-----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, LUbLR3wmhk8Kmuzokwmi/Nm5QzB0E9koubHbwr1NnvEYU8FrtQIPmoO46RAYV+bi IaLFhE5w48cbcAazu4Qwrg== 0000898430-97-002054.txt : 19970514 0000898430-97-002054.hdr.sgml : 19970514 ACCESSION NUMBER: 0000898430-97-002054 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970513 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: 97602579 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, 1997 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, 1997: 68,997,386 Number of shares of Series C Common Stock outstanding at May 8, 1997: 26,620,836 ================================================================================ 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 -------------------- 1997 1996 -------- -------- REVENUES............................................................ $773,882 $806,759 -------- -------- COSTS AND EXPENSES: Cost of sales...................................................... 398,408 446,276 Selling, general and administrative expenses....................... 287,934 310,255 -------- -------- 686,342 756,531 OPERATING PROFIT.................................................... 87,540 50,228 Interest expense.................................................... (10,012) (7,407) Interest income..................................................... 964 1,956 Other, net.......................................................... 873 3,294 -------- -------- Income before income taxes.......................................... 79,365 48,071 Income taxes........................................................ 34,132 22,034 -------- -------- NET INCOME.......................................................... $ 45,233 $ 26,037 ======== ======== Preferred dividend requirements..................................... $ 10,911 $ 10,911 ======== ======== Earnings available to common shareholders........................... $ 34,322 $ 15,126 ======== ======== Primary earnings per share.......................................... $ .36 $ .14 ======== ======== Fully diluted earnings per share.................................... $ * $ * ======== ========
________________ * Per share amount on a fully diluted basis has been omitted as the amount is antidilutive in relation to the primary share amount. See notes to condensed consolidated financial statements 3 THE TIMES MIRROR COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
MARCH 31, DECEMBER 31, 1997 1996 --------- ------------ (Unaudited) ASSETS Current Assets Cash and cash equivalents.................................................... $ 48,990 $ 145,105 Marketable securities........................................................ 14,468 31,740 Accounts receivable, less allowance for doubtful accounts and returns of $67,954 and $79,540........................................................ 449,601 488,572 Inventories.................................................................. 100,744 103,648 Deferred income taxes........................................................ 49,967 49,248 Other current assets......................................................... 55,189 52,159 ---------- ---------- Total current assets....................................................... 718,959 870,472 Property, plant and equipment, at cost less accumulated depreciation of $961,299 and $941,803........................................................ 1,163,688 1,177,077 Goodwill...................................................................... 509,167 530,142 Other intangibles............................................................. 42,707 46,039 Deferred charges.............................................................. 150,457 153,454 Other assets.................................................................. 718,268 752,678 ---------- ---------- Total assets............................................................... $3,303,246 $3,529,862 ========== ==========
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, 1997 1996 ----------- ------------- (UNAUDITED) LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable...................................................................... $ 270,360 $ 304,983 Short-term debt....................................................................... 108,995 15 Employees' compensation............................................................... 79,597 112,570 Unearned income....................................................................... 234,647 233,021 Other current liabilities............................................................. 137,932 158,558 ---------- ---------- Total current liabilities........................................................... 831,531 809,147 Long-term debt.......................................................................... 433,693 459,007 Deferred income taxes................................................................... 98,850 129,491 Other liabilities....................................................................... 582,154 595,235 ---------- ---------- Total liabilities................................................................... 1,946,228 1,992,880 Common stock subject to put options..................................................... 18,146 38,172 Commitments and contingencies Shareholders' Equity Series A preferred stock, $1 par value; 900,000 shares authorized; 824,000 shares issued and outstanding; 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 and outstanding; stated at liquidation value; convertible to Series A common stock................................................ 164,595 164,595 Preferred stock, $1 par value; 7,100,000 shares authorized; no shares issued or outstanding Common stock Series A, $1 par value; 500,000,000 shares authorized; 66,955,000 and 69,757,000 shares issued and outstanding........................... 66,955 69,757 Series B, $1 par value; 100,000,000 shares authorized; no shares issued or outstanding Series C, convertible, $1 par value; 300,000,000 shares authorized; 26,665,000 and 26,973,000 shares issued and outstanding........................... 26,665 26,973 Additional paid-in capital............................................................ 257,714 225,934 Retained earnings..................................................................... 366,831 533,131 Net unrealized gain on securities..................................................... 44,328 66,636 ---------- ---------- Total shareholders' equity.......................................................... 1,338,872 1,498,810 ---------- ---------- Total liabilities and shareholders' equity.......................................... $3,303,246 $3,529,862 ========== ==========
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 -------------------- 1997 1996 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net cash provided by continuing operating activities............................. $ 30,698 $ 31,507 Net cash used in discontinued operating activities............................... (1,591) --------- --------- Net cash provided by operating activities....................................... 30,698 29,916 CASH FLOWS FROM INVESTING ACTIVITIES Investment in marketable and long-term securities................................ 60,574 Capital expenditures............................................................. (22,016) (26,911) Capitalization of product costs.................................................. (6,323) (14,280) Other, net....................................................................... (196) (5,669) --------- --------- Net cash provided by (used in) investing activities............................ (28,535) 13,714 CASH FLOWS FROM FINANCING ACTIVITIES Repurchases of common stock...................................................... (201,622) (155,709) Proceeds from issuance of premium equity participating securities................ 51,221 Dividends paid................................................................... (20,130) (17,420) Proceeds from exercise of stock options.......................................... 15,208 14,329 Net proceeds from issuance of commercial paper................................... 108,980 Other, net....................................................................... (714) 96 --------- --------- Net cash used in financing activities.......................................... (98,278) (107,483) --------- --------- Decrease in cash and cash equivalents............................................. (96,115) (63,853) Cash and cash equivalents at beginning of year.................................... 145,105 182,901 --------- --------- Cash and cash equivalents at end of period........................................ $ 48,990 $ 119,048 ========= =========
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, 1996. Certain amounts in the previously issued financial statements have been reclassified to conform to the 1997 presentation. NOTE 2 -- RESTRUCTURING The balance sheet classification of restructuring liabilities is as follows (in thousands):
MARCH 31, DECEMBER 31, 1997 1996 --------- ------------ Other current liabilities: 1995 Restructuring............................ $ 52,817 $ 69,111 1996 Restructuring............................ 6,007 7,341 Other liabilities: 1995 Restructuring............................ 77,285 79,409 1996 Restructuring............................ 2,318 2,864 -------- -------- $138,427 $158,725 ======== ========
During the quarter ended March 31, 1997, cash spent on severance payments related to 1995 restructuring efforts totaled $2,332,000. At March 31, 1997, the remaining liability for 1995 severance costs aggregated $15,898,000. NOTE 3 -- SUPPLEMENTAL CASH FLOW INFORMATION Cash payments during the periods ended March 31, 1997 and 1996 included interest of $6,851,000 and $7,206,000 and income taxes of $51,455,000 and $4,632,000, respectively. NOTE 4 -- DEBT Short-term debt consists of the following (in thousands):
March 31, December 31, 1997 1996 ---------- ------------- Commercial paper at a weighted average interest rate of 5.7%......... $108,980 Current maturities of long-term debt................................. 15 $15 -------- --- $108,995 $15 ======== ===
7 THE TIMES MIRROR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) Long-term debt is summarized as follows (in thousands):
MARCH 31, DECEMBER 31, 1997 1996 ---------- ------------- 7 1/4% Debentures due March 1, 2013.................................................. $148,215 $148,215 7 1/2% Debentures due July 1, 2023................................................... 98,750 98,750 7 1/4% Debentures due November 15, 2096.............................................. 148,000 148,000 4 1/4% PEPS due March 15, 2001; 1,305,000 securities stated at current maturity value 39,232 64,543 Others at various interest rates, maturing through 2001.............................. 80 84 -------- -------- 434,277 459,592 Less current maturities.............................................................. (15) (15) Unamortized discount................................................................. (569) (570) -------- -------- Long-term debt....................................................................... $433,693 $459,007 ======== ========
The 4 1/4% Premium Equity Participating Securities (PEPS) hedge a significant portion of the Company's investment in the 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. Changes in the current maturity value of the PEPS are included as a separate component of shareholders' equity, net of applicable income taxes. At March 31, 1997 and December 31, 1996, the fair market value of Netscape common stock was $30.0625 and $56.875 per share, respectively. Effective March 31, 1997, the Company's $400 million revolving line of credit was amended to replace the consolidated minimum net worth requirement with a financial ratio measuring coverage of interest expense. The Company's earnings before interest expense, income taxes, depreciation and amortization divided by interest expense must be greater than or equal to 5. Liquid Yield Option Notes were issued in the second quarter of 1997 as described in Note 11. NOTE 5 -- 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 result in less than 3% dilution. The weighted average number of shares used for primary earnings per share totaled 96,248,000 and 105,225,000 for the quarters ended March 31, 1997 and 1996, respectively. 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 and dilutive common stock equivalents outstanding, assuming that the Series B preferred stock was converted to common stock as further described in Note 11. The weighted average number of shares used in computing fully diluted earnings per share totaled 100,947,000 and 113,014,000 for the quarters ended March 31, 1997 and 1996, respectively. Cash dividends of $.10 per share of common stock were declared in the quarters ended March 31, 1997 and 1996. On May 8, 1997, the Company's Board of Directors approved an increase in the quarterly dividend to $.15 per share on its common stock, beginning with the June 10, 1997 payment date. 8 THE TIMES MIRROR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) NOTE 6 -- 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 12 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 1996. The Company repurchased 3,957,000 shares of common stock during the first quarter of 1997 for an aggregate cost of $201,622,000. The aggregate remaining shares authorized for repurchase at March 31, 1997 is approximately 6.8 million shares. At March 31, 1997, the Company had 360,000 put options outstanding with an average strike price of approximately $50.41. The cash received from the sale of these put options was not significant. The put options, which have expiration dates in the second quarter of 1997, 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." During the first quarter of 1997, the Company issued 733,000 shares of its common stock as a result of the exercise of stock options. As further described in Note 11, the Company redeemed its Series B preferred stock and exercised its early termination right on forward purchase contracts in the second quarter of 1997. NOTE 7 -- STOCK OPTIONS The Company granted each eligible employee 100 stock options on February 6, 1997. This grant is expected to result in the issuance of approximately 1,266,000 stock options at a price of $46.5625. These options will be fully vested on February 6, 2000 for employees still employed by the Company at that date. NOTE 8 -- 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 the Company's 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; (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. 9 THE TIMES MIRROR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) NOTE 9 -- 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 10 -- FUTURE ACCOUNTING REQUIREMENT Statement of Financial Accounting Standards No. 128, "Earnings Per Share," (SFAS 128) was issued in February 1997 and must be adopted by the Company on December 31, 1997. Early adoption is not permitted, however, all prior year earnings per share data must be restated upon adoption to conform to the new standard. SFAS 128 simplifies the calculation of earnings per share data by replacing primary and fully diluted earnings per share with basic and diluted earnings per share, respectively. Basic earnings per share excludes dilutive securities, including stock options, and is calculated using the weighted average common shares outstanding for the period. Diluted earnings per share, which is generally consistent with the fully diluted calculation under present accounting rules, reflects the dilution to earnings that would occur if securities, stock options and other dilutive securities resulted in the issuance of common stock. The Company anticipates that prior period earnings per share, when restated for SFAS 128, will remain unchanged or will be slightly higher. If the Company had been permitted to adopt SFAS 128 in the first quarter of 1997, the Company would have reported basic earnings per common share of $.37 and diluted earnings per common share of $.37. NOTE 11 -- SUBSEQUENT EVENTS In April 1997, the Company received gross proceeds of $195,530,000 from the issuance of Liquid Yield Option Notes (LYON(TM)) due in 2017. The LYONs are zero coupon subordinated notes with an aggregate face value of $500 million and a yield to maturity of 4.75%. Each LYON has a $1,000 face value and is convertible at the option of the holder any time prior to maturity. If conversion is elected, the Company will, at its option, deliver (a) 5.828 shares of Series A common stock for each LYON or (b) cash equal to the market value of such shares. On or after April 15, 2002, the LYONs may be redeemed at any time by the Company for cash equal to the issuance price plus accrued original discount through the date of redemption. In addition, each LYON may be redeemed for cash at the option of the holder on April 15, 2002, 2007 or 2012. The cash payable for each LYON at these redemption dates is approximately $495, $625 and $791, respectively, which is equal to the issuance price plus accrued original discount through the date of redemption. The Company also entered into an interest rate swap agreement for a notional amount of $170,111,000, expiring April 15, 2002, to exchange a fixed interest rate of 4.75% for a variable rate based on six-month LIBOR less 2.458%. Pursuant to the original terms of its Series B preferred stock (PERCs), the Company issued 4,446,000 shares of Series A common stock in exchange for all of the outstanding PERCs on April 2, 1997. As a result, dividend requirements on the Company's preferred stock outstanding after the April 2, 1997 conversion will be $24,708,000 for the remainder of 1997 and $32,943,000 for 1998 and future years. In early May 1997, the Company exercised its early termination right on forward purchase contracts for 3,900,000 shares of its PERCs resulting in the purchase of approximately 2,226,000 Series A common shares for an aggregate cost of $111,530,000. 10 THE TIMES MIRROR COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CONSOLIDATED RESULTS OF OPERATIONS During the first quarter of 1997, the Company continued to improve its operating results led by the performance of Newspaper Publishing, its largest business segment. The following table summarizes the Company's consolidated financial results (dollars in thousands, except per share amounts):
First Quarter ---------------------------------- 1997 1996 Change -------- -------- --------- Revenues.................................... $773,882 $806,759 (4.1)% Operating profit............................ 87,540 50,228 74.3 Interest expense, net....................... 9,048 5,451 66.0 Net income.................................. 45,233 26,037 73.7 Preferred dividend requirements............. 10,911 10,911 - Earnings applicable to common shareholders.. 34,322 15,126 126.9 Primary earnings per share.................. $ .36 $ .14 157.1
Consolidated operating profit for the first quarter of 1997 rose to $87.5 million from $50.2 million in the first quarter of 1996. The improvement primarily reflects the strong operating performance of the Newspaper Publishing segment, which benefited from increased economic strength in the Los Angeles and Long Island markets and experienced advertising revenue growth at all newspapers. Lower newsprint expense was another major contributor to the 1997 first quarter results; however, the Company anticipates that newsprint prices will firm and rise for the balance of the year. In addition, operating profitability for last year's first quarter was relatively low due to seasonal losses in the Company's college and scientific publishing businesses which were sold near year-end 1996. As a result, the Company does not expect year-over- year comparisons to be as favorable for the remaining quarters of 1997. In the first quarter of 1997, Times Mirror's consolidated revenues declined due to the divestitures of college and scientific publishing businesses in the Professional Information segment. Earnings per share for the first quarter of 1997 rose to $.36 per share, an increase of more than 150 percent from $.14 per share for the first quarter of 1996. Earnings applicable to common shareholders, reflecting deductions for preferred dividend requirements, were $34.3 million in the first quarter of 1997 compared to $15.1 million in the first quarter of 1996. Net interest expense for the first quarter of 1997 rose to $9.0 million from $5.5 million in the same prior year quarter due to increased debt levels and reductions in interest earning investments. 11 ANALYSIS BY SEGMENT NEWSPAPER PUBLISHING Newspaper Publishing revenues and operating profit were as follows (dollars in thousands):
First Quarter ----------------------------------- 1997 1996 Change -------- -------- ---------- Revenues Advertising............................. $391,203 $369,924 5.8% Circulation............................. 108,465 113,251 (4.2) Other................................... 14,997 11,761 27.5 -------- -------- ---- $514,665 $494,936 4.0% ======== ======== ==== Operating profit.......................... $ 92,457 $ 50,995 81.3% ======== ======== ====
Newspaper Publishing revenues were higher in the first quarter of 1997 compared to the same prior year period reflecting increases in national and classified help-wanted advertising and improved economic conditions in the Southern California and Long Island, New York markets. Daily circulation gains were achieved at the Los Angeles Times, Newsday and the Hartford Courant during the six months ended March 31, 1997, as the newspapers' marketing strategies of lower pricing and discounts resulted in higher circulation but lower overall circulation revenues. Daily circulation at The Times rose 47,691, or 4.7 percent, to 1,068,812 during the same period versus the comparable six-month results for the prior year, as reported to the Audit Bureau of Circulations. The improvement resulted from the continuing success of The Times' marketing and promotional campaign launched last year. Newsday reported circulation gains of 4,030 on daily and 3,025 on Sunday, due to improved customer service, 5:30 a.m. home delivery, a redesigned Sunday newspaper, a new Monday business section, introduction of credit card billing for home subscribers and active marketing and promotions of the newspaper. Segment operating profit increased significantly due to the revenue gains as well as a substantial year-over-year decline in newsprint expense. For the first quarter of 1997, newsprint expense, which accounted for more than 15 percent of this segment's operating costs, declined almost 30 percent compared to the first quarter of 1996. PROFESSIONAL INFORMATION Professional Information revenues and operating profit were as follows (dollars in thousands):
First Quarter ----------------------------------- 1997 1996 Change -------- -------- ---------- Revenues................................. $190,862 $237,074 (19.5)% ======== ======== Operating profit......................... $ 17,527 $ 13,161 33.2% ======== ========
Comparisons of results in the Professional Information segment are heavily influenced by the change in business mix resulting from the sale of the college and scientific publishing businesses and the commencement of the Shepard's 50/50 joint venture, which is accounted for on the equity method. The segment's 1997 first quarter operating profit increased, reflecting a sharp reduction in seasonal losses related to the book publishing businesses which were sold near year-end 1996, partly offset by the absorption of the costs of a workforce reduction at Mosby-Year Book. The segment's revenues for the 1997 first quarter declined largely due to the divestitures. Excluding the revenues of the recently divested businesses, segment revenues reported in the first quarter of 1997 approximated pro forma segment revenues for the first quarter of 1996. Professional Information's operating profit does not include the Company's $2.6 million share of equity income for the Shepard's joint venture, which was partially offset by an equity loss for MD Consult, an investment in a startup medical online joint venture. Equity income or losses on investments are recorded in "Other, net." 12 MAGAZINE PUBLISHING Magazine Publishing revenues and operating profit were as follows (dollars in thousands):
First Quarter ----------------------------------- 1997 1996 Change -------- -------- ---------- Revenues................................. $57,876 $63,120 (8.3)% ======= ======= Operating profit......................... $ 2,591 $ 2,963 (12.6)% ======= =======
Magazine Publishing revenues and operating profit declined in the first quarter of 1997 compared to the first quarter of 1996, as both advertising and circulation revenues weakened in 1997 while last year's first quarter benefited from the issuance of a special edition of Field & Stream and a Golf Magazine Tour section. CORPORATE AND OTHER Corporate and Other revenues and operating loss were as follows (dollars in thousands):
First Quarter ----------------------------------- 1997 1996 Change -------- -------- ---------- Revenues................................. $ 10,682 $ 11,637 (8.2)% ======== ======== Operating loss........................... $(25,035) $(16,891) 48.2% ======== ========
Corporate and Other for the first quarters of 1997 and 1996 includes the results of Harry N. Abrams, Incorporated., the Company's art book publisher as well as the National Journal, Inc., both of which were previously reported in the Consumer Media segment, which has now been renamed Magazine Publishing. The Corporate and Other operating loss increased primarily due to information system conversion costs, as well as losses from these operating businesses. LIQUIDITY AND CAPITAL RESOURCES The Company's operating cash requirements are funded by its operations. During the first quarter of 1997, cash generated from operating activities and proceeds from short-term borrowings were used primarily for common share repurchases. At March 31, 1997, the Company had a $400 million long-term revolving line of credit through a group of domestic and international banks. This line of credit is used to support a commercial paper program which is available for short-term cash requirements. The Company had approximately $109 million of commercial paper outstanding at March 31, 1997. In April 1997, the Company issued Liquid Yield Option Notes (LYON) due in 2017 in a private placement under Rule 144A of the Securities Act of 1933 and received gross proceeds of $195.5 million. The LYONs are zero coupon subordinated notes with an aggregate face value of $500 million and a yield to maturity of 4.75%. Each LYON has a $1,000 face value and is convertible at the option of the holder any time prior to maturity. If conversion is elected, the Company will, at its option, deliver (a) 5.828 shares of Series A common stock for each LYON or (b) cash equal to the market value of such shares. On or after April 15, 2002, the LYONs may be redeemed at any time by the Company for cash equal to the issuance price plus accrued original discount through the date of redemption. In addition, each LYON may be redeemed for cash at the option of the holder on April 15, 2002, 2007 or 2012. The cash payable for each LYON at these redemption dates is approximately $495, $625 and $791, respectively, which is equal to the issuance price plus accrued original discount through the date of redemption. The Company agreed to file a shelf registration statement with the Securities and Exchange Commission with respect to the resale of the LYONs and the Series A common stock issuable upon conversion of the LYONs. The Company also entered into an interest rate swap agreement for a notional amount of $170.1 million, expiring April 15, 2002, to exchange a fixed interest rate of 4.75% for a variable rate based on six-month LIBOR less 2.458%. 13 Pursuant to the original terms of its Series B preferred stock (PERCs), the Company issued 4.4 million shares of Series A common stock in exchange for all of the outstanding PERCs on April 2, 1997. As a result, dividend requirements on the Company's preferred stock outstanding after the April 2, 1997 conversion will be $24.7 million for the remainder of 1997 and $32.9 million for 1998 and future years. In early May 1997, the Company exercised its early termination right on forward purchase contracts for 3.9 million shares of its PERCs resulting in the purchase of approximately 2.2 million Series A common shares for an aggregate cost of $111.5 million. The following table sets forth certain items from the Statements of Condensed Consolidated Cash Flows (in millions):
First Quarter ------------------------------ 1997 1996 ---------- ---------- Net cash provided by continuing operating activities........... $ 30.7 $ 31.5 Capital expenditures .......................................... (22.0) (26.9) Repurchases of common stock.................................... (201.6) (155.7) Issuance of debt and securities................................ 109.0 51.2
Cash generated by continuing operations in the first quarter of 1997 was slightly lower compared to the first quarter of 1996 as higher operating profit in 1997 and reduced restructuring expenditures were offset by higher tax payments and the absence of cash generated by operations from the Company's college and scientific publishing businesses which were sold near year-end. Capital expenditures during the first quarter of 1997 decreased compared to the first quarter of 1996 due to fewer office relocations and consolidations. Capital expenditures for the remainder of 1997 are expected to decrease somewhat from 1996 levels as capital costs associated with real estate relocations are expected to lessen. Total debt at March 31, 1997 rose to $542.7 million from $459.0 million at December 31, 1996 primarily due to an increase in short-term borrowings. The proceeds from these borrowings, as well as funds generated from operations and cash received from the exercise of stock options, were used for share repurchases. The Company repurchased approximately 4.0 million and 1.9 million shares of its common stock during the first quarters of 1997 and 1996, respectively. Common share repurchases are intended to enhance shareholder value as well as to offset dilution from the shares of common stock issued under the Company's stock-based employee compensation and benefit programs. The remaining aggregate stock repurchase authorization at March 31, 1997 totaled approximately 6.8 million shares. Repurchases are expected to be made in the open market or in private transactions, depending on market conditions, and may be discontinued at any time. In connection with this program, the Company from time-to-time sells put options on its common stock. DIVIDENDS Cash dividends of $.10 per share of common stock were declared for the first quarters of 1997 and 1996. On May 8, 1997, the Company's Board of Directors approved an increase in the quarterly dividend to $.15 per share on its common stock, beginning with the June 10, 1997 payment date. 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 8 to the Condensed Consolidated Financial Statements. 14 THE TIMES MIRROR COMPANY BUSINESS SEGMENT INFORMATION (IN THOUSANDS) (UNAUDITED)
FIRST QUARTER ENDED MARCH 31 ---------------------------- 1997 1996 ------------ ------------ REVENUES Newspaper Publishing........................... $514,665 $494,936 Professional Information....................... 190,862 237,074 Magazine Publishing............................ 57,876 63,120 Corporate and Other............................ 10,682 11,637 Intersegment Revenues.......................... (203) (8) -------- -------- $773,882 $806,759 ======== ======== OPERATING PROFIT (LOSS) Newspaper Publishing........................... $ 92,457 $ 50,995 Professional Information....................... 17,527 13,161 Magazine Publishing............................ 2,591 2,963 Corporate and Other............................ (25,035) (16,891) -------- -------- $ 87,540 $ 50,228 ======== ======== DEPRECIATION AND AMORTIZATION Newspaper Publishing........................... $ 27,030 $ 26,635 Professional Information....................... 9,303 12,134 Magazine Publishing............................ 1,620 1,630 Corporate and Other............................ 767 465 -------- -------- $ 38,720 $ 40,864 ======== ======== CAPITAL EXPENDITURES Newspaper Publishing........................... $ 11,155 $ 14,637 Professional Information....................... 6,447 11,441 Magazine Publishing............................ 562 287 Corporate and Other............................ 3,852 546 -------- -------- $ 22,016 $ 26,911 ======== ========
_________________ Corporate and Other includes the results of Harry N. Abrams, Incorporated and National Journal, Inc. previously included in the Consumer Media segment, which has now been renamed Magazine Publishing. 15 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) No reports on Form 8-K were filed for the quarter ended March 31, 1997. 16 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. The Times Mirror Company By /s/ Thomas Unterman ------------------------------- Thomas Unterman Senior Vice President and Chief Financial Officer Date: May 13, 1997 17 EX-11 2 COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11 THE TIMES MIRROR COMPANY COMPUTATION OF EARNINGS PER SHARE (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
FIRST QUARTER ENDED MARCH 31, ----------------------------- 1997 1996 ------------ ------------ PRIMARY Average shares outstanding........................................................... 93,930,692 105,225,121 Dilutive stock options based on the treasury stock method using average market price................................................................ 2,317,213 * ------------ ------------ Total.............................................................................. 96,247,905 105,225,121 ============ ============ Net income........................................................................... $ 45,233 $ 26,037 ============ ============ Preferred dividend requirements...................................................... $ 10,911 $ 10,911 ============ ============ Earnings available to common shareholders............................................ $ 34,322 $ 15,126 ============ ============ Primary earnings per share........................................................... $ .36 $ .14 ============ ============ FULLY DILUTED Average shares outstanding........................................................... 93,930,692 105,225,121 Common shares assumed issued upon conversion of Series B preferred stock............. 4,446,352 7,789,276 Dilutive stock options based on the treasury stock method using market price at the close of the period, if higher than average market price............... 2,570,031 * ------------ ------------ Total.............................................................................. 100,947,075 113,014,397 ============ ============ Net income........................................................................... $ 45,233 $ 26,037 ============ ============ Preferred dividend requirements...................................................... $ 8,236 $ 8,236 ============ ============ Earnings available to common shareholders............................................ $ 36,997 $ 17,801 ============ ============ Fully diluted earnings per share..................................................... $ ** $ ** ============ ============
________________ * Less than 3% dilution **Antidilutive EX-12 3 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12 PAGE 1 OF 2 THE TIMES MIRROR COMPANY COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (IN THOUSANDS OF DOLLARS, EXCEPT RATIO)
First Quarter Ended March 31, 1997 -------------------- Fixed Charges Interest expense.................................................................... $10,012 Portion of rents deemed to be interest.............................................. 4,406 Amortization of debt expense........................................................ 121 ------- Total Fixed Charges............................................................... $14,539 ======= Earnings Income before income taxes.......................................................... $79,365 Fixed charges....................................................................... 14,539 Amortization of capitalized interest................................................ 997 Add: Equity loss from less than 50% owned unconsolidated affiliates................. 1,852 ------- Total Earnings.................................................................... $96,753 ======= Ratio of earnings to fixed charges.................................................. 6.7x
EXHIBIT 12 PAGE 2 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, 1997 --------------------- Fixed Charges Interest expense.................................................................... $10,012 Portion of rents deemed to be interest.............................................. 4,406 Amortization of debt expense........................................................ 121 ------- Total Fixed Charges............................................................... $14,539 Preferred Stock Dividend Requirements................................................. 19,145 ------- Fixed Charges and Preferred Stock Dividends......................................... $33,684 ======= Earnings Income before income taxes.......................................................... $79,365 Fixed charges....................................................................... 14,539 Amortization of capitalized interest................................................ 997 Add: Equity loss from less than 50% owned unconsolidated affiliates................. 1,852 ------- Total Earnings.................................................................... $96,753 ======= Ratio of earnings to fixed charges and preferred stock dividends...................... 2.9x
EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH 31, 1997 QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 48,990 14,468 517,555 67,954 100,744 718,959 2,124,987 961,299 3,303,246 831,531 433,693 0 576,379 93,620 668,873 3,303,246 773,882 773,882 398,408 398,408 0 5,605 10,012 79,365 34,132 45,233 0 0 0 45,233 .36 0 PER SHARE AMOUNT ON A FULLY DILUTED BASIS HAS BEEN OMITTED AS THE AMOUNT IS ANTIDILUTIVE IN RELATION TO THE PRIMARY PER SHARE AMOUNT
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