-----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, SM0nvPDIyxQ+WYrXfHKztJLSqDKQHqkLyZnOIGjPLbyOrkw1GGB1+lZLbgcfdDMR mHgOwixBNElqW5OkFgc5MA== 0000898430-96-002067.txt : 19960517 0000898430-96-002067.hdr.sgml : 19960517 ACCESSION NUMBER: 0000898430-96-002067 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TIMES MIRROR CO /NEW/ CENTRAL INDEX KEY: 0000925260 STANDARD INDUSTRIAL CLASSIFICATION: NEWSPAPERS: PUBLISHING OR PUBLISHING & PRINTING [2711] IRS NUMBER: 954481525 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13492 FILM NUMBER: 96567848 BUSINESS ADDRESS: STREET 1: TIMES MIRROR SQUARE STREET 2: 220 WEST FIRST STREET CITY: LOS ANGELES STATE: CA ZIP: 90053 BUSINESS PHONE: 2132373700 MAIL ADDRESS: STREET 1: TIMES MIRROR SQUARE STREET 2: 202 WEST 1ST ST CITY: LOS ANGELES STATE: CA ZIP: 90053 FORMER COMPANY: FORMER CONFORMED NAME: NEW TMC INC DATE OF NAME CHANGE: 19940613 10-Q 1 FORM 10-Q - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to___________ Commission File Number 1-13492 THE TIMES MIRROR COMPANY State of Incorporation: Delaware I.R.S. Employer Id. No. 95-4481525 TIMES MIRROR SQUARE Los Angeles, California 90053 Telephone: (213) 237-3700 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------ ------ Number of shares of Series A Common Stock outstanding at May 8, 1996: 75,876,172 Number of shares of Series C Common Stock outstanding at May 8, 1996: 27,568,320 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THE TIMES MIRROR COMPANY PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Financial information herein, and management's discussion thereof, include consolidated data for The Times Mirror Company ("Registrant" or "Times Mirror") and its subsidiaries. Registrant and its subsidiaries are sometimes herein referred to collectively as the "Company". -2- THE TIMES MIRROR COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
FIRST QUARTER ENDED MARCH 31 ---------------------- 1996 1995 -------- ---------- REVENUES.................................................... $806,759 $ 773,670 -------- ---------- COSTS AND EXPENSES: Cost of sales............................................. 446,276 422,200 Selling, general and administrative expenses.............. 310,255 321,989 Restructuring charge...................................... 3,223 -------- ---------- 756,531 747,412 OPERATING PROFIT............................................ 50,228 26,258 Interest expense............................................ (7,407) (8,732) Interest income............................................. 1,956 6,392 Other, net.................................................. 3,294 7,534 -------- ---------- Income from continuing operations before income taxes....... 48,071 31,452 Income taxes.............................................. 22,034 15,102 -------- ---------- Income from continuing operations........................... 26,037 16,350 Discontinued operations..................................... 1,637,642 Cumulative effect of changes in accounting principles, net of income tax benefit of $8,817....................... (12,724) -------- ---------- NET INCOME.................................................. $ 26,037 $1,641,268 ======== ========== Preferred dividend requirements............................. $ 10,911 $ 4,730 ======== ========== Earnings available to common shareholders................... $ 15,126 $1,636,538 ======== ========== Primary earnings per share: Continuing operations..................................... $ .14 $ .09 Discontinued operations................................... 13.27 Cumulative effect of accounting changes, net.............. (.10) -------- ---------- Primary earnings per share.................................. $ .14 $ 13.26 ======== ========== Fully diluted earnings per share............................ $ * $ 12.70 ======== ========== - ----------- * Per share amount on a fully diluted basis has been omitted as the amount is antidilutive in relation to the primary per share amount.
See notes to condensed consolidated financial statements -3- THE TIMES MIRROR COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
MARCH 31, DECEMBER 31, 1996 1995 ---------- ----------- ASSETS (UNAUDITED) Current Assets Cash and cash equivalents................................ $ 119,048 $ 182,901 Marketable securities.................................... 19,272 72,806 Accounts receivable, less allowance for doubtful accounts and returns of $71,636 and $79,536........... 491,301 561,828 Inventories.............................................. 178,393 173,568 Deferred income taxes.................................... 104,271 134,395 Other current assets..................................... 98,344 122,539 ---------- ---------- Total Current Assets.................................. 1,010,629 1,248,037 Property, plant and equipment, at cost less accumulated depreciation of $920,499 and $903,608.................... 1,172,208 1,174,831 Goodwill................................................... 647,839 651,745 Other intangibles.......................................... 84,025 84,186 Deferred charges........................................... 207,579 199,188 Other assets............................................... 429,972 459,172 ---------- ---------- $3,552,252 $3,817,159 ========== ==========
See notes to condensed consolidated financial statements -4- THE TIMES MIRROR COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
MARCH 31, DECEMBER 31, 1996 1995 ----------- ------------ (UNAUDITED) LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable............................................. $ 313,684 $ 395,292 Employees' compensation...................................... 81,950 118,111 Unearned income.............................................. 241,937 222,893 Other current liabilities.................................... 155,830 298,894 ---------- ---------- Total Current Liabilities................................. 793,401 1,035,190 Long-term debt................................................. 299,076 247,934 Deferred income taxes.......................................... 98,433 140,087 Other liabilities.............................................. 619,814 587,712 ---------- ---------- Total Liabilities......................................... 1,810,724 2,010,923 Common stock subject to put options............................ 7,351 Commitments and contingencies Shareholders' Equity Series A preferred stock, $1 par value; 900,000 shares authorized; 824,000 shares issued; stated at liquidation value........................................... 411,784 411,784 Series B preferred stock, $1 par value; 25,000,000 shares authorized; 7,789,000 shares issued; stated at liquidation value........................................... 164,595 164,595 Preferred stock, $1 par value; 7,100,000 shares authorized; no shares issued Common stock Series A, $1 par value; 500,000,000 shares authorized; 76,864,000 and 77,765,000 shares issued................... 76,864 77,765 Series B, $1 par value; 100,000,000 shares authorized; no shares issued Series C, convertible, $1 par value; 300,000,000 shares authorized; 27,827,000 and 27,933,000 shares issued....... 27,827 27,933 Additional paid-in capital................................... 199,435 192,266 Retained earnings............................................ 820,368 875,981 Net unrealized gain on securities............................ 33,304 55,912 ---------- ---------- Total Shareholders' Equity........................... 1,734,177 1,806,236 ---------- ---------- $3,552,252 $3,817,159 ========== ==========
See notes to condensed consolidated financial statements -5- THE TIMES MIRROR COMPANY STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS (IN THOUSANDS) (UNAUDITED)
FIRST QUARTER ENDED MARCH 31 --------------------- 1996 1995 ---------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net cash provided by continuing operating activities................. $43,270 $ 25,510 Net cash provided by (used in) discontinued operating activities..... (1,591) 5,198 --------- --------- Net cash provided by operating activities......................... 41,679 30,708 CASH FLOWS FROM INVESTING ACTIVITIES Investment in marketable and long-term securities..................... 48,811 (162,339) Capital expenditures.................................................. (26,911) (27,179) Capitalization of product costs....................................... (14,280) (18,736) Acquisitions, net of cash acquired.................................... (3,099) (48,405) Proceeds from disposal of cable television operations................. 1,225,013 Proceeds from sales of assets......................................... 5,418 Other, net............................................................ (2,570) (3,763) --------- --------- Net cash provided by investing activities of continuing operations.... 1,951 970,009 Net cash used in investing activities of discontinued operations.............................................. (17,015) --------- --------- Net cash provided by investing activities......................... 1,951 952,994 CASH FLOWS FROM FINANCING ACTIVITIES Repurchases of common stock........................................... (155,709) Proceeds from issuance of premium equity participating securities..... 51,221 Dividends paid........................................................ (17,420) (34,727) Proceeds from exercise of stock options............................... 14,329 Principal repayments of other debt.................................... (80) (100,107) Repayment of commercial paper and short-term borrowings, net......................................... (488,010) Other, net............................................................ 176 108 --------- --------- Net cash used in financing activities.............................. (107,483) (622,736) --------- --------- Increase (decrease) in cash and cash equivalents....................... (63,853) 360,966 Cash and cash equivalents at beginning of year......................... 182,901 81,944 --------- --------- Cash and cash equivalents at end of period............................. $ 119,048 $ 442,910 ========= =========
See notes to condensed consolidated financial statements -6- THE TIMES MIRROR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - BASIS OF PREPARATION The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the fiscal year. For further information, refer to the consolidated financial statements and accompanying notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 1995. Certain amounts in the previously issued financial statements have been reclassified to conform to the first quarter 1996 presentation. Financial information in the Notes to Condensed Consolidated Financial Statements excludes discontinued operations, except where noted. NOTE 2 - CHANGES IN ACCOUNTING PRINCIPLES Effective January 1, 1995, the Company changed its method of accounting for certain contract-related revenues from the licensing and sale of training programs and related materials. The Company believes that this provides for consistent accounting treatment among its professional training companies. The Company recorded a cumulative charge of $7,372,000 ($4,511,000 net of taxes, or 4 cents per share) as of January 1, 1995. The effect of this change on first quarter 1995 net income before cumulative effect of changes in accounting principles was not significant. Effective January 1, 1995, the Company adopted the Financial Accounting Standards Board's Practice Bulletin 13, "Direct-Response Advertising and Probable Future Benefits," which clarified the accounting for direct-response advertising costs. The Company recorded a cumulative charge of $14,169,000 ($8,213,000 net of taxes, or 6 cents per share) as of January 1, 1995. The effect of this change on first quarter 1995 net income before cumulative effect of changes in accounting principles was not significant. -7- THE TIMES MIRROR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) NOTE 3 - REORGANIZATION On February 1, 1995, the Company completed the merger of its cable television operations with Cox Communications, Inc. (Cox) and related transactions. The transactions involved in the reorganization included the merger of the cable television operations with Cox, the retirement of approximately 75% of total debt outstanding at December 31, 1994, the issuance of two new series of preferred stock, and a partial redemption of certain shareholder interests through the distribution of Cox common stock. See Note 2 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 1995 for a detailed discussion of these transactions. NOTE 4 - DISCONTINUED OPERATIONS Discontinued operations include cable programming, consumer multimedia, an electronic shopping joint venture and cable television. The cable programming business, consumer multimedia business and the joint venture were discontinued during the third quarter of 1995. The cable television operations were disposed of on February 1, 1995 in connection with the reorganization described in Note 3, for a nontaxable gain of $1.634 billion or $13.24 per share. The combined results of operations of these businesses have been reported as discontinued operations. The income from discontinued operations is as follows (in thousands):
March 31, 1995 ---------- Revenues........................ $ 42,260 ---------- Income before income taxes...... 5,574 Income taxes.................... 2,226 ---------- Net income...................... 3,348 Net gain on disposal............ 1,634,294 ---------- Total discontinued operations... $1,637,642 ==========
-8- THE TIMES MIRROR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) NOTE 5 - RESTRUCTURING At March 31, 1996, the Company had restructuring liabilities of $190,428,000, of which $93,524,000 is included in "Other current liabilities" and $96,904,000 is included in "Other liabilities" in the condensed consolidated balance sheet. Cash spent for restructuring program actions was $67,321,000 during the quarter ended March 31, 1996, of which $29,413,000 was for severance payments. As of March 31, 1996, approximately 2,300 full-time equivalent employees had terminated employment under the 1995 restructuring program. The remaining liability for severance costs at March 31, 1996 aggregated $34,663,000. NOTE 6 - SUPPLEMENTAL CASH FLOW INFORMATION Cash payments during the periods ended March 31, 1996 and 1995 included interest, net of amounts capitalized, of $7,206,000 and $15,782,000 and income taxes of $4,632,000 and $14,972,000, respectively. The reorganization described in Note 3 resulted in the following non-cash transactions during the period ended March 31, 1995 (in thousands): Fair value of Cox Class A common stock issued to noncontrolling shareholders and accounted for as a partial redemption of certain shareholder interests.......... $932,000 Transfer of debt, related interest and other liabilities to Cox... 133,257 Exchange of debentures............................................ 246,965 Issuance of Series A preferred stock.............................. 411,784 Exchange of common stock for Series B preferred stock............. 349,954 Retirement of treasury stock...................................... 61,543
NOTE 7 - OTHER, NET Other, Net in 1995 includes a gain of $7,163,000, or $4,500,000 (4 cents per share) after taxes on the sale of warrants to purchase preferred stock obtained as part of the 1993 sale of the broadcast television stations. -9- THE TIMES MIRROR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) NOTE 8 - DEBT Debt is summarized as follows (in thousands):
March 31, December 31, 1996 1995 --------- ------------ 7-1/4% Debentures due March 1, 2013........... $148,215 $148,215 7-1/2% Debentures due July 1, 2023............ 98,750 98,750 4-1/4% PEPS due March 15, 2001; 1,305,000 securities stated at the issuance price of $39.25 per security................ 51,221 Others at various interest rates, maturing through 2001........................ 1,143 1,222 -------- -------- 299,329 248,187 Less current maturities....................... (253) (253) -------- -------- Long-term debt................................ $299,076 $247,934 ======== ========
In March 1996, the Company issued 1,305,000 securities, designated as "4-1/4% Premium Equity Participating Securities (PEPS)" for gross proceeds of $39.25 per security. This obligation hedges a significant portion of the Company's investment in common stock of Netscape Communications Corporation (Netscape). The amount payable at maturity is determined by reference to the fair market value of the Netscape stock. As a result, the payable will generally move in tandem with changes in the fair market value of the Netscape stock. The PEPS obligation is recorded at its maturity value or at the issuance price of $39.25 if the fair market value of Netscape common stock is between $39.25 and $45.14. At March 31, 1996, the fair market value of Netscape common stock is $41.50 per share. NOTE 9 - EARNINGS AND DIVIDENDS PER SHARE Primary earnings per share is computed by dividing net income, less preferred dividend requirements, by the weighted average number of shares of common stock and common stock equivalents outstanding during the period, except when the common stock equivalents are antidilutive or result in less than 3% dilution. The weighted average number of shares used for primary earnings per share totaled 105,225,000 and 123,416,000 for the quarters ended March 31, 1996 and 1995, respectively. -10- THE TIMES MIRROR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) Fully diluted earnings per share is computed by dividing net income, less preferred dividend requirements for Series A preferred stock, by the weighted average number of shares of common stock outstanding at the end of the 1995 first quarter and common stock equivalents outstanding, assuming that the Series B preferred stock outstanding at the end of the 1996 and 1995 first quarters was converted to common stock on a one-for-one basis on March 1, 1995 and January 1, 1996, respectively. The weighted average number of shares for fully diluted earnings per share is 113,014,000 and 129,027,000 for the quarters ended March 31, 1996 and 1995, respectively. Cash dividends of 6 cents per share of common stock were declared in the quarters ended March 31, 1996 and 1995, respectively. NOTE 10 - FAIR VALUE OF FINANCIAL INSTRUMENTS Financial instruments consist of the following (in thousands):
March 31, 1996 December 31, 1995 --------------- ------------------ Fair Fair Cost Value Cost Value ---- ----- ---- ----- Assets: Investments $ 7,937 $ 64,729 $ 7,937 $102,663 Liabilities: Long-term debt 299,076 297,679 247,934 273,582 Off Balance Sheet: Unrealized net gain on interest rate swaps - 8,880 - 19,478 Unrealized gain on foreign currency forward swap - 527 - -
Investments are comprised of investments in equity securities, which are classified as available-for-sale, and are carried at fair value in the condensed consolidated balance sheets. Fair value is based on estimated or quoted market prices. The unrealized gain is reported as a separate component of shareholders' equity, net of applicable income taxes. NOTE 11 - CAPITAL STOCK AND STOCK REPURCHASE PROGRAM The Company's stock repurchase program, which includes the issuance of put options from time-to-time, is described in Note 13 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 1995. During the first quarter of 1996, the Company issued 200,000 put options with an average strike price of $36.75. The cash received from the sale of these put options was not significant. The put options, which have mid-1996 expiration dates, entitle the holder to sell shares of Times Mirror common stock to the Company at the strike price on the expiration date of the put option. The potential obligation under these put options has been transferred from shareholders' equity to "Common stock subject to put options." The Company repurchased 1,864,000 shares of common stock during the first quarter of 1996 for an aggregate cost of $64,542,000. -11- THE TIMES MIRROR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED) NOTE 12 - STOCK OPTIONS The Company granted each eligible employee 100 stock options on January 31, 1996. This grant is expected to result in the issuance of approximately 1,400,000 stock options at a price of $30.8125. These options will vest 100 percent on January 31, 1999 for employees still employed by the Company at that date. NOTE 13 - INCOME TAXES The Company's effective tax rate for continuing operations exceeds the federal statutory income tax rate due principally to state taxes and permanent state and federal tax differences related to the non-deductible amortization of goodwill. NOTE 14 -- USE OF ESTIMATES AND OTHER UNCERTAINTIES Financial statements prepared in accordance with generally accepted accounting principles require management to make estimates and judgments that affect amounts and disclosures reported in the financial statements. Actual results could differ from those estimates, although management does not believe that any differences would materially affect its financial position or reported results. The Company's future results could be adversely affected by a number of factors, including (a) an increase in paper, printing and distribution costs over the levels anticipated; (b) increased consolidation among major retailers or other events depressing the level of display advertising; (c) an economic downturn in the Company's principal newspaper markets or other occurrences leading to decreased circulation and diminished revenues from both display and classified advertising; (d) competitive pressures arising from increased consolidation in the legal information industry and the college textbook publishing industry; (e) an increase in expenses related to new initiatives and product improvement efforts in the legal information, flight information and health information operating units; (f) unfavorable foreign currency fluctuations; and (g) a general economic downturn resulting in decreased professional or corporate spending on discretionary items such as information or training and in decreased consumer spending on discretionary items such as magazines or newspapers. NOTE 15 - CONTINGENT LIABILITIES The Company and its subsidiaries are defendants in actions for libel and other matters arising out of their business operations. In addition from time to time, the Company and its subsidiaries are involved as parties in various governmental and administrative proceedings, including environmental matters. The Company does not believe that any such proceedings currently pending will have a material adverse effect on its consolidated financial position, although an adverse resolution in any reporting period of one or more of these matters could have a material impact on results of operations for that period. NOTE 16 - SUBSEQUENT EVENTS In early May 1996, the Company terminated an interest rate swap as well as its two forward swap agreements. The net cash payment related to the termination of these agreements was not significant. At the completion of these transactions, the Company had one interest rate swap outstanding. On May 9, 1996, the Board of Directors approved an increase in the quarterly dividend to 10 cents per share on its common stock, beginning with the June 10, 1996 payment date. -12- THE TIMES MIRROR COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - --------------------- OVERVIEW GENERAL - ------- First quarter operating results were strong, aided by better than expected newspaper advertising revenues early in the quarter and significant reductions in operating expenses achieved through the Company's 1995 restructuring and other cost reduction programs. NEWSPAPER PUBLISHING OUTLOOK - ---------------------------- In the first quarter of 1996, Newspaper Publishing achieved significantly improved operating performance on modest revenue gains, as a decline in operating expenses resulting from last year's restructuring and other cost reduction programs was greater than expected. In addition, newsprint suppliers did not implement the price increases originally scheduled for March 1996. First quarter 1996 newsprint prices, which were approximately 36 percent higher than last year's first quarter, are expected to decline for the remainder of 1996. Newsprint expense accounted for more than 20 percent of this segment's operating costs in the first quarter of 1996. Based on the outlook for more favorable newsprint pricing and other expense reductions overall, the Newspaper Publishing segment is expected to continue to experience year-over-year profit margin expansion. PROFESSIONAL INFORMATION OUTLOOK - -------------------------------- During the first quarter, Times Mirror announced plans to explore its strategic alternatives for the higher education publishing businesses and CRC Press. The higher education publishing businesses include business and economics publisher Richard D. Irwin; business professional publisher IPRO; life and physical science publisher Wm. C. Brown Publishers; social science and humanities publisher Brown & Benchmark Publishers; and related college publishing activities in another Times Mirror professional information company. CRC Press publishes scientific and technical information. The Company's higher education publishing businesses collectively rank fifth among U.S. college publishers. Times Mirror plans to concentrate its resources in businesses in which it can be a market leader; i.e., ranking number one or two in the marketplace. The nature of the strategic alternative selected for these businesses, including divestiture, could have a material impact on the results of this segment in 1996. In addition, because Times Mirror International Publishing manages the international sales and distribution for these businesses, the reduction of international revenues resulting from a sale of college and scientific publishing may increase international distribution costs of other professional information companies within Times Mirror, particularly in health sciences. For the year, the outlook for the Company's remaining professional information companies remains positive, as revenues and operating profits at Matthew Bender, the Company's legal publishing franchise, are expected to be stable after three years of decline. In addition, Jeppesen Sanderson, the flight information company, will continue to grow both core and new lines of business. Apart from the expected sale of its college publishing business, Mosby-Year Book, a leader in health science publishing, is expected to show continued growth, particularly in its consumer health information business. -13- CONSOLIDATED RESULTS OF OPERATIONS - ---------------------------------- The following table summarizes Times Mirror's financial results (dollars in thousands, except per share amounts):
FIRST QUARTER ----------------------- 1996 1995 --------- ----------- Revenues $806,759 $ 773,670 Operating profit 50,228 26,258 Interest expense (7,407) (8,732) Interest income 1,956 6,392 Income from continuing operations 26,037 16,350 Net income from discontinued operations 3,348 Net gain on disposal of discontinued 1,634,294 operations Cumulative effect of changes in (12,724) accounting principles Net income 26,037 1,641,268 Preferred dividend requirements 10,911 4,730 Earnings available to common shareholders 15,126 1,636,538 Earnings per share from continuing operations $ .14 $ .09 Earnings per share $ .14 $ 13.26
In the first quarter of 1996, Times Mirror's consolidated revenues increased 4.3 percent to $806.8 million and consolidated operating profit rose to $50.2 million, primarily reflecting the improvement in the Newspaper Publishing segment. Net interest expense of $5.5 million was nearly double the $2.3 million in the first quarter of 1995, as interest income declined in the first quarter of 1996. Interest-earning investments were substantially reduced, beginning in the latter part of 1995, due to the significant cash requirements of the restructuring program and share repurchases. Income from continuing operations for the first quarter of 1996 increased to $26.0 million from $14.1 million in the prior year, excluding a 1995 gain on an asset sale and a 1995 restructuring charge. Earnings improved in all business segments, due principally to greater than expected cost savings resulting from the 1995 restructuring and other cost reduction programs. Net income in the 1996 first quarter was $26.0 million, or 14 cents per share, compared with $1.641 billion, or $13.26 per share, in the prior year. The 1995 first quarter included a gain of $1.634 billion, or $13.24 per share, on the disposition of the Company's discontinued cable television operations. Net income for the first quarter of 1995 also included net income from discontinued operations of $3.3 million, or 3 cents per share, an after-tax restructuring charge in Newspaper Publishing of $2.2 million, or 2 cents per share, and a $12.7 million after-tax charge, or 10 cents per share, for accounting changes. -14- ANALYSIS BY SEGMENT NEWSPAPER PUBLISHING - -------------------- Newspaper Publishing revenues and operating profit were as follows (dollars in thousands):
FIRST QUARTER ----------------------------- 1996 CHANGE 1995 -------- ------- -------- Revenues Advertising $369,924 3.6% $356,961 Circulation 113,251 3.0 109,903 Other 11,761 26.6 9,288 -------- -------- $494,936 3.9% $476,152 ======== ======== Operating Profit $ 50,995 44.3% $ 35,345 ======== ======== Operating Profit Excluding Restructuring Charge $ 50,995 32.2% $ 38,568 ======== ========
Newspaper Publishing revenues in the first quarter of 1996 increased slightly over the prior year period, reflecting higher advertising and circulation revenues due in part to the six additional weekdays included in the 1996 quarter. However, the reported advertising and circulation revenue increases do not reflect any adjustment for the closing of the New York City edition of Newsday in mid-July 1995 or the Baltimore Evening Sun in mid-September 1995. First-quarter Newspaper Publishing revenues are historically the smallest quarter of the year. Advertising revenues improved at most of the Company's newspapers, as higher retail and classified advertising more than offset a slight decline in national advertising. Higher circulation revenues at The Times and other newspapers, due largely to pricing increases and reduced discounting, more than offset lower circulation revenues at Newsday, which was impacted by the closure of its New York City edition. Operating profit for the Newspaper Publishing segment rose substantially in the 1996 first quarter, led by strong results at the Los Angeles Times and Newsday, the Company's two largest newspapers. Excluding a restructuring charge in 1995, the operating profit margin in the first quarter of 1996 expanded to 10.3 percent from last year's 8.1 percent, despite an increase of nearly 30 percent in newsprint expense, as all other costs declined by approximately 4 percent. Consumption of newsprint declined by approximately 5 percent in the first quarter of 1996 compared to the prior year due to the closure of Newsday's New York City edition, the Baltimore Evening Sun and certain sections of The Times in the latter part of 1995, as well as overall conservation efforts. -15- PROFESSIONAL INFORMATION - ------------------------ Professional Information revenues and operating profit were as follows (dollars in thousands):
FIRST QUARTER ----------------------------- 1996 CHANGE 1995 -------- ------- -------- Revenues $237,074 6.2% $223,338 ======== ======== Operating Profit $ 13,161 50.6% $ 8,738 ======== ========
First quarter 1996 Professional Information revenues grew over the prior year quarter due principally to higher revenues at Mosby-Year Book, the Company's health science publisher, and Jeppesen Sanderson, the Company's flight information business. Segment operating profit in the first quarter of 1996 improved over the prior year as a result of higher operating profit in Mosby's consumer health information business, which benefited from 1995 acquisitions, earnings growth at Jeppesen Sanderson and lower seasonal first-quarter losses in higher education publishing, while results at Matthew Bender stabilized. Because the sales cycle in higher education publishing is highly seasonal, operating losses in this business are typically reported in the first quarter with peak revenue and operating profit results attained in the third and fourth quarters. CONSUMER MEDIA - -------------- Consumer Media revenues and operating profit were as follows (dollars in thousands):
FIRST QUARTER ----------------------------- 1996 CHANGE 1995 ------- ------- -------- Revenues $74,757 .5% $74,369 ======= ======= Operating Profit (Loss) $ 1,298 100+ $(2,820) ======= =======
Consumer Media generated operating profit in the first quarter of 1996, compared with an operating loss in 1995, largely due to cost reductions at Times Mirror Magazines resulting from the 1995 restructuring and other cost reduction programs. Revenues in the 1996 first quarter were up less than one percent from the prior year quarter, as weakness in advertising revenues at certain magazine titles slowed revenue growth. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Capital expenditures in 1996 are expected to total approximately $140 million for the full year, compared to the $128.6 million spent in 1995. The 1996 anticipated increase in capital expenditures is the result of office space consolidation planned in connection with the 1995 restructuring program. Total debt at March 31, 1996 of $299.3 million increased $51.1 million from the year-end 1995 level primarily due to the issuance of Premium Equity Participating Securities (PEPS) due March 15, 2001. As described in Note 8 to the Condensed Consolidated Financial Statements, the PEPS hedge a significant portion of the Company's investment in Netscape Communications Corporation common stock. -16- In December 1995, the Board of Directors authorized the repurchase of 12 million shares of common stock over the next three years. Repurchases are expected to be made from time-to-time in the open market or in private transactions, depending on market conditions, and may be discontinued at any time. The common shares purchased are intended, in part, to offset dilution from shares of common stock issued under the Company's stock-based employee compensation and benefit programs. In connection with this program, the Company may from time-to-time sell put options on its common stock. During the first quarter of 1996, the Company repurchased 1.8 million shares of common stock for an aggregate cost of $64.5 million and issued 200,000 put options for proceeds of approximately $176,000. The Company's cash requirements are funded primarily by its operating activities. The Company also obtains external financing through the issuance of fixed rate debt and has unsecured long-term revolving bank lines of credit with commitments totaling $400 million at March 31, 1996. In addition to loans, these lines of credit may be used to support a commercial paper program which was established in late 1995. There was no commercial paper outstanding at March 31, 1996. Future commercial paper issuances or other debt drawdowns are expected to be used for short-term or other periodic cash requirements. CASH FLOWS - ---------- During the first quarter of 1996, the Company generated $43.3 million in net cash from continuing operating activities, compared with $25.5 million for the same period in 1995. The increased cash flow in 1996 is largely attributable to the increase in operating profit and decreases in accounts receivable and taxes paid compared to the prior-year period. A total of $67.3 million was spent for restructuring-related actions in the 1996 first quarter compared to $8.9 million in the prior-year. Net cash provided by investing activities of continuing operations during the first quarter of 1996 was $2.0 million, compared to $970.0 million in the 1995 first quarter. The 1995 period included proceeds of $1.225 billion from the disposition of the cable television operations. Capital expenditures of $26.9 million in the 1996 first quarter were about the same as the prior year while cash of $3.1 million used for acquisitions in the first quarter of 1996 was significantly lower than the $48.4 million spent in the prior-year period. Capitalized product costs in the first quarter of 1996 of $14.3 million were slightly less than the $18.7 million capitalized in the prior year. Proceeds of $48.8 million from a reduction in marketable securities benefited the 1996 first quarter while $162.3 million was used to purchase marketable securities in the first quarter of 1995. For the first quarter of 1996, net cash used in financing activities of $107.5 million was significantly lower than the $622.7 million used in the first quarter of 1995. During the first quarter of 1995, the Company repaid $588.1 million of its debt using proceeds from the cable transaction. Cash of $155.7 million used for 1996 share repurchases, and to settle year-end 1995 share repurchases, more than offset the $65.6 million received from the issuance of securities and the exercise of stock options as well as a $17.3 million reduction in dividends paid to shareholders. DIVIDENDS - --------- Since June 1995, the Company has paid a quarterly dividend of 6 cents per share on its common stock. On May 9, 1996, the Board of Directors approved an increase in the quarterly dividend to 10 cents per share on its common stock, beginning with the June 10, 1996 payment date. Dividend requirements on Series A preferred stock were $8.2 million and $2.8 million in the first quarter of 1996 and 1995, respectively, while dividend requirements on Series B preferred stock were $2.7 million and $1.9 million, respectively. Both series of preferred stock accrued dividends beginning March 1, 1995. In addition, the Company repurchased nearly 8.8 million shares of Series B preferred stock during the last part of 1995. The Series B preferred stock will be converted into Series A common stock on April 1, 1998, unless previously redeemed by the Company. FORWARD-LOOKING STATEMENTS - -------------------------- The forward-looking statements set forth above and elsewhere in this Quarterly Report on Form 10-Q are subject to uncertainty and could be adversely affected by a number of factors. Some of these factors are described in Note 14 to the Condensed Consolidated Financial Statements. -17- THE TIMES MIRROR COMPANY PART II. OTHER INFORMATION Item 1. Legal Proceedings ----------------- No material legal proceedings are pending. Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits -------- 11. Computation of Earnings Per Share. 12. Ratio of Earnings to Fixed Charges and Ratio of Earnings to Fixed Charges and Preferred Stock Dividends. 27. Financial Data Schedule. (b) Reports on Form 8-K ------------------- A report on Form 8-K dated March 13, 1996 announced the Company's plan to explore its strategic alternatives for higher education publishing and CRC Press. A copy of the related press release was included in such filing. A report on Form 8-K dated March 19, 1996 announced that the Company had entered into an Underwriting Agreement on March 13, 1996 with Morgan Stanley & Co., Incorporated relating to the issuance and sale of the Company's 4-1/4% Premium Equity Participating Securities due March 15, 2001 (the "PEPS"). The Company also announced the completion of the issuance and sale of the PEPS on March 19, 1996, and the issuance of the PEPS pursuant to an Indenture dated as of March 19, 1996 between the Company and Citibank, N.A., as trustee. Copies of related documents were included in such filing. -18- THE TIMES MIRROR COMPANY SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, who is also signing in his capacity as Registrant's chief accounting officer. THE TIMES MIRROR COMPANY Date: May 15, 1996 By /s/ Thomas Unterman ------------------------------------ Thomas Unterman Senior Vice President and Chief Financial Officer -19- EX-11 2 COMPUTATION OF EARNINGS PER SHARE THE TIMES MIRROR COMPANY COMPUTATION OF EARNINGS PER SHARE (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
FIRST QUARTER ENDED MARCH 31 ---------------------------- 1996 1995 ------------ ------------ PRIMARY Average shares outstanding.......................... 105,225,121 123,114,766 Dilutive stock options based on the treasury stock method using average market price.................. * 301,420 ------------ ------------ Total............................................ 105,225,121 123,416,186 ============ ============ Income from continuing operations................... $ 26,037 $ 16,350 Discontinued operations............................. 1,637,642 Cumulative effect of changes in accounting principles, net of income tax benefit of $8,817.... (12,724) ------------ ------------ Net income.......................................... $ 26,037 $ 1,641,268 ============ ============ Preferred dividend requirements..................... $ 10,911 $ 4,730 ============ ============ Earnings available to common shareholders........... $ 15,126 $ 1,636,538 ============ ============ Primary earnings per share: Continuing operations............................. $ .14 $ .09 Discontinued operations........................... 13.27 Cumulative effect of accounting changes, net...... (.10) ------------ ------------ Primary earnings per share.......................... $ .14 $ 13.26 ============ ============
* Less than 3% dilution: common stock equivalents of 2,566,281 are not added to weighted average shares. Exhibit 11 Page 1 of 2 THE TIMES MIRROR COMPANY COMPUTATION OF EARNINGS PER SHARE (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
FIRST QUARTER ENDED MARCH 31 ---------------------------- 1996 1995 ------------ ------------ FULLY DILUTED Average shares outstanding.......................... 105,225,121 123,114,766 Common shares assumed issued upon conversion of Series B preferred stock........................... 7,789,276 5,520,393 Dilutive stock options based on the treasury stock method using market price at the close of the period, if higher than average market price........ * 391,909 ------------ ------------ Total............................................ 113,014,397 129,027,068 ============ ============ Income from continuing operations................... $ 26,037 $ 16,350 Discontinued operations............................. 1,637,642 Cumulative effect of changes in accounting principles, net of income tax benefit of $8,817.... (12,724) ------------ ------------ Net Income.......................................... $ 26,037 $ 1,641,268 ============ ============ Preferred dividend requirements..................... $ 8,236 $ 2,798 ============ ============ Earnings available to common shareholders........... $ 17,801 $ 1,638,470 ============ ============ Fully diluted earnings per share: Continuing operations.............................. $ ** $ .11 Discontinued operations............................ 12.69 Cumulative effect of accounting changes, net....... (.10) ------------ ------------ Fully diluted earnings per share.................... $ ** $ 12.70 ============ ============
*Less than 3% dilution: common stock equivalents of 3,301,185 are not added to weighted average shares. **Antidilutive Exhibit 11 Page 2 of 2 EX-12 3 COMPUTATION RATIO OF EARNINGS TO FIXED CHARGES THE TIMES MIRROR COMPANY COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES ------------------------------------------------- (IN THOUSANDS OF DOLLARS, EXCEPT RATIO)
FIRST QUARTER ENDED MARCH 31, 1996 -------------------- Fixed Charges Interest expense........................ $ 7,407 Portion of rents deemed to be interest.. 4,884 Amortization of debt expense............ 27 ------- Total Fixed Charges................... $12,318 ======= Earnings Income from continuing operations before income taxes.................... $48,071 Fixed charges........................... 12,318 Amortization of capitalized interest.... 833 Distributed income from less than 50% owned unconsolidated affiliate......... 22 Subtract: Equity income from less than 50% owned unconsolidated affiliate..... (391) ------- Total Earnings........................ $60,853 ======= Ratio of earnings to fixed charges...... 4.9
Exhibit 12 Page 1 of 2 THE TIMES MIRROR COMPANY COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS ------------------------------------------------- (IN THOUSANDS OF DOLLARS, EXCEPT RATIO)
FIRST QUARTER ENDED MARCH 31, 1996 ------------------- Fixed Charges Interest expense.............................. $ 7,407 Portion of rents deemed to be interest........ 4,884 Amortization of debt expense.................. 27 --------- Total Fixed Charges......................... $ 12,318 Preferred Stock Dividend Requirements............ 18,493 --------- Fixed Charges and Preferred Stock Dividends............................ $ 30,811 ========= Earnings (Loss) Earnings from continuing operations before income taxes.......................... $ 48,071 Fixed charges................................. 12,318 Amortization of capitalized interest.......... 833 Distributed income from less than 50% owned unconsolidated affiliate............... 22 Subtract: Equity income from less than 50% owned unconsolidated affiliate........... (391) --------- Total Earnings.............................. $ 60,853 ========= Ratio of earnings to fixed charges and preferred stock dividends....................... 2.0
Exhibit 12 Page 2 of 2 EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH, 31 1996 QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 119,048 19,272 562,937 71,636 178,393 1,010,629 2,092,707 920,499 3,552,252 793,401 0 0 576,379 104,691 1,053,107 3,552,252 806,759 806,759 446,276 446,276 0 6,119 7,407 48,071 22,034 26,037 0 0 0 26,037 .14 0 PER SHARE AMOUNT ON A FULLY DILUTED BASES HAS BEEN OMITTED AS THE AMOUNT IS ANTIDILUTIVE IN RELATION TO THE PRIMARY PER SHARE AMOUNT
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