-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, mOICny9Dp5SUQTcAEBKV1KN5dvcdSgJturpLEP0FfgQx63zIoFpj7V0JDufrgGYO U6ANUMZ5g89W+x9DvmXSOg== 0000950150-95-000321.txt : 19950516 0000950150-95-000321.hdr.sgml : 19950516 ACCESSION NUMBER: 0000950150-95-000321 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 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: 95539776 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 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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, 1995 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 DELAWARE 95-4481525 STATE OF INCORPORATION I.R.S. EMPLOYER ID. NO.
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, 1995: 83,045,823 Number of shares of Series C Common Stock outstanding at May 8, 1995: 29,058,096 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 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". 1 3 CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
FIRST QUARTER ENDED ------------------------ MARCH 31, MARCH 27, 1995 1994 ---------- --------- REVENUES............................................................. $ 774,011 $733,706 ---------- -------- COSTS AND EXPENSES: Cost of sales...................................................... 422,558 404,874 Selling, general and administrative expenses....................... 324,088 295,903 Restructuring charge............................................... 3,223 ---------- -------- 749,869 700,777 OPERATING PROFIT..................................................... 24,142 32,929 Interest expense..................................................... (8,772) (17,709) Interest income...................................................... 6,392 421 Nonrecurring gain.................................................... 7,163 Other, net........................................................... 371 1,057 ---------- -------- Income from continuing operations before income taxes................ 29,296 16,698 Income taxes....................................................... 14,209 9,197 ---------- -------- Income from continuing operations.................................... 15,087 7,501 Discontinued operations.............................................. 1,638,905 15,225 ---------- -------- Income before cumulative effect of change in accounting principle.... 1,653,992 22,726 Cumulative effect of change in accounting principle, net of income tax benefit of $2,861.............................................. (4,511) ---------- -------- NET INCOME........................................................... $1,649,481 $ 22,726 ========== ======== Preferred dividends.................................................. $ 4,730 ========== Earnings available to common shareholders............................ $1,644,751 $ 22,726 ========== ======== Primary earnings per common share: Continuing operations.............................................. $ .08 $ .06 Discontinued operations............................................ 13.28 .12 Cumulative effect of change in accounting principle................ (.04) ---------- -------- Primary earnings per common share.................................... $ 13.32 $ .18 ========== ======== Fully diluted earnings per common share: Income before cumulative effect of change in accounting principle....................................................... $ 12.80 $ .18 Cumulative effect of change in accounting principle................ (.04) ---------- -------- Fully diluted earnings per common share.............................. $ 12.76 $ .18 ========== ========
See notes to condensed consolidated financial statements 2 4 (This page intentionally left blank) 3 5 THE TIMES MIRROR COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
MARCH 31, DECEMBER 31, 1995 1994 ---------- ------------ (UNAUDITED) ASSETS Current Assets Cash and cash equivalents........................................ $ 442,910 $ 81,944 Marketable securities............................................ 84,633 Accounts receivable, less allowance for doubtful accounts and returns of $63,410 and $72,317................................ 484,187 535,982 Inventories...................................................... 181,297 153,017 Deferred income taxes............................................ 50,569 Net assets of discontinued cable television operations........... 642,377 Prepaid expenses................................................. 105,276 119,960 ---------- ---------- Total Current Assets.......................................... 1,348,872 1,533,280 Property, plant and equipment, at cost less accumulated depreciation of $851,179 and $828,711............................ 1,304,716 1,311,130 Goodwill........................................................... 772,200 732,293 Other intangibles.................................................. 120,956 124,082 Deferred charges................................................... 166,315 154,989 Other assets....................................................... 508,686 409,527 ---------- ---------- $4,221,745 $4,265,301 ========== ==========
See notes to condensed consolidated financial statements 4 6 THE TIMES MIRROR COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
MARCH 31, DECEMBER 31, 1995 1994 ---------- ------------ (UNAUDITED) LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable................................................. $ 329,880 $ 362,139 Accrued liabilities.............................................. 37,318 43,741 Short-term debt.................................................. 794 645,870 Deferred income taxes............................................ 36,681 Dividends payable................................................ 11,456 34,727 Other current liabilities........................................ 311,517 363,199 ---------- ---------- Total Current Liabilities..................................... 690,965 1,486,357 Long-term debt..................................................... 247,603 246,462 Deferred income taxes.............................................. 143,025 131,163 Other liabilities.................................................. 477,480 444,276 ---------- ---------- Total Liabilities............................................. 1,559,073 2,308,258 ---------- ---------- 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 Series B Preferred Stock, $1 par value; 25,000,000 shares authorized; 16,561,000 shares issued; stated at liquidation value......................................................... 349,954 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; 82,924,000 and 99,024,000 issued............................. 82,924 99,024 Series B, $1 par value; 100,000,000 shares authorized; no shares issued Series C, convertible, $1 par value; 300,000,000 shares authorized; 29,166,000 and 30,939,000 issued................. 29,166 30,939 Additional paid-in capital....................................... 167,973 167,898 Retained earnings................................................ 1,620,871 1,720,725 ---------- ---------- 2,662,672 2,018,586 Less treasury stock, at cost; 1,345,000 Series A shares.......... 61,543 ---------- ---------- Total Shareholders' Equity.................................... 2,662,672 1,957,043 ---------- ---------- $4,221,745 $4,265,301 ========== ==========
See notes to condensed consolidated financial statements 5 7 THE TIMES MIRROR COMPANY STATEMENT OF CONDENSED CONSOLIDATED CASH FLOWS (IN THOUSANDS) (UNAUDITED)
FIRST QUARTER ENDED ------------------------ MARCH 31, MARCH 27, 1995 1994 ---------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net cash provided by continuing operating activities............... $ 24,015 $ 56,242 Net cash provided by discontinued cable television operations...... 6,693 46,388 ---------- --------- Net cash provided by operating activities....................... 30,708 102,630 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from disposal of cable television operations.............. 1,225,013 Investment in marketable and long-term securities.................. (162,339) Acquisitions, net of cash acquired................................. (48,405) (13,084) Capital expenditures............................................... (27,296) (24,244) Additions to product development costs............................. (18,746) (12,543) Proceeds from sales of assets...................................... 5,418 299,903 Other, net......................................................... (7,383) (1,417) ---------- --------- Net cash provided by investing activities of continuing operations...................................................... 966,262 248,615 Net cash used in investing activities of discontinued cable television operations........................................... (13,268) (32,297) ---------- --------- Net cash provided by investing activities....................... 952,994 216,318 CASH FLOWS FROM FINANCING ACTIVITIES Repayment of commercial paper and short-term borrowings............ (488,010) (259,904) Principal repayments of long-term debt............................. (100,107) Dividends paid..................................................... (34,727) (34,726) Other, net......................................................... 108 (191) ---------- --------- Net cash used in financing activities........................... (622,736) (294,821) ---------- --------- Increase in cash and cash equivalents................................ 360,966 24,127 Cash and cash equivalents at beginning of year....................... 81,944 46,756 ---------- --------- Cash and cash equivalents at end of period........................... $ 442,910 $ 70,883 ========== =========
See notes to condensed consolidated financial statements 6 8 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 incorporated in the Company's Annual Report on Form 10-K for the year ended December 31, 1994. Certain amounts in the previously issued financial statements have been reclassified to conform to the first quarter 1995 presentation. Financial information in the Notes to Condensed Consolidated Financial Statements excludes discontinued operations, except where noted. NOTE 2 -- ACCOUNTING CHANGE 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. Prior to 1995, revenues were recognized for licensing fees, as well as the sale of training products and seminars. However, the majority of the revenues were recognized as licensing fees on the date a non-cancelable agreement was signed and a master copy of the training materials was delivered to the customer. As of January 1, 1995, revenues are recognized either when the training products are delivered or the seminars presented, with no revenues recognized for licensing fees. 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 the change in accounting principle was not significant. NOTE 3 -- SUPPLEMENTAL CASH FLOW INFORMATION Cash payments during the periods ended March 31, 1995 and March 27, 1994 included interest, net of amounts capitalized, of $15,782,000 and $14,903,000 and income taxes of $14,899,000 and $9,071,000 respectively. The reorganization described in Note 14 resulted in the following non-cash transactions during the period ended March 31, 1995 (in thousands): 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 4 -- DISCONTINUED OPERATIONS On February 1, 1995, the Company completed the merger of its cable television operations with Cox Communications, Inc. (Cox). The Company received cash proceeds of $1,225,013,000 and recognized a gain of $1,634,294,000, or $13.24 per share, related to the merger. 7 9 THE TIMES MIRROR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) NOTE 4 -- DISCONTINUED OPERATIONS (CONTINUED) The cable television operations are reported as discontinued operations for all periods presented. Income from discontinued operations is summarized as follows (in thousands):
MARCH 31, MARCH 27, 1995 1994 ---------- ------------ Revenues........................................... $ 41,919 $122,968 ---------- -------- Income before income taxes......................... 7,730 27,175 Income taxes....................................... 3,119 11,950 ---------- -------- Net income......................................... 4,611 15,225 Net gain on disposal............................... 1,634,294 ---------- -------- Total discontinued operations...................... $1,638,905 $ 15,225 ========== ========
The net assets of the cable television operations transferred to Cox, which were comprised primarily of property, plant and equipment and intangible assets, were classified as net assets of discontinued cable television operations as of December 31, 1994. NOTE 5 -- NONRECURRING GAIN In March 1995, the Company sold warrants to purchase preferred stock obtained as part of the 1993 sale of its broadcast television stations. This transaction resulted in a gain of $7,163,000, or $4,500,000 (4 cents per share) after taxes. NOTE 6 -- INVENTORIES Inventories are summarized as follows (in thousands):
MARCH 31, DECEMBER 31, 1995 1994 --------- ------------ Newsprint, paper, and other raw materials............ $ 50,049 $ 33,789 Books and other finished products.................... 103,113 94,290 Work-in-process...................................... 28,135 24,938 --------- -------- $ 181,297 $153,017 ========= ========
NOTE 7 -- DEBT Short-term debt is summarized as follows (in thousands):
MARCH 31, DECEMBER 31, 1995 1994 --------- ------------ Commercial paper..................................... $124,330 Short-term borrowings................................ 363,680 8 7/8% Notes due February 1, 1998, called on February 1, 1995............................................ 100,000 Debt assumed by Cox Communications, Inc. ............ 57,349 Current maturities of long-term debt................. $ 794 511 ----- -------- $ 794 $645,870 ===== ========
8 10 THE TIMES MIRROR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) NOTE 7 -- DEBT (CONTINUED) Long-term debt is summarized as follows (in thousands):
MARCH 31, DECEMBER 31, 1995 1994 --------- ------------ 7 1/4% Debentures due March 1, 2013................. $148,215 7 1/2% Debentures due July 1, 2023.................. 98,750 7 1/8% Debentures due March 1, 2013................. $148,215 7 3/8% Debentures due July 1, 2023.................. 98,750 Others at various interest rates, maturing through 2001.............................................. 1,432 1,539 -------- -------- 248,397 248,504 Unamortized discount................................ (1,531) Less current maturities............................. (794) (511) -------- -------- $247,603 $246,462 ======== ========
Commercial paper and short-term borrowings carried a weighted average interest rate of 6.1% at December 31, 1994. In January 1995, the Company completed an exchange offer for $246,965,000 of the 7 1/8% and 7 3/8% Debentures for similar debentures bearing interest rates of 7 1/4% and 7 1/2%, respectively. The publicly held notes of $57,349,000 at December 31, 1994 were assumed by Cox on February 1, 1995 as part of the reorganization described in Note 14. Part of the proceeds received from the reorganization transactions were used to retire all of the Company's commercial paper and short-term borrowings and to redeem the 8 7/8% Notes on February 1, 1995. In addition, the Company has $48,815,000 of unused standby letters of credit at March 31, 1995. NOTE 8 -- EARNINGS AND DIVIDENDS PER COMMON SHARE Primary earnings per common 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. The weighted average number of shares for primary earnings per share totaled 123,416,000 and 129,032,000 for the quarter ended March 31, 1995 and March 27, 1994, respectively. Fully diluted earnings per common share for the quarter ended March 31, 1995 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 common stock equivalents outstanding, assuming that the Series B preferred stock was converted to common stock on a one for one basis on March 1, 1995. The weighted average number of shares for fully diluted earnings per share was 129,044,000 for the quarter ended March 31, 1995. Fully diluted earnings per share for the quarter ended March 27, 1994 are the same as the primary earnings per share. Cash dividends of 6 cents and 27 cents per share of common stock were declared in the quarter ended March 31, 1995 and March 27, 1994, respectively, payable in the following quarter. NOTE 9 -- CASH MANAGEMENT SYSTEM Under the Company's cash management system, the bank notifies the Company daily of checks presented for payment against its primary disbursing accounts. The Company transfers funds from other sources, such as short-term investments to cover the checks presented for payment. This program results in a book cash overdraft in the primary disbursing accounts as a result of the checks outstanding. The book overdraft, which was reclassified to accounts payable, was approximately $28,242,000 and $54,263,000 at March 31, 1995 and December 31, 1994, respectively. 9 11 THE TIMES MIRROR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) NOTE 10 -- FAIR VALUE OF FINANCIAL INSTRUMENTS The Company enters into interest rate swaps and foreign currency forward contracts to manage exposures associated with interest rate and foreign currency fluctuations. The Company has two interest rate swap agreements, one for $150,000,000 expiring in 2010 and one for $100,000,000 expiring in 2023. These agreements exchange payments to the Company at fixed rates of 7 1/8% and 7 3/8%, respectively, for payments by the Company at a variable rate based generally on LIBOR. These payments are recognized as an adjustment to interest expense related to the debt. The Company has forward contracts maturing in 1995 to sell approximately $22,229,000 of foreign currency. Gains and losses on the forward contracts, which do not qualify as accounting hedges, are recognized currently in earnings. The fair value of the interest rate swaps and forward contracts, based on estimates received from third parties, was not significant at March 31, 1995. The fair value of long-term debt at March 31, 1995, based primarily on the Company's current refinancing rates for publicly issued fixed rate debt with comparable maturities, was $229,459,000, compared to a carrying value of $247,603,000. The carrying value of cash equivalents, marketable and long-term securities and short-term debt approximates fair value at March 31, 1995 due to the short maturity period for these instruments. NOTE 11 -- STOCK OPTION PLANS As described in Note 12 to the Consolidated Financial Statements in the Company's 1994 Annual Report, the Company has various stock option plans. In connection with the reorganization (see Note 14), the number of options and the option price were adjusted in order to preserve the economic value of the outstanding options. The following table sets forth information relative to the stock option plans:
NUMBER OF OPTION PRICE SHARES PER SHARE --------- ---------------- Options Outstanding at December 31, 1994........ 4,532,657 $19.46 to $37.93 Adjustment due to reorganization.............. 3,065,245 Granted....................................... 41,940 $18.88 Exercised..................................... (58,010) $24.61 to $32.13 Canceled...................................... (130,033) $14.54 to $36.94 --------- Options Outstanding at March 31, 1995........... 7,451,799 $11.43 to $22.28 ========
At March 31, 1995, there were 632,808 options outstanding with purchase prices equal to 75 percent of the fair market value on the date of grant. NOTE 12 -- 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 13 -- 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 10 12 THE TIMES MIRROR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) NOTE 13 -- CONTINGENT LIABILITIES (CONTINUED) 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 14 -- 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 18 to the Consolidated Financial Statements in the Company's 1994 Annual Report for a detailed discussion of these transactions. NOTE 15 -- PREFERRED STOCK DIVIDEND REQUIREMENTS The Series A preferred stock has a dividend rate of 8% of its liquidation value of $411,784,000. The Series B preferred stock has a dividend rate of $1.374 per share. Both series of preferred stock are entitled to cumulative dividends effective March 1, 1995. 11 13 THE TIMES MIRROR COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS CABLE MERGER AND RELATED TRANSACTIONS During the first quarter of 1995, the Company completed the merger of its cable television operations with Cox Communications, Inc. (Cox) and also completed related transactions, including the issuance of two new series of preferred stock and the retirement of nearly 75 percent of total debt outstanding at year-end 1994. Note 18 to the Consolidated Financial Statements in the Company's 1994 Annual Report provides a detailed discussion of these transactions. The first quarter 1995 results included a gain of $1.634 billion, or $13.24 per share, on the merger and also benefited from lower interest expense due to the debt reduction and higher interest income from the investment of cash proceeds from the merger. Dividend requirements on the new preferred shares in the first quarter reduced earnings available to common shareholders by $4.7 million. The full-year impact of the preferred dividend requirements on earnings available to common shareholders is expected to total approximately $47 million, but this impact is expected to be substantially offset by the net benefit from higher interest income and lower interest expense. OUTLOOK FOR 1995 Although the economic recovery in its major newspaper markets has been slower than anticipated, the Company expects total revenues in 1995 to exceed the prior year, reflecting increased advertising revenues, expanded sales in its professional information operations, and the impact of planned acquisitions. Revenue growth in 1995 is expected to be substantially offset by the impact of higher newsprint prices and increased paper and postage costs overall. In addition, costs related to new initiatives, as discussed below, are currently expected to reduce 1995 results by as much as $30 million on an after-tax basis, comprised of $6 to $7 million in Newspaper Publishing, $4 to $6 million in Professional Information, $12 to $15 million in Consumer Media, and $5 to $6 million in Corporate and Other. NEW BUSINESS DEVELOPMENT As previously announced, and as noted above, the Company is pursuing a series of new initiatives to develop new businesses and products, as well as to reduce ongoing operating and administrative processing costs. Spending on these new initiatives reduced first quarter results by $7.4 million, or $4.4 million (4 cents per share) after taxes. Acquisitions in the Professional Information segment in the first quarter of 1995 totaled approximately $45 million, including the purchases of Madison Publishing Corporation and StayWell Health Management Systems for the Company's fast-growing consumer health information business. During the first quarter of 1995, the Company completed structuring its cable television programming joint venture with Cox. Times Mirror and Cox have each committed up to $100 million to investments identified by the joint venture. The Company expects to make contributions as capital calls are made. The first two investments identified by the joint venture are the Outdoor Life channel, scheduled for launch in July 1995, and Speedvision, which is expected to debut in January 1996 and will be the first channel for automotive, marine and aviation enthusiasts. The Company initially will own two-thirds of the Outdoor Life channel and one-third of Speedvision. NEWSPAPER PUBLISHING OUTLOOK In the first quarter of 1995, the economic recovery in Southern California and New York continued, but at a much slower pace than other U.S. regions. As a result of the constrained economies in its major newspaper markets, advertising revenue growth at the Company's major newspapers was below the industry 12 14 average for the first quarter. If this economic trend continues, advertising revenue growth may remain slow throughout the year, and may be further impacted by continued structural shifts in retail promotional spending, retail consolidations and growth in discount stores, which use little newspaper advertising. The average price per ton of newsprint in 1995 is expected to rise by more than 45 percent over the 1994 level. Newsprint expense in 1994 represented approximately 15 percent of the segment's total operating costs. Overall, 1995 newsprint price increases are expected to be partially offset by declines in consumption due to waste reduction efforts, editorial product changes and lower circulation levels. As previously mentioned, the 1995 segment results are expected to be reduced by spending for new initiatives, including electronic online services of the Los Angeles Times and Newsday/New York Newsday. The Company's net income will also be reduced by equity losses related to electronic and shopping joint ventures between The Times and Pacific Telesis and between Newsday/New York Newsday and NYNEX. PROFESSIONAL INFORMATION OUTLOOK Higher revenues are expected for most of the professional information businesses in 1995. However, Matthew Bender, the largest profit contributor in the segment, is expected to show declines in revenues and operating profit in 1995. In addition, the segment's full-year results are expected to be reduced by costs associated with the previously described new initiatives. These costs relate primarily to the development of new electronic business activities in health information services and legal publishing. CONSUMER MEDIA OUTLOOK Consumer Media revenues in 1995 are expected to improve over the prior year due to increased advertising revenues at the magazines. However, the segment is expected to generate operating losses throughout the year due to costs associated with new initiatives in the consumer multimedia and television programming businesses, including expenses related to the launch of the Outdoor Life channel, currently scheduled for July 1995. The Company's net income will also be reduced by equity losses related to its investment in Speedvision, which is expected to debut in January 1996. COST REDUCTION AND RESTRUCTURING EFFORTS Over the past several years, Times Mirror has provided restructuring reserves in order to streamline the operating and administrative functions of its businesses. The Company is continuing to pursue cost reduction and process re-engineering opportunities and, in the first quarter of 1995, recorded a $3.2 million pre-tax charge for a voluntary separation program at The Baltimore Sun. In addition, as part of the previously-noted new initiatives, the 1995 results are expected to be impacted by costs for the development and installation of a network to link product, marketing and administrative databases across the Company. The network is also designed to reduce certain operating and administrative processing costs over time, and the impact of these costs is reflected in the Corporate and Other segment. Other opportunities to reduce costs could lead to additional restructuring or other charges in future periods. 13 15 CONSOLIDATED RESULTS OF OPERATIONS The following table summarizes Times Mirror's financial results (dollars in thousands, except per share amounts):
QUARTER ENDED ------------------------ MARCH 31 MARCH 27 1995 1994 ---------- --------- Revenues............................................. $ 774,011 $733,706 Restructuring charge................................. (3,223) Impact of new initiatives on operating profit........ (7,433) Operating profit..................................... 24,142 32,929 Nonrecurring gain.................................... 7,163 Interest expense..................................... (8,772) (17,709) Interest income...................................... 6,392 421 Income from continuing operations.................... 15,087 7,501 Discontinued operations.............................. 1,638,905 15,225 Net income........................................... 1,649,481 22,726 Primary earnings per share: Continuing operations.............................. .08 .06 Discontinued operations............................ 13.28 .12 Net income......................................... 13.32 .18 Effective tax rate for continuing operations......... 48.5% 55.1%
Times Mirror's consolidated revenues increased 5.5 percent for the first quarter of 1995, reflecting increases in each of the company's business segments. Revenue gains in the Professional Information segment reflected improvements in health information services, higher education and international sales, while increased revenues in the Consumer Media segment were due largely to higher advertising revenues at the Company's consumer magazines. A modest improvement in the Newspaper Publishing segment primarily reflected advertising revenue gains at each of the Eastern newspapers. Consolidated operating profit in the first quarter of 1995 fell 26.7 percent from the prior year quarter, due primarily to more pronounced seasonal losses in the higher education operations, continued declines at Matthew Bender, and the impact of new initiatives, which included continued start-up losses in the new consumer multimedia and television programming businesses. The 1995 results were also impacted by a $3.2 million charge (2 cents per share after taxes) for a voluntary separation program at The Baltimore Sun. Income from continuing operations for the first quarter of 1995 was $15.1 million, or 8 cents per share after preferred dividend requirements, compared with $7.5 million, or 6 cents per share, for the comparable 1994 period. Continuing operations in the 1995 first quarter included a nonrecurring gain on the sale of securities of $7.2 million, or $4.5 million (4 cents per share) after taxes. Excluding this nonrecurring gain and the previously mentioned restructuring charge, income from continuing operations in 1995 would have been $12.5 million, compared with $7.5 million in the 1994 first quarter. Operating profit declines in the 1995 first quarter were more than offset by the net benefit from lower interest expense due to debt reductions and higher interest income from the investment of cash proceeds from the cable merger. Net income for the first quarter of 1995 was $1.649 billion, or $13.32 per share after preferred dividend requirements ($12.76 fully diluted), compared with $22.7 million, or 18 cents per share, in the 1994 first quarter. The 1995 results reflected the gain of $1.634 billion, or $13.24 per share, on the merger of the cable television operations in February. Net income for the first quarters of 1995 and 1994 included income from the discontinued cable television operations of $4.6 million, or 4 cents per share, and $15.2 million, or 12 cents per share, respectively. The 1995 first quarter also included a $4.5 million charge, or 4 cents per share, for an accounting change, which is discussed in Note 2 to the Condensed Consolidated Financial Statements. 14 16 The effective tax rate of 48.5 percent in the first quarter of 1995 was lower than the 55.1 percent rate in the prior-year quarter due to the impact of tax reserves included in the 1994 tax provision. ANALYSIS BY SEGMENT NEWSPAPER PUBLISHING Newspaper Publishing revenues and operating profit were as follows (dollars in thousands):
QUARTER ENDED ----------------------- MARCH 31 MARCH 27 1995 1994 CHANGE --------- --------- ------ Revenues: Advertising................................... $356,961 $353,159 1.1% Circulation................................... 109,903 108,761 1.1 Other......................................... 9,288 9,201 1.0 --------- --------- $476,152 $471,121 1.1 ======== ======== Operating Profit.............................. $ 35,345 $ 36,160 (2.3) ======== ======== Impact of New Initiatives on Operating Profit...................................... $ (2,686) ========
Newspaper Publishing revenues rose a modest 1.1 percent in the first quarter of 1995 as compared to last year's first quarter. Advertising revenues in the Company's major markets were weak in the 1995 first quarter, as Newsday remained relatively level with the prior year and The Times fell by 1.0 percent. The other newspapers reported solid improvements in advertising revenues, largely reflecting strength in classifieds and preprints. Circulation revenues for the 1995 quarter were slightly ahead of the prior-year first quarter, as price increases at most of the newspapers more than offset declines in circulation levels. Circulation price increases, as well as the planned curtailment of circulation outside primary market areas, contributed to the lower circulation levels. Operating profit for the segment declined 2.3 percent in 1995's first quarter, as improvements at The Times and Newsday were offset by the impact of The Baltimore Sun restructuring charge and costs related to new initiatives. Excluding the restructuring charge, the segment's 1995 first-quarter operating profit would have increased 6.6 percent over 1994's first quarter. Although newsprint prices increased approximately 20 percent in the 1995 first quarter compared to the prior-year quarter, the company's aggressive cost management program resulted in a 2.4 percent decrease in all other expenses, excluding the restructuring charge. The segment's first-quarter operating margin, excluding the 1995 restructuring charge, would have been 8.1 percent as compared to 7.6 percent in the prior year quarter. PROFESSIONAL INFORMATION Professional Information revenues and operating profit were as follows (dollars in thousands):
QUARTER ENDED ----------------------- MARCH 31 MARCH 27 1995 1994 CHANGE --------- --------- ------ Revenues...................................... $223,338 $198,097 12.7% ======== ======== Operating Profit.............................. $ 8,738 $ 15,294 (42.9) ======== ======== Impact of New Initiatives on Operating Profit...................................... $ (1,302) ========
Professional Information revenues in the 1995 first quarter increased 12.7 percent over the prior-year quarter, reflecting significant increases in health information services, higher education and international sales. Operating profit in the first quarter of 1995 fell 42.9 percent compared to the prior year quarter, due primarily to declines at Matthew Bender, higher seasonal losses associated with expanding product lists in the higher education businesses, and costs related to new initiatives in the health information services and legal publishing businesses. 15 17 CONSUMER MEDIA Consumer Media revenues and operating losses were as follows (dollars in thousands):
QUARTER ENDED --------------------- MARCH 31 MARCH 27 1995 1994 CHANGE -------- -------- ------ Revenues....................................... $74,735 $64,637 15.6% ======= ======= Operating Loss................................. $(4,936) $(3,352) (47.3) ======= ======= Impact of New Initiatives on Operating Loss.... $(2,166) =======
First-quarter 1995 revenues for the Consumer Media segment increased 15.6 percent over the prior year quarter, due primarily to higher advertising revenues at Times Mirror Magazines as well as improved consumer art book sales. The higher revenues at the magazines were tempered, however, by increased paper and postage costs in the 1995 first quarter. Costs related to new initiatives, primarily in the consumer multimedia and television programming businesses, also contributed to the higher operating loss in the 1995 first quarter. LIQUIDITY AND CAPITAL RESOURCES Total debt at March 31, 1995 of $248.4 million declined $643.9 million from the year-end 1994 level, as proceeds from the cable merger were used to retire the majority of the Company's short-term debt outstanding at December 31, 1994. The Company's debt-to-adjusted capitalization ratio fell to 8.5 percent at March 31, 1995 from 31.3 percent at the prior year-end. Cash flow from continuing operations in 1995 is expected to contribute to the Company's financial resources. Cash flow in 1995 and future years is expected to benefit from lower interest expense, interest earned on cash invested, and significantly reduced dividend and capital expenditure requirements. As previously discussed, Times Mirror expects to use its cash resources, including cash flow from operations, for a number of purposes, including developing its existing businesses and investing in new information franchises. In addition, as noted earlier, the Company has committed up to $100 million to investments identified by The Times Mirror/Cox Programming Joint Venture, which is expected to be contributed as capital calls are made. YEAR-TO-DATE CASH FLOWS During the first quarter of 1995, the Company generated $24.0 million in net cash from continuing operations, compared with $56.2 million for the same period in 1994. The reduced cash flow in the 1995 quarter is largely attributable to the decrease in operating profit, higher inventory levels, primarily at the newspapers and professional information companies, and an increase in taxes paid compared to the prior-year quarter. The higher inventory levels at the newspapers were due, in part, to the increased newsprint prices. Decreased cash outlays for restructuring activities in the 1995 first quarter compared to the prior-year quarter, as well as higher interest income from the investment of proceeds from the cable merger, partially offset these items. Net cash provided by investing activities of continuing operations during the first quarter of 1995 was $966.3 million, compared to $248.6 million in the 1994 quarter. The 1995 quarter reflected proceeds of $1.225 billion from the cable merger, partially offset by investments in securities of $162.3 million and acquisitions totaling $48.4 million. The prior-year quarter included the approximately $300 million of proceeds from the sale of the broadcast television operations. In the 1995 first quarter, spending for capital projects and product development exceeded the prior-year quarter by $9.3 million. Full-year capital spending for continuing operations in 1995 is expected to be slightly below the 1994 level. Net cash used in financing activities of $622.7 million in the first quarter of 1995 was more than double the net cash used in the prior-year quarter. As previously discussed, during the first quarter of 1995 the Company repaid $588.1 million of its short-term debt and commercial paper borrowings outstanding at the end of 1994 using proceeds from the cable merger. Dividends to common shareholders of $34.7 million were 16 18 paid during the first quarter of both years, representing dividends declared in the fourth quarter of the previous years. DIVIDENDS On March 2, 1995, the Board of Directors declared a dividend of 6 cents per common share, payable June 10, 1995 to shareholders of record at May 26, 1995. Beginning in June 1995, the Company has agreed to pay an annual dividend to common shareholders of no less than 24 cents per share for a period of three years, subject to the fiduciary duties of its Board of Directors. Thereafter, the payment of dividends on common stock will depend on future earnings, capital requirements, financial condition and other factors. As previously mentioned, Times Mirror issued two new series of preferred stock during the first quarter of 1995. Earnings per common share will be reduced by the dividend requirements of the preferred stock. Annual dividends on the Series A preferred stock will be approximately $28 million in 1995 and $33 million thereafter. Annual dividends on the Series B preferred stock will be approximately $19 million in 1995, $23 million in 1996 and 1997, and $4 million in 1998, assuming the Series B preferred stock is not called for redemption prior to its mandatory conversion to Series A common stock in early 1998. 17 19 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. 18. Letter Regarding Change in Accounting Principle, dated May 12, 1995, from Ernst & Young LLP. (b) REPORTS ON FORM 8-K During the first quarter of 1995, the Company filed current reports on Form 8-K as follows: (1) Current Report on Form 8-K dated February 1, 1995, to announce the completion of the merger of its cable television operations with Cox Communications, Inc. (2) Current Report on Form 8-K dated March 23, 1995, to announce the issuance of the Series A Preferred Stock and the final results of the Series B Preferred Stock exchange offer. 18 20 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. Date: May 15, 1995 THE TIMES MIRROR COMPANY By STUART K. COPPENS -------------------------------- Stuart K. Coppens Controller and Chief Accounting Officer 19 EX-11 2 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11 THE TIMES MIRROR COMPANY COMPUTATION OF EARNINGS PER SHARE (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
FIRST QUARTER ENDED --------------------------- MARCH 31, MARCH 27, 1995 1994 ----------- ----------- PRIMARY Average shares outstanding........................................ 123,114,766 128,607,235 Dilutive stock options based on the treasury stock method using average market price............................................ 301,420 424,912 ----------- ----------- Total........................................................ 123,416,186 129,032,147 ========== ========== Income from continuing operations................................. $ 15,087 $ 7,501 Discontinued operations........................................... 1,638,905 15,225 ----------- ----------- Income before cumulative effect of change in accounting principle....................................................... 1,653,992 22,726 Cumulative effect of change in accounting principle, net of income tax benefit of $2,861........................................... (4,511) ----------- ----------- Net income........................................................ $1,649,481 $22,726 ========== ========== Preferred dividends............................................... $ 4,730 ========== Earnings available to common shareholders......................... $1,644,751 $22,726 ========== ========== Primary earnings per common share: Continuing operations........................................... $ .08 $.06 Discontinued operations......................................... 13.28 .12 Cumulative effect of change in accounting principle............. (.04) ----------- ----------- Primary earnings per common share................................. $13.32 $.18 ========== ==========
Page 1 of 2 2 EXHIBIT 11 THE TIMES MIRROR COMPANY COMPUTATION OF EARNINGS PER SHARE (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
FIRST QUARTER ENDED --------------------------- MARCH 31, MARCH 27, 1995 1994 ----------- ----------- FULLY DILUTED Average shares outstanding........................................ 123,114,766 128,607,235 Common shares assumed issued upon conversion of Series B preferred stock................................................. 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.................................................... 391,909 424,912 ----------- ----------- Total........................................................ 129,027,068 129,032,147 ========== ========== Income from continuing operations................................. $ 15,087 $ 7,501 Discontinued operations........................................... 1,638,905 15,225 ----------- ----------- Income before cumulative effect of change in accounting principle....................................................... 1,653,992 22,726 Cumulative effect of change in accounting principle, net of income tax benefit of $2,861.................................... (4,511) ----------- ----------- Net Income........................................................ $1,649,481 $22,726 ========== ========== Preferred dividends............................................... $ 2,798 ========== Earnings available to common shareholders......................... $1,646,683 $22,726 ========== ========== Fully diluted earnings per common share: Income before cumulative effect of change in accounting principle.................................................... $12.80 $.18 Cumulative effect of change in accounting principle............. (.04) ------ ---- Fully diluted earnings per common share........................... $12.76 $.18 ====== ====
Page 2 of 2 EX-18 3 LETTER REGARDING CHANGE IN ACCOUNTING PRINCIPLE 1 EXHIBIT 18 LETTER REGARDING CHANGE IN ACCOUNTING PRINCIPLE May 12, 1995 The Board of Directors The Times Mirror Company Times Mirror Square Los Angeles, California 90053 Dear Sir: Note 2 of Notes to the Unaudited Condensed Consolidated Financial Statements of The Times Mirror Company included in its Form 10-Q for the three months ended March 31, 1995 describes a change in the method of accounting for recording certain contract-related revenues from the licensing and sale of training programs and related training materials by one of its operating units. Under its previous accounting treatment, the entity recognized revenues on the date a non-cancelable license agreement was signed and an initial copy of the training materials was delivered to the customer. Under the new accounting method, revenue is recognized at the time of delivery of the training materials. If partial shipments of the overall quantity are made, a pro rata share of the related revenues is recorded as shipped. You have advised us that you believe that this change is to a preferable method in your circumstances because it recognizes revenues over the period of contract performance and provides for consistent accounting treatment among The Times Mirror Company's professional training companies. We conclude that the change in the method of accounting for these contract-related training revenues is to an acceptable alternative method which, based on your business judgment to make this change for the reasons cited above, is preferable in your circumstances. We have not conducted an audit in accordance with generally accepted auditing standards of any financial statements of the Company as of any date or for any period subsequent to December 31, 1994, and therefore we do not express any opinion on any financial statements of The Times Mirror Company subsequent to that date. Very truly yours, Ernst & Young LLP EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE QUARTERLY FINANCIAL INFORMATION SET FORTH IN THE REGISTRANT'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q. 1,000 U.S. DOLLARS 3-MOS DEC-31-1994 JAN-01-1995 MAR-31-1995 1,000 442,910 84,633 547,597 63,410 181,297 1,348,872 2,155,895 851,179 4,221,745 690,965 0 112,090 0 761,738 1,788,844 4,221,745 774,011 774,011 422,558 749,869 (371) 5,384 8,772 29,296 14,209 15,087 1,638,905 0 (4,511) 1,649,481 13.32 12.76
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