-----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, CB5YcHG49n7J8+9+toFF9T1I4bO4V/RsXIhYdbBY3QgPYB/gD5/JjMop4+0SHrks s1X52MSXpeD0owRRipYQlg== 0000950150-98-000721.txt : 19980505 0000950150-98-000721.hdr.sgml : 19980505 ACCESSION NUMBER: 0000950150-98-000721 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980504 SROS: NYSE SROS: PCX 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: 944481525 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13492 FILM NUMBER: 98609590 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, 1998 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 April 24, 1998: 63,295,267, excluding 18,237,864 shares held by subsidiaries of the Registrant and 4,001,067 shares held by TMCT, LLC, representing 80% of the shares held by TMCT, LLC and 1,118,480 held as treasury shares. Number of shares of Series C Common Stock outstanding at April 24, 1998: 25,436,733. ================================================================================ 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." 2 3 THE TIMES MIRROR COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
FIRST QUARTER ENDED MARCH 31, -------------------- 1998 1997 -------- -------- REVENUES.................................................... $803,900 $773,882 COSTS AND EXPENSES: Cost of sales............................................. 427,042 398,408 Selling, general and administrative expenses.............. 286,576 287,934 -------- -------- 713,618 686,342 OPERATING PROFIT............................................ 90,282 87,540 Interest expense............................................ (19,527) (10,012) Interest income............................................. 5,348 964 Equity income (loss)........................................ (2,794) 766 Other, net.................................................. 4,421 107 -------- -------- Income before income tax provision.......................... 77,730 79,365 Income tax provision........................................ 32,469 34,132 -------- -------- NET INCOME.................................................. 45,261 45,233 Preferred dividend requirements............................. 5,424 10,911 -------- -------- Earnings applicable to common shareholders.................. $ 39,837 $ 34,322 ======== ======== Earnings per common share: Basic..................................................... $ .45 $ .37 ======== ======== Diluted................................................... $ .44 $ .36 ======== ======== Weighted average shares outstanding: Basic..................................................... 88,335 93,931 ======== ======== Diluted................................................... 90,740 96,248 ======== ========
See notes to condensed consolidated financial statements 3 4 THE TIMES MIRROR COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
MARCH 31, DECEMBER 31, 1998 1997 ----------- ------------ (UNAUDITED) ASSETS Current assets Cash and cash equivalents................................. $ 51,602 $ 56,996 Accounts receivable, less allowance for doubtful accounts and returns of $65,202 and $66,225..................... 449,945 499,642 Inventories............................................... 76,419 76,531 Deferred income taxes..................................... 79,864 58,807 Prepaid expenses.......................................... 44,016 34,205 Other current assets...................................... 13,720 37,763 ---------- ---------- Total current assets................................... 715,566 763,944 Property, plant and equipment, net.......................... 989,612 997,430 Goodwill, net............................................... 562,428 554,854 Other intangibles, net...................................... 115,548 118,677 Deferred charges............................................ 158,231 158,996 Equity investments.......................................... 344,585 350,571 Other assets................................................ 526,932 471,121 ---------- ---------- Total assets........................................... $3,412,902 $3,415,593 ========== ==========
See notes to condensed consolidated financial statements 4 5 THE TIMES MIRROR COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
MARCH 31, DECEMBER 31, 1998 1997 ----------- ------------ (UNAUDITED) LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable.......................................... $ 272,880 $ 328,203 Short-term debt........................................... 182,087 139,067 Employees' compensation................................... 81,651 119,164 Unearned income........................................... 231,935 229,457 Other current liabilities................................. 87,927 105,892 ----------- ----------- Total current liabilities.............................. 856,480 921,783 Long-term debt.............................................. 917,822 925,404 Deferred income taxes....................................... 166,631 149,561 Other liabilities........................................... 536,736 529,246 ----------- ----------- Total liabilities...................................... 2,477,669 2,525,994 Common stock subject to put options......................... 25,575 13,600 Commitments and contingencies Shareholders' equity Preferred stock, $1 par value; stated at liquidation value; convertible to Series A common stock: Series A: 900,000 shares authorized; 824,000 shares issued and outstanding................................ 411,784 411,784 Series C-1: 381,000 shares authorized, issued and outstanding........................................... 190,486 190,486 Series C-2: 245,000 shares authorized, issued and outstanding........................................... 122,550 122,550 Preferred stock, $1 par value; 23,035,000 shares authorized; no shares issued or outstanding Common stock, $1 par value: Series A: 500,000,000 shares authorized; 86,617,000 and 86,552,000 shares issued and outstanding.............. 86,617 86,552 Series B: 100,000,000 shares authorized; no shares issued or outstanding Series C: convertible to Series A common stock; 300,000,000 shares authorized; 25,472,000 and 25,503,000 shares issued and outstanding.......................................... 25,472 25,503 Additional paid-in capital................................ 1,242,664 1,253,142 Retained earnings......................................... 386,100 384,503 Accumulated other comprehensive income.................... 12,923 12,804 ----------- ----------- 2,478,596 2,487,324 Less treasury stock at cost: Series A common stock: 23,383,000 and 24,151,000 shares; and Series A preferred stock: 735,000 shares........... (1,568,938) (1,611,325) ----------- ----------- Total shareholders' equity............................. 909,658 875,999 ----------- ----------- Total liabilities and shareholders' equity............. $ 3,412,902 $ 3,415,593 =========== ===========
See notes to condensed consolidated financial statements 5 6 THE TIMES MIRROR COMPANY STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS (IN THOUSANDS) (UNAUDITED)
FIRST QUARTER ENDED MARCH 31, -------------------- 1998 1997 ------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net cash provided by operating activities................. $50,959 $ 30,698 CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions, net of cash acquired........................ (12,819) (7,565) Proceeds from sales of assets............................. 5,253 4,646 Capital expenditures...................................... (25,593) (22,016) Capitalization of product costs........................... (3,926) (6,323) Note receivable........................................... (47,600) Other, net................................................ (14,339) 2,723 ------- --------- Net cash used in investing activities.................. (99,024) (28,535) ------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from issuance of commercial paper............ 82,684 108,980 Proceeds from exercise of stock options................... 20,669 15,208 Repayments of other debt.................................. (39,621) (3) Dividends paid............................................ (21,338) (20,130) Repurchase of common stock................................ (320) (201,622) Other, net................................................ 597 (711) ------- --------- Net cash provided by (used in) financing activities.... 42,671 (98,278) ------- --------- Decrease in cash and cash equivalents....................... (5,394) (96,115) Cash and cash equivalents at beginning of year.............. 56,996 145,105 ------- --------- Cash and cash equivalents at end of period.................. $51,602 $ 48,990 ======= =========
See notes to condensed consolidated financial statements 6 7 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, 1997. Certain amounts in previously issued financial statements have been reclassified to conform to the 1998 presentation. NOTE 2 -- COMPREHENSIVE INCOME As of January 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130). SFAS 130 establishes new rules for the reporting of comprehensive income and its components; however, the adoption of SFAS 130 had no impact on the Company's net income or shareholders' equity. SFAS 130 requires unrealized gains or losses on the Company's available-for-sale securities and foreign currency translation adjustments to be included in other comprehensive income. Such items were reported in shareholders' equity prior to the adoption of SFAS 130. Prior year financial statements have been reclassified to conform to the requirements of SFAS 130. During the first quarters of 1998 and 1997, total comprehensive income amounted to $45,380,000 and $21,000,000, respectively. Comprehensive income differs from net income in the first quarter of 1997 primarily due to the reclassification adjustment of realized gains that are recognized in net income, which were previously included as part of comprehensive income. NOTE 3 -- RESTRUCTURING The balance sheet classification of restructuring liabilities is as follows (in thousands):
MARCH 31, DECEMBER 31, 1998 1997 --------- ------------ Other current liabilities: 1995 Restructuring........................................ $20,609 $22,860 1996 Restructuring........................................ 193 390 Other liabilities: 1995 Restructuring........................................ 31,503 36,856 ------- ------- $52,305 $60,106 ======= =======
The restructuring liabilities relate primarily to severance costs and lease payments. During the quarter ended March 31, 1998, cash spent on severance payments related to 1995 restructuring efforts totaled $1,688,000. At March 31, 1998, the remaining liability for 1995 severance costs aggregated $5,381,000. NOTE 4 -- SUPPLEMENTAL CASH FLOW INFORMATION Cash payments during the quarters ended March 31, 1998 and 1997 included interest of $21,260,000 and $6,851,000 and income taxes of $6,191,000 and $51,455,000, respectively. 7 8 THE TIMES MIRROR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) NOTE 5 -- DEBT Debt consists of the following (in thousands):
MARCH 31, DECEMBER 31, 1998 1997 --------- ------------ Short-term debt: Commercial paper at a weighted average interest rate of 5.7% and 5.9%.......................................... $169,132 $ 86,448 Notes payable at 6.125% due January 2, 1998............... 39,209 Current maturities of long-term debt...................... 7,624 7,671 Other..................................................... 5,331 5,739 -------- -------- Total short-term debt.................................. $182,087 $139,067 ======== ======== Long-term debt: 6.61% Debentures due September 15, 2027, net of unamortized discount of $101................................................ $249,899 $249,899 4.75% Liquid Yield Option Notes due 2017, net of unamortized discount of $295,468 and $297,845.......... 204,532 202,155 7 1/4% Debentures due March 1, 2013....................... 148,215 148,215 7 1/4% Debentures due November 15, 2096, net of unamortized discount of $563 and $565.......................................... 147,437 147,435 7 1/2% Debentures due July 1, 2023........................ 98,750 98,750 Property financing obligation expiring on August 8, 2009, net of unamortized discount of $163,611 and $165,353, with an effective interest rate of 4.3%................ 52,813 54,743 4 1/4% Premium Equity Participating Securities due March 15, 2001; 1,305,000 securities stated at current maturity value......................................... 23,735 31,809 Others at various interest rates, maturing through 2001... 65 69 -------- -------- 925,446 933,075 Less current maturities................................... (7,624) (7,671) -------- -------- Total long-term debt................................... $917,822 $925,404 ======== ========
The Company has interest rate swap agreements on the 7 1/2% Debentures and the Liquid Yield Option Notes (LYON(TM)) for notional amounts of $100,000,000 and $170,111,000, respectively. These swaps effectively convert a portion of the Company's long-term fixed rate debt to a variable rate obligation based on LIBOR. As such, these interest rate swaps converted the weighted average interest rate from 5.7% to 4.0% for the quarter ended March 31, 1998. The 4 1/4% Premium Equity Participating Securities (PEPS) hedge 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 in accumulated other comprehensive income, net of applicable income taxes. At March 31, 1998 and December 31, 1997, the fair market value of Netscape common stock was $18.1875 and $24.375 per share, respectively. The PEPS are redeemable at the option of the Company, in whole or in part, at any time after December 15, 2000. 8 9 THE TIMES MIRROR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) NOTE 6 -- EARNINGS AND DIVIDENDS PER SHARE The following table sets forth the calculation of basic and diluted earnings per share (in thousands, except per share amounts):
FIRST QUARTER ENDED MARCH 31, -------------------- 1998 1997 -------- -------- Earnings: Net income................................................ $45,261 $45,233 Preferred dividends....................................... (5,424) (10,911) ------- ------- Earnings applicable to common shareholders for basic and diluted earnings per share.............................................. $39,837 $34,322 ======= ======= Shares: Weighted average shares for basic earnings per share...... 88,335 93,931 Stock options............................................. 2,405 2,317 ------- ------- Adjusted weighted average shares for diluted earnings per share.................................................. 90,740 96,248 ======= ======= Basic earnings per share.................................. $ .45 $ .37 ======= ======= Diluted earnings per share................................ $ .44 $ .36 ======= =======
The Company has convertible securities which are not included in the calculation of diluted earnings per share because the effects are antidilutive. Cash dividends of $.18 and $.10 per share of common stock were declared in the quarters ended March 31, 1998 and 1997, respectively. NOTE 7 -- CAPITAL STOCK At March 31, 1998, the Company had 450,000 put options outstanding with an average strike price of approximately $56.83. The put options, which have various expiration dates in the second and third quarters of 1998, 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." NOTE 8 -- STOCK OPTIONS During the quarter ended March 31, 1998, the Company issued 770,000 shares of its common stock as a result of the exercise of stock options. The Company granted each eligible employee 100 stock options on February 5, 1998. This grant resulted in the issuance of approximately 1,756,000 stock options at an option price of $58.03125 which was equal to fair value at the date of grant. These options will be fully vested on February 6, 2001 for employees still employed by the Company at that date. NOTE 9 -- USE OF ESTIMATES AND OTHER UNCERTAINTIES Financial statements prepared in accordance with generally accepted accounting principles require management to make estimates and judgments that affect amounts and disclosures reported in the financial statements. Actual results could differ from those estimates, although management does not believe that any differences would materially affect its financial position or reported results. 9 10 THE TIMES MIRROR COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 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) an increase in expenses related to new initiatives and product improvement efforts in the flight information and health information operating units; (e) unfavorable foreign currency fluctuations; and (f) a general economic downturn resulting in decreased professional or corporate spending on discretionary items such as information or training and in decreased consumer spending on discretionary items such as magazines or newspapers. NOTE 10 -- CONTINGENT LIABILITIES The Company and its subsidiaries are defendants in various 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 11 -- FUTURE ACCOUNTING REQUIREMENTS Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS 131) was issued in June 1997. Statement of Financial Accounting Standards No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits" (SFAS 132) was issued in February 1998. The disclosures required by these statements must be reported by the Company's year end in 1998. The Company is reviewing SFAS 131 and SFAS 132 and will adopt them by the required dates. The adoption of these statements will have no impact on the Company's consolidated results of operations, financial position or cash flows. NOTE 12 -- ACQUISITION AND PENDING DISPOSITION OF CERTAIN ASSETS On April 27, 1998, Times Mirror announced that Reed Elsevier Inc. will acquire Matthew Bender & Company, Inc., the Company's legal publisher and Times Mirror's 50% ownership interest in Shepard's in a transaction valued at $1.65 billion. Pending the customary regulatory review, the transaction is expected to be completed in Summer 1998. The Company is also evaluating a variety of alternatives regarding its investment in Mosby, Inc., its health sciences publisher, and an announcement is expected in the second quarter of 1998. On April 30, 1998, the Company acquired the Los Angeles area business of EZ Buy & EZ Sell Recycler Corporation (Recycler), consisting primarily of the Recycler Publications in the Los Angeles, Orange, Riverside, San Bernardino and Ventura counties and a portion of Santa Barbara county. The Company also acquired preferred stock of Target Media Partners, a new entity that owns all of the non-Los Angeles area assets of Recycler. Together, these transactions value the Recycler organization at more than $200 million. 10 11 THE TIMES MIRROR COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION CONSOLIDATED RESULTS OF OPERATIONS The following table summarizes the Company's consolidated financial results (dollars in thousands, except per share amounts):
FIRST QUARTER ------------------------------ 1998 1997 CHANGE -------- -------- ------ Revenues.................................................... $803,900 $773,882 3.9% Operating profit............................................ 90,282 87,540 3.1 Interest expense, net....................................... (14,179) (9,048) 56.7 Net income.................................................. 45,261 45,233 0.1 Preferred dividend requirements............................. 5,424 10,911 (50.3) Earnings applicable to common shareholders.................. 39,837 34,322 16.1 Earnings per common share: Basic..................................................... $ .45 $ .37 21.6 Diluted................................................... $ .44 $ .36 22.2
Growth in each of the Company's three business segments led to higher revenues in the first quarter of 1998 compared to the first quarter of 1997. Consolidated operating profit for the first quarter of 1998 increased from the first quarter of 1997, reflecting improved results in the Professional Information segment and lower Corporate and Other expenses, partially offset by reduced operating profit in the Newspaper Publishing and Magazine Publishing segments. Substantially higher newsprint expense, as well as softer than expected advertising revenue and increased investments in circulation growth at the Los Angeles Times, contributed to the decline in operating profit in Newspaper Publishing, the Company's largest business segment. Higher newsprint expense along with the Company's continuing spending to build advertising and circulation volume growth, particularly at The Times, is expected to result in newspaper operating costs rising faster in 1998 than in 1997. Diluted earnings per share for the first quarter of 1998 benefited from lower preferred dividend requirements and a reduction in average shares outstanding. Preferred dividend requirements in the first quarter of 1998 declined due to the Company's redemption of its Series B preferred stock in April 1997 and a recapitalization in August 1997. Net interest expense for the first quarter of 1998 was higher than the prior-year quarter due primarily to increased debt levels attributable to 1997 common stock repurchases and the recapitalization in 1997. ANALYSIS BY SEGMENT NEWSPAPER PUBLISHING Newspaper Publishing revenues and operating profit were as follows (dollars in thousands):
FIRST QUARTER ------------------------------ 1998 1997 CHANGE -------- -------- ------ Revenues Advertising............................................... $415,636 $391,203 6.2% Circulation............................................... 106,528 108,465 (1.8) Other..................................................... 20,757 11,844 75.3 -------- -------- ---- $542,921 $511,512 6.1% ======== ======== ==== Operating profit............................................ $ 90,154 $ 95,264 (5.4)% ======== ======== ====
11 12 THE TIMES MIRROR COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION (CONTINUED) Newspaper Publishing revenues rose in the first quarter of 1998 compared to the first quarter of 1997 with gains in advertising and circulation volume growth, particularly at the Company's three largest newspapers. Advertising revenues continued to improve at all newspapers with strong gains at the Eastern Newspapers, reflecting, in part, the results of Patuxent Publishing Company and This Week Publications, Inc. which were acquired in the second half of 1997. Advertising revenues increased modestly at The Times, the Company's largest newspaper, but it experienced weaker than expected results, particularly in the classified help-wanted category. Circulation revenue declined slightly as marketing strategies involving pricing and promotional discounts helped stimulate circulation volume gains but resulted in lower overall circulation revenues. Average daily and Sunday circulation were higher at each of the Company's three largest newspapers, The Times, Newsday and The Baltimore Sun, for the six-month period ended March 31, 1998, as reported by the Company to the Audit Bureau of Circulations. In addition, average daily circulation increased at The Morning Call, as well as The (Stamford) Advocate and Greenwich Time, and average Sunday circulation rose at The Hartford Courant, as well as The (Stamford) Advocate and Greenwich Time. For The Times, average daily circulation rose over 2%, or 26,195, to 1,095,007 and average Sunday circulation rose almost 2%, or 23,385, to 1,385,373 for the six-month period ended March 31, 1998, with strong growth achieved in the 1998 first quarter. At Newsday, average daily circulation for the six-month period ended March 31, 1998 increased over 2%, or 12,050, to 571,283 and average Sunday circulation increased almost 2%, or 11,113, to 657,559, the largest March gains for Long Island's Newsday since 1987. Segment operating profit declined due primarily to a 26% rise in newsprint expense, as both average newsprint price and consumption increased in the first quarter of 1998 compared to the prior-year quarter. Non-newsprint costs rose 5% in the 1998 first quarter, reflecting, in part, the 1997 second-half acquisitions of weeklies and shoppers. PROFESSIONAL INFORMATION Professional Information revenues and operating profit were as follows (dollars in thousands):
FIRST QUARTER ------------------------------ 1998 1997 CHANGE -------- -------- ------ Revenues.................................................... $191,600 $190,862 0.4% ======== ======== Operating profit............................................ $ 20,876 $ 17,527 19.1% ======== ========
Professional Information's operating profit rose in the first quarter of 1998 due to improved performance at AchieveGlobal, the Company's integrated training company, and the third quarter 1997 acquisition of Krames Communications Incorporated, a publisher of consumer-oriented health education information. MAGAZINE PUBLISHING Magazine Publishing revenues and operating profit (loss) were as follows (dollars in thousands):
FIRST QUARTER ---------------------------- 1998 1997 CHANGE ------- ------- ------ Revenues.................................................... $65,645 $57,876 13.4% ======= ======= Operating profit (loss)..................................... $ (223) $ 2,591 (100)+% ======= =======
Magazine Publishing achieved advertising revenue gains at nearly all magazines in the first quarter of 1998. The acquisitions of TransWorld Skateboarding and Warp in April 1997, as well as Ride BMX, SNAP 12 13 THE TIMES MIRROR COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION (CONTINUED) and InterZine Productions, Inc. in the first quarter of 1998, also contributed to higher revenues. Operating profit for the segment declined, however, due to the substantial investment related to the relaunch of The Sporting News and higher paper costs. CORPORATE AND OTHER Corporate and Other revenues and operating loss were as follows (dollars in thousands):
FIRST QUARTER ------------------------------ 1998 1997 CHANGE -------- -------- ------ Revenues.................................................... $ 4,050 $ 13,835 (70.7)% ======== ======== Operating loss.............................................. $(20,525) $(27,842) (26.3)% ======== ========
Corporate and Other includes the results of Apartment Search, Hollywood Online, Auction Universe and ListingLink. The 1997 segment results have been restated to include Apartment Search and Hollywood Online, which were formerly included in the Newspaper Publishing segment. The decline in revenues for the first quarter of 1998 was attributable to the divestitures of two publishing operations in mid-1997. Operating loss for the 1998 first quarter decreased from the prior year due to the absence of certain information systems costs incurred in 1997, as well as operating losses of the divested businesses. OTHER INCOME For the first quarter of 1998, the Company had equity income from the Shepard's joint venture of $2.8 million which was offset by an equity loss related to MD Consult, an investment in a start-up medical online joint venture, and equity losses from the Company's other new media initiatives. In addition, the Company realized gains on the disposition of certain incidental properties. LIQUIDITY AND CAPITAL RESOURCES The Company's operating cash requirements are funded primarily by its operations. Total debt at March 31, 1998 rose to $1.10 billion from $1.06 billion at December 31, 1997 due to the issuance of commercial paper. At March 31, 1998, 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 $169.1 million of commercial paper outstanding at March 31, 1998 under this credit facility. CASH FLOW The following table sets forth certain items from the Statements of Condensed Consolidated Cash Flows (dollars in millions):
FIRST QUARTER --------------- 1998 1997 ----- ------ Net cash provided by operating activities................... $51.0 $ 30.7 Capital expenditures........................................ (25.6) (22.0) Issuance of commercial paper................................ 82.7 109.0
Cash generated by operating activities in the first quarter of 1998 was higher compared to the same period in 1997 due primarily to lower tax payments which were partially offset by higher interest payments. 13 14 THE TIMES MIRROR COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION (CONTINUED) Capital expenditures for the first quarter of 1998 were higher compared to the same period in 1997 due primarily to investments for upgrades and enhancements in the Newspaper Publishing segment. Capital expenditures for 1998 are expected to be consistent with the 1997 levels. On April 27, 1998, Times Mirror announced that Reed Elsevier Inc. will acquire Matthew Bender & Company, Inc., the Company's legal publisher and Times Mirror's 50% ownership interest in Shepard's in a transaction valued at $1.65 billion. Pending the customary regulatory review, the transaction is expected to be completed in Summer 1998. The Company is also evaluating a variety of alternatives regarding its investment in Mosby, Inc., its health sciences publisher, and an announcement is expected in the second quarter of 1998. On April 30, 1998, the Company acquired the Los Angeles area business of EZ Buy & EZ Sell Recycler Corporation (Recycler), consisting primarily of the Recycler Publications in the Los Angeles, Orange, Riverside, San Bernardino and Ventura counties and a portion of Santa Barbara county. The Company also acquired preferred stock of Target Media Partners, a new entity that owns all of the non-Los Angeles area assets of Recycler. Together, these transactions value the Recycler organization at more than $200 million. DIVIDENDS Cash dividends of $.18 and $.10 per share of common stock were declared for the quarters ended March 31, 1998 and 1997, respectively. 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 9 to the Condensed Consolidated Financial Statements. 14 15 THE TIMES MIRROR COMPANY BUSINESS SEGMENT INFORMATION (IN THOUSANDS) (UNAUDITED)
FIRST QUARTER ENDED MARCH 31 -------------------- 1998 1997 -------- -------- REVENUES Newspaper Publishing(a)................................... $542,921 $511,512 Professional Information.................................. 191,600 190,862 Magazine Publishing....................................... 65,645 57,876 Corporate and Other(a).................................... 4,050 13,835 Intersegment Revenues..................................... (316) (203) -------- -------- $803,900 $773,882 ======== ======== OPERATING PROFIT (LOSS) Newspaper Publishing(a)................................... $ 90,154 $ 95,264 Professional Information.................................. 20,876 17,527 Magazine Publishing....................................... (223) 2,591 Corporate and Other(a).................................... (20,525) (27,842) -------- -------- $ 90,282 $ 87,540 ======== ======== DEPRECIATION AND AMORTIZATION Newspaper Publishing(a)................................... $ 28,965 $ 26,532 Professional Information.................................. 9,349 9,303 Magazine Publishing....................................... 1,945 1,620 Corporate and Other(a).................................... 1,673 1,265 -------- -------- $ 41,932 $ 38,720 ======== ======== CAPITAL EXPENDITURES Newspaper Publishing(a)................................... $ 17,232 $ 10,827 Professional Information.................................. 5,353 6,447 Magazine Publishing....................................... 433 562 Corporate and Other(a).................................... 2,575 4,180 -------- -------- $ 25,593 $ 22,016 ======== ========
- --------------- (a) The Corporate and Other segment includes operating results of Apartment Search, Hollywood Online, Auction Universe and ListingLink. The 1997 segment results have been restated to include Apartment Search and Hollywood Online, which were formerly included in the Newspaper Publishing segment. 15 16 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 12. Ratio of Earnings to Fixed Charges and Ratio of Earnings to Fixed Charges and Preferred Dividends. 27. Financial Data Schedule. (b) The Company filed a report on Form 8-K dated March 19, 1998 announcing that the Company had entered into an agreement for the acquisition of the Los Angeles area business of EZ Buy & EZ Sell Recycler Corporation, consisting primarily of the Recycler Publications in the Los Angeles, Orange, Riverside, San Bernardino and Ventura counties and a portion of Santa Barbara county. 16 17 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 Executive Vice President and Chief Financial Officer Date: May 4, 1998 17 EX-12 2 RATIO OF EARNINGS TO FIXED CHARGES 1 EXHIBIT 12 THE TIMES MIRROR COMPANY COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS (IN THOUSANDS OF DOLLARS, EXCEPT RATIO)
FIRST QUARTER ENDED MARCH 31, 1998 ------------------- Fixed Charges: Interest expense.......................................... $ 19,539 Portion of rents deemed to be interest.................... 4,385 Amortization of debt expense.............................. 505 -------- Total fixed charges.................................... 24,429 Preferred dividends......................................... 9,315 -------- Fixed charges and preferred dividends..................... $ 33,744 ======== Earnings: Income before income tax provision........................ $ 77,730 Fixed charges............................................. 24,429 Amortization of capitalized interest...................... 3,638 Subtract: Equity income from less than 50% owned unconsolidated affiliates.............................. (9) Add: Equity loss from less than 50% owned unconsolidated affiliates............................................. 6,548 -------- Total earnings......................................... $112,336 ======== Ratio of earnings to fixed charges.......................... 4.6x Ratio of earnings to fixed charges and preferred dividends................................................. 3.3x
EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH 31, 1998 QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 51,602 0 515,147 65,202 76,419 715,566 2,021,631 1,032,019 3,412,902 856,480 917,822 0 724,820 112,089 72,749 3,412,902 803,900 803,900 427,042 427,042 0 8,312 19,527 77,730 32,469 45,261 0 0 0 45,261 0.45 0.44
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