-----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, sarozKvMJRX1UO+QLY1uTg7o1Yk6ySSCo24kK8MByR1Ss1d2s+5EquVZluUSpBhs EwtZtLiqQ6e7uDWJyobREQ== 0000950131-95-000686.txt : 19950616 0000950131-95-000686.hdr.sgml : 19950616 ACCESSION NUMBER: 0000950131-95-000686 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19941225 FILED AS OF DATE: 19950322 SROS: MSE SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRIBUNE CO CENTRAL INDEX KEY: 0000726513 STANDARD INDUSTRIAL CLASSIFICATION: NEWSPAPERS: PUBLISHING OR PUBLISHING & PRINTING [2711] IRS NUMBER: 361880355 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-08572 FILM NUMBER: 95522457 BUSINESS ADDRESS: STREET 1: 435 N MICHIGAN AVE CITY: CHICAGO STATE: IL ZIP: 60611 BUSINESS PHONE: 3122229100 10-K405 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 25, 1994 Commission file number 1-8572 TRIBUNE COMPANY (Exact name of registrant as specified in its charter) Delaware 36-1880355 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 435 North Michigan Avenue, Chicago, Illinois 60611 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (312) 222-9100 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered - ------------------- ------------------------ Common Stock (without par value) New York Stock Exchange Preferred Share Purchase Rights Chicago Stock Exchange Pacific Stock Exchange Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . ---- ---- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Aggregate market value of the Company's voting stock held by non-affiliates on March 7, 1995, based upon the closing price of the Company's Common Stock as reported on the New York Stock Exchange Composite Transactions list for such date: approximately $3,132,000,000. At March 7, 1995 there were 65,757,111 shares of the Company's Common Stock outstanding. The following documents are incorporated by reference, in part: 1994 Annual Report to Stockholders (Parts I and II, to the extent described therein). Definitive Proxy Statement for the May 2, 1995 Annual Meeting of Stockholders (Part III, to the extent described therein). PART I ITEM 1. BUSINESS. Tribune Company (the "Company") is an information and entertainment company. Through its subsidiaries, the Company is engaged in the publishing of newspapers, books and information in print and digital formats and the broadcasting, production and syndication of information and entertainment in metropolitan areas in the United States. The Company also has an ownership interest in a Canadian newsprint manufacturer. The Company was founded in 1847 and incorporated in Illinois in 1861. As a result of a corporate restructuring in 1968, the Company became a holding company incorporated in Delaware. References in this report to "Tribune Company" or "the Company" include Tribune Company and its subsidiaries, unless the context otherwise indicates. The information in this Item 1 should be read in conjunction with the information contained under the heading "Management's Discussion and Analysis of Results of Operations and Financial Condition" in the Company's 1994 Annual Report to Stockholders, which information is incorporated herein by reference. BUSINESS SEGMENTS The Company's operations are divided for reporting purposes into three industry segments: Publishing, Broadcasting and Entertainment, and New Media/Education. These segments operate in the United States. The New Media/education segment was established in 1994 and consists of three recently acquired businesses - Contemporary Books, Inc., Compton's NewMedia and The Wright Group. Until the fourth quarter of 1994, the new media/education segment's operating results were reported within the publishing segment. Prior to 1993 the Company also had a segment called Newsprint Operations which consisted entirely of QUNO Corporation ("QUNO") and which operated in Canada. As a result of an initial public offering completed by QUNO in February 1993, the Company's ownership interest in the newsprint operations segment was reduced from 100% to 59%, and its voting interest was reduced to 49%. On April 14, 1994 the Company reduced its ownership holdings in QUNO to 34% by selling 5.5 million shares of QUNO common stock. Newsprint operations is no longer reported as a business segment as the Company began accounting for its investment in QUNO using the equity method in 1993. On March 20, 1991, the Company sold its New York newspaper, the Daily News. The following table sets forth operating revenue and profit information regarding each segment of the Company (in millions).
FISCAL YEAR ENDED DECEMBER ----------------------------------------------------- 1994 1993 1992 1991 1990 --------- --------- --------- --------- --------- Operating Revenues: (1) Publishing (2)...................... $1,292.4 $1,199.1 $1,166.6 $1,142.1 $1,521.2 Broadcasting and Entertainment (3).. 764.2 727.2 684.0 617.5 624.0 New Media/Education................. 98.3 21.2 - - - -------- -------- -------- -------- -------- Total........................... 2,154.9 1,947.5 1,850.6 1,759.6 2,145.2 Newsprint Operations................ - - 366.3 422.1 351.7 Intercompany........................ - - (117.2) (142.5) (138.0) -------- -------- -------- -------- -------- Total Operating Revenues........ $2,154.9 $1,947.5 $2,099.7 $2,039.2 $2,358.9 -------- -------- -------- -------- -------- Operating Profit (1) (4): Publishing (2) (5).................. $ 287.6 $ 253.0 $ 224.5 $ 217.0 $ 164.1 Broadcasting and Entertainment (3).. 132.4 125.7 121.3 100.2 107.5 New Media/Education................. 2.8 2.1 - - - Corporate expenses.................. (26.2) (24.4) (23.6) (22.2) (22.6) -------- -------- -------- -------- -------- Total........................... 396.6 356.4 322.2 295.0 249.0 Newsprint Operations................ - - (53.8) (7.0) (11.1) -------- -------- -------- -------- -------- Total Operating Profit.......... $ 396.6 $ 356.4 $ 268.4 $ 288.0 $ 237.9 -------- -------- -------- -------- --------
1 - ---------- (1) Amounts have been restated to conform to the 1994 presentation. (2) 1990 includes revenues of $321.8 million and an operating loss of $114.5 million for the New York Daily News. (3) 1992 includes $12.3 million of Major League Baseball expansion fees. (4) Operating profit for each segment excludes interest income and expense, non-operating gains and losses, equity in QUNO net loss and income taxes. (5) 1992 includes a $15.3 million charge for the disposition of The Peninsula Times Tribune. The following table sets forth asset information for each industry segment (in millions).
FISCAL YEAR ENDED DECEMBER ------------------------------------------------------- 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- Assets: Publishing........................ $ 757.9 $ 880.4 $ 856.4 $ 861.9 $ 924.3 Broadcasting and Entertainment.... 1,321.8 1,155.3 1,149.5 1,120.0 1,065.0 New Media/Education............... 210.4 108.0 - - - Corporate (1)..................... 495.7 392.7 133.2 132.2 148.6 Intercompany receivables.......... - - (10.8) (18.7) (12.3) -------- -------- -------- -------- -------- Total......................... 2,785.8 2,536.4 2,128.3 2,095.4 2,125.6 Newsprint Operations.............. - - 623.3 699.9 700.5 -------- -------- -------- -------- -------- Total Assets.................. $2,785.8 $2,536.4 $2,751.6 $2,795.3 $2,826.1 -------- -------- -------- -------- -------- - ----------
(1) Corporate assets include the investment in and advances to QUNO. The Company's results of operations, when examined on a quarter-by-quarter basis, reflect the seasonality of advertising that affects both publishing and broadcasting operations. Second and fourth quarter advertising revenues are typically higher than first and third quarter revenues. Results for the second quarter usually reflect spring advertising, while the fourth quarter includes advertising related to the holiday season. PUBLISHING The publishing segment represented 60% of the Company's consolidated operating revenues for 1994. The combined average circulation of the Company's daily newspapers was approximately 1.4 million daily and 2.0 million Sunday, according to Audit Bureau of Circulation ("ABC") averages for the six-month period ended September 1994. The Company's primary newspapers are the Chicago Tribune, the Fort Lauderdale-based Sun-Sentinel and The Orlando Sentinel. In Virginia, the Company owns the Newport News Daily Press. In California, the Company owns two daily newspapers and a weekly newspaper located in suburban areas in the San Diego market. The Company also operated one daily newspaper and several weekly newspapers in Palo Alto, California, which ceased publication in March 1993. The Company recorded a $15.3 million pre-tax charge in 1992 for the closure of these Palo Alto-based papers. For 1994, the portion of total publishing operating revenues represented by each of the Company's principal newspapers was as follows: Chicago Tribune--54%; Sun-Sentinel--21%; The Orlando Sentinel--16%; and California and Virginia Newspapers--5%. In addition, the Company owns a newspaper syndication and media marketing company, direct mail operations and other publishing-related businesses. Each of the Company's newspapers operates independently to most effectively meet the needs of the area it serves. Editorial policies are established by local management. The Company coordinates certain aspects of operations and resources in order to provide greater efficiency and economies of scale. 2 The Company's newspapers compete for readership and advertising in varying degrees with other metropolitan, suburban and national newspapers, as well as with television, radio and other media. Competition for newspaper advertising is based upon circulation levels, readership demographics, price, service and advertiser results, while competition for circulation is based upon the content of the newspaper, service and price. The Company's newspapers are printed in Company-owned production facilities. The principal raw material is newsprint. In 1994, the Company's newspapers utilized approximately 408,000 metric tons of newsprint. Approximately 67% of the newspapers' supply was purchased from QUNO, with the remainder purchased from outside sources. The Company is party to a contract with QUNO expiring in 2007 to supply newsprint based on market prices. Under the contract, the Company has agreed to purchase specified minimum amounts of newsprint each year subject to certain limitations. The specified minimum annual volume is 250,000 metric tons in years 1995 to 1999, 225,000, 200,000 and 175,000 metric tons in years 2000 to 2002, respectively, and 150,000 metric tons in each of years 2003 to 2007. See "QUNO Corporation" for a discussion of the Company's investment in the newsprint manufacturing business. The North American newsprint industry has begun to increase newsprint prices due to increased demand for newsprint in the U.S. and overseas. Price increases in 1994 and announced 1995 increases for March 1 and May 1 would result in an approximate 40% increase in average newsprint selling prices in 1995 over 1994. This will increase newsprint expense at the Company's newspapers in 1995 by approximately $70 million. The Company expects to offset the increase, at least in part, through cost controls and expected revenue increases. QUNO Corporation, a Canadian newsprint manufacturer in which the Company has a 34% equity investment, will benefit from the price increases in 1995. The following table provides a breakdown of revenues for the publishing segment for the last five years, excluding revenues at the Daily News. OPERATING REVENUES EXCLUDING DAILY NEWS (IN THOUSANDS)
FISCAL YEAR ENDED DECEMBER ---------------------------------------------------------- 1994 1993 1992 1991 1990 ---------- ---------- ---------- ---------- ---------- Advertising: Retail....................... $ 461,119 $ 435,107 $ 427,997 $ 429,340 $ 442,946 General...................... 135,267 120,589 128,501 124,391 129,481 Classified................... 385,127 336,828 311,553 300,795 356,356 ---------- ---------- ---------- ---------- ---------- Total.................... 981,513 892,524 868,051 854,526 928,783 Circulation.................... 242,767 246,093 238,302 234,720 222,992 Other (1) (2).................. 68,105 60,486 60,227 52,870 47,619 ---------- ---------- ---------- ---------- ---------- Total.................... $1,292,385 $1,199,103 $1,166,580 $1,142,116 $1,199,394 ---------- ---------- ---------- ---------- ---------- - -----------
(1) Amounts have been restated to conform to the 1994 presentation. (2) Primarily includes revenues from advertising placement services, the syndication of columns, features, information and comics to newspapers, commercial printing operations, direct mail operations and other publishing-related activities. Total advertising revenues improved in 1994 due to linage increases in all categories and higher advertising rates. The increase in retail advertising reflects increases in the department store and food and drug categories at nearly all of the newspapers. General advertising revenues increased in 1994 due to higher advertising in the transportation and media categories. Classified advertising also increased in 1994 as help wanted, automotive and real estate advertising improved. 3 Chicago Tribune Company Founded in 1847, the Chicago Tribune is published daily, including Sunday, and primarily serves an eight-county market in northern Illinois and Indiana. This market ranks third in the United States in number of households. For the six months ended September 1994, the Chicago Tribune ranked 8th in average daily circulation and 6th in average Sunday circulation in the nation, based on ABC averages. Approximately 72% and 52% of the Tribune's daily and Sunday circulation, respectively, is sold through home delivery, with the remainder primarily sold at newsstands and vending boxes. The daily edition's newsstand price increased by $.15 to $.50 and its home delivery price increased $.05 to $.40 effective September 27, 1992. The Sunday edition's newsstand price increased by $.25 to $1.50 effective April 8, 1990. The following tables set forth selected information for the Chicago Tribune daily newspaper and other related activities.
AVERAGES FOR THE TWELVE MONTHS ENDED DECEMBER ---------------------------------------------------------- 1994 1993 1992 1991 1990 ---------- ---------- ---------- ---------- ---------- CIRCULATION: Daily.......................... 682,000 700,000 715,000 733,000 728,000 Sunday......................... 1,092,000 1,113,000 1,114,000 1,121,000 1,119,000
FISCAL YEAR ENDED DECEMBER ---------------------------------------------------------- 1994 1993 1992 1991 1990 ---------- ---------- ---------- ---------- ---------- (IN THOUSANDS) ADVERTISING INCHES: Full Run (all zones) Retail........................ 1,211 1,198 1,202 1,195 1,181 General....................... 338 318 345 347 386 Classified.................... 1,320 1,214 1,183 1,213 1,452 ---------- ---------- ---------- ---------- ---------- Total........................ 2,869 2,730 2,730 2,755 3,019 Part Run....................... 5,017 4,672 4,442 4,299 4,523 Preprinted Inserts............. 2,852 2,437 2,210 2,002 1,874 ---------- ---------- ---------- ---------- ---------- Total Inches................. 10,738 9,839 9,382 9,056 9,416 ---------- ---------- ---------- ---------- ---------- OPERATING REVENUES.............. $ 696,946 $ 647,112 $ 619,670 $ 604,703 $ 632,001 ---------- ---------- ---------- ---------- ----------
The 1994 improvement in advertising volume is due to increases in classified part run and preprinted inserts as additional targeted zoning options were offered to advertisers. The daily edition price increase on September 27, 1992 contributed to the decrease in circulation volume since 1992. Based on ABC averages for the six months ended September 1994, the Chicago Tribune had a 31% lead in total daily paid circulation and a 117% lead in Sunday paid circulation over its principal competitor, the Chicago Sun-Times. The Chicago Tribune's total advertising volume and operating revenues are estimated to be substantially greater than those of the Sun-Times. The Chicago Tribune also competes with other city, suburban and national daily newspapers, direct mail operations and other media. In September 1993, the Chicago Tribune began publishing Exito!, a weekly newspaper targeted to Spanish-speaking households. The Chicago Tribune also operates Chicago Online, a local interactive computer service that offers news and entertainment information through a joint venture with America Online, and audiotex services and publications targeted to specific consumer market segments. 4 Sun-Sentinel Company The Sun-Sentinel is published daily, including Sunday, and leads the Fort Lauderdale market in circulation. Approximately 66% and 64% of the Sun- Sentinel's daily and Sunday circulation, respectively, is sold through home delivery, with the remainder sold at newsstands and vending boxes. The paper's principal competition comes from the Miami Herald and national and local publications, as well as other media. The Miami/Fort Lauderdale market ranks 16th in the nation in terms of households. The newsstand price of all Sunday editions was increased by $.25 to $1.00 on November 20, 1989. In January 1992, the newsstand price of the Palm Beach Sunday edition increased by $.25 to $1.25. Prior to March 27, 1992, the News and the Sun-Sentinel, based in Fort Lauderdale, Florida, were published in the afternoon and morning, respectively. The paper was combined for Saturday and Sunday editions as the Fort Lauderdale Sun-Sentinel. The News, which accounted for approximately 3% of 1991 circulation, discontinued publication after the March 27, 1992 edition. The following tables set forth selected information for the Sun-Sentinel daily newspaper and other related activities.
AVERAGES FOR THE TWELVE MONTHS ENDED DECEMBER ------------------------------------------------ 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- CIRCULATION: Daily.......................... 266,000 263,000 259,000 251,000 245,000 Sunday......................... 365,000 362,000 350,000 338,000 328,000
FISCAL YEAR ENDED DECEMBER ------------------------------------------------ 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- (IN THOUSANDS) ADVERTISING INCHES: (1) Full Run (all zones) Retail........................ 1,237 1,155 1,105 1,182 1,221 General....................... 237 203 214 214 252 Classified.................... 2,442 2,261 2,091 2,159 2,520 -------- -------- -------- -------- -------- Total........................ 3,916 3,619 3,410 3,555 3,993 Part Run....................... 2,979 2,831 2,889 2,629 2,326 Preprinted Inserts............. 1,660 1,564 1,473 1,314 1,269 -------- -------- -------- -------- -------- Total Inches................. 8,555 8,014 7,772 7,498 7,588 -------- -------- -------- -------- -------- OPERATING REVENUES.............. $267,095 $241,621 $227,519 $219,524 $228,841 -------- -------- -------- -------- --------
(1) Excludes inches for Gold Coast Publications. The 1994 improvement in advertising volume is primarily due to increased help wanted, real estate and department store advertising. The 1991 reduction in advertising volume is attributable primarily to a slowdown in the south Florida economy. The Sun-Sentinel Company also owns Gold Coast, a shopper publication located in Fort Lauderdale. During 1990, 13 other shoppers and weekly publications located on Florida's Gulf Coast were sold. The Sun-Sentinel also has a commercial printing operation. In 1991, two weekly publications, XS and Exito!, targeted to young adults and Spanish-speaking households, respectively, were launched and have continued to expand readership. Like the Chicago Tribune, the Sun-Sentinel also operates audiotex services and publications targeted to specific consumer market segments. 5 Sentinel Communications Company (Orlando) The Orlando Sentinel is published daily, including Sunday, and serves primarily a five-county area in central Florida. It is the only major daily newspaper in the Orlando market, although it competes with other Florida and national newspapers as well as other media. Approximately 74% of the paper's daily and 67% of its Sunday circulation is sold on a home delivery basis, with the remainder sold at newsstands and vending boxes. On October 12, 1992, the weekly home delivery price was increased by $.50 to $3.75. On March 30, 1992, the newsstand price of the daily edition increased $.15 to $.50, except for most Thursday editions, which had been priced at $.50 since February 1991. The newsstand price of the Sunday edition was increased to $1.50 from $1.25 at the end of 1990. The Orlando/Daytona Beach/Melbourne market ranks 22nd among U.S. markets in terms of households. The following tables set forth selected information for The Orlando Sentinel daily newspaper and other related activities.
AVERAGES FOR THE TWELVE MONTHS ENDED DECEMBER ------------------------------------------------ 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- CIRCULATION: Daily.......................... 269,000 269,000 281,000 283,000 280,000 Sunday......................... 390,000 387,000 387,000 382,000 384,000
FISCAL YEAR ENDED DECEMBER ------------------------------------------------ 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- (IN THOUSANDS) ADVERTISING INCHES: Full Run (all zones) Retail........................ 971 956 985 1,074 1,074 General....................... 99 83 90 93 118 Classified.................... 1,842 1,665 1,522 1,468 1,796 -------- -------- -------- -------- -------- Total........................ 2,912 2,704 2,597 2,635 2,988 Part Run....................... 1,884 1,766 2,024 2,157 1,890 Preprinted Inserts............. 2,741 2,508 2,220 1,877 1,924 -------- -------- -------- -------- -------- Total Inches................. 7,537 6,978 6,841 6,669 6,802 -------- -------- -------- -------- -------- OPERATING REVENUES.............. $214,125 $202,327 $196,043 $196,180 $203,307 -------- -------- -------- -------- --------
The central Florida economy continued to strengthen in 1994. Advertising volume was up overall due to improved help wanted, automotive and food and drug advertising and increased preprint volume from increased zoning. The 1991 reduction in advertising volume is attributable primarily to a slowdown in the central Florida economy. In 1990, The Orlando Sentinel launched US Express, a free weekly entertainment publication that is used to distribute advertising to non-subscribers. US Express is syndicated nationally. California and Virginia Newspapers The Times Advocate, located in Escondido, California, serves the northern portion of San Diego County. The Times Advocate was published weekday afternoons and Saturday and Sunday mornings until April 1992, when the weekday afternoon edition was converted to a morning edition. In 1988, the Times Advocate acquired two weekly newspaper publications, which complement the paper's daily coverage with more local news and advertising. In June 1990, one of these weekly publications, The Californian, began publishing six days a week. The Palo Alto-based Times Tribune ceased publication in March 1993. 6 In 1986, the Company purchased the Daily Press/The Times-Herald in Newport News, Virginia. The Daily Press is published every morning including Sunday. The Times-Herald was published each weekday afternoon until September 1, 1991, when this edition was discontinued. The Daily Press constitutes the only major daily newspaper in the market, although it competes with other regional and national newspapers, as well as other media. In addition to Newport News, the Daily Press market includes Hampton, Williamsburg and eight other cities and counties in Virginia. This market area is commonly called the Virginia Peninsula and, together with Norfolk, Portsmouth and Virginia Beach, is the 40th largest U.S. market in terms of households. The weekly home delivery price was increased by $.30 to $2.75 in September 1992. The newsstand price of the daily edition increased by $.10 to $.35, and the Sunday edition newsstand price was increased to $1.25 from $1.00, both effective October 1, 1990. Approximately 78% of the paper's daily and 77% of its Sunday circulation is sold on a home delivery basis, with the remainder sold at newsstands and vending boxes. The following tables set forth selected combined information for the California and Virginia daily newspapers and other related activities.
AVERAGES FOR THE TWELVE MONTHS ENDED DECEMBER ------------------------------------------------ 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- CIRCULATION (1): Daily.......................... 153,000 154,000 153,000 154,000 159,000 Sunday......................... 180,000 179,000 178,000 175,000 177,000
FISCAL YEAR ENDED DECEMBER ------------------------------------------------ 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- (IN THOUSANDS) ADVERTISING INCHES (1) (2): Full Run (all zones) Retail........................ 1,204 1,111 1,114 1,154 1,269 General....................... 80 61 61 88 99 Classified.................... 1,311 1,362 1,227 1,176 1,319 -------- -------- -------- -------- -------- Total........................ 2,595 2,534 2,402 2,418 2,687 Part Run (3)................... 764 781 801 922 948 Preprinted Inserts (3)......... 3,393 3,313 3,198 3,129 2,962 -------- -------- -------- -------- -------- Total Inches................. 6,752 6,628 6,401 6,469 6,597 -------- -------- -------- -------- -------- OPERATING REVENUES (3)......... $ 68,526 $ 65,146 $ 82,506 $ 86,323 $ 92,233 -------- -------- -------- -------- -------- - -----------
(1) The Peninsula Times Tribune was closed on March 12, 1993. Circulation and inches relating to the Times Tribune have been excluded from all years presented. (2) The Times-Herald (afternoon edition) was discontinued on September 1, 1991. Inches relating to this edition have been excluded from all years presented. (3) Includes related weekly publications. The increased inches in 1994 reflect the improving economies of both Virginia and California. Related Businesses The Company is also involved in syndication activities, primarily through Tribune Media Services, Inc. ("TMS"), involving the marketing of columns, features, information and comic strips to newspapers; direct mail operations through AmeriComm/Illinois, acquired in 1991, and other publishing-related activities. TMS is also engaged in advertising placement services for television listings in newspapers and the development of news products and services for electronic and print media. Total operating revenues for these related businesses are shown below, net of intercompany revenues. Amounts have been restated to conform to the 1994 presentation. 7
RELATED BUSINESS REVENUES ------------------------- (IN THOUSANDS) 1994............ $45,693 1993............ 42,897 1992............ 40,842 1991............ 35,386 1990............ 43,012
Sale of the New York Daily News On March 20, 1991 the Company sold the New York Daily News to Maxwell Newspapers, Inc. ("Maxwell"). Daily News operating losses for 1991 through the date of sale were recorded in the Company's 1990 financial statements. The following table sets forth selected historical information for the New York Daily News included as part of the publishing segment in 1990 (in thousands):
FISCAL YEAR ENDED DECEMBER 1990 ----------------- OPERATING REVENUES: Advertising: Retail................................... $114,151 General.................................. 47,981 Classified............................... 43,147 -------- Total................................. 205,279 Circulation................................ 116,222 Other...................................... 322 -------- Total................................. $321,823 -------- ADVERTISING INCHES: Full Run (all zones) Retail................................... 467 General.................................. 141 Classified............................... 189 -------- Total................................. 797 Part Run................................... 919 Preprinted Inserts......................... 854 -------- Total Inches.......................... 2,570 --------
BROADCASTING AND ENTERTAINMENT The broadcasting and entertainment segment represented 35% of the Company's consolidated operating revenues for 1994. The segment currently includes independent VHF television stations located in New York, Los Angeles, Chicago and Denver, independent UHF television stations located in Philadelphia, Boston and New Orleans, a CBS television affiliate (effective December 1994) in Atlanta, and six radio stations in New York, Chicago, Denver (2 stations) and Sacramento (2 stations). The Company acquired independent television station WLVI-Boston in April 1994, for approximately $25 million in cash. In June 1994 the Company acquired Farm Journal Inc., publisher of The Farm Journal, the nation's leading farm magazine, for approximately $17.5 million in cash. Farm Journal results are reported in radio. In January 1993, the Company acquired its two Denver radio stations, KOSI-FM and KEZW-AM, for $19.9 million in cash. These acquisitions were accounted for as purchases. In June 1992, the Company exercised its warrant to acquire a controlling common equity interest in 8 WPHL-TV, Inc., in Philadelphia. This warrant was acquired by the Company in 1991 for $19 million in cash. The exercise of the warrant was accounted for as a purchase and the results of WPHL are included in the Company's consolidated statements of income since June 1992. In entertainment/Chicago Cubs, the Company owns the Chicago Cubs baseball team and produces and syndicates television programming. Cable programming/development includes CLTV News, a Chicago area news cable channel, and the Company's equity losses in TV Food Network, a basic cable channel specializing in nutrition and fitness programming. The following table shows sources of revenue for the broadcasting and entertainment segment for the last five years.
OPERATING REVENUES (IN THOUSANDS) FISCAL YEAR ENDED DECEMBER ----------------------------------------------- 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- Television (1)..................... $598,532 $536,773 $477,193 $445,883 $458,897 Radio (2).......................... 68,817 58,740 49,552 49,167 47,380 Entertainment/Chicago Cubs (3)(4).. 92,080 130,054 157,306 122,464 117,704 Cable Programming/Development...... 4,768 1,646 - - - -------- -------- -------- -------- -------- Total............................. $764,197 $727,213 $684,051 $617,514 $623,981 -------- -------- -------- -------- --------
(1) Includes WLVI-Boston and WPHL-Philadelphia since their acquisition on April 4, 1994 and June 5, 1992, respectively. (2) Includes Farm Journal Inc., and KOSI/KEZW-Denver since their acquisition on June 30, 1994 and January 6, 1993, respectively. (3) 1992 includes $12.3 million of Major League Baseball expansion fees. (4) 1994 reflects the impact of the Major League baseball strike which began August 10, 1994. Television In 1994, television contributed 78% of broadcasting and entertainment operating revenues. The Company's television stations compete for audience and advertising with other television and radio stations, cable television and other media serving the same markets. Competition for audience and advertising is based upon various interrelated factors including programming content, audience acceptance and price. Selected data for the Company's television stations is shown in the following table.
MARKET (1) MAJOR ----------------------- COMMERCIAL EXPIRATION HOUSEHOLDS NATIONAL STATIONS IN OF FCC (000'S) RANK CHANNEL MARKET (2) LICENSE (3) ----------- -------- ------- ----------- ----------- WPIX - New York, New York........ 6,716 1 11-VHF 6 1994 (4) KTLA - Los Angeles, California... 4,936 2 5-VHF 7 1993 (5) WGN - Chicago, Illinois......... 3,102 3 9-VHF 7 1997 WPHL - Philadelphia, Pennsylvania 2,682 4 17-UHF 6 1994 (6) WLVI - Boston, Massachusetts..... 2,105 6 56-UHF 7 1999 WGNX - Atlanta, Georgia.......... 1,567 10 46-UHF 7 1997 KWGN - Denver, Colorado.......... 1,142 18 2-VHF 6 1998 WGNO - New Orleans, Louisiana.... 615 41 26-UHF 5 1997
9 - ----------- (1) Source: Nielsen Station Index, September 1994. Ranking of markets is based on number of television households in DMA (Designated Market Area). (2) Source: 1994 Television & Cable Fact Book (3) See "Governmental Regulation." (4) Expired on June 1, 1994. Renewal application filed on February 1, 1994 is pending. (5) Expired on December 1, 1993. Renewal application filed on August 2, 1993 is pending. (6) Expired on August 1, 1994. Renewal application filed on April 1, 1994 is pending. Programming emphasis at the Company's stations is placed on syndicated series, feature motion pictures, local and regional sports coverage, news and children's programs. The stations acquire most of their programming from outside sources, although a significant amount is produced locally or supplied by Tribune Entertainment (see "Entertainment"). Contracts for purchased programming generally cover a period of one to seven years, with payment also typically made over several years. The expense for amortization of television broadcast rights in 1994 was approximately $223 million, which represents approximately 37% of total television operating revenues. In December 1994, WGNX-Atlanta became a CBS network affiliate. In January 1995, the Company's other television stations began broadcasting WB Network programming two hours a week. The Company has entered into an agreement to make a less than 50% equity investment in Qwest Broadcasting, L.L.C., a new company formed to acquire and operate television and radio stations. In November 1994, Qwest agreed to acquire television stations in Atlanta (WATL) and New Orleans (WNOL) for approximately $167 million in the aggregate. These acquisitions are pending approvals of the Federal Communications Commission and other regulatory agencies and are expected to close in 1995. The Company will provide certain services to each of the stations under a cost-sharing agreement with Qwest. As part of this transaction, Qwest has agreed to pay $150 million to WATL's current owner on December 14, 1995 even if regulatory approvals have not been received. The Company has guaranteed this payment. Average audience share information for the Company's television stations for the past five years is shown in the following table.
AVERAGE AUDIENCE SHARE (1) YEAR ENDED DECEMBER -------------------------------- 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- WPIX - New York, New York................ 9.8% 10.8% 11.5% 10.5% 9.8% KTLA - Los Angeles, California........... 9.3 9.5 9.5 9.8 9.8 WGN - Chicago, Illinois................. 10.8 11.5 12.0 13.0 13.0 WPHL - Philadelphia, Pennsylvania (2).... 4.8 5.8 5.0 5.0 4.8 WLVI - Boston, Massachusetts (3)......... 5.0 5.0 5.0 5.0 5.0 WGNX - Atlanta, Georgia.................. 7.0 7.0 7.3 7.5 6.8 KWGN - Denver, Colorado.................. 9.8 12.0 9.8 10.3 9.8 WGNO - New Orleans, Louisiana............ 9.5 8.0 7.8 7.3 6.8
- ----------- (1) Represents the estimated number of television households tuned to a specific station as a percent of total viewing households in a defined area. The percentages shown reflect the average Nielsen ratings shares for the February, May, July and November measurement periods for 7 a.m. to 1 a.m. daily. (2) Acquired June 5, 1992. (3) Acquired April 4, 1994. 10 Radio In 1994, the Company's radio operations contributed 9% of broadcasting and entertainment operating revenues. The largest radio station owned by the Company, measured in terms of operating revenues, is WGN. Radio operations include Tribune Radio Networks, which produces and distributes farm and sports programming to radio stations, primarily in the Midwest, and Farm Journal Inc., which was acquired June 30, 1994. Selected information for the Company's radio operations is shown in the following table.
NUMBER OF NATIONAL OPERATING MARKET STATIONS IN AUDIENCE FORMAT FREQUENCY RANK (1) MARKET (2) SHARE (3) ------------------------- --------- -------- ------------ --------- WQCD - New York, New York...... New Adult Contemporary/Jazz 101.9-FM 1 49 3.7% WGN - Chicago, Illinois........ Personality/Infotainment/ Sports 720-AM 3 38 6.6% KOSI - Denver, Colorado (4)..... Adult Contemporary 101.1-FM 23 29 6.3% KEZW - Denver, Colorado (4)..... Nostalgia 1430-AM 23 29 3.0% KYMX - Sacramento, California... Adult Contemporary 96.1-FM 29 25 4.7% KCTC - Sacramento, California... Nostalgia 1320-AM 29 25 3.6%
- ----------- (1) Source: Radio markets ranked by Arbitron Metro Survey Area, Arbitron Company 1994. (2) Source: Arbitron Company 1994. (3) Source: Average of Winter, Spring, Summer and Fall 1994 Arbitron shares for persons 12 years old and over, 6 a.m. to midnight daily during the period measured. (4) Acquired January 1993. Entertainment/Chicago Cubs In 1994, entertainment/Chicago Cubs contributed 12% of the segment's operating revenues. This portion of the broadcasting and entertainment segment includes Tribune Entertainment Company, the Chicago Cubs baseball team and two minor league baseball teams. The Major League Baseball players' contract expired on December 31, 1993. The Major League Baseball Players Association initiated a strike on August 12, 1994, and on August 28, 1994, the owners cancelled the remainder of the Major League Baseball season. Negotiations to settle the strike are continuing. The strike impacted the Company's Chicago Cubs baseball operations, and, to a lesser extent, television and radio operations. In total, the baseball strike negatively impacted the Company's primary earnings per share by approximately $.10. The Company cannot predict the ultimate outcome of the negotiations. Tribune Entertainment Company was formed in 1982 to acquire and develop programming for Company television stations and for syndication. Tribune Entertainment participates in the production or distribution of first-run programming, including two daily talk shows, music and variety shows, television movies and specials. Tribune Entertainment's most popular program is "Geraldo," a one-hour, daily talk show which is aired on 152 stations that cover 91% of U.S. television households and is sold internationally to many cities in Canada, as well as to several countries in Latin America and Europe. During the 1994- 1995 television season, Tribune Entertainment originated approximately 13.5 hours of first-run programs per week. On average, the Company's eight television stations utilize over nine hours per week of programming furnished by Tribune Entertainment. The Company owns the Chicago Cubs baseball team. In addition to providing local sports entertainment, the Cubs represent an important source of live programming for the Company's Chicago-based broadcasting operations and regional cable programming service. In 1992, the Company acquired a Class AA Southern League franchise in Orlando and a Class A Midwest League franchise in Rockford, Illinois. The Chicago Cubs baseball team received $12.3 million in Major League Baseball expansion fees in December 1992. 11 Cable Programming/Development Cable programming/development contributed 1% of the segment's operating revenues in 1994. CLTV News, a regional 24-hour cable news programming service, was launched in January 1993 and currently is available to more than 1.3 million cable households in the Chicago-area market. In 1993, the Company acquired a 31% equity share in Television Food Network, a 24-hour basic cable channel focusing on nutrition and fitness. NEW MEDIA/EDUCATION The new media/education segment represented 5% of the Company's consolidated operating revenues for 1994. Until the fourth quarter of 1994, the new media/education segment's operating results were reported within the publishing segment. In July 1993, the Company acquired Contemporary Books, Inc., a publisher of nonfiction trade titles and educational books and materials, for approximately $22.0 million in cash and $18.5 million in common stock. In September 1993, the Company acquired Compton's Multimedia Publishing Group for approximately $57 million in cash. Compton's develops and distributes interactive multimedia software for the consumer and education markets. In February 1994, the Company acquired substantially all of the assets of The Wright Group, a leading publisher of supplemental education materials for the elementary school market, for approximately $100 million in cash. The acquisitions were accounted for as purchases. New media/education operating revenues in 1994 were $98 million. Revenues are derived from publishing supplemental education and adult education materials, trade books, and multimedia products. The multimedia products are sold primarily by Compton's and include the "Compton's Interactive Encyclopedia" and other CD-ROM titles. QUNO CORPORATION In February 1993, QUNO completed an initial public offering of 9 million shares of common stock. As a result of the offering, the Company held 49% of the voting common shares and 59% of QUNO's total 22 million outstanding common shares. On April 14, 1994, the Company reduced its ownership holdings in QUNO to 34% by selling 5.5 million shares of QUNO common stock. The sale of the shares resulted in an after-tax gain of approximately $13 million, or $.19 per share on a primary basis. The pretax gain was $39 million. The Company also holds a $138.8 million subordinated debenture, convertible into 11.7 million voting common shares of QUNO. The Company has accounted for its investment in QUNO using the equity method since the beginning of 1993. QUNO is no longer a business segment for reporting purposes. Based in Canada, QUNO's principal operation is the manufacturing and marketing of newsprint. QUNO's related operations presently include a sawmill, a materials recycling company and 60% ownership of a hydro-electric power company in Baie-Comeau, Quebec. QUNO operates two newsprint mills, in Thorold, Ontario and Baie-Comeau, Quebec. QUNO ranks seventh in production capacity among newsprint-producing groups in North America. The following table shows sources of revenue for QUNO from 1990 through 1992, the last year QUNO's balance sheet and income statement were consolidated in the Company's financial statements. 12 OPERATING REVENUES (IN THOUSANDS OF U.S. DOLLARS)
FISCAL YEAR ENDED DECEMBER ---------------------------- 1992 1991 1990 -------- -------- -------- Newsprint: Affiliated Customers.... $117,195 $142,585 $137,986 Unaffiliated Customers.. 224,781 255,603 185,597 Lumber and Other.......... 24,293 23,940 28,155 -------- -------- -------- Total.............. $366,269 $422,128 $351,738 -------- -------- --------
Diminished newsprint revenues for 1992 reflect lower transaction prices. The Company's paper mills in Baie-Comeau and Thorold currently have annual newsprint production capacities of approximately 469,000 and 346,000 metric tons, respectively. Competition for newsprint sales is based upon price, product quality and customer service. Sales of newsprint through 1994 are shown in the following table.
NEWSPRINT SALES (IN THOUSANDS OF METRIC TONS) FISCAL YEAR ENDED DECEMBER ---------------------------- 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- Affiliated customers........... 256 271 266 269 250 Unaffiliated customers......... 531 471 508 473 332 ---- ---- ---- ---- ---- Total sales................... 787 742 774 742 582 ---- ---- ---- ---- ----
QUNO supplies newsprint to most of the Company's newspapers. The newspapers also purchase newsprint from other suppliers to maintain diversified sources of supply. Approximately 33% of QUNO's 1994 sales (in metric tons) were to the Company's newspapers. See "Publishing" for a discussion of the supply contract between the Company and QUNO. QUNO sells newsprint to approximately 100 unaffiliated customers located primarily in North America. The majority of such sales are to medium and small newspapers and commercial printers, with no single unaffiliated customer accounting for more than 10% of total newsprint revenue. Generally, QUNO sells newsprint under renewable contracts varying in length from one to five years. These contracts base the selling price on the list price for comparable newsprint at the date of shipment, with negotiated discounts from the list price. 13 GOVERNMENTAL REGULATION Various aspects of the Company's operations are subject to regulation by governmental authorities in the United States and Canada. The Company's television and radio broadcasting operations are subject to Federal Communications Commission ("FCC") jurisdiction under the Communications Act of 1934, as amended. FCC rules, among other things, govern the term, renewal and transfer of radio and television broadcasting licenses, prohibit concentrations of broadcasting control inconsistent with the public interest, strictly limit common ownership of most communications media in the same market and regulate network programming and syndication of programs. The FCC also regulates certain commercial practices of local broadcast stations, including the rates charged for political advertising and the quantity of advertising within children's programs. The Company is permitted to own both newspaper and broadcast operations in the Chicago market by virtue of "grandfather" provisions in the FCC regulations. Licensees are currently permitted to own up to 12 television stations, 18 AM radio stations and 18 FM radio stations. These numerical limits are subject to other FCC regulations which impose geographic market restrictions and limit the percentage of the national television audience that may be reached by a licensee's television stations in the aggregate. Television and radio broadcasting licenses are subject to renewal by the FCC at five-year and seven-year intervals, respectively, and at such times may be subject to competing applications for the licensed frequencies. The Company presently has FCC authorization to operate eight television stations and three AM and three FM radio stations. From time to time, the FCC revises existing regulations and policies in ways that could affect the Company's broadcasting operations. In addition, Congress from time to time considers and adopts substantive amendments to the Communications Act of 1934 and related legislation. The Company cannot predict what regulations or legislation may be proposed or finally enacted or what effect, if any, such regulations or legislation could have on the Company's broadcasting operations. EMPLOYEES The average number of full-time equivalent employees of the Company in 1994 was 10,500, approximately 600 more than the average for 1993. This increase was due to the acquisition of The Wright Group, WLVI-Boston and Farm Journal Inc. Pension and other employee benefit plans are provided for substantially all employees of the Company. Eligible employees also participate in the Company's Employee Stock Ownership Plan. During 1994, the Company's publishing segment employed approximately 7,800 full-time equivalent employees, about 8% of whom were represented by a total of five unions. Contracts with unionized employees of the publishing segment expire at various times through October 1996. Broadcasting and entertainment had an average of 2,300 full-time equivalent employees in 1994. Approximately 23% of these employees are represented by a total of 22 unions. New media/education had an average of 400 full-time equivalent employees in 1994. None of these employees are represented by unions. 14 EXECUTIVE OFFICERS OF THE COMPANY Information with respect to the executive officers of the Company is set forth below. The descriptions of the business experience of these individuals include the principal positions held by them since March 1990. Robert D. Bosau (48) Executive Vice President/General Manager, Tribune New Media since August 1994; Vice President/Administration of Tribune Publishing Company* from 1991 to August 1994; Vice President/Human Resources of the Company from 1987 to 1991. Charles T. Brumback (66) Chairman since January 1993, Chief Executive Officer since August 1990 (Chief Operating Officer until July 1990) and President from January 1989 to May 1994 of the Company; Director of the Company since 1981. Joseph D. Cantrell (50) Executive Vice President, Tribune Publishing Company* since August 1994; President of The Daily Press, Inc.* and Publisher of the Daily Press from 1986 to August 1994. James C. Dowdle (61) Executive Vice President/Media Operations since August 1994, Executive Vice President of the Company since August 1991; President and Chief Executive Officer of Tribune Broadcasting Company* since 1981; Director of the Company since 1985. Dennis J. FitzSimons (44) Executive Vice President, Tribune Broadcasting Company* since August 1994; President of Tribune Television* from 1992 to August 1994; Vice President/General Manager of WGN-TV* from 1987 to 1992. Donald C. Grenesko (46) Senior Vice President and Chief Financial Officer (since March 1993) and Vice President and Chief Financial Officer (from October 1991 to March 1993) of the Company; President and Chief Executive Officer (until September 1991), Chicago National League Ball Club, Inc.* David D. Hiller (41) Senior Vice President/Development since November 1993; Senior Vice President and General Counsel (from March to November 1993) and Vice President and General Counsel (until March 1993) of the Company; Partner, Sidley & Austin until November 1993. John S. Kazik (52) Senior Vice President/Information Systems since March 1993; Vice President/Information Systems from December 1989 to March 1993 of the Company and Vice President of Chicago Tribune Company* since 1982. John W. Madigan (57) President and Chief Operating Officer of the Company since May 1994; Executive Vice President of the Company and President and Chief Executive Officer of Tribune Publishing Company* from August 1991 to May 1994; Publisher of the Chicago Tribune from August 1990 to May 1994 and President and Chief Executive Officer of Chicago Tribune Company* until September 1993. Director of the Company since 1975. John T. Sloan (43) Senior Vice President/Administration since March 1993 and Vice President/Human Resources of the Company from August 1991 to March 1993; Vice President and Director of Human Resources of the New York Daily News until July 1991. - ----------- * A subsidiary of the Company. 15 ITEM 2. PROPERTIES. The corporate headquarters of the Company are located at 435 North Michigan Avenue, Chicago, Illinois. The general character, location and approximate size of the principal physical properties used by the Company at December 25, 1994 are listed below. In addition to those listed, the Company owns or leases transmitter sites, parking lots and other properties aggregating approximately 450 acres in 58 separate locations, and owns or leases an aggregate of approximately 1,590,000 square feet of space in 185 separate locations. Included in these figures are 62 acres and 233,000 square feet of space owned by the Company which had previously been owned by the New York Daily News. On March 20, 1991, the Company sold the Daily News, and these properties are in the process of being sold. Also included in these figures are 82,000 square feet of space owned by The Peninsula Times Tribune. On March 12, 1993 the Times Tribune ceased publication. Since then, the Company has been in the process of selling the property owned in Palo Alto, California. The Company also owns the 39,000-seat stadium used by the Chicago Cubs baseball team. The Company considers its various properties to be in good condition and suitable for the purposes for which they are used.
APPROXIMATE AREA IN SQUARE FEET ------------------------------- GENERAL CHARACTER OF PROPERTY OWNED LEASED --------- ------- Publishing: Printing plants, business and editorial offices, and warehouse space located in: Chicago, Illinois.............................. 1,327,000 (1) 74,000 Orlando, Florida............................... 406,000 101,000 Fort Lauderdale, Florida....................... 279,000 (2) 44,000 Deerfield Beach, Florida....................... 386,000 - Newport News, Virginia......................... 207,000 - Escondido, California.......................... 62,000 - Broadcasting and Entertainment: Business offices, studios, garages and transmitters located in: Chicago, Illinois.............................. 99,000 4,000 Oak Brook, Illinois............................ - 69,000 Los Angeles, California........................ 253,000 - Boston, Massachusetts.......................... 28,000 - Denver, Colorado............................... 43,000 7,000 Philadelphia, Pennsylvania..................... 137,000 3,000 New York, New York............................. - 100,000 (3) New Orleans, Louisiana......................... - 17,000 Atlanta, Georgia............................... - 21,000 New Media/Education: Business offices and warehouse space located in: Chicago, Illinois.............................. 185,000 34,000 Carlsbad, California........................... - 74,000 Bothell, Washington............................ - 60,000
- ----------- (1) Includes Tribune Tower, an approximately 630,000 square foot office building in downtown Chicago, and Freedom Center, the approximately 697,000 square feet production center of the Chicago Tribune. Tribune Tower houses the Company's corporate headquarters, the Chicago Tribune's business and editorial offices, offices of various subsidiary companies and approximately 80,630 square feet of space leased to unaffiliated tenants. Freedom Center houses the Chicago Tribune's printing, packaging and distribution operations. 16 (2) Represents New River Center, an approximately 279,000 square feet office building in downtown Fort Lauderdale. New River Center houses the business and editorial offices of the Sun-Sentinel, which occupies approximately 91,000 square feet. The remaining space is leased to or available for commercial tenants. (3) Includes space leased by subsidiary companies in the New York Daily News building, which is owned by a limited partnership in which the Company has a minority interest. No portion of this building is listed as "owned" property in the table. ITEM 3. LEGAL PROCEEDINGS. The Company and its subsidiaries are defendants from time to time in actions for libel and other matters arising out of their business operations. In addition, the Company and its subsidiaries are involved from time to time as parties in various regulatory, environmental and other proceedings with governmental authorities and administrative agencies. The State of Florida Department of Environmental Protection ("DEP") has issued a preliminary draft report identifying the Company's subsidiary, Sentinel Communications Company (the "Sentinel"), as a source of certain trichloroethene (TCE) groundwater contamination in downtown Orlando, Florida. Based upon separate environmental reviews performed by the Company's environmental consultants, management believes that many of the findings contained in the DEP's preliminary draft report are inaccurate and that the Sentinel is not the source of the extensive contamination. The Company does not believe that any of the matters or proceedings presently pending will have a material adverse effect on its consolidated financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not Applicable. 17 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's Common Stock is presently listed on the New York, Chicago and Pacific stock exchanges. The high and low sales prices of the Common Stock by fiscal quarter for the two most recent fiscal years, as reported on the New York Stock Exchange Composite Transactions list, were as follows:
1994 1993 ---------------- ---------------- QUARTER HIGH LOW HIGH LOW ------- ------- ------- ------- First............................... $61 7/8 $55 $56 7/8 $47 5/8 Second.............................. 64 1/2 54 56 1/4 50 Third............................... 56 5/8 50 1/4 55 48 3/8 Fourth.............................. 56 1/8 48 7/8 61 1/4 50 7/8
At March 7, 1995 there were 4,554 record holders of the Company's Common Stock. Quarterly cash dividends declared on Common Stock were $.26 per share in 1994 and were $.24 per share in 1993. Total cash dividends declared on Common Stock by the Company were $69,907,000 for 1994 and $63,799,000 for 1993. ITEM 6. SELECTED FINANCIAL DATA. The information for the years 1990 through 1994 contained under the heading "Eleven Year Financial Summary" in the Company's 1994 Annual Report to Stockholders is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information contained under the heading "Management's Discussion and Analysis of Results of Operations and Financial Condition" in the Company's 1994 Annual Report to Stockholders is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The Company's Consolidated Financial Statements and Notes thereto and the information contained under the heading "Business Segments" appearing on pages 43 through 60 of the Company's 1994 Annual Report to Stockholders, together with the report thereon of Price Waterhouse LLP dated January 27, 1995, appearing on page 42 of such Annual Report and the information contained under the heading "Quarterly Results" on pages 62 and 63, are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not Applicable. 18 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information contained under the heading "Executive Officers of the Company" in Item 1 hereof, and the information under the heading "Election of Directors" in the definitive Proxy Statement for the Company's May 2, 1995 Annual Meeting of Stockholders is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION. The information contained under the heading "Executive Compensation" (except those portions relating to Item 13, below) in the definitive Proxy Statement for the Company's May 2, 1995 Annual Meeting of Stockholders is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information contained under the subheadings "Principal Stockholders" and "Management Ownership" under the heading "Ownership Information" in the definitive Proxy Statement for the Company's May 2, 1995 Annual Meeting of Stockholders, is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information contained under the heading "Executive Compensation" (except those portions relating to Item 11, above) and the subheadings "Compensation of Directors" and "Other Transactions" in the definitive Proxy Statement for the Company's May 2, 1995 Annual Meeting of Stockholders, is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a)(1)&(2) Financial Statements and Financial Statement Schedules filed as part of this report As listed in the Index to Financial Statements and Financial Statement Schedule on page 22 hereof. (a)(3) Index to Exhibits filed as part of this report As listed in the Exhibit Index beginning on page 25 hereof. (b) Reports on Form 8-K No Reports on Form 8-K were filed in the last quarter of the period covered by this report. 19 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 22, 1995. TRIBUNE COMPANY By: Charles T. Brumback Chairman/CEO Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 22, 1995. Signature Title --------- ----- Charles T. Brumback Chairman/CEO and Director (principal executive officer) John W. Madigan President and Chief Operating Officer and Director James C. Dowdle Executive Vice President and Director Donald C. Grenesko Senior Vice President and Chief Financial Officer (principal financial officer) 20 Signature Title --------- ----- R. Mark Mallory Vice President and Controller (principal accounting officer) Stanton R. Cook Director Diego E. Hernandez Director Newton N. Minow Director Donald H. Rumsfeld Director 21 TRIBUNE COMPANY INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
PAGE ---- Consolidated Statements of Income for each of the three fiscal years in the period ended December 25, 1994............................................................ * Consolidated Statements of Financial Position at December 25, 1994 and December 26, 1993......................................................................... * Consolidated Statements of Cash Flows for each of the three fiscal years in the period ended December 25, 1994........................................................ * Consolidated Statements of Stockholders' Investment for each of the three fiscal years in the period ended December 25, 1994........................................ * Notes to Consolidated Financial Statements................................................. * Report of Independent Accountants on Consolidated Financial Statements..................... * Report of Independent Accountants on Financial Statement Schedule.......................... 23 Financial Statement Schedule for each of the three fiscal years in the period ended December 25, 1994............................................................ 24 Schedule II Valuation and qualifying accounts and reserves.
- ----------- * Incorporated by reference to the Company's 1994 Annual Report to Stockholders. See Item 8 of this Annual Report on Form 10-K. --------------- All other schedules required under Regulation S-X are omitted because they are not applicable, not required or the required information is shown in the consolidated financial statements or notes thereto. Financial statements of entities accounted for by the equity method have been omitted because they do not constitute significant subsidiaries. 22 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors of Tribune Company Our audits of the consolidated financial statements referred to in our report dated January 27, 1995 appearing in the 1994 Annual Report to Stockholders of Tribune Company (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 14(a) of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. PRICE WATERHOUSE LLP Chicago, Illinois January 27, 1995 23 SCHEDULE II TRIBUNE COMPANY AND SUBSIDIARIES SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (IN THOUSANDS OF DOLLARS) ================================================================================
ADDITIONS BALANCE AT CHARGED TO BALANCE BEGINNING COSTS AND AT END OF DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD ----------- ----------- ---------- ---------- --------- Valuation accounts deducted from assets to which they apply: Year ended December 25, 1994 Allowance for doubtful accounts: Bad debts............................. $17,589 $18,024 $11,149 $24,464 Rebates, volume discounts and other... 7,843 18,284 16,593 9,534 ------- ------- ------- ------- Total................................ $25,432 $36,308 $27,742 $33,998 ======= ======= ======= ======= Year ended December 26, 1993 Allowance for doubtful accounts: Bad debts............................. $19,329 $12,932 $14,672(1) $17,589 Rebates, volume discounts and other... 4,082 19,460 15,699 7,843 ------- ------- ------- ------- Total................................ $23,411 $32,392 $30,371 $25,432 ======= ======= ======= ======= Year ended December 27, 1992 Allowance for doubtful accounts: Bad debts............................. $19,423 $14,924 $15,018 $19,329 Rebates, volume discounts and other... 3,926 15,299 15,143 4,082 ------- ------- ------- ------- Total................................ $23,349 $30,223 $30,161 $23,411 ======= ======= ======= =======
- -------------- (1) For 1993, $4,612 represents deductions pertaining to QUNO Corporation. As a result of an initial public offering by QUNO in February 1993, QUNO's balance sheet is no longer consolidated in the Company's financial statements. ================================================================================ 24 TRIBUNE COMPANY EXHIBIT INDEX Exhibits marked with an asterisk (*) are incorporated by reference to documents previously filed by Tribune Company with the Securities and Exchange Commission, as indicated. Exhibits marked with a circle (o) are management contracts or compensatory plan contracts or arrangements filed pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K. All other documents listed are filed with this Report. NUMBER DESCRIPTION ------ ----------- 3.1 * Restated Certificate of Incorporation of Tribune Company, dated April 21, 1987; Certificate of Designations of Series A Junior Participating Preferred Stock, dated December 31, 1987; Certificate of Designations of Series B Convertible Preferred Stock, dated April 4, 1989 (Exhibit 3.1 to Annual Report on Form 10-K for 1991). 3.2 * By-laws of Tribune Company. 4 * Rights Agreement between Tribune Company and The First National Bank of Chicago, as Rights Agent, dated as of December 22, 1987 (Exhibit 1 to Form 8-K Current Report dated January 6, 1988); First Amendment thereto dated as of July 31, 1990 (Exhibit 4 to Form 10-Q Quarterly Report for the quarter ended July 1, 1990); Second Amendment thereto dated as of October 31, 1990 (Exhibit 4 to Form 10-Q Quarterly Report for the quarter ended September 30, 1990). 10.1a o* Employment agreement dated as of July 31, 1990 between Tribune Company and Stanton R. Cook (Exhibit 19.1 to Form 10-Q Quarterly Report for the quarter ended September 30, 1990). 10.1b o* Consulting agreement dated as of December 14, 1993 between Tribune Company and Stanton R. Cook (Exhibit 10.1b to Annual Report on Form 10-K for 1993). 10.2a o* Employment agreement dated as of July 27, 1993 between Tribune Company and Charles T. Brumback (Exhibit 10.2a to Annual Report on Form 10-K for 1993). 10.2b o* Amendment dated February 15, 1994 to employment agreement dated as of July 27, 1993 between Tribune Company and Charles T. Brumback (Exhibit 10.2b to Annual Report on Form 10-K for 1993). 10.2c o Termination of Employment Agreement dated December 22, 1994 between Tribune Company and Charles T. Brumback. 10.3 o* Chicago Tribune Company Split-Dollar Insurance Plan dated June 29, 1978, together with first amendment dated August 28, 1981, covering certain employees of Tribune Company and Chicago Tribune Company (Exhibit 10.4 in File No. 2-86087). 10.4a o* Tribune Company Supplemental Retirement Plan, as amended and restated on January 1, 1989 (Exhibit 10.6 to Annual Report on Form 10-K for 1988). 25 NUMBER DESCRIPTION ------ ----------- 10.4b o* First Amendment of Tribune Company Supplemental Retirement Plan, effective January 1, 1994 (Exhibit 10.4b to Annual Report on Form 10-K for 1993). 10.5 o* Quebec and Ontario Paper Company Ltd. Supplemental Retirement Plan dated January 1, 1989 (Exhibit 10.7 to Annual Report on Form 10-K for 1988). 10.6 o* Tribune Company Deferred Compensation Administration Plan, as adopted on July 29, 1982, and first amendment thereto dated December 1, 1982 (Exhibit 10.16 in File No. 2-86087); second amendment thereto dated October 29, 1984, and third amendment thereto dated December 16, 1986 (Exhibit 10.8b to Annual Report on Form 10-K for 1989). 10.7 o Tribune Company Directors' Deferred Compensation Plan, as amended and restated on July 1, 1994. 10.8 o* Tribune Company Bonus Deferral Plan, dated as of December 14, 1993 (Exhibit 10.8 to Annual Report on Form 10-K for 1993). 10.9a o* Tribune Company Management Incentive Plan, dated as of January 1, 1991 (Exhibit 10.10 to Annual Report on Form 10-K for 1990). 10.9b o* Amendment effective January 1, 1992 to the Tribune Company Management Incentive Plan dated as of January 1, 1991 (Exhibit 10.9b to Annual Report on Form 10-K for 1991). 10.10 o* Tribune Company Amended and Restated 1984 Long-Term Performance Plan, effective as of July 25, 1989 (Exhibit 19.2 to Form 10-Q Quarterly Report for the quarter ended June 25, 1989); Forms of Incentive Stock Option Agreement and Non-Qualified Stock Option Agreements for Tribune Company Amended and Restated 1984 Long-Term Performance Plan (Exhibit 19.2 to Form 10-Q Quarterly Report for the quarter ended July 1, 1990). 10.11 o Tribune Company 1992 Long-Term Incentive Plan, dated as of April 29, 1992 and as amended and in effect on April 19, 1994. 10.12a o* 1988 Restricted Stock Plan For Outside Directors, dated February 16, 1988 (Exhibit 10.12 to Annual Report on Form 10-K for 1992). 10.12b o* Amendment effective April 28, 1992 to the 1988 Restricted Stock Plan For Outside Directors (Exhibit 10.12b to Annual Report on Form 10-K for 1993). 10.13 o* Tribune Company Executive Financial Counseling Plan, dated October 19, 1988 and as amended effective January 1, 1994 (Exhibit 10.13 to Annual Report on Form 10-K for 1993). 10.14 o Tribune Company Amended and Restated Transitional Compensation Plan for Executive Employees, effective as of January 1, 1995. 26 NUMBER DESCRIPTION - ------ ----------- 10.15 o* Tribune Company Supplemental Defined Contribution Plan, effective as of January 1, 1994 (Exhibit 10.15 to Annual Report on Form 10-K for 1993). 10.16 * Amended and Restated Agreement of Limited Partnership of Two Twenty East Limited Partnership, dated as of November 5, 1982, and first amendment thereto dated December 6, 1982 (Exhibit 10.25 in File No. 2-86087). 10.17 * Asset Purchase Agreement dated March 14, 1991 by and among Maxwell Newspapers, Inc., Mirror Group PLC, New York News Inc. and Tribune Company; and letter amendment thereto dated March 20, 1991 (Exhibits 10.1 and 10.2 to Form 8-K Current Report dated March 14, 1991). 10.18 * Newsprint Agreement dated December 2, 1992 between Tribune Company and QUNO Corporation (Exhibit 10.17 to Annual Report on Form 10-K for 1992). 11 Statements of Computation of Primary and Fully Diluted Net Income Per Share. 12 Computation of Ratios of Earnings to Fixed Charges. 13 The portions of the Company's 1994 Annual Report to Stockholders which are specifically incorporated herein by reference. 21 Table of subsidiaries of Tribune Company. 23 Consent of Independent Accountants. 27 Financial Data Schedule 99 Form 11-K financial statements for Tribune Company Savings Incentive Plan (to be filed by amendment). 27 EX-10.2C 2 TERM. OF EMPLOY. AGMT Exhibit 10.2c TERMINATION OF EMPLOYMENT AGREEMENT Charles T. Brumback of Chicago, Illinois ("Brumback") and Tribune Company, a Delaware corporation (the "Company") agree as follows: 1. Continued Employment. For value received, Brumback and the Company hereby terminate the Employment Agreement effective July 27, 1993, as amended (the "Employment Agreement"). Notwithstanding such termination, Brumback shall continue in the employ of the Company for such period and on such terms as he and the Company's Board of Directors shall mutually agree and he shall render such services to the Company and its subsidiaries as the Company's Board of Directors may from time to time direct. 2. Deferred Compensation. --------------------- (a) Notwithstanding the termination of the Employment Agreement, at such time as Brumback is no longer employed full-time by the Company, he shall be entitled to receive, as deferred compensation as originally provided in the Employment Agreement and in lieu of any other employment compensation, one hundred twenty-five thousand dollars ($125,000) per year for a period of ten (10) years. Such amount shall be paid in quarterly installments and shall commence within ninety (90) days after the last day of Brumback's full-time employment. (b) If Brumback's employment is terminated as a result of Brumback's death or if otherwise Brumback dies prior to the date on which the payments provided for in paragraph 2(a) begin, or if Brumback dies within ten (10) years after the payments provided for in paragraph 2(a) have begun, the amounts that would otherwise have been paid to Brumback during such ten (10) year period (or the remainder thereof) shall be paid to the beneficiary or beneficiaries named in the last written instrument signed by Brumback for such purpose and received by the Company prior to his death; provided, that if Brumback fails to so name any beneficiary, such amounts shall be paid to Brumback's estate. Such amounts may be paid in annual or quarterly installments, in the Company's discretion, and shall commence within ninety (90) days after the date of Brumback's death. (c) If Brumback is living at the end of the ten (10) year period specified under paragraph 2(a), he shall be entitled to receive, as deferred compensation, payments at the rate of sixty thousand dollars ($60,000) per year for the remainder of his life. Such amounts shall be paid in quarterly installments and shall commence within ninety (90) days after the last day for which he received payments provided in paragraph 2(a). 1 (d) If Mary H. Brumback survives Brumback, is married to him at the time of his death and is living on the tenth (10th) anniversary of the date on which the payments provided for in paragraph 2(a) began, she shall be entitled to receive payments at the rate of sixty thousand dollars ($60,000) per year for the remainder of her life following Brumback's death. Such amounts shall be paid in quarterly installments, and shall commence within ninety (90) days after the later of the tenth (10th) anniversary of the date on which the payments provided for in paragraph 2(a) began or the date of Brumback's death. (e) Brumback agrees that he and his beneficiaries shall be unsecured, general creditors of the Company with respect to his or their right to receive such amounts. 3. Consulting and Advisory Services. -------------------------------- (a) Due to Brumback's wide and intimate knowledge of all aspects of the operations of the Company and its subsidiaries, the Company desires to retain the benefit of Brumback's consulting and advisory services after the termination of his full-time employment period. Accordingly, Brumback agrees that, subsequent to his full-time employment period, he will render such consulting and advisory services to the Company as its Board of Directors may reasonably request. Brumback will inform the Company of any plans he may from time to time make for holidays or travel and the Company will not, except in emergencies, call for consulting or advisory services at times which would interfere with such plans; provided, that such plans shall not render Brumback unavailable for consultation for more than two (2) months in any calendar year. (b) The Company shall compensate Brumback at the rate of Two Hundred Fifty Dollars ($250.00) per hour for the performance of consulting and advisory services rendered to the Company. Brumback shall keep, and shall submit to the Company upon request, adequate records of the time spent in the performance of such services. Brumback agrees that any amounts paid to him pursuant to this paragraph 3 shall, for purposes of federal, state, and local income taxes, be treated as compensation for the performance of services rendered as an independent contractor, and neither Brumback nor his successor shall take any position inconsistent with such treatment. 4. Competition. ----------- (a) In consideration of his continued employment by the Company, and of his entitlement to the amounts payable under paragraphs 2 and 3 of this Agreement, Brumback covenants and agrees that for a period of three (3) years after the termination of his employment , he will not, except with the express written consent of the Board of Directors of the Company, engage directly or indirectly in, or permit his name to be used in connection with, a business similar to the business of, or any business being developed by, the Company or any of its subsidiaries during a period of eighteen (18) months preceding the last day of his employment, in an area within a radius of one hundred (100) miles of any city in which such business is then 2 being engaged or developed by the Company or any of its subsidiaries. (b) For the purposes of this paragraph 4, the phrase, "engage directly or indirectly in" shall encompass: (i) all of Brumback's activities whether on his own account or as an employee, director, officer, agent, consultant, independent contractor, or partner of or in any person, firm, or corporation (other than the Company and its subsidiaries), and (ii) Brumback's ownership of more than fifteen (15%) of the voting capital stock of any corporation, three percent (3%) or more of the gross income of which is derived from any business or businesses in which Brumback may not then engage. 5. Confidential Information. Brumback agrees that he will not, without the prior written consent of the Board of Directors of the Company, during and after his employment with the Company, directly or indirectly disclose to any individual, corporation, or other entity (other than the Company or any subsidiary thereof, their officers, directors, or employees entitled to such information, or to any other person or entity to whom such information is regularly disclosed in the normal course of the Company's business) or use for his own or such another's benefit, any information, whether or not reduced to written or other tangible form, which: (a) is not generally known to the public or in the industry; (b) has been treated by the Company or any of its subsidiaries as confidential or proprietary; and (c) is of competitive advantage to the Company or any of its subsidiaries and in the confidentiality of which the Company or any of its subsidiaries has a legally protectible interest; (such information being referred to in this paragraph 5 as "Confidential Information"). Confidential Information which becomes generally known to the public or in the industry, or in which the Company and its subsidiaries cease to have a legally protectible interest, shall cease to be subject to the restrictions of this paragraph. 6. Enforcement. If, at the time of enforcement of any provision of paragraphs 4 and 5, a court of competent jurisdiction shall finally determine that the period, scope, or geographical area restrictions stated therein are unreasonable under circumstances then existing, the maximum period, scope, or geographical area reasonable under the circumstances shall be substituted for the stated period, scope, or area. In the event of a breach by Brumback of any of the provisions of paragraphs 4 and 5, the Company may, in addition to any other rights and remedies existing in its favor, apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions thereof. 7. Rights in the Event of a Dispute. If a claim or dispute arises concerning the rights of 3 Brumback or a beneficiary to benefits under the Agreement, regardless of the party by whom such claim or dispute is initiated, the Company shall, upon presentation of appropriate vouchers, pay all legal expenses, including reasonable attorneys' fees, court costs, and ordinary and necessary out-of- pocket costs of attorneys, billed to and payable by Brumback or by anyone claiming under or through Brumback (such person being hereinafter referred to as "claimant"), in connection with the bringing, prosecuting, defending, litigating, negotiating, or settling such claim or dispute; provided, that Brumback or the claimant shall repay to the Company such expenses theretofore paid or advanced by the Company if and to the extent that the party disputing Brumback's rights obtains a judgment in its favor from a court of competent jurisdiction from which no appeal may be taken, whether because the time to do so has expired or otherwise, and it is determined that such expenses were not incurred by Brumback or the claimant while acting in good faith. 8. General Provisions. ------------------ (a) Assignments. This Agreement shall be binding upon, and shall inure to the benefit of, the Company and any successor to all or substantially all of the business or assets of the Company. Brumback's rights and interests under this Agreement may not be assigned, pledged, or encumbered by him without the Company's written consent. (b) Effect of Headings. The headings of paragraphs and subparagraphs of this Agreement are inserted for convenience of reference only, and shall not affect the construction or interpretation of this Agreement. (c) Modification, Amendment, Waiver. No modification, amendment, or waiver of any provision of this Agreement shall be effective unless approved in writing by both parties. The failure of either party at any time to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of either party thereafter to enforce each and every provision of this Agreement in accordance with its terms. (d) Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. (e) No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction shall be applied against either party. (f) Choice of Law. All questions concerning the construction, validity, and interpretation of this Agreement shall be governed by the laws of the State of Illinois. 4 (g) Notices. Any notice to be served under this Agreement shall be in writing and shall be mailed by registered mail, return receipt requested, addressed: If to the Company, to: Tribune Company 435 North Michigan Avenue Chicago, Illinois 60611 Attention: Corporate Secretary; or If to Brumback, to: Charles T. Brumback 1500 Lake Shore Drive Chicago, Illinois 60610; or to such other place as either party may specify in writing, delivered in accordance with the provisions of this subparagraph. (h) Survival. The rights and obligations of the parties shall survive Brumback's employment to the extent that any performance is required under this Agreement after the expiration or termination of such employment. (i) Entire Agreement. This Agreement constitutes the entire agreement of the parties with respect to the subject matter thereof, and supersedes all previous agreements between the parties relating to the same subject matter, including specifically the Employment Agreement. 9. No Other Inducements. Other than stated herein, Brumback attests that no promise or inducement has been offered for this Agreement and that he is legally competent to execute this Agreement and accepts the full responsibility therefor. Brumback further attests that he has read and voluntarily entered into this Agreement and that he has been encouraged to consult with any person or attorney of his choosing regarding this Agreement and that this Agreement reflects his informed judgment and consent regarding the subject matter of this Agreement. Brumback acknowledges that he has been given up to twenty-one (21) days to consider and enter into this Agreement, and that he will have seven (7) days thereafter within which to revoke this 5 Agreement. This Agreement shall become effective immediately upon the expiration of the revocation period. Dated: December 22, 1994 TRIBUNE COMPANY By Andrew J. McKenna ______________________________________ Charles T. Brumback ________________________________________ Charles T. Brumback 6 EX-10.7 3 DIR. DEF. COMP. PLAN EXHIBIT 10.7 TRIBUNE COMPANY DIRECTORS' DEFERRED COMPENSATION PLAN (AS AMENDED EFFECTIVE JULY 1, 1994) The purpose of this Plan is to enable eligible directors of Tribune Company to defer the receipt of cash payments that otherwise would be payable to them for their services as directors of Tribune Company. 1. DEFINITIONS. Where the following words and phrases are used in this Plan, they shall have the meanings set forth below, unless their context clearly indicates to the contrary: (a) ACCOUNT. Each Deferred Compensation Account or subsidiary account established on behalf of a Participant pursuant to this Plan. (b) COMMITTEE. The Committee appointed by the Board of Directors of Tribune to administer the Plan. (c) DEFERRED COMPENSATION. The cash stipends and fees for services as a director of Tribune which an Eligible Director has elected to have treated as Deferred Compensation pursuant to paragraph 2(a). (d) ELIGIBLE DIRECTOR. Any member of the Board of Directors of Tribune who is entitled to stipends and fees for his or her services as a director. (e) PARTICIPANT. An Eligible Director who has elected to receive Deferred Compensation pursuant to paragraph 2(a). (f) PLAN. The Tribune Company Directors' Deferred Compensation Plan, as set forth herein and as from time to time in effect. (g) TRIBUNE. Tribune Company, a Delaware corporation, and its successor or successors. 2. ELECTION OF DEFERRED COMPENSATION. (a) Subject to the provisions of paragraph 2(b), any Eligible Director may at any time, and from time to time, elect to defer receipt of the cash stipends and fees that he or she is entitled to receive for services as a director of Tribune. Any such election shall be exercised by the Eligible Director in writing filed with the Secretary of Tribune prior to the beginning of the calendar quarter for which any such stipends and fees are earned. The director may designate 25%, 50%, 75% or 100% of the cash amount payable to such director to be deferred, and such election shall remain in effect until it is amended or terminated pursuant to paragraph 2(b). (b) An Eligible Director may at any time, and from time to time, amend or terminate his or her election under paragraph 2(a). Any such amendment or termination shall take effect with respect to the amounts payable to such Eligible Director for calendar quarters commencing after his or her written direction to amend or terminate such election is received by the Secretary of Tribune. An Eligible Director who has terminated an election under paragraph 2(a) may not make another such election until a period of twenty-four (24) months has lapsed from the date as of which the previous such election was terminated. (c) Deferred Compensation shall be subject to the rules set forth in this Plan and each Eligible Director shall have the right to receive cash payments on account of previously Deferred Compensation only in the amounts and under the circumstances hereinafter set forth. 3. COMMITTEE. Full power and authority to construe, interpret and administer this Plan shall be vested in the Committee. In particular, the Committee shall have full power and authority to make each determination provided for in this Plan. All determinations made by the Committee shall be conclusive upon Tribune, upon each Eligible Director, and upon their designees. If one or more members of the Committee are disqualified by personal interest from taking part in a particular decision, the remaining member or members of the Committee (although less than a quorum) shall have full power to act on such matter. 4. DEFERRED COMPENSATION ACCOUNT. (a) A Participant's Deferred Compensation shall be held, accounted for, and deemed to be invested in accordance with this paragraph 4. (b) Tribune shall establish a Deferred Compensation Account for each Participant based on his or her election to participate in the Plan. Tribune shall credit to each Participant's Account an amount equal to the Deferred Compensation earned by the Participant. Each Account shall also be credited with the interest, dividends, income or other distributions which would be received if the amounts held in the Account were invested in the manner elected pursuant to paragraph 4(c), and each Account shall be credited or charged for any appreciation or depreciation in the fair market value of the deemed investment(s) elected pursuant to paragraph 4(c) whether or not Tribune actually holds such investments. The balance credited to an Account at a given date shall be referred to as the "Deferred Amount". (c) Each Participant may elect the manner in which his or her Account shall be deemed invested subject to the following rules: (i) Accounts may be deemed invested and reinvested in the following assets: (A) Any common or preferred stock, except a security issued by Tribune, traded on the New York Stock Exchange, American Stock Exchange or the NASDAQ National Market at the time the deemed investment is to be made. 2 (B) A registered mutual fund that is open and accepts new investments; (C) A time deposit, saving certificate or other bank investment at a bank selected by the Committee; (D) A fixed income account credited with interest at the same rate as credited to participants in the Tribune Company Bonus Deferral Plan; (E) Tribune Company common stock. (ii) A Participant may designate the amount in his or her Account to be deemed invested in no more than two investments, other than amounts deemed invested as described in paragraph 4(c)(i)(D), at any one time. (iii) Amounts may be reallocated to other investments no more than once per calendar quarter. Amounts deemed invested as described in paragraph 4(c)(i)(E) may not subsequently be reallocated to other investments and any amounts once invested as described in paragraphs 4(c)(i)(A) through (D) may not be reallocated to Tribune common stock while the Participant is serving as a Tribune director. (iv) If a Participant does not specify a choice of deemed investment, the balance in his or her Account shall be deemed invested as described in paragraph 4(c)(i)(D). (v) A Participant shall elect a choice of deemed investment(s) or changes therein by written direction delivered to the Secretary of Tribune. (vi) Each selected investment shall be deemed to have been made or withdrawn on a date which is not more than thirty (30) days after the date on which Tribune receives a written direction from the Participant with respect to such investment. (d) Although the amount of payments to be made to each Participant pursuant to the Plan are measured by the value of and income on certain deemed investments designated by the Participant, Tribune need not actually make any of such investments. Rather, the value of and income on the designated investments are merely a measuring device to determine the amount to be paid to a Participant. Accordingly, each Participant is and shall remain an unsecured creditor of Tribune with respect to any amounts owed to such Participant hereunder. If Tribune, in its discretion, should from time to time make any of the investments designated by a Participant, or set aside amounts for the purposes of payment of Deferred Amounts hereunder, such investments or amounts shall be solely for Tribune's own account and shall not in any way be considered to create a fund or trust for the benefit of the Participant or his or her beneficiaries, the Participant shall have no right, title or interest in any such investments, and the Participant's rights hereunder shall be solely those of an unsecured creditor to receive the payments described herein. 3 5. PAYMENTS OF DEFERRED AMOUNTS. (a) Each participant shall elect in writing at the time he or she makes an election described in paragraph 2(a) that the Deferred Amount payable to him or her shall be paid in from one (1) to ten (10) annual installments commencing after: (i) the date on which such Participant ceases to be a director of Tribune; or (ii) the date which is twelve (12) months after the date as of which such election was terminated pursuant to paragraph 2(b); whichever first occurs. (b) Upon the happening of the relevant event described in paragraph 5(a)(i) or (ii), the Deferred Amount with respect to the affected Participant shall be calculated as of the December 31st immediately following the happening of such event. If such Deferred Amount is less than Fifty Thousand Dollars ($50,000), it shall be paid to the Participant in one installment, notwithstanding any prior election by the Participant to receive a greater number of installments. If such Deferred Amount is Fifty Thousand Dollars ($50,000) or more, it shall be paid to the Participant in that number of installments which is equal to the lesser of: (i) the number of installments elected by the Participant with respect to such Deferred Amount pursuant to paragraph 5(a); or (ii) the largest number of installments which, when divided into the Deferred Amount, produces a result which is not less than Twenty- Five Thousand Dollars ($25,000); notwithstanding any prior election by the Participant to receive a greater number of installments. The first installment shall be paid on the February 15th following the December 31st first following the happening specified in paragraph 5(a), and succeeding installments, if any, shall be paid on the annual anniversaries of the first payment. The amount of each installment shall be in an amount equal to the Deferred Amount calculated as of the December 31st immediately preceding the payment date and payable to the Participant at the time for payment of such installment multiplied by a fraction (the "Installment Fraction"), the numerator of which is one and the denominator of which is the number of installments remaining to be paid, including the current installment. At the time each such installment is paid, the amount credited to such Account shall be reduced by the amount so paid. Each installment payment shall be deemed to have been made first from amounts held in the Participant's Account and deemed invested as described in paragraph 4(c)(i)(D), then from a deemed sale or redemption of a pro rata share of the other investments deemed held for the Participant's Account (unless otherwise agreed by the Committee and the Participant). (c) All payments due under this Plan shall be paid in cash to the Participant except that: 4 (i) In the event a Participant's Board service terminates by reason of his or her death, or in the event any installments are unpaid at the time of a Participant's death, payments shall be made at the same time and in the same amounts as if the Participant were living to, and instructions regarding investments and sales of amounts credited to the Participant's Accounts shall be given by, such person or persons (including a trustee or trustees) as are named in the last written instrument signed by the Participant and received by Tribune prior to his or her death, or if the Participant fails to so name any person, the amounts shall be paid to, and such instructions shall be given by, his or her estate. Tribune shall be fully protected in making any payments due hereunder and in following such instructions in accordance with what Tribune believes to be such last written instrument received. (ii) Tribune may make payments due to a legally incompetent person in such of the following ways as the Committee shall determine: (A) directly to such incompetent person; (B) to the legal representative of such incompetent person; or (C) to some near relative of the incompetent person to be used for the latter's benefit. (d) Notwithstanding the foregoing, in the event of a Change in Control as defined in Section 12.2 of the Tribune 1992 Long-Term Incentive Plan, all Deferred Amounts (except those related to the Tribune Company Common Stock Account while the participant is a member of the Tribune Board of Directors) shall be accelerated and become immediately payable. 6. EMERGENCY PAYMENTS. In the event of an emergency as determined hereunder, Tribune may pay any unpaid installments, or determine the Deferred Amount payable to such Participant and pay such amount, without regard to the payment dates otherwise provided herein (except those related to the Tribune Company Common Stock Account while the participant is a member of the Tribune Board of Directors), to the extent required to meet such emergency where the Committee determines that such action is necessary to prevent undue hardship to a Participant. Such action shall be taken only if a Participant (or his legal representatives or successors) shall sign an application describing fully the circumstances which are deemed to justify the payment, together with an estimate of the amounts necessary to prevent great hardship. 7. MISCELLANEOUS. (a) Except as limited by paragraph 5(c), and except that each Participant shall have a continuing power to designate a new beneficiary in the event of his or her death at any time without the consent or approval of any person theretofore named as a beneficiary, this 5 document shall be binding upon and inure to the benefit of Tribune, the Committee, the Participants, their legal representatives, successors and assigns, and all persons entitled to benefits hereunder. (b) Any notice given in connection with this document shall be in writing and shall be delivered in person or by registered mail, return receipt requested. Any notice given by registered mail shall be deemed to have been given upon the date of delivery indicated on the registered mail return receipt, if correctly addressed. (c) All payments to persons entitled to benefits hereunder shall be made to such persons in person, or upon their personal receipt or endorsement, and shall not be grantable, transferable, or otherwise assignable in anticipation of payment thereof, in whole or in part, by the voluntary or involuntary acts of any such persons, or by operation of law, and shall not be liable or taken for any obligation of such person. 8. TERMINATION OR AMENDMENT. The Board of Directors of Tribune may in its discretion terminate or amend this Plan from time to time, provided, however, that no such termination or amendment shall (without the Participant's consent) alter a Participant's right to payments of amounts previously credited to such Participant's Accounts, the amount or times of payment of such amounts, the rights to change investments in his or her Accounts, or the rights set forth to designate beneficiaries in the event of his or her death, except that if Tribune is liquidated, merged or otherwise ceases to exist as a separate publicly-owned company, it shall have the right to determine the amount in each Participant's Account established for a Participant with respect to any Deferred Compensation awarded by Tribune, treating a date established by the Committee as the valuation date under paragraph 5(a), and to pay the amount so determined in one or more installments or upon such other terms and conditions as the Committee determines to be just and equitable. 9. EXPENSES OF ADMINISTRATION. The expenses of administering the Plan shall be borne by Tribune. As Amended by the Board of Directors: Stanley J. Gradowski ____________________________________ Stanley J. Gradowski, Secretary April 19, 1994 6 EX-10.11 4 AMEND TO 1992 LT INC. PL. Exhibit 10.11 TRIBUNE COMPANY ---------------------------- 1992 LONG-TERM INCENTIVE PLAN (As Amended and In Effect on 4-19-94) ---------------------------- ARTICLE I Purpose The purpose of the 1992 Long-Term Incentive Plan (this "Plan") is to enable Tribune Company (the "Company") to offer key management employees of the Company and Subsidiaries (defined below) performance-based stock incentives and other equity interests in the Company and other incentive awards, thereby attracting, retaining and rewarding such employees, and strengthening the mutuality of interests between the employees and the Company's stockholders. ARTICLE II Definitions For purposes of this Plan, the following terms shall have the following meanings: 2.1 "Award" shall mean any form of Stock Option, Stock Appreciation Right, Stock Award, Performance Shares, Performance Units or Other Stock-Based Award granted under this Plan, whether singly, in combination, or in tandem, to a Participant by the Committee pursuant to such terms, conditions, restrictions and/or limitations, if any, as the Committee may establish by the Award Notice or otherwise. 2.2 "Award Notice" shall mean a written notice from the Company to a Participant that establishes the terms, conditions, restrictions, and/or limitations applicable to an Award. 2.3 "Beneficiary" shall mean a person or persons designated by a Participant to succeed to, in the event of death, any outstanding Award held by the Participant. Any Participant may, subject to such limitations as may be prescribed by the Committee, designate one or more persons primarily or contingently as beneficiaries in writing by notice delivered to the Company, and may revoke such designations in writing. If a Participant fails effectively to designate a beneficiary, then the Participant's estate shall be the Participant's beneficiary. 2.4 "Board" shall mean the Board of Directors of the Company. 2.5 "Code" shall mean the Internal Revenue Code of 1986, as amended, or any successor legislation. 2.6 "Committee" shall mean the Governance and Compensation Committee or such other committee of the Board appointed from time to time by the Board consisting of two or more Directors, none of whom can participate in this Plan. Members of the Committee must qualify as disinterested persons within the meaning of Securities and Exchange Commission Regulation (S) 240.16b-3 or any successor regulation. 2.7 "Common Stock" shall mean the common stock (without par value) of the Company. 2.8 "Disability" shall mean a disability qualifying the Participant to receive benefits under the Company's or a Subsidiary's long-term disability plan. Disability shall be deemed to occur on the date eligibility for such benefit payments begins. 2.9 "Fair Market Value" unless otherwise required by any applicable provision of the Code or any regulations issued thereunder shall mean, as of any date, the closing price of the applicable security as reported on the New York Stock Exchange Composite Transactions list (or such other consolidated transaction reporting system on which the applicable security is primarily traded) for such day, or if the applicable security was not traded on such day, then the next preceding day on which the security was traded, all as reported by such source as the Committee may select. If the applicable security is not readily tradeable on a national securities exchange or other market system, its Fair Market Value shall be set under procedures established by the Committee on the advice of an investment advisor. 2.10 "Incentive Stock Option" shall mean any Stock Option awarded under Article VI of this Plan intended to be and designated as an "Incentive Stock Option" within the meaning of Section 422 of the Code or any successor provision. 2.11 "Non-Qualified Stock Option" shall mean any Stock Option awarded under Article VI of this Plan that is not an Incentive Stock Option. 2.12 "Officer" shall mean an employee of the Company or a Subsidiary who is considered to be an officer under Securities and Exchange Commission Regulation (S) 240.16a-1(f) or any successor regulation. 2.13 "Participant" shall mean an Eligible Employee (as defined in Section 5.1) to whom an Award has been made pursuant to this Plan. 2.14 "Replacement Option" shall mean a Non-Qualified Stock Option granted pursuant to Section 6.3, upon the exercise of a Stock Option granted pursuant to this Plan or the Company's 1984 Long-Term Performance Plan (the "1984 Plan") where the option price is paid with previously owned shares of Common Stock. 2.15 "Retirement" shall mean any termination of employment by an employee (other than by death or Disability) who is at least 55 years of age after at least 10 years of employment by the Company and/or a Subsidiary. 2.16 "Stock Option" or "Option" shall mean any right to purchase shares of Common Stock (including a Replacement Option) granted pursuant to Article VI of this Plan. 2.17 "Subsidiary" shall mean any corporation (or partnership, joint venture, or other enterprise) (i) of which the Company owns or controls, directly or indirectly, 50.1% or more of the outstanding shares of stock normally entitled to vote for the election of directors (or comparable equity participation and voting power) or (ii) which the Company otherwise controls (by contract or any other means). "Control" means the power to direct or cause the direction of the management and policies of a corporation, partnership, joint venture, or other enterprise. 2.18 "Termination of Employment" shall mean the termination of a Participant's employment with the Company and any Subsidiary. A Participant employed by a Subsidiary shall also be deemed to incur a Termination of Employment if the Subsidiary ceases to be a Subsidiary and the Participant does not immediately thereafter become an employee of the Company or another Subsidiary. -2- 2.19 "Transfer" shall mean anticipation, alienation, attachment, sale, assignment, pledge, encumbrance, charge or other disposition; and the terms "Transferred" or "Transferable" shall have corresponding meanings. ARTICLE III Administration 3.1 The Committee. This Plan shall be administered and interpreted by the Committee. 3.2 Awards. The Committee shall have full authority to grant, pursuant to the terms of this Plan, to Eligible Employees: (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Stock Awards, (iv) Performance Shares, (v) Performance Units, and (vi) Other Stock-Based Awards. In particular, and without limitation, the Committee shall have the authority: (a) to select the Eligible Employees to whom Awards may from time to time be granted hereunder; (b) to determine the types of Awards, and combinations thereof, to be granted hereunder to Eligible Employees and whether such Awards are to operate on a tandem basis and/or in conjunction with or apart from other awards made by the Company outside of this Plan; (c) to determine the number of shares of Common Stock or monetary units to be covered by each such Award granted hereunder; (d) to determine the terms and conditions, not inconsistent with the terms of this Plan, of any Award granted hereunder (including, but not limited to, any restriction or limitation on transfer, any vesting schedule or acceleration thereof, or any forfeiture provisions or waiver thereof, regarding any Award and the shares of Common Stock relating thereto, based on such factors as the Committee shall determine, in its sole discretion); (e) to determine whether Stock and other amounts payable with respect to an Award under this Plan shall be deferred either automatically or at the election of the Participant; and (f) to modify or waive any restrictions or limitations contained in, and grant extensions to or accelerate the vestings of, any outstanding Awards as long as such modifications, waivers, extensions or accelerations are consistent with the terms of this Plan; but no such changes shall impair the rights of any Participant without his or her consent. 3.3 Guidelines. The Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing this Plan and perform all acts, including the delegation of its administrative responsibilities, as it shall, from time to time, deem advisable; to construe and interpret the terms and provisions of this Plan and any Award issued under this Plan (and any Award Notices or agreements relating thereto); and to otherwise supervise the administration of this Plan. The Committee may correct any defect, supply any omission or reconcile any inconsistency in this Plan or in any Award Notices or agreement relating thereto in the manner and to the extent it shall deem necessary to carry this Plan into effect. -3- 3.4 Decisions Final. Any decision, interpretation or other action made or taken in good faith by or at the direction of the Company, the Board, or the Committee (or any of its members) arising out of or in connection with this Plan shall be within the absolute discretion of all and each of them, as the case may be, and shall be final, binding and conclusive on the Company and all employees and Participants and their respective Beneficiaries, heirs, executors, administrators, successors and assigns. ARTICLE IV Shares Available 4.1 Shares. For each fiscal year of the Company from and including the year ending December 27, 1992, the number of shares of Common Stock available for Awards under this Plan shall be the sum of the following amounts: (a) For Awards generally: a number of shares equal to (i) nine-tenths of one percent (0.9%) of the adjusted average Common Stock outstanding used by the Company to calculate fully diluted earnings per share for the preceding year, plus (ii) any shares of Common Stock available for Awards under this subsection in previous years but not actually awarded, plus (iii) any shares of Common Stock subject to an Award hereunder (other than Replacement Options) if there is a lapse, forfeiture, expiration or termination of any such Award; (b) For Replacement Options: a number of shares equal to (i) four-tenths of one percent (0.4%) of the adjusted average Common Stock outstanding used by the Company to calculate fully diluted earnings per share for the preceding year, plus (ii) any shares of Common Stock which as of the effective date of this Plan are authorized for awards under the 1984 Plan and which have not been awarded, plus (iii) any shares of Common Stock available for Awards under this subsection in previous years but not actually awarded, plus (iv) any shares of Common Stock subject to an Award hereunder of Replacement Options granted to persons who are Officers if there is a lapse, forfeiture, expiration or termination of any such Award; and (c) For Replacement Options for Non-Officers: the number of shares of Common Stock (i) exchanged by a Participant as full or partial payment to the Company of the exercise price, or withheld to pay taxes in connection with the exercise of, a Stock Option awarded under this Plan or the 1984 Plan, plus (ii) any shares of Common Stock available for Awards under this subsection in previous years but not actually awarded, plus (iii) any shares of Common Stock subject to an Award of a Replacement Option granted to a person who is not an Officer if there is a lapse, forfeiture, expiration or termination of any such Award. The shares authorized under subsection (a) above shall be available for any Awards made under this Plan; the shares authorized under subsection (b) above shall be available only for Awards of Replacement Options; and the shares authorized under subsection (c) above shall be available only for Awards of Replacement Options to persons who are not Officers on the date of the Award. Any shares of Common Stock delivered pursuant to an Award may consist, in whole or in part, of authorized and unissued shares or treasury shares. No more than three million (3,000,000) shares of Common Stock shall be cumulatively available for issuance under this Plan for Awards made pursuant to Articles VIII and XI. -4- Notwithstanding any provision in this Plan to the contrary, but subject to the adjustment provisions of Section 4.4 hereof, the maximum number of shares of Common Stock available for Awards under this Plan to any Participant in any fiscal year of the Company shall not exceed 500,000 shares. 4.2 Use of Authorized Shares. The shares covered by any Award made under this Plan shall be charged against the applicable pool of shares authorized by Section 4.1 by first charging them, to the extent permitted in the next to last paragraph of Section 4.1, against any shares available under Subsection 4.1(c), next against any shares available under Subsection 4.1(b), and last against any shares available under Subsection 4.1(a). For purposes of this Article IV, if an Award is denominated in shares of Common Stock, the number of shares covered by such Award, or to which such Award relates, shall be counted on the date of grant of such Award against the aggregate number of shares available for granting Awards under this Plan; provided, however, that Awards that operate in tandem with (whether granted simultaneously with or at a different time from), or are substituted for, other Awards granted under the 1984 Plan or this Plan may be counted or not counted under procedures adopted by the Committee in order to avoid double counting. 4.3 Compliance with Rule 16b-3. To the extent that the provisions above on the number of shares of Common Stock that can be issued under this Plan do not conform with Securities and Exchange Commission Regulation (S) 240.16b-3, the Committee may make such modification in the determination of share usage and issuance so as to conform this Plan and any Awards granted hereunder to the Rule's requirements. 4.4 Adjustment Provisions. (a) If the Company shall at any time change the number of issued shares of Common Stock without new consideration to the Company (such as by stock dividend, stock split, recapitalization, reorganization, exchange of shares, liquidation, combination or other change in corporate structure affecting the Common Stock) or make a distribution of cash or property which has a substantial impact on the value of issued Common Stock, the total number of shares available for Awards under this Plan shall be appropriately adjusted and the number of shares covered by each outstanding Award and the reference price or Fair Market Value for each outstanding Award shall be adjusted so that the net value of such Award shall not be changed. (b) In the case of any sale of assets, merger, consolidation, combination or other corporate reorganization or restructuring of the Company with or into another corporation which results in the outstanding Common Stock being converted into or exchanged for different securities, cash or other property, or any combination thereof (an "Acquisition"), subject to the provisions of this Plan and any limitation applicable to the Award: (i) any Participant to whom an Option has been granted shall have the right thereafter and during the term of the Option, to receive upon exercise thereof the Acquisition Consideration (as defined below) receivable upon the Acquisition by a holder of the number of shares of Common Stock which might have been obtained upon exercise of the Option or portion thereof, as the case may be, immediately prior to the Acquisition; (ii) any Participant to whom a Stock Appreciation Right has been granted shall have the right thereafter and during the term of such right to receive upon exercise thereof the difference on the exercise date between the aggregate Fair Market Value of the Acquisition Consideration receivable upon such acquisition by a holder of the number of shares of Common Stock which are covered by such right and the aggregate reference price of such right; -5- (iii) any Participant to whom Performance Shares or Performance Units have been awarded shall have the right thereafter and during the term of the Award, upon fulfillment of the terms of the Award, to receive on the date or dates set forth in the Award, the Acquisition Consideration receivable upon the Acquisition by a holder of the number of shares of Common Stock which are covered by the Award; and (iv) any Participant to whom Other Stock-Based Awards have been awarded shall have the right thereafter and during the term of the Award to substitute the Acquisition Consideration for the Common Stock upon which the Award is valued or in which the Award is payable. The term "Acquisition Consideration" shall mean the kind and amount of securities, cash or other property or any combination thereof receivable in respect of one share of Common Stock upon consummation of an Acquisition. (c) Notwithstanding any other provision of this Plan, the Committee may authorize the issuance, continuation or assumption of Awards or provide for other equitable adjustments after changes in the Common Stock resulting from any other merger, consolidation, sale of assets, acquisition of property or stock, recapitalization, reorganization or similar occurrence upon such terms and conditions as it may deem equitable and appropriate. (d) In the event that another corporation or business entity is being acquired by the Company, and the Company assumes outstanding employee stock options and/or stock appreciation rights and/or the obligation to make future grants of options or rights to employees of the acquired entity, the aggregate number of shares of Common Stock available for Awards under this Plan shall be increased accordingly. 4.5 Purchase Price. Notwithstanding any provision of this Plan to the contrary, if authorized but previously unissued shares of Common Stock are issued for purchase under this Plan, such shares shall be issued for a consideration which shall not be less than $1 per share. ARTICLE V Eligibility 5.1 Officers and key management employees of the Company and its Subsidiaries ("Eligible Employees") are eligible to be granted Awards under this Plan. Directors who are not full-time employees of the Company or a Subsidiary shall not be eligible to be granted Awards under this Plan. Eligibility under this Plan shall be determined by the Committee. ARTICLE VI Stock Options 6.1 Grants. Stock Options may be granted alone or in addition to other Awards granted under this Plan. Each Stock Option granted under this Plan shall be of one of two types: (i) an Incentive Stock Option or (ii) a Non-Qualified Stock Option. The Committee shall have the authority to grant to any Eligible Employee one or more Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock Options (in each case with or without Stock Appreciation Rights). -6- 6.2 Incentive Stock Options. Anything in this Plan to the contrary notwithstanding, no term of this Plan relating to Incentive Stock Options shall be interpreted, amended or altered, nor shall any discretion or authority granted under this Plan be so exercised, so as to disqualify this Plan under Section 422 of the Code, or, without the consent of the Participants affected, to disqualify any Incentive Stock Option under Section 422 of the Code. No Incentive Stock Options may be awarded after the tenth anniversary of the date this Plan is adopted by the Board, and no more than three million (3,000,000) shares of Common Stock shall be cumulatively available under this Plan for issuance upon exercise of Incentive Stock Options. 6.3 Replacement Options. The Committee may provide either at the time of grant or subsequently that an Option include the right to acquire a Replacement Option upon exercise of such Option (in whole or in part) prior to termination of employment of the Participant and through payment of the exercise price in shares of Common Stock. In addition to any other terms and conditions the Committee deems appropriate, the Replacement Option shall be subject to the following terms: (i) the number of shares of Common Stock subject to the Replacement Option shall not exceed the number of whole shares used to satisfy the exercise price of the original Option and the number of whole shares, if any, withheld by the Company as payment for withholding taxes in accordance with Section 14.4 hereof, (ii) the option grant date will be the date of the exercise of the original Option, (iii) the exercise price per share shall be the Fair Market Value on the option grant date, (iv) the Replacement Option shall be exercisable no earlier than twelve (12) months after the option grant date, (v) the Option term will not extend beyond the term of the original Option, and (vi) the Replacement Option shall be a Non-Qualified Stock Option and shall otherwise meet all conditions of this Article VI. A Replacement Option may also be granted with respect to any option granted under the 1984 Plan. The Committee may without the consent of the Participant rescind the right to receive a Replacement Option grant at any time prior to an Option being exercised. 6.4 Terms of Options. Options granted under this Plan shall be subject to the following terms and conditions and shall be in such form and contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem desirable: (a) Exercise Price. The exercise price per share of Common Stock purchasable under a Stock Option shall be determined by the Committee at the time of grant but shall be not less than 100% of the Fair Market Value of the Common Stock at the option grant date. In lieu of a fixed exercise price, the Committee may establish an exercise price that increases automatically on the anniversary of the Option grant date or that adjusts periodically based on the relative performance of the Company or its stock price as compared with the performance or stock prices of a group of comparable companies selected by the Committee for comparison purposes at the time of the Option grant date. (b) Option Term. The term of each Stock Option shall be fixed by the Committee, but no Incentive Stock Option shall be exercisable more than ten (10) years after the date the Option is granted, and no Non-Qualified Stock Option shall be exercisable more than eleven (11) years after the date the Option is granted. (c) Exercisability. Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at grant; provided, however, that, unless otherwise determined by the Committee at grant, no Stock Option shall be exercisable prior to six months after the option grant date. (d) Method of Exercise. Stock Options may be exercised in whole or in part at any time during the option term, by giving written notice of exercise to the Company specifying the number of shares to be purchased. Such notice shall be accompanied by payment in full of the exercise price in such form as the Committee may accept. If and to the extent determined by the Committee at or after -7- grant, payment in full or in part may also be made in the form of Common Stock owned by the Participant for at least six months prior to exercise (or by certification of such ownership) or by reduction in the number of shares issuable upon such exercise based, in each case, on the Fair Market Value of the Common Stock on the payment date. In the discretion of the Committee, payment may also be made by delivering a properly executed exercise notice to the Company together with a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds to pay the exercise price. To facilitate the foregoing, the Company may enter into agreements for coordinated procedures with one or more brokerage firms. (e) Non-Transferability of Options. No Stock Option shall be Transferable by the Participant otherwise than by a qualified domestic relations order as defined in the Code (but only with respect to Non-Qualified Stock Options) or by will or the laws of descent and distribution, and all Stock Options shall be exercisable, during the Participant's lifetime, only by the Participant or his or her guardian, conservator or other legal representative. (f) Termination of Employment by Death, Disability or Retirement. If a Participant's employment by the Company or a Subsidiary terminates by reason of death, Disability or Retirement, any Stock Option held by such Participant, unless otherwise determined by the Committee at or after grant, shall be fully vested and may thereafter be exercised by the Participant or by the Beneficiary or legal representative of the estate of a disabled or deceased Participant, for a period of five years (or such shorter period as the Committee may specify at grant) from the date of such death, Disability or Retirement or until the expiration of the stated term of such Stock Option, whichever period is the shorter. (g) Other Termination of Employment. Unless otherwise determined by the Committee at or after grant, if a Participant's employment by the Company or a Subsidiary terminates for any reason other than death, Disability or Retirement, the Stock Option shall terminate at such time as provided in the Award, but in no event more than one year after termination. (h) Buyout and Settlement Provisions. The Committee may at any time offer to buy out an Option previously granted, based on such terms and conditions as the Committee shall establish and communicate to the Participant at the time that such offer is made. ARTICLE VII Stock Appreciation Rights 7.1 Tandem Stock Appreciation Rights. Stock Appreciation Rights may be granted in conjunction with all or part of any Stock Option (a "Reference Stock Option") granted under this Plan ("Tandem Stock Appreciation Rights"). In the case of a Non-Qualified Stock Option, such rights may be granted either at or after the option grant date of such Reference Stock Option. In the case of an Incentive Stock Option, such rights may be granted only at the option grant date of such Reference Stock Option. Tandem Stock Appreciation Rights shall be subject to such terms and conditions, not inconsistent with the provisions of this Plan, as shall be determined from time to time by the Committee, including the following: -8- (a) Term. A Tandem Stock Appreciation Right granted with respect to a Reference Stock Option shall terminate and no longer be exercisable upon the termination or exercise of the Reference Stock Option. (b) Exercisability. Tandem Stock Appreciation Rights shall be exercisable only at such time or times and to the extent that the Reference Stock Options to which they relate shall be exercisable. (c) Method of Exercise. A Tandem Stock Appreciation Right may be exercised by an optionee by surrendering the applicable portion of the Reference Stock Option. (d) Payment. Upon the exercise of a Tandem Stock Appreciation Right a Participant shall be entitled to receive an amount in cash and/or shares of Common Stock equal in value to the excess of the Fair Market Value of one share of Common Stock over the exercise price per share specified in the Reference Stock Option multiplied by the number of shares in respect of which the Tandem Stock Appreciation Right shall have been exercised, with the Committee having the right to determine the form of payment. (e) Non-Transferability and Termination. Tandem Stock Appreciation Rights shall be Transferable only to the extent provided in Subsection 6.4(e) of this Plan and shall terminate in accordance with Subsections 6.4(f) or (g) of this Plan. 7.2 Non-Tandem Stock Appreciation Rights. Non-Tandem Stock Appreciation Rights may also be granted without reference to any Stock Options granted under this Plan. Non-Tandem Stock Appreciation Rights shall be subject to such terms and conditions, not inconsistent with the provisions of this Plan, as shall be determined from time to time by the Committee, including the following: (a) Term. The term of each Non-Tandem Stock Appreciation Right shall be fixed by the Committee, but shall not be greater than eleven (11) years after the date the right is granted. (b) Exercisability. Non-Tandem Stock Appreciation Rights shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at or after grant. (c) Method of Exercise. A Non-Tandem Stock Appreciation Right may be exercised in whole or in part at any time during its term, by giving written notice of exercise to the Company specifying the number of rights to be exercised. (d) Payment. Upon the exercise of a Non-Tandem Stock Appreciation Right a Participant shall be entitled to receive, for each right exercised, an amount in cash and/or shares of Common Stock equal in value to the excess of the Fair Market Value of one share of Common Stock on the date the Right is exercised over the Fair Market Value of one share of Common Stock on the date the Right was awarded to the Participant, with the Committee having the right to determine the form of payment. (e) Non-Transferability and Termination. Non-Tandem Stock Appreciation Rights shall be Transferable only to the extent provided in Subsection 6.4(e) of this Plan and shall terminate in accordance with Subsections 6.4(f) or (g) of this Plan. -9- ARTICLE VIII Stock Awards 8.1 Grants. Restricted or unrestricted shares of Common Stock may be granted either alone or in addition to other Awards granted under this Plan. The Committee may grant Awards of Common Stock subject to the attainment of specified performance goals, continued employment and such other limitations or restrictions as the Committee may determine. 8.2 Awards and Certificates. Stock Awards shall be subject to the following provisions: (a) Stock Powers and Custody. The Committee may require the Participant to deliver a duly signed stock power, endorsed in blank, relating to the Common Stock covered by such an Award. The Committee may also require that the stock certificates evidencing such shares be held in custody by the Company until any restrictions thereon shall have lapsed. (b) Rights as Stockholder. The Participant shall have, with respect to the shares of Common Stock, all of the rights of a holder of shares of Common Stock of the Company including the right to receive any dividends and to vote the Common Stock. -10- ARTICLE IX Performance Shares 9.1 Award of Performance Shares. Performance Shares may be awarded either alone or in addition to other Awards granted under this Plan and shall consist of the right to receive Common Stock or cash of an equivalent value at the end of a specified Performance Period (defined below). The Committee shall determine the Eligible Employees to whom and the time or times at which Performance Shares shall be awarded, the number of Performance Shares to be awarded to any person, the duration of the period (the "Performance Period") during which, and the conditions under which, receipt of the Shares will be deferred, and the other terms and conditions of the Award in addition to those set forth in Section 9.2. The Committee may condition the grant of Performance Shares upon the attainment of specified performance goals or such other factors or criteria as the Committee shall determine. 9.2 Terms and Conditions. Performance Shares awarded pursuant to this Article IX shall be subject to the following terms and conditions: (a) Non-Transferability. Performance Share Awards shall be Transferable only in accordance with the provisions of Section 6.4(e) of this Plan. (b) Dividends. Unless otherwise determined by the Committee at the time of the grant of the Award, amounts equal to any dividends declared during the Performance Period with respect to the number of shares of Common Stock covered by a Performance Share Award will not be paid to the Participant. (c) Payment. Subject to the provisions of the Award Notice and this Plan, at the expiration of the Performance Period, share certificates and/or cash of an equivalent value (as the Committee may determine) shall be delivered to the Participant, or his or her legal representative, in a number equal to the vested shares covered by the Performance Share Award. (d) Termination of Employment. Subject to the applicable provisions of the Award Notice and this Plan, upon termination of a Participant's employment with the Company or a Subsidiary for any reason during the Performance Period for a given Award, the Performance Shares in question will vest or be forfeited in accordance with the terms and conditions established by the Committee. ARTICLE X Performance Units 10.1 Award of Performance Units. Performance Units may be awarded either alone or in addition to other Awards granted under this Plan and shall consist of the right to receive a fixed dollar amount, payable in cash or Common Stock or a combination of both. The Committee shall determine the Eligible Employees to whom and the time or times at which Performance Units shall be awarded, the number of Performance Units to be awarded to any person, the duration of the period (the "Performance Cycle") during which, and the conditions under which, a Participant's right to Performance Units will be vested, the ability of Participants to defer the receipt of payment of such Units, and the other terms and conditions of the Award in addition to those set forth in Section 10.2. -11- The Committee may condition the vesting of Performance Units upon the attainment of specified performance goals or such other factors or criteria as the Committee shall determine. 10.2 Terms and Conditions. The Performance Units awarded pursuant to this Article X shall be subject to the following terms and conditions: (a) Non-Transferability. Performance Unit Awards shall be Transferable only in accordance with the provision of Section 6.4(e) of this Plan. (b) Vesting. At the expiration of the Performance Cycle, the Committee shall determine the extent to which the performance goals have been achieved, and the percentage of the Performance Units of each Participant that have vested. (c) Payment. Subject to the applicable provisions of the Award Notice and this Plan, at the expiration of the Performance Cycle, cash and/or share certificates of an equivalent value (as the Committee may determine) shall be delivered to the Participant, or his or her legal representative, in payment of the vested Performance Units covered by the Performance Unit Award. (d) Termination of Employment. Subject to the applicable provisions of the Award Notice and this Plan, upon termination of a Participant's employment with the Company or a Subsidiary for any reason during the Performance Cycle for a given Award, the Performance Units in question will vest or be forfeited in accordance with the terms and conditions established by the Committee. ARTICLE XI Other Stock-Based Awards 11.1 Other Awards. Other Awards of Common Stock and cash Awards that are valued in whole or in part by reference to, or are payable in or otherwise based on, Common Stock ("Other Stock-Based Awards") including, without limitation, Awards valued by reference to performance concepts may be granted either alone or in addition to or in tandem with Stock Options, Stock Appreciation Rights, Stock Awards, Performance Shares or Performance Units. Subject to the provisions of this Plan, the Committee shall have authority to determine the persons to whom and the time or times at which such Awards shall be made, the number of shares of Common Stock to be awarded pursuant to such Awards, and all other conditions of the Awards. 11.2 Terms and Conditions. Other Stock-Based Awards made pursuant to this Article XI shall be subject to the following terms and conditions: (a) Non-Transferability. Other Stock-Based Awards shall be Transferable only in accordance with the provisions of Section 6.4(e) of this Plan. (b) Dividends. Unless otherwise determined by the Committee at the time of the grant of the Award, amounts equal to any dividends declared during the Performance Period with respect to the number of shares of Common Stock covered by such Award will not be paid to the Participant. -12- (c) Vesting. Any Award under this Article XI and any Common Stock covered by any such Award shall vest or be forfeited to the extent so provided in the Award Notice, as determined by the Committee. (d) Price. Common Stock issued on a bonus basis under this Article XI may be issued for no cash consideration; Common Stock purchased pursuant to a purchase right awarded under this Article XI shall be priced as determined by the Committee subject to the provisions of Section 4.5. ARTICLE XII Change in Control Provisions 12.1 Benefits. In the event of a Change in Control of the Company (as defined below), and except as otherwise provided by the Committee upon the grant of an Award: (a) All outstanding Stock Options granted prior to the Change in Control shall be fully vested and immediately exercisable in their entirety. The Committee may provide for the purchase of any such Stock Options by the Company or Subsidiary for an amount of cash equal to the excess of the Change in Control price (as defined below) of the shares of Common Stock covered by such Stock Options, over the aggregate exercise price of such Stock Options. (b) All outstanding Stock Appreciation Rights granted prior to the Change in Control shall be fully vested and immediately exercisable in their entirety. The Fair Market Value of the Common Stock on the date of exercise shall be determined by the Committee and may be the Change in Control price of the shares of Common Stock covered by such rights. (c) All outstanding Stock Awards granted prior to the Change in Control shall be fully vested and certificates shall be immediately delivered to the Participants. (d) All Performance Share and Performance Unit Awards granted prior to the Change in Control shall vest as if (i) the applicable Performance Period had ended upon such Change in Control, and (ii) the determination of the extent to which any specified performance goals or targets had been achieved will be made at such time. (e) Any Other Stock-Based Awards granted prior to the Change in Control shall be fully vested and payable, deliverable or exercisable, as applicable, in accordance with the terms of the Award at the time of its grant. For purposes of this Section 12.1, Change in Control price shall mean the higher of (i) the highest price per share of Common Stock paid in any transaction related to a Change in Control of the Company, or (ii) the highest Fair Market Value per share of Common Stock at any time during the 60-day period preceding a Change in Control. Notwithstanding any other provision hereof, if a Change in Control occurs within six months of the date of grant of an Award to an Officer, such an Award shall be cancelled in exchange for a cash payment to the Officer, effected on the day which is six months and one day after the date of grant of such Award (the "valuation date"), equal to the difference between the Fair Market Value of the Award on the valuation date and the exercise price (if any) of the Award. -13- Any determination by the Committee made pursuant to this Section 12.1 may be made as to all outstanding Awards, and any such determination may be made prior to or after a Change in Control. 12.2 Change in Control. For the purposes of this Plan, a "Change in Control" of the Company shall mean: (a) The acquisition, other than from the Company, by any person, entity or "group" (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange Act")), excluding for this purpose the Company, the Robert R. McCormick Tribune Foundation, the Cantigny Foundation and any employee benefit plan (or related trust) sponsored or maintained by the Company or its subsidiaries, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either the then outstanding shares of Common Stock or the combined voting power of the Company's then outstanding voting securities entitled to vote generally in the election of directors; or (b) Individuals who, as of April 28, 1992, constitute the Board of Directors of the Company (as of April 28, 1992 the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election, by the stockholders of the Company was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the members of the Board, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall be considered as though such person were a member of the Incumbent Board; or (c) Approval by the stockholders of the Company of a reorganization, merger, or consolidation, in each case, with respect to which persons who were the stockholders of the Company immediately prior to such approval do not, immediately after such reorganization, merger or consolidation, own, directly or indirectly, more than 60% of the combined voting power of the then outstanding securities entitled to vote generally in the election of directors of the reorganized, merged or consolidated company, or a liquidation or dissolution of the Company, or the sale of all or substantially all of the assets of the Company. 12.3 Taxes. If, for any reason, any part or all of the amounts payable to a Participant pursuant to this Plan (or otherwise, if such amounts are paid by the Company or any of its subsidiaries after there has been a Change in Control) are deemed to be "excess parachute payments" within the meaning of Section 280G(b)(1) of the Code, the Committee may provide in the Award that the Company shall pay to such Participant, in addition to any other amounts that he or she may be entitled to receive pursuant to this Plan, an amount which, after all Federal, state, and local taxes (of whatever kind) imposed on the Participant with respect to such amount are subtracted therefrom, is equal to the excise taxes imposed on such excess parachute payments pursuant to Section 4999 of the Code. -14- ARTICLE XIII Termination or Amendment of this Plan 13.1 Termination or Amendment. Notwithstanding any other provision of this Plan, the Board may at any time, and from time to time, amend, in whole or in part, any or all of the provisions of this Plan, or suspend or terminate it entirely; provided, however, that, unless otherwise required by law, the rights of a Participant with respect to any Awards granted prior to such amendment, suspension or termination, may not be impaired without the consent of such Participant; and, provided further, no amendment may be made which would cause this Plan to lose its exemption under Securities and Exchange Commission Regulation (S) 240.16b-3 or which would increase the percentages set forth in Section 4.1 without shareholder approval. ARTICLE XIV General Provisions 14.1 Unfunded Status of Plan. This Plan is intended to be unfunded. With respect to any payments as to which a Participant has a fixed and vested interest but which are not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company. 14.2 No Right to Employment. Neither this Plan nor the grant of any Award hereunder shall give any Participant or other employee any right with respect to continuance of employment by the Company or any Subsidiary, nor shall they be a limitation in any way on the right of the Company or any Subsidiary by which an employee is employed to terminate his or her employment at any time. 14.3 Other Plans. In no event shall the value of, or income arising from, any Awards under this Plan be treated as compensation for purposes of any pension, profit sharing, life insurance, disability or any other retirement or welfare benefit plan now maintained or hereafter adopted by the Company or any Subsidiary, unless such plan specifically provides to the contrary. 14.4 Withholding of Taxes. The Company shall have the right to deduct from any payment to be made pursuant to this Plan, or to otherwise require, prior to the issuance or delivery of any shares of Common Stock or the payment of any cash hereunder, payment by the Participant of any Federal, state or local taxes required by law to be withheld. The Committee may permit any such withholding obligation to be satisfied by reducing the number of shares of Common Stock otherwise deliverable or by accepting the delivery of previously owned shares of Common Stock. Any fraction of a share of Common Stock required to satisfy such tax obligations shall be disregarded and the amount due shall be paid instead in cash by the Participant. -15- 14.5 No Assignment of Benefits. No Award or other benefit payable under this Plan shall, except as otherwise specifically provided by law, be Transferable in any manner, and any attempt to Transfer any such benefit shall be void, and any such benefit shall not in any manner be subject to the debts, contracts, liabilities, engagements or torts of any person who shall be entitled to such benefit, nor shall it be subject to attachment or legal process for or against such person. 14.6 Governing Law. This Plan and actions taken in connection herewith shall be governed and construed in accordance with the laws of the State of Delaware (without regard to applicable Delaware principles of conflict of laws). 14.7 Construction. Wherever any words are used in this Plan in the masculine gender they shall be construed as though they were also used in the feminine gender in all cases where they would so apply, and wherever any words are used herein in the singular form they shall be construed as though they were also used in the plural form in all cases where they would so apply. 14.8 Liability. No member of the Board, no member of the Committee and no employee of the Company shall be liable for any act or failure to act hereunder, by any other member or employee or by any agent to whom duties in connection with the administration of this Plan have been delegated or, except in circumstances involving his bad faith, gross negligence or fraud, for any act or failure to act by the member or employee. ARTICLE XV Effective Date of Plan This Plan was adopted by the Board on February 18, 1992 and shall become effective on the date it is approved by the stockholders of the Company. This Plan shall continue in effect until terminated by the Board pursuant to Article XIII. 2/21/94 -16- EX-10.14 5 AM. TRANS. COMP. PLAN Exhibit 10.14 Tribune Company Transitional Compensation Plan for Executive Employees Tribune Company, by resolution of its Board of Directors, adopted the Tribune Company Transitional Compensation Plan for Executive Employees (the "Plan") on December 9, 1985, to attract and retain executives of outstanding competence and to provide additional assurance that they will remain with Tribune Company and its subsidiaries on a long-term basis. The following provisions constitute an amendment and restatement of the Plan effective as of January 1, 1995. 1. PARTICIPATION. Any full-time, key executive employee of Tribune Company or of any of its subsidiaries shall be eligible to participate in the Plan in one of two separate tiers, if at the time his employment terminates he has been designated by the Committee as being covered by the Plan within a specific tier, and such designation has not been revoked; provided, however, that no revocation of such designation shall be effective if made: (a) on the day of, or within 36 months after, occurrence of a "Change in Control," as such term is hereinafter defined; or (b) prior to a Change in Control, but at the request of any third party participating in or causing the Change in Control; or (c) otherwise in connection with or in anticipation of a Change in Control. For the purposes of the Plan, the term "subsidiary" shall mean any corporation, more than 50 percent of the outstanding, voting stock in which is owned by Tribune Company or by a subsidiary. 2. ADMINISTRATION. The Plan shall be administered by the Governance and Compensation Committee of the Board of Directors of Tribune Company (the "Committee") or by a successor committee. The Committee shall have the authority to make rules and regulations governing the administration of the Plan, to designate executive employees to be covered by the Plan, to revoke such designations, and to make all other determinations or decisions, and to take such actions, as may be necessary or advisable for the administration of the Plan. The Committee's determinations need not be uniform, and may be made selectively among eligible employees, whether or not they are similarly situated. 3. ELIGIBILITY FOR TRANSITIONAL COMPENSATION. An executive who is a Participant in the Plan shall be eligible to receive transitional compensation, in the amounts and at the times described in paragraph 5, if: (a) His employment with the Company and all of its subsidiaries is terminated: 1 (i) On the day of, or within 36 months after, occurrence of a "Change in Control," as such term is hereinafter defined; or (ii) Prior to a Change in Control, but at the request of any third party participating in or causing the Change in Control; or (iii) Otherwise in connection with or in anticipation of a Change in Control; and (b) The Participant's termination of employment was not: (i) On account of his death; (ii) On account of a physical or mental condition that would entitle him to long-term disability benefits under the Tribune Company Salary Continuation Plan, as then in effect (whether or not he is actually a Participant in such plan); (iii) For conduct involving dishonesty or willful misconduct which, in either case, is detrimental in a significant way to the business of Tribune Company or any of its subsidiaries; or (iv) On account of the employee's voluntary resignation; provided that a resignation shall not be considered to be "voluntary" for the purposes of the Plan in the following situations: (x) if the termination by a Tier I Participant occurs during the 30-day period immediately following the first anniversary of the Change in Control (i.e., this provision is not available for Tier II Participants); or (y) if the termination occurs under the circumstances described in paragraph 13(a) of the Plan; or (z) if, subsequent to the Change in Control and prior to such resignation, there has been a reduction in the nature or scope of the Participant's compensation or benefits, or a change in the city in which he is required to perform his duties. 4. CHANGE IN CONTROL. For the purposes of the Plan, a "Change in Control" shall mean: (a) The acquisition, other than from Tribune Company, by any person, entity, or "group" (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange Act")), excluding for this purpose the Robert R. McCormick Tribune Foundation, the Cantigny Foundation (or any charitable trust, foundation, organization, or similar entity or entities succeeding to one or both of those Foundations or any substantial part thereof) and any employee benefit plan or trust of Tribune Company or its subsidiaries, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20 percent or more of either the 2 then outstanding shares of common stock or the combined voting power of Tribune Company's then outstanding voting securities entitled to vote generally in the election of directors; or (b) Individuals who, as of January 1, 1995, constitute the Board of Directors of Tribune Company (as of January 1, 1995 the "Incumbent Board" and, generally, the "Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election, by the shareholders of Tribune Company was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the members of the Board of Tribune Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall be considered as though such persons were a member of the Incumbent Board; or (c) Approval by the shareholders of Tribune Company of a reorganization, merger, or consolidation, in each case, with respect to which persons who were the shareholders of Tribune Company immediately prior to such reorganization, merger, or consolidation do not, immediately thereafter, own, directly or indirectly, more than 60 percent of the combined voting power for the then outstanding securities entitled to vote generally in the election of directors of the reorganized, merged, or consolidated company, or a liquidation or dissolution of Tribune Company, or the sale of all or substantially all of the assets of Tribune Company. 5. AMOUNT AND PAYMENT OF TRANSITIONAL COMPENSATION. A Participant who is eligible for transitional compensation shall receive: (a) A lump-sum cash payment, payable within 30 calendar days after the date on which his employment terminates, in an amount equal to the sum of: (i) For Tier I Participants, three (3) multiplied by the sum of the Participant's highest annual rate of Base Salary in effect within the three years prior to or upon the effective date of termination, and by the Participant's average annual bonus paid over the prior three years, or shorter period equal to the Participant's total years of prior service (a target bonus will be paid to Participants with less than one year of prior service); or 3 (ii) For Tier II Participants, two (2) multiplied by the sum of the Participant's highest annual rate of Base Salary in effect within the three years prior to or upon the effective date of termination, and by the Participant's average annual bonus paid over the prior three years, or shorter period equal to the Participant's total years of prior service (a target bonus will be paid to Participants with less than one year of prior service); (b) Outplacement services at a qualified agency selected by Tribune Company; (c) Continuation of coverage under his employer's group medical, group life, and group long-term disability plans, if any, and under any policy or policies of "split dollar" life insurance maintained by his employer, until the earliest to occur of: (i) The expiration of 36 months for Tier I Participants, and the expiration of 24 months for Tier II Participants, from the date on which his employment terminates; or (ii) The date on which he obtains comparable coverage provided by a new employer. For purposes of this paragraph 5, a Participant's annual rate of base salary shall be determined prior to any reduction for deferred compensation, "401(k)" plan contributions, and similar items, provided that any reduction in a Participant's annual rate of salary, group insurance or split dollar coverage, occurring within 36 months after a Change in Control shall be disregarded, and the payments and coverage under this paragraph shall be governed by the annual salary, group insurance and split dollar coverage, provided to such Participant immediately prior to such reduction. 6. TAXES. If, for any reason, any part or all of the amounts payable to a Tier I or Tier II Participant pursuant to the Plan (or otherwise, if such amounts are paid by Tribune Company or any of its subsidiaries after there has been a Change in Control) are deemed to be "excess parachute payments" within the meaning of Section 280G(b)(1) of the Internal Revenue Code of 1986, as amended (the "Code"), Tribune Company shall pay to such Participant, in addition to any other amounts that he may be entitled to receive pursuant to the Plan, an amount which, after all federal, state, and local taxes (of whatever kind) imposed on the Participant with respect to such amount are subtracted therefrom, is equal to the excise taxes imposed on such excess parachute payments pursuant to Section 4999 of the Code. 4 7. NO FUNDING OF TRANSITIONAL COMPENSATION. Nothing herein contained shall require or be deemed to require Tribune Company or a subsidiary to segregate, earmark, or otherwise set aside any funds or other assets to provide for any payments required to be made hereunder, and the rights of a terminating Participant to transitional compensation hereunder shall be solely those of a general, unsecured creditor of Tribune Company. However, Tribune Company may, in its discretion, deposit cash or property, or both, equal in value to all or a portion of the amounts anticipated to be payable hereunder for any or all Participants into a trust, the assets of which are to be distributed at such times as are provided for in the Plan; provided that such assets shall be subject at all times to the rights of Tribune Company's general creditors. 8. DEATH. In the event of a Participant's death, any amount or benefit payable or distributable to him pursuant to paragraph 5(a) and paragraph 6 shall be paid to the beneficiary designated by such Participant for such purpose in the last written instrument received by the Committee prior to the Participant's death, if any, otherwise, to the Participant's estate. 9. RIGHTS IN THE EVENT OF DISPUTE. If a claim or dispute arises concerning the rights of a Participant or beneficiary to benefits under the Plan, regardless of the party by whom such claim or dispute is initiated, Tribune Company shall, upon presentation of appropriate vouchers, pay all legal expenses, including reasonable attorneys' fees, court costs, and ordinary and necessary out-of-pocket costs of attorneys, billed to and payable by the Participant or by anyone claiming under or through the Participant (such person being hereinafter referred to as the Participant's "claimant"), in connection with the bringing, prosecuting, defending, litigating, negotiating, or settling such claim or dispute; provided that: (a) The Participant or the Participant's claimant shall repay to Tribune Company any such expenses theretofore paid or advanced by Tribune Company if and to the extent that the party disputing the Participant's rights obtains a judgment in its favor from a court of competent jurisdiction from which no appeal may be taken, whether because the time to do so has expired or otherwise, and it is determined that such expenses were not incurred by the Participant or the Participant's claimant while acting in good faith; provided further that (b) In the case of any claim or dispute initiated by a Participant or the Participant's claimant, such claim shall be made, or notice of such dispute given, with specific reference to the provisions of this Plan, to the Committee within one year after the occurrence of the event giving rise to such claim or dispute. 5 10. AMENDMENT OR TERMINATION. The Board of Directors of Tribune Company reserves the right to amend, modify, suspend, or terminate the Plan at any time; provided that: (a) Without the consent of the Participant, no such amendment, modification, suspension, or termination shall reduce or diminish his right to receive any payment or benefit which becomes due and payable under the Plan as then in effect by reason of his termination of employment prior to the date on which such amendment, modification, suspension, or termination becomes effective; and (b) No such amendment, modification, suspension, or termination which has the effect of reducing or diminishing the right of any Participant to receive any payment or benefit under the Plan will become effective prior to the expiration of the 36 consecutive month period commencing on the date of a Change in Control, if such amendment, modification, suspension, or termination was effected: (i) on the day of or subsequent to the Change in Control; (ii) prior to the Change in Control, but at the request of any third party participating in or causing the Change in Control; or (iii) otherwise in connection with or in anticipation of a Change in Control. 11. NO OBLIGATION TO MITIGATE DAMAGES. In the event a Participant becomes eligible to receive benefits hereunder, the Participant shall have no obligation to seek other employment in an effort to mitigate damages. To the extent a Participant shall accept other employment after his termination of employment, the compensation and benefits received from such employment shall not reduce any compensation and benefits due under this Plan, except as provided in paragraph 5(c). 12. OTHER BENEFITS. The benefits provided under the Plan shall, except to the extent otherwise specifically provided herein, be in addition to, and not in derogation or diminution of, any benefits that a Participant or his beneficiary may be entitled to receive under any other plan or program now or hereafter maintained by Tribune Company or by any of its subsidiaries. 13. SUCCESSORS. (a) Tribune Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business and/or assets of Tribune Company, to expressly assume and agree to perform Tribune Company's obligations under this Plan in the same manner and to the same extent that Tribune Company would be required to perform them if no such succession had taken place unless, in the opinion of legal counsel mutually acceptable to a majority of the Participants, such obligations have been assumed by the successor as a matter of law. Failure of Tribune Company to obtain such agreement prior to the effectiveness of any such succession (unless the foregoing opinion is rendered to the Participants) shall entitle each Participant to terminate his employment and to receive the payments provided for in paragraphs 5 and 6 above. As used in this Plan, "Tribune Company" shall mean such company, as presently constituted, and any successor to its business and/or 6 assets which executes and delivers the agreement provided for in this paragraph 13 or which otherwise becomes bound by all the terms and provisions of the Plan as a matter of law. (b) A Participant's rights under this Plan shall inure to the benefit of, and shall be enforceable by, the Participant's legal representative or other successors in interest, but shall not otherwise be assignable or transferable. 14. NOTICES. Any notices referred to herein shall be in writing and shall be sufficient if delivered in person or sent by U.S. registered or certified mail to the Participant at his address on file with his employer (or to such other address as the Participant shall specify by notice), or to Tribune Company at 435 North Michigan Avenue, Chicago, Illinois 60611, Attention: Governance and Compensation Committee. 15. WAIVER. Any waiver of any breach of any of the provisions of the Plan shall not operate as a waiver of any other breach of such provisions or any other provisions, nor shall any failure to enforce any provision of the Plan operate as a waiver of any party's right to enforce such provision or any other provision. 16. SEVERABILITY. If any provision of the Plan or the application thereof is held invalid or unenforceable by a court of competent jurisdiction, the invalidity or unenforceability thereof shall not affect any other provisions or applications of this Plan which can be given effect without the invalid or unenforceable provision or application. 17. GOVERNING LAW. The validity, interpretation, construction, and performance of the Plan shall be governed by the laws of the state of Illinois. 18. HEADINGS. The headings and paragraph designations of the Plan are included solely for convenience of reference and shall in no event be construed to effect or modify any provisions of the Plan. 19. GENDER AND NUMBER. In the Plan where the context admits, words in any gender shall include the other genders, words in the plural shall include the singular, and words in the singular shall include the plural. 7 EX-11 6 STATE. OF NET INC. PER. SH. Exhibit 11 TRIBUNE COMPANY STATEMENTS OF COMPUTATION OF PRIMARY AND FULLY DILUTED NET INCOME PER SHARE
(In thousands, except per share amounts) Fiscal Year Ended December ------------------------------------------ PRIMARY 1994 1993 1992 - ------- -------- -------- -------- Income before cumulative effects of changes in accounting principles $242,047 $188,606 $136,625 Cumulative effects of changes in accounting principles, net of tax - - (16,800) -------- -------- -------- Net income 242,047 188,606 119,825 Preferred dividends, net of tax (18,574) (18,439) (18,168) -------- -------- -------- Net income attributable to common shares $223,473 $170,167 $101,657 -------- -------- -------- Weighted average common shares outstanding 67,213 66,371 65,018 -------- -------- -------- Primary net income per share: Before cumulative effects of changes in accounting principles $3.32 $2.56 $1.82 Cumulative effects of accounting changes, net - - (0.26) -------- -------- -------- Total $3.32 $2.56 $1.56 ======== ======== ======== FULLY DILUTED - ------------- Income before cumulative effects of changes in accounting principles $242,047 $188,606 $136,625 Additional ESOP contribution required assuming all preferred shares were converted, net of tax (11,822) (12,442) (12,408) Assumed elimination of tax benefit on certain ESOP preferred dividends (2,817) (2,248) (1,606) -------- -------- -------- Adjusted net income before cumulative effects of changes in accounting principles 227,408 173,916 122,611 Cumulative effects of changes in accounting principles, net of tax - - (16,800) -------- -------- -------- Adjusted net income $227,408 $173,916 $105,811 -------- -------- -------- Weighted average common shares outstanding 67,213 66,371 65,018 Assumed conversion of preferred shares into common shares 6,050 6,126 6,331 Assumed exercise of stock options, net of common shares assumed repurchased with the proceeds 810 1,198 971 -------- -------- -------- Adjusted weighted average common shares outstanding 74,073 73,695 72,320 -------- -------- -------- Fully diluted net income per share: Before cumulative effects of changes in accounting principles $3.07 $2.36 $1.70 Cumulative effects of accounting changes, net - - (0.24) -------- -------- -------- Total $3.07 $2.36 $1.46 ======== ======== ========
See Notes to Consolidated Financial Statements. EX-12 7 COMP. OF RATIOS OF EARN. Exhibit 12 TRIBUNE COMPANY COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES (In thousands, except ratios)
Fiscal Year Ended December -------------------------------------------------------- 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- Net income (loss) before cumulative effects of accounting changes $242,047 $188,606 $136,625 $141,981 ($63,533) Add: Income tax expense (benefit) 186,668 143,821 96,266 99,894 (30,695) Losses on equity investments 16,176 20,212 1,903 1,107 2,285 -------- -------- -------- -------- -------- Sub-total 444,891 352,639 234,794 242,982 (91,943) -------- -------- -------- -------- -------- Fixed charge adjustments Add: Interest expense 20,585 24,660 49,254 63,083 53,576 Amortization of capitalized interest 2,362 2,392 5,304 5,258 4,850 Interest component of rental expense (A) 8,236 8,732 9,329 9,047 14,467 -------- -------- -------- -------- -------- Earnings (loss), as adjusted $476,074 $388,423 $298,681 $320,370 ($19,050) ======== ======== ======== ======== ======== Fixed charges: Interest expense $20,585 $ 24,660 $ 49,254 $ 63,083 $ 53,576 Interest capitalized - 1,099 3,445 1,976 8,652 Interest component of rental expense (A) 8,236 8,732 9,329 9,047 14,467 Interest related to guaranteed ESOP debt (B) 24,017 25,742 27,019 27,500 27,757 -------- -------- -------- -------- -------- Total fixed charges $ 52,838 $ 60,233 $ 89,047 $101,606 $104,452 ======== ======== ======== ======== ======== Ratio of Earnings to Fixed Charges 9.0 6.4 3.4 3.2 (C) ======== ======== ======== ======== ========
(A) Represents a portion of rental expense incurred by the Company, which is a reasonable approximation of the interest cost component of such expense. (B) Tribune Company guarantees the debt of its Employee Stock Ownership Plan (ESOP). (C) The net loss for 1990 reflects an after-tax non-recurring loss of $185 million ($295 million before income taxes) relating to the sale of the New York Daily News. Excluding this non-recurring item, the ratio for 1990 was 2.6. As a result of the loss incurred for the full-year 1990, the Company was unable to cover the indicated fixed charges. The Company's loss, as adjusted, plus the indicated fixed charges for 1990 totaled $124 million. EX-13 8 ANNUAL REPORT Exhibit 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following discussion presents the significant factors that have affected the businesses of Tribune Company and its subsidiaries (the "Company") over the last three years. This commentary should be read in conjunction with the Company's consolidated financial statements and Eleven Year Financial Summary, which are also presented in this annual report. SIGNIFICANT EVENTS AND TRENDS - ----------------------------- The Major League Baseball players' contract expired on December 31, 1993. The Major League Baseball Players Association initiated a strike on August 12, 1994, and on August 28, 1994, the owners cancelled the remainder of the Major League Baseball season. Negotiations to settle the strike are continuing. The strike impacted the Company's Chicago Cubs baseball operations, and, to a lesser extent, television and radio operations. In total, the baseball strike negatively impacted the Company's primary earnings per share by approximately $.10. The Company cannot predict the ultimate outcome of the negotiations. The North American newsprint industry has begun to increase newsprint prices due to increased demand for newsprint in the U.S. and overseas. Price increases in 1994 and announced 1995 increases for March 1 and May 1 would result in an approximate 40% increase in average newsprint selling prices in 1995 over 1994. This will increase newsprint expense at the Company's newspapers in 1995 by approximately $70 million. The Company expects to offset the increase, at least in part, through cost controls and expected revenue increases. QUNO Corporation, a Canadian newsprint manufacturer in which the Company has a 34% equity investment, will benefit from the price increases in 1995. RESULTS OF OPERATIONS - --------------------- The Company's fiscal year ends on the last Sunday of the calendar year. Fiscal years 1994, 1993 and 1992 all included 52 weeks. -32- CONSOLIDATED The Company's consolidated financial results as reported for 1994, 1993 and 1992 were as follows:
Change (Dollars in millions, except per share amounts) 1994 1993 1992 94-93 93-92 - -------------------------------------------------------------------------------------------- Operating revenues $2,154 $1,947 $2,100 + 11% - 7% Operating profit 396 356 268 + 11% + 33% Equity in QUNO net loss (6) (18) - + 65% * Gain on QUNO stock sale 39 - - * - Net income 242 189 120 + 28% + 57% Before gain on QUNO stock sale/ accounting changes 229 189 137 + 21% + 38% Primary net income per share 3.32 2.56 1.56 + 30% + 64% Before gain on QUNO stock sale/ accounting changes 3.13 2.56 1.82 + 22% + 41% * Not Meaningful
On February 17, 1993, the Company's previously wholly owned newsprint subsidiary, QUNO, completed an initial public offering of 9 million shares of common stock. Subsequent to the offering, the Company held 49% of the voting common shares and 59% of QUNO's total 22 million outstanding common shares. On April 14, 1994, the Company reduced its ownership holdings in QUNO to 34% by selling 5.5 million shares of QUNO common stock. The sale of the shares resulted in an after-tax gain of approximately $13 million, or $.19 per share on a primary basis. The pretax gain on the sale was $39 million. The Company also holds a $138.8 million subordinated debenture, convertible into 11.7 million voting common shares of QUNO. The Company has accounted for its investment in QUNO using the equity method since the beginning of 1993. Prior year statements were not restated. Effective as of the beginning of 1992, the Company adopted three new accounting standards related to income taxes, postretirement benefits and postemployment benefits. The cumulative effect of these rules resulted in a net after-tax charge against 1992 earnings of $16.8 million, or $.26 per share on a primary basis. [GRAPH APPEARS HERE] NET INCOME PER SHARE -- The 22% increase in 1994 primary net income per share before the gain on the QUNO stock sale was due to higher profits at the media businesses, lower equity losses from QUNO and lower net interest expense. The 41% increase in 1993 primary net income per share before accounting changes was due to higher profits at the media businesses, lower QUNO losses and a reduction in the Company's share of those losses, and lower net interest expense. Average common shares outstanding increased 1% in 1994 and 2% in 1993. OPERATING PROFIT AND REVENUES -- The following table shows consolidated operating revenues, EBITDA (earnings before equity in QUNO net loss, gain on QUNO stock sale, interest, taxes, depreciation and amortization) and operating profit by business segment, excluding QUNO from 1992: -33- [GRAPH APPEARS HERE]
Change (Dollars in millions) 1994 1993 1992 94-93 93-92 - ---------------------------------------------------------------------------- Operating Revenues Publishing $1,292 $1,199 $1,167 + 8% + 3% Broadcasting & Entertainment 764 727 684 + 5% + 6% New Media/Education 98 21 - + 364% * - ---------------------------------------------------------------------------- Total operating revenues $2,154 $1,947 $1,851 + 11% + 5% - ---------------------------------------------------------------------------- EBITDA Publishing $ 359 $ 318 $ 288 + 13% + 11% Broadcasting & Entertainment 168 161 153 + 4% + 5% New Media/Education 10 4 - + 175% * Corporate expenses (25) (24) (23) - 4% - 4% - ---------------------------------------------------------------------------- Total EBITDA $ 512 $ 459 $ 418 + 12% + 10% - ---------------------------------------------------------------------------- Operating profit Publishing $ 287 $ 253 $ 225 + 14% + 13% Broadcasting & Entertainment 132 125 121 + 5% + 4% New Media/Education 3 2 - + 37% * Corporate expenses (26) (24) (24) - 7% - 3% - ---------------------------------------------------------------------------- Total operating profit $ 396 $ 356 $ 322 + 11% + 11% - ---------------------------------------------------------------------------- * Not Meaningful
As shown above, consolidated 1994 revenues were up 11%, or $207 million from 1993, with each of the segments reporting gains. New media/education, previously included in the publishing segment, includes Contemporary Books, Compton's NewMedia and The Wright Group, acquired July 1993, September 1993 and February 1994, respectively. A more detailed discussion of this new segment begins on page 39. Consolidated 1993 revenues increased 5%, or $96 million, from 1992. Consolidated operating profit increased 11%, or $40 million, in 1994. Publishing was up $34 million and broadcasting and entertainment was up $7 million, primarily due to increased advertising revenues. Consolidated 1994 EBITDA was up $53 million, or 12%, due primarily to publishing, which was up $41 million. Consolidated operating profit increased 11% and EBITDA increased 10% in 1993, primarily due to increased revenues. [GRAPH APPEARS HERE] OPERATING EXPENSES -- Consolidated operating expenses, excluding QUNO from 1992, were as follows:
Change (Dollars in millions) 1994 1993 1992 94-93 93-92 - ------------------------------------------------------------------------- Cost of sales $1,078 $1,026 $ 985 + 5% + 4% Selling, general & administrative 565 462 448 + 22% + 3% Depreciation & amortization of intangible assets 115 103 96 + 12% + 7% - ------------------------------------------------------------------------- Total operating expenses $1,758 $1,591 $1,529 + 11% + 4% - -------------------------------------------------------------------------
-34- The 5% increase in cost of sales in 1994 was due primarily to the additional costs from five acquisitions made since mid-1993, increased newsprint and ink expense and increased compensation expense. Excluding the acquisitions, cost of sales increased $14 million, or 1%, in 1994. Newsprint and ink expense was up $5 million, or 3%, and compensation expense was up $6 million, or 2%. In 1993, the 4% increase in cost of sales resulted primarily from increased compensation costs of $12 million, or 4%, higher newsprint and ink expense of $11 million, or 6%, and the acquisitions of Contemporary Books and Compton's in 1993. Cost of sales was 50% of revenues in 1994 and 53% in 1993 and 1992. SG&A expense increased 22% in 1994 from 1993, mainly due to acquisitions. Excluding the acquisitions, SG&A expense increased $41 million, or 9%, due primarily to increased compensation costs of $12 million, or 6%, and increased sales costs of $14 million, or 20%. The 3% increase in SG&A expense in 1993 from 1992 was mainly attributable to increased compensation costs of $10 million, or 4%. The increase in depreciation and amortization of intangible assets in both 1994 and 1993 was principally due to the acquisitions and capital expenditures. PUBLISHING OPERATING PROFIT AND REVENUES -- The following table shows publishing operating revenues, EBITDA and operating profit split between daily newspapers and other publications/services/development. The latter category includes syndication of editorial products, advertising placement services, alternative publications, alternate delivery services, direct mail operations, online/electronic products and, for EBITDA and operating profit, the Company's equity losses from its investment in Picture Network International. [GRAPH APPEARS HERE]
Change (Dollars in millions) 1994 1993 1992 94-93 93-92 - ------------------------------------------------------------------------------------------ Operating revenues Daily newspapers $1,214 $1,133 $1,105 + 7% + 3% Other publications/services/development 78 66 62 + 18% + 6% - ------------------------------------------------------------------------------------------ Total operating revenues $1,292 $1,199 $1,167 + 8% + 3% - ------------------------------------------------------------------------------------------ EBITDA Daily newspapers $ 366 $ 321 $ 294 + 14% + 9% Other publications/services/development (7) (3) (6) - 121% + 45% - ------------------------------------------------------------------------------------------ Total EBITDA $ 359 $ 318 $ 288 + 13% + 11% - ------------------------------------------------------------------------------------------ Operating profit Daily newspapers $ 297 $ 259 $ 233 + 15% + 11% Other publications/services/development (10) (6) (8) - 85% + 32% - ------------------------------------------------------------------------------------------ Total operating profit $ 287 $ 253 $ 225 + 14% + 13% - ------------------------------------------------------------------------------------------
Operating revenues increased 8%, or $93 million, in 1994 due primarily to increased advertising revenues of 10%, or $88 million. Operating revenues increased 3%, or $32 million, in 1993 due to increased advertising revenues of 3%, or $24 million. Publishing operating profit rose to $287 million in 1994, a $34 million increase from 1993. This increase resulted from higher revenues, partially offset by increased costs to support these revenues and higher development expenditures. The 1993 operating profit increase of 13% was principally due to higher 1993 revenues and the absence of the $15.3 million pretax charge recorded in 1992 for the March 12, 1993 closure of the Times Tribune in Palo Alto. Excluding the Times Tribune from 1992, 1993 revenues grew 4% while operating profits rose 5%. -35- Daily newspaper operating margins for 1994 were 24.5% compared to 22.8% in 1993 and 21.1% in 1992. The increase each year was due primarily to higher revenues. Total publishing revenues by classification, excluding the Times Tribune from 1992, were as follows:
Change (Dollars in millions) 1994 1993 1992 94-93 93-92 - ------------------------------------------------------------------------------ Advertising Retail $ 461 $ 435 $ 420 + 6% + 4% General 135 121 127 + 12% - 5% Classified 385 337 305 + 14% + 11% - ------------------------------------------------------------------------------ Total advertising 981 893 852 + 10% + 5% Circulation 243 246 236 - 1% + 4% Other 68 60 60 + 13% - 2% - ------------------------------------------------------------------------------ Total revenues $1,292 $1,199 $1,148 + 8% + 4% - ------------------------------------------------------------------------------
[GRAPH APPEARS HERE] All of the Company's newspapers reported improvements in each of the three advertising categories in 1994 due to both linage and advertising rate increases. The 6% rise in retail advertising revenues was due to increases in department store and food and drug categories at nearly all of the newspapers. General advertising revenues climbed 12% due to higher advertising in the transportation and media categories. Classified advertising revenues rose 14% due to increases in help wanted, automotive and real estate advertising. Retail advertising revenues were up 4% in 1993 due to increases in the electronics and department store categories in Chicago and Fort Lauderdale. General advertising revenues declined 5% in 1993 due principally to lower advertising in the transportation and resorts categories at nearly all of the newspapers. Classified advertising revenues rose mainly due to increases in help wanted and automotive advertising. All newspapers reported improved classified advertising except the Company's newspaper in Escondido, California. The following table presents 1994, 1993 and 1992 advertising linage, excluding the Times Tribune from 1992:
Change (Inches in thousands) 1994 1993 1992 94-93 93-92 - ------------------------------------------------------------------------------ Full run Retail 4,623 4,444 4,406 + 4% + 1% General 754 641 710 + 18% - 10% Classified 6,915 6,502 6,023 + 6% + 8% - ------------------------------------------------------------------------------ Total full run 12,292 11,587 11,139 + 6% + 4% Part run 10,644 10,050 10,156 + 6% - 1% Preprint 10,646 9,822 9,101 + 8% + 8% - ------------------------------------------------------------------------------ Total inches 33,582 31,459 30,396 + 7% + 3% - ------------------------------------------------------------------------------
-36- The 1994 increases in all categories reflect improved economic conditions in most of the Company's major markets. Preprint linage also benefited from an increase in the number of advertising zones offered by the Company's newspapers. Increased zones enable advertisers to target special market areas for their advertisements. The 1993 increases in retail and classified full run linage reflect generally improved economic conditions. The decrease in general full run linage in 1993 reflects a shift in advertising to preprints. The 1993 increase in preprint advertising linage is mainly attributable to the increased number of advertising zones offered by the Company's newspapers. [GRAPH APPEARS HERE] Circulation revenues decreased 1% in 1994 due to declining copies and, excluding the Times Tribune from 1992, increased 4% in 1993 due primarily to increased newspaper prices. Total average daily circulation decreased 1% in 1994 to 1,370,000 copies from 1,386,000 copies in 1993, while total average Sunday circulation decreased 1% to 2,027,000 in 1994 from 2,041,000 copies in 1993. Total average daily circulation, excluding the Times Tribune, decreased 2% in 1993 from 1,408,000 copies in 1992, while total average Sunday circulation increased 1% from 2,029,000 copies in 1992. The decrease in average daily circulation for both years was primarily due to pricing action in Chicago, Orlando and Newport News in 1992 and a general circulation decline experienced by the newspaper industry, offset partially by an increase in circulation in Fort Lauderdale. Other revenues are derived from advertising placement services; the syndication of columns, features, information and comics to newspapers; commercial printing operations; direct mail operations; and other publishing- related activities. The increase in 1994 resulted primarily from higher revenues from advertising placement services. Other revenues declined 2% in 1993 due to a decrease in commercial printing revenues. Operating Expenses -- Publishing operating expenses increased $59 million, or 6%, in 1994 due to higher compensation, circulation and newsprint and ink expenses. Compensation costs rose $17 million, or 5%, with full-time equivalent employees unchanged from 1993. Circulation costs rose $8 million, or 6%, in 1994 primarily due to higher selling, postage and delivery expenses for expanded total market coverage in Chicago. Newsprint and ink expense increased $5 million, or 3%, in 1994. Newsprint consumption increased 8%, while the average cost of newsprint consumed declined 5% due to lower average newsprint selling prices. Newsprint prices declined in the first half of 1994 and then increased in the second half. Publishing operating expenses were flat in 1993. Excluding the Times Tribune, expenses increased $42 million, or 5%, in 1993. The increase was due to higher newsprint and ink expense and increased circulation expenses. Newsprint and ink expense rose 7%, or $13 million, in 1993 due to a 5% increase in newsprint prices and a 2% increase in consumption. Circulation costs rose 9%, or $11 million, primarily due to higher selling, postage and delivery expenses for expanding total market coverage in Chicago. Other expenses, including compensation, increased $18 million, or 3%, in 1993. Full-time equivalent employees, excluding the Times Tribune, decreased 1% in 1993. BROADCASTING AND ENTERTAINMENT OPERATING PROFIT AND REVENUES -- The following table presents operating revenues, EBITDA and operating profit for television, radio, entertainment/ Chicago Cubs and cable programming/ development. Cable programming/development includes CLTV News (a regional news cable channel) and, for EBITDA and operating profit, the Company's equity losses from its investment in TV Food Network. -37- Operating revenues, EBITDA and operating profit for the group were as follows: [GRAPH APPEARS HERE]
Change (Dollars in millions) 1994 1993 1992 94-93 93-92 - ------------------------------------------------------------------------- Operating revenues Television $599 $537 $477 + 12% +12% Radio 69 59 50 + 17% +19% Entertainment/Chicago Cubs 92 130 157 - 29% -17% Cable Programming/Development 4 1 - +190% * - ------------------------------------------------------------------------- Total operating revenues $764 $727 $684 + 5% + 6% - ------------------------------------------------------------------------- EBITDA Television $189 $147 $121 + 29% +21% Radio 13 14 12 - 5% +17% Entertainment/Chicago Cubs (24) 9 20 -375% -56% Cable Programming/Development (10) (9) - - 23% * - ------------------------------------------------------------------------- Total EBITDA $168 $161 $153 + 4% + 5% - ------------------------------------------------------------------------- Operating profit Television $162 $120 $ 95 + 35% +26% Radio 10 11 10 - 10% +10% Entertainment/Chicago Cubs (28) 4 16 -795% -74% Cable Programming/Development (12) (10) - - 20% * - ------------------------------------------------------------------------ Total operating profit $132 $125 $121 + 5% + 4% - ------------------------------------------------------------------------ * Not meaningful
[GRAPH APPEARS HERE] Broadcasting and entertainment revenues increased 5%, or $37 million, in 1994 due to a 12%, or $62 million, increase in television revenues, partially offset by a $38 million decrease in revenues from entertainment/Chicago Cubs. Television revenues were up at all of the Company's stations in 1994, with the largest increases reported by WPIX-New York, KTLA-Los Angeles and WGN-Chicago. Television revenues in 1994 include those of WLVI-Boston, acquired in April 1994. Excluding WLVI-Boston, television revenues were up 7%, or $36 million. Radio revenues include those of Farm Journal Inc., acquired in June 1994. Excluding Farm Journal, radio revenues were up 1%. Entertainment/Chicago Cubs revenues were down 29% as a result of the baseball strike and fewer shows in syndication. Revenues of approximately $30 million were lost due to the Major League Baseball strike, mostly from the Chicago Cubs. Television revenues were up at all of the Company's stations in 1993. The 12% increase in 1993 was largely due to higher revenues at WPIX-New York and KTLA- Los Angeles, as well as the addition of WPHL-Philadelphia, which was acquired June 5, 1992. Excluding WPHL, television revenues were up 9% in 1993. Radio revenues increased 19% in 1993 principally due to the addition of two Denver radio stations, KOSI-FM and KEZW-AM, acquired in January 1993. Excluding revenues from these stations, radio revenues rose 5% in 1993 primarily due to higher revenues at WQCD-New York. Entertainment/Chicago Cubs revenues decreased 17% in 1993, due to the cancellation in 1992 of the syndicated programs "The Dennis Miller Show" and "Now It Can Be Told," and the inclusion in 1992 of $12.3 million of baseball expansion fees. Excluding the expansion fees from 1992, entertainment revenues declined 9% in 1993. Operating profit was up 5% in 1994 to a record $132 million due primarily to a 35%, or $42 million, increase in television operating profit. The segment's operating profit was reduced by a $40 million loss resulting from the combined impact of the baseball strike and significant development and programming expenses for "The Road," CLTV News and TV Food Network. The baseball strike had -38- an approximate $.10 impact on the Company's 1994 primary net income per share. Broadcasting and entertainment operating profit was up 4%, or $4 million, in 1993 from 1992. The Chicago Cubs received $12.3 million of Major League Baseball expansion fees in December 1992, which was recorded in operating revenues in 1992. Excluding the expansion fees from 1992, operating profit in 1993 was up 15%, or $17 million. This increase was primarily the result of improved television and radio results due to higher revenues, partially offset by development and programming expenses for CLTV News and TV Food Network. OPERATING EXPENSES -- Expenses for the group increased 5%, or $30 million, in 1994 due principally to the two 1994 acquisitions and programming and development costs for "The Road" and TV Food Network. These increases were partially offset by the expense savings associated with the baseball strike. Excluding WLVI-Boston, Farm Journal and the Cubs, total operating expenses for the group were up 6%, or $33 million, as a result of the programming and development costs mentioned above and higher compensation costs. Compensation costs rose 8%, or $10 million, due to higher benefits and normal wage increases. Operating expenses for the broadcasting and entertainment group increased 7%, or $39 million, in 1993. The increase was principally due to higher compensation costs and higher television broadcast rights expense, partially offset by a decrease in production costs for original entertainment programming. Compensation costs increased 15% in 1993 to $184 million, primarily due to increased player compensation at the Chicago Cubs, the addition of the new television and radio stations and the January 1993 startup of CLTV News. Excluding these new operations and the Cubs, compensation costs rose 5% in 1993. Television broadcast rights expense increased $21 million, or 10%, to $221 million in 1993 due primarily to the addition of Los Angeles Dodgers and Philadelphia Phillies baseball in 1993. Production costs for original programming were down 46%, or $22 million, due to the cancellation of "The Dennis Miller Show" and "Now It Can Be Told." NEW MEDIA/EDUCATION OPERATING PROFIT AND REVENUES -- Until the fourth quarter of 1994, the new media/education segment's operating results were reported within the publishing segment. The following table presents operating revenues, EBITDA and operating profit for the new media/education segment. This segment consists of three recently acquired businesses - Contemporary Books, acquired in July 1993; Compton's, acquired in September 1993; and The Wright Group, acquired in February 1994. Contemporary Books is a publisher of nonfiction trade titles and educational books and materials. Compton's develops and distributes interactive multimedia software for the consumer and education markets. The Wright Group is a leading publisher of supplemental education materials for the elementary school market. The results of these operations are included in the consolidated statements of income from their respective dates of acquisition.
Change (Dollars in millions) 1994 1993 94-93 - ------------------------------------------------------------- Operating revenues $ 98 $ 21 + 364% EBITDA 10 4 + 175% Operating profit 3 2 + 37%
New media/education operating revenues in 1994 were $98 million. Revenues are derived from publishing supplemental education and adult education materials, trade books, and multimedia products. The multimedia products are sold primarily by Compton's and include the "Compton's Interactive Encyclopedia" and other CD-ROM titles. Operating profit for the group was $3 million in 1994, while EBITDA was $10 million. Results for 1994 were impacted by an operating loss of $11 million at Compton's. This resulted primarily from unusually high product returns and inventory write-offs of obsolete third-party products. -39- OPERATING EXPENSES -- Expenses for the group were $95 million in 1994. The major components were product costs of $29 million, selling and promotion expenses of $26 million, compensation costs of $20 million, other cash expenses of $13 million, and depreciation and amortization of $7 million. EQUITY IN QUNO NET LOSS The Company's share of QUNO's 1994 net loss was $6 million, which reduced the Company's primary net income per share by $.10. This amount represents 59% of QUNO's net loss prior to April 14, 1994, and 34% of QUNO's net loss thereafter. This compares to a 1993 equity in QUNO net loss of $18 million, which reduced 1993 primary net income per share by $.28. This loss represented 100% of QUNO's net loss prior to February 17, 1993, the date of QUNO's stock offering, and 59% of QUNO's net loss thereafter. The improvement in 1994 was the result of increased newsprint shipments and the absence of a one-time $13 million pretax charge recorded by QUNO in the 1993 fourth quarter for the closure of a pulping operation. QUNO's newsprint shipments were up 6% while average newsprint selling prices were down 1%. The Company's 1993 equity in QUNO's net loss, after interest expense and taxes, was $18 million. QUNO reported an operating loss of $31 million in 1993, $23 million less than the $54 million operating loss incurred in 1992. This was the result of higher average newsprint selling prices and lower operating expenses, partially offset by a 4% decrease in newsprint shipments and the $13 million charge recorded in 1993 for the pulping operation closure. Revenues were up 6% to $387 million in 1993 from $366 million in 1992 due to the increased newsprint selling prices and improved sawmill revenues. Operating expenses declined 1% from 1992. INTEREST INCOME AND EXPENSE The components of net interest expense were as follows:
Change (Dollars in millions) 1994 1993 1992 94-93 93-92 - --------------------------------------------------------------- Interest income $ 20 $ 19 $ 14 + 14% + 38% Interest expense (21) (25) (49) - 17% - 50% - --------------------------------------------------------------- Net interest expense $ (1) $ (6) $ (35) - 85% - 84% - ---------------------------------------------------------------
Interest income consists primarily of interest on mortgage notes receivable from real estate affiliates, the QUNO convertible debenture and short-term marketable securities. Interest expense decreased 17% in 1994 to $21 million due to lower average debt levels. Average debt levels declined approximately $97 million in 1994 to $488 million. Outstanding debt dropped to $439 million at year-end 1994 from $537 million at the end of 1993. Interest income increased 38% to $19 million in 1993 due to the convertible debenture. Interest expense decreased 50% in 1993 to $25 million due to lower average debt levels, primarily as a result of the QUNO initial public offering. Average debt levels declined approximately $280 million in 1993 to $585 million. Outstanding debt dropped to $537 million at year-end 1993 from $841 million at the end of 1992. FINANCIAL CONDITION - ------------------- LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operations was $368 million in 1994 compared to $302 million in 1993. The 1994 increase was primarily due to higher net income and changes in working capital. Net cash used for investments was $171 million for 1994 compared to $54 million in 1993. The 1994 amount includes the $95 million of proceeds received by the Company from the sale of 5.5 million shares of QUNO common stock, the acquisition of The Wright Group in February for approximately $100 million in cash, the acquisition of WLVI-Boston in April for approximately $25 million in cash, and the acquisition of Farm Journal Inc. in June for approximately $17.5 million in cash. These acquisitions were financed with available cash. In November 1994, the Company entered into an agreement to make a less than 50% equity investment in Qwest Broadcasting L.L.C., a new company formed to acquire and operate television and radio stations. Qwest has entered into an agreement to -40- acquire, pending FCC and other regulatory agencies approval, two television stations for a total of $167 million. The Company has guaranteed the payment of $150 million for one of the stations if FCC approval is not received by December 14, 1995. In March 1994, the Company contributed to a partnership in which it had a 50% interest the $35 million mortgage note it held on an office building owned and operated by the partnership. This increased the Company's ownership interest in the partnership to 99%, and the partnership is consolidated in the Company's financial statements since the date of the mortgage note contribution. Capital expenditures of $92 million in 1994 related to a variety of modernization and normal replacement projects. Capital spending for 1995 is expected to total approximately $125 million. The 1995 spending will include a variety of normal replacement projects, as well as a press expansion project at Fort Lauderdale and the relocation and expansion of WPIX-New York's news and production studios. [GRAPH APPEARS HERE] Net cash used for financing activities in 1994 was $194 million compared to $246 million in 1993. Net cash used for financing activities in 1994 included debt repayments of $77 million and dividends of $88 million. Dividends on common stock increased 8% in 1994 to $1.04 per share. In 1994, the Company acquired 946,500 shares of its common stock for approximately $49 million. This exhausted the previous authorization for share repurchases. In December 1994, the Company's board of directors authorized the Company to acquire an additional 5 million shares. At December 25, 1994, the Company had authorization to repurchase 4.96 million shares of its common stock. Net cash used for financing activities in 1993 reflects dividends of $82 million, $284 million of debt repayments primarily funded with the proceeds received from the QUNO stock offering and debt financing, and $78 million of Medium-Term Notes, Series B, issued in September 1993. The Company has revolving credit agreements with banks in the aggregate amount of $460 million that extend to December 31, 1999, and of $50 million that extend to December 31, 1995. These agreements are fully available to support the issuance of commercial paper. At December 25, 1994, the Company had commercial paper outstanding of $5 million with a weighted average interest rate of 5.6%. In 1993, the Company filed a Prospectus Supplement with the Securities and Exchange Commission relating to the offer and sale from time to time of up to $300 million principal amount of the Company's Medium-Term Notes, Series C, originally registered with the SEC under a shelf registration effective July 13, 1992. Funds borrowed under this issue will be used for general corporate purposes. [GRAPH APPEARS HERE] The Company expects to fund 1995 dividends, capital expenditures and other operating requirements primarily with net cash provided by operations. The State of Florida Department of Environmental Protection ("DEP") has issued a preliminary draft report identifying the Company's subsidiary, Sentinel Communications Company (the "Sentinel"), as a source of certain trichloroethene (TCE) groundwater contamination in downtown Orlando, Florida. Based upon separate environmental reviews performed by the Company's environmental consultants, management believes that many of the findings contained in the DEP's preliminary draft report are inaccurate and that the Sentinel is not the source of the extensive contamination. Although the Company cannot predict the ultimate resolution of this matter, based on information currently available, the Company does not believe that the resolution of this matter will have a material adverse effect on its consolidated financial position or results of operations. IMPACT OF INFLATION The Company's financial statements have been prepared in accordance with generally accepted accounting principles and are expressed in historical dollars, which measure amounts of dollars used at the dates the related transactions occurred. Management does not believe that the effects of inflation are significantly any more or less adverse on the Company's businesses than they are on other companies. -41- REPORT OF INDEPENDENT ACCOUNTANTS - --------------------------------- To the Board of Directors and Stockholders of Tribune Company In our opinion, the accompanying consolidated statements of financial position and the related consolidated statements of income, of cash flows and of stockholders' investment present fairly, in all material respects, the financial position of Tribune Company and its subsidiaries at December 25, 1994 and December 26, 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 25, 1994, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note 1 to the consolidated financial statements, in 1992 the Company changed its method of accounting for postretirement benefits other than pensions, for income taxes and for postemployment benefits. PRICE WATERHOUSE LLP Chicago, Illinois January 27, 1995 -42- Tribune Company and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME
(In thousands of dollars, except per share data) Year Ended Dec. 25, 1994 Dec. 26, 1993 Dec. 27, 1992 - ------------------------------------------------------------------------------------------------------------------------------------ OPERATING Publishing REVENUES Advertising $ 981,513 $ 892,524 $ 868,051 Circulation 242,767 246,093 238,302 Other 68,105 60,486 60,227 ------------------------------------------------------------------------------------------------------- Total 1,292,385 1,199,103 1,166,580 Broadcasting and Entertainment 764,197 727,213 684,051 New Media/Education 98,335 21,209 - Newsprint Operations - - 366,269 Intercompany - - (117,195) ------------------------------------------------------------------------------------------------------- Total operating revenues 2,154,917 1,947,525 2,099,705 - ------------------------------------------------------------------------------------------------------------------------------------ OPERATING Cost of sales (exclusive of items shown below) 1,077,508 1,025,986 1,181,401 EXPENSES Selling, general and administrative 565,409 462,374 510,362 Depreciation and amortization of intangible assets 115,375 102,762 139,579 ------------------------------------------------------------------------------------------------------- Total operating expenses 1,758,292 1,591,122 1,831,342 - ------------------------------------------------------------------------------------------------------------------------------------ OPERATING PROFIT 396,625 356,403 268,363 Equity in QUNO net loss (6,437) (18,355) - Gain on sale of QUNO stock 39,381 - - Interest income 19,731 19,039 13,782 Interest expense (20,585) (24,660) (49,254) - ------------------------------------------------------------------------------------------------------------------------------------ INCOME BEFORE INCOME TAXES 428,715 332,427 232,891 Income taxes (186,668) (143,821) (96,266) - ------------------------------------------------------------------------------------------------------------------------------------ INCOME BEFORE CUMULATIVE EFFECTS OF CHANGES IN ACCOUNTING PRINCIPLES 242,047 188,606 136,625 Cumulative effects of changes in accounting principles, net of tax - - (16,800) - ------------------------------------------------------------------------------------------------------------------------------------ NET INCOME 242,047 188,606 119,825 Preferred dividends, net of tax (18,574) (18,439) (18,168) - ------------------------------------------------------------------------------------------------------------------------------------ NET INCOME ATTRIBUTABLE TO COMMON SHARES $ 223,473 $ 170,167 $ 101,657 - ------------------------------------------------------------------------------------------------------------------------------------ NET INCOME PER SHARE Primary: Before cumulative effects of changes in accounting principles $ 3.32 $ 2.56 $ 1.82 Cumulative effects of accounting changes, net - - (.26) ------------------------------------------------------------------------------------------------------- Net income $ 3.32 $ 2.56 $ 1.56 ------------------------------------------------------------------------------------------------------- Fully diluted: Before cumulative effects of changes in accounting principles $ 3.07 $ 2.36 $ 1.70 Cumulative effects of accounting changes, net - - (.24) ------------------------------------------------------------------------------------------------------- Net income $ 3.07 $ 2.36 $ 1.46 -------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements. -43- Tribune Company and Subsidiaries CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
ASSETS (In thousands of dollars, except share data) Dec. 25, 1994 Dec. 26, 1993 - -------------------------------------------------------------------------------------------------------------- CURRENT ASSETS Cash and short-term investments $ 21,824 $ 18,524 Accounts receivable (less allowances of $33,998 and $25,432) 313,316 284,110 Inventories 33,488 26,290 Broadcast rights 155,754 144,233 Prepaid expenses and other 19,162 18,102 ---------------------------------------------------------------------------------------------- Total current assets 543,544 491,259 - -------------------------------------------------------------------------------------------------------------- INVESTMENT IN AND ADVANCES TO QUNO 265,818 250,923 - -------------------------------------------------------------------------------------------------------------- PROPERTIES Machinery, equipment and furniture 849,188 792,642 Buildings and land and leasehold improvements 361,280 314,953 ---------------------------------------------------------------------------------------------- 1,210,468 1,107,595 Accumulated depreciation (675,684) (599,552) ---------------------------------------------------------------------------------------------- 534,784 508,043 Land 60,984 54,471 Construction in progress 45,263 39,101 ---------------------------------------------------------------------------------------------- Net properties 641,031 601,615 - -------------------------------------------------------------------------------------------------------------- OTHER ASSETS Broadcast rights 195,535 217,229 Intangible assets (less accumulated amortization of $182,982 and $156,372) 834,596 719,965 Mortgage notes receivable from affiliates 83,314 119,437 Other 221,987 135,982 ---------------------------------------------------------------------------------------------- Total other assets 1,335,432 1,192,613 ---------------------------------------------------------------------------------------------- Total assets $2,785,825 $2,536,410 ----------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements. -44-
LIABILITIES AND STOCKHOLDERS' INVESTMENT Dec. 25, 1994 Dec. 26, 1993 - ----------------------------------------------------------------------------------------------------------------------------------- CURRENT LIABILITIES Long-term debt due within one year $ 27,598 $ 25,817 Employee compensation 86,821 77,335 Accounts payable 118,642 85,334 Contracts payable for broadcast rights 145,026 142,686 Accrued liabilities 96,542 106,488 Deferred income 35,766 29,009 Income taxes 19,291 38,358 -------------------------------------------------------------------------------------------------------------- Total current liabilities 529,686 505,027 - ----------------------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT (less portions due within one year) 411,200 510,838 - ----------------------------------------------------------------------------------------------------------------------------------- OTHER Deferred income taxes 149,521 87,605 NON-CURRENT Contracts payable for broadcast rights 218,102 194,846 LIABILITIES Compensation and other obligations 144,336 142,467 -------------------------------------------------------------------------------------------------------------- Total other non-current liabilities 511,959 424,918 - ----------------------------------------------------------------------------------------------------------------------------------- COMMITMENTS (see Note 8) - - - ----------------------------------------------------------------------------------------------------------------------------------- STOCKHOLDERS' Series B convertible preferred stock (without par value) INVESTMENT Authorized: 1,600,000 shares Issued and outstanding: 1,502,573 in 1994 and 1,531,084 shares in 1993 (liquidation value $220 per share) 329,286 335,532 Common stock (without par value) Authorized: 400,000,000 shares; 81,771,658 shares issued 1,018 1,018 Additional paid-in capital 112,624 105,819 Retained earnings 1,743,417 1,589,695 Treasury stock (at cost) 15,070,216 shares in 1994 and 14,791,114 shares in 1993 (636,561) (607,332) Unearned compensation related to ESOP (274,101) (298,969) Cumulative translation adjustment (20,675) (30,136) Unrealized gain on investments 77,972 - -------------------------------------------------------------------------------------------------------------- Total stockholders' investment 1,332,980 1,095,627 -------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' investment $2,785,825 $2,536,410 --------------------------------------------------------------------------------------------------------------
-45- Tribune Company and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars) Dec. 25, 1994 Dec. 26, 1993 Dec. 27, 1992 - ------------------------------------------------------------------------------------------------------------------------------------ OPERATIONS Net income $ 242,047 $ 188,606 $ 119,825 Adjustments to reconcile net income to net cash provided by operations: Equity in QUNO net loss 6,437 18,355 - Gain on sale of QUNO stock (39,381) - - Cumulative effects of accounting changes, net - - 16,800 Depreciation and amortization of intangible assets 115,375 102,762 139,579 Deferred income taxes 11,537 3,531 (35,527) (Increase) decrease in working capital items excluding effects from acquisitions: Accounts receivable (18,999) (27,311) (658) Inventories, prepaid expenses and other current assets (593) (4,288) 19,144 Accounts payable, employee compensation, deferred income and accrued liabilities 37,655 (11,166) (477) Income taxes (20,827) (2,166) (15,760) Decrease in broadcast rights net of current and long-term contracts payable 20,319 28,959 21,470 Other, net 15,217 4,676 13,948 --------------------------------------------------------------------------------------------------------------------- Net cash provided by operations 368,787 301,958 278,344 - ---------------------------------------------------------------------------------------------------------------------------------- INVESTMENTS Capital expenditures (91,626) (75,620) (130,232) Acquisitions (excluding $18.5 million of stock issued in 1993) (138,477) (98,918) (3,293) Investments (24,186) (10,408) (5,153) Proceeds from sale of QUNO stock 94,936 - - Repayment of note receivable from QUNO - 179,846 - Purchase of mortgage note - (35,500) - Other, net (12,039) (13,852) (19,372) --------------------------------------------------------------------------------------------------------------------- Net cash used for investments (171,392) (54,452) (158,050) - ---------------------------------------------------------------------------------------------------------------------------------- FINANCING Proceeds from issuance of long-term debt - 78,050 - Repayments of long-term debt (77,100) (283,968) (67,876) Sale of common stock to employees, net 20,410 46,138 31,918 Purchase of treasury stock (49,080) - - Dividends (88,325) (81,927) (80,407) Redemption of preferred stock - (4,043) (4,118) --------------------------------------------------------------------------------------------------------------------- Net cash used for financing (194,095) (245,750) (120,483) - ---------------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS 3,300 1,756 (189) Cash and short-term investments at the beginning of year 18,524 16,768 16,957 --------------------------------------------------------------------------------------------------------------------- Cash and short-term investments at the end of year $ 21,824 $ 18,524 $ 16,768 - ---------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL Cash paid for: CASH FLOW Interest (net of amounts capitalized) $ 20,957 $ 28,015 $ 53,768 INFORMATION Income taxes $ 175,965 $ 121,727 $ 128,921 ---------------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements. -46- Tribune Company and Subsidiaries CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
Common Treasury Stock Series B Stock and -------------- (In thousands, Convertible Additional Unearned Cumulative Unrealized except per share data) Preferred Paid-In Retained Amount Compensation Translation Gain on Stock Capital (1) Earnings Shares - at cost (ESOP) Adjustment Investments Total - ----------------------------------------------------------------------------------------------------------------------------------- Balance at December 29, 1991 $345,862 $102,294 $1,443,598 (17,240) $(701,527) $(342,032) $ 3,504 - $ 851,699 - ----------------------------------------------------------------------------------------------------------------------------------- Net income 119,825 119,825 Translation adjustment (27,370) (27,370) Redemptions of convertible preferred stock (5,228) 107 25 1,003 (4,118) Dividends declared Common-$.96/share (62,450) (62,450) Preferred-$17.05/share (26,502) (26,502) Tax benefit on dividends paid to the ESOP (2) 8,545 8,545 Repayment of ESOP debt 20,342 20,342 Shares issued under option and stock plans (938) 1,417 57,685 56,747 Stock tendered as payment for options exercised (494) (24,829) (24,829) - ----------------------------------------------------------------------------------------------------------------------------------- Balance at December 27, 1992 340,634 101,463 1,483,016 (16,292) (667,668) (321,690) (23,866) - 911,889 - ----------------------------------------------------------------------------------------------------------------------------------- Net income 188,606 188,606 Translation adjustment (6,270) (6,270) Redemptions of convertible preferred stock (5,102) 228 20 831 (4,043) Dividends declared Common-$.96/share (63,799) (63,799) Preferred-$17.05/share (26,104) (26,104) Tax benefit on dividends paid to the ESOP (2) 7,976 7,976 Repayment of ESOP debt 22,721 22,721 Shares issued under option and stock plans 908 1,225 50,171 51,079 Stock tendered as payment for options exercised (92) (4,941) (4,941) Shares issued for Contemporary Books acquisition 4,238 348 14,275 18,513 - ----------------------------------------------------------------------------------------------------------------------------------- Balance at December 26, 1993 335,532 106,837 1,589,695 (14,791) (607,332) (298,969) (30,136) - 1,095,627 - ----------------------------------------------------------------------------------------------------------------------------------- Net income 242,047 242,047 Translation adjustment, net of stock sale (3) 9,461 9,461 Unrealized gain on investments 77,972 77,972 Redemptions of convertible preferred stock (6,246) 1,589 114 4,657 - Dividends declared Common-$1.04/share (69,907) (69,907) Preferred-$17.05/share (25,619) (25,619) Tax benefit on dividends paid to the ESOP (2) 7,201 7,201 Repayment of ESOP debt 24,868 24,868 Purchase of treasury stock (947) (49,080) (49,080) Shares issued under option and stock plans 5,216 903 36,467 41,683 Stock tendered as payment for options exercised (349) (21,273) (21,273) - ----------------------------------------------------------------------------------------------------------------------------------- Balance at December 25, 1994 $329,286 $113,642 $1,743,417 (15,070) $(636,561) $(274,101) $(20,675) $77,972 $1,332,980 - -----------------------------------------------------------------------------------------------------------------------------------
(1) Issued shares of common stock totaled 81,771,658 for all dates presented. (2) Excludes the tax benefit on allocated preferred shares held by the ESOP, which is credited to income tax expense. (3) Includes a $14.3 million write-off of the cumulative translation adjustment related to the sale of QUNO common stock in April 1994. See Notes to Consolidated Financial Statements. -47- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The significant accounting policies of Tribune Company and subsidiaries (the "Company"), as summarized below, conform with generally accepted accounting principles and reflect practices appropriate to the businesses in which they operate. Certain prior year amounts have been reclassified to conform with the 1994 presentation. NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - ---------------------------------------------------- FISCAL YEAR - The Company's fiscal year ends on the last Sunday in December. The fiscal years included herein comprised 52 weeks. PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the accounts of Tribune Company and all majority-owned subsidiaries. Investments comprising 20 to 50 percent of the voting stock of companies and joint ventures are accounted for using the equity method. All significant intercompany transactions are eliminated. SHORT-TERM INVESTMENTS - Short-term investments are stated at cost, which approximates market value. For purposes of the consolidated statements of cash flows, investments with maturities of three months or less at the time of purchase are considered to be cash equivalents. INVENTORIES - Inventories are stated at the lower of cost or market. Cost is determined on the last-in, first-out ("LIFO") basis for newsprint and on the first-in, first-out ("FIFO") or average basis for all other inventories. BROADCAST RIGHTS - Broadcast rights consist principally of rights to broadcast syndicated programs, sports and feature films and are stated at the lower of cost or estimated net realizable value. The total cost of these rights is recorded as an asset and a liability when the program becomes available for broadcast. Broadcast rights that have limited showings are generally amortized using an accelerated method as programs are aired. Those with unlimited showings are amortized on a straight-line basis over the contract period. The current portion of broadcast rights represents those rights available for broadcast that are expected to be amortized in the succeeding year. PROPERTIES - Property, plant and equipment are stated at cost. Depreciation is computed using the straight-line method over the properties' estimated useful lives. Depreciation expense was $88.7 million in 1994, $81.1 million in 1993 and $120.5 million in 1992. INTANGIBLE ASSETS - Intangible assets primarily represent the excess of cost over the fair market value of tangible net assets acquired. The excess cost related to net assets acquired since 1971 is being amortized on a straight-line basis over various periods ranging from 3 to 40 years, with the majority over 40 years. Intangible assets of $23.5 million related to pre-1971 acquisitions are not being amortized -48- as the Company believes there has been no diminution of value. The Company evaluates the carrying value of intangibles periodically in relation to the future undiscounted cash flows of the related businesses. PENSION PLANS - The Company contributes to pension plans that provide retirement benefits for substantially all employees. These plans are sponsored either by the Company or by unions. Under the Company-sponsored plans, pension benefits are primarily a function of both the years of service and the level of compensation for a specified number of years, depending on the plan. It is the Company's policy to fund at least the minimum for Company-sponsored pension plans as required by ERISA. Contributions made to union-sponsored plans are based upon collective bargaining agreements. NEW ACCOUNTING PRINCIPLES - In 1994, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The statement generally requires the Company to record investments in debt and equity securities at their market value, except for debt securities that the Company intends to hold to maturity and equity securities that are accounted for using the equity method. At December 25, 1994, the Company has recorded an unrealized gain on investments of approximately $78 million, which is net of a tax effect of $50 million, in a separate component of stockholders' investment. The market value of the Company's long-term investments in equity securities with readily determinable fair values was approximately $87 million and the cost basis was $24 million. The QUNO convertible debenture (see note 2) has a cost basis of $138.8 million and a fair value of $204 million based on the Canadian quoted market price per share of the underlying QUNO common stock at December 25, 1994. There was no effect on net income as a result of this adoption. The Company estimates that the effect of adopting this statement in 1993 would have been to increase assets by approximately $100 million and stockholders' investment by $60 million at December 26, 1993, with no impact on net income. In 1992, the Company adopted three new accounting rules and recorded the cumulative effects of these changes in accounting principles in the 1992 consolidated statement of income. SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," resulted in an after-tax charge against earnings of $37.6 million, or $.58 per share on a primary basis. SFAS No. 109, "Accounting for Income Taxes," resulted in a credit to earnings of $26.3 million, or $.40 per share on a primary basis. SFAS No. 112, "Employers' Accounting for Postemployment Benefits," resulted in an after-tax charge against earnings of $5.5 million, or $.08 per share on a primary basis. NET INCOME PER SHARE - Primary net income per share is computed by dividing net income attributable to common shares by the weighted average number of common shares outstanding during the period. Fully diluted net income per share is computed based on the assumption that all of the convertible preferred shares are converted into common shares. For purposes of calculating fully diluted net income per share, net income is reduced by the additional Employee Stock Ownership Plan ("ESOP") contribution that would be required for ESOP debt service, and the weighted average number of shares outstanding is increased by (i) the additional common shares that would be issued upon conversion of the preferred shares based on the stated conversion rate plus any additional common shares that would have to be issued to meet the redemption price guarantee for all preferred shares that have been allocated to participants, and (ii) the effect of stock options. The numbers of common shares used in the computations of primary and fully diluted net income per share were as follows:
(In thousands) 1994 1993 1992 - -------------------------------------------------------------------------- Primary 67,213 66,371 65,018 Fully diluted 74,073 73,695 72,320
-49- NOTE 2: INVESTMENT IN QUNO CORPORATION - --------------------------------------- On February 17, 1993, the Company's previously wholly owned newsprint subsidiary, QUNO Corporation ("QUNO"), completed an initial public offering ("IPO") of 9 million shares of common stock. After the IPO, the Company held 8.8 million, or 49%, of the voting common shares and 4.2 million non-voting common shares for a combined total of 59% of QUNO's total 22 million outstanding common shares. At closing, QUNO used the net proceeds of approximately $100 million from the stock offering plus proceeds from a bank financing of approximately $80 million to repay a portion of its intercompany borrowings owed the Company. The Company has accounted for its investment in QUNO using the equity method beginning in 1993. On April 14, 1994, the Company reduced its ownership holdings in QUNO to 34% by selling 5.5 million shares of QUNO common stock. The sale of the shares resulted in an after-tax gain of approximately $13 million, or $.19 per share on a primary basis. The Company also holds a $138.8 million subordinated debenture, convertible at the option of the Company into 11.7 million voting common shares of QUNO. The debenture is callable by QUNO after December 27, 1997, matures in 2002 and bears interest at an effective rate of 2.77%. The financial statements and transactions of QUNO are maintained in its functional currency (Canadian dollars) and translated into U.S. dollars. Translation adjustments are accumulated in a separate component of stockholders' investment. QUNO manufactures newsprint for sale to the Company's newspapers and other North American and overseas customers. The Company is party to a contract with QUNO expiring in 2007 to supply newsprint based on market prices. Under the contract, the Company has agreed to purchase specified minimum amounts of newsprint each year subject to certain limitations. The specified minimum annual volume is 250,000 metric tons in years 1995 to 1999, 225,000, 200,000 and 175,000 metric tons in years 2000 to 2002, respectively, and 150,000 metric tons in each of years 2003 to 2007. In 1994 and 1993, respectively, 27% and 33% of QUNO's sales, or $112.8 million and $127.2 million, were to the Company's newspapers, which represented 67% and 74% of their consumption. During the period that QUNO was a wholly owned subsidiary, provision was made for U.S. income taxes on undistributed earnings of QUNO that were expected to be remitted to the Company. No provision for U.S. income taxes, however, was made on undistributed earnings that were intended to be reinvested in facilities and other assets in Canada for an indefinite period of time. At December 25, 1994, the cumulative amount of unremitted earnings and other book/tax bases differences for which no deferred taxes have been provided was approximately $35 million. Approximately $24 million of deferred taxes on the unremitted earnings have not been recorded and would be recognized if and when additional QUNO shares are sold. Since the IPO, no U.S. tax benefit has been provided on the Company's share of QUNO's net losses. The unrecognized tax benefit on these losses is approximately $10 million at December 25, 1994. NOTE 3: CHANGES IN OPERATIONS AND UNUSUAL ITEMS - ------------------------------------------------ ACQUISITIONS -- The Company recorded acquisitions totaling $138.5 million in 1994, $117.4 million in 1993 and $3.3 million in 1992. These acquisitions were all accounted for as purchases. The intangibles recorded on these acquisitions are being amortized on a straight-line basis over periods from 3 to 40 years. The results of these operations are included in the consolidated statements of income from the respective dates of their acquisitions. On February 18, 1994, the Company acquired The Wright Group, a leading publisher of supplemental education materials for the elementary school market, for approximately $100 million in cash. On April 6, 1994, the Company acquired independent television station WLVI-Boston for approximately $25 million in cash. On June 30, 1994, the Company acquired Farm Journal Inc., publisher of The Farm Journal, the nation's leading farm magazine, for approximately $17.5 million in cash. -50- The Company has entered into an agreement to make a less than 50% equity investment in Qwest Broadcasting, L.L.C., a new company formed to acquire and operate television and radio stations. In November 1994, Qwest agreed to acquire television stations in Atlanta (WATL) and New Orleans (WNOL) for approximately $167 million. These acquisitions are pending approvals of the Federal Communications Commission and other regulatory agencies and are expected to close in 1995. The Company will provide certain services to each of the stations under a cost-sharing agreement with Qwest. As part of this transaction, Qwest has agreed to pay $150 million to WATL's current owner even if regulatory approvals have not been received by December 14, 1995. The Company has guaranteed this payment. The Company acquired two Denver radio stations, KOSI-FM and KEZW-AM, on January 6, 1993 for $19.9 million in cash. On July 28, 1993, the Company acquired Contemporary Books, Inc., a publisher of nonfiction trade titles and educational books and materials, for approximately $22 million in cash and $18.5 million in common stock. On September 13, 1993, the Company acquired Compton's Multimedia Publishing Group for approximately $57 million in cash. Compton's develops and distributes interactive multimedia software for the consumer and education markets. DISPOSITION -- The Company recorded a $15.3 million pretax charge in the fourth quarter of 1992 as a result of its decision to close The Peninsula Times Tribune, a Palo Alto-based newspaper, which ceased operations on March 12, 1993. Total operating revenues and losses for the Times Tribune in 1992 were not material. BASEBALL EXPANSION FEES -- In December 1992, the Company's Chicago Cubs subsidiary received Major League Baseball expansion fees totaling $12.3 million. The fees have been included in operating revenue and profit of the broadcasting and entertainment business segment. NOTE 4: MORTGAGE NOTES RECEIVABLE FROM AFFILIATES - -------------------------------------------------- The Company holds a mortgage note resulting from the sale in 1982 of the New York Daily News building to a limited partnership in which the Company holds a 23% interest. The note is due December 31, 1997, can be prepaid beginning December 31, 1996, and bears interest at 13% plus contingent interest based upon the building's cash flow and appreciation. In 1993, the Company purchased a mortgage note for $35.5 million on a building owned by a partnership in which the Company held a 50% interest. In 1994, the Company contributed the mortgage note to the partnership and, for $1.6 million in cash, acquired an additional 49% of the partnership. Subsequent to this transaction, the partnership has been consolidated in the Company's financial statements. NOTE 5: INVENTORIES - -------------------- Inventories consist of:
(In thousands) Dec. 25, 1994 Dec. 26, 1993 - ---------------------------------------------------------------------------- Finished goods $13,893 $ 3,202 Supplies and materials 11,935 13,100 Newsprint (at LIFO) 7,660 9,988 - ---------------------------------------------------------------------------- Total inventories $33,488 $26,290 - ----------------------------------------------------------------------------
If newsprint inventories were valued at FIFO cost, such inventories would have been greater by $8.0 million at December 25, 1994, $9.3 million at December 26, 1993 and $8.5 million at December 27, 1992. NOTE 6: CONTRACTS PAYABLE FOR BROADCAST RIGHTS - ----------------------------------------------- Contracts payable for broadcast rights are classified as current or long-term liabilities in accordance with the payment terms of the contracts. Required payments under contractual agreements for broadcast rights recorded at December 25, 1994 are: $145.0 million in 1995, $102.5 million in 1996, $59.7 million in 1997, $27.0 million in 1998, $15.0 million in 1999 and $13.9 million thereafter. -51- NOTE 7: LONG-TERM DEBT - ----------------------- Long-term debt consists of:
(In thousands) Dec. 25, 1994 Dec. 26, 1993 - -------------------------------------------------------------------------------- Promissory notes, weighted average interest rate of 5.6% in 1994 and 3.3% in 1993 $ 4,992 $ 41,829 Medium-term notes, weighted average interest rates of 7.0% and 7.3% , due 1994-2003 135,800 163,200 8.4% guaranteed ESOP notes, due 1994-2003 259,172 280,999 8.19% guaranteed ESOP note, due 1994-1998 14,929 17,970 Other notes and obligations 23,905 32,657 - -------------------------------------------------------------------------------- Total debt 438,798 536,655 Less portions due within one year (27,598) (25,817) - -------------------------------------------------------------------------------- Long-term debt $411,200 $510,838 - --------------------------------------------------------------------------------
In 1990, the Company began offering up to $200.0 million of its Series B medium-term notes, which have maturities from 2 to 10 years and may not be redeemed by the Company prior to maturity. The proceeds from the sale of the notes have been used for general corporate purposes. The final $78 million of these notes were issued during 1993. The notes issued by the Company's ESOP are unconditionally guaranteed by the Company as to payment of principal and interest. Therefore, the unpaid balance of these borrowings is reflected in the accompanying consolidated statements of financial position as long-term debt. An amount equivalent to the unpaid balance of these borrowings, representing unearned employee compensation, is recorded as a reduction of stockholders' investment. Certain debt agreements limit the amount of secured debt the Company can incur without equally and ratably securing additional borrowings under those agreements. In 1995, the Company intends to refinance $5.0 million of promissory notes and $8.5 million of Series B medium-term notes scheduled to mature in 1995, and has the ability to do so on a long-term basis through existing revolving credit agreements. Accordingly, these notes were classified as long-term and treated as maturing in fiscal year 1999. The Company has revolving credit agreements with a number of banks in the aggregate amount of $510.0 million that are fully available to support the issuance of promissory notes. These agreements contain various interest rate options and provide for annual fees based on a percentage of the commitment. Such fees totaled approximately $.7 million in 1994 and $.5 million in 1993 and 1992. A total of $460 million of the credit agreements extend to December 31, 1999 and $50 million terminate at December 31, 1995. Long-term debt at December 25, 1994 matures as follows: $27.6 million in 1995, $40.3 million in 1996, $60.3 million in 1997, $34.5 million in 1998, $40.9 million in 1999 and $235.2 million thereafter. NOTE 8: COMMITMENTS - -------------------- The Company has entered into commitments for broadcast rights that are not currently available for broadcast and are therefore not included in the financial statements. These commitments totaled approximately $237 million at December 25, 1994. Payments for broadcast rights generally commence when the programs become available for broadcast. The Company had commitments totaling approximately $77 million at December 25, 1994 related to the purchase of property, plant and equipment and to talent contracts. The Company leases certain equipment and office and production space under various operating leases. Rental expense totaled $24.6 million in 1994, $26.2 million in 1993 and $28.0 million in 1992. Future minimum rental commitments under non-cancelable operating leases are $15.4 million in 1995, $14.4 million in 1996, $12.0 million in 1997, $10.8 million in 1998, $9.7 million in 1999 and $55.1 million thereafter. -52- NOTE 9: FAIR VALUE OF FINANCIAL INSTRUMENTS - -------------------------------------------- Estimated fair values and carrying amounts of the Company's financial instruments at December 25, 1994 and December 26, 1993 were as follows:
1994 1993 Fair Carrying Fair Carrying (In thousands) Value Amount Value Amount - --------------------------------------------------------------------------------------- Investments in less than 20% owned companies: Practicable to estimate fair value $ 87,211 $ 87,211 $ 47,536 $ 10,624 Not practicable - 5,887 - 6,939 QUNO debenture 204,342 204,342 202,323 138,757 Mortgage notes receivable 91,135 83,937 138,235 119,986 Debt 459,453 438,798 574,142 536,655 Contracts payable for broadcast rights 316,809 363,128 299,433 337,532
The following methods and assumptions were used to estimate the fair value of each class of financial instruments. INVESTMENTS IN LESS THAN 20% OWNED COMPANIES AND QUNO DEBENTURE - In 1994, upon adoption of SFAS No. 115 (see note 1), certain of these investments and the QUNO debenture have been recorded at fair value in the consolidated financial statements. For other investments for which there are no readily determinable market prices, it was not practicable to estimate fair value. MORTGAGE NOTES RECEIVABLE - Fair value was estimated using the discounted cash flow method. DEBT - Fair value of the Company's debt was determined based on quoted market prices for similar issues or on current rates available to the Company for debt of the same remaining maturities and similar terms. CONTRACTS PAYABLE FOR BROADCAST RIGHTS - Fair value of contracts payable for broadcast rights, which are not discounted in the consolidated statements of financial position, was estimated using the discounted cash flow method. NOTE 10: CAPITAL STOCK - ------------------------ Under the Company's Restated Certificate of Incorporation, 5.0 million shares of preferred stock are authorized. In 1989, the Company established a series of 1.6 million shares of Series B Convertible Preferred Stock of which 1.59 million shares were issued to the Company's ESOP. Each share of such preferred stock pays a cumulative dividend of 7.75% annually, has a liquidation value of $220 per share, is convertible into four shares of the Company's common stock and is voted with the common stock with an entitlement to 4.58 votes per preferred share. In December 1987, the Company adopted a Share Purchase Rights Plan and declared a distribution of one right on each outstanding share of the Company's common stock. Each right will entitle stockholders to buy one one-hundredth of a share of Series A Junior Participating Preferred Stock at an exercise price of $150. The rights have no voting rights and are not exercisable until 10 days after the occurrence of certain triggering events, upon which the holders of the rights are entitled to purchase either the common stock of an acquiror or additional common stock of the Company at a discounted price. The rights are redeemable at the option of the Company for $.01 per right. The Company has established a series of 800,000 shares of Series A Junior Participating Preferred Stock in connection with the plan, none of which have been issued. The Board from time to time has authorized the repurchase of shares of the Company's common stock in the open market or through private transactions to be used for employee benefit programs. In 1994, the Company acquired 946,500 shares of its common stock for approximately $49 million. At December 25, 1994, the Company had authorization to repurchase an additional 4.96 million shares of its common stock. There were approximately 4,500 holders of record of the Company's common stock at January 27, 1995. -53- NOTE 11: INCENTIVE COMPENSATION AND STOCK PLANS - ------------------------------------------------- EMPLOYEE STOCK OWNERSHIP PLAN (ESOP) - In 1988, the Company established an ESOP as a long-term employee benefit plan to supplement the Company's U.S. employee pension plan. In connection therewith, the ESOP purchased, in 1988 and 1989, approximately 800,000 common shares and 1.59 million Series B convertible preferred shares for an aggregate of $375.0 million. The ESOP provides for the awarding of shares of the Company's preferred and common stock on a noncontributory basis to eligible non-union employees of the Company. At December 25, 1994, 6.0 million shares of common stock were reserved for issuance in connection with this plan. Shares of stock held by the ESOP have been placed with the ESOP Trustee and are allocated to eligible employees annually. These common and preferred shares are allocated in the same proportion that the current year's principal and interest payments bear to the total principal and interest paid over the lives of the related borrowings. Each preferred share is convertible into four shares of the Company's common stock. The ESOP Trustee must convert the preferred shares when making distributions to participants upon their withdrawal from the ESOP. If at the time of such conversion, the price of the Company's common stock is below $55 per share, the Company must, at its option, either pay the difference in cash or issue additional common stock. As of December 25, 1994, approximately 87,897 shares of Series B Convertible Preferred Stock have been redeemed and 429,078 shares have been allocated. The Company recognizes expense for this plan based upon cash contributions it makes to the ESOP. The ESOP services its debt requirements with amounts received from preferred dividends, common dividends earned on unallocated common shares and Company contributions. The following table summarizes ESOP debt service activity for the three years ended December 25, 1994:
(In thousands) 1994 1993 1992 - ------------------------------------------------------- Debt Requirements: Principal $24,868 $22,721 $20,342 Interest 25,015 26,932 28,885 - ------------------------------------------------------- Total $49,883 $49,653 $49,227 - ------------------------------------------------------- Debt Service: Dividends $26,019 $26,548 $27,019 Company cash contributions 23,864 23,105 22,208 - ------------------------------------------------------- Total $49,883 $49,653 $49,227 - -------------------------------------------------------
EMPLOYEE STOCK PURCHASE PLAN - This plan permits eligible employees to purchase shares of the Company's common stock at 85% of market price. A total of 4.0 million shares of stock may be sold under the plan. The Company's only expense relating to this plan is for its administration. During 1994, 1993 and 1992, 110,925, 99,809 and 121,747 shares, respectively, were sold to employees under this plan. As of December 25, 1994, a total of 2.3 million shares were available for sale. SAVINGS INCENTIVE PLAN - The Company maintains various qualified Savings Incentive Plans, whereby eligible employees may make voluntary contributions to these plans on a pre-tax salary reduction basis. The plans provide for uniform employer contributions to eligible employees of $.25 for each $1.00 contributed by participants up to 4% of the participants' compensation. These plans allow participants to invest their savings in various investments including the Company's common stock. Company contributions to these plans for each of the last three years were not material. The Company had 400,000 shares of common stock reserved for possible issuance under these plans at December 25, 1994. -54- RESTRICTED STOCK PLAN FOR OUTSIDE DIRECTORS - This plan provides for the granting of restricted shares of the Company's common stock to outside directors. The Company has reserved 50,000 shares of common stock in connection with this plan. Upon each election or re-election, each outside director receives an award of 300 shares of the Company's common stock for each year in the term for which he or she is elected. The Company granted 2,700, 2,700 and 2,100 shares of its common stock under this plan in 1994, 1993 and 1992, respectively. At December 25, 1994, 29,000 shares were available for future grant in connection with this plan. 1992 LONG-TERM INCENTIVE PLAN - In 1992, the 1984 Long-Term Performance Plan was terminated and replaced with the 1992 Long-Term Incentive Plan. Remaining options outstanding under the 1984 plan at December 25, 1994 totaled 2.1 million shares. No further awards will be made under the 1984 plan. The 1992 plan provides for the granting of stock options or various other types of awards to eligible employees. General awards available under this plan, on an annual basis, are equal to nine-tenths of one percent (.009) of the adjusted average number of common shares outstanding used by the Company to calculate fully diluted net income per share for the preceding year, plus shares of stock available for awards in previous years that have not been awarded, and any previously forfeited or expired options. At December 25, 1994 and December 26, 1993, approximately .7 million shares were available for general awards. An additional number of shares is available for replacement options. The number of shares available for replacement options is generally equal to four- tenths of one percent (.004) of the adjusted average number of common shares outstanding used by the Company to calculate fully diluted net income per share for the preceding year, plus shares available under the 1984 Long-Term Performance Plan for which no awards had been granted prior to its termination, plus shares of stock available for awards in previous years that have not been awarded, and any previously forfeited or expired replacement options. At December 25, 1994 and December 26, 1993, 2.3 million and 2.0 million shares, respectively, were available for replacement options. Shares not awarded in any year carry over and are available for award in subsequent years. Under the 1992 plan, only 3.0 million of the shares available for general awards may be used for certain outright stock awards and other stock-based awards, and only 3.0 million of the shares may be used for incentive stock options. No such awards have been granted. The option price is the market value of the Company's common stock at the time the option is granted. Options are exercisable not less than six months or more than 11 years after the date the option is granted. At December 25, 1994, 3.2 million options were exercisable. A combined summary of stock option activity and prices is as follows:
(Shares in thousands) 1994 1993 1992 - ---------------------------------------------------------------------------------- Options Outstanding Beginning of year 4,893 5,261 5,596 Granted 1,050 889 1,187 Exercised (832) (1,131) (1,293) Cancelled (66) (126) (229) - ---------------------------------------------------------------------------------- End of year 5,045 4,893 5,261 Prices of Options Granted $ 49 5/8 - 63 1/8 $51 1/8 - 57 7/8 $41 1/4 - 50 3/8 Exercised 16 7/8 - 57 3/4 16 7/8 - 47 3/8 16 7/8 - 41 Outstanding at year end 20 1/16 - 63 1/8 16 7/8 - 57 7/8 16 7/8 - 57 3/4
-55- NOTE 12: EMPLOYEE PENSION PLANS - -------------------------------- The Company amended its Company-sponsored U.S. pension plans, effective January 1989, for employees not covered by a collective bargaining agreement. The amendments were made in connection with the establishment of the Company's ESOP and to comply with the provisions of the Tax Reform Act of 1986. These pension plans will continue to provide substantially the same pension benefits as under the pre-amended plans until December 1998. After that date, the plans provide that the pension benefit credits will be frozen in terms of pay and service. Net pension expense (credit) for Company-sponsored plans in 1994, 1993 and 1992 included the following components:
(In thousands) 1994 1993 U.S. QUNO - ----------------------------------------------------------------------------- Benefits earned during the period (service costs) $ 9,038 $ 8,000 $ 7,699 $ 3,288 Interest cost on projected benefit obligation 17,912 17,900 17,364 15,180 Recognized return on plan assets (27,424) (27,151) (27,036) (17,549) Amortization, net (380) (511) (443) (337) - ------------------------------------------------------------------------------ Net pension expense (credit) $ (854) $ (1,762) $ (2,416) $ 582 - ------------------------------------------------------------------------------
Actual returns on U.S. plan assets were: loss of $2.0 million in 1994 and gains of $37.1 million in 1993 and $21.1 million in 1992. Actual returns on plan assets for Canadian plans were gains of $7.6 million in 1992. The following table sets forth the funded status of the Company-sponsored pension plans as of year-end 1994 and 1993:
(In thousands) 1994 1993 - --------------------------------------------------------------------- Plans' assets at fair value $281,515 $297,125 Less: Actuarial present value of benefit obligations Vested benefits 229,019 224,800 Non-vested benefits 9,024 12,900 - --------------------------------------------------------------------- Accumulated benefit obligation 238,043 237,700 Projected future salary increases 12,917 16,188 - --------------------------------------------------------------------- Projected benefit obligation 250,960 253,888 - --------------------------------------------------------------------- Plans' assets in excess of projected benefit obligation 30,555 43,237 Unrecognized net asset at transition being amortized through 2001 (13,686) (15,251) Unrecognized net loss due to actual experience varying from actuarial assumptions 15,717 2,509 Unrecognized prior service costs 906 1,932 - --------------------------------------------------------------------- Pension asset recognized in the consolidated statements of financial position $ 33,492 $ 32,427 - ---------------------------------------------------------------------
The plans' assets consist primarily of listed common stocks and bonds, including 350,725 shares of the Company's common stock having an aggregate market value of $18.9 million at December 25, 1994. In determining the projected benefit obligation for the U.S. plans, the weighted average assumed discount rate used was 8.5% in 1994 and 7.25% in 1993, while the average rate of increase in future salary levels was 5.0% for 1994 and 4.5% for 1993. The weighted average expected long-term rate of return on assets used in determining net pension credit was 9.75% in 1994, 10% in 1993 and 10.5% in 1992. For the Canadian plans in 1992, the expected long-term rate of return on assets was 8.5%. Total pension expense for union-sponsored pension plans was $5.8 million in 1994, $4.9 million in 1993 and $5.1 million in 1992. The Company's portion of assets and liabilities for multi-employer union pension plans is not determinable. -56- NOTE 13: POSTRETIREMENT BENEFITS OTHER THAN PENSIONS - ----------------------------------------------------- The Company provides postretirement health care and life insurance benefits to eligible employees under a variety of plans. Employees become eligible for these benefits if they meet age and service requirements. For U.S. plans and effective January 1991, the Company provides a fixed medical contribution to participants who retire between the age of 55 to 65 and have 10 or more years of service. Medical coverage for these participants ends when they reach age 65. Retirees are also eligible for life insurance benefits, which are primarily a function of both the years of service and the level of compensation at retirement. The cost of postretirement medical and life benefits is accrued over the active service periods of employees to the date they attain full eligibility for such benefits. It is the Company's policy to fund postretirement benefits as claims are incurred. Postretirement benefit cost for 1994, 1993 and 1992 included the following components:
1992 (In thousands) 1994 1993 U.S. QUNO - --------------------------------------------------------------------------- Service cost of benefits earned during the year $ 350 $ 288 $ 278 $ 492 Interest cost on accumulated postretirement benefit obligation ("APBO") 3,069 3,159 3,175 2,249 - --------------------------------------------------------------------------- Postretirement benefit cost $ 3,419 $ 3,447 $3,453 $2,741 - ---------------------------------------------------------------------------
The plans' APBO and postretirement liability were composed of the following:
(In thousands) Dec. 25, 1994 Dec. 26, 1993 - ---------------------------------------------------------------------------- Actuarial present value of benefit obligations: Retirees $35,079 $37,193 Active participants, fully eligible 2,158 2,271 Other participants 3,489 3,673 - ---------------------------------------------------------------------------- APBO 40,726 43,137 Unrecognized net gain (loss) due to actual experience varying from actuarial assumptions 2,774 (1,488) - ---------------------------------------------------------------------------- Postretirement benefit liability $43,500 $41,649 - ----------------------------------------------------------------------------
In determining the APBO for U.S. participants, the weighted average assumed discount rate used was 8.5% in 1994 and 7.25% in 1993, while the average rate of increase in future salary levels was 5.0% in 1994 and 4.5% in 1993. Increases of 12.6% and 10.5% in the cost of covered health care benefits were assumed for fiscal 1995 for pre-age 65 employees and post-age 65 employees, respectively. These rates were assumed to decrease ratably to 7.0% after nine years and remain at that level thereafter. The effect of a one percentage point increase in the assumed health care cost trend rate for each future year for U.S. employees would increase the total APBO at year-end 1994 by $2.6 million and the 1994 net benefit cost by $.2 million. NOTE 14: CONTINGENCIES AND LEGAL PROCEEDINGS - --------------------------------------------- The Company and its subsidiaries are defendants from time to time in actions for libel and other matters arising out of their business operations. In addition, the Company and its subsidiaries are involved from time to time as parties in various regulatory, environmental and other proceedings with governmental authorities and administrative agencies. The State of Florida Department of Environmental Protection ("DEP") has issued a preliminary draft report identifying the Company's subsidiary, Sentinel Communications Company (the "Sentinel"), as a source of certain trichloroethene (TCE) groundwater contamination in downtown Orlando, Florida. Based upon separate environmental reviews performed by the Company's environmental consultants, management believes that many of the findings contained in the DEP's preliminary draft report are inaccurate and that the Sentinel is not the source of the extensive contamination. The Company does not believe that any of the matters or proceedings presently pending will have a material adverse effect on its consolidated financial position or results of operations. -57- NOTE 15: SEGMENT INFORMATION - ----------------------------- Tribune Company is an information and entertainment company comprising three business segments. The Company's publishing segment consists of six daily newspapers and other related publications and services. The principal newspapers are the Chicago Tribune, the Fort Lauderdale-based Sun-Sentinel and The Orlando Sentinel. The Company's new media/education segment is composed of educational and reference publishing operations and includes Contemporary Books, Compton's and The Wright Group. The Company's broadcasting operations consist of independent television stations in New York, Los Angeles, Chicago, Philadelphia, Boston, Denver and New Orleans, a CBS television affiliate in Atlanta and six radio stations. In entertainment, the Company owns the Chicago Cubs baseball team, produces and syndicates television programming and has interests in cable programming. The Company currently holds a 34% ownership interest in QUNO Corporation, which manufactures newsprint for sale to the Company's newspapers and other North American and overseas customers. Prior to February 1993, when QUNO completed an initial public offering, QUNO was a wholly owned subsidiary and was reported as the newsprint operations business segment. Beginning in 1993, QUNO is no longer consolidated in the company's financial statements. Financial data for each of the Company's business segments is presented on page 60. In calculating operating profit for each segment, none of the following items have been added or deducted: interest income and expense, non-operating gains and losses, equity in QUNO net loss or income taxes. Assets represent those identifiable tangible and intangible assets used in the operations of each segment. The Company's cost of sales by business segment is as follows:
(In thousands) 1994 1993 1992 - -------------------------------------------------------------------------- Publishing $ 630,276 $ 607,181 $ 599,677 Broadcasting and Entertainment 412,704 410,007 384,860 New Media/Education 34,528 8,798 - - -------------------------------------------------------------------------- Total 1,077,508 1,025,986 984,537 Newsprint Operations - - 314,059 Intercompany (newsprint) - - (117,195) - -------------------------------------------------------------------------- Total cost of sales $1,077,508 $1,025,986 $1,181,401 - --------------------------------------------------------------------------
NOTE 16: INCOME TAXES - ---------------------- The amounts of income (loss) before income taxes and cumulative effects of accounting changes attributable to U.S. and foreign operations, and a reconciliation of income taxes computed at the U.S. federal statutory rate to income taxes reported in the consolidated statements of income follow:
(In thousands) 1994 1993 1992 - -------------------------------------------------------------------------- Income (loss) before income taxes and accounting changes U.S. $435,152 $350,782 $321,989 Foreign (6,437) (18,355) (89,098) - -------------------------------------------------------------------------- $428,715 $332,427 $232,891 Federal income taxes at 35% in 1994 and 1993 and 34% in 1992 $150,050 $116,349 $ 79,183 Increase (decrease) resulting from: State and local income taxes, net of federal tax 22,500 18,502 15,781 Gain on sale of QUNO stock 12,598 - - Equity in QUNO net loss 2,253 6,424 - Amortization of intangible assets 4,912 4,814 5,141 Other (5,645) (2,268) (3,839) - -------------------------------------------------------------------------- Income taxes reported $186,668 $143,821 $ 96,266 Effective tax rate 43.5% 43.3% 41.3% - --------------------------------------------------------------------------
-58- Components of income tax expense charged to income before cumulative effects of accounting changes were as follows:
(In thousands) 1994 1993 1992 - -------------------------------------------------------------------------- Currently payable U.S. Federal $149,240 $106,678 $101,856 Foreign - - 1,812 State 39,960 28,654 24,027 - -------------------------------------------------------------------------- 189,200 135,332 127,695 - -------------------------------------------------------------------------- Deferred U.S. Federal (979) 8,679 534 Foreign - - (31,847) State (1,553) (190) (116) - -------------------------------------------------------------------------- (2,532) 8,489 (31,429) - -------------------------------------------------------------------------- Total $186,668 $143,821 $ 96,266 - --------------------------------------------------------------------------
Significant components of the Company's net deferred tax liabilities were as follows:
(In thousands) Dec. 25, 1994 Dec. 26, 1993 - -------------------------------------------------------------------------- Net properties $ 93,229 $ 98,680 Net intangible assets 61,113 64,006 Pensions 12,483 12,452 Unrealized gain on investments 50,324 - Investment in QUNO common stock 12,340 - Other future taxable items 17,710 7,522 - -------------------------------------------------------------------------- Total deferred tax liabilities 247,199 182,660 - -------------------------------------------------------------------------- Broadcast rights (27,250) (27,991) Postretirement and postemployment benefits other than pensions (19,461) (17,457) Deferred compensation (26,241) (27,091) Disposition of New York Daily News (7,645) (9,218) Other accrued liabilities (19,817) (12,144) Accrued employee compensation (14,122) (10,988) Federal benefit on deferred state taxes (14,748) (13,125) Accounts receivable (10,275) (10,556) Other future deductible items (12,495) (3,197) - -------------------------------------------------------------------------- Total deferred tax assets (152,054) (131,767) - -------------------------------------------------------------------------- Net deferred tax liability $ 95,145 $ 50,893 - --------------------------------------------------------------------------
-59- Tribune Company and Subsidiaries BUSINESS SEGMENTS
(In thousands of dollars) 1994 1993 1992 - ------------------------------------------------------------------------------------------------ OPERATING REVENUES Publishing $1,292,385 $1,199,103 $1,166,580 Broadcasting and Entertainment (1) 764,197 727,213 684,051 New Media/Education 98,335 21,209 - - ------------------------------------------------------------------------------------------------ Total 2,154,917 1,947,525 1,850,631 Newsprint Operations - - 366,269 Intercompany - - (117,195) - ------------------------------------------------------------------------------------------------ Total operating revenues $2,154,917 $1,947,525 $2,099,705 - ------------------------------------------------------------------------------------------------ OPERATING PROFIT Publishing (2) $ 287,590 $ 253,050 $ 224,509 Broadcasting and Entertainment (1) 132,413 125,684 121,267 New Media/Education 2,829 2,071 - Corporate expenses (26,207) (24,402) (23,643) - ------------------------------------------------------------------------------------------------ Total 396,625 356,403 322,133 Newsprint Operations - - (53,770) - ------------------------------------------------------------------------------------------------ Total operating profit $ 396,625 $ 356,403 $ 268,363 - ------------------------------------------------------------------------------------------------ CAPITAL EXPENDITURES Publishing $ 51,205 $ 50,647 $ 66,971 Broadcasting and Entertainment 21,041 18,782 20,958 New Media/Education 4,905 721 - Corporate 14,475 5,470 420 - ------------------------------------------------------------------------------------------------ Total 91,626 75,620 88,349 Newsprint Operations - - 41,883 - ------------------------------------------------------------------------------------------------ Total capital expenditures $ 91,626 $ 75,620 $ 130,232 - ------------------------------------------------------------------------------------------------ DEPRECIATION AND AMORTIZATION OF INTANGIBLE ASSETS Publishing $ 71,629 $ 65,387 $ 63,465 Broadcasting and Entertainment 35,107 35,203 31,753 New Media/Education 7,064 1,529 - Corporate 1,575 643 880 - ------------------------------------------------------------------------------------------------ Total 115,375 102,762 96,098 Newsprint Operations - - 43,481 - ------------------------------------------------------------------------------------------------ Total depreciation and amortization of intangible assets $ 115,375 $ 102,762 $ 139,579 - ------------------------------------------------------------------------------------------------ ASSETS Publishing $ 757,889 $ 880,384 $ 856,383 Broadcasting and Entertainment 1,321,768 1,155,331 1,149,482 New Media/Education 210,445 107,964 - Corporate 495,723 392,731 133,181 Intercompany receivables - - (10,747) - ------------------------------------------------------------------------------------------------ Total 2,785,825 2,536,410 2,128,299 Newsprint Operations - - 623,271 - ------------------------------------------------------------------------------------------------ Total assets $2,785,825 $2,536,410 $2,751,570 - ------------------------------------------------------------------------------------------------
(1) 1992 includes $12.3 million of Major League Baseball expansion fees. (2) 1992 includes a $15.3 million pretax charge for the closure of The Peninsula Times Tribune. -60-
Tribune Company and Subsidiaries QUARTERLY RESULTS (Unaudited) Quarters 1994 (In thousands of dollars, except per share data) First Second Third Fourth Total - ------------------------------------------------------------------------------------------------------------------------------ OPERATING Publishing $ 314,886 $ 321,153 $ 308,288 $ 348,058 $1,292,385 REVENUES (1) Broadcasting and Entertainment 146,948 223,085 179,986 214,178 764,197 New Media/Education 18,884 27,049 23,542 28,860 98,335 ---------------------------------------------------------------------------------------------------------------- Total operating revenues $ 480,718 $ 571,287 $ 511,816 $ 591,096 $2,154,917 - ------------------------------------------------------------------------------------------------------------------------------ OPERATING Publishing $ 69,237 $ 76,325 $ 60,354 $ 81,674 $ 287,590 PROFIT Broadcasting and Entertainment 20,375 50,247 23,699 38,092 132,413 New Media/Education 1,330 2,631 (5,311) 4,179 2,829 Corporate expenses (6,340) (6,418) (6,813) (6,636) (26,207) ---------------------------------------------------------------------------------------------------------------- Total operating profit 84,602 122,785 71,929 117,309 396,625 - ------------------------------------------------------------------------------------------------------------------------------ Equity in QUNO net income (loss) (9,123) (636) 3,923 (601) (6,437) Gain on sale of QUNO stock (2) - 39,381 - - 39,381 Net interest expense (1,226) 32 473 (133) (854) - ------------------------------------------------------------------------------------------------------------------------------ INCOME BEFORE INCOME TAXES 74,253 161,562 76,325 116,575 428,715 Income taxes (34,184) (76,530) (28,498) (47,456) (186,668) - ------------------------------------------------------------------------------------------------------------------------------ NET INCOME 40,069 85,032 47,827 69,119 242,047 Preferred dividends, net of tax (4,644) (4,643) (4,644) (4,643) (18,574) - ------------------------------------------------------------------------------------------------------------------------------ NET INCOME ATTRIBUTABLE TO COMMON SHARES $ 35,425 $ 80,389 $ 43,183 $ 64,476 $ 223,473 - ------------------------------------------------------------------------------------------------------------------------------ NET INCOME PER SHARE (3) Primary $ .53 $ 1.19 $ .64 $ .96 $ 3.32 ---------------------------------------------------------------------------------------------------------------- Fully diluted $ .49 $ 1.09 $ .60 $ .89 $ 3.07 - ------------------------------------------------------------------------------------------------------------------------------ COMMON DIVIDENDS PER SHARE $ .26 $ .26 $ .26 $ .26 $ 1.04 - ------------------------------------------------------------------------------------------------------------------------------ COMMON STOCK PRICE (HIGH - LOW) $61 7/8-55 $64 1/2-54 $56 5/8-50 1/4 $56 1/8-48 7/8 - -------------------------------------------------------------------------------------------------------------
Notes to Quarterly Results: (1) Revenues have been restated to reflect the formation of a new segment, New Media/Education, and to conform to revised financial statement presentation. The restatement had no effect on net income. (2) On April 14, 1994, the Company sold 5.5 million shares of QUNO common stock. The sale resulted in an after-tax gain of $13 million, or $.19 per share on a primary basis. (3) Quarterly and full year net income per share amounts are calculated independently based on the weighted average number of common shares applicable for each period. -62-
Quarters 1993 (In thousands of dollars, except per share data) First Second Third Fourth Total - --------------------------------------------------------------------------------------------------------------------- OPERATING Publishing $ 292,639 $ 300,115 $ 285,321 $ 321,028 $1,199,103 REVENUES (1) Broadcasting and Entertainment 140,981 216,903 195,352 173,977 727,213 New Media/Education - - 4,924 16,285 21,209 -------------------------------------------------------------------------------------------------------- Total operating revenues $ 433,620 $ 517,018 $ 485,597 $ 511,290 $1,947,525 - --------------------------------------------------------------------------------------------------------------------- OPERATING Publishing $ 55,729 $ 63,697 $ 52,054 $ 81,570 $ 253,050 PROFIT Broadcasting and Entertainment 9,170 49,254 32,053 35,207 125,684 New Media/Education - - 492 1,579 2,071 Corporate expenses (5,798) (5,860) (6,345) (6,399) (24,402) -------------------------------------------------------------------------------------------------------- Total operating profit 59,101 107,091 78,254 111,957 356,403 - --------------------------------------------------------------------------------------------------------------------- Equity in QUNO net income (loss) (2,711) (2,757) (5,849) (7,038) (18,355) Net Interest expense (3,779) (73) (173) (1,596) (5,621) - --------------------------------------------------------------------------------------------------------------------- INCOME BEFORE INCOME TAXES 52,611 104,261 72,232 103,323 332,427 Income taxes (22,960) (41,976) (33,637) (45,248) (143,821) - --------------------------------------------------------------------------------------------------------------------- NET INCOME 29,651 62,285 38,595 58,075 188,606 Preferred dividends, net of tax (4,628) (4,628) (4,672) (4,511) (18,439) - --------------------------------------------------------------------------------------------------------------------- NET INCOME ATTRIBUTABLE TO COMMON SHARES $ 25,023 $ 57,657 $ 33,923 $ 53,564 $ 170,167 - --------------------------------------------------------------------------------------------------------------------- NET INCOME PER SHARE (3) Primary $ .38 $ .87 $ .51 $ .80 $ 2.56 -------------------------------------------------------------------------------------------------------- Fully diluted $ .36 $ .80 $ .48 $ .73 $ 2.36 - --------------------------------------------------------------------------------------------------------------------- COMMON DIVIDENDS PER SHARE $ .24 $ .24 $ .24 $ .24 $ .96 - --------------------------------------------------------------------------------------------------------------------- COMMON STOCK PRICE (HIGH - LOW) $56 7/8-47 5/8 $56 1/4-50 $55-48 3/8 $61 1/4-50 7/8 - -----------------------------------------------------------------------------------------------------
-63-
Tribune Company and Subsidiaries ELEVEN YEAR FINANCIAL SUMMARY (Dollars in thousands, except per share data) 1994 1993 1992 1991 - --------------------------------------------------------------------------------------------------------------------------- OPERATING RESULTS OPERATING REVENUES Publishing excluding Daily News $1,292,385 1,199,103 1,166,580 1,142,116 New York Daily News $ - - - - Broadcasting and Entertainment $ 764,197 727,213 684,051 617,514 New Media/Education $ 98,335 21,209 - - - ---------------------------------------------------------------------------------------------------------------------------- Total $2,154,917 1,947,525 1,850,631 1,759,630 Newsprint Operations (net of intercompany) $ - - 249,074 279,543 - ---------------------------------------------------------------------------------------------------------------------------- TOTAL OPERATING REVENUES $2,154,917 1,947,525 2,099,705 2,039,173 OPERATING PROFIT Publishing excluding Daily News $ 287,590 253,050 224,509 217,031 New York Daily News $ - - - - Broadcasting and Entertainment $ 132,413 125,684 121,267 100,175 New Media/Education $ 2,829 2,071 - - Corporate expenses $ (26,207) (24,402) (23,643) (22,256) - ---------------------------------------------------------------------------------------------------------------------------- Total $ 396,625 356,403 322,133 294,950 Newsprint Operations $ - - (53,770) (6,975) - ---------------------------------------------------------------------------------------------------------------------------- TOTAL OPERATING PROFIT $ 396,625 356,403 268,363 287,975 Equity in QUNO net loss $ (6,437) (18,355) - - Net interest expense $ (854) (5,621) (35,472) (46,100) Other $ 39,381 - - - - ---------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) BEFORE INCOME TAXES $ 428,715 332,427 232,891 241,875 Income taxes $ (186,668) (143,821) (96,266) (99,894) - ---------------------------------------------------------------------------------------------------------------------------- INCOME (LOSS) BEFORE ACCOUNTING CHANGES $ 242,047 188,606 136,625 141,981 Cumulative effects of changes in accounting principles $ - - (16,800) - - ---------------------------------------------------------------------------------------------------------------------------- NET INCOME (LOSS) (1) $ 242,047 188,606 119,825 141,981 SHARE INFORMATION Primary net income (loss) per share (1) $ 3.32 2.56 1.56 1.94 Common dividends per share $ 1.04 .96 .96 .96 Stockholders' investment per share $ 18.93 15.54 13.32 12.78 Weighted average common shares outstanding (000's) 67,213 66,371 65,018 64,364 FINANCIAL RATIOS Operating profit margin 18.4% 18.3% 12.8% 14.1% Net income margin 11.2% 9.7% 5.7% 7.0% Net income as a percentage of average stockholders' investment 19.9% 18.8% 13.6% 17.6% Long-term debt to total capital 22% 30% 43% 47% FINANCIAL POSITION AND OTHER DATA Total assets $2,785,825 2,536,410 2,751,570 2,795,298 Long-term debt $ 411,200 510,838 740,979 897,835 Stockholders' investment $1,332,980 1,095,627 911,889 851,699 Capital expenditures $ 91,626 75,620 130,232 93,931 Repurchase (issuance) of treasury stock, net $ 28,670 (46,138) (31,918) (10,007) Dividends $ 88,325 81,927 80,407 78,415 Amortization of broadcast rights $ 244,361 236,468 233,859 207,392 Employees (full-time equivalents) 10,500 9,900 12,400 12,900
(1) Includes the gain on sale of QUNO stock of $13 million or $.19 per share in 1994, the cumulative effects of accounting changes of $16.8 million or $.26 per share in 1992, charges relating to New York Daily News totaling $255.0 million or $3.86 per share in 1990, and a non-recurring net loss of $21.1 million or $.27 per share in 1987 and a non-recurring net gain of $151.6 million or $1.88 per share in 1986. -64-
1990 1989 1988 1987 1986 1985 1984 ------------------------------------------------------------------------------------ 1,199,394 1,210,084 1,125,260 1,049,872 948,390 948,173 871,089 321,823 422,024 436,843 419,853 411,840 405,862 402,509 623,981 584,326 505,729 485,276 466,231 384,723 322,082 - - - - - - - ------------------------------------------------------------------------------------ 2,145,198 2,216,434 2,067,832 1,955,001 1,826,461 1,738,758 1,595,680 213,752 243,208 270,741 202,144 202,370 198,319 199,817 ------------------------------------------------------------------------------------ 2,358,950 2,459,642 2,338,573 2,157,145 2,028,831 1,937,077 1,795,497 278,594 299,282 248,567 239,358 209,525 171,932 149,623 (114,468) (2,179) 15,167 (47,357) (9,228) 3,040 (4,817) 107,528 96,803 77,754 62,858 65,537 45,693 41,182 - - - - - - - (22,654) (22,100) (22,699) (25,815) (17,650) (19,459) (15,441) ------------------------------------------------------------------------------------ 249,000 371,806 318,789 229,044 248,184 201,206 170,547 (11,058) 61,285 99,154 73,009 33,126 40,206 17,929 ------------------------------------------------------------------------------------ 237,942 433,091 417,943 302,053 281,310 241,412 188,476 - - - - - - - (37,170) (25,340) (39,515) (32,459) (35,026) (16,416) (16,283) (295,000) 3,133 - - 276,587 6,466 14,421 ------------------------------------------------------------------------------------ (94,228) 410,884 378,428 269,594 522,871 231,462 186,614 30,695 (168,463) (168,022) (128,057) (230,001) (107,618) (83,571) ------------------------------------------------------------------------------------ (63,533) 242,421 210,406 141,537 292,870 123,844 103,043 - - - - - - - ------------------------------------------------------------------------------------ (63,533) 242,421 210,406 141,537 292,870 123,844 103,043 (1.22) 3.17 2.78 1.80 3.63 1.53 1.28 .96 .88 .76 .64 .52 .44 .38 11.68 15.60 15.88 14.35 13.91 11.19 10.23 66,032 72,390 75,636 78,536 80,677 81,045 80,801 10.1% 17.6% 17.9% 14.0% 13.9% 12.5% 10.5% (2.7)% 9.9% 9.0% 6.6% 14.4% 6.4% 5.7% (6.9)% 21.4% 18.4% 12.9% 29.1% 14.3% 12.9% 51% 40% 32% 31% 29% 41% 20% 2,826,099 3,013,537 2,905,382 2,738,484 2,571,432 2,445,924 1,737,142 998,962 880,686 650,118 551,651 522,750 732,521 244,982 764,512 1,077,996 1,188,480 1,094,943 1,101,274 908,486 827,676 148,897 238,307 213,596 191,895 147,726 171,687 122,352 178,517 296,738 56,185 108,647 65,893 (5,692) (2,336) 80,110 75,298 57,416 50,025 42,201 35,490 30,383 228,605 221,897 192,045 169,921 155,183 83,463 66,888 16,100 17,100 16,800 16,800 17,300 18,700 18,400
-65- TRIBUNE COMPANY AND SUBSIDIARIES APPENDIX TO EXHIBIT 13 DESCRIPTION OF GRAPHS ---------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - ------------------------------------------------------------------------------------- Annual Report Page Number Description - ------------- ----------- 33 Bar graph of Net Income Excluding Accounting Changes and Daily News (In millions). 1990 - $191, 1991 - $142, 1992 - $137, 1993 - $189, 1994 - $242. 34 Bar graph of Operating Profit Excluding QUNO and Daily News (In millions). 1990 - $363, 1991 - $295, 1992 - $322, 1993 - $356, 1994 - $396. 34 Pie chart of 1994 Consolidated Expenses as a Percent of Revenues. Compensation - 27%, Amortization of Broadcast Rights - 11%, Newsprint & Ink - 9%, Other - 35%, Operating Margin - 18%. 35 Bar graph of Publishing Operating Profit Per FTE (In thousands). 1990 - $33, 1991 - $27, 1992 - $28, 1993 - $33, 1994 - $38. 36 Stacked bar graph of Publishing Advertising Revenues Excluding Daily News (In millions). Retail - 1990 - $443, 1991 - $429, 1992 - $428, 1993 - $435, 1994 - $461; General - 1990 -$130, 1991 - $124, 1992 - $129, 1993 - $121, 1994 - $135; Classified - 1990 - $356, 1991 - $301, 1992 - $312, 1993 - $337, 1994 - $385. 37 Pie chart of 1994 Publishing Revenues by Market. Chicago - 54%, Fort Lauderdale - 21%, Orlando - 16%, Virginia/CA - 5%, National - 4%. 38 Bar graph of Broadcasting and Entertainment Operating Profit (In millions). 1990 - $108, 1991 - $100, 1992 - $121, 1993 - $125, 1994 - $132. 38 Bar graph of Television EBITDA (In millions). 1990 - $108, 1991 - $104, 1992 - $121, 1993 - $147, 1994 - $189. 41 Bar graph of Long-Term Debt to Total Capital. 1990 - 51%, 1991 - 47%, 1992 - 43%, 1993 - 30%, 1994 - 22%. 41 Bar graph of Return on Equity (Excluding Accounting Changes and Daily News). 1990 - 18.3%, 1991 - 17.6%, 1992 - 15.3%, 1993 - 18.8%, 1994 - 19.9%.
EX-21 9 SUB. OF TRIBUNE CO. EXHIBIT 21 TRIBUNE COMPANY SUBSIDIARIES
Jurisdiction of Other names under which Incorporation subsidiary does business --------------- ------------------------ PUBLISHING - ---------- Tribune Publishing Company Delaware Illinois Chicago Tribune; Exito! Chicago Tribune Company Chicago Tribune Newspapers, Inc. Illinois Tribune Newspaper Network Chicago Tribune Press Service, Inc. Illinois Newspaper Readers Agency, Inc. Illinois Tribune Direct Marketing, Inc. Delaware AmeriComm/Illinois Precision Home Delivery, Inc. Delaware Relcon, Inc. Delaware Tribune Media Services, Inc. Delaware TV Log; TV Week Sun-Sentinel Company Delaware Sun-Sentinel; Gold Coast Labeling Gold Coast Publications, Inc. Delaware Gold Coast Shopper; Porch Plus; XS; Exito!; iCE; Vital Signs; South Florida Parenting New River Center Maintenance Association, Inc. Florida Sentinel Communications Company Delaware The Orlando Sentinel; US Express; Magic Magazine; Tribune Interactive Network Services Neocomm, Inc. Delaware Porch Plus
Peninsula Newspapers, Inc. Delaware Jurisdiction of Other names under which Incorporation subsidiary does business --------------- ------------------------ Times-Advocate Company Delaware Times-Advocate; GO Magazine; The Californian; The Californian Extra Twin County Community Newspapers, Inc. Delaware The Enterprise; The Extraprize The Daily Press, Inc. Delaware Daily Press Hampton Roads Newspapers, Inc. Virginia Tribune National Marketing Company Delaware Real Estate Information Connection/REIC Picture Network International Delaware NEW MEDIA - --------- Tribune New Media Company Delaware Contemporary Books, Inc. Illinois Best Publications Company; Best Books Company Congdon & Weed, Inc. New York Wright Group Publishing, Inc. Delaware Compton's Learning Company Delaware Compton's NewMedia, Inc. California Compton's Multimedia Publishing Group, Inc. Delaware NewMedia Source, Inc. California
Jurisdiction of Other names under which Incorporation subsidiary does business --------------- ------------------------ BROADCASTING AND ENTERTAINMENT - ------------------------------ Tribune Broadcasting Company Delaware Tribune Plus; Tribune Plus Corporate Sales; Tribune Creative Services Group Tribune Broadcasting News Network, Inc. Delaware Trib Net ChicagoLand Television News, Inc. Delaware ChicagoLand Television/CLTV Oak Brook Productions, Inc. Delaware ChicagoLand Microwave Licensee, Inc. Delaware Tribune Regional Programming, Inc. Delaware Tribune New York Radio, Inc. Delaware WQCD-FM Tribune Denver Radio, Inc. Delaware KOSI; KEZW Tribune Denver Direct Mail, Inc. Delaware KOSI Coupons WGN Continental Broadcasting Company Delaware WGN-TV; WGN Radio; Tribune Radio Networks Interstate Radio Network, Inc. Illinois Tribune Sacramento Radio, Inc. Delaware KYMX; KCTC Tribune Entertainment Company Delaware Magic T Music Publishing Company Delaware Tribune Entertainment Production Company Delaware Chicago River Production Company Delaware The Road 435 Production Company Delaware Gossip Production Company Delaware North Michigan Production Company Delaware Fairfax Media, Incorporated Virginia Tribune (FN) Cable Ventures, Inc. Delaware KWGN Inc. Delaware KWGN-TV WGNO Inc. Delaware WGNO-TV WGNX Inc. Delaware WGNX-TV
Jurisdiction of Other names under which Incorporation subsidiary does business --------------- ------------------------ KTLA Inc. California KTLA-TV GWB Productions Delaware WPHL-TV, Inc. Pennsylvania WPHL WPIX Inc. New York WPIX-TV; Tribune New York Holdings WLVI Inc. Delaware Tribune California Properties, Inc. Delaware Farm Journal, Inc. Pennsylvania Rockwood Research Corporation Farm Journal Tours, Inc. Pennsylvania Chicago National League Ball Club, Inc. Delaware Chicago Cubs Diana-Quentin, Inc. Illinois Rockford Professional Baseball Club, Inc. Florida Rockford Cubbies Rock River Concessions, Inc. Florida Orlando Baseball Club, Inc. Delaware Orlando Cubs Orlando Baseball Concessions, Inc. Delaware MISCELLANEOUS - ------------- Tribune Properties, Inc. Delaware New River Center Management Co. Tribune New York Properties, Inc. Delaware Riverwalk Center I Joint Venture
EX-23 10 CONSENT OF INC. ACCTS. EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (File No. 33-45793) and in the Registration Statements on Form S-8 (File Nos. 2-90727, 33-21853, 33-26239 and 33-47547) of Tribune Company of our report dated January 27, 1995 appearing in the 1994 Annual Report to Stockholders which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedule, which appears in this Form 10-K. PRICE WATERHOUSE LLP Chicago, Illinois March 22, 1995 EX-27 11 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1994 CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-25-1994 DEC-27-1993 DEC-25-1994 18,476 3,348 347,314 33,998 33,488 543,544 1,316,715 675,684 2,785,825 529,686 0 1,018 0 329,286 1,002,676 2,785,825 0 2,154,917 0 1,077,508 0 0 20,585 428,715 186,668 242,047 0 0 0 242,047 3.32 3.07
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