF 7 1998 WGN - Chicago, Illinois............. 3,082 3 9-VHF 7 1997 WPHL - Philadelphia, Pennsylvania.... 2,646 4 17-UHF 6 1999 WLVI - Boston, Massachusetts......... 2,122 6 56-UHF 7 1999 WGNX - Atlanta, Georgia.............. 1,584 10 46-UHF 7 1997 KHTV - Houston, Texas (5)............ 1,574 11 39-UHF 6 1998 KWGN - Denver, Colorado.............. 1,160 18 2-VHF 6 1998 WGNO - New Orleans, Louisiana........ 613 41 26-UHF 5 1997 - - ----- (1) Source: Nielsen Station Index, September 1995. Ranking of markets is based on number of television households in DMA (Designated Market Area). (2) Source: 1995 Television & Cable Fact Book (3) See "Governmental Regulation." (4) Expired on June 1, 1994. Renewal application filed on February 1, 1994 is pending. (5) Acquired January 17, 1996.
Programming emphasis at the Company's independent stations is placed on syndicated series, feature motion pictures, local and regional sports coverage, news and children's programs. The stations acquire most of their programming from outside sources, including The WB Network, although a significant amount is produced locally or supplied by Tribune Entertainment (see "Entertainment/ Chicago Cubs"). Contracts for purchased programming generally cover a period of one to seven years, with payment also typically made over several years. The expense for amortization of television broadcast rights in 1995 was $219 million, which represents approximately 35% of total television operating revenues. In January 1996, WGNO-New Orleans became an ABC affiliate, and in December 1994, WGNX-Atlanta became a CBS network affiliate. Average audience share information for the Company's television stations for the past three years is shown in the following table.
AVERAGE AUDIENCE SHARE (1) YEAR ENDED DECEMBER -------------------------------- 1995 1994 1993 ---- ---- ---- WPIX - New York, New York............. 10.0% 9.8% 10.8% KTLA - Los Angeles, California........ 10.0 9.3 9.5 WGN - Chicago, Illinois.............. 10.8 10.8 11.5 WPHL - Philadelphia, Pennsylvania..... 5.3 4.8 5.8 WLVI - Boston, Massachusetts (2)...... 4.5 5.0 5.0 WGNX - Atlanta, Georgia............... 9.3 7.0 7.0 KHTV - Houston, Texas (3)............. 6.3 6.8 6.5 KWGN - Denver, Colorado............... 9.0 9.8 12.0 WGNO - New Orleans, Louisiana......... 9.0 9.5 8.0
9 - - ------ (1) Represents the estimated number of television households tuned to a specific station as a percent of total viewing households in a defined area. The percentages shown reflect the average Nielsen ratings shares for the February, May, July and November measurement periods for 7 a.m. to 1 a.m. daily. (2) Acquired April 4, 1994. (3) Acquired January 17, 1996. Radio In 1995, the Company's radio operations contributed 11% of broadcasting and entertainment operating revenues. The largest radio station owned by the Company, measured in terms of operating revenues, is WGN. Radio operations include Tribune Radio Networks, which produces and distributes farm and sports programming to radio stations, primarily in the Midwest, and Farm Journal Inc., which was acquired in June 1994. In November 1995, the Company swapped its two Sacramento radio stations, KYMX and KCTC, for $3 million in cash and a Denver radio station. Selected information for the Company's radio operations is shown in the following table.
NUMBER OF NATIONAL OPERATING MARKET STATIONS IN AUDIENCE FORMAT FREQUENCY RANK (1) MARKET (2) SHARE (3) ------------------------- --------- -------- ----------- --------- WQCD - New York, New York New Adult Contemporary/Jazz 101.9-FM 1 46 3.2% WGN - Chicago, Illinois Personality/Infotainment/ Sports 720-AM 3 41 6.3% KOSI - Denver, Colorado Adult Contemporary 101.1-FM 23 30 6.0% KEZW - Denver, Colorado Nostalgia 1430-AM 23 30 2.6% KKHK - Denver, Colorado (4) Classic Rock 99.5-FM 23 30 2.8% - - ----------- (1) Source: Radio markets ranked by Arbitron Metro Survey Area, Arbitron Company 1995. (2) Source: Arbitron Company 1995. (3) Source: Average of Winter, Spring, Summer and Fall 1995 Arbitron shares for persons 12 years old and over, 6 a.m. to midnight daily during the period measured. (4) Acquired November 1995. Call letters pending approval from the FCC (previously known as KVOD).
Entertainment/Chicago Cubs In 1995, entertainment/Chicago Cubs contributed 12% of the segment's operating revenues. This portion of the broadcasting and entertainment segment includes Tribune Entertainment Company, the Chicago Cubs baseball team and two minor league baseball teams. The Major League Baseball players' contract expired on December 31, 1993. The Major League Baseball Players Association initiated a strike on August 12, 1994, and on August 28, 1994, the owners cancelled the remainder of the 1994 Major League Baseball season. In April 1995, the National Labor Relations Board invalidated the owners' posted rules, and the players ended their strike. The 1995 baseball season began April 26, 1995. The strike shortened the 1995 season by 18 games and continued to impact attendance throughout the season. Negotiations for a new players' contract are continuing. Tribune Entertainment Company was formed to acquire and develop programming for Company television stations and for syndication. Tribune Entertainment participates in the production or distribution of first-run programming, including one daily talk show, music and variety shows, television movies and specials. Tribune Entertainment's most popular program is "Geraldo," a one-hour, daily talk show which is aired on 143 stations that cover 87% of U. S. television households, and is sold internationally to many cities in Canada, as well as to several 10 countries in Latin America and Europe. During the 1995-1996 television season, Tribune Entertainment originated or syndicated approximately 9 hours of first- run programs per week. On average, the Company's eight television stations utilize over four hours per week of programming furnished by Tribune Entertainment. The Company owns the Chicago Cubs baseball team. In addition to providing local sports entertainment, the Cubs represent an important source of live programming for the Company's Chicago-based broadcasting operations and regional cable programming service. In 1992, the Company acquired a Class AA Southern League franchise in Orlando and a Class A Midwest League franchise in Rockford, Illinois. Cable Programming/Development Cable programming/development contributed 1% of the segment's operating revenues in 1995. CLTV News, a regional 24-hour cable news programming service, was launched in January 1993 and currently is available to more than 1.4 million cable households in the Chicago-area market. In 1995, the Company acquired an 11.125% equity interest in The WB Network. In 1993, the Company acquired a 31% equity share in TVFN, a 24-hour basic cable channel focusing on cooking, nutrition and fitness. EDUCATION The education segment represented 5% of the Company's consolidated operating revenues for 1995. In July 1993, the Company acquired Contemporary Books, Inc., a publisher of nonfiction trade titles and educational books and materials, for approximately $22.0 million in cash and $18.5 million in common stock. In September 1993, the Company acquired Compton's Multimedia Publishing Group for approximately $57 million in cash. Compton's develops and distributes interactive multimedia software for the consumer and education markets. The Company sold Compton's to SoftKey International Inc. in December 1995. In February 1994, the Company acquired The Wright Group, a leading publisher of supplemental education materials for the elementary school market, for approximately $96 million in cash. In May 1995, the Company acquired Jamestown Publishers for approximately $6 million in cash. In August 1995, the Company acquired Everyday Learning Corporation, a publisher of mathematics materials for grades kindergarten through 6, for approximately $25 million. The acquisitions were accounted for as purchases. In March 1996, the Company also acquired two education publishers - Educational Publishing Corporation for $200 million in cash and NTC Publishing Group for $82 million in cash. Educational Publishing is a developer, publisher and marketer of supplemental education and innovative curriculum materials for early childhood through high school. NTC is a publisher of educationally oriented materials for the school and consumer markets. Education operating revenues in 1995 were $103 million. Revenues are derived from publishing innovative curriculum materials, supplemental education and adult education materials, trade books and multimedia products. The multimedia products were sold primarily by Compton's. DISCONTINUED OPERATIONS (QUNO CORPORATION) In December 1995, the Company announced it had agreed to sell all of its holdings in QUNO Corporation, a Canadian newsprint producer, as part of QUNO's agreement to merge with Donohue Inc. The sale was completed March 1, 1996. Donohue paid approximately C$30.50 per common QUNO share. At the time of the sale, the Company owned approximately 34% of QUNO's common stock plus $138.8 million in convertible debt. The Company's gross proceeds from the sale were approximately US$427 million, consisting of US$284 million in cash, US$74 million in short-term notes and US$69 million in Donohue common stock. After-tax proceeds will 11 be approximately US$331 million. The Company sold the notes and common stock for cash shortly after the transaction. The Company will record an after-tax gain on the sale of approximately $89 million in the first quarter of 1996. The Company's consolidated financial statements have been restated to reflect equity earnings from QUNO, interest income from the QUNO convertible debenture and the 1994 gain on the sale of QUNO common shares, net of income tax, as discontinued operations. The following table shows QUNO newsprint sales to affiliated and unaffiliated customers for the last three years. NEWSPRINT SALES (IN THOUSANDS OF METRIC TONS)
FISCAL YEAR ENDED DECEMBER -------------------------- 1995 1994 1993 ---- ---- ---- Affiliated customers........................ 251 256 271 Unaffiliated customers...................... 585 531 471 ---- ---- ---- Total sales.......................... 836 787 742 ---- ---- ----
QUNO supplies newsprint to most of the Company's newspapers. The newspapers also purchase newsprint from other suppliers to maintain diversified sources of supply. Approximately 30% of QUNO's 1995 sales (in metric tons) were to the Company's newspapers. See "Publishing" for a discussion of the supply contract between the Company and QUNO. GOVERNMENTAL REGULATION Various aspects of the Company's operations are subject to regulation by governmental authorities in the United States. The Company's television and radio broadcasting operations are subject to Federal Communications Commission ("FCC") jurisdiction under the Communications Act of 1934, as amended. The newly-adopted Telecommunications Act of 1996 and FCC rules, among other things, govern the term, renewal and transfer of radio and television broadcasting licenses, prohibit concentrations of broadcasting control inconsistent with the public interest, strictly limit common ownership of most communications media in the same market and regulate network programming and syndication of programs. The FCC also regulates certain commercial practices of local broadcast stations, including the rates charged for political advertising and the quantity of advertising within children's programs. The Company is permitted to own both newspaper and broadcast operations in the Chicago market by virtue of "grandfather" provisions in the FCC regulations. Numerical limits on the number of broadcast stations a licensee may own have been removed by the Telecommunications Act, as implemented. However, the Company will remain subject to other limitations on the number of radio stations a single owner may own in a local market, and on the percentage of the national television audience that may be reached by a licensee's television stations in the aggregate. The Telecommunications Act provides that television and radio broadcasting licenses will be subject to renewal by the FCC at eight-year intervals, and at such times may be subject to competing applications for the licensed frequencies. The Company presently has FCC authorization to operate nine television stations and two AM and three FM radio stations. From time to time, the FCC revises existing regulations and policies in ways that could affect the Company's broadcasting operations. In addition, Congress from time to time considers and adopts substantive amendments to the governing communications legislation. The Company cannot predict what regulations or legislation may be proposed or finally enacted or what effect, if any, such regulations or legislation could have on the Company's broadcasting operations. 12 EMPLOYEES The average number of full-time equivalent employees of the Company in 1995 was 10,500, relatively unchanged from 1994. Pension and other employee benefit plans are provided for substantially all employees of the Company. Eligible employees also participate in the Company's Employee Stock Ownership Plan. During 1995, the Company's publishing segment employed approximately 7,500 full-time equivalent employees, about 8% of whom were represented by a total of five unions. Contracts with unionized employees of the publishing segment expire at various times through December 1998. Broadcasting and entertainment had an average of 2,600 full-time equivalent employees in 1995. Approximately 23% of these employees were represented by a total of 22 unions. Contracts with unionized employees of the broadcasting and entertainment segment expire at various times through June 1999. Education had an average of 400 full-time equivalent employees in 1995. None of these employees were represented by unions. EXECUTIVE OFFICERS OF THE COMPANY Information with respect to the executive officers of the Company as of March 11, 1996 is set forth below. The descriptions of the business experience of these individuals include the principal positions held by them since March 1991. Robert D. Bosau (49) Executive Vice President/General Manager, Tribune Education Company* since August 1994; Vice President/Administration of Tribune Publishing Company* from 1991 to August 1994; Vice President/Human Resources of the Company from 1987 to 1991. Joseph D. Cantrell (51) Executive Vice President, Tribune Publishing Company* since August 1994; President of The Daily Press, Inc.* and Publisher of the Daily Press from 1986 to August 1994. James C. Dowdle (62) Executive Vice President/Media Operations since August 1994, Executive Vice President of the Company since August 1991; President and Chief Executive Officer of Tribune Broadcasting Company* since 1981; President of Tribune Publishing Company* since August 1994; Director of the Company since 1985. Dennis J. FitzSimons (45) Executive Vice President, Tribune Broadcasting Company* since August 1994; President of Tribune Television* from 1992 to August 1994; Vice President/General Manager of WGN-TV* from 1987 to 1992. Donald C. Grenesko (47) Senior Vice President and Chief Financial Officer since March 1993 and Vice President and Chief Financial Officer from October 1991 to March 1993 of the Company; President and Chief Executive Officer of Chicago National League Ball Club, Inc.* from 1988 to 1991. 13 David D. Hiller (42) Senior Vice President/Development since November 1993; Senior Vice President and General Counsel from March to November 1993 and Vice President and General Counsel until March 1993 of the Company; Partner, Sidley & Austin until November 1993. John S. Kazik (53) Senior Vice President/Information Systems since March 1993; Vice President/Information Systems from December 1989 to March 1993 of the Company. Crane H. Kenney (33) Vice President/Chief Legal Officer since February 1996, Senior Counsel from March 1995 to January 1996 and Counsel from February 1994 to February 1995 of the Company; Associate, Schiff, Harden & Waite until January 1994. John W. Madigan (58) Chairman since January 1996, Chief Executive Officer since May 1995, President since May 1994 and Chief Operating Officer of the Company from May 1994 to May 1995; Executive Vice President of the Company and President and Chief Executive Officer of Tribune Publishing Company* from August 1991 to May 1994; Publisher of the Chicago Tribune from August 1990 to May 1994 and President and Chief Executive Officer of Chicago Tribune Company* until September 1993; Director of the Company since 1975. Ruthellyn Musil (44) Vice President/Corporate Relations since March 1995 and Director of Communications from July 1992 to March 1995 of the Company; Director of Employee Communications of Chicago Tribune Company* from 1989 to July 1992. John T. Sloan (44) Senior Vice President/Administration since March 1993 and Vice President/Human Resources of the Company from August 1991 to March 1993; Vice President and Director of Human Resources of the New York Daily News until July 1991. - - ----------- * A subsidiary of the Company. 14 ITEM 2. PROPERTIES. The corporate headquarters of the Company are located at 435 North Michigan Avenue, Chicago, Illinois. The general character, location and approximate size of the principal physical properties used by the Company on December 31, 1995 are listed below. In addition to those listed, the Company owns or leases transmitter sites, parking lots and other properties aggregating approximately 373 acres in 49 separate locations, and owns or leases an aggregate of approximately 1,701,370 square feet of space in 176 locations. Included in these figures are 62 acres and 233,000 square feet of space owned by the Company that had previously been owned by the New York Daily News. On March 20, 1991, the Company sold the Daily News, and these properties are in the process of being sold. The Company also owns the 39,000-seat stadium used by the Chicago Cubs baseball team. The Company considers its various properties to be in good condition and suitable for the purposes for which they are used.
APPROXIMATE AREA IN SQUARE FEET ------------------------------- GENERAL CHARACTER OF PROPERTY OWNED LEASED ----------------------------- --------- ------- Publishing: Printing plants, business and editorial offices, and warehouse space located in: Chicago, Illinois.............................. 1,327,000 (1) 79,000 Orlando, Florida............................... 406,000 92,000 Fort Lauderdale, Florida....................... 279,000 (2) 42,000 Deerfield Beach, Florida....................... 386,000 -- Newport News, Virginia......................... 207,000 -- Broadcasting and Entertainment: Business offices, studios, garages and transmitters located in: Chicago, Illinois.............................. 99,000 7,000 Oak Brook, Illinois............................ -- 69,000 Los Angeles, California........................ 253,000 -- Boston, Massachusetts.......................... 28,000 -- Denver, Colorado............................... 49,000 11,000 Philadelphia, Pennsylvania..................... 22,000 50,000 New York, New York............................. -- 120,000 (3) New Orleans, Louisiana......................... -- 17,000 Atlanta, Georgia............................... -- 22,000 Education: Business offices and warehouse space located in: Chicago, Illinois.............................. 185,000 21,000 Bothell, Washington............................ -- 74,000
- - ----- (1) Includes Tribune Tower, an approximately 630,000 square foot office building in downtown Chicago, and Freedom Center, the approximately 697,000 square foot production center of the Chicago Tribune. Tribune Tower houses the Company's corporate headquarters, the Chicago Tribune's business and editorial offices, offices of various subsidiary companies and approximately 80,000 square feet of space leased to unaffiliated tenants. Freedom Center houses the Chicago Tribune's printing, packaging and distribution operations. 15 (2) Represents New River Center, an approximately 279,000 square foot office building in downtown Fort Lauderdale. New River Center houses the business and editorial offices of the Sun-Sentinel, which occupies approximately 91,000 square feet. The remaining space is leased to or available for commercial tenants. (3) Includes space leased by subsidiary companies in the New York Daily News building, which is owned by a limited partnership in which the Company has a minority interest. No portion of this building is listed as "owned" property in the table. ITEM 3. LEGAL PROCEEDINGS. The Company and its subsidiaries are defendants from time to time in actions for libel and other matters arising out of their business operations. In addition, the Company and its subsidiaries are involved from time to time as parties in various regulatory, environmental and other proceedings with governmental authorities and administrative agencies. The State of Florida Department of Environmental Protection ("DEP") and the Company's subsidiary, Sentinel Communications Company (the "Sentinel"), have entered into a consent decree under which the Sentinel will assist the DEP in remediating certain trichloroethene groundwater contamination in downtown Orlando, Florida. The Company currently estimates that the Sentinel's share of the remediation costs will not be material and has provided for the costs in the Company consolidated financial statements. The Company does not believe that any of the matters or proceedings presently pending will have a material adverse effect on its consolidated financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not Applicable. 16 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's Common Stock is presently listed on the New York, Chicago and Pacific stock exchanges. The high and low sales prices of the Common Stock by fiscal quarter for the two most recent fiscal years, as reported on the New York Stock Exchange Composite Transactions list, were as follows:
1995 1994 ------------------ ------------------ QUARTER HIGH LOW HIGH LOW ------- ------- ------- ------- ------- First................ $56 1/8 $50 3/4 $61 7/8 $55 Second............... 60 3/4 53 3/4 64 1/2 54 Third................ 68 1/4 59 3/4 56 5/8 50 1/4 Fourth............... 68 7/8 59 5/8 56 1/8 48 7/8
At March 11, 1996, there were 4,812 record holders of the Company's Common Stock. Quarterly cash dividends declared on Common Stock were $.28 per share in 1995 and $.26 per share in 1994. Total cash dividends declared on Common Stock by the Company were $72,524,000 for 1995 and $69,907,000 for 1994. ITEM 6. SELECTED FINANCIAL DATA. The information for the years 1991 through 1995 contained under the heading "Eleven Year Financial Summary" in the Company's 1995 Annual Report to Stockholders is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information contained under the heading "Management's Discussion and Analysis of Results of Operations and Financial Condition" in the Company's 1995 Annual Report to Stockholders is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The Company's Consolidated Financial Statements and Notes thereto and the information contained under the heading "Business Segments" appearing on pages 43 through 60 of the Company's 1995 Annual Report to Stockholders, together with the report thereon of Price Waterhouse LLP dated January 31, 1996, appearing on page 61 of such Annual Report and the information contained under the heading "Quarterly Results" on pages 62 and 63, are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not Applicable. 17 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information contained under the heading "Executive Officers of the Company" in Item 1 hereof, and the information under the heading "Election of Directors" in the definitive Proxy Statement for the Company's May 7, 1996 Annual Meeting of Stockholders is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION. The information contained under the heading "Executive Compensation" (except those portions relating to Item 13, below) in the definitive Proxy Statement for the Company's May 7, 1996 Annual Meeting of Stockholders is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information contained under the subheadings "Principal Stockholders" and "Management Ownership" under the heading "Ownership Information" in the definitive Proxy Statement for the Company's May 7, 1996 Annual Meeting of Stockholders, is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information contained under the heading "Executive Compensation" (except those portions relating to Item 11, above) and the subheadings "Compensation of Directors" and "Other Transactions" in the definitive Proxy Statement for the Company's May 7, 1996 Annual Meeting of Stockholders, is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a)(1)&(2) Financial Statements and Financial Statement Schedule filed as part of this report As listed in the Index to Financial Statements and Financial Statement Schedule on page 21 hereof. (a)(3) Index to Exhibits filed as part of this report As listed in the Exhibit Index beginning on page 24 hereof. (b) Reports on Form 8-K The Company filed one report on Form 8-K during the last quarter of the period covered by this report. The Form 8-K Current Report, dated December 14, 1995, reported under Item 5 an agreement to merge Compton's NewMedia and Compton's Learning Company into SoftKey International Inc. for SoftKey common stock valued at approximately $106.5 million and the assumption of up to $17 million in intercompany debt. The Company also agreed to invest $150 million in SoftKey convertible notes once SoftKey acquired a majority of the common stock of The Learning Company. No financial statements were filed as part of the report. 18 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 25, 1996. TRIBUNE COMPANY /s/ John W. Madigan By: John W. Madigan Chairman, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 25, 1996. Signature Title --------- ----- John W. Madigan Chairman, President and Chief Executive Officer and Director (principal executive officer) James C. Dowdle Executive Vice President and Director Donald C. Grenesko Senior Vice President and Chief Financial Officer (principal financial officer) R. Mark Mallory Vice President and Controller (principal accounting officer) 19 Signature Title --------- ----- Charles T. Brumback Director Diego E. Hernandez Director Robert E. La Blanc Director Nancy Hicks Maynard Director Newton N. Minow Director Arnold R. Weber Director 20 TRIBUNE COMPANY INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE PAGE ---- Consolidated Statements of Income for each of the three fiscal years in the period ended December 31, 1995........................... * Consolidated Balance Sheets at December 31, 1995 and December 25, 1994..................................................... * Consolidated Statements of Cash Flows for each of the three fiscal years in the period ended December 31, 1995........................... * Consolidated Statements of Shareholders' Equity for each of the three fiscal years in the period ended December 31, 1995.................... * Notes to Consolidated Financial Statements.............................. * Report of Independent Accountants on Consolidated Financial Statements.. * Report of Independent Accountants on Financial Statement Schedule....... 22 Financial Statement Schedule for each of the three fiscal years in the period ended December 31, 1995........................................ 23 Schedule II Valuation and qualifying accounts and reserves. - - ----------- * Incorporated by reference to the Company's 1995 Annual Report to Stockholders. See Item 8 of this Annual Report on Form 10-K. --------------- All other schedules required under Regulation S-X are omitted because they are not applicable or not required. 21 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors of Tribune Company Our audits of the consolidated financial statements referred to in our report dated January 31, 1996 appearing in the 1995 Annual Report to Stockholders of Tribune Company (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 14(a) of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. /s/ Price Waterhouse LLP - - ------------------------ PRICE WATERHOUSE LLP Chicago, Illinois January 31, 1996 22
SCHEDULE II TRIBUNE COMPANY AND SUBSIDIARIES SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (IN THOUSANDS OF DOLLARS) ================================================================================================ ADDITIONS BALANCE AT CHARGED TO BALANCE BEGINNING COSTS AND AT END OF DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS OF PERIOD ----------- ----------- ---------- ---------- ----------- Valuation accounts deducted from assets to which they apply: Year ended December 31, 1995 Allowance for doubtful accounts: Bad debts............................ $24,464 $19,745 $21,131 $23,078 Rebates, volume discounts and other.. 9,534 27,754 30,212 7,076 ------- ------- ------- ------- Total.......................... $33,998 $47,499 $51,343(1) $30,154 ======= ======= ======= ======= Year ended December 25, 1994 Allowance for doubtful accounts: Bad debts............................ $17,589 $18,024 $11,149 $24,464 Rebates, volume discounts and other.. 7,843 18,284 16,593 9,534 ------- ------- ------- ------- Total.......................... $25,432 $36,308 $27,742 $33,998 ======= ======= ======= ======= Year ended December 26, 1993 Allowance for doubtful accounts: Bad debts............................ $19,329 $12,932 $14,672(1) $17,589 Rebates, volume discounts and other.. 4,082 19,460 15,699 7,843 ------- ------- ------- ------- Total.......................... $23,411 $32,392 $30,371 $25,432 ======= ======= ======= ======= - - -------------- (1) For 1995, $9,389 represents deductions pertaining to Compton's NewMedia and Times Advocate Company, sold in 1995. For 1993, $4,612 represents deductions pertaining to QUNO Corporation. As a result of an initial public offering by QUNO in February 1993, QUNO's balance sheet was no longer consolidated in the Company's financial statements. ================================================================================================
23 TRIBUNE COMPANY EXHIBIT INDEX Exhibits marked with an asterisk (*) are incorporated by reference to documents previously filed by Tribune Company with the Securities and Exchange Commission, as indicated. Exhibits marked with a circle (o) are management contracts or compensatory plan contracts or arrangements filed pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K. All other documents listed are filed with this Report. NUMBER DESCRIPTION ------ ----------- 2 * Pre-Amalgamation Agreement among Donohue Inc., Tribune Company and QUNO Corporation, dated as of December 22, 1995 (Exhibit 99.2 to Form 8-K Current Report dated January 8, 1996); Pre-Amalgamation Amendment Agreement thereto dated as of December 28, 1995 (Exhibit 99.3 to Form 8-K Current Report dated January 8, 1996). 3.1 * Restated Certificate of Incorporation of Tribune Company, dated April 21, 1987; Certificate of Designations of Series A Junior Participating Preferred Stock, dated December 31, 1987; Certificate of Designations of Series B Convertible Preferred Stock, dated April 4, 1989 (Exhibit 3.1 to Annual Report on Form 10-K for 1991). 3.2 By-laws of Tribune Company As Amended and In Effect on February 20, 1996. 4 * Rights Agreement between Tribune Company and The First National Bank of Chicago, as Rights Agent, dated as of December 22, 1987 (Exhibit 1 to Form 8-K Current Report dated January 6, 1988); First Amendment thereto dated as of July 31, 1990 (Exhibit 4 to Form 10-Q Quarterly Report for the quarter ended July 1, 1990); Second Amendment thereto dated as of October 31, 1990 (Exhibit 4 to Form 10-Q Quarterly Report for the quarter ended September 30, 1990). 10.1a o* Employment agreement dated as of July 31, 1990 between Tribune Company and Stanton R. Cook (Exhibit 19.1 to Form 10-Q Quarterly Report for the quarter ended September 30, 1990). 10.1b o* Consulting agreement dated as of December 14, 1993 between Tribune Company and Stanton R. Cook (Exhibit 10.1b to Annual Report on Form 10-K for 1993). 10.2a o* Employment agreement dated as of July 27, 1993 between Tribune Company and Charles T. Brumback (Exhibit 10.2a to Annual Report on Form 10-K for 1993). 10.2b o* Amendment dated February 15, 1994 to employment agreement dated as of July 27, 1993 between Tribune Company and Charles T. Brumback (Exhibit 10.2b to Annual Report on Form 10-K for 1993). 10.2c o* Termination of Employment Agreement dated December 22, 1994 between Tribune Company and Charles T. Brumback (Exhibit 10.2c to Annual Report on Form 10-K for 1994). 10.3 o* Chicago Tribune Company Split-Dollar Insurance Plan dated June 29, 1978, together with first amendment dated August 28, 1981, covering certain employees of Tribune Company and Chicago Tribune Company (Exhibit 10.4 in File No. 2-86087). 10.4a o* Tribune Company Supplemental Retirement Plan, as amended and restated on January 1, 1989 (Exhibit 10.6 to Annual Report on Form 10-K for 1988). 24 NUMBER DESCRIPTION ------ ----------- 10.4b o* First Amendment of Tribune Company Supplemental Retirement Plan, effective January 1, 1994 (Exhibit 10.4b to Annual Report on Form 10-K for 1993). 10.6 o* Tribune Company Deferred Compensation Administration Plan, as adopted on July 29, 1982, and first amendment thereto dated December 1, 1982 (Exhibit 10.16 in File No. 2-86087); second amendment thereto dated October 29, 1984, and third amendment thereto dated December 16, 1986 (Exhibit 10.8b to Annual Report on Form 10-K for 1989). 10.7 o* Tribune Company Directors' Deferred Compensation Plan, as amended and restated on July 1, 1994 (Exhibit 10.7 to Annual Report on Form 10-K for 1994). 10.8 o* Tribune Company Bonus Deferral Plan, dated as of December 14, 1993 (Exhibit 10.8 to Annual Report on Form 10-K for 1993). 10.9a o* Tribune Company Management Incentive Plan, dated as of January 1, 1991 (Exhibit 10.10 to Annual Report on Form 10-K for 1990). 10.9b o* Amendment effective January 1, 1992 to the Tribune Company Management Incentive Plan dated as of January 1, 1991 (Exhibit 10.9b to Annual Report on Form 10-K for 1991). 10.10 o* Tribune Company Amended and Restated 1984 Long-Term Performance Plan, effective as of July 25, 1989 (Exhibit 19.2 to Form 10-Q Quarterly Report for the quarter ended June 25, 1989); Forms of Incentive Stock Option Agreement and Non-Qualified Stock Option Agreements for Tribune Company Amended and Restated 1984 Long-Term Performance Plan (Exhibit 19.2 to Form 10-Q Quarterly Report for the quarter ended July 1, 1990). 10.11 o* Tribune Company 1992 Long-Term Incentive Plan, dated as of April 29, 1992 and as amended and in effect on April 19, 1994 (Exhibit 10.11 to Annual Report on Form 10-K for 1994). 10.12a o* 1988 Restricted Stock Plan For Outside Directors, dated February 16, 1988 (Exhibit 10.12 to Annual Report on Form 10-K for 1992). 10.12b o* Amendment effective April 28, 1992 to the 1988 Restricted Stock Plan For Outside Directors (Exhibit 10.12b to Annual Report on Form 10-K for 1993). 10.13 o* Tribune Company Executive Financial Counseling Plan, dated October 19, 1988 and as amended effective January 1, 1994 (Exhibit 10.13 to Annual Report on Form 10-K for 1993). 10.14 o* Tribune Company Amended and Restated Transitional Compensation Plan for Executive Employees, effective as of January 1, 1995 (Exhibit 10.14 to Annual Report on Form 10-K for 1994). 10.15 o* Tribune Company Supplemental Defined Contribution Plan, effective as of January 1, 1994 (Exhibit 10.15 to Annual Report on Form 10-K for 1993). 10.16 * Amended and Restated Agreement of Limited Partnership of Two Twenty East Limited Partnership, dated as of November 5, 1982, and first amendment thereto dated December 6, 1982 (Exhibit 10.25 in File No. 2-86087). 25 NUMBER DESCRIPTION - - ------ ----------- 10.17 * Asset Purchase Agreement dated March 14, 1991 by and among Maxwell Newspapers, Inc., Mirror Group PLC, New York News Inc. and Tribune Company; and letter amendment thereto dated March 20, 1991 (Exhibits 10.1 and 10.2 to Form 8-K Current Report dated March 14, 1991). 10.18 * Newsprint Agreement dated December 2, 1992 between Tribune Company and QUNO Corporation (Exhibit 10.17 to Annual Report on Form 10-K for 1992). 10.19 o* Tribune Company 1995 Nonemployee Director Stock Option Plan, dated March 8, 1995 (Exhibit 10.19 to Form 10-Q Quarterly Report for the quarter ended September 24, 1995). 10.20 o Tribune Company Amended and Restated Employee Stock Purchase Plan, dated October 30, 1995. 11 Statements of Computation of Primary and Fully Diluted Net Income Per Share. 12 Computation of Ratios of Earnings to Fixed Charges. 13 The portions of the Company's 1995 Annual Report to Stockholders which are specifically incorporated herein by reference. 21 Table of subsidiaries of Tribune Company. 23 Consent of Independent Accountants. 27 Financial Data Schedule. 27.1 Restated Financial Data Schedules. 99 Form 11-K financial statements for Tribune Company Savings Incentive Plan (to be filed by amendment). 26 EX-3.2 2 BY-LAWS EXHIBIT 3.2 BY-LAWS OF TRIBUNE COMPANY A DELAWARE CORPORATION As Amended and In Effect on February 20, 1996 ARTICLE I REGISTERED OFFICE AND AGENT SECTION 1.1 REGISTERED OFFICE AND AGENT. The registered office of the Company in the State of Delaware shall be the office of The Corporation Trust Company in the City of Wilmington, County of New Castle, and the registered agent in charge thereof shall be The Corporation Trust Company. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 2.1 PLACE OF MEETING. Meetings of stockholders shall be held at such locations as are designated by the Board of Directors or the officers calling such meetings. SECTION 2.2 ANNUAL MEETING. The annual meeting of the stockholders shall be held on such date (not a legal holiday) and at such time as is designated by resolution of the Board of Directors, for the purpose of electing directors and for the transaction of such other business as may properly be brought before the meeting. SECTION 2.3 SPECIAL MEETINGS. Special meetings of the stockholders may be called by the Chief Executive Officer of the Company or the Board of Directors. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice of the meeting. SECTION 2.4 NOTICE OF MEETINGS. Unless otherwise required by statute, written notice stating the place, date and hour of each meeting of stockholders and the purpose or purposes of each such meeting shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting. In the case of a meeting to vote on a merger or consolidation such notice shall be given not less than twenty nor more than sixty days before the date of the meeting. If given by mail, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Company. SECTION 2.5 NOTICE OF STOCKHOLDER BUSINESS. At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Company. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Company not less than 60 days prior to the meeting; provided, however, that in the event that less than 70 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the annual meeting was mailed to stockholders or such public disclosure was made, whichever occurs first. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and address, as they appear on the Company's books, of the stockholder proposing such business, (c) the class and number of shares of the Company which are beneficially owned by the stockholder, and (d) any material interest of the stockholder in such business. Notwithstanding anything in these By-Laws to the contrary, no business shall be conducted at an annual meeting of stockholders except in accordance with the procedures set forth in this Section. The chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and in accordance with the provisions of this Section, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. At any special meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting by or at the direction of the Chief Executive Officer or the Board of Directors. SECTION 2.6 LIST OF STOCKHOLDERS. The officer or agent having charge of the stock ledger of the Company shall make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city -2- where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. SECTION 2.7 INSPECTORS. In advance of any meeting of stockholders the Company, by its Board of Directors or by its Chairman or President, shall appoint one or more inspectors of voting who shall receive and count the ballots and make a written report of the results of the balloting, and who shall perform such other duties in connection therewith as is provided by law. The Company may also designate one or more persons as alternate inspectors to replace any inspector who is unable or fails to act. SECTION 2.8 QUORUM. The holders of record of shares of capital stock of the Company having a majority of the votes entitled to be cast at the meeting, represented in person or by proxy, shall constitute a quorum at all meetings of stockholders. Where a separate vote by class or classes is to be held, the holders of stock having a majority of the votes entitled to be cast by such class or classes, represented in person or by proxy, shall constitute a quorum at the meeting. Regardless of whether a quorum is present or represented, the chairman of the meeting, or stockholders represented in person or by proxy at the meeting voting a majority of the votes cast by such stockholders on the matter, shall have the power to adjourn the meeting to another time and/or place. Unless the adjournment is for more than thirty days, or unless a new record date is set for the adjourned meeting, no notice of the adjourned meeting need be given to any stockholder; provided that the time and place of the adjourned meeting were announced at the meeting at which the adjournment was taken. At the adjourned meeting the Company may transact any business which might have been transacted at the original meeting. SECTION 2.9 VOTING OF SHARES; PROXIES. The voting rights of holders of common stock and preferred stock of the Company shall be as set forth in the Restated Certificate of Incorporation, as from time to time in effect, and in resolutions of the Board of Directors providing for series of the preferred stock. A stockholder may vote either in person, by proxy executed in writing by the stockholder or an authorized officer, director, employee or agent of the stock- holder, or by electronic transmission as provided by law. No proxy shall be voted or acted upon after three years from the date of its execution, unless the proxy provides for a longer period. Action on any question or in any election may be by a voice vote unless the presiding officer shall order that voting be by ballot. The presiding officer at the meeting shall fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at the meeting. SECTION 2.10 REQUIRED VOTE. At any duly constituted meeting of stockholders, the affirmative vote of holders of a majority of the voting power of all shares represented at the meeting in person or by proxy and entitled to vote on the matter shall be necessary -3- for the adoption or approval of any matter properly brought before the meeting, unless the proposed action is for the election of directors or is one upon which, by express provision of statute or of the Restated Certificate of Incorporation, a different affirmative vote is specified or required, in which case such express provision shall govern and control the decision of such question. In elections for directors, the nominees receiving the highest number of votes cast for the number of director positions to be filled shall be elected. Where a separate vote by class or classes is to be held, unless otherwise provided by statute or the Restated Certificate of Incorporation, the affirmative vote of the holders of a majority of the voting power of all shares of such class or classes represented at the meeting in person or by proxy shall be the act of such class or classes. SECTION 2.11 ACTION WITHOUT A MEETING. Action by the stockholders may be taken without a meeting as provided in the Restated Certificate of Incorporation. ARTICLE III DIRECTORS SECTION 3.1 NUMBER, TENURE AND QUALIFICATIONS. The business and affairs of the Company shall be managed by a Board of no less than ten (10) nor more than fifteen (15) directors, as fixed from time to time by resolution of the Board of Directors. No person shall be eligible for election as a director unless such person shall be under the age of 68 at the time of election, provided that a person who has reached his/her 68th birthday can be elected to fill an unexpired term that will be completed prior to such person's 71st birthday. The Board shall be classified with respect to the time during which they hold office into three classes, as nearly equal in number as possible based on the then current membership of the Board, as determined by the Board of Directors, all as provided in the Restated Certificate of Incorporation. One class of directors shall be elected at each annual meeting of the stockholders to hold office for the term of three years or until their respective successors are duly elected and qualified or until their earlier resignation or removal. SECTION 3.2 NOMINATING PROCEDURES. SECTION 3.2.1 ELIGIBILITY TO MAKE NOMINATIONS. Nominations of candidates for election as directors at any meeting of stockholders called for that purpose may be made by the Board of Directors or by any stockholder entitled to vote at such meeting, in accordance with the following provisions. SECTION 3.2.2 PROCEDURE FOR NOMINATIONS BY THE BOARD OF DIRECTORS. Nominations made by the Board of Directors shall be made at a meeting of the Board of Directors, or by written consent of the directors in lieu of a meeting, not less than 30 days prior to the date of the meeting of stockholders at which directors are to be elected. At the request -4- of the Secretary of the Company, each proposed nominee shall provide the Company with such information concerning himself or herself as is necessary for purposes of the Company's proxy statement relating to the meeting. SECTION 3.2.3 PROCEDURE FOR NOMINATIONS BY STOCKHOLDERS. Not less than 90 days (except as provided below) prior to the date of a meeting of stockholders at which directors are to be elected, any stockholder who intends to make a nomination at such meeting shall deliver a notice to the Secretary of the Company setting forth (i) the name, age, business address and residence address of each nominee proposed in such notice, (ii) the principal occupation or employment of each such nominee, (iii) the number of shares of capital stock of the Company which are beneficially owned by each such nominee and (iv) such other information concerning each such nominee as would be required, under the rules of the Securities and Exchange Commission, in a proxy statement soliciting proxies for the election of such nominees. Such notice shall be accompanied by a signed consent of each proposed nominee to serve as a director of the Company if elected. In the event that less than 100 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice of stockholder nominees to be timely under this Section must be delivered not later than the close of business on the 10th day following the day on which notice of the date of the meeting is mailed to stockholders or public disclosure thereof is made, whichever occurs first. SECTION 3.2.4 SUBSTITUTION OF NOMINEES. In the event that a person is validly designated as a nominee in accordance with the preceding Sections and shall thereafter become unable or unwilling to stand for election to the Board of Directors, the Board of Directors or the stockholder who proposed such nominee, as the case may be, may designate a substitute nominee. At the request of the Secretary of the Company, each substitute nominee shall provide the Company with such information concerning himself or herself as would be necessary for purposes of a proxy statement relating to the meeting. SECTION 3.2.5 DETERMINATION OF COMPLIANCE WITH PROCEDURES. If the chairman of the meeting of stockholders determines that a nomination for director was not made in accordance with the foregoing procedures, such nomination shall be void. SECTION 3.3 REGULAR MEETINGS. A regular meeting of the Board of Directors shall be held without other notice than this By-Law immediately after, and at the same address as, the annual meeting of stockholders. The Board of Directors may fix the time and place for the holding of additional regular meetings. No notice or call shall be required. SECTION 3.4 SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by the Chairman, the President or any two directors, by notice to the Secretary of the Company. The person or persons authorized to call special meetings of the Board of Directors may fix any place as the place for holding any special meeting of the Board of Directors called by them, provided that any meeting called at the request of directors -5- shall be held at Tribune Tower, Chicago, Illinois. Notice of any special meeting shall be given to all directors at least twenty-four hours in advance thereof (except as set forth below), either (a) personally or by telephone or (b) by mail or telegram addressed to the director at his/her address as it appears on the records of the Company. Such notice shall include the time and place at which the meeting is to be held. If mailed, such notice must be given at least five days prior to the meeting and shall be deemed to be delivered when deposited in the United States mail so addressed, with postage thereon prepaid. If notice is to be given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegraph company. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice of such meeting. SECTION 3.5 QUORUM AND ACTION. A majority of the total number of directors then in office shall constitute a quorum for the transaction of business at any meeting, but if less than a quorum is present a majority of the directors present may adjourn the meeting from time to time without further notice. The vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless the act of a greater number is required by statute, the Restated Certificate of Incorporation or these By-Laws. SECTION 3.6 VACANCIES. Any vacancy occurring in the Board of Directors and any newly created directorship resulting from an increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, and the directors so chosen shall hold office for the unexpired portion of their designated terms of office and until their successors are duly elected and qualified, or until their earlier resignation or removal. SECTION 3.7 COMPENSATION OF DIRECTORS. The Board of Directors, by the affirmative vote of the majority of the directors then in office, and irrespective of any personal interest of any of the directors, shall have authority to fix the compensation of directors for services to the Company as Board members, committee members or otherwise. SECTION 3.8 REMOVAL OF DIRECTORS. Any one or more directors may be removed from office only for cause, and only by the affirmative vote of holders of at least a majority of the voting power of all of the then outstanding shares of voting stock of the Company, voting together as a single class. SECTION 3.9 COMMITTEES. SECTION 3.9.1 EXECUTIVE COMMITTEE. The Board of Directors, by resolution of a majority of the whole Board, shall appoint an Executive Committee to consist of not less than five members of the Board, one of whom shall be the person designated as Chief Executive Officer of the Company. The Executive Committee shall have the right to exercise the full power and authority of the Board of Directors of the Company -6- to the fullest extent permitted by Section 141(c) of the General Corporation Law of the State of Delaware; provided, that, in addition to the restrictions provided in said Section 141(c), such Executive Committee shall not have the authority of the Board of Directors in reference to: (a) electing or removing officers of the Company or members of the Executive Committee; (b) fixing the compensation of any officer or director; (c) amending, altering or repealing these By-Laws or any resolution of the Board of Directors; (d) submission to the stockholders of any matter whatsoever; (e) action with respect to dividends; or (f) any action which either the Chief Executive Officer or two other members of the Executive Committee shall designate, by written instrument filed with the Secretary of the Company, as a matter to be considered by the full Board. All action taken by the Executive Committee between Board meetings on matters of a nature ordinarily requiring Board action shall be promptly reported to the Board of Directors. SECTION 3.9.2 AUDIT COMMITTEE. The Board of Directors, by resolution of a majority of the whole Board, shall appoint an Audit Committee to consist of not less than three directors, none of whom shall be an officer or employee of the Company or of any subsidiary or affiliated corporation. The Audit Committee (a) shall recommend to the Board of Directors the appointment of independent public accountants for each year to audit the books, records and accounts of the Company and to perform such other duties as the board of Directors or Audit Committee may from time to time prescribe, (b) shall review the financial statements submitted by the independent public accountants and shall report to the Board of Directors the results of such review, (c) shall review all recommendations made by the independent public accountants to the Board of Directors with respect to the accounting methods used, the organization and operations of the Company and the system of internal control followed by the Company and shall advise the Board of Directors with respect thereto and (d) shall have authority to examine, and to make recommendations to the Board of Directors with respect to, the audit conducted by the Company's independent public accountants. The scope and frequency of the Audit Committee's review and examination shall be determined by the Committee, which shall have all the powers of the Board of Directors in carrying out its duties. SECTION 3.9.3 FINANCE COMMITTEE. The Board of Directors, by resolution of a majority of the whole Board, shall appoint a Finance Committee to consist of not less than three directors. The functions of the Finance Committee shall be (a) to supervise generally the financial affairs of the Company, (b) to review with management the capital needs of the Company and its subsidiaries, (c) to provide consultation on major borrowings and proposed issuances of debt and equity securities and (d) to report to the Board of Directors from time to time with respect to the foregoing. The Finance Committee shall make recommendations to the Board concerning the Company's financial strategies, policies and structure, and shall undertake such additional functions and activities related to the foregoing as may be requested from time to time by the Board of Directors. -7- SECTION 3.9.4 GOVERNANCE AND COMPENSATION COMMITTEE. The Board of Directors, by resolution of a majority of the whole Board, shall appoint a Governance and Compensation Committee to consist of not less than three directors, none of whom shall be an officer or employee of the Company or of any subsidiary or affiliated corporation. The functions of the Governance and Compensation Committee shall be (a) to identify and make recommendations to the Board of Directors regarding candidates for election to the Board, (b) to review and make recommendations to the Board of Directors regarding the renomination of incumbent directors, (c) to perform other related tasks, such as studying the size, committee structure or meeting frequency of the Board, making studies or recommendations regarding management succession, or tasks of similar character as may be requested from time to time by the Board of Directors or the Chief Executive Officer, (d) to establish the compensation of the Chief Executive Officer of the Company, (e) to consult with the Chief Executive Officer with respect to the compensation of officers and executive employees of the Company and its subsidiaries, (f) to fix and determine awards to employees of stock or stock options pursuant to any of the Company's employee stock option or stock related plans now or from time to time hereafter in effect and to exercise such other power and authority as may be permitted or required under such plans and (g) to undertake such additional similar functions and activities as may be required by other compensation plans maintained by the Company or as may be requested from time to time by the Board of Directors. The Board of Directors, by resolution of a majority of the whole Board, shall designate one member of the Governance and Compensation Committee to act as chairman of the Committee. The Committee member so designated shall (a) chair all meetings of the Committee, (b) chair meetings involving only non-employee directors, (c) coordinate an annual performance evaluation of the Company, (d) coordinate the evaluation of the performance of the Chief Executive Officer, and (e) perform such other activities as from time-to-time are requested by the other directors or as circumstances indicate. SECTION 3.9.5 OTHER COMMITTEES. In addition to the Committees provided for in Sections 3.9.1 through 3.9.4 above, the Board of Directors may, by resolution passed by a majority of the whole Board, designate and appoint one or more other Board committees, each such committee to consist of two or more directors of the Company. Any such Board committee, to the extent provided in the resolution creating it and authorized by statute, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Company, and may authorize the seal of the Company to be affixed to all papers which may require it. The Board of Directors may also appoint other committees for the administration of the affairs of the Company, whose members may or may not be directors. Every committee appointed by the Board of Directors may, unless the Board provides otherwise, fix its own rules of procedure and hold its meetings in accordance with such rules. The Board may designate one or more persons as alternate members of any Board or other committee, as applicable, who may replace any absent or disqualified member at any meeting of such committee. -8- SECTION 3.10 ACTION BY DIRECTORS WITHOUT MEETING. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. SECTION 3.11 MEETINGS BY TELEPHONE. Members of the Board of Directors, or any committee of the Board, may participate in a meeting of the Board or of such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section shall constitute presence in person at such meeting. ARTICLE IV OFFICERS SECTION 4.1 OFFICERS OF THE COMPANY. The officers of the Company shall consist of a Chairman and/or a President, a Secretary and a Treasurer, elected or appointed by the Board of Directors. The Board may also elect or appoint as officers of the Company a Controller, a General Counsel and one or more Vice Chairmen, Executive Vice Presidents, Senior Vice Presidents, Vice Presidents, Deputy General Counsels, Assistant Controllers, Assistant Secretaries, Assistant Treasurers or Assistant Vice Presidents, and such other officers, as the Board may from time to time determine. If the Board of Directors shall at any time elect or appoint both a Chairman and a President, the Board shall specify which individual is to serve as the Chief Executive Officer of the Company. Any two or more offices may be held by the same person except that neither the Chairman nor the President may also hold the office of Secretary. All officers of the Company shall have such authority and perform such duties in the management of the property and affairs of the Company as are provided in these By-Laws or as may be determined by resolution of the Board of Directors and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board. SECTION 4.2 ELECTION AND TERM OF OFFICE. The officers of the Company shall be elected annually by the Board of Directors at the first regular meeting of the Board of Directors held after the annual meeting of stockholders. Each officer shall hold office until his successor is duly elected and qualified or until his earlier resignation or removal. SECTION 4.3 REMOVAL. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the whole Board of Directors, with or without cause, but such removal shall be without prejudice to the -9- contract rights, if any, of the person so removed. Election or appointment of an officer shall not of itself create any contract rights. SECTION 4.4 VACANCIES. A vacancy in any office by reason of death, resignation, removal, disqualification or otherwise may be filled by the Board of Directors for the unexpired portion of the term. SECTION 4.5 DELEGATION OF DUTIES OF OFFICERS. In case of the absence of any officer of the Company, or for any other reason that the Board of Directors may deem sufficient, the Board of Directors may temporarily delegate the power or duties of an officer to any other officer or to any other person. SECTION 4.6 THE CHAIRMAN; CHIEF EXECUTIVE OFFICER. If the Board of Directors shall elect a Chairman, that person when present shall preside at all meetings of the stockholders and of the Board of Directors. The Chairman shall also have the power to vote shares of stock registered in the name of the Company and shall exercise such other powers and duties as from time to time may be provided in these By-Laws or as may be prescribed by the Board of Directors. If the Chairman shall be designated as Chief Executive Officer of the Company, he or she shall have the general management and direction, subject to the authority of the Board of Directors, of the Company's business and affairs and its officers and employees, with the power to appoint and to remove and discharge any and all employees of the Company not elected or appointed directly by the Board. The Chief Executive Officer shall, upon consultation with the Governance and Compensation Committee of the Board, fix the salaries and bonuses (if any) of all officers and executive employees of the Company and its subsidiaries other than himself. SECTION 4.7 THE PRESIDENT. If the Board of Directors shall elect a President, that person when present and in the absence of a Chairman shall preside at all meetings of the stockholders and of the Board of Directors. If there is no Chairman, or if the Board of Directors shall designate the President as the Chief Executive Officer of the Company, the President shall have all of the powers of the Chief Executive Officer enumerated in the preceding Section. The President shall also have the power to vote shares of stock registered in the name of the Company, and shall exercise such other powers and duties as from time to time may be provided in these By-Laws or as may be prescribed by the Board of Directors. SECTION 4.8 VICE CHAIRMAN, EXECUTIVE VICE PRESIDENT, SENIOR VICE PRESIDENT, VICE PRESIDENT. Each Vice Chairman, Executive Vice President, Senior Vice President or Vice President of the Company shall perform such duties as may from time to time be assigned by the Chief Executive Officer or the Board of Directors. The Chief Executive Officer or the Board of Directors may add words signifying the function or position to the title of any Vice Chairman, Executive Vice President, Senior Vice President or Vice President appointed by the Board. The persons holding the foregoing positions shall -10- each have the power to vote shares of stock registered in the name of the Company where such ownership interest constitutes less than 20% of the total voting interest of the corporation issuing the stock. SECTION 4.9 THE SECRETARY. The Secretary shall record all of the proceedings of the meetings of the stockholders and directors in a book to be kept for that purpose, and shall perform like duties for the standing committees, when requested; shall have custody and care of the corporate seal, records, minutes and stock books of the Company; shall keep a suitable record of the addresses of stockholders and of directors, and shall, except as may be otherwise required by statute or these By-Laws, issue all notices required for meetings of stockholders and of the Board of Directors and committees thereof. The Secretary shall have authority to cause the seal of the Company to be affixed to all papers requiring the seal, to attest the same, and to attest any instruments signed by an officer of the Company. The Secretary shall perform such other duties as from time to time may be assigned by the Chairman, the President or the Board of Directors. SECTION 4.10 THE TREASURER. The Treasurer shall have charge of the safekeeping of the Company's funds, and shall perform such other duties as may from time to time be assigned by the Chief Executive Officer or the Board of Directors. The Treasurer may be required to give bond to the Company, at the Company's expense, for the faithful discharge of his or her duties in such form and in such amount and with such sureties as shall be determined by the Board of Directors. SECTION 4.11 THE CONTROLLER. The Controller shall have charge of the general accounting department of the Company, and shall see that correct accounts of the Company's business are properly kept. He or she shall perform such other duties as from time to time may be assigned by the Chief Executive Officer or the Board of Directors. The Controller may be required to give bond to the Company, at the Company's expense, for the faithful discharge of his or her duties in such form and in such amount and with such sureties as shall be determined by the Board of Directors. SECTION 4.12 GENERAL COUNSEL. The General Counsel shall be the chief legal officer of the Company and shall be responsible for the management of the legal affairs of the Company. The General Counsel shall perform such other duties as from time to time may be assigned by the Chief Executive Officer or the Board of Directors. SECTION 4.13 DEPUTY GENERAL COUNSEL, ASSISTANT CONTROLLER, ASSISTANT SECRETARY, ASSISTANT TREASURER AND ASSISTANT VICE PRESIDENT. The Deputy General Counsel shall assist the General Counsel in such manner and perform such duties as may be designated from time to time by the General Counsel. Each Assistant Vice President shall have such duties as may from time to time be assigned by the Vice President or Vice Presidents to whom he or she reports. Each Assistant Controller, Assistant Secretary and Assistant Treasurer shall assist the Controller, the Secretary or the -11- Treasurer, as the case may be, in the performance of the respective duties of such principal officers. Each Assistant Secretary shall have the authority to affix the corporate seal to any instrument requiring it, to attest the same, and to attest any instrument signed by an officer of the Company. The powers and duties of the Controller, the Secretary, the Treasurer and the General Counsel, respectively, shall in case of the absence, disability, death, resignation, or removal from office of such principal officer, and except as otherwise ordered by the Board of Directors, temporarily devolve upon the first appointed deputy or assistant who is able to serve. Deputy or assistant officers shall perform such other duties as may be assigned to them from time to time. The Chief Executive Officer or the Board of Directors may add words signifying function or position to the title of any deputy or assistant officer. ARTICLE V CAPITAL STOCK SECTION 5.1 CERTIFICATES FOR SHARES. Subject to the provisions of Section 5.2, every holder of fully paid stock in the Company shall be entitled to have a certificate or certificates signed in the name of the Company by the Chairman, the President or any Vice President and by the Secretary or an Assistant Secretary of the Company, representing and certifying the number of shares of the Company's capital stock owned by such holder. Any or all of the signatures on each certificate may be facsimile. In case any officer, transfer agent or registrar whose signature or facsimile signature appears on a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Company with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. SECTION 5.2 CERTIFICATES FOR FRACTIONAL SHARES. The Board of Directors may provide that, with respect to classes or series of stock as to which the issuance and ownership of fractional shares are permitted in accordance with the Restated Certificate of Incorporation, the ownership of fractional interests shall be evidenced by scrip certificates in lieu of the certificates referred to in Section 5.1 of these By-Laws. Any or all of the signatures on each scrip certificate may be facsimile. The Board of Directors may specify from time to time, with respect to any series or class of stock, particular fractions in which ownership will be permitted and recognized and as to which certificates will be issued. SECTION 5.3 REGISTRATION AND TRANSFER OF SHARES. The Company will maintain or cause to be maintained a register for the registration of shares of its capital stock. Transfers of shares and exchanges of stock certificates shall be recorded on the books of the Company only at the request of the holder of record thereof or by his legal representative, who shall furnish proper evidence of authority to transfer, or by his attorney thereunto authorized by power of attorney duly executed and filed with the -12- Secretary of the Company, and only upon the surrender for cancellation of the certificate or certificates for such shares. SECTION 5.4 ONLY HOLDER OF RECORD ENTITLED TO RECOGNITION. The Company shall be entitled to treat the holder of record of any share or shares as the owner thereof for all purposes and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law. SECTION 5.5 FIXING RECORD DATE. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a date as the record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which shall not be more than sixty nor less than ten days (or, in the case of a meeting to vote on a merger or consolidation, not more than sixty nor less than twenty days) before the date of such meeting, nor more than sixty days prior to any other action. The record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be as provided by law. The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. When a determination of stockholders entitled to notice of or to vote at any meeting of stockholders has been made as provided in this Section, such determination shall apply to any adjournment thereof; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 5.6 LOST CERTIFICATES. If an outstanding certificate of stock shall be lost, destroyed or stolen, the holder thereof may have a new certificate issued to him or her upon producing evidence satisfactory to the Company of such loss, destruction, or theft, and also upon furnishing to the Company a bond of indemnity deemed sufficient by the Secretary to protect the Company and any registrar or transfer agent against claims under the certificate alleged to be lost, destroyed or stolen; provided, however, that upon good cause shown the Board of Directors may waive the furnishing of such bond of indemnity. ARTICLE VI MISCELLANEOUS SECTION 6.1 EXECUTION OF INSTRUMENTS. Contracts and other written documents of the Company shall be executed as the Board of Directors may from time to time direct. In the absence of specific directions by the Board, the officers of the Company shall duly -13- execute all necessary contracts and other written instruments properly coming within the scope of their respective powers and duties. When the execution of any contract or other written instrument of the Company has been authorized by the Board of Directors without specification of the executing officers, the Chairman, the President, any Vice Chairman or any Vice President may execute the same in the name and on behalf of the Company and the Secretary or any Assistant Secretary may attest the same and affix the corporate seal thereto. SECTION 6.2 LOANS. No loans (except loans for current expenses) shall be incurred on behalf of the Company and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors or a duly authorized committee thereof. Such authority may be general or confined to specific instances. No loans shall be made by the Company to any director or officer except upon the affirmative vote of a majority of the disinterested directors. SECTION 6.3 BANK DEPOSITS AND CHECK AUTHORIZATION. The funds of the Company shall be deposited to its credit in such banks, trust companies or other financial institutions as may be determined from time to time by the Chairman or President and the Secretary of the Company, evidenced by joint written action. By such joint written action, filed with the minutes of the Board of Directors, the Chairman or President together with the Secretary may authorize (a) the opening of one or more deposit accounts at any such institution and (b) the designation of, or a change in the designation of, the officers or employees upon whose signature checks may be written or funds withdrawn on any Company account at any such institution, provided that the signature of one person other than the Chairman, President and Secretary shall be required therefor. By the adoption of this Section 6.3 of these By-Laws the Board of Directors adopts the form of any resolution or resolutions requested by or acceptable to any financial institution in connection with the foregoing actions, provided that the Secretary of the Company (x) believes that the adoption of such resolution or resolutions is necessary or advisable and (y) files such resolution or resolutions with the minutes of the Board of Directors. SECTION 6.4 FISCAL YEAR. The fiscal year of the Company shall begin on the first Monday after the last Sunday in December of each year and end on the last Sunday in the following December. SECTION 6.5 SEAL. The corporate seal shall be in the form of a circle and shall have inscribed thereon the name of the Company and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed, affixed, printed or otherwise reproduced. The Board of Directors may give general authority to any officer to affix the seal of the Company and to attest the fixing by his or her signature. -14- SECTION 6.6 WAIVER OF NOTICE. Whenever any notice whatever is required to be given by statute, by the Restated Certificate of Incorporation of the Company, by these By-Laws or otherwise, in connection with any meeting of stockholders, directors or members of a committee of directors, a written waiver thereof, signed by the person entitled to such notice, whether before or after the event as to which such notice is required, shall be deemed equivalent to such required notice. In addition, attendance by a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of such meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any meeting of stockholders, directors or members of a committee of directors need be specified in any written waiver of notice. ARTICLE VII AMENDMENTS OF BY-LAWS SECTION 7.1 These By-Laws may be altered, amended or repealed and new by-laws may be made (a) by the stockholders as provided in the Restated Certificate of Incorporation or (b) by the affirmative vote of a majority of the whole Board of Directors at any regular or special meeting thereof. -15- EX-10.20 3 AMENDED/RESTATED EMPLOYEE STOCK PURCHASE PLAN EXHIBIT 10.20 TRIBUNE COMPANY AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN The purpose of the Tribune Company Amended and Restated Employee Stock Purchase Plan (the "Plan") is to enable employees of Tribune Company and its qualified subsidiaries to purchase shares of the Common Stock (without par value) of Tribune Company ("Common Stock") at a discount through payroll withholding. The Plan was amended and restated effective October 24, 1995. 1. SHARES SUBJECT TO PLAN. An aggregate of 4,000,000 shares of Common Stock (the "Shares") may be sold pursuant to the Plan. Such Shares may be authorized but unissued Common Stock or authorized and issued Common Stock acquired by Tribune Company for the purposes of the Plan or held in Tribune Company's Treasury. Shares that are subject to rights granted under the Plan which expire or terminate unexercised shall again be available for sale under the Plan. If there is any change in the outstanding shares of Common Stock by reason of a stock dividend or distribution, stock split-up, recapitalization, combination or exchange of shares, or by reason of any merger, consolidation or other corporate reorganization in which Tribune Company is the surviving corporation, the number of Shares available for sale shall be equitably adjusted by the Committee appointed to administer the Plan to give proper effect to such change. 2. ADMINISTRATION. The Plan shall be administered by a Committee consisting of at least three members of the Board of Directors of Tribune Company. Each member of the Committee shall be a "disinterested person" within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 (or any successor to such Rule) as now or hereafter amended. For as long as it continues to meet this requirement, the Governance and Compensation Committee of the Board of Directors of Tribune Company shall serve as the Committee. The Committee shall have the authority to make rules and regulations governing the administration of the Plan, and any interpretation or decision made by the Committee regarding the administration of the Plan shall be final and conclusive. 3. ELIGIBILITY. All regular employees of Tribune Company, and of each qualified subsidiary of Tribune Company which may be designated by Tribune Company's Board of Directors, other than: (a) employees whose customary employment is 20 hours or less per week; (b) employees whose customary employment is for not more than 5 months per year; and (c) employees who have not been employed for at least one year as of any Enrollment Date (as defined in paragraph 4); shall be eligible to participate in the Plan. For the purposes of this Plan, the term "qualified subsidiary" means any subsidiary, more than 50% of the total combined voting power of all classes of stock in which is now owned or hereafter acquired by Tribune Company or any such qualified subsidiary. The term "subsidiary" means any corporation, 50% or more of the total combined voting power of all classes of stock in which is now owned or hereafter acquired by Tribune Company or any such subsidiary. 4. PARTICIPATION. An eligible employee may elect to participate in the Plan as of any "Enrollment Date". Enrollment Dates shall occur on the first day of each payroll period immediately following a Cutoff Date (as defined in paragraph 8). Any such election shall be made by completing and forwarding a payroll deduction authorization form to the employee's appropriate payroll location prior to such Enrollment Date, authorizing payroll deductions up to, but not exceeding, 10% of the employee's regular rate of cash compensation for the payroll period immediately preceding such Enrollment Date. A participating employee may increase or decrease his payroll deductions as of any subsequent Enrollment Date by completing and forwarding a revised payroll deduction authorization form to his or her appropriate payroll location prior to such Enrollment Date; provided, that changes in payroll deductions shall not be permitted to the extent that they would result in total payroll deductions exceeding 10% of the employee's regular rate of cash compensation for the payroll period immediately preceding the Enrollment Date as of which the change takes effect. An eligible employee may not initiate, increase or decrease payroll deductions as of any date other than an Enrollment Date except by withdrawing from the Plan as provided in paragraph 6. 5. PAYROLL DEDUCTION ACCOUNTS. Tribune Company shall establish a payroll deduction account for each participating employee, and shall credit all payroll deductions made on behalf of each employee pursuant to paragraph 4 to his or her payroll deduction account. No interest shall be credited to any payroll deduction account. 6. WITHDRAWALS. An employee may withdraw from an offering at any time by completing and forwarding a written notice to the employee's appropriate payroll location. Upon receipt of such notice, payroll deductions on behalf of the employee shall be discontinued commencing with the immediately following payroll period, and such employee may not again be eligible to participate in the Plan until the next Enrollment Date. Amounts credited to the payroll deduction account of any employee who withdraws shall remain in the account and be used to purchase Shares in accordance with paragraph 8 hereof, subject to the limitations in paragraph 7 hereof. 7. OFFERINGS. The third Wednesday of each March, June, September and December prior to the termination of the Plan shall constitute the purchase dates (the "Purchase Dates") on which each employee for whom a payroll deduction account has been maintained shall purchase the number of Shares determined under paragraph 8(a). Notwithstanding the foregoing, Tribune Company shall not permit the exercise of any right to purchase Shares: (a) to an employee who, immediately after the right is granted, would own stock possessing 5% or more of the total combined voting power or value of all classes of stock of Tribune Company or any subsidiary; or -2- (b) which would permit an employee's rights to purchase stock under this Plan, or under any other qualified employee stock purchase plan maintained by Tribune Company or any subsidiary, to accrue at a rate in excess of $25,000 of the fair market value of such stock (determined at the time such rights are granted) for each calendar year in which the right is outstanding at any time. For the purposes of subparagraph (a), the provisions of Section 425(d) of the Internal Revenue Code shall apply in determining the stock ownership of an employee, and the stock which an employee may purchase under outstanding rights or options shall be treated as stock owned by the employee. 8. PURCHASE OF SHARES. (a) Subject to the limitations set forth in paragraph 7, each employee participating in an offering shall have the right to purchase as many whole Shares (plus any fractional interest in a Share) as may be purchased with the amounts credited to his or her payroll deduction account as of the payroll date coinciding with or immediately preceding the second Wednesday of the month in which occurs the applicable Purchase Date (the "Cutoff Date"). Employees may purchase Shares only through payroll deductions, and cash contributions shall not be permitted. (b) The Purchase Price for each Share shall be 85% of the closing price of one share of Common Stock as reported on the New York Stock Exchange Composite Transactions list for the applicable Purchase Date. If no sales of Common Stock were reported on that date, the Purchase Price shall be the closing price of one share of Common Stock reported for the last preceding date on which sales of Common Stock were so reported. (c) On each Purchase Date, the amount credited to each participating employee's payroll deduction account as of the immediately preceding Cutoff Date shall be applied to purchase as many whole Shares (plus any fractional interest in a Share) as may be purchased with such amount at the applicable Purchase Price. Any amounts remaining in an employee's payroll deduction account as of the relevant Cutoff Date in excess of the amount that may properly be applied to the purchase of Shares shall be refunded to the employee as soon as practicable. 9. BROKERAGE ACCOUNTS OR PLAN SHARE ACCOUNTS. By enrolling in the Plan, each participating employee shall be deemed to have authorized the establishment of a brokerage account on his or her behalf at a securities brokerage firm selected by the Committee. Alternatively, the Committee may provide for Plan share accounts for each participating employee to be established by Tribune Company or by an outside entity selected by the Committee which is not a brokerage firm. Shares purchased by an employee pursuant to the Plan shall be held in the employee's brokerage or Plan share account in his or her name, or if the employee so indicates on his or her payroll deduction authorization form, in the employee's name jointly with a member of the employee's family, with right of survivorship. An employee who is a resident of a jurisdiction which does not recognize such a joint tenancy may request that such Shares be held in his or her name as tenant in common with a member of the employee's family, without right of survivorship. -3- 10. RIGHTS AS STOCKHOLDER. An employee shall have no rights as a stockholder with respect to Shares subject to any rights granted under this Plan until payment for such Shares has been completed at the close of business on the relevant Purchase Date. An employee shall have no right to vote any fractional interest in a Share credited to his account. 11. CERTIFICATES. Certificates for whole Shares purchased shall be issued as soon as practicable following an employee's written request. Tribune Company may make a reasonable charge for the issuance of such certificates. Fractional interests in Shares shall be carried forward in an employee's brokerage or Plan share account until they equal one whole Share or until the termination of the employee's participation in the Plan, in which event an amount in cash equal to the value of such fractional interest shall be paid to the employee in cash. 12. TERMINATION OF EMPLOYMENT. If a participating employee's employment is terminated for any reason, including death, if an employee is granted a leave of absence of more than 90 days duration or if an employee otherwise ceases to be eligible to participate in the Plan, payroll deductions on behalf of the employee shall be discontinued and any amounts then credited to the employee's payroll deduction account shall remain in the account and be used to purchase Shares in accordance with paragraph 8 hereof, subject to the limitations in paragraph 7 hereof. 13. RIGHTS NOT TRANSFERABLE. Rights granted under this Plan are not transferable by a participating employee other than by will or the laws of descent and distribution, and are exercisable during an employee's lifetime only by the employee. 14. EMPLOYMENT RIGHTS. Neither participation in the Plan, nor the exercise of any right granted under the Plan, shall be made a condition of employment, or of continued employment, with Tribune Company or any subsidiary. 15. APPLICATION OF FUNDS. All funds received by Tribune Company pursuant to this Plan may be used for any corporate purpose. 16. AMENDMENTS. The Board of Directors may at any time, and from time to time, amend this Plan in any respect, except that no amendment: (a) increasing the number of Shares available for sale under this Plan (other than as permitted by paragraph 1); (b) changing the classification of employees eligible to participate in the Plan or the definitions of "subsidiary" or "qualified subsidiary"; or (c) materially changing the method for determining the Purchase Price of Shares; -4- shall be made without the affirmative vote of stockholders holding at least a majority of the voting power of all shares of Tribune Company represented in person or by proxy at a duly held stockholders' meeting. 17. TERMINATION. This Plan, and all rights of employees under any offering hereunder, shall terminate upon the first to occur of: (a) December 31, 1996; (b) the date on which the Committee determines that the total number of Shares then available for sale under the Plan is not sufficient to meet all unfilled purchase requirements; or (c) the date on which the Plan is terminated by the Board of Directors of Tribune Company. Upon termination of the Plan, all payroll deductions shall cease and all amounts then credited to the participating employees' payroll deduction accounts shall be equitably applied to the purchase of whole Shares then available for sale, and any remaining amounts shall be promptly refunded to the participating employees. 18. APPLICABLE LAWS. This Plan, and all rights granted hereunder, are intended to meet the requirements of an "employee stock purchase plan" under Section 423 of the Internal Revenue Code, as from time to time amended, and the Plan shall be construed and interpreted to accomplish this intent. Sales of Shares under the Plan are subject to, and shall be accomplished only in accordance with, the requirements of all applicable securities and other laws. 19. EXPENSES. Except to the extent provided in paragraph 11, all expenses of administering the Plan, including expenses incurred in connection with the purchase of Shares for sale to participating employees, shall be borne by Tribune Company and its subsidiaries. -5- EX-11 4 STMT. OF 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) Fiscal Year Ended December -------------------------------- PRIMARY 1995 1994 1993 - - ------- -------- -------- -------- Income from continuing operations $245,458 $233,149 $204,646 Income (loss) from discontinued operations of QUNO 32,707 8,898 (16,040) -------- -------- -------- Net income 278,165 242,047 188,606 Preferred dividends, net of tax (18,841) (18,574) (18,439) -------- -------- -------- Net income attributable to common shares $259,324 $223,473 $170,167 -------- -------- -------- Weighted average common shares outstanding 64,790 67,213 66,371 -------- -------- -------- Primary net income per share: Continuing operations (A) $ 3.50 $ 3.19 $ 2.80 Discontinued operations .50 .13 (.24) -------- -------- -------- Total $ 4.00 $ 3.32 $ 2.56 ======== ======== ======== FULLY DILUTED - - ------------- Income from continuing operations $245,458 $233,149 $204,646 Additional ESOP contribution required assuming all preferred shares were converted, net of tax (11,377) (11,822) (12,442) Assumed elimination of tax benefit on certain ESOP preferred dividends (3,382) (2,817) (2,248) -------- -------- -------- Adjusted income from continuing operations 230,699 218,510 189,956 Income (loss) from discontinued operations of QUNO 32,707 8,898 (16,040) -------- -------- -------- Adjusted net income $263,406 $227,408 $173,916 -------- -------- -------- Weighted average common shares outstanding 64,790 67,213 66,371 Assumed conversion of preferred shares into common shares 5,887 6,050 6,126 Assumed exercise of stock options, net of common shares assumed repurchased with the proceeds 829 810 1,198 -------- -------- -------- Adjusted weighted average common shares outstanding 71,506 74,073 73,695 -------- -------- -------- Fully diluted net income per share: Continuing operations $ 3.22 $ 2.95 $ 2.58 Discontinued operations .46 .12 (.22) -------- -------- -------- Total $ 3.68 $ 3.07 $ 2.36 ======== ======== ========
(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. See Notes to Consolidated Financial Statements. EX-12 5 COMP. OF RATIO OF EARNINGS TO FIXED CHARGES
EXHIBIT 12 TRIBUNE COMPANY COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES(A) (In thousands, except ratios) Fiscal Year Ended December ---------------------------------------------------- 1995 1994 1993 1992 1991 -------- -------- -------- -------- -------- Income from continuing operations before cumulative effects of accounting changes $245,458 $233,149 $204,646 $179,534 $158,049 Add: Income tax expense 167,076 158,698 142,212 120,089 106,514 Losses on equity investments 13,209 9,739 1,857 1,903 1,107 -------- -------- -------- -------- -------- Subtotal 425,743 401,586 348,715 301,526 265,670 -------- -------- -------- -------- -------- Fixed charge adjustments Add: Interest expense 21,814 20,585 24,660 35,301 45,588 Amortization of capitalized interest 2,253 2,362 2,392 2,434 2,435 Interest component of rental expense(B) 8,200 8,236 8,732 8,182 7,647 -------- -------- -------- -------- -------- Earnings, as adjusted $458,010 $432,769 $384,499 $347,443 $321,340 ======== ======== ======== ======== ======== Fixed charges: Interest expense $ 21,814 $ 20,585 $ 24,660 $ 35,301 $ 45,588 Interest capitalized 610 - 1,099 1,092 146 Interest component of rental expense(B) 8,200 8,236 8,732 8,182 7,647 Interest related to guaranteed ESOP debt(C) 22,057 24,017 25,742 27,019 27,500 -------- -------- -------- -------- -------- Total fixed charges $ 52,681 $ 52,838 $ 60,233 $ 71,594 $ 80,881 ======== ======== ======== ======== ======== Ratio of Earnings to Fixed Charges 8.7 8.2 6.4 4.9 4.0 ======== ======== ======== ======== ========
(A) The Company's financial statements and this exhibit have been restated to reflect earnings from QUNO, net of income tax, as discontinued operations. (B) Represents a portion of rental expense incurred by the Company, which is a reasonable approximation of the interest cost component of such expense. (C) Tribune Company guarantees the debt of its Employee Stock Ownership Plan (ESOP). EX-13 6 ANNUAL REPORT EXHIBIT 13 Tribune Company and Subsidiaries MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following discussion presents the significant factors that have affected the businesses of Tribune Company and its subsidiaries (the "Company") over the last three years. This commentary should be read in conjunction with the Company's consolidated financial statements and Eleven Year Financial Summary, which are also presented in this annual report. Certain prior year amounts have been restated to conform with the 1995 presentation. SIGNIFICANT EVENTS AND TRENDS ................................................................................ In December 1995, the Company announced it had agreed to sell all of its holdings in QUNO Corporation, a Canadian newsprint producer, as part of QUNO's agreement to merge with Donohue Inc. Donohue will pay approximately C$30.50 per common QUNO share. The transaction is subject to approval by QUNO's stockholders and is scheduled to close in March 1996. Tribune owns approximately 34% of QUNO's common stock plus $138.8 million in convertible debt. Upon conversion of this debt, the Company's ownership of QUNO increases to 53%, or 19.2 million of 36.2 million common shares outstanding. The Company's gross proceeds from the sale will be approximately US$425 million (C$585 million), consisting of US$285 million in cash, US$75 million in short-term notes and US$65 million in Donohue common stock (5.6 million shares valued at C$17 per share). After-tax proceeds will be approximately US$330 million. The Company will record an after-tax gain of approximately $85 million upon completion of the transaction. The exact amount of the proceeds received and the gain recorded will depend upon several factors at the date the transaction is consummated, including the U.S./Canadian dollar exchange rate and Donohue's stock price. The Company's consolidated financial statements have been restated to reflect equity earnings from QUNO, interest income from the QUNO convertible debenture and the 1994 gain on the sale of QUNO common shares, net of income tax, as discontinued operations. The Major League Baseball players' contract expired on December 31, 1993. The Major League Baseball Players Association initiated a strike on August 12, 1994, and on August 28, 1994, the owners cancelled the remainder of the 1994 Major League Baseball season. In April 1995, the National Labor Relations Board invalidated the owners' posted rules, and the players ended their strike. The 1995 baseball season began April 26, 1995. The strike shortened the 1995 season by 18 games and continued to impact attendance throughout the season. Negotiations for a new players' contract are continuing. The North American newsprint industry has increased newsprint prices several times since the beginning of 1994 due to higher demand for newsprint in the U.S. and overseas. As a result, average newsprint transaction prices increased 45% in 1995 over 1994. The higher newsprint prices increased newsprint expense at the Company's newspapers by approximately $75 million in 1995. The Company's publishing operations offset most of this increase through cost controls, a decrease in newsprint consumption and revenue increases. Although another 10% price increase has been announced for April 1996, there are indications in the industry that this may be delayed. QUNO's operating results in 1994 and 1995 benefited from the price increases. 35 RESULTS OF OPERATIONS ................................................................................ The Company's fiscal year ends on the last Sunday in December. Fiscal year 1995 comprised 53 weeks, while fiscal years 1994 and 1993 comprised 52 weeks. The effect of the additional week in 1995 on the comparisons of the financial statements taken as a whole is generally not significant. ACQUISITIONS AND DISPOSITIONS The Company has acquired eight businesses since the middle of 1993. In 1993, the Company acquired Contemporary Books in July and Compton's NewMedia in September. In 1994, the Company acquired The Wright Group in February, television station WLVI-Boston in April and Farm Journal, Inc. in June. In 1995, the Company purchased RELCON, Inc. in January, Jamestown Publishers, Inc. in May and Everyday Learning Corporation in August. The results of these businesses have been included in the consolidated financial statements since their dates of acquisition. The Company has also made several equity investments, including TV Food Network and Picture Network International in 1993 and The Warner Bros. Television Network, Qwest Broadcasting LLC and Interealty in 1995. The Company's share of these companies' results of operations has been included in the consolidated financial statements since their investment date. In December 1995, the Company sold its Compton's NewMedia subsidiary to SoftKey International Inc. for $120.5 million of SoftKey common shares and a $3 million note and also invested $150 million in SoftKey convertible notes. These transactions resulted in a pretax gain of $6.9 million and an after-tax gain of $4.1 million, or $.06 per share on a primary basis. In July 1995, the Company sold its California newspaper subsidiary, Times Advocate Company in Escondido, for approximately $16 million in cash. The sale resulted in a pretax loss of $7.5 million and an after-tax loss of $4.5 million, or $.07 per share. In March 1995, the Company sold shares of America Online common stock for approximately $17 million. The sale resulted in a pretax gain of $15.3 million and an after- tax gain of $9.1 million, or $.14 per share. In April 1994, the Company reduced its ownership holdings in QUNO to 34% by selling 5.5 million shares of QUNO common stock. The sale of the shares resulted in an after-tax gain in 1994 of approximately $13 million, or $.19 per share. CONSOLIDATED The Company's consolidated financial results for 1995, 1994 and 1993 were as follows:
Change (Dollars in millions, except per share amounts) 1995 1994 1993 95-94 94-93 ====================================================================================== Operating revenues $2,244 $2,112 $1,911 + 6% + 11% Operating profit 405 396 356 + 2% + 11% Dispositions of subsidiary stock and investment 15 - - * - Income from continuing operations 245 233 205 + 5% + 14% Income (loss) from discontinued operations of QUNO 33 9 (16) +268% * Net income 278 242 189 + 15% + 28% Before dispositions 269 229 189 + 18% + 21% Primary net income per share Continuing operations 3.50 3.19 2.80 + 10% + 14% Discontinued operations .50 .13 (.24) +285% * Total 4.00 3.32 2.56 + 20% + 30% Before dispositions 3.87 3.13 2.56 + 24% + 22% * Not meaningful
NET INCOME PER SHARE -- The 24% increase in 1995 primary net income per share before dispositions was primarily due to strong results from QUNO, increased television operating profit and a lower number of shares outstanding as a result of stock repurchases during 1995. The 22% increase in 1994 primary net income per share before dispositions was due to higher profits from all three of the Company's business segments, lower equity losses from QUNO and lower net interest expense. Average common shares outstanding decreased 4% in 1995 and increased 1% in 1994. 36 OPERATING PROFIT AND REVENUES -- The following table shows consolidated operating revenues, EBITDA (earnings before interest, taxes, depreciation and amortization) and operating profit by business segment:
Change (Dollars in millions) 1995 1994 1993 95-94 94-93 ============================================================================= Operating revenues Publishing $1,312 $1,246 $1,163 + 5% + 7% Broadcasting and Entertainment 829 764 727 + 8% + 5% Education 103 102 21 + 1% +381% - - ----------------------------------------------------------------------------- Total operating revenues $2,244 $2,112 $1,911 + 6% + 11% - - ----------------------------------------------------------------------------- EBITDA Publishing $ 344 $ 359 $ 318 - 4% + 13% Broadcasting and Entertainment 198 168 161 + 18% + 4% Education 13 10 4 + 33% +175% Corporate expenses (29) (25) (24) - 18% - 4% - - ----------------------------------------------------------------------------- Total EBITDA $ 526 $ 512 $ 459 + 3% + 12% - - ----------------------------------------------------------------------------- Operating profit Publishing $ 270 $ 287 $ 253 - 6% + 14% Broadcasting and Entertainment 160 132 125 + 21% + 5% Education 5 3 2 + 62% + 37% Corporate expenses (30) (26) (24) - 15% - 7% - - ----------------------------------------------------------------------------- Total operating profit $ 405 $ 396 $ 356 + 2% + 11% - - -----------------------------------------------------------------------------
As shown above, consolidated 1995 operating revenues were up 6%, or $132 million, from 1994 and 1994 revenues increased 11%, or $201 million, from 1993, with all three segments reporting gains in both 1995 and 1994. Consolidated operating profit increased 2%, or $9 million, in 1995. Publishing was down $17 million due primarily to higher newsprint prices, while broadcasting and entertainment was up $28 million due mainly to higher television profits. Consolidated 1995 EBITDA was up $14 million, or 3%, due primarily to broadcasting and entertainment, which was up $30 million, or 18%. Consolidated operating profit increased 11%, or $40 million, in 1994. Publishing was up $34 million, and broadcasting and entertainment was up $7 million, primarily due to increased advertising revenues. Consolidated 1994 EBITDA was up $53 million, or 12%, due primarily to publishing, which was up $41 million. OPERATING EXPENSES -- Consolidated operating expenses were as follows:
Change (Dollars in millions) 1995 1994 1993 95-94 94-93 ============================================================================= Cost of sales $1,164 $1,059 $1,008 + 10% + 5% Selling, general and administrative 554 542 444 + 2% + 22% Depreciation and amortization of intangible assets 121 115 103 + 5% + 12% - - ----------------------------------------------------------------------------- Total operating expenses $1,839 $1,716 $1,555 + 7% + 10% - - -----------------------------------------------------------------------------
The 10%, or $105 million, increase in cost of sales in 1995 was due primarily to increased newsprint and ink expense and additional costs from six acquisitions made since the beginning of 1994. Excluding the acquisitions, cost of sales increased $82 million, or 8%. Newsprint and ink expense rose $67 million, or 36%, as average newsprint transaction prices increased 45%. The 5% increase in cost of sales in 1994 was due primarily to the additional costs from five acquisitions made since mid-1993, increased newsprint and ink expense and increased compensation expense. Excluding the acquisitions, cost of sales increased $14 million, or 1%, in 1994. Newsprint and ink expense was up $5 million, or 3%, and compensation expense was up $6 million, or 2%. 37 Selling, general and administrative expense increased 2%, or $12 million, in 1995 mainly due to the acquisitions. Excluding the acquisitions, SG&A expense remained virtually unchanged in 1995. SG&A expense increased 22% in 1994 from 1993, mainly due to the acquisitions. Excluding the acquisitions, SG&A expense increased $35 million, or 8%, due primarily to increased compensation costs of $12 million, or 6%, and increased sales costs of $8 million, or 15%. The increase in depreciation and amortization of intangible assets in both 1995 and 1994 was principally due to the acquisitions and capital expenditures. PUBLISHING OPERATING PROFIT AND REVENUES -- The following table, which excludes Times Advocate Company, 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, alternate delivery services, direct mail operations, online/electronic products and, for EBITDA and operating profit, equity losses from investments.
Change (Dollars in millions) 1995 1994 1993 95-94 94-93 ============================================================================================ Operating revenues Daily newspapers $1,238 $1,176 $1,099 + 5% + 7% Other publications/services/development 66 53 48 + 23% + 12% - - -------------------------------------------------------------------------------------------- Total operating revenues $1,304 $1,229 $1,147 + 6% + 7% - - -------------------------------------------------------------------------------------------- EBITDA Daily newspapers $ 350 $ 368 $ 323 - 5% + 14% Other publications/services/development (5) (7) (3) + 25% -121% - - -------------------------------------------------------------------------------------------- Total EBITDA $ 345 $ 361 $ 320 - 4% + 13% - - -------------------------------------------------------------------------------------------- Operating profit Daily newspapers $ 281 $ 301 $ 262 - 7% + 15% Other publications/services/development (9) (10) (6) + 6% - 85% - - -------------------------------------------------------------------------------------------- Total operating profit $ 272 $ 291 $ 256 - 7% + 14% - - --------------------------------------------------------------------------------------------
Publishing operating revenues, excluding Times Advocate, increased 6%, or $75 million, in 1995 due principally to higher advertising revenues of 6%, or $57 million. Operating revenues increased 7%, or $82 million, in 1994 due primarily to increased advertising revenues of 10%, or $85 million. Including Times Advocate, operating revenues were up 5% and 7% in 1995 and 1994, respectively. Operating profit for 1995, excluding Times Advocate, was down 7% to $272 million from $291 million in 1994 as gains in operating revenues were more than offset by increased expenses that resulted primarily from significantly higher newsprint prices. Publishing operating profit rose to $291 million in 1994, a $35 million increase from 1993. This increase resulted from higher revenues, partially offset by increased costs to support these revenues and higher development expenditures. Including Times Advocate, operating profit declined 6% in 1995 and rose 14% in 1994. Daily newspaper operating margins, excluding Times Advocate, were 22.7% in 1995 compared to 25.6% in 1994 and 23.8% in 1993. The decline in 1995 was mainly due to the significant increase in newsprint costs. The increase in 1994 was due primarily to higher revenues. 38 Total publishing revenues by classification, excluding Times Advocate, were as follows:
Change (Dollars in millions) 1995 1994 1993 95-94 94-93 ============================================================================================ Advertising Retail $ 447 $ 430 $ 410 + 4% + 5% General 130 135 120 - 3% + 12% Classified 427 382 332 + 12% + 15% - - -------------------------------------------------------------------------------------------- Total advertising 1,004 947 862 + 6% + 10% Circulation 249 241 244 + 3% - 1% Other 51 41 41 + 26% + 3% - - -------------------------------------------------------------------------------------------- Total revenues $1,304 $1,229 $1,147 + 6% + 7% - - --------------------------------------------------------------------------------------------
Advertising revenues in 1995 increased largely due to rate increases. Retail advertising revenues increased due primarily to improvements in the general merchandise category in Chicago. Classified advertising revenues rose 12% as a result of increased help wanted advertising at all of the newspapers and increased real estate advertising in Chicago and Fort Lauderdale. General advertising was down 3% in 1995 due to decreased transportation advertising in Chicago and Fort Lauderdale. All of the Company's newspapers reported improvements in each of the three advertising categories in 1994 due to both linage and advertising rate increases. The 5% rise in retail advertising revenues was due to increases in the department store and food and drug categories at all of the newspapers. General advertising revenues climbed 12% due to higher advertising in the transportation and media categories. Classified advertising revenues rose 15% due to increases in help wanted, automotive and real estate advertising. The following table presents advertising linage for 1995, 1994 and 1993, excluding Times Advocate:
Change (Inches in thousands) 1995 1994 1993 95-94 94-93 ============================================================================================ Full run Retail 3,930 4,147 4,008 - 5% + 3% General 695 703 630 - 1% + 12% Classified 6,525 6,484 6,006 + 1% + 8% - - -------------------------------------------------------------------------------------------- Total full run 11,150 11,334 10,644 - 2% + 6% Part run 9,743 9,995 9,361 - 3% + 7% Preprint 8,765 8,400 7,587 + 4% + 11% - - -------------------------------------------------------------------------------------------- Total inches 29,658 29,729 27,592 - + 8% - - --------------------------------------------------------------------------------------------
Total advertising linage in 1995, excluding Times Advocate, was virtually unchanged from 1994. Full run retail advertising linage was down at all four of the newspapers. Part run advertising linage was down 3% in 1995 due primarily to decreases at Orlando in both retail and classified. Preprint advertising linage increased 4% in 1995 due in part to a new large customer in Chicago. The 1994 increases in all categories reflected improved economic conditions in most of the Company's major markets. Preprint linage also benefited from an increase in the number of advertising zones offered by the Company's newspapers. Increased zones enable advertisers to target special market areas for their advertisements. Circulation revenues, excluding Times Advocate, increased 3% in 1995 due primarily to selective price increases and decreased 1% in 1994 due to declining copies. Total average daily circulation, excluding Times Advocate, was down slightly in 1995 to 1,314,000 from 1,318,000 in 1994, and total average Sunday circulation also was down slightly to 1,970,000 in 1995 from 1,973,000 in 1994. Total average daily circulation decreased 1% in 1994 to 1,318,000 copies from 1,335,000 copies in 1993, while total average Sunday circulation decreased 1% to 1,973,000 in 1994 from 1,987,000 copies in 1993. Other revenues are derived from advertising placement services; the syndication of columns, features, information and comics to newspapers; commercial printing operations; direct mail operations; and other publishing- related activities. Excluding Times Advocate, 39 the 1995 increase in other revenues resulted primarily from higher advertising placement services and from the addition of RELCON, Inc., acquired in January 1995. The increase in 1994 resulted primarily from higher revenues generated by advertising placement services. OPERATING EXPENSES -- Publishing operating expenses increased 9% in 1995 and 5% in 1994. Excluding Times Advocate, operating expenses increased 10%, or $94 million, in 1995. Newsprint and ink expense rose $69 million, or 37%, as average newsprint selling prices increased 45%. Newsprint consumption declined 5% in 1995 mainly due to lower full run and part run linage and to actions at the newspapers to reduce newsprint usage. Compensation costs rose $18 million, or 5%, with full-time equivalent employees down slightly from 1994. Publishing operating expenses, excluding Times Advocate, increased $47 million, or 5%, in 1994 due to higher compensation, circulation, depreciation and amortization, and newsprint and ink expenses. Compensation costs rose $16 million, or 5%, with full-time equivalent employees unchanged from 1993. Circulation costs rose $2 million, or 2%, in 1994 primarily due to higher expenses for expanded total market coverage in Chicago. Depreciation and amortization expense increased $6 million, or 10%, due principally to capital expenditures. Newsprint and ink expense increased $5 million, or 3%, in 1994. Newsprint consumption increased 9%, while the average cost of newsprint consumed declined 5% due to lower average newsprint selling prices. Newsprint prices declined in the first half of 1994 and then increased in the second half. 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 (a regional news cable channel) and, for EBITDA and operating profit, the Company's equity losses from The WB Network and TV Food Network.
Change (Dollars in millions) 1995 1994 1993 95-94 94-93 ============================================================================================ Operating revenues Television $ 630 $ 599 $ 537 + 5% + 12% Radio 88 69 59 + 29% + 17% Entertainment/Chicago Cubs 104 92 130 + 13% - 29% Cable Programming/Development 7 4 1 + 51% +190% - - -------------------------------------------------------------------------------------------- Total operating revenues $ 829 $ 764 $ 727 + 8% + 5% - - -------------------------------------------------------------------------------------------- EBITDA Television $ 215 $ 189 $ 147 + 14% + 29% Radio 15 13 14 + 15% - 5% Entertainment/Chicago Cubs (17) (24) 9 + 29% -375% Cable Programming/Development (15) (10) (9) - 42% - 23% - - -------------------------------------------------------------------------------------------- Total EBITDA $ 198 $ 168 $ 161 + 18% + 4% - - -------------------------------------------------------------------------------------------- Operating profit Television $ 186 $ 162 $ 120 + 15% + 35% Radio 11 10 11 + 16% - 10% Entertainment/Chicago Cubs (21) (28) 4 + 25% -795% Cable Programming/Development (16) (12) (10) - 39% - 20% - - -------------------------------------------------------------------------------------------- Total operating profit $ 160 $ 132 $ 125 + 21% + 5% - - --------------------------------------------------------------------------------------------
Broadcasting and entertainment revenues increased 8%, or $65 million, in 1995 from $764 million in 1994. Television revenues were up 5%, or $31 million, with strong growth at all of the Company's stations except KTLA-Los Angeles and KWGN-Denver, which declined from 1994 due to soft advertising markets. The largest increases were reported by WGN-Chicago, WPIX-New York and WPHL- Philadelphia. Television revenues include those of WLVI-Boston, acquired in April 1994. Excluding WLVI-Boston, television revenues were up 4%, or $25 million, in 1995. Radio revenues include those of Farm Journal Inc., acquired in June 1994. Excluding Farm Journal, radio revenues were up 4%. Entertainment/ Chicago Cubs revenues were up 13% in 1995 as a result of higher Cubs revenues and more shows in syndication. Cubs revenues in 1994 and 1995 were impacted 40 by the Major League Baseball strike that began August 12, 1994 and cancelled the remainder of the 1994 season. The strike also shortened the 1995 baseball season by 18 games and continued to impact attendance throughout the season. Broadcasting and entertainment revenues increased 5%, or $37 million, in 1994 due to a 12%, or $62 million, increase in television revenues, partially offset by a $38 million decrease in revenues from entertainment/Chicago Cubs. Television revenues were up at all of the Company's stations in 1994, with the largest increases reported by WPIX-New York, KTLA-Los Angeles and WGN-Chicago. Excluding WLVI-Boston, television revenues were up 7%, or $36 million, in 1994. Excluding Farm Journal, radio revenues were up 1%. Entertainment/Chicago Cubs revenues were down 29% as a result of the baseball strike and fewer shows in syndication. Revenues of approximately $30 million were lost due to the strike, mostly from the Chicago Cubs. Operating profit was up 21%, or $28 million, in 1995 to a record $160 million due primarily to a 15%, or $24 million, increase in television and a 25%, or $7 million, improvement in entertainment/Chicago Cubs. Entertainment results in 1994 were significantly impacted by programming and development costs recorded for "The Road," a program cancelled in 1995. These improvements were partially offset by equity losses from the Company's recent investment in The WB Network. Operating profit was up 5% in 1994 to $132 million due primarily to a 35%, or $42 million, increase in television operating profit. The segment's operating profit was reduced by an estimated $40 million loss resulting from the combined impact of the baseball strike and significant development and programming expenses for "The Road," CLTV News and TV Food Network. OPERATING EXPENSES -- Broadcasting and entertainment operating expenses increased 6%, or $37 million, in 1995 due primarily to the 1994 acquisitions of Farm Journal and WLVI-Boston, equity losses from The WB Network, and increased Chicago Cubs expenses as more games were played in 1995. These increases were partially offset by a reduction in programming and development costs for "The Road." Excluding WLVI-Boston, Farm Journal and the Cubs, total operating expenses for the group were up $7 million, or 1%. Expenses for the group increased 5%, or $30 million, in 1994 due principally to the two 1994 acquisitions and programming and development costs for "The Road" and TV Food Network. These increases were partially offset by the expense savings associated with the baseball strike. Excluding WLVI-Boston, Farm Journal and the Cubs, total operating expenses for the group were up 6%, or $33 million, as a result of the programming and development costs for "The Road" and TV Food Network and higher compensation costs. Compensation costs rose 8%, or $10 million, due to higher benefits and normal wage increases. EDUCATION OPERATING PROFIT AND REVENUES -- The following table presents operating revenues, EBITDA and operating profit for the Company's education segment. This segment consists of the following businesses--Contemporary Books, acquired in July 1993; Compton's, acquired in September 1993 and sold in December 1995; The Wright Group, acquired in February 1994; Jamestown Publishers, acquired in May 1995; and Everyday Learning, acquired in August 1995.
Change (Dollars in millions) 1995 1994 1993 95-94 94-93 ============================================================================================ Operating revenues $ 103 $ 102 $ 21 + 1% +381% EBITDA 13 10 4 + 33% +175% Operating profit 5 3 2 + 62% + 37%
Education revenues are derived from publishing supplemental education and adult education materials, trade books and multimedia products. The multimedia products were sold primarily by Compton's, which was sold in 1995. Education operating revenues in 1995 increased 1% to $103 million from $102 million in 1994. Excluding Compton's, operating revenues were up 29% to $77 million in 1995 from $59 million in 1994. This increase was due to growth at both The Wright Group and Contemporary Books and to the acquisitions of Jamestown and Everyday Learning. Excluding Compton's, Jamestown and Everyday Learning, revenues were up 22% in 1995. Education operating profit increased 62%, or $2 million, in 1995 to $5 million. Excluding Compton's $12 million operating loss in 1995 and $11 million operating loss in 1994, operating profit was up 21% to $17 million and EBITDA increased 21% to $22 million in 1995. The increases were due to improvements at The Wright Group and Contemporary Books, offset partially by losses at Everyday Learning. Everyday Learning's revenues are highly seasonal and substantially all of its profits are earned in the summer months, which was prior to its acquisition by the Company. Excluding Compton's, 1993 revenues for the education group were $8 million and operating profit was $1 million. OPERATING EXPENSES -- Education expenses were $98 million in 1995 and $99 million in 1994. Excluding Compton's, operating expenses were up 32% to $60 million in 1995 41 from $46 million in 1994 due mainly to higher sales volume and the acquisitions of The Wright Group in 1994 and Everyday Learning in 1995. DISCONTINUED OPERATIONS (QUNO CORPORATION) Income from discontinued operations of QUNO in 1995 was $32.7 million, or $.50 per share compared with $8.9 million, or $.13 per share, in 1994. Excluding the $13 million gain on the April 1994 QUNO stock sale, there was a loss from discontinued operations of $4.1 million, or $.06 per share in 1994. The improvement in 1995 was mainly due to increased newsprint prices and higher sales volume. QUNO's average newsprint selling prices increased 47% in 1995, and newsprint shipments were up 6%. The 1994 loss from discontinued operations of $4.1 million, before the $13 million stock sale gain, compared to a 1993 loss of $16.0 million. The 1993 loss from discontinued operations reduced primary net income per share by $.24. The improvement in 1994 was the result of increased newsprint shipments and the absence of a one-time $13 million pretax charge recorded by QUNO in 1993 for the closure of a pulping operation. QUNO's newsprint shipments in 1994 were up 6%, while average newsprint selling prices were down 1%. INTEREST INCOME AND EXPENSE The components of net interest expense were as follows:
Change (Dollars in millions) 1995 1994 1993 95-94 94-93 ============================================================================================ Interest income $ 14 $ 16 $ 15 - 8% + 5% Interest expense (21) (21) (25) + 6% - 17% - - -------------------------------------------------------------------------------------------- Net interest expense $ (7) $ (5) $ (10) + 54% - 50% - - --------------------------------------------------------------------------------------------
Interest income consists primarily of interest on a mortgage note receivable from a real estate affiliate and short-term marketable securities. Interest expense increased 6% in 1995 due to higher average debt levels. Average debt levels increased approximately $13 million in 1995 to $501 million. Outstanding debt increased to $786 million at year-end 1995 from $439 million at the end of 1994. Interest expense decreased 17% in 1994 to $21 million due to lower average debt levels. Average debt levels declined approximately $97 million in 1994 to $488 million. Outstanding debt dropped to $439 million at year-end 1994 from $537 million at the end of 1993. LIQUIDITY AND CAPITAL RESOURCES ................................................................................ Cash flow generated from operations is the Company's primary source of liquidity. Net cash provided by operations was $394 million in 1995 and $369 million in 1994. 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 $393 million in 1995 as the Company spent $312 million for acquisitions and investments. In 1995, the Company invested $150 million in SoftKey International Inc. and $70 million in Qwest Broadcasting LLC and capital spending totaled $118 million. The Company received $33 million in 1995 from the Times Advocate and America Online common stock sales. In 1995, financing proceeds from the issuance of long-term debt and the sale of stock to employees were offset by dividends, purchases of treasury stock and repayments of long-term debt. In 1995, the Company issued $180 million of medium-term notes with an average interest rate of 6.4% and repurchased 5.2 million shares of its common stock for $315 million. In December 1995, the Board of Directors authorized the Company to acquire an additional 5 million shares. Dividends on common and preferred shares were $91 million in 1995. Dividends on common stock increased 8% in 1995 to $1.12 per share. At December 31, 1995, the Company had commercial paper outstanding of $209 million with a weighted average interest rate of 5.7%. The Company has revolving credit agreements with banks in the aggregate amount of $480 million that extend to December 31, 1999. These agreements are fully available to support the issuance of commercial paper. In the first half of 1996, the Company expects to acquire four businesses for a total of approximately $455 million. These consist of television stations in Houston and San Diego and two education publishers. See note 3 to the consolidated financial statements. The Company's sale of its QUNO holdings is expected to be completed in March 1996. The Company currently expects to use the after-tax proceeds of approximately $330 million from the sale to reduce commercial paper outstanding and provide funding for share repurchases and acquisitions. Capital spending for 1996 is expected to total approximately $130 million for a variety of normal replacement projects, as well as for pagination systems at each of the newspapers and the relocation and renovation of facilities at several broadcasting business units. 42
Tribune Company and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME (In thousands of dollars, except per share data) Year Ended Dec. 31, 1995 Dec. 25, 1994 Dec. 26, 1993 ==================================================================================================================================== OPERATING Publishing REVENUES Advertising $1,010,782 $ 961,694 $ 876,327 Circulation 249,860 242,993 246,178 Other 52,125 41,690 40,611 ----------------------------------------------------------------------------------------------------------------- Total 1,312,767 1,246,377 1,163,116 Broadcasting and Entertainment 828,806 764,197 727,213 Education 103,101 102,082 21,209 ----------------------------------------------------------------------------------------------------------------- Total operating revenues 2,244,674 2,112,656 1,911,538 - - ------------------------------------------------------------------------------------------------------------------------------------ OPERATING Cost of sales (exclusive of items shown below) 1,164,609 1,059,306 1,007,902 EXPENSES Selling, general and administrative 553,868 541,350 444,471 Depreciation and amortization of intangible assets 120,986 115,375 102,762 ----------------------------------------------------------------------------------------------------------------- Total operating expenses 1,839,463 1,716,031 1,555,135 - - ------------------------------------------------------------------------------------------------------------------------------------ OPERATING PROFIT 405,211 396,625 356,403 Dispositions of subsidiary stock and investment 14,672 - - Interest income 14,465 15,807 15,115 Interest expense (21,814) (20,585) (24,660) - - ------------------------------------------------------------------------------------------------------------------------------------ INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 412,534 391,847 346,858 Income taxes (167,076) (158,698) (142,212) - - ------------------------------------------------------------------------------------------------------------------------------------ INCOME FROM CONTINUING OPERATIONS 245,458 233,149 204,646 INCOME (LOSS) FROM DISCONTINUED OPERATIONS OF QUNO 32,707 8,898 (16,040) - - ------------------------------------------------------------------------------------------------------------------------------------ NET INCOME 278,165 242,047 188,606 Preferred dividends, net of tax (18,841) (18,574) (18,439) - - ------------------------------------------------------------------------------------------------------------------------------------ NET INCOME ATTRIBUTABLE TO COMMON SHARES $ 259,324 $ 223,473 $ 170,167 - - ------------------------------------------------------------------------------------------------------------------------------------ NET INCOME PER SHARE Primary: Continuing operations $ 3.50 $ 3.19 $ 2.80 Discontinued operations .50 .13 (.24) ----------------------------------------------------------------------------------------------------------------- Net income $ 4.00 $ 3.32 $ 2.56 ----------------------------------------------------------------------------------------------------------------- Fully Diluted: Continuing operations $ 3.22 $ 2.95 $ 2.58 Discontinued operations .46 .12 (.22) ----------------------------------------------------------------------------------------------------------------- Net income $ 3.68 $ 3.07 $ 2.36 ----------------------------------------------------------------------------------------------------------------- See Notes to Consolidated Financial Statements. 43
CONSOLIDATED BALANCE SHEETS
Assets (In thousands of dollars, except share data) Dec. 31, 1995 Dec. 25, 1994 ============================================================================================================================= CURRENT ASSETS Cash and short-term investments $ 22,899 $ 21,824 Accounts receivable (less allowances of $30,154 and $33,998) 296,363 313,316 Inventories 45,348 33,488 Broadcast rights 163,339 155,754 Prepaid expenses and other 17,651 19,162 ---------------------------------------------------------------------------------------------------------- Total current assets 545,600 543,544 - - ----------------------------------------------------------------------------------------------------------------------------- INVESTMENT IN AND ADVANCES TO QUNO (see Note 2) 356,925 265,818 - - ----------------------------------------------------------------------------------------------------------------------------- PROPERTIES Machinery, equipment and furniture 886,601 849,188 Buildings and land and leasehold improvements 355,369 361,280 ---------------------------------------------------------------------------------------------------------- 1,241,970 1,210,468 Accumulated depreciation (725,995) (675,684) ---------------------------------------------------------------------------------------------------------- 515,975 534,784 Land 55,849 60,984 Construction in progress 68,922 45,263 ---------------------------------------------------------------------------------------------------------- Net properties 640,746 641,031 - - ----------------------------------------------------------------------------------------------------------------------------- OTHER ASSETS Broadcast rights 194,038 195,535 Intangible assets (less accumulated amortization of $197,090 and $182,982) 795,856 834,596 Investments 549,735 96,412 Mortgage note receivable from affiliate 82,599 83,314 Other 122,756 125,575 ---------------------------------------------------------------------------------------------------------- Total other assets 1,744,984 1,335,432 ---------------------------------------------------------------------------------------------------------- Total assets $3,288,255 $2,785,825 ---------------------------------------------------------------------------------------------------------- See Notes to Consolidated Financial Statements.
44
Tribune Company and Subsidiaries Liabilities and Shareholders' Equity Dec. 31, 1995 Dec. 25, 1994 ============================================================================================================================= CURRENT Long-term debt due within one year $ 28,665 $ 27,598 LIABILITIES Accounts payable 112,357 118,642 Employee compensation and benefits 107,755 101,033 Contracts payable for broadcast rights 164,443 145,026 Deferred income 43,961 35,766 Income taxes 8,401 19,291 Accrued liabilities 91,571 82,330 ---------------------------------------------------------------------------------------------------------- Total current liabilities 557,153 529,686 - - ----------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT (less portions due within one year) 757,437 411,200 - - ----------------------------------------------------------------------------------------------------------------------------- OTHER Deferred income taxes 223,756 149,521 NON-CURRENT Contracts payable for broadcast rights 225,771 218,102 LIABILITIES Compensation and other obligations 144,229 144,336 ---------------------------------------------------------------------------------------------------------- Total other non-current liabilities 593,756 511,959 - - ----------------------------------------------------------------------------------------------------------------------------- COMMITMENTS (see Note 10) - - - - ----------------------------------------------------------------------------------------------------------------------------- SHAREHOLDERS' Series B convertible preferred stock (without par value) EQUITY Authorized: 1,600,000 shares Issued and outstanding: 1,471,795 in 1995 and 1,502,573 shares in 1994 (liquidation value $220 per share) 322,540 329,286 Common stock (without par value) Authorized: 400,000,000 shares; 81,771,658 shares issued 1,018 1,018 Additional paid-in capital 126,796 112,624 Retained earnings 1,930,380 1,743,417 Treasury stock (at cost) 19,219,809 shares in 1995 and 15,070,216 shares in 1994 (923,828) (636,561) Unearned compensation related to ESOP (247,281) (274,101) Cumulative translation adjustment (see Note 2) (19,188) (20,675) Unrealized gain on investments 189,472 77,972 ---------------------------------------------------------------------------------------------------------- Total shareholders' equity 1,379,909 1,332,980 ---------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $3,288,255 $2,785,825 ---------------------------------------------------------------------------------------------------------- 45
Tribune Company and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of dollars) Dec. 31, 1995 Dec. 25, 1994 Dec. 26, 1993 ============================================================================================================= OPERATIONS Net income $ 278,165 $ 242,047 $ 188,606 Adjustments to reconcile net income to net cash provided by operations: (Income) loss from discontinued operations of QUNO, net of tax (32,707) (8,898) 16,040 Dispositions of subsidiary stock and investment (14,672) - - Depreciation and amortization of intangible assets 120,986 115,375 102,762 (Increase) decrease in working capital items excluding effects from acquisitions: Accounts receivable 20,455 (18,999) (27,311) Inventories, prepaid expenses and other current assets (15,585) (593) (4,288) Accounts payable, employee compensation and benefits, deferred income and accrued liabilities 10,678 37,655 (11,166) Income taxes (13,939) (36,457) (3,775) Decrease in broadcast rights net of current and long-term contracts payable 20,998 20,319 28,959 Other, net 19,288 18,338 12,131 --------------------------------------------------------------------------------------------- Net cash provided by operations 393,667 368,787 301,958 - - ----------------------------------------------------------------------------------------------------------- INVESTMENTS Capital expenditures (117,863) (91,626) (75,620) Acquisitions (excluding $18.5 million of stock issued in 1993) (39,817) (138,477) (98,918) Investments (271,939) (24,186) (45,908) Proceeds from dispositions of subsidiary stock and investment 32,729 - - Proceeds from sale of QUNO stock - 94,936 - Repayment of note receivable from QUNO - - 179,846 Other, net 4,291 (12,039) (13,852) -------------------------------------------------------------------------------------------- Net cash used for investments (392,599) (171,392) (54,452) - - ---------------------------------------------------------------------------------------------------------- FINANCING Proceeds from issuance of long-term debt 383,876 - 78,050 Repayments of long-term debt (12,826) (77,100) (283,968) Sale of common stock to employees, net 40,794 20,410 46,138 Purchase of treasury stock (314,667) (49,080) - Dividends (91,202) (88,325) (81,927) Redemption of preferred stock (5,968) - (4,043) ------------------------------------------------------------------------------------------- Net cash provided by (used for) financing 7 (194,095) (245,750) - - --------------------------------------------------------------------------------------------------------- NET INCREASE IN CASH AND SHORT-TERM INVESTMENTS 1,075 3,300 1,756 Cash and short-term investments at the beginning of year 21,824 18,524 16,768 ------------------------------------------------------------------------------------------- Cash and short-term investments at the end of year $ 22,899 $ 21,824 $ 18,524 - - --------------------------------------------------------------------------------------------------------- SUPPLEMENTAL Cash paid for: CASH FLOW Interest (net of amounts capitalized) $ 20,646 $ 20,957 $ 28,015 INFORMATION Income taxes $ 165,675 $ 175,965 $ 121,727 ------------------------------------------------------------------------------------------- See Notes to Consolidated Financial Statements.
46
Tribune Company and Subsidiaries CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Common Treasury Stock Series B Stock and ------------------- Convertible Additional Unearned Cumulative Unrealized (In thousands, Preferred Paid-In Retained Amount Compensation Translation Gain on except per share data) Stock Capital(1) Earnings Shares -at cost (ESOP) Adjustment Investments Total =================================================================================================================================== BALANCE AT DECEMBER 27, 1992 $340,634 $101,463 $1,483,016 (16,292) $(667,668) $(321,690) $(23,866) - $ 911,889 - - ----------------------------------------------------------------------------------------------------------------------------------- Net income 188,606 188,606 Translation adjustment (6,270) (6,270) Redemptions of convertible preferred stock (5,102) 228 20 831 (4,043) Dividends declared Common-$.96/share (63,799) (63,799) Preferred-$17.05/share (26,104) (26,104) Tax benefit on dividends paid to the ESOP(2) 7,976 7,976 Repayment of ESOP debt 22,721 22,721 Shares issued under option and stock plans 908 1,225 50,171 51,079 Stock tendered as payment for options exercised (92) (4,941) (4,941) Shares issued for Contemporary Books acquisition 4,238 348 14,275 18,513 - - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 26, 1993 335,532 106,837 1,589,695 (14,791) (607,332) (298,969) (30,136) - 1,095,627 - - ----------------------------------------------------------------------------------------------------------------------------------- Net income 242,047 242,047 Translation adjustment(3) 9,461 9,461 Unrealized gain on investments 77,972 77,972 Redemptions of convertible preferred stock (6,246) 1,589 114 4,657 - Dividends declared Common-$1.04/share (69,907) (69,907) Preferred-$17.05/share (25,619) (25,619) Tax benefit on dividends paid to the ESOP(2) 7,201 7,201 Repayment of ESOP debt 24,868 24,868 Purchase of treasury stock (947) (49,080) (49,080) Shares issued under option and stock plans 5,216 903 36,467 41,683 Stock tendered as payment for options exercised (349) (21,273) (21,273) - - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 25, 1994 329,286 113,642 1,743,417 (15,070) (636,561) (274,101) (20,675) 77,972 1,332,980 - - ----------------------------------------------------------------------------------------------------------------------------------- Net income 278,165 278,165 Translation adjustment 1,487 1,487 Unrealized gain on investments 111,500 111,500 Redemptions of convertible preferred stock (6,746) 171 14 607 (5,968) Dividends declared Common-$1.12/share (72,524) (72,524) Preferred-$17.05/share (25,094) (25,094) Tax benefit on dividends paid to the ESOP(2) 6,416 6,416 Repayment of ESOP debt 26,820 26,820 Purchase of treasury stock (5,189) (314,667) (314,667) Shares issued under option and stock plans 14,001 1,968 86,018 100,019 Stock tendered as payment for options exercised (943) (59,225) (59,225) - - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE AT DECEMBER 31, 1995 $322,540 $127,814 $1,930,380 (19,220) $(923,828) $(247,281) $(19,188) $189,472 $1,379,909 - - -----------------------------------------------------------------------------------------------------------------------------------
(1) Issued shares of common stock totaled 81,771,658 for all dates presented. (2) Excludes the tax benefit on allocated preferred shares held by the ESOP, which is credited to income tax expense. (3) Includes a $14.3 million write-off of the cumulative translation adjustment related to the sale of QUNO common stock in April 1994. See Notes to Consolidated Financial Statements. 47 Tribune Company and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The significant accounting policies of Tribune Company and subsidiaries (the "Company"), as summarized below, conform with generally accepted accounting principles and reflect practices appropriate to the businesses in which they operate. The preparation of financial statements in conformity with generally accepted accounting principles requires the use of management's estimates. Certain prior year amounts have been reclassified to conform with the 1995 presentation. NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ................................................................................ FISCAL YEAR -- The Company's fiscal year ends on the last Sunday in December. Fiscal year 1995 comprised 53 weeks. Fiscal years 1994 and 1993 comprised 52 weeks. PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements include the accounts of Tribune Company and all majority-owned subsidiaries. Investments comprising 20 to 50 percent of the voting stock of companies and joint ventures are accounted for using the equity method. All other investments are generally accounted for using the cost method. All significant intercompany transactions are eliminated. SHORT-TERM INVESTMENTS -- Short-term investments are stated at cost, which approximates market value. For purposes of the consolidated statements of cash flows, investments with maturities of three months or less at the time of purchase are considered to be cash equivalents. INVENTORIES -- Inventories are stated at the lower of cost or market. Cost is determined on the last-in, first-out ("LIFO") basis for newsprint and on the first-in, first-out ("FIFO") or average basis for all other inventories. BROADCAST RIGHTS -- Broadcast rights consist principally of rights to broadcast syndicated programs, sports and feature films and are stated at the lower of cost or estimated net realizable value. The total cost of these rights is recorded as an asset and a liability when the program becomes available for broadcast. Broadcast rights that have limited showings are generally amortized using an accelerated method as programs are aired. Those with unlimited showings are amortized on a straight-line basis over the contract period. The current portion of broadcast rights represents those rights available for broadcast that are expected to be amortized in the succeeding year. PROPERTIES -- Property, plant and equipment are stated at cost. Depreciation is computed using the straight-line method over the properties' estimated useful lives, ranging from 3 to 40 years. INTANGIBLE ASSETS -- Intangible assets primarily represent the excess of cost over the fair market value of tangible net assets acquired. The excess cost related to net assets acquired since 1971 is being amortized on a straight-line basis over various periods ranging from 3 to 40 years, with the majority being amortized over 40 years. Intangible assets of $23.5 million related to pre-1971 acquisitions are not being amortized as the Company believes there has been no diminution of value. The Company evaluates the carrying value of intangibles periodically in relation to the projected future undiscounted cash flows of the related businesses. PENSION PLANS -- The Company contributes to pension plans that provide retirement benefits for substantially all employees. These plans are sponsored either by the Company or by unions. Under the Company-sponsored plans, pension benefits are primarily a function of both the years of service and the level of compensation for a specified number of years, depending on the plan. It is 48 the Company's policy to fund at least the minimum for Company-sponsored pension plans as required by ERISA. Contributions made to union-sponsored plans are based upon collective bargaining agreements. INVESTMENTS -- The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 115 in 1994. This standard requires that the Company record investments in debt and equity securities at their fair value, except for debt securities that the Company intends to hold to maturity and equity securities that are accounted for under the equity method or have no readily determinable fair value. All of these investments have been classified as available for sale. The difference between cost and fair value, net of related tax effects, is recorded in a separate component of shareholders' equity. The adoption of this standard had no effect on net income. NEW ACCOUNTING PRINCIPLES -- In 1995, the Financial Accounting Standards Board ("FASB") issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The statement, effective for fiscal year 1996, requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The statement also requires that long-lived assets and certain identifiable intangibles to be disposed of be reported at the lower of carrying amount or fair value less cost to sell. The Company plans to adopt the standard in fiscal year 1996. Management believes that the adoption will not have a material effect on the financial position or the results of operations of the Company. In 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation." This statement, effective for fiscal year 1996, establishes a fair value-based method of accounting for employee stock-based compensation plans and encourages adoption of that method. Companies may, however, continue to apply the method currently prescribed under existing accounting rules, provided certain pro forma disclosures are made. The Company plans to retain the current accounting method and will provide the necessary disclosures in 1996. NET INCOME PER SHARE -- Primary net income per share is computed by dividing net income attributable to common shares by the weighted average number of common shares outstanding during the period. Fully diluted net income per share is computed based on the assumption that all of the convertible preferred shares are converted into common shares. For purposes of calculating fully diluted net income per share, net income is reduced by the additional Employee Stock Ownership Plan ("ESOP") contribution that would be required for ESOP debt service, and the weighted average number of shares outstanding is increased by (i) the additional common shares that would be issued upon conversion of the preferred shares based on the stated conversion rate plus any additional common shares that would have to be issued to meet the redemption price guarantee for all preferred shares that have been allocated to participants, and (ii) the effect of stock options. The numbers of common shares used in the computations of primary and fully diluted net income per share were as follows:
(In thousands) 1995 1994 1993 ======================================== Primary 64,790 67,213 66,371 Fully diluted 71,506 74,073 73,695
NOTE 2: DISCONTINUED OPERATIONS (QUNO CORPORATION) ................................................................................ In December 1995, the Company announced it had agreed to sell all of its holdings in QUNO Corporation as part of QUNO's agreement to merge with Donohue Inc. Donohue will pay approximately C$30.50 per common QUNO share. The transaction is subject to approval by QUNO's stockholders and is scheduled to close in March 1996. The Company owns approximately 34% of QUNO's common stock plus $138.8 million in convertible debt. Upon conversion of this debt, the Company's ownership of QUNO increases to 53%, or 19.2 million of 36.2 million common shares outstanding. The Company's gross proceeds from the sale will be approximately US$425 million (C$585 million), consisting of US$285 million in cash, US$75 million in short-term notes and US$65 million in Donohue common stock (5.6 million shares valued at C$17 per share). After-tax proceeds will be approximately US$330 million. The Company will record an after-tax gain of approximately $85 million upon completion of the transaction. The exact amount of the proceeds received and the gain recorded will depend on several factors at the date the transaction is consummated, including the U.S./Canadian dollar exchange rate and Donohue's stock price. QUNO was a wholly owned subsidiary of the Company until February 1993, when QUNO completed an initial public offering of 9 million shares of common stock. This reduced the Company's ownership to 59% and its voting interest to 49%. At closing, QUNO used 49 the net proceeds of approximately $100 million from the stock offering plus proceeds from a bank financing of $80 million to repay a portion of its intercompany borrowings owed the Company. The Company has accounted for its investment in QUNO using the equity method since 1993. In April 1994, the Company reduced its ownership holdings in QUNO to 34% by selling 5.5 million shares of QUNO common stock. The sale of the shares resulted in an after-tax gain of $13 million, or $.19 per share on a primary basis. The $138.8 million convertible debenture is callable by QUNO after December 27, 1997, matures in 2002 and bears interest at an effective rate of 2.8%. The Company's consolidated financial statements have been restated to reflect equity earnings from QUNO, interest income from the QUNO convertible debenture and the 1994 gain on the sale of QUNO common shares, net of income tax, as discontinued operations. Income tax expense related to discontinued operations was $5.1 million in 1995, $28.0 million in 1994 and $1.6 million in 1993. Summarized financial information for QUNO follows:
(In thousands) 1995 1994 1993 Dec. 31, 1995 Dec. 25, 1994 ============================================================================================================= Revenues $618,886 $410,756 $386,646 Current assets $176,133 $130,114 Operating profit (loss) 163,281 6,531 (31,110) Non-current assets 537,754 439,793 Net income (loss) 99,525 (7,458) (28,881) Current liabilities 64,909 58,906 Non-current liabilities 361,253 320,805
The financial statements and transactions of QUNO are maintained in its functional currency (Canadian dollars) and translated into U.S. dollars. The translation adjustments are accumulated in a separate component of shareholders' equity and will be eliminated and reported as part of the gain on sale of QUNO. The financial information included herein reflects U.S. accounting principles. QUNO manufactures newsprint for sale to the Company's newspapers and other North American and overseas customers. The Company is party to a contract with QUNO expiring in 2007 to supply newsprint based on market prices. Under the contract, the Company has agreed to purchase specified minimum amounts of newsprint each year subject to certain limitations. The specified minimum annual volume is 250,000 metric tons in years 1996 to 1999, 225,000, 200,000 and 175,000 metric tons in years 2000 to 2002, respectively, and 150,000 metric tons in each of years 2003 to 2007. QUNO's sales to the Company's newspapers were $161.4 million in 1995, $112.8 million in 1994 and $127.2 million in 1993, which represented 66%, 67% and 74% of their total newsprint consumption, respectively. NOTE 3: CHANGES IN OPERATIONS AND UNUSUAL ITEMS ................................................................................ ACQUISITIONS -- The Company recorded acquisitions totaling $39.8 million in 1995, $138.5 million in 1994 and $117.4 million in 1993. These acquisitions were accounted for as purchases. The intangibles recorded on these acquisitions are being amortized on a straight-line basis over periods from 3 to 40 years. The results of these operations are included in the consolidated statements of income from their respective dates of acquisition. In January 1995, the Company acquired RELCON, Inc. for approximately $8 million in cash. RELCON publishes free apartment guides and provides apartment rental referral services to prospective renters. In May 1995, the Company acquired Jamestown Publishers, Inc., a publisher and distributor of supplementary education materials for the elementary and high school market, for approximately $6 million in cash. In August 1995, the Company acquired Everyday Learning Corporation, a publisher of mathematics materials for grades kindergarten through 6, for approximately $25 million in cash. In January 1996, the Company acquired Houston television station KHTV for approximately $102 million in cash. The Company has also announced agreements to acquire San Diego television station KTTY for $70.5 million in cash and two education publishers--Educational Publishing Corporation for $200 million in cash and NTC Publishing Group for $82 million in cash. These acquisitions are subject to various regulatory approvals and are expected to close in the first half of 1996. In February 1996, the Company is expected to acquire the remaining minority interest in television station WPHL-Philadelphia for approximately $23 million in cash. In February 1994, the Company acquired The Wright Group for $96 million in cash. In April 1994, the Company acquired Boston television station WLVI for 50 $25 million in cash. In June 1994, the Company acquired Farm Journal Inc. for $17.5 million in cash. The Company acquired two Denver radio stations, KOSI-FM and KEZW-AM, in January 1993 for $19.9 million in cash. In July 1993, the Company acquired Contemporary Books, Inc. for $22 million in cash and $18.5 million in common stock. In September 1993, the Company acquired Compton's NewMedia for $57 million in cash. INVESTMENTS -- In 1995, 1994 and 1993, respectively, the Company invested cash of $271.9 million, $24.2 million and $45.9 million in several companies. The 1995 investments included $150 million in SoftKey International Inc. convertible notes (see below) and $70 million in Qwest Broadcasting LLC, a company formed to acquire and operate television and radio stations. The Company's investment in Qwest is composed of a $7 million equity interest (33%) and $63 million in convertible notes. The notes bear interest at 6%, are convertible into an additional 47% interest and may only be converted when and if the Federal Communications Commission regulations permit such conversion. In December 1995, Qwest acquired television stations in Atlanta (WATL) and New Orleans (WNOL) for approximately $167 million. DISPOSITIONS -- In December 1995, the Company sold Compton's NewMedia to SoftKey International Inc. for $120.5 million of SoftKey common stock (5.1 million shares, or 16% of common shares outstanding) and a $3 million note. In connection with the Compton's sale, the Company also invested $150 million in SoftKey in exchange for five-year, 5.5% notes, convertible into common stock at $53 per share. The notes were recorded at $100 million, representing their estimated fair value at the time of the transaction. The $50 million difference between fair value and face value will be amortized into interest income over the five-year term of the notes, making the effective interest rate on the notes 15.5%. These transactions resulted in a pretax gain of $6.9 million and an after-tax gain of $4.1 million, or $.06 per share on a primary basis. Compton's operating results included in the consolidated statements of income were operating revenues of $26.4 million, $42.8 million and $13.3 million in 1995, 1994 and 1993, respectively, and operating losses of $12.1 million and $11.0 million in 1995 and 1994 and operating profit of $.8 million in 1993. In July 1995, the Company sold Times Advocate Company, a California newspaper subsidiary, for $16 million in cash. The sale resulted in a pretax loss of $7.5 million and an after-tax loss of $4.5 million, or $.07 per share. Times Advocate operating results included in the consolidated statements of income were revenues of $8.5 million, $17.5 million and $16.5 million in 1995, 1994 and 1993, and operating losses of $1.4 million, $3.2 million and $3.1 million in 1995, 1994 and 1993, respectively. In March 1995, the Company sold shares of America Online common stock for approximately $17 million. The sale resulted in a pretax gain of $15.3 million and an after-tax gain of $9.1 million, or $.14 per share. The Company currently owns approximately 5% of America Online common stock. NOTE 4: INVENTORIES ................................................................................ Inventories consisted of the following:
(In thousands) Dec. 31, 1995 Dec. 25, 1994 =================================================== Finished goods $21,638 $13,893 Supplies 11,237 11,935 Newsprint (at LIFO) 12,473 7,660 - - --------------------------------------------------- Total inventories $45,348 $33,488 - - ---------------------------------------------------
If newsprint inventories were valued at FIFO cost, such inventories would have been greater by $12.8 million at December 31, 1995, $8.0 million at December 25, 1994 and $9.3 million at December 26, 1993. Finished goods primarily include educational publishing materials. NOTE 5: MORTGAGE NOTE RECEIVABLE FROM AFFILIATE ................................................................................ The Company holds a mortgage note resulting from the 1982 sale of a building to a limited partnership in which the Company holds an equity interest. The note is due December 31, 1997, can be prepaid beginning December 31, 1996, and bears interest at 13% plus contingent interest based upon the building's cash flow and appreciation. 51 NOTE 6: INVESTMENTS ................................................................................ Investments, excluding QUNO, consisted of the following:
(In thousands) Dec. 31, 1995 Dec. 25, 1994 ============================================================= Cost method investments $343,345 $90,111 Equity method investments 31,878 5,164 Debt securities 174,512 1,137 - - ------------------------------------------------------------- Total investments $549,735 $96,412 - - -------------------------------------------------------------
For investments recorded at fair value under SFAS No. 115, the aggregate cost basis, net unrealized gain and fair value were as follows:
December 31, 1995 December 25, 1994 Cost Unrealized Fair Cost Unrealized Fair (In thousands) Basis Gain Value Basis Gain Value ============================================================================================== Marketable equity securities $146,040 $188,716 $334,756 $ 12,370 $62,711 $ 75,081 QUNO debenture 138,757 121,891 260,648 138,757 65,585 204,342 Debt securities 174,512 - 174,512 1,137 - 1,137
The net unrealized gain on marketable equity securities included an unrealized loss on two investments of $4.6 million at December 31, 1995. 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 $189.5 million at December 31, 1995 and $78 million at December 25, 1994. NOTE 7: FAIR VALUE OF FINANCIAL INSTRUMENTS ................................................................................ Estimated fair values and carrying amounts of the Company's financial instruments were as follows:
December 31, 1995 December 25, 1994 Fair Carrying Fair Carrying (In thousands) Value Amount Value Amount ================================================================================ Cost method investments: Practicable to estimate fair value $345,620 $340,766 $ 87,211 $ 87,211 Not practicable - 2,579 - 2,900 QUNO debenture 260,648 260,648 204,342 204,342 Debt securities 174,512 174,512 1,137 1,137 Mortgage note receivable 89,070 83,313 91,135 83,937 Debt 847,577 786,102 459,453 438,798 Contracts payable for broadcast rights 349,845 390,214 316,809 363,128
The following methods and assumptions were used to estimate the fair value of each category of financial instruments. COST METHOD INVESTMENTS, QUNO DEBENTURE AND DEBT SECURITIES -- Certain of the cost method investments, the QUNO debenture and the debt securities have been recorded at fair value in the consolidated balance sheets (see notes 1 and 6). For investments for which there is no public market, fair value was estimated based on prices recently paid for shares in that company. For several investments, it was not practicable to estimate fair value. MORTGAGE NOTE RECEIVABLE -- Fair value was estimated using the discounted cash flow method. 52 DEBT -- Fair value was determined based on quoted market prices for similar issues or on current rates available to the Company for debt of the same remaining maturities and similar terms. CONTRACTS PAYABLE FOR BROADCAST RIGHTS -- Fair value was estimated using the discounted cash flow method. NOTE 8: CONTRACTS PAYABLE FOR BROADCAST RIGHTS ............................................................................... Contracts payable for broadcast rights are classified as current or long-term liabilities in accordance with the payment terms of the contracts. Required payments under contractual agreements for broadcast rights recorded at December 31, 1995 are: $164.4 million in 1996, $109.0 million in 1997, $67.9 million in 1998, $30.9 million in 1999, $9.3 million in 2000 and $8.7 million thereafter. NOTE 9: LONG-TERM DEBT ............................................................................... Long-term debt consisted of the following:
(In thousands) Dec. 31, 1995 Dec. 25, 1994 ================================================================================= Promissory notes, weighted average interest rates of 5.7% and 5.6% $208,718 $ 4,992 Medium-term notes, weighted average interest rates of 6.6% and 7.0%, due 1995-2005 307,300 135,800 8.4% guaranteed ESOP notes, due 1995-2003 235,648 259,172 8.19% guaranteed ESOP note, due 1995-1998 11,633 14,929 Other notes and obligations 22,803 23,905 - - --------------------------------------------------------------------------------- Total debt 786,102 438,798 Less portions due within one year (28,665) (27,598) - - --------------------------------------------------------------------------------- Long-term debt $757,437 $411,200 - - ---------------------------------------------------------------------------------
In 1990, the Company began offering up to $200 million of its Series B medium-term notes, which have maturities from 2 to 10 years. All of these notes have been issued. In 1995, the Company began offering up to $300 million of its Series C medium-term notes, of which $180 million were issued and outstanding as of December 31, 1995. These notes have maturities from 5 to 10 years and may not be redeemed by the Company prior to maturity. The proceeds from the sale of the notes have been used for general corporate purposes. The notes issued by the Company's ESOP are unconditionally guaranteed by the Company as to payment of principal and interest. Therefore, the unpaid balance of these borrowings is reflected in the accompanying consolidated balance sheets as long-term debt. An amount equivalent to the unpaid balance of these borrowings, representing unearned employee compensation, is recorded as a reduction of shareholders' equity. Certain debt agreements limit the amount of secured debt the Company can incur without equally and ratably securing additional borrowings under those agreements. In 1996, the Company intends to refinance $208.7 million of promissory notes and $10.0 million of Series B medium-term notes scheduled to mature in 1996, and has the ability to do so on a long-term basis through existing revolving credit agreements. Accordingly, these notes were classified as long- term and treated as maturing in fiscal year 1999. The Company has revolving credit agreements with a number of banks in an aggregate amount of $480 million, extending to December 31, 1999, that are fully available to support the issuance of promissory notes. These agreements contain various interest rate options and provide for annual fees based on a percentage of the commitment. Such fees totaled approximately $.5 million in 1995, 1994 and 1993. Long-term debt at December 31, 1995 matures as follows: $28.7 million in 1996, $60.4 million in 1997, $34.6 million in 1998, $246.4 million in 1999, $63.1 million in 2000 and $352.9 million thereafter. 53 NOTE 10: COMMITMENTS ............................................................................... The Company has entered into commitments for broadcast rights that are not currently available for broadcast and are therefore not included in the financial statements. These commitments totaled $277 million at December 31, 1995. Payments for broadcast rights generally commence when the programs become available for broadcast. The Company had commitments totaling $70 million at December 31, 1995 related to the purchase of property, plant and equipment and to talent contracts. The Company leases certain equipment and office and production space under various operating leases. Rental expense totaled $24.6 million in 1995, $24.6 million in 1994 and $26.2 million in 1993. Future minimum rental commitments under non-cancelable operating leases are $17.5 million in 1996, $15.3 million in 1997, $14.3 million in 1998, $12.7 million in 1999, $11.6 million in 2000 and $63.6 million thereafter. The Company has guaranteed certain obligations of affiliates totaling $21.2 million at December 31, 1995. NOTE 11: CAPITAL STOCK ............................................................................... Under the Company's Restated Certificate of Incorporation, 5 million shares of preferred stock are authorized. In 1989, the Company established a series of 1.6 million shares of Series B Convertible Preferred Stock of which 1.59 million shares were issued to the Company's ESOP. Each share of such preferred stock pays a cumulative dividend of 7.75% annually, has a liquidation value of $220 per share, is convertible into four shares of the Company's common stock and is voted with the common stock with an entitlement to 4.58 votes per preferred share. In December 1987, the Company adopted a Share Purchase Rights Plan and declared a distribution of one right on each outstanding share of the Company's common stock. Each right will entitle stockholders to buy one one-hundredth of a share of Series A Junior Participating Preferred Stock at an exercise price of $150. The rights have no voting rights and are not exercisable until 10 days after the occurrence of certain triggering events, upon which the holders of the rights are entitled to purchase either the common stock of an acquiror or additional common stock of the Company at a discounted price. The rights are redeemable at the option of the Company for $.01 per right. The Company has established a series of 800,000 shares of Series A Junior Participating Preferred Stock in connection with the plan, none of which have been issued. The Board from time to time has authorized the repurchase of shares of the Company's common stock in the open market or through private transactions to be used for employee benefit programs and other purposes. In 1995, the Company acquired 5,188,998 shares of its common stock for $314.7 million. In 1994, the Company acquired 946,500 shares for $49.1 million. At December 31, 1995, the Company had authorization to repurchase an additional 4.8 million shares of its common stock. There were approximately 4,700 holders of record of the Company's common stock at January 31, 1996. NOTE 12: INCENTIVE COMPENSATION AND STOCK PLANS ............................................................................... EMPLOYEE STOCK OWNERSHIP PLAN (ESOP) -- In 1988, the Company established an ESOP as a long-term employee benefit plan to supplement the Company's U.S. employee pension plan. In connection therewith, the ESOP purchased, in 1988 and 1989, approximately 800,000 common shares and 1.59 million Series B convertible preferred shares for an aggregate of $375 million. The ESOP provides for the awarding of shares of the Company's preferred and common stock on a noncontributory basis to eligible non-union employees of the Company. At December 31, 1995, 5.9 million shares of common stock were reserved for issuance in connection with this plan. Shares of stock held by the ESOP have been placed with the ESOP Trustee and are allocated to eligible employees annually. These common and preferred shares are allocated in the same proportion that the current year's principal and interest payments bear to the total principal and interest to be paid over the lives of the related borrowings. Each preferred share is convertible into four shares of the Company's common stock. The ESOP Trustee must convert the preferred shares when making distributions to participants upon their withdrawal from the ESOP. If at the time of such conversion, the price of the Company's common stock is below $55 per share, the Company must, at its option, either pay the difference in cash or issue additional common stock. At December 31, 1995, 630,306 allocated preferred shares and 493,068 allocated common shares were held by the ESOP. 54 The Company recognizes expense for this plan based upon cash contributions it makes to the ESOP. The ESOP services its debt requirements with amounts received from preferred dividends, common dividends earned on unallocated common shares and Company contributions. The following table summarizes ESOP debt service activity for the three years ended December 31, 1995:
(In thousands) 1995 1994 1993 ======================================================= Debt Requirements: Principal $26,820 $24,868 $22,721 Interest 22,927 25,015 26,932 - - ------------------------------------------------------- Total $49,747 $49,883 $49,653 - - ------------------------------------------------------- Debt Service: Dividends $25,439 $26,019 $26,548 Company cash contributions 24,308 23,864 23,105 - - ------------------------------------------------------- Total $49,747 $49,883 $49,653 - - -------------------------------------------------------
1992 LONG-TERM INCENTIVE PLAN -- In 1992, the 1984 Long-Term Performance Plan was terminated and replaced with the 1992 Long-Term Incentive Plan. The 1992 plan provides for the granting of stock options or various other types of awards to eligible employees. General awards available under this plan, on an annual basis, are equal to nine-tenths of one percent (.009) of the adjusted average number of common shares outstanding used by the Company to calculate fully diluted net income per share for the preceding year, plus shares of stock available for awards in previous years that have not been awarded, and any previously forfeited or expired options. At December 31, 1995 and December 25, 1994, approximately .7 million shares were available for general awards. An additional number of shares is available for replacement options. The number of shares available for replacement options each year is generally equal to four-tenths of one percent (.004) of the adjusted average number of common shares outstanding used by the Company to calculate fully diluted net income per share for the preceding year, plus shares of stock available for awards in previous years that have not been awarded, and any previously forfeited or expired replacement options. At December 31, 1995 and December 25, 1994, 3.1 million and 2.3 million shares, respectively, were available for replacement options. Under the 1992 plan, only 3 million of the shares available for general awards may be used for certain outright stock awards and other stock-based awards, and only 3 million of the shares may be used for incentive stock options. No such awards have been granted. The option price is the market value of the Company's common stock at the time the option is granted. Options are exercisable not less than six months or more than 11 years after the date the option is granted. At December 31, 1995, 2.5 million options were exercisable. A combined summary of stock option activity and prices follows:
(Shares In thousands) 1995 1994 1993 ======================================================================== Options Outstanding: Beginning of year 5,045 4,893 5,261 Granted 1,475 1,050 889 Exercised (1,954) (832) (1,131) Cancelled (113) (66) (126) - - ------------------------------------------------------------------------ End of year 4,453 5,045 4,893 - - ------------------------------------------------------------------------ Prices of Options: Granted $52 1/4-68 $49 5/8-63 1/8 $51 1/8-57 7/8 Exercised 20 1/16-57 3/4 16 7/8-57 3/4 16 7/8-47 3/8 Outstanding at year end 30-68 20 1/16-63 1/8 16 7/8-57 7/8
EMPLOYEE STOCK PURCHASE PLAN -- This plan permits eligible employees to purchase shares of the Company's common stock at 85% of market price. A total of 4 million shares of stock may be sold under the plan. The Company's only expense relating to this plan is for its administration. During 1995, 1994 and 1993, 111,017, 110,925 and 99,809 shares, respectively, were sold to employees under this plan. As of December 31, 1995, a total of 2.2 million shares were available for sale. SAVINGS INCENTIVE PLAN -- The Company maintains various qualified Savings Incentive Plans, which permit eligible employees to make voluntary contributions on a pretax basis. The plans provide for uniform employer contributions to eligible employees of $.25 for each $1.00 contributed by participants up to 4% of the participants' compensation. These plans allow participants to invest their savings in various investments including the Company's common stock. Company contributions to these plans for 1995, 1994 and 1993 were $2.6 million, $2.3 million and $2.1 million, respectively. The Company had 400,000 shares of common stock reserved for possible issuance under these plans at December 31, 1995. 55 NOTE 13: EMPLOYEE PENSION PLANS ................................................................................ The Company amended its Company-sponsored pension plans, effective January 1989, for employees not covered by a collective bargaining agreement. The amendments were made in connection with the establishment of the Company's ESOP and to comply with the provisions of the Tax Reform Act of 1986. These pension plans will continue to provide substantially the same pension benefits as under the pre-amended plans until December 1998. After that date, the plans provide that the pension benefit credits will be frozen in terms of pay and service. Net pension expense (credit) for Company-sponsored plans in 1995, 1994 and 1993 included the following components:
(In thousands) 1995 1994 1993 =================================================================================== Benefits earned during the period (service costs) $ 8,256 $ 9,038 $ 8,000 Interest cost on projected benefit obligation 20,302 17,912 17,900 Recognized return on plan assets (27,857) (27,424) (27,151) Amortization, net (531) (380) (511) - - ----------------------------------------------------------------------------------- Net pension expense (credit) $ 170 $ (854) $ (1,762) - - -----------------------------------------------------------------------------------
Actual returns on plan assets were a gain of $57.9 million in 1995, a loss of $2.0 million in 1994 and a gain of $37.1 million in 1993. The following table sets forth the funded status of the Company-sponsored pension plans as of year-end 1995 and 1994:
(In thousands) Dec. 31, 1995 Dec. 25, 1994 ============================================================================================ Plans' assets at fair value $324,860 $281,515 Actuarial present value of benefit obligations: Vested benefits 288,086 229,019 Non-vested benefits 10,872 9,024 - - -------------------------------------------------------------------------------------------- Accumulated benefit obligation 298,958 238,043 Projected future salary increases 8,324 12,917 - - -------------------------------------------------------------------------------------------- Projected benefit obligation 307,282 250,960 - - -------------------------------------------------------------------------------------------- Plans' assets in excess of projected benefit obligation 17,578 30,555 Unrecognized net asset at transition being amortized through 2003 (12,120) (13,686) Unrecognized net loss due to actual experience varying from actuarial assumptions 27,941 15,717 Unrecognized prior service costs 131 906 - - -------------------------------------------------------------------------------------------- Pension asset recognized in the consolidated balance sheets $ 33,530 $ 33,492 - - --------------------------------------------------------------------------------------------
The plans' assets consist primarily of listed common stocks and bonds, including 225,725 shares of the Company's common stock having an aggregate market value of $13.8 million at December 31, 1995. In determining the projected benefit obligation for the plans, the weighted average assumed discount rate used was 7.25% in 1995 and 8.5% in 1994, while the assumed average rate of increase in future salary levels was 4.5% for 1995 and 5.0% for 1994. The weighted average expected long-term rate of return on assets used in determining net pension expense or credit was 9.5% in 1995, 9.75% in 1994, and 10% in 1993. Total pension expense for union-sponsored pension plans was $5.6 million in 1995, $5.8 million in 1994 and $4.9 million in 1993. The Company's portion of assets and liabilities for multi-employer union pension plans is not determinable. 56 NOTE 14: POSTRETIREMENT BENEFITS OTHER THAN PENSIONS ................................................................................ The Company provides postretirement health care and life insurance benefits to eligible employees under a variety of plans. Employees become eligible for these benefits if they meet age and service requirements. Effective January 1991, the Company provides a fixed medical contribution to participants who retire between the age of 55 to 65 and have 10 or more years of service. Medical coverage for these participants ends when they reach age 65. Retirees are also eligible for life insurance benefits, which are primarily a function of both the years of service and the level of compensation at retirement. The cost of postretirement medical and life benefits is accrued over the active service periods of employees to the date they attain full eligibility for such benefits. It is the Company's policy to fund postretirement benefits as claims are incurred. Postretirement benefit cost for 1995, 1994 and 1993 included the following components:
(In thousands) 1995 1994 1993 ======================================================================================== Service cost of benefits earned during the year $ 222 $ 350 $ 288 Interest cost on accumulated postretirement benefit obligation ("APBO") 3,437 3,069 3,159 - - ---------------------------------------------------------------------------------------- Postretirement benefit cost $ 3,659 $ 3,419 $ 3,447 - - ----------------------------------------------------------------------------------------
The plans' APBO and the Company's postretirement liability were as follows:
(In thousands) Dec. 31, 1995 Dec. 25, 1994 ========================================================================================= Actuarial present value of benefit obligations: Retirees $42,705 $35,079 Active participants, fully eligible 1,405 2,158 Active participants, not eligible 2,649 3,489 - - ----------------------------------------------------------------------------------------- APBO 46,759 40,726 Unrecognized net gain (loss) due to actual experience varying from actuarial assumptions (3,699) 2,774 - - ----------------------------------------------------------------------------------------- Postretirement benefit liability $43,060 $43,500 - - -----------------------------------------------------------------------------------------
In determining the APBO, the weighted average assumed discount rate used was 7.25% in 1995 and 8.5% in 1994. Increases of 10.0% in the cost of covered health care benefits were assumed for fiscal 1996. These rates were assumed to decrease ratably to 7.0% after six years and remain at that level thereafter. The effect of a one percentage point increase in the assumed health care cost trend rate for each future year would increase the total APBO at year-end 1995 by $3.3 million and the 1995 net benefit cost by $.2 million. NOTE 15: CONTINGENCIES AND LEGAL PROCEEDINGS ................................................................................ The Company and its subsidiaries are defendants from time to time in actions for libel and other matters arising out of their business operations. In addition, the Company and its subsidiaries are involved from time to time as parties in various regulatory, environmental and other proceedings with governmental authorities and administrative agencies. The State of Florida Department of Environmental Protection ("DEP") and the Company's subsidiary, Sentinel Communications Company (the "Sentinel"), have entered into a consent decree under which the Sentinel will assist the DEP in remediating certain trichloroethene groundwater contamination in downtown Orlando, Florida. The Company currently estimates that the Sentinel's share of the remediation costs will not be material and has provided for the costs in the Company's consolidated financial statements. The Company does not believe that any of the matters or proceedings presently pending will have a material adverse effect on its consolidated financial position or results of operations. 57 NOTE 16: INCOME TAXES ................................................................................ The following is a reconciliation of income taxes computed at the U.S. federal statutory rate to income taxes from continuing operations reported in the consolidated statements of income:
(In thousands) 1995 1994 1993 ================================================================================================================== Income from continuing operations before income taxes $412,534 $391,847 $346,858 - - ------------------------------------------------------------------------------------------------------------------ Federal income taxes at 35% $144,387 $137,146 $121,400 State and local income taxes, net of federal tax 24,344 24,000 18,502 Other (1,655) (2,448) 2,310 - - ------------------------------------------------------------------------------------------------------------------ Income taxes reported $167,076 $158,698 $142,212 Effective tax rate 40.5% 40.5% 41.0% - - ------------------------------------------------------------------------------------------------------------------
Components of income tax expense charged to income from continuing operations were as follows:
(In thousands) 1995 1994 1993 ================================================================================ Currently payable: U.S. federal $137,420 $135,145 $104,446 State and local 37,389 37,390 28,307 - - -------------------------------------------------------------------------------- 174,809 172,535 132,753 - - -------------------------------------------------------------------------------- Deferred: U.S. federal (7,617) (10,380) 9,517 State and local (116) (3,457) (58) - - -------------------------------------------------------------------------------- (7,733) (13,837) 9,459 - - -------------------------------------------------------------------------------- Total $167,076 $158,698 $142,212 - - --------------------------------------------------------------------------------
Significant components of the Company's net deferred tax liabilities were as follows:
(In thousands) Dec. 31, 1995 Dec. 25, 1994 ============================================================================================= Net properties $87,956 $ 93,229 Net intangible assets 58,483 61,113 Pensions 9,226 12,483 Unrealized gain on investments (excluding QUNO debenture) 74,024 24,598 Investment in QUNO 59,792 36,013 Investment in nonconsolidated subsidiaries 12,146 5,422 Other future taxable items 7,102 12,288 - - --------------------------------------------------------------------------------------------- Total deferred tax liabilities 308,729 245,146 - - --------------------------------------------------------------------------------------------- Broadcast rights (20,211) (27,250) Postretirement and postemployment benefits other than pensions (19,646) (19,461) Deferred compensation (26,733) (26,241) Disposition of New York Daily News (6,448) (7,645) Other accrued liabilities (23,486) (19,817) Accrued employee compensation (13,626) (14,122) Federal benefit on deferred state taxes (16,952) (14,748) Accounts receivable (11,822) (10,275) Other future deductible items (7,199) (10,442) - - --------------------------------------------------------------------------------------------- Total deferred tax assets (146,123) (150,001) - - --------------------------------------------------------------------------------------------- Net deferred tax liability $ 162,606 $ 95,145 - - ---------------------------------------------------------------------------------------------
58 NOTE 17: SEGMENT INFORMATION ................................................................................ Tribune Company is an information, entertainment and education company comprising three business segments. As of December 31, 1995, the Company's publishing segment consisted of four daily newspapers and other related publications and services. The newspapers are the Chicago Tribune, the Fort Lauderdale-based Sun-Sentinel, The Orlando Sentinel and the Newport News-based Daily Press. The Company's broadcasting operations consisted of independent television stations in New York, Los Angeles, Chicago, Philadelphia, Boston and Denver, an ABC television affiliate in New Orleans, a CBS television affiliate in Atlanta and five radio stations. The independent television stations are also affiliated with The Warner Bros. Television Network. In entertainment, the Company owns the Chicago Cubs baseball team, produces and syndicates television programming and has interests in cable programming. The Company's education segment (previously referred to as "new media/education") consisted of Contemporary Books, The Wright Group and Everyday Learning, educational and reference publishing operations. In 1995, the Company sold Times Advocate Company, its California newspaper subsidiary, and Compton's NewMedia, a computer software company (see note 3). Financial data for each of the Company's business segments is presented on the following page. In determining operating profit for each segment, none of the following items have been added or deducted: interest income and expense, nonoperating gains and losses or income taxes. Assets represent those identifiable tangible and intangible assets used in the operations of each segment. The Company's cost of sales by business segment was as follows:
(In thousands) 1995 1994 1993 ====================================================================== Publishing $ 679,037 $ 608,327 $ 589,097 Broadcasting and Entertainment 451,749 412,704 410,007 Education 33,823 38,275 8,798 - - ---------------------------------------------------------------------- Total cost of sales $1,164,609 $1,059,306 $1,007,902 - - ----------------------------------------------------------------------
59
Tribune Company and Subsidiaries BUSINESS SEGMENTS (In thousands of dollars) 1995 1994 1993 ================================================================================================= OPERATING Publishing $1,312,767 $1,246,377 $1,163,116 REVENUES Broadcasting and Entertainment 828,806 764,197 727,213 Education 103,101 102,082 21,209 ----------------------------------------------------------------------------- Total operating revenues $2,244,674 $2,112,656 $1,911,538 - - ------------------------------------------------------------------------------------------------- OPERATING Publishing $ 270,143 $ 287,590 $ 253,050 PROFIT Broadcasting and Entertainment 160,616 132,413 125,684 Education 4,586 2,829 2,071 Corporate expenses (30,134) (26,207) (24,402) ----------------------------------------------------------------------------- Total operating profit $ 405,211 $ 396,625 $ 356,403 - - ------------------------------------------------------------------------------------------------- DEPRECIATION Publishing $ 68,123 $ 66,639 $ 60,689 Broadcasting and Entertainment 21,384 18,891 19,515 Education 2,818 1,554 242 Corporate 1,048 1,575 643 ----------------------------------------------------------------------------- Total depreciation $ 93,373 $ 88,659 $ 81,089 - - ------------------------------------------------------------------------------------------------- AMORTIZATION OF Publishing $ 5,675 $ 4,990 $ 4,858 INTANGIBLE ASSETS Broadcasting and Entertainment 16,188 16,216 15,688 Education 5,750 5,510 1,127 ----------------------------------------------------------------------------- Total amortization of intangible assets $ 27,613 $ 26,716 $ 21,673 - - ------------------------------------------------------------------------------------------------- CAPITAL Publishing $ 65,676 $ 51,205 $ 50,647 EXPENDITURES Broadcasting and Entertainment 38,025 21,041 18,782 Education 4,883 4,905 721 Corporate 9,279 14,475 5,470 ----------------------------------------------------------------------------- Total capital expenditures $ 117,863 $ 91,626 $ 75,620 - - ------------------------------------------------------------------------------------------------- ASSETS Publishing $ 693,853 $ 757,889 $ 880,384 Broadcasting and Entertainment 1,405,213 1,321,768 1,155,331 Education 211,510 210,445 107,964 Corporate 977,679 495,723 392,731 ----------------------------------------------------------------------------- Total assets $3,288,255 $2,785,825 $2,536,410 - - -------------------------------------------------------------------------------------------------
60 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Tribune Company ................................................................................ In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, of cash flows and of shareholders' equity present fairly, in all material respects, the financial position of Tribune Company and its subsidiaries at December 31, 1995 and December 25, 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ Price Waterhouse LLP Chicago, Illinois January 31, 1996 61 QUARTERLY RESULTS (UNAUDITED)
Quarters 1995 (In thousands of dollars, except per share data) First Second Third Fourth Total =================================================================================================================================== OPERATING Publishing $ 323,547 $ 327,787 $ 304,686 $ 356,747 $1,312,767 REVENUES (1) Broadcasting and Entertainment 176,432 220,910 217,031 214,433 828,806 Education 21,427 28,521 30,527 22,626 103,101 ------------------------------------------------------------------------------------------------------------- Total operating revenues $ 521,406 $ 577,218 $ 552,244 $ 593,806 $2,244,674 - - ---------------------------------------------------------------------------------------------------------------------------------- OPERATING Publishing $ 70,805 $ 74,991 $ 52,186 $ 72,161 $ 270,143 PROFIT Broadcasting and Entertainment 28,724 53,024 35,058 43,810 160,616 Education (356) 3,862 3,215 (2,135) 4,586 Corporate expenses (7,139) (7,366) (7,336) (8,293) (30,134) ------------------------------------------------------------------------------------------------------------- Total operating profit 92,034 124,511 83,123 105,543 405,211 - - ---------------------------------------------------------------------------------------------------------------------------------- Dispositions of subsidiary stock and investment (2) 15,272 - (7,500) 6,900 14,672 Net interest expense (923) (1,438) (1,553) (3,435) (7,349) - - ---------------------------------------------------------------------------------------------------------------------------------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 106,383 123,073 74,070 109,008 412,534 Income taxes (43,085) (49,845) (29,998) (44,148) (167,076) - - ---------------------------------------------------------------------------------------------------------------------------------- INCOME FROM CONTINUING OPERATIONS 63,298 73,228 44,072 64,860 245,458 INCOME FROM DISCONTINUED OPERATIONS OF QUNO (3) 4,665 8,899 11,828 7,315 32,707 - - ---------------------------------------------------------------------------------------------------------------------------------- NET INCOME 67,963 82,127 55,900 72,175 278,165 Preferred dividends, net of tax (4,621) (4,622) (4,622) (4,976) (18,841) - - ---------------------------------------------------------------------------------------------------------------------------------- NET INCOME ATTRIBUTABLE TO COMMON SHARES $ 63,342 $ 77,505 $ 51,278 $ 67,199 $ 259,324 - - ---------------------------------------------------------------------------------------------------------------------------------- NET INCOME PER SHARE (4) Primary: Continuing operations $ .89 $ 1.05 $ .61 $ .94 $ 3.50 Discontinued operations .07 .14 .18 .12 .50 ------------------------------------------------------------------------------------------------------------- Net income $ .96 $ 1.19 $ .79 $ 1.06 $ 4.00 ------------------------------------------------------------------------------------------------------------- Fully Diluted: Continuing operations $ .82 $ .97 $ .56 $ .87 $ 3.22 Discontinued operations .07 .12 .17 .10 .46 ------------------------------------------------------------------------------------------------------------- Net income $ .89 $ 1.09 $ .73 $ .97 $ 3.68 - - ---------------------------------------------------------------------------------------------------------------------------------- COMMON DIVIDENDS PER SHARE $ .28 $ .28 $ .28 $ .28 $ 1.12 - - ---------------------------------------------------------------------------------------------------------------------------------- COMMON STOCK PRICE (HIGH-LOW) $56 1/8-50 3/4 $60 3/4-53 3/4 $68 1/4-59 3/4 $68 7/8-59 5/8 - - ----------------------------------------------------------------------------------------------------------------------
Notes to Quarterly Results: (1) Revenues have been restated to conform to revised financial statement presentation. The restatement had no effect on net income. (2) In March 1995, shares of America Online common stock were sold, which resulted in a pretax gain of $15.3 million, or $9.1 million after taxes ($.14 per share on a primary basis). In July 1995, Times Advocate Company was sold, which resulted in a pretax loss of $7.5 million, or $4.5 million after taxes ($.07 per share). In December 1995, Compton's NewMedia was sold, which resulted in a pretax gain of $6.9 million, or $4.1 million after taxes ($.06 per share). (3) In December 1995, the Company announced it had agreed to sell its holdings in QUNO as part of QUNO's planned merger with Donohue Inc. The financial statements have been restated to reflect the Company's equity earnings from QUNO and the interest income on the QUNO convertible debenture, net of tax, as discontinued operations. (4) Quarterly and full year net income per share amounts are calculated independently based on the weighted average number of common shares applicable for each period. (5) In April 1994, the Company sold 5.5 million shares of QUNO common stock, which resulted in an after-tax gain of approximately $13 million, or $.19 per share on a primary basis. 62
Tribune Company and Subsidiaries Quarters 1994 (In thousands of dollars, except per share data) First Second Third Fourth Total ============================================================================================================================ OPERATING Publishing $ 303,949 $ 310,919 $ 296,464 $ 335,045 $1,246,377 REVENUES (1) Broadcasting and Entertainment 146,948 223,085 179,986 214,178 764,197 Education 19,203 27,941 25,116 29,822 102,082 ------------------------------------------------------------------------------------------------------- Total operating revenues $ 470,100 $ 561,945 $ 501,566 $ 579,045 $2,112,656 - - ---------------------------------------------------------------------------------------------------------------------------- OPERATING Publishing $ 69,237 $ 76,325 $ 60,354 $ 81,674 $ 287,590 PROFIT Broadcasting and Entertainment 20,375 50,247 23,699 38,092 132,413 Education 1,330 2,631 (5,311) 4,179 2,829 Corporate expenses (6,340) (6,418) (6,813) (6,636) (26,207) ------------------------------------------------------------------------------------------------------- Total operating profit 84,602 122,785 71,929 117,309 396,625 - - ---------------------------------------------------------------------------------------------------------------------------- Net interest expense (2,207) (949) (508) (1,114) (4,778) - - ---------------------------------------------------------------------------------------------------------------------------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 82,395 121,836 71,421 116,195 391,847 Income taxes (33,782) (49,746) (28,111) (47,059) (158,698) - - ---------------------------------------------------------------------------------------------------------------------------- INCOME FROM CONTINUING OPERATIONS 48,613 72,090 43,310 69,136 233,149 INCOME FROM DISCONTINUED OPERATIONS OF QUNO (3)(5) (8,544) 12,942 4,517 (17) 8,898 - - ---------------------------------------------------------------------------------------------------------------------------- NET INCOME 40,069 85,032 47,827 69,119 242,047 Preferred dividends, net of tax (4,644) (4,643) (4,644) (4,643) (18,574) - - ---------------------------------------------------------------------------------------------------------------------------- NET INCOME ATTRIBUTABLE TO COMMON SHARES $ 35,425 $ 80,389 $ 43,183 $ 64,476 $ 223,473 - - ---------------------------------------------------------------------------------------------------------------------------- NET INCOME PER SHARE (4) Primary: Continuing operations $ .66 $ 1.00 $ .57 $ .96 $ 3.19 Discontinued operations (.13) .19 .07 - .13 ------------------------------------------------------------------------------------------------------- Net income $ .53 $ 1.19 $ .64 $ .96 $ 3.32 ------------------------------------------------------------------------------------------------------- Fully Diluted: Continuing operations $ .61 $ .92 $ .54 $ .89 $ 2.95 Discontinued operations (.12) .17 .06 - .12 ------------------------------------------------------------------------------------------------------- Net income $ .49 $ 1.09 $ .60 $ .89 $ 3.07 - - ---------------------------------------------------------------------------------------------------------------------------- COMMON DIVIDENDS PER SHARE $ .26 $ .26 $ .26 $ .26 $ 1.04 - - ---------------------------------------------------------------------------------------------------------------------------- COMMON STOCK PRICE (HIGH-LOW) $61 7/8-55 $64 1/2-54 $56 5/8-50 1/4 $56 1/8-48 7/8 - - --------------------------------------------------------------------------------------------------------------- 63
ELEVEN YEAR FINANCIAL SUMMARY
(Dollars in thousands, except per share data) 1995 1994 1993 1992 ======================================================================================================== OPERATING RESULTS OPERATING REVENUES Publishing excluding Daily News $1,312,767 1,246,377 1,163,116 1,136,619 New York Daily News $ - - - - Broadcasting and Entertainment $ 828,806 764,197 727,213 684,051 Education $ 103,101 102,082 21,209 - - - -------------------------------------------------------------------------------------------------------- TOTAL OPERATING REVENUES $2,244,674 2,112,656 1,911,538 1,820,670 - - -------------------------------------------------------------------------------------------------------- OPERATING PROFIT Publishing excluding Daily News $ 270,143 287,590 253,050 224,509 New York Daily News $ - - - - Broadcasting and Entertainment $ 160,616 132,413 125,684 121,267 Education $ 4,586 2,829 2,071 - Corporate expenses $ (30,134) (26,207) (24,402) (23,643) - - -------------------------------------------------------------------------------------------------------- TOTAL OPERATING PROFIT $ 405,211 396,625 356,403 322,133 - - -------------------------------------------------------------------------------------------------------- Net interest expense $ (7,349) (4,778) (9,545) (22,510) Other $ 14,672 - - - - - -------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES $ 412,534 391,847 346,858 299,623 Income taxes $ (167,076) (158,698) (142,212) (120,089) - - -------------------------------------------------------------------------------------------------------- INCOME (LOSS) FROM CONTINUING OPERATIONS $ 245,458 233,149 204,646 179,534 INCOME (LOSS) FROM DISCONTINUED OPERATIONS $ 32,707 8,898 (16,040) (42,909) Cumulative effects of changes in accounting principles $ - - - (16,800) - - -------------------------------------------------------------------------------------------------------- NET INCOME (LOSS) (1) $ 278,165 242,047 188,606 119,825 - - -------------------------------------------------------------------------------------------------------- SHARE INFORMATION Primary net income (loss) per share (1) Continuing operations $ 3.50 3.19 2.80 2.48 Discontinued operations $ .50 .13 (.24) (.66) Net income $ 4.00 3.32 2.56 1.56 Common dividends per share $ 1.12 1.04 .96 .96 Shareholders' equity per share $ 20.67 18.93 15.54 13.32 Weighted average common shares outstanding (000's) 64,790 67,213 66,371 65,018 FINANCIAL RATIOS Operating profit margin 18.1% 18.8% 18.6% 17.7% Net income margin 12.4% 11.5% 9.9% 6.6% Net income as a percentage of average shareholders' equity 20.5% 19.9% 18.8% 13.6% Long-term debt to total capital 32% 22% 30% 43% FINANCIAL POSITION AND OTHER DATA Total assets $3,288,255 2,785,825 2,536,410 2,751,570 Long-term debt $ 757,437 411,200 510,838 740,979 Shareholders' equity $1,379,909 1,332,980 1,095,627 911,889 Capital expenditures $ 117,863 91,626 75,620 130,232 Repurchase (issuance) of treasury stock, net $ 273,873 28,670 (46,138) (31,918) Dividends $ 91,202 88,325 81,927 80,407 Amortization of broadcast rights $ 234,065 244,361 236,468 233,859 Employees (full-time equivalents) 10,500 10,500 9,900 12,400
(1) Includes a gain on sale of America Online common stock of $9.1 million or $.14 per share, a loss on sale of Times Advocate Company of $4.5 million or $.07 per share, and a gain on sale of Compton's NewMedia of $4.1 million or $.06 per share in 1995, a gain on sale of QUNO stock of $13 million or $.19 per share in 1994, the cumulative effects of accounting changes of $16.8 million or $.26 per share in 1992, charges relating to New York Daily News totaling $255.0 million or $3.86 per share in 1990, a non-recurring net loss of $21.1 million or $.27 per share in 1987 and a non-recurring net gain of $151.6 million or $1.88 per share in 1986. 64
Tribune Company and Subsidiaries 1991 1990 1989 1988 1987 1986 1985 =================================================================================== 1,122,434 1,183,177 1,197,077 1,117,487 1,043,310 943,366 942,773 - 321,823 422,024 436,843 419,853 411,840 405,862 617,514 623,981 584,326 505,729 485,276 466,231 384,723 - - - - - - - ----------------------------------------------------------------------------------- 1,739,948 2,128,981 2,203,427 2,060,059 1,948,439 1,821,437 1,733,358 ----------------------------------------------------------------------------------- 217,031 278,594 299,282 248,567 239,358 209,525 171,932 - (114,468) (2,179) 15,167 (47,357) (9,228) 3,040 100,175 107,528 96,803 77,754 62,858 65,537 45,693 - - - - - - - (22,256) (22,654) (22,100) (22,699) (25,815) (17,650) (19,459) ----------------------------------------------------------------------------------- 294,950 249,000 371,806 318,789 229,044 248,184 201,206 ----------------------------------------------------------------------------------- (30,387) (23,478) (12,040) (33,341) (33,414) (29,019) (8,458) - (295,000) 3,133 - - 276,587 6,466 ----------------------------------------------------------------------------------- 264,563 (69,478) 362,899 285,448 195,630 495,752 199,214 (106,514) 22,055 (150,948) (135,135) (101,349) (219,520) (97,637) ----------------------------------------------------------------------------------- 158,049 (47,423) 211,951 150,313 94,281 276,232 101,577 (16,068) (16,110) 30,470 60,093 47,256 16,638 22,267 - - - - - - - ----------------------------------------------------------------------------------- 141,981 (63,533) 242,421 210,406 141,537 292,870 123,844 ----------------------------------------------------------------------------------- 2.19 (.98) 2.75 1.99 1.20 3.42 1.26 (.25) (.24) .42 .79 .60 .21 .27 1.94 (1.22) 3.17 2.78 1.80 3.63 1.53 .96 .96 .88 .76 .64 .52 .44 12.78 11.68 15.60 15.88 14.35 13.91 11.19 64,364 66,032 72,390 75,636 78,536 80,677 81,045 17.0% 11.7% 16.9% 15.5% 11.8% 13.6% 11.6% 8.2% (3.0)% 11.0% 10.2% 7.3% 16.1% 7.1% 17.6% (6.9)% 21.4% 18.4% 12.9% 29.1% 14.3% 47% 51% 40% 32% 31% 29% 41% 2,795,298 2,826,099 3,013,537 2,905,382 2,738,484 2,571,432 2,445,924 897,835 998,962 880,686 650,118 551,651 522,750 732,521 851,699 764,512 1,077,996 1,188,480 1,094,943 1,101,274 908,486 93,931 148,897 238,307 213,596 191,895 147,726 171,687 (10,007) 178,517 296,738 56,185 108,647 65,893 (5,692) 78,415 80,110 75,298 57,416 50,025 42,201 35,490 207,392 228,605 221,897 192,045 169,921 155,183 83,463 12,900 16,100 17,100 16,800 16,800 17,300 18,700 65
EX-21 7 SUBSIDIARIES OF TRIBUNE COMPANY EXHIBIT 21 TRIBUNE COMPANY SUBSIDIARIES
Jurisdiction of Other names under which Incorporation subsidiary does business --------------- ------------------------ PUBLISHING - - ---------- Tribune Publishing Company Delaware Chicago Tribune Company Illinois Chicago Tribune; Exito! Chicago Tribune Newspapers, Inc. Illinois Tribune Newspaper Network Chicago Tribune Press Service, Inc. Illinois Newspaper Readers Agency, Inc. Illinois Tribune Direct Marketing, Inc. Delaware Chicago Tribune Direct Precision Home Delivery, Inc. Delaware RELCON, Inc. Delaware Tribune Media Services, Inc. Delaware TV Log; TV Week; TV Listings; TMS Stocks; Voice News Network Sun-Sentinel Company Delaware Sun-Sentinel; Gold Coast Labeling Gold Coast Publications, Inc. Delaware Gold Coast Shopper; Porch Plus; XS; Exito!; iCE; Vital Signs; South Florida Parenting New River Center Maintenance Association, Inc. Florida Sentinel Communications Company Delaware The Orlando Sentinel; US Express; Magic Magazine; Tribune Interactive Network Services; Downtown Orlando Magazine; Florida Journal Publications; Black Family Today; Central Florida Family; Tampa Bay Family; Jacksonville Family Neocomm, Inc. Delaware Porch Plus; Relcon of Florida; Neocomm of Delaware, Inc.
Jurisdiction of Other names under which Incorporation subsidiary does business --------------- ------------------------ The Daily Press, Inc. Delaware Daily Press Hampton Roads Newspapers, Inc. Virginia Tribune National Marketing Company Delaware Picture Network International, Ltd. Delaware EDUCATION - - --------- Tribune Education Company (Tribune New Media Company) Delaware NTC/Contemporary Publishing Company Illinois Best Publications Company; Best Books Company; National Textbook Company; Passport Books; VGM Career Horizons; The Quilt Digest Press; NTC Business Books Congdon & Weed, Inc. New York Wright Group Publishing, Inc. Delaware Compton's Multimedia Publishing Group, Inc. Delaware NewMedia Source, Inc. California Compton's NewMedia U.K. Limited United Kingdom Jamestown Publishers, Inc. Rhode Island Everyday Learning Corporation Illinois NTC/Contemporary Publishing Company Delaware Educational Publishing Corporation Delaware Creative Publication Ideal School Supply Corporation Delaware Instructional Fair Inc. Delaware Instructional Fair.TS Denison
Jurisdiction of Other names under which Incorporation subsidiary does business --------------- ------------------------ BROADCASTING AND ENTERTAINMENT - - ------------------------------ Tribune Broadcasting Company Delaware Tribune Plus; Tribune Plus Corporate Sales; Tribune Creative Services Group Tribune Broadcasting News Network, Inc. Delaware Trib Net ChicagoLand Television News, Inc. Delaware ChicagoLand Television/CLTV Oak Brook Productions, Inc. Delaware ChicagoLand Microwave Licensee, Inc. Delaware Tribune Regional Programming, Inc. Delaware Tribune New York Radio, Inc. Delaware WQCD-FM Tribune Denver Radio, Inc. Delaware KOSI; KEZW Tribune Denver Direct Mail, Inc. Delaware KOSI Coupons WGN Continental Broadcasting Company Delaware WGN-TV; WGN Radio; Tribune Radio Networks Tribune Sacramento Radio, Inc. Delaware KKHK (pending FCC approval, previously known as KVOD) Tribune Entertainment Company Delaware Magic T Music Publishing Company Delaware Tribune Entertainment Production Company Delaware Chicago River Production Company Delaware 435 Production Company Delaware 5800 Sunset Productions Inc. Delaware North Michigan Production Company Delaware Fairfax Media, Incorporated Virginia Tribune (FN) Cable Ventures, Inc. Delaware KWGN Inc. Delaware KWGN-TV WGNO Inc. Delaware WGNO-TV WGNX Inc. Delaware WGNX-TV KTLA Inc. California KTLA-TV
Jurisdiction of Other names under which Incorporation subsidiary does business --------------- ------------------------ WPHL-TV, Inc. Pennsylvania WPHL-TV WPIX Inc. New York WPIX-TV; Tribune New York Holdings WLVI Inc. Delaware WLVI-TV Tribune Network Holdings Company Delaware KTTY, Inc. Delaware KHTV, Inc. Delaware KHTV-TV Interstate Radio Network, Inc. Illinois Tribune California Properties, Inc. Delaware Farm Journal, Inc. Pennsylvania Farm Journal Tours, Inc. Pennsylvania Rockwood Research Corporation Pennsylvania Chicago National League Ball Club, Inc. Delaware Chicago Cubs Diana-Quentin, Inc. Illinois Rockford Professional Baseball Club, Inc. Florida Rockford Cubbies Rock River Concessions, Inc. Florida Orlando Baseball Club, Inc. Delaware Orlando Cubs Orlando Baseball Concessions, Inc. Delaware MISCELLANEOUS - - ------------- Tribune Properties, Inc. Delaware New River Center Management Co. Tribune New York Properties, Inc. Delaware Riverwalk Center I Joint Venture Florida (Partnership)
EX-23 8 CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS ---------------------------------- We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (File No. 33-45793) and in the Registration Statements on Form S-8 (File Nos. 2-90727, 33-21853, 33-26239, 33-47547, 33-59233 and 333-00575) of Tribune Company of our report dated January 31, 1996 appearing in the 1995 Annual Report to Stockholders which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedule, which appears in this Form 10-K. /s/ Price Waterhouse LLP - - ------------------------ PRICE WATERHOUSE LLP Chicago, Illinois March 25, 1996 EX-27 9 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the 1995 Consolidated Statements of Income and Consolidated Balance Sheets and is qualified in its entirety by reference to such financial statements. 1,000 YEAR DEC-31-1995 DEC-26-1994 DEC-31-1995 10,631 12,268 326,517 30,154 45,348 545,600 1,366,741 725,995 3,288,255 557,153 0 1,018 0 322,540 1,056,351 3,288,255 0 2,244,674 0 1,164,609 0 0 21,814 412,534 167,076 245,458 32,707 0 0 278,165 4.00 3.68
EX-27.1 10 RESTATED FINANCIAL DATA SCHEDULES
5 This schedule contains restated financial information extracted from the 1995 annual report for fiscal years 1995 and 1994 and is qualified in its entirety by reference to such report. The previously filed financial data schedules have been restated to conform to revised financial statement presentation. The restatement had no effect on income. 1,000 3-MOS 6-MOS 9-MOS 9-MOS YEAR DEC-31-1995 DEC-31-1995 DEC-31-1995 DEC-25-1994 DEC-25-1994 DEC-26-1994 DEC-26-1994 DEC-26-1994 DEC-27-1993 DEC-27-1993 MAR-26-1995 JUN-25-1995 SEP-24-1995 SEP-25-1994 DEC-25-1994 23,290 18,102 14,712 16,736 18,476 43,759 42,890 22,198 45,895 3,348 317,976 365,583 351,911 305,637 347,314 34,286 34,103 36,661 35,819 33,998 39,570 47,431 53,162 34,674 33,488 599,261 611,663 616,628 566,190 543,544 1,335,803 1,347,442 1,344,971 1,291,633 1,316,715 693,142 706,705 716,663 657,182 675,684 2,831,209 2,876,418 3,080,850 2,836,793 2,785,825 619,603 553,094 568,409 522,305 529,686 0 0 0 0 0 1,018 1,018 1,018 1,018 1,018 0 0 0 0 0 322,917 322,541 322,541 329,286 329,286 975,633 1,018,677 1,091,295 972,921 1,002,676 2,831,209 2,876,418 3,080,850 2,836,793 2,785,825 0 0 0 0 0 521,406 1,098,624 1,650,868 1,533,611 2,112,656 0 0 0 0 0 265,312 555,656 851,300 770,672 1,059,306 0 0 0 0 0 0 0 0 0 0 4,263 8,883 14,534 15,689 20,585 106,383 229,456 303,526 275,652 391,847 43,085 92,930 122,928 111,639 158,698 63,298 136,526 180,598 164,013 233,149 4,665 13,564 25,392 8,915 8,898 0 0 0 0 0 0 0 0 0 0 67,963 150,090 205,990 172,928 242,047 0.96 2.15 2.94 2.36 3.32 0.89 1.98 2.71 2.18 3.07
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