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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 28, 1997 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. [ ]
Aggregate market value of the Company's voting and non-voting common equity
held by non-affiliates on March 10, 1998, 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 $6,584,000,000.
At March 10, 1998 there were 122,614,705 shares of the Company's Common
Stock outstanding.
The following documents are incorporated by reference, in part:
1997 Annual Report to Shareholders (Parts I and II, to the extent
described therein).
Definitive Proxy Statement for the May 5, 1998 Annual Meeting of
Stockholders (Part III, to the extent described therein).
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PART I
ITEM 1. BUSINESS.
Tribune Company (the "Company") is a media company. Through its
subsidiaries, the Company is engaged in the publishing of newspapers, books,
educational materials 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 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 "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 1997 Annual Report to Shareholders, which
information is incorporated herein by reference. Certain prior year amounts have
been reclassified to conform with the 1997 presentation. All share and per share
data have been restated to reflect a two-for-one common stock split effective
January 15, 1997.
This Annual Report on Form 10-K contains certain forward-looking statements
that are based largely on the Company's current expectations and are subject to
certain risks, trends and uncertainties that could cause actual results to
differ materially from those anticipated. Among such risks, trends and
uncertainties are changes in advertising demand, newsprint prices, interest
rates, regulatory rulings and other economic conditions and the effect of
acquisitions, investments and dispositions on the Company's results of
operations or financial condition. The words "believe," "expect," "anticipate"
and similar expressions generally identify forward-looking statements. Readers
are cautioned not to place undue reliance on such forward-looking statements,
which are as of the date of this filing.
BUSINESS SEGMENTS
The Company's operations are divided for reporting purposes into three
industry segments: publishing, broadcasting and entertainment, and education.
These segments operate primarily in the United States. The following table sets
forth operating revenues and profit information for each segment of the Company
(in thousands).
Fiscal Year Ended December
--------------------------------------------
1997 1996 1995
---------- ---------- ----------
Operating Revenues(1):
Publishing ......................................... $1,436,718 $1,336,639 $1,312,767
Broadcasting and Entertainment ..................... 1,057,529 876,750 828,806
Education........................................... 225,533 192,316 103,101
---------- ---------- ----------
Total Operating Revenues....................... $2,719,780 $2,405,705 $2,244,674
---------- ---------- ----------
Operating Profit (2)(3):
Publishing ......................................... $ 354,585 $ 291,257 $ 272,093
Broadcasting and Entertainment ..................... 285,896 203,531 171,618
Education........................................... 35,976 39,504 4,608
Corporate Expenses.................................. (34,426) (30,935) (29,899)
---------- ---------- ----------
Total Operating Profit......................... $ 642,031 $ 503,357 $ 418,420
---------- ---------- ----------
- -----
(1) Includes revenues earned outside the United States which were not significant.
(2) In 1997, the Company began reporting separately equity earnings and losses. These amounts are
shown as net loss on equity investments in the consolidated statements of income and were
previously included in operating profit. Prior years' equity results have been reclassified to
conform to the current presentation. The reclassification had no effect on net income or
earnings per share.
(3) Operating profit for each segment excludes interest income and expense, non-operating gains
and losses, equity income and losses and income taxes.
1
The following table sets forth asset information for each industry segment
(in thousands).
Fiscal Year Ended December
---------------------------------------------
1997 1996 1995
---------- ---------- ----------
Assets:
Publishing...................................... $ 668,532 $ 686,730 $ 693,853
Broadcasting and Entertainment.................. 2,923,663 1,616,797 1,405,213
Education....................................... 717,301 544,226 211,510
Corporate (1)................................... 468,058 853,147 977,679
---------- ---------- ----------
Total Assets............................... $4,777,554 $3,700,900 $3,288,255
---------- ---------- ----------
- -----
(1) Corporate assets include the investment in and advances to QUNO in 1995.
Prior to 1993, the Company also owned a newsprint segment, which consisted
entirely of QUNO Corporation ("QUNO") and operated in Canada. In 1993 and 1994,
the Company reduced its ownership holdings in QUNO and in March 1996, the
Company completed the sale of its holdings in QUNO as part of QUNO's merger with
Donohue Inc. Since 1993, the Company has accounted for its investment in QUNO
using the equity method. QUNO has been accounted for as a discontinued operation
in the consolidated financial statements.
The Company's results of operations, when examined on a quarterly basis,
reflect the seasonality of the Company's revenues. In both publishing and
broadcasting and entertainment, 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. In education, second and
third quarter revenues are typically higher than first and fourth quarter
revenues. Results for the second and third quarters generally reflect the timing
of purchases in advance of the upcoming school year, which begins in September.
Fiscal years 1997 and 1996 comprised 52 weeks. Fiscal year 1995 comprised 53
weeks. The effect of the additional week in 1995 on the comparisons of the
financial statements taken as a whole is generally not significant.
PUBLISHING
The publishing segment represented 53% of the Company's consolidated
operating revenues in 1997. The twelve-month combined average circulation in
1997 of the Company's daily newspapers was approximately 1.3 million daily and
1.9 million Sunday. The Company's primary newspapers are the Chicago Tribune,
the South Florida-based Sun-Sentinel, The Orlando Sentinel and the Hampton Roads
(VA.)-based Daily Press. The Company formerly owned two daily newspapers
and a weekly newspaper located in suburban areas in the San Diego, California
market that were sold in July 1995 for approximately $16 million in cash. The
Company recorded a $7.5 million pretax loss on this sale in 1995. For 1997, the
portion of total publishing operating revenues represented by each of the
Company's newspaper subsidiaries was as follows: Chicago Tribune Company--55%;
Sun-Sentinel Company--21%; Orlando Sentinel Communications Company--18%; and The
Daily Press, Inc.--4%. In addition, the Company owns a newspaper syndication and
media marketing company 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 operating efficiency and economies of
scale.
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.
2
The Company's newspapers are printed in Company-owned production
facilities. The principal raw material is newsprint. In 1997, the Company's
newspapers consumed approximately 376,000 metric tons of newsprint. In 1995,
the North American newsprint industry increased newsprint prices several times
due to higher demand for newsprint in the U.S. and overseas. The Company's
publishing operations offset most of the 1995 increase through cost controls, a
decrease in newsprint consumption and revenue increases. Newsprint prices peaked
in the first quarter of 1996 and then declined throughout the remainder of 1996
and the beginning of 1997. Although newsprint prices increased moderately after
the first quarter of 1997, average newsprint transaction prices for the year
decreased 15% in 1997 from 1996. Several of the Company's newsprint suppliers
have announced price increases effective April 1998. If these price increases
occur, the Company expects to offset the additional expense through cost
controls and revenue increases.
The Company is party to a contract with Donohue Inc., 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 1998 and 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
1997, approximately 70% of the newspapers' newsprint supply was purchased from
Donohue.
The following table provides a breakdown of revenues for the publishing
segment for the last three years.
Operating Revenues
(In thousands)
Fiscal Year Ended December
-----------------------------------------
1997 1996 1995
---------- ---------- ----------
Advertising
Retail.................... $ 455,104 $ 433,373 $ 450,141
General................... 149,681 140,741 130,680
Classified................ 510,753 456,912 429,961
---------- ---------- ----------
Total................ 1,115,538 1,031,026 1,010,782
Circulation................. 250,558 252,263 249,860
Other (1)................... 70,622 53,350 52,125
---------- ---------- ----------
Total................ $1,436,718 $1,336,639 $1,312,767
---------- ---------- ----------
- -----
(1) Primarily includes revenues from advertising placement services; the
syndication of columns, features, information and comics to newspapers;
commercial printing operations; delivery of other publications; direct mail
operations; non-advertising revenues from Internet/electronic projects; and
other publishing-related activities.
Total advertising revenues improved in 1997 due to both linage and rate
increases. The increase in retail advertising revenues was primarily due to
improvements in the movie and electronics categories in Chicago and the
department store and healthcare categories in Orlando and Fort Lauderdale.
General advertising increased mainly due to growth in the resorts,
transportation and hi-tech categories in Chicago and the telecommunications,
movie and transportation categories in Fort Lauderdale. Classified advertising
revenues were up mainly due to increases in help wanted advertising at all of
the newspapers.
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 1997, the Chicago Tribune ranked 7th in average daily
circulation and 4th in average Sunday circulation in the nation, based on ABC
averages. Approximately 76% of the paper's daily and 58% of its Sunday
circulation is sold through home delivery, with the remainder sold at newsstands
and vending boxes. The daily edition's newsstand price increased by $.15 to $.50
in September 1992. The Sunday edition's newsstand price increased by $.25 to
$1.75 in October 1995. In September 1997, the weekly home delivery price
increased $.10 to $4.10. The following tables set forth selected information for
the Chicago Tribune daily newspaper and other related activities.
Averages for the Twelve Months Ended December
---------------------------------------------------
1997 1996 1995
--------- --------- ---------
Circulation:
Daily................................... 656,000 674,000 683,000
Sunday.................................. 1,028,000 1,052,000 1,085,000
Fiscal Year Ended December
--------------------------------------------------
1997 1996 1995
-------- -------- --------
Advertising Inches (in thousands):
Full Run (all zones)
Retail................................ 923 953 1,123
General............................... 361 354 314
Classified............................ 1,406 1,330 1,339
-------- -------- --------
Total.............................. 2,690 2,637 2,776
Part Run................................ 5,445 4,877 5,160
Preprinted Inserts...................... 3,347 2,967 3,045
-------- -------- --------
Total Inches....................... 11,482 10,481 10,981
-------- -------- --------
Operating Revenues (in thousands)......... $788,577 $735,158 $723,344
-------- -------- --------
The 1997 improvement in advertising volume was mainly due to higher full
run and part run classified help wanted inches and increases in preprinted
inserts for retailers.
Based on ABC averages for the six months ended September 1997, the Chicago
Tribune had a 35% lead in total daily paid circulation and a 142% 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 owns Chicago Tribune Direct, a direct mail operation. The
Chicago Tribune also operates audiotex services and publications targeted to
specific consumer market segments. In January 1995, the Chicago Tribune acquired
RELCON, Inc. for approximately $8 million in cash, which publishes free
apartment and new home guides and provides apartment rental referral services to
prospective renters.
4
Sun-Sentinel Company (Fort Lauderdale)
The Sun-Sentinel is published daily, including Sunday, and leads the
Broward/South Palm Beach market in circulation. Approximately 71% of the paper's
daily and 65% of its Sunday circulation 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 daily Broward edition's newsstand price increased by
$.10 to $.35 in May 1995. The daily South Palm Beach edition's newsstand price
increased $.15 to $.50 in January 1996. The newsstand price of all Sunday
editions was increased by $.25 to $1.00 in November 1989. In January 1992, the
newsstand price of the South Palm Beach Sunday edition increased by $.25 to
$1.25. In March 1996, the weekly home delivery price for the Broward edition
increased $.15 to $2.75. In November 1996, the weekly home delivery price for
the South Palm Beach edition increased $.25 to $3.00. The following tables set
forth selected information for the Sun-Sentinel daily newspaper and other
related activities.
Averages for the Twelve Months Ended December
-------------------------------------------------
1997 1996 1995
------- ------- -------
Circulation:
Daily.................................. 257,000 256,000 262,000
Sunday................................. 372,000 371,000 370,000
Fiscal Year Ended December
--------------------------------------------------
1997 1996 1995
-------- -------- --------
Advertising Inches (in thousands)(1):
Full Run (all zones)
Retail............................... 1,190 1,161 1,203
General.............................. 245 240 226
Classified........................... 2,417 2,425 2,451
-------- -------- --------
Total............................. 3,852 3,826 3,880
Part Run............................... 2,938 2,980 2,967
Preprinted Inserts..................... 1,754 1,521 1,748
-------- -------- --------
Total Inches...................... 8,544 8,327 8,595
-------- -------- --------
Operating Revenues (in thousands)........ $308,023 $292,248 $284,838
-------- -------- --------
- -----
(1) Excludes inches for Gold Coast Shopper and other targeted publications.
The 1997 improvement in advertising volume was mainly due to higher
preprinted inserts for retailers. Higher classified help wanted inches were
offset by lower real estate inches.
The Sun-Sentinel Company owns Gold Coast Shopper, a publication located in
Deerfield Beach. In 1991, two weekly publications, City Link (formerly known as
XS) and Exito!, targeted to young adults and Spanish-speaking households,
respectively, were launched; Exito! ceased publication in December 1997. The
Sun-Sentinel also offers delivery of other publications, audiotex services and
publications targeted to specific consumer market segments, such as South
Florida Parenting, acquired in 1994.
5
Orlando Sentinel Communications Company
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 77% of the paper's
daily and 67% of its Sunday circulation is sold through home delivery, with the
remainder sold at newsstands and vending boxes. In March 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. In
October 1995, the weekly home delivery price was increased by $.10 to $3.85. 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
--------------------------------------------------
1997 1996 1995
------- ------- -------
Circulation:
Daily..................................... 259,000 261,000 268,000
Sunday.................................... 382,000 383,000 389,000
Fiscal Year Ended December
---------------------------------------------------
1997 1996 1995
-------- -------- --------
Advertising Inches (in thousands):
Full Run (all zones)
Retail.................................. 964 914 930
General................................. 158 133 137
Classified.............................. 1,720 1,728 1,848
-------- -------- --------
Total................................ 2,842 2,775 2,915
Part Run ................................. 1,481 1,387 1,506
Preprinted Inserts........................ 3,155 2,764 2,787
-------- -------- --------
Total Inches......................... 7,478 6,926 7,208
-------- -------- --------
Operating Revenues (in thousands)........... $253,570 $232,874 $221,786
-------- -------- --------
The 1997 improvement in advertising volume was mainly due to higher
preprinted inserts for retailers and full run retail inches for the department
store and healthcare categories. Higher classified help wanted inches were
offset by lower automotive inches as a result of auto dealer consolidations.
The Orlando Sentinel also publishes US/Express, a free weekly entertainment
publication that is used to distribute advertising to non-subscribers, which is
syndicated nationally, a group of central Florida parenting magazines, and the
RELCON apartment guide for the central Florida market. In 1997, The Orlando
Sentinel began publishing New Homes and Auto Finder, which are free publications
distributed in the Central Florida market.
The Daily Press, Inc. (Newport News, Virginia)
The Daily Press is published daily, including Sunday, and serves the
Hampton Roads market. 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. The Hampton Roads market includes Newport News, Hampton,
Williamsburg and eight other cities and counties in Virginia. This market area
is also commonly called the Virginia Peninsula and, together with Norfolk,
Portsmouth and Virginia Beach, is the 39th largest U.S. market in terms of
households. The newsstand price of the daily edition increased by $.15 to $.50
in July 1996. The Sunday edition newsstand price was increased to $1.50 from
$1.25 in October 1995. The weekly home delivery price was increased by $.30 to
$3.05 in
6
October 1995. Approximately 82% of the paper's daily and 77% of its Sunday
circulation is sold through home delivery, with the remainder sold at newsstands
and vending boxes. The following tables set forth selected information for the
Daily Press.
Averages for the Twelve Months Ended December
--------------------------------------------------
1997 1996 1995
------- ------- -------
Circulation:
Daily..................................... 98,000 100,000 103,000
Sunday.................................... 118,000 121,000 126,000
Fiscal Year Ended December
--------------------------------------------------
1997 1996 1995
------- ------- -------
Advertising Inches (in thousands):
Full Run (all zones)
Retail.................................. 630 610 674
General................................. 35 28 18
Classified.............................. 926 858 887
------- ------- -------
Total................................ 1,591 1,496 1,579
Part Run ................................. 150 125 110
Preprinted Inserts ....................... 1,282 1,184 1,185
------- ------- -------
Total Inches......................... 3,023 2,805 2,874
------- ------- -------
Operating Revenues (in thousands)........... $55,721 $52,618 $51,555
------- ------- -------
The 1997 improvement in advertising volume was mainly due to higher
preprinted inserts for retailers and full run classified inches, primarily in
the automotive and help wanted categories.
Related Businesses
The Company is also involved in syndication activities, advertising
placement services, Internet and other online-related businesses and other
publishing-related activities. The syndication activities, conducted primarily
through Tribune Media Services ("TMS"), involve the marketing of columns,
features, information and comic strips to newspapers. 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.
Internet and other online-related businesses include the electronic publishing
of each of the Company's daily newspapers with enhanced content on the Internet.
In addition, the Company owns and operates the Digital City affiliate in each of
the Company's markets. See "Investments" for a discussion of the Company's
investment in Digital City.
Total operating revenues for these publishing-related businesses are shown
below, net of intercompany revenues.
Operating Revenues
(In thousands)
Fiscal Year Ended
December
--------
1997................................ $30,827
1996................................ 23,741
1995................................ 22,739
Other revenues rose in 1997 primarily due to increased revenues from
Internet/electronic projects.
7
BROADCASTING AND ENTERTAINMENT
The broadcasting and entertainment segment represented 39% of the Company's
consolidated operating revenues in 1997. At December 28, 1997, the segment
included WB television affiliates located in New York, Los Angeles, Chicago,
Philadelphia, Boston, Dallas, Houston, Miami, Denver and San Diego; Fox
television affiliates in Sacramento, Indianapolis, Hartford and Harrisburg; a
CBS television affiliate (effective December 1994) in Atlanta; an ABC television
affiliate (effective January 1996) in New Orleans; and four radio stations, one
located in Chicago and three located in Denver.
In March 1997, the Company acquired Renaissance Communications Corp., a
publicly traded company that owned six television stations, for $1.1 billion in
cash. The stations acquired were KDAF-Dallas, WDZL-Miami, KTXL-Sacramento,
WXIN-Indianapolis, WTIC-Hartford and WPMT-Harrisburg. The Federal Communications
Commission ("FCC") order granting the Company's application to acquire the
Renaissance stations contained waivers of two FCC rules. First, the FCC
temporarily waived its duopoly rule relating to the overlap of WTIC's and WPMT's
broadcast signals with those of other Tribune stations. The temporary waivers
were granted subject to the outcome of pending FCC rulemaking that is expected
to make such duopoly waivers unnecessary. Second, the FCC granted a 12-month
waiver of its rule prohibiting television/newspaper cross-ownership in the same
market, which relates to the Miami television station and the Fort Lauderdale
Sun-Sentinel newspaper. The Company appealed the FCC's ruling and filed a
petition with the FCC requesting a rulemaking procedure. Although the Court of
Appeals affirmed the FCC's order requiring divestiture of either the Miami
television station or the Sun-Sentinel newspaper, the FCC subsequently issued a
rule review to consider modifying its cross-ownership rule. In March 1998, the
FCC granted the Company a waiver extension to allow continued ownership of both
the Miami television station and the Sun-Sentinel newspaper until the rule
review has concluded. The Company cannot predict the outcome of the FCC duopoly
rulemaking or cross-ownership rule review.
In May 1997, the Company reached an agreement with Emmis Broadcasting
Corporation regarding the sale or exchange of the Company's WQCD radio station
in New York. Effective July 1, 1997 and in connection with the agreement, Emmis
assumed responsibility for certain operations of the station for up to three
years for an annual fee of approximately $8 million, after which Emmis has the
right to purchase the station. In December 1997, the Company signed an agreement
with Emmis to exchange substantially all of the assets of WQCD, with a fair
market value of approximately $160 million, and cash for the assets of
television stations KTZZ-Seattle (WB) and WXMI-Grand Rapids (Fox). Emmis has
agreed to acquire these television stations as part of its acquisition of Dudley
Communications Corporation. The transaction, pending FCC approval, is expected
to close during the second quarter of 1998.
In January 1996, the Company acquired television station KHTV-Houston for
$102 million in cash. In February 1996, the Company acquired the remaining
minority interest in WPHL-Philadelphia for $23 million in cash. In April 1996,
the Company acquired television station KSWB-San Diego for $72 million in cash.
In November 1995, the Company swapped its two Sacramento radio stations, KYMX
and KCTC, for $3 million in cash and a Denver radio station. The Company
acquired television station WLVI-Boston in April 1994, for $25 million in cash.
In June 1994, the Company acquired Farm Journal Inc., publisher of The Farm
Journal, a leading farm magazine, for $17 million in cash. Farm Journal results
were reported in radio until March 1997, when it was sold by the Company for
approximately $17 million in cash. The acquisitions were accounted for as
purchases.
In entertainment/other, the Company owns the Chicago Cubs baseball team,
produces and syndicates television programming and owns CLTV News, a
Chicago-area news cable channel.
8
The following table shows sources of revenue for the broadcasting and
entertainment segment for the last three years.
Operating Revenues
(In thousands)
Fiscal Year Ended December
---------------------------------------------
1997 1996 1995
---------- -------- --------
Television (1)................................ $ 861,434 $680,504 $629,502
Radio (2)..................................... 71,641 89,260 88,435
Entertainment/other (3)....................... 124,454 106,986 110,869
---------- -------- --------
Total..................................... $1,057,529 $876,750 $828,806
---------- -------- --------
- -----
(1) Includes the six Renaissance stations since their acquisition in March
1997, KHTV-Houston since its acquisition in January 1996 and KSWB-San Diego
since its acquisition in April 1996.
(2) Includes Farm Journal until its sale in March 1997 and WQCD, which
transferred station operations to Emmis Broadcasting Corporation effective
July 1, 1997 in return for an annual management fee.
(3) 1996 reflects the impact of the cancellation of two Tribune Entertainment
syndicated programs, "Charles Perez" and "The Road." 1995 reflects the
impact of the Major League baseball strike which began August 12, 1994 and
ended in April 1995.
Television
In 1997, television contributed 81% 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
National % of U.S. FCC Stations in of FCC When
Rank Households % Channel Affiliation Market (2) License (3) Acquired
-------- ---------- --- ------- ----------- ----------- ----------- --------
WPIX - New York, NY........... 1 6.9 6.9 11-VHF WB 6 1999 1948
KTLA - Los Angeles, CA........ 2 5.1 5.1 5-VHF WB 7 1998 (4) 1985
WGN - Chicago, IL............ 3 3.2 3.2 9-VHF WB 7 1997 (5) 1948
WPHL - Philadelphia, PA....... 4 2.7 1.3 17-UHF WB 6 1999 1992
WLVI - Boston, MA............. 6 2.2 1.1 56-UHF WB 7 1999 1994
KDAF - Dallas, TX ............ 8 1.9 1.0 33-UHF WB 8 1998 (6) 1997
WGNX - Atlanta, GA............ 10 1.7 0.9 46-UHF CBS 7 2005 1984
KHTV - Houston, TX ........... 11 1.7 0.8 39-UHF WB 6 1998 (6) 1996
WDZL - Miami, FL.............. 16 1.4 0.7 39-UHF WB 6 2005 (7) 1997
KWGN - Denver, CO............. 18 1.2 1.2 2-VHF WB 6 1998 (8) 1966
KTXL - Sacramento, CA......... 20 1.2 0.6 40-UHF Fox 6 1998 (4) 1997
WXIN - Indianapolis, IN....... 25 1.0 0.5 59-UHF Fox 6 2005 1997
KSWB - San Diego, CA.......... 26 1.0 0.5 69-UHF WB 6 1998 (4) 1996
WTIC - Hartford, CT........... 27 0.9 0.5 61-UHF Fox 6 1999 1997
WGNO - New Orleans, LA........ 41 0.6 0.3 26-UHF ABC 6 2005 1983
WPMT - Harrisburg, PA......... 45 0.6 0.3 43-UHF Fox 5 1999 1997
- -----
(1) Source: Nielsen Station Index (DMA Market and Demographic Rank Report, September 1997). Ranking of markets is based on
number of television households in DMA (Designated Market Area).
(2) Source: Nielsen Station Index (Viewers in Profile Reports, 1997). Major commercial stations program for a broad, general
audience and have a large viewership in the market.
(3) See "Governmental Regulation."
(4) Expires December 1998. Renewal application will be filed.
(5) Expired December 1997. Renewal application filed in August 1997 is pending.
(6) Expires August 1998. Renewal application will be filed.
9
(7) The FCC has granted the Company a waiver extension to allow continued
ownership of both the Miami television station and the Fort Lauderdale
Sun-Sentinel newspaper until the FCC has completed a review of the
newspaper/television cross-ownership rule. See "Item 3, Legal Proceedings"
for a discussion of the cross-ownership rule.
(8) Expires April 1998. Renewal application filed in December 1997 is pending.
Programming emphasis at the Company's WB affiliated 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, including The WB Television Network ("The WB Network"),
although a significant amount is produced locally or supplied by Tribune
Entertainment (see "Entertainment/Other"). The Company's stations affiliated
with other major networks acquire most of their programming from those networks.
Contracts for purchased programming generally cover a period of one to five
years, with payment also typically made over several years. The expense for
amortization of television broadcast rights in 1997 was $250 million, which
represented approximately 29% of total television operating revenues.
Average audience share information for the Company's television stations
for the past three years is shown in the following table.
Average Audience Share (1)
Year Ended December
----------------------------------------
1997 1996 1995
------ ------ ------
WPIX - New York, NY......................... 10.0% 11.0% 10.0%
KTLA - Los Angeles, CA...................... 8.3 8.5 10.0
WGN - Chicago, IL.......................... 10.0 10.0 10.8
WPHL - Philadelphia, PA..................... 4.5 4.8 5.3
WLVI - Boston, MA........................... 4.5 4.3 4.5
KDAF - Dallas, TX........................... 8.3 8.3 10.0
WGNX - Atlanta, GA.......................... 8.3 8.3 9.3
KHTV - Houston, TX.......................... 6.5 5.8 6.3
WDZL - Miami, FL............................ 6.3 6.5 6.8
KWGN - Denver, CO........................... 8.0 8.8 9.0
KTXL - Sacramento, CA....................... 9.0 9.3 10.0
WXIN - Indianapolis, IN..................... 8.0 7.8 9.3
KSWB - San Diego, CA........................ 4.0 3.3 2.5
WTIC - Hartford, CT......................... 7.5 8.3 8.8
WGNO - New Orleans, LA...................... 9.8 7.3 9.0
WPMT - Harrisburg, PA....................... 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.
Radio
In 1997, the Company's radio operations contributed 7% 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); WQCD (which
transferred station operations to Emmis Broadcasting through a management
agreement in July 1997); and Farm Journal (until its sale in March 1997).
10
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)
------------------------ --------- -------- ----------- ----------
WGN - Chicago, IL Personality/Infotainment
/Sports 720-AM 3 40 6.0%
KOSI - Denver, CO Adult Contemporary 101.1-FM 22 24 6.5%
KEZW - Denver, CO Nostalgia/Big Band 1430-AM 22 24 3.2%
KKHK - Denver, CO All Rock & Roll Hits 99.5-FM 22 24 4.6%
- -----
(1) Source: Radio markets ranked by Arbitron Metro Survey Area, Arbitron Company 1997.
(2) Source: Arbitron Company 1997.
(3) Source: Average of Winter, Spring, Summer and Fall 1997 Arbitron shares for persons 12 years old and over, 6 a.m. to
midnight daily during the period measured.
Entertainment/Other
In 1997, entertainment/other 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, one minor league
baseball team and CLTV News.
Tribune Entertainment Company was formed to acquire and develop weekly
programming for Company television stations and for syndication. Tribune
Entertainment participates in the production or distribution of first-run
programming, including television shows, music and variety shows, one daily talk
show, movies and specials. In 1997, Tribune Entertainment successfully launched
two weekly action shows: "Earth: Final Conflict," which is aired on 177 stations
that cover 96% of U.S. television households; and "Nightman," which is aired on
156 stations that cover 92% of U.S. television households. In addition, Tribune
Entertainment produces and syndicates "The Geraldo Rivera Show," a one-hour,
daily talk show, which is aired on 113 stations that cover 80% of U.S.
television households. Mr. Rivera has announced his intention to end the show
after the 1997-1998 television season. During the 1997-1998 television season,
Tribune Entertainment originated or syndicated approximately 12.5 hours of
first-run programs per week. On average, the Company's 16 television stations
utilized approximately seven 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. The Company also owns a Class A Midwest League
franchise in Rockford, Illinois.
Agreement on a new five-year contract between the Major League Baseball
Players Association ("MLBPA") and Major League Baseball was reached in December
1996. The previous contract expired on December 31, 1993. The MLBPA initiated a
strike on August 12, 1994, and on August 28, 1994, the owners canceled the
remainder of the 1994 Major League Baseball season. In April 1995, the National
Labor Relations Board invalidated the owners' posted rules, and the players
ended their strike. The 1995 baseball season began April 26, 1995. The strike
shortened the 1995 season by 18 games and continued to impact attendance
throughout the season. The new contract has not had a material impact on the
Company's results of operations.
CLTV News, a regional 24-hour cable news programming service, was launched
in January 1993 and currently is available to more than 1.7 million cable
households in the Chicago-area market.
11
EDUCATION
The education segment represented 8% of the Company's consolidated
operating revenues in 1997. Education operating revenues in 1997 were $226
million, up 17% from 1996 due primarily to improvements at all of the education
businesses except Educational Publishing Corporation's Creative Publications
division. Education revenues are derived from publishing supplemental and core
curriculum education materials and adult education and trade books. The
education market consists primarily of two components, core curriculum education
products and supplemental education materials. The Company's education segment
has become one of the nation's largest supplemental publishers for grades K-12.
In September 1997, the Company acquired Shortland Publications Limited for
$32 million in cash. Shortland is a New Zealand-based company that publishes
reading, language arts, science and social studies materials for several
international elementary school markets. In December 1997, the Company acquired
approximately 80% of Landoll, Inc. for $77 million in cash. Landoll publishes
children's books for the mass market. In March 1996, the Company acquired
Educational Publishing Corporation for $205 million in cash and NTC Publishing
Group for $83 million in cash. Educational Publishing publishes supplemental and
core curriculum education materials through its Creative Publications and
Ideal/Instructional Fair divisions. NTC Publishing publishes trade books and
educational products for the school and consumer markets. In August 1995, the
Company acquired Everyday Learning Corporation, a publisher of mathematics
materials for grades kindergarten through 6, for $25 million in cash. In
February 1994, the Company acquired The Wright Group, a publisher of
supplemental education materials for the elementary school market, for $96
million in cash. In July 1993, the Company acquired Contemporary Books, Inc., a
publisher of nonfiction trade titles and educational books and materials, for
$22 million in cash and $18.5 million in common stock. In September 1993, the
Company acquired Compton's Multimedia Publishing Group for $57 million in cash.
The Company sold Compton's to The Learning Company, Inc. in December 1995. The
acquisitions were accounted for as purchases.
INVESTMENTS
The Company has investments in several public and private companies. See
Note 6 to the Company's Consolidated Financial Statements in the 1997 Annual
Report to Shareholders for a discussion of the Company's cost and equity method
investments.
The principal equity method investments include Digital City, The WB
Network and Qwest Broadcasting. In 1996, the Company purchased a 20% equity
interest in Digital City, a venture with America Online to develop a national
network of local interactive services. The Company acquired a 13% equity
interest in The WB Network in 1995, and exercised options to increase its
ownership interest to 22% in 1997 and 25% in March 1998. The WB is a growing
network that provides the Company's WB affiliate television stations with
original prime-time and kids' programming. In 1995, the Company acquired a 33%
equity interest in Qwest Broadcasting, which owns WB affiliate television
stations in Atlanta and New Orleans.
NON-RECURRING ITEMS
In 1997, the Company sold a portion of its investment portfolio and wrote
down certain investments. In 1996, the Company recorded non-recurring equity
income representing the Company's interest in a gain recorded by Qwest
Broadcasting for the cancellation of an option to purchase a television station.
In 1995, the Company sold a portion of its investment in America Online common
stock, a publishing subsidiary and an education subsidiary. See Note 3 to the
Company's Consolidated Financial Statements in the 1997 Annual Report to
Shareholders for a discussion of these non-recurring items.
12
DISCONTINUED OPERATIONS (QUNO CORPORATION)
In March 1996, the Company completed the sale of its holdings in QUNO
Corporation, a Canadian newsprint company, as part of QUNO's merger with Donohue
Inc. The Company owned approximately 34% of QUNO's common stock plus $138.8
million in convertible debt. The sale resulted in a 1996 after-tax gain of $89.3
million, or $.66 per diluted share. The gross proceeds from the sale were
approximately $427 million in cash, Donohue stock and short-term notes.
Immediately after the sale, the Company sold the Donohue stock and notes for
cash. After-tax proceeds were approximately $331 million. QUNO has been
accounted for as a discontinued operation in the Company's consolidated
financial statements.
QUNO newsprint sales to affiliated (Tribune) and unaffiliated customers for
1995 were 251,000 metric tons and 585,000 metric tons, respectively. See
"Publishing" for a discussion of the supply contract between the Company and
Donohue.
GOVERNMENTAL REGULATION
Various aspects of the Company's operations are subject to regulation by
governmental authorities in the United States.
The Company's television and radio broadcasting operations are subject to
Federal Communications Commission 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, and limit concentrations
of broadcasting control inconsistent with the public interest. Federal law also
regulates 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. National limits on the number
of broadcast stations a licensee may own were removed by Congress in 1996.
However, federal law continues to limit the number of radio and television
stations a single owner may own in a local market, and 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 which time they may be subject to competing
applications for the licensed frequencies. At December 28, 1997, the Company had
FCC authorization to operate 16 television stations and two AM and three FM
radio stations.
The FCC has approved technical standards and channel assignments for
digital television ("DTV") service. DTV will permit broadcasters to transmit
video images with higher resolution than existing analog signals. Operators of
full-power television stations (including those owned by the Company) have each
been assigned a second channel for DTV while they continue analog broadcasts on
the original channel. After the transition is complete, broadcasters will be
required to return one of the two channels to the FCC and transmit exclusively
in digital format. By law, the transition to DTV is to occur by December 31,
2006, subject to extension under certain circumstances. Conversion to digital
transmission will require all television broadcasters, including those owned by
the Company, to invest in digital equipment and facilities. The Company does not
believe that the required capital expenditures will have a material effect on
its consolidated financial position or results of operations.
The FCC has not yet issued regulations governing some aspects of DTV
operation. These include the obligations of cable television systems and other
multichannel video providers to carry DTV signals, additional "public interest"
obligations that may be imposed on broadcasters' use of DTV, and fees to be paid
by broadcasters to the government for transmitting subscription-based services
over the DTV channel.
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
governing communications 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. See "Item 3, Legal Proceedings" for a discussion of pending FCC
rulemaking and rule review.
13
EMPLOYEES
The average number of full-time equivalent employees of the Company in 1997
was 11,600, approximately 900 more than the average for 1996. The increase was
due to the net impact of the 1996 and 1997 acquisitions and dispositions and the
growth of the Company's Internet/online businesses.
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 1997, the Company's publishing segment employed approximately 7,700
full-time equivalent employees, about 7% of whom were represented by a total of
five unions. Contracts with unionized employees of the publishing segment expire
at various times through September 1999.
Broadcasting and entertainment had an average of 3,000 full-time equivalent
employees in 1997. Approximately 22% of these employees were represented by a
total of 21 unions. Contracts with unionized employees of the broadcasting and
entertainment segment expire at various times through December 1999.
Education had an average of 900 full-time equivalent employees in 1997.
Approximately 9% of these employees were represented by one union. The contract
with the unionized employees of the education segment expires in October 1998.
EXECUTIVE OFFICERS OF THE COMPANY
Information with respect to the executive officers of the Company as of
March 10, 1998 is set forth below. The descriptions of the business experience
of these individuals include the principal positions held by them since March
1993.
Robert D. Bosau (51)
President since May 1997 and Executive Vice President from August 1994 to May
1997 of Tribune Education Company*; Vice President/Administration of Tribune
Publishing Company* until August 1994.
James C. Dowdle (64)
Executive Vice President of the Company; President and Chief Executive Officer
of Tribune Broadcasting Company* until May 1997; President of Tribune Publishing
Company* from August 1994 to May 1997; Director of the Company since 1985.
Dennis J. FitzSimons (47)
President since May 1997 and Executive Vice President from August 1994 until May
1997 of Tribune Broadcasting Company*; President of Tribune Television Company*
until August 1994.
Jack W. Fuller (51)
President since May 1997 of Tribune Publishing Company*; President and Publisher
from September 1993 to May 1997 and Vice President/Editor until September 1993
of Chicago Tribune Company*.
Donald C. Grenesko (49)
Senior Vice President/Finance and Administration since August 1996, Senior Vice
President and Chief Financial Officer from March 1993 to August 1996 and Vice
President and Chief Financial Officer until March 1993 of the Company.
- -----
* A subsidiary of the Company.
14
David D. Hiller (44)
Senior Vice President/Development since November 1993, Senior Vice President and
General Counsel from March to November 1993 of the Company; Partner, Sidley &
Austin until November 1993.
Crane H. Kenney (35)
Vice President/General Counsel and Secretary since August 1996, Vice
President/Chief Legal Officer from February 1996 to August 1996, Senior Counsel
from March 1995 to January 1996 and Counsel from February 1994 to February 1995
of the Company; Associate, Schiff, Harden & Waite until January 1994.
Luis E. Lewin (49)
Vice President/Human Resources since October 1996 and Director of Human
Resources from March 1994 to October 1996 of the Company; Acting Publisher of
Exito! in Chicago from December 1995 to September 1996; Vice President/Human
Resources of Sun-Sentinel Company* until March 1994.
John W. Madigan (60)
Chairman since January 1996, Chief Executive Officer since May 1995, President
since May 1994, Chief Operating Officer from May 1994 to May 1995 and Executive
Vice President of the Company until May 1994; President of Tribune Publishing
Company* until May 1994; Publisher of the Chicago Tribune until May 1994 and
President and Chief Executive Officer of Chicago Tribune Company* until
September 1993; Director of the Company since 1975.
Ruthellyn Musil (46)
Vice President/Corporate Relations since March 1995 and Director of
Communications until March 1995 of the Company.
Jeff R. Scherb (40)
Senior Vice President/Chief Technology Officer since August 1996 of the Company;
Chief Technology Officer and Senior Vice President, Dun & Bradstreet Software
from March 1995 to August 1996; Vice President/Systems Development, Turner
Broadcasting from 1994 to 1995; Senior Vice President/Product Development,
Delphi Information Systems until 1994.
- -----
* 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 on December 28, 1997
are listed below. In addition to those listed, the Company owns or leases
transmitter sites, parking lots and other properties aggregating approximately
624 acres in 55 separate locations, and owns or leases an aggregate of
approximately 1,552,000 square feet of space in 193 locations. 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) 161,000
Orlando, Florida.................................................. 424,000 98,000
Deerfield Beach, Florida.......................................... 386,000 -
Northlake, Illinois............................................... - 216,000
Newport News, Virginia............................................ 207,000 -
Fort Lauderdale, Florida.......................................... - (2) 128,000
Broadcasting and Entertainment:
Business offices, studios and transmitters located in:
Los Angeles, California........................................... 253,000 -
New York, New York................................................ - 131,000
Chicago, Illinois................................................. 99,000 4,000
Oak Brook, Illinois............................................... - 69,000
Denver, Colorado.................................................. 44,000 11,000
Houston, Texas.................................................... 36,000 -
Indianapolis, Indiana............................................. 5,000 31,000
Dallas, Texas..................................................... 33,000 -
Boston, Massachusetts............................................. 28,000 -
Philadelphia, Pennsylvania........................................ 22,000 2,500
Sacramento, California............................................ 24,000 -
Chula Vista, California........................................... 22,000 -
Hartford, Connecticut............................................. - 22,000
New Orleans, Louisiana............................................ - 22,000
Atlanta, Georgia.................................................. - 21,000
Miami, Florida.................................................... 20,000 -
York, Pennsylvania................................................ 20,000 -
Education:
Printing plants, business offices and warehouse space located in:
Ashland, Ohio..................................................... - 716,000
Chicago, Illinois................................................. 185,000 29,000
Alsip, Illinois................................................... - 171,000
Kirkland, Washington.............................................. - 126,000
Lincolnwood, Illinois............................................. - 71,000
Bothell, Washington............................................... - 60,000
Grand Rapids, Michigan............................................ - 53,000
Mountain View, California......................................... - 28,000
Denver, Colorado.................................................. - 9,700
Oakdale, Iowa..................................................... - 5,800
- -----
(1) Includes Tribune Tower, an approximately 630,000 square foot office building in downtown Chicago, and Freedom
Center, the approximately 697,000 square foot 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 70,000 square feet of space leased to unaffiliated tenants.
Freedom Center houses the Chicago Tribune's printing, packaging and distribution operations.
(2) In 1997, the Company sold New River Center, an office building in downtown Fort Lauderdale. The Sun-Sentinel
newspaper subsidiary currently leases approximately 35% of the building.
16
ITEM 3. LEGAL PROCEEDINGS.
The Company and its subsidiaries are defendants from time to time in
actions for 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.
In March 1997, the Company acquired Renaissance Communications Corp., a
publicly traded company that owned six television stations, for $1.1 billion in
cash. The stations acquired were KDAF-Dallas, WDZL-Miami, KTXL-Sacramento,
WXIN-Indianapolis, WTIC-Hartford and WPMT-Harrisburg. The Federal Communications
Commission ("FCC") order granting the Company's application to acquire the
Renaissance stations contained waivers of two FCC rules. First, the FCC
temporarily waived its duopoly rule relating to the overlap of WTIC's and WPMT's
broadcast signals with those of other Tribune stations. The temporary waivers
were granted subject to the outcome of pending FCC rulemaking that is expected
to make such duopoly waivers unnecessary. Second, the FCC granted a 12-month
waiver of its rule prohibiting television/newspaper cross-ownership in the same
market, which relates to the Miami television station and the Fort Lauderdale
Sun-Sentinel newspaper. The Company appealed the FCC's ruling and filed a
petition with the FCC requesting a rulemaking procedure. Although the Court of
Appeals affirmed the FCC's order requiring divestiture of either the Miami
television station or the Sun-Sentinel newspaper, the FCC subsequently issued a
rule review to consider modifying its cross-ownership rule. In March 1998, the
FCC granted the Company a waiver extension to allow continued ownership of both
the Miami television station and the Sun-Sentinel newspaper until the rule
review has concluded. The Company cannot predict the outcome of the FCC duopoly
rulemaking or cross-ownership rule review.
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.
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. Per share data have been restated to reflect a
two-for-one common stock split effective January 15, 1997. 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:
1997 1996
--------------------- --------------------
Quarter High Low High Low
------- --------- -------- ------- --------
First.................. $42 3/8 $35 1/2 $34 1/2 $28 5/16
Second................. 50 5/16 39 3/4 38 1/8 32 1/16
Third.................. 54 13/16 48 39 1/2 31 5/8
Fourth................. 61 1/2 51 9/16 44 1/8 37 7/8
At March 10, 1998, there were 5,678 holders of record of the Company's
Common Stock.
Quarterly cash dividends declared on Common Stock were $.16 per share in
1997 and $.15 per share in 1996. Total cash dividends declared on Common Stock
by the Company were $78,646,000 for 1997 and $73,742,000 for 1996.
During 1997, the Company did not sell any of its equity securities in
transactions that were not registered under the Securities Act of 1933, as
amended.
17
ITEM 6. SELECTED FINANCIAL DATA.
The information for the years 1993 through 1997 contained under the heading
"Eleven Year Financial Summary" in the Company's 1997 Annual Report to
Shareholders is incorporated herein by reference.
The following table shows basic earnings per share for the last 11 years.
Basic Earnings (Loss) per Share (1)
Continuing Operations
------------------------------
Before
Non-Recurring Discontinued Net
Items Total (2) Operations Income
------------- --------- ------------ ------
1997 $2.49 $3.05 $ - $3.05
1996 2.10 2.15 .73 2.88
1995 1.68 1.75 .25 2.00
1994 1.60 1.60 .06 1.66
1993 1.40 1.40 (.12) 1.28
1992 (3) 1.24 1.24 (.33) .78
1991 1.09 1.09 (.12) .97
1990 1.44 (.49) (.12) (.61)
1989 1.38 1.38 .21 1.59
1988 .99 .99 .40 1.39
1987 .73 .60 .30 .90
- -----
(1) All per share data have been restated for the two-for-one common stock
split effective January 15, 1997.
(2) Includes non-recurring items as follows: gain on the sales of investments,
net of write-downs, totaling $.56 per share in 1997; equity income related
to Qwest Broadcasting of $.05 per share in 1996; gain on the sale of
investment and subsidiaries totaling $.07 per share in 1995; and charges
relating to the New York Daily News totaling $1.93 per share in 1990 and
$.13 per share in 1987.
(3) The adoption of new accounting rules for retiree benefits, income taxes and
postemployment benefits decreased net income per share by $.13 per share in
1992.
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 1997
Annual Report to Shareholders is incorporated herein by reference.
The Company is currently evaluating the Year 2000 issue concerning the
ability of its operational and financial reporting systems to properly recognize
date sensitive information when the year changes to 2000. Systems that do not
properly recognize such information could generate erroneous data or cause
system failures. Both internal and external resources are being utilized to test
the Company's systems. The Company has determined that it will be required to
modify or, in certain cases, replace portions of its systems in order to
address the Year 2000 issue and such system remediations are being effected.
The Company believes that with modifications to its existing systems and
conversions to new systems, the Year 2000 issue can be mitigated. However, if
such modifications and conversions are not made, or are not completed in a
timely manner, the Year 2000 issue could impact the operations of the Company.
The Company has also initiated communications with its significant
suppliers and large customers to determine their plans to address the Year 2000
issue. While the Company expects a successful resolution of all issues, there
can be no guarantee that the systems of other companies will be converted in a
timely manner.
Management believes the cost of addressing these issues will not have a
material effect on the financial position or the results of operations of the
Company.
18
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
The information provided below about the Company's market sensitive
financial information contains forward-looking statements.
Interest rate risks. The Company's long-term debt is subject to changes in
interest rates in the United States. All of the Company's borrowings are
denominated in U.S. dollars. The Company's policy is to manage interest rate
risk through the use of a combination of medium-term notes and commercial paper.
The Company currently does not use derivative financial instruments.
Fixed Rate Weighted Avg. Variable Rate Weighted Avg.
Maturities (in thousands) Debt Interest Rate Debt Interest Rate
- ------------------------ ---------- ------------- ------------- -------------
1998 (1) $ 37,098 8.4% $476,375 5.9%
1999 61,914 7.5% - -
2000 80,052 7.4% - -
2001 (1) 36,166 8.4% - -
2002 92,827 7.1% - -
Thereafter 770,369 6.5% - -
---------- --------
Total $1,078,426 $476,375
---------- --------
Fair Value at Dec. 28, 1997 (2) $1,099,046 $476,375
---------- --------
- -----
(1) As discussed in Note 7 to the Company's Consolidated Financial Statements
in the 1997 Annual Report to Shareholders, medium-term notes (fixed rate
debt) of $3.8 million and promissory notes (variable rate debt) of $476.4
million scheduled to mature in 1998 were presented as maturing in 2001 for
financial statement presentation because of the Company's ability and
intent to refinance these maturities.
(2) Fair value 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.
Equity price risks. The Company has common stock investments in several publicly
traded companies which are subject to market price volatility. These investments
are classified as available for sale and are recorded on the balance sheet at
fair value with unrealized gains or losses, net of related tax effects, reported
in a separate component of shareholders' equity.
The following analysis presents the hypothetical change in the fair value
of the Company's common stock investments in publicly traded companies arising
from selected hypothetical changes in each stock's price. The fair value of the
Company's common stock investments in publicly traded companies assuming stock
price fluctuations of plus or minus 10%, 20% and 30% would be as follows (in
thousands):
Valuation of Investments Valuation of Investments
Assuming Indicated Decrease in Assuming Indicated Increase in
Each Stock's Price Each Stock's Price
-------------------------------- Dec. 28, 1997 --------------------------------
-30% -20% -10% Fair Value +10% +20% +30%
-------- -------- -------- ------------- -------- -------- --------
Common stock investments
in public companies $184,329 $210,661 $236,994 $263,327 $289,659 $315,992 $342,325
During the last 12 quarters, market price movements have caused the fair
value of the Company's common stock investments in publicly traded companies to
change by 10% or more in nine of the quarters, by 20% or more in five of the
quarters and by 30% or more in three of the quarters.
19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Company's Consolidated Financial Statements and Notes thereto appearing
on pages 51 through 71 of the Company's 1997 Annual Report to Shareholders,
together with the report thereon of Price Waterhouse LLP dated February 10,
1998, appearing on page 50 of such Annual Report, the information contained
under the heading "Quarterly Results (Unaudited)" on pages 72 and 73, and the
information contained under the heading "Business Segments" appearing on page 76
are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
Not applicable.
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 contained under the heading
"Election of Directors" and contained under the subheading "Section 16(a)
Beneficial Ownership Reporting Compliance" under the heading "Ownership
Information" in the definitive Proxy Statement for the Company's May 5, 1998
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 5, 1998 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 5, 1998 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 contained under the
subheadings "Compensation of Directors" and "Other Transactions" under the
heading "Election of Directors" in the definitive Proxy Statement for the
Company's May 5, 1998 Annual Meeting of Stockholders is incorporated herein by
reference.
20
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1)&(2) Financial Statements and Financial Statement Schedule filed as part
of this report
As listed in the Index to Financial Statements and Financial
Statement Schedule on page 24 hereof.
(a)(3) Index to Exhibits filed as part of this report
As listed in the Exhibit Index beginning on page 27 hereof.
(b) Reports on Form 8-K
The Company filed one report on Form 8-K during the last quarter of
the period covered by this report.
o The Company filed a Form 8-K Current Report dated December 12,
1997, which reported under Item 5 the declaration of a dividend
of one preferred share purchase right for each outstanding share
of common stock, without par value, of the Company. The dividend
was paid to stockholders of record at the close of business on
January 5, 1998. No financial statements were filed as part of
the report.
21
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
24, 1998.
TRIBUNE COMPANY
(Registrant)
/s/ John W. Madigan
-------------------
John W. Madigan
Chairman, President and Chief Executive Officer
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 24, 1998.
Signature Title
--------- -----
/s/ John W. Madigan
-------------------
John W. Madigan Chairman, President and Chief Executive Officer
and Director (principal executive officer)
/s/ James C. Dowdle
-------------------
James C. Dowdle Executive Vice President and Director
/s/ Donald C. Grenesko
----------------------
Donald C. Grenesko Senior Vice President/Finance and Administration
(principal financial officer)
/s/ R. Mark Mallory
-------------------
R. Mark Mallory Vice President and Controller
(principal accounting officer)
22
Signature Title
--------- -----
/s/ Diego E. Hernandez
----------------------
Diego E. Hernandez Director
/s/ Robert E. La Blanc
----------------------
Robert E. La Blanc Director
/s/ Nancy Hicks Maynard
-----------------------
Nancy Hicks Maynard Director
/s/ Dudley S. Taft
------------------
Dudley S. Taft Director
/s/ Arnold R. Weber
-------------------
Arnold R. Weber Director
23
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 28, 1997........................ *
Consolidated Balance Sheets at December 28, 1997
and December 29, 1996..................................................... *
Consolidated Statements of Cash Flows for each of the
three fiscal years in the period ended December 28, 1997.................. *
Consolidated Statements of Shareholders' Equity for each of the three
fiscal years in the period ended December 28, 1997........................ *
Notes to Consolidated Financial Statements................................... *
Report of Independent Accountants on Consolidated
Financial Statements...................................................... *
Report of Independent Accountants on Financial
Statement Schedule........................................................ 25
Financial Statement Schedule for each of the three fiscal years in the
period ended December 28, 1997............................................ 26
Schedule II Valuation and qualifying accounts and reserves.
- -----
* Incorporated by reference to the Company's 1997 Annual Report to Shareholders.
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 or not required.
24
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 February 10, 1998 appearing in the 1997 Annual Report to Shareholders 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.
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
Chicago, Illinois
February 10, 1998
25
SCHEDULE II
TRIBUNE COMPANY
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(In thousands of dollars)
Additions Additions
Balance at Charged to Recorded Balance
Beginning Costs and Upon at End of
Description of Period Expenses Acquisitions Deductions Period
----------- ---------- ---------- ------------ ---------- ---------
Valuation accounts deducted from assets
to which they apply:
Year ended December 28, 1997
Accounts receivable allowances:
Bad debts.................................... $24,445 $19,135 $4,158 $16,029 $31,709
Rebates, volume discounts and other.......... 9,961 19,945 633 19,043 11,496
------- ------- ------ ------- -------
Total.................................. $34,406 $39,080 $4,791 $35,072 $43,205
======= ======= ====== ======= =======
Year ended December 29, 1996
Accounts receivable allowances:
Bad debts.................................... $23,078 $19,846 $ 992 $19,471 $24,445
Rebates, volume discounts and other.......... 7,076 20,313 1,331 18,759 9,961
------- ------- ------ ------- -------
Total.................................. $30,154 $40,159 $2,323 $38,230 $34,406
======= ======= ====== ======= =======
Year ended December 31, 1995
Accounts receivable allowances:
Bad debts.................................... $24,464 $19,745 - $21,131 $23,078
Rebates, volume discounts and other.......... 9,534 27,754 - 30,212 7,076
------- ------- ------ ------- -------
Total.................................. $33,998 $47,499 - $51,343 (1) $30,154
======= ======= ====== ======= =======
- -----
(1) For 1995, $9,389 represents deductions pertaining to Compton's NewMedia and Times Advocate Company, sold in 1995.
26
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
------ -----------
2 * Pre-Amalgamation Agreement among Donohue Inc., Tribune
Company and QUNO Corporation, dated as of December 22,
1995 (Exhibit 99.2 to Form 8-K Current Report dated
January 8, 1996); Pre-Amalgamation Amendment Agreement
thereto dated as of December 28, 1995 (Exhibit 99.3 to
Form 8-K Current Report dated January 8, 1996).
2.1 * Agreement and Plan of Merger among Tribune Company, Tower
Acquisition Company, Inc. and Renaissance Communications
Corp. dated as of July 1, 1996 (Exhibit 99.1 to Form 8-K
Current Report dated July 9, 1996).
3.1 * Restated Certificate of Incorporation of Tribune Company,
dated April 21, 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).
3.1a Amended Certificate of Designation of Series A Junior
Participating Preferred stock, dated December 2, 1997.
3.2 * By-Laws of Tribune Company As Amended and In Effect on
December 10, 1996. (Exhibit 3.2 to Annual Report on Form
10-K for 1996).
4 * Rights Agreement between Tribune Company and First Chicago
Trust Company of New York, as Rights Agent, dated as of
December 12, 1997 (Exhibit 1 to Form 8-K Current Report
dated December 12, 1997).
4.1 * Indenture, dated as of March 1, 1992 between Tribune
Company and Continental Bank, National Association
(Incorporated by reference to Registration Statement on
Form S-3, Registration No. 333-02831).
4.2 * Indenture, dated as of January 1, 1997 between Tribune
Company and Bank of Montreal Trust Company (Incorporated
by reference to Registration Statement on Form S-3,
Registration No. 333-18921).
10.1 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).
10.2 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).
27
Number Description
------ -----------
10.2a 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).
10.3 o* Tribune Company Directors' Deferred Compensation Plan, as
amended and restated on July 1, 1994 (Exhibit 10.7 to
Annual Report on Form 10-K for 1994).
10.4 o* Tribune Company Bonus Deferral Plan, dated as of December
14, 1993 (Exhibit 10.8 to Annual Report on Form 10-K for
1993).
10.4a o* First Amendment of Tribune Company Bonus Deferral Plan,
effective December 1, 1996 (Exhibit 10.4a to Annual Report
on Form 10-K for 1996).
10.5 o* Tribune Company Management Incentive Plan, dated as of
January 1, 1991 (Exhibit 10.10 to Annual Report on Form
10-K for 1990).
10.5a 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).
10.6 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).
10.7 o* Tribune Company 1992 Long-Term Incentive Plan, dated as of
April 29, 1992 and as amended and in effect on April 19,
1994 (Exhibit 10.11 to Annual Report on Form 10-K for
1994).
10.8 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).
10.9 o* Tribune Company Amended and Restated Transitional
Compensation Plan for Executive Employees, effective as of
January 1, 1995 (Exhibit 10.14 to Annual Report on Form
10-K for 1994).
10.10 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).
10.11 o* Tribune Company Amended and Restated Employee Stock
Purchase Plan, dated October 22, 1996 (Exhibit 10.20 to
Form 10-Q Quarterly Report for the quarter ended September
29, 1996).
10.12 o* 1988 Restricted Stock Plan For Outside Directors, dated
February 16, 1988 (Exhibit 10.12 to Annual Report on Form
10-K for 1992).
10.12a 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 Amended and Restated 1995 Nonemployee
Director Stock Option Plan, dated October 22, 1996
(Exhibit 10.19 to Form 10-Q Quarterly Report for the
quarter ended September 29, 1996).
28
Number Description
------ -----------
10.14 o Tribune Company Amended and Restated 1996 Nonemployee
Director Stock Compensation Plan, dated as of February 17,
1998.
10.15 o* Tribune Company 1997 Incentive Compensation Plan effective
December 29, 1996 (Exhibit 10.15 to Form 10-Q Quarterly
Report for the quarter ended March 30, 1997).
11 Statements of Computation of Basic and Diluted Earnings
Per Share.
12 Computation of Ratios of Earnings to Fixed Charges.
13 The portions of the Company's 1997 Annual Report to
Shareholders which are specifically incorporated herein by
reference.
21 Table of subsidiaries of Tribune Company.
23 Consent of Independent Accountants.
27 Financial Data Schedule.
27.1 Restated Financial Data Schedules (1997).
27.2 Restated Financial Data Schedules (1996 and 1995).
99 Form 11-K financial statements for the Tribune Company
Savings Incentive Plan (to be filed by amendment).
29