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                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
 
                               ----------------
 
                                   FORM 10-K
 
             ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
 
FOR FISCAL YEAR ENDED DECEMBER 31, 1996          COMMISSION FILE NUMBER 1-13492
 
                               ----------------
 
                           THE TIMES MIRROR COMPANY
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
                 DELAWARE                      95-4481525
      (STATE OR OTHER JURISDICTION OF       (I.R.S. EMPLOYER
      INCORPORATION OR ORGANIZATION)       IDENTIFICATION NO.)
            TIMES MIRROR SQUARE
          LOS ANGELES, CALIFORNIA                 90053
 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)      (ZIP CODE)
 
      REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (213) 237-3700
 
                               ----------------
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
 
<TABLE>
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                                               NAME OF EACH EXCHANGE
           TITLE OF EACH CLASS                  ON WHICH REGISTERED
           -------------------                 ---------------------
   <C>                                  <S>
                                        New York Stock Exchange and Pacific
   Series A Common Stock                Stock Exchange
   Conversion Preferred Stock, Series B New York Stock Exchange
</TABLE>
 
                               ----------------
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                             Series C Common Stock
                               (TITLE OF CLASS)
 
                               ----------------
 
  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.
 
  The aggregate market value of the voting stock of the Registrant held by
non-affiliates of the Registrant on March  13, 1997 was approximately $3.1
billion. (For purposes of this calculation, the market value of a share of
Series C Common Stock was assumed to be the same as a share of Series A Common
Stock, into which it is convertible.)
 
  Number of shares of the Registrant's Series A Common Stock outstanding at
March 13, 1997: 66,801,511

  Number of shares of the Registrant's Series C Common Stock outstanding at
March 13, 1997: 26,679,236
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
  The following documents are incorporated by reference: In Part III, portions
of the Registrant's definitive Proxy Statement for the Company's 1997 Annual
Meeting of Shareholders to be filed by the Company within 120 days after the
end of the Company's fiscal year.
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                                    PART I
 
ITEM 1. BUSINESS.
 
GENERAL
 
  The Times Mirror Company ("Times Mirror" or the "Company") is engaged
principally in the newspaper publishing, professional information and consumer
media businesses. The Company publishes the Los Angeles Times, Newsday, The
Baltimore Sun, The Hartford Courant, The Morning Call, The (Stamford)
Advocate, Greenwich Time and several smaller newspapers. Through its
subsidiaries, the Company also provides professional information to the legal,
aviation, health science and consumer health markets, publishes books,
journals and magazines and also provides training information and services. In
early 1996, the Company announced its plan to explore its strategic
alternatives for its higher education publishing businesses and CRC Press,
Inc., both of which were included in the Professional Information segment. As
described below under "Professional Information Segment," in the fourth
quarter of 1996 the Company exchanged its college publishing businesses for
Shepard's, the nation's premier legal citation service, and signed an
agreement for the sale of CRC Press, which was completed in the first quarter
of 1997. CRC Press and the college publishing businesses accounted for less
than 10% of the Company's revenues and total assets in 1995 as well as 1996.
 
  Prior to February 1, 1995, the Company also engaged in the ownership and
operation of cable television systems, which business was divested by the
merger of the Company's corporate predecessor ("Old Times Mirror") with and
into Cox Communications, Inc. ("Cox"), resulting in the acquisition of Old
Times Mirror's cable business by Cox (the "Cox Merger"). The Company was
incorporated in the State of Delaware in June 1994 for the purpose of owning
and operating the Publishing and Information Businesses after the Cox Merger
was completed on February 1, 1995. Old Times Mirror was incorporated in 1884
in the State of California and was reincorporated in the State of Delaware in
1986. All references to "Times Mirror" shall include the Company and the
Company's subsidiaries, collectively, unless the context suggests otherwise.
 
NEWSPAPER PUBLISHING SEGMENT
 
  Times Mirror publishes the Los Angeles Times, Newsday, The Baltimore Sun,
The Hartford Courant, The Morning Call, The (Stamford) Advocate and Greenwich
Time. In addition, Times Mirror publishes several other daily and weekly
newspapers. Each daily newspaper operates independently in order to meet most
effectively the needs of the area it serves. Editorial policies and business
practices are established by local management. Each daily newspaper is a
member of Associated Press. The Los Angeles Times and Newsday also subscribe
to other supplementary news services. Production of Times Mirror's newspapers
is performed on presses owned by Times Mirror. National Journal, Inc.,
publisher of key information for decision makers in and around the nation's
capital, is also managed as part of the Newspaper Publishing Segment.
 
 LOS ANGELES TIMES
 
  The Los Angeles Times has been published continuously since 1881. It is
published every morning, and in 1996 ranked as the second largest metropolitan
newspaper in the United States in weekday circulation based on five-day
averages, and the second largest in Sunday circulation. During 1996, the Los
Angeles Times ran a new multimedia brand advertising campaign, and cut its
street sales price from 50 cents to 25 cents marketwide, which increased
single-copy sales. In 1996, its annual average unaudited circulation was
1,047,370 for Monday through Friday, 985,600 for Saturday and 1,368,875 for
Sunday, compared with 1,026,697, 966,291, and 1,420,755, respectively, in
1995. Approximately 78% of the Monday through Saturday circulation was home-
delivered in 1996, compared with 80% of the circulation in 1995.
 
  In 1996, the Los Angeles Times recorded full-run billed advertising volume
of 3,053,103 standard advertising unit inches (hereafter "inches"), part-run
volume of 3,959,024 inches, and preprinted inserts of 1,128.9 million pieces,
compared with 3,211,952 inches, 4,025,315 inches and 1,086.5 million pieces,
respectively, in 1995. In addition, the Los Angeles Times derived revenue from
advertising supplements
 
                                       1
<PAGE>
 
distributed to non-subscribers equivalent to 923.0 million pieces in 1996,
compared with 865.7 million pieces in 1995.
 
  Net revenues for the Los Angeles Times were $1,044,543,000 in 1996,
$1,029,277,000 in 1995, and $1,033,486,000 in 1994, representing 30.7%, 29.8%
and 30.8% of the Company's consolidated revenues for such years.
 
  The Los Angeles Times serves a five-county region in Southern California
that includes Los Angeles, Orange, Riverside, San Bernardino and Ventura
counties. In addition to the daily edition covering the Los Angeles
metropolitan area, the Los Angeles Times publishes daily Orange County, San
Fernando Valley and Ventura County editions. The Los Angeles Times also
publishes an edition which is distributed Monday through Friday in the
Washington, D.C. area.
 
  In conjunction with the Washington Post, the Los Angeles Times operates a
supplementary news service sold to newspapers in the United States and foreign
countries. The Los Angeles Times also sells syndicated features to other
newspapers throughout the world. The Los Angeles Times and La Opinion, the
largest Spanish-language daily newspaper in Southern California of which the
Company owns a 50% equity interest, publish a Spanish-language weekly paper,
Para Ti, targeted at Latino households in Southern California. Times Mirror
also owns California Community News, which publishes daily newspapers
including the Daily Pilot and the Independent, which are distributed in Orange
County, and the Glendale News Press, which is distributed in Los Angeles
County, and the Foothill Leader and the Burbank Leader, which are biweekly
newspapers distributed in Los Angeles County.
 
  In its primary markets of Los Angeles and Orange counties, the Los Angeles
Times competes with 12 local daily newspapers, with the largest having
approximately 350,000 total average daily circulation, and three daily
regional editions of national newspapers. In addition, there are over 300
weekly, semiweekly and free distribution newspapers.
 
 NEWSDAY
 
  Newsday, which is published seven days a week, circulates primarily in
Nassau and Suffolk counties on Long Island, New York and the borough of Queens
in New York City, and prior to being discontinued on July 17, 1995, New York
Newsday circulated in New York City. In 1996, Newsday ranked as the sixth
largest metropolitan daily newspaper in the country for Monday through Friday
circulation, and as the thirteenth largest for Sunday circulation. In 1996,
Newsday's annual average unaudited circulation was 557,145 for Monday through
Friday, 505,983 for Saturday, and 648,070 for Sunday, compared with 619,019,
558,187 and 694,781, respectively, in 1995, which included New York Newsday
for a partial year before its discontinuation. In 1995, New York Newsday's
annual average unaudited circulation prior to its discontinuation was 161,271
for Monday through Friday, 115,040 for Saturday, and 150,476 for Sunday. In
1996, Newsday introduced Distinction, a bimonthly magazine designed to serve
Long Island's upscale community, which is supported by advertising revenues
and paid subscriptions.
 
  In 1996, Newsday recorded full-run billed advertising volume of 1,364,967
inches, part-run volume of 1,172,773 inches, and preprinted inserts of 675.0
million pieces, compared with 1,347,412 inches, 995,092 inches, and 726.3
million pieces, respectively, in 1995. The 1995 part-run volume and pieces of
preprinted inserts included New York Newsday for a partial year before its
discontinuation. In addition, Newsday, together with its alternate
distribution company, derived revenue from advertising supplements distributed
to non-subscribers equivalent to 986.0 million pieces in 1996, compared with
975.7 million pieces in 1995.
 
  Newsday competes with three major metropolitan newspapers and daily regional
editions of national newspapers. In addition, there are numerous daily, weekly
and semiweekly local newspapers in its distribution area.
 
                                       2
<PAGE>
 
 THE BALTIMORE SUN
 
  The Baltimore Sun primarily serves the Baltimore-Annapolis metropolitan
area, including Anne Arundel, Baltimore, Carroll, Harford and Howard counties.
Prior to September 1995, The Baltimore Sun published three editions, including
The Sun, a morning newspaper published Monday through Saturday; The Evening
Sun, an afternoon paper published Monday through Friday; and The Sunday Sun,
published Sunday mornings. In September 1995, The Baltimore Sun ceased
publishing The Evening Sun and completely redesigned The Sun. In 1996, The Sun
had an annual average unaudited circulation of 316,074 for Monday through
Saturday, compared with 341,692 in 1995. In 1996, The Sunday Sun had an annual
average unaudited circulation of 477,292, compared with 489,706 in 1995.
 
  In 1996, The Baltimore Sun newspapers recorded full-run billed advertising
volume of 1,656,736 inches, part-run volume of 371,903 inches, and preprinted
inserts of 576.1 million pieces, compared with 1,765,391 inches, 418,920
inches and 560.7 million pieces, respectively, in 1995. In addition, The
Baltimore Sun newspapers derived revenues from advertising supplements
delivered to non-subscribers equivalent to 67.8 million pieces in 1996,
compared with 86.5 million pieces in 1995.
 
  The Baltimore Sun also publishes weekly newspapers, including The Aegis and
the Record which are distributed in Harford County, and four other weeklies
that serve the Aberdeen Proving Ground and certain zip codes in Harford
County. The Baltimore Sun competes with the Washington Post in Carroll and
Howard counties, with the Annapolis Capital in Anne Arundel County, as well as
with daily regional editions of national newspapers. In addition, there are
other daily and weekly local newspapers in the distribution area.
 
 THE HARTFORD COURANT
 
  The Hartford Courant, a morning daily and Sunday newspaper that was first
published in 1764, is the oldest continuously published newspaper in the
United States. It is published in Hartford, Connecticut, and serves the
state's northern and central regions. The Hartford Courant publishes nine
regional editions on a daily basis, which provide local news and advertising.
In 1996, the annual average unaudited circulation was 210,876 for Monday
through Saturday, and 303,502 for Sunday, compared with 214,751 and 310,490,
respectively, in 1995.
 
  In 1996, The Hartford Courant recorded full-run billed advertising volume of
1,504,667 inches, part-run volume of 649,684 inches, and preprinted inserts of
415.0 million pieces, compared with 1,414,188 inches, 686,328 inches and 431.7
million pieces, respectively, in 1995. In addition, The Hartford Courant
derived revenues from advertising supplements distributed to non-subscribers
equivalent to 63.6 million pieces in 1996, compared with 43.1 million pieces
in 1995.
 
  The Hartford Courant competes with a number of larger daily newspapers,
especially in metropolitan areas on the periphery of its trade area, as well
as daily regional editions of national newspapers. In addition, there are
other weekly and local daily newspapers in the distribution area.
 
 THE MORNING CALL
 
  The Morning Call in Allentown, Pennsylvania, is published daily and
primarily services Lehigh and Northampton counties in eastern Pennsylvania. In
1996, annual average unaudited circulation was 128,927 for Monday through
Friday, 142,482 for Saturday, and 183,119 for Sunday, compared with 131,628,
145,158 and 186,733, respectively, in 1995.
 
  In 1996, The Morning Call recorded full-run billed advertising volume of
1,347,395 inches, part-run volume of 251,185 inches, and preprinted inserts of
223.1 million pieces, compared with 1,378,005 inches, 281,236 inches and 229.3
million pieces, respectively, in 1995. In addition, The Morning Call derived
revenues from advertising supplements distributed to non-subscribers
equivalent to 16.3 million pieces in 1996, compared with 13.5 million pieces
in 1995.
 
                                       3
<PAGE>
 
  The Morning Call competes with a few smaller daily and weekly newspapers,
with its principal competitor being the Express Times in Easton, Pennsylvania.
 
 THE (STAMFORD) ADVOCATE AND GREENWICH TIME
 
  The (Stamford) Advocate and Greenwich Time are published every morning, and
serve the southern part of Fairfield County, Connecticut. The Advocate
circulates primarily in Stamford, Connecticut and Greenwich Time circulates in
Greenwich, Connecticut. In 1996, The Advocate had an annual average unaudited
circulation of 27,854 for Monday through Saturday, and 39,465 for Sunday,
compared with 28,840 and 40,489, respectively, in 1995. In 1996, Greenwich
Time had an annual average unaudited circulation of 12,584 for Monday through
Saturday, and 14,021 for Sunday, compared with 12,797 and 14,184,
respectively, in 1995.
 
  In 1996, The Advocate recorded full-run billed advertising volume of 783,368
inches, and preprinted inserts of 37.4 million pieces, compared with 769,193
inches and 39.5 million pieces in 1995. In 1996, Greenwich Time recorded full-
run billed advertising volume of 758,567 inches and preprinted inserts of 12.8
million pieces, compared with 738,802 inches and 12.8 million pieces in 1995.
In addition, the newspapers derived revenues from advertising supplements
distributed to non-subscribers equivalent to 17.8 million pieces in 1996,
compared with 17.6 million pieces in 1995.
 
  Both The Advocate and Greenwich Time compete with a number of larger daily
newspapers which serve the New York City metropolitan area.
 
 APARTMENT SEARCH, INC.
 
  During the third quarter of 1996, Times Mirror acquired Apartment Search,
Inc., the nation's largest apartment locator service, expanding the services
provided by its newspapers to the apartment rental market. At the time of the
acquisition, Apartment Search served the Minneapolis/St. Paul, Kansas City,
Detroit, Washington, D.C. and Baltimore areas through 37 retail offices, and
has been expanding into other markets since the acquisition.
 
 ELECTRONIC PUBLISHING
 
  In the spring of 1996, the Los Angeles Times moved its "TimesLink" service,
a regional online interactive information service, from the Prodigy network to
the World Wide Web under the name of LATimes.com due to the wider audience
provided by the Internet. LATimes.com has become Southern California's leading
online news and advertising service. Newsday also moved from Prodigy to the
World Wide Web in early 1996 under the name of newsday.com. The Hartford
Courant expanded and redesigned its courant.com site to provide more news and
information daily. During 1996, The Baltimore Sun launched a new site on the
World Wide Web, sunspot.net, and The Morning Call launched its site,
mcall.com. Times Mirror newspaper web sites experienced increased traffic in
1996. During 1996, the Los Angeles Times continued to build CareerPath.com, a
national employment online service with an extensive listing of jobs on the
Internet. CareerPath.com, founded by the Los Angeles Times and five other
leading newspapers, now has 26 affiliate newspapers, including The Baltimore
Sun and The Hartford Courant, and runs over four million job searches per
month.
 
  In January 1996, Times Mirror acquired Hollywood Online Inc., a leading
online provider of award-winning entertainment information for consumers about
the latest in movies, television and music. In addition, Hollywood Online
offers turnkey creative, design, production and distribution services for the
Internet to leading motion picture studios, television networks and record
labels.
 
  During 1996, Times Mirror invested in ListingLink, the leading resale real
estate site for California on the Internet. Times Mirror also invested in
PointCast, a provider of network news on the Internet, and the Los Angeles
Times now offers regional news, information and advertising to viewers on The
PointCast Network(TM).
 
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 OTHER COMPETITION
 
  Besides competing vigorously with similar media in their respective markets,
the Company's newspapers compete for advertising revenues with other local and
national sales promotion media such as radio, broadcast television, cable
television, magazines and direct mail.
 
 RAW MATERIALS
 
  The primary raw material used by the newspapers is newsprint. Times Mirror
centrally purchases newsprint for all of its newspapers in order to achieve
advantageous terms from its vendors. The newsprint requirements for all Times
Mirror newspapers are obtained from United States and Canadian sources
unaffiliated with Times Mirror. In 1996, average newsprint prices were
essentially unchanged from 1995. For 1996, Times Mirror's newsprint costs
declined moderately due largely to lower consumption following the 1995 closing
of certain editions and conservation efforts.
 
 SEASONALITY
 
  Quarterly revenues of the Company's Newspaper Publishing Segment vary
slightly due to industry seasonality, with first and third quarters' results
generally being minimally lower than those of the second and fourth quarters.
In 1996, the quarterly revenues expressed as a percentage of total annual
revenues for the Company's Newspaper Publishing Segment were 23.8% for the
first quarter, 24.8% for the second quarter, 24.2% for the third quarter and
27.2% for the fourth quarter.
 
PROFESSIONAL INFORMATION SEGMENT
 
  Times Mirror produces a variety of books and other information products in
the areas of legal information, aeronautical charts and flight information,
health information products and services, professional training, and, prior to
January 1997, technical and scientific publishing. In October 1996, Times
Mirror and its subsidiary Mosby-Year Book, Inc. completed an exchange in which
The McGraw-Hill Companies, Inc. sold its subsidiary Shepard's/McGraw-Hill, Inc.
to the Company for (i) the stock of Times Mirror Higher Education Group, Inc.,
(ii) the assets and related liabilities of Mosby's college-level life and
physical science text business, (iii) certain assets and liabilities of Times
Mirror International Publishers U.S., Inc. and affiliated entities relating to
the Company's college textbook business, and (iv) certain cash consideration.
Revenues of these college publishing businesses sold to McGraw-Hill represented
approximately 5% and 7% of the Company's consolidated revenues in 1996 and
1995, respectively, with the 5% figure for 1996 representing revenues through
October 1996 when these businesses were sold.
 
  In late November 1996, the Company commenced operating Shepard's as a 50/50
joint venture with Reed Elsevier Inc. as part of a broader strategic alliance
between Matthew Bender and LEXIS(R)/NEXIS(R), a Reed subsidiary and a provider
of full-text online information services in the legal, news, business and
government areas. The Company received $242,500,000 from Reed for the 50%
interest in the Shepard's joint venture.
 
  Books, journals and other materials published by Times Mirror, many of which
are distributed worldwide, are sold through a variety of means, including the
use of Times Mirror sales forces, wholesalers, retailers, jobbers, direct-to-
the-customer selling and direct mail. In the fourth quarter of 1996, the
Company closed Times Mirror International Publishers, the Company's
unprofitable international book distributor, and appointed Harcourt Brace & Co.
as its exclusive international distributor of Mosby professional medical
publications in most international markets. The Company also disposed of Doyma
Libros, the Company's Spanish-language medical book publisher. Printing and
binding are performed primarily by outside suppliers in the United States and
abroad. In accordance with publishing industry practice, softcover and
hardcover books, as well as CD-ROM products, are generally sold on a returnable
basis.
 
  The primary raw material used by the book publishing businesses is paper. In
1996, paper prices for the book publishing industry declined slightly from 1995
levels. On an annual basis, the Company enters into various
 
                                       5
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centralized, volume-purchasing agreements with a number of unaffiliated
primary paper suppliers to obtain beneficial volume discounts for the book
publishing operations of Times Mirror. Volume discounts for the book
publishing operations are expected to decline slightly in 1997 because of the
sale of the college textbook business in October 1996.
 
 LEGAL INFORMATION PRODUCTS AND SERVICES
 
  Matthew Bender & Company, Incorporated, a legal information company, offers
an array of legal products and services, including treatises in the areas of
bankruptcy, intellectual property, federal practice and immigration law, as
well as law school textbooks. Matthew Bender offers its core products in print
as well as on CD-ROM and is developing electronic practice tools for lawyers.
Matthew Bender provides its publications to approximately 119,000 accounts,
including each of the 100 largest law firms in the United States. In 1996,
Matthew Bender introduced six additional CD-ROM library versions of its print
titles, bringing the total to 24 libraries. In early 1996, Matthew Bender
launched a new brand of CD-ROM products distributed under the trademark
"Authority From Matthew Bender(TM)," which employs the industry-standard
search engine FOLIO(R), and introduced new case law collections in four states
and three legal practice specialties on CD-ROM under license from LEXIS/NEXIS.
During 1996, Matthew Bender established its bender.com site containing its
catalogue and other information about Matthew Bender legal products.
 
  Matthew Bender competes with various legal information providers, including
LEXIS/NEXIS, Thomson Legal Publishing and its affiliate West Publishing Group,
The Bureau of National Affairs, Inc., Commerce Clearing House, Inc. (owned by
Wolters Kluwer) and several other smaller legal information publishers. In the
past three years, the consolidation of the legal publishing industry has
accelerated dramatically. As this consolidation is likely to continue, the
Company anticipates that competitive pressures will increase and that
publishers whose revenues principally come from proprietary information may
fare better than those organizations whose sales are derived from repackaging
public domain information. The Company's acquisition of Shepard's during 1996
and subsequent joint venture with Reed for the ownership and management of
Shepard's, together with the alliance with Reed's subsidiary LEXIS/NEXIS,
significantly strengthen Matthew Bender's position as a legal information
provider.
 
 FLIGHT INFORMATION SERVICES
 
  Through Jeppesen Sanderson, Inc. and its European sister company, Jeppesen &
Co. GmbH, Times Mirror publishes aeronautical charts, flight information,
pilot training materials and navigational aids worldwide. Jeppesen DataPlan,
Inc., a subsidiary of Jeppesen Sanderson, also provides computerized online
flight plans, weather information and other flight services. Jeppesen
Sanderson offers a service called OnSight, a sophisticated operations control
workstation combining its aviation, flight planning and weather display
information. In early 1996, Jeppesen Sanderson commenced delivery of an
electronic aircraft maintenance service to airline carriers. The Jeppesen
Sanderson companies serve all U.S. domestic airlines and the majority of
airlines worldwide.
 
  The Jeppesen companies compete with various airline consortiums and
governmental entities, as well as numerous vendors of training, maintenance,
weather and flight planning information.
 
 HEALTH INFORMATION SERVICES
 
  Mosby-Year Book, Inc. publishes medical, dental, nursing and allied health
books and journals and, prior to the October 1996 exchange transaction
described above, college-life and physical science textbooks. In addition,
Mosby provides consumer health and wellness information, online health
information for professionals and medical cost-containment information. In
connection with its electronic publishing efforts, Mosby has published a
multimedia catalogue of more than 250 products including "Mosby's Medical
Encyclopedia for the Health Consumer," "Physician's GenRx" and "The
Interactive Skeleton." In December 1996, Mosby entered into a joint venture to
launch an Internet-based medical online service for physicians, using Mosby's
content as well as content from a select group of other health information
publishers. This joint venture, known as MD Consult(TM), is expected to
commence operations in the second quarter of 1997. As discussed above, Mosby
changed its method of international distribution in the fourth quarter of 1996
when Times Mirror closed Times Mirror International Publishers and now
primarily uses an unaffiliated distributor, Harcourt Brace.
 
                                       6
<PAGE>
 
  Mosby competes with several larger health information companies, including
J.B. Lippincott Co., W.B. Saunders Company, Williams & Wilkins and an
assortment of smaller publishers.
 
  Third and fourth quarter revenues at Mosby tend to be higher than earlier
quarters, because medical and nursing school adoptions are heaviest during the
third and fourth quarters. Mosby's reference publication schedule is also
strongest in the fourth quarter, generating substantial sales due to strong
pre-publication direct marketing efforts.
 
 TIMES MIRROR HIGHER EDUCATION GROUP
 
  In October 1996, the Company transferred to McGraw-Hill, in the exchange
transaction described above, the Times Mirror Higher Education Group, which
Times Mirror formed in 1994 by combining Richard D. Irwin, publisher of
business, economics and higher education information products; Wm. C. Brown
Communications, publisher of science and mathematics textbooks; Brown &
Benchmark, publisher of social sciences and humanities; and Irwin
Professional, publisher of broad-based business products.
 
 TIMES MIRROR TRAINING
 
  Times Mirror provides sales, customer service and management training
programs for professionals in business and industry throughout the world
through Times Mirror Training: Zenger Miller, Learning International and Kaset
International. These divisions were operated as separate corporations prior to
January 1, 1996, when they were merged and consolidated into Times Mirror
Training, Inc. In 1996, dramatic revenue growth from Kaset International
products, supported by revenue increases at Zenger Miller and Learning
International, highlighted a year in which Times Mirror Training launched
several new products and began to unify its domestic marketing and sales
efforts. Other significant accomplishments in 1996 included the launch of
Zenger Miller's integrated call center for customer service and outbound
sales, the ramp-up of the group's shared service provider, ServiceOne, and
several global initiatives through Times Mirror Training's international arm.
In addition, Allen Communication produces interactive software to create
multimedia training courses.
 
  Generally, quarterly revenues for Times Mirror Training vary only slightly;
fourth quarter revenues may tend to be stronger when customers finish the year
by spending the balance of their budgets on more discretionary items such as
training.
 
  Times Mirror Training competes with many organizations worldwide, including
such enterprises as Development Dimensions International, Forum Corporation,
Wilson Learning Corporation and a myriad of smaller local and national
businesses.
 
CONSUMER MEDIA SEGMENT
 
  Times Mirror publishes a number of special interest and trade magazines
through its subsidiary, Times Mirror Magazines, Inc., as well as art books
through its subsidiary, Harry N. Abrams, Inc. In September 1996, the Company
announced its intention to sell Abrams, with the transaction expected to close
in the first half of 1997 (see Recent Developments below).
 
  The six-month average unaudited circulation figures per issue for the
magazines, for the year ended December 31, 1996, were 1,793,200 for Popular
Science; 1,750,200 for Field & Stream; 1,353,100 for Outdoor Life; 901,300 for
Today's Homeowner (previously named Home Mechanix) (published 10 times a
year); 1,293,000 for Golf Magazine; 407,400 for Ski Magazine (published 8
times a year); 404,500 for Skiing (published 7 times a year); 205,000 for
Transworld SNOWboarding (published 8 times a year); 131,400 for Yachting;
 
                                       7
<PAGE>
 
146,200 for Salt Water Sportsman; and 160,000 for Snowboard Life (published 4
times a year). Each of these magazines is published monthly unless otherwise
noted.
 
  In 1996, the magazines had several major accomplishments, including the
launch of a new series called Popular Science's Essential Guides, with the
first guide covering the subject of Sports Utility Vehicles, and a single-
sponsored thirteenth issue of Field & Stream. In addition, Home Mechanix was
changed to Today's Homeowner and the publication was completely redesigned to
appeal to a wider audience. Verge, a quarterly men's magazine, and Freeze, the
first skier publication targeted at the 12 to 24 year old market, are
scheduled to be introduced in 1997.
 
  In addition, Times Mirror Magazines publishes The Sporting News, a national
sports weekly; Skiing Trade News and TransWorld SNOWboarding Business,
controlled-circulation business magazines; and other related publications.
These magazines are primarily intended for specialized markets.
 
  The primary raw material used by Times Mirror Magazines is paper. For 1996,
the prices for the grades of papers used by its magazines declined moderately.
In 1996, Times Mirror Magazines centrally purchased paper for all of its
magazines to obtain more favorable terms and reduced inventory levels due to
the improved availability of paper.
 
  Capitalizing on the expertise of its magazines, in 1996 Times Mirror
Magazines entered into an agreement with America Online, making the content of
its publications, including The Sporting News, Golf Magazine, Popular Science
and Ski Magazine, available to America Online subscribers. In 1996 Times
Mirror Magazines also introduced World Wide Web sites which feature articles
and other information from its various publications; the sites include
sportingnews.com, skinet.com, outdoorlife.com, twsnow.com, swsfish.com,
popsci.com, todayshomeowner.com, golfonline.com, fieldandstream.com and
yachtingnet.com.
 
  Times Mirror Magazines competes nationally with numerous special interest
and trade magazines. While Times Mirror Magazines not only competes with
similar national media, it must also compete for advertising revenues with
other local and national sales promotion media such as radio, broadcast
television and direct mail.
 
INTELLECTUAL PROPERTY
 
  In recognition of the fact that intellectual property (e.g. trademarks,
copyrights, licenses and the like) is fast becoming one of its most important
assets, the Company added internal resources in 1996 to intensify its effort
to protect its intellectual property and capitalize on these rights. The
Company expects that this undertaking, which will continue indefinitely, will
support its ongoing efforts to grow its businesses internally, especially in
the realm of electronic and online publishing activities.
 
EMPLOYEES
 
  At December 31, 1996, Times Mirror's businesses had 20,803 employees, 15,330
of whom were full-time employees. Approximately 2,655 employees were
represented by collective bargaining agents. The Company believes that its
employee relations are good. Employees receive supplemental benefits ranging
from various forms of group insurance coverage to retirement income programs.
 
RECENT DEVELOPMENTS
 
  As part of its previously announced plan to explore strategic alternatives
for CRC Press, Inc., the Company sold the assets and certain liabilities of
CRC Press in January 1997. The Company also announced in September 1996 its
intention to sell Harry N. Abrams, Inc., the premier publisher of art and
illustrated books in the United States and a publisher of textbooks,
children's books and calendars, in order to concentrate on its core
businesses. The transaction is expected to close in the first half of 1997.
Revenues from Abrams and CRC Press accounted for 2% of the consolidated
revenues of Times Mirror in both 1996 and 1995.
 
                                       8
<PAGE>
 
  On February 28, 1997, the Company announced that it would redeem all of its
outstanding Series B preferred stock on April 2, 1997. In the redemption, each
share of Series B preferred stock will be exchanged for approximately .57083
of a share of the Company's Series A common stock.
 
CERTAIN FACTORS AFFECTING FORWARD-LOOKING STATEMENTS
 
  Certain plans, objectives, projections and other information regarding
future performance and outcomes discussed in this Form 10-K are forward-
looking statements that are subject to risks and uncertainties. There can be
no assurances that these future results will be achieved. Potential risks and
uncertainty which could adversely affect the Company's ability to obtain these
results include, without limitation, the following factors: (a) an increase in
paper, printing and distribution costs over the levels anticipated; (b)
increased consolidation among major retailers or other events depressing the
level of display advertising; (c) an economic downturn in the Company's
principal newspaper markets or other occurrences leading to decreased
circulation and diminished revenues from both display and classified
advertising; (d) competitive pressures arising from increased consolidation in
the legal information industry; (e) an increase in expenses related to new
initiatives and product improvement efforts in the legal information, flight
information and health information operating units; (f) unfavorable foreign
currency fluctuations; and (g) a general economic downturn resulting in
decreased professional or corporate spending on discretionary items such as
information or training and in decreased consumer spending on discretionary
items such as newspapers or magazines.
 
ITEM 2. PROPERTIES.
 
  The general character, location, terms of occupancy and approximate size of
Times Mirror's principal plants and other materially important physical
properties at December 31, 1996 are listed below.
 
<TABLE>
<CAPTION>
                                                          APPROXIMATE AREA IN
                                                              SQUARE FEET
                                                         ----------------------
   GENERAL CHARACTER OF PROPERTY                         OWNED(1)  LEASED(2)(3)
   -----------------------------                         --------- ------------
   <S>                                                   <C>       <C>
   NEWSPAPER PUBLISHING
    Printing plants, business and editorial offices,
     garages and warehouse space located in:
      Los Angeles, California..........................  2,096,000    305,000
      Hartford, Connecticut............................    568,000
      Baltimore, Maryland..............................    632,000      6,000
      Melville, New York...............................    716,000
      Other locations..................................  1,202,000  1,643,000

   PROFESSIONAL INFORMATION
    Business and editorial offices and warehouses in
     California, Colorado, Missouri, New York and other
     locations.........................................    982,000    981,000

   CONSUMER MEDIA
    Business and editorial offices in Connecticut, New
     York, Missouri, Washington, D.C. and other
     locations.........................................     29,000    225,000

   CORPORATE
    Corporate offices and garages located in California
     and New York......................................    185,000     24,000
</TABLE>
--------
(1) Excludes 648,000 square feet of undeveloped land, primarily in
    Connecticut; 598,000 square feet of office/plant space in Maryland and
    Colorado available for sale or lease; and 48,000 square feet of office
    space in Los Angeles leased to unrelated third parties.
(2) Excludes 472,000 square feet of space sublet to unrelated third parties
    and 53,000 square feet of vacant space which is available for subleasing.
(3) The Company's material lease agreements expire at various dates through
    2011.
 
 
                                       9
<PAGE>
 
ITEM 3. LEGAL PROCEEDINGS.
 
  Times Mirror and its subsidiaries are defendants in actions for libel and
other matters arising out of their business operations. In addition, from time
to time, Times Mirror and its subsidiaries are involved as parties in various
governmental and administrative proceedings, including environmental matters.
Times Mirror does not believe that any such proceedings currently pending will
have a material adverse effect on its business or financial condition.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
  No matters were submitted to a vote of security holders during the fourth
quarter of 1996.
 
EXECUTIVE AND KEY OFFICERS OF THE REGISTRANT
 
  The executive and key officers of the Company as of March 10, 1997 are
listed below. Executive and key officers are elected to serve until they
resign or are removed, or are otherwise disqualified to serve, or until their
successors are elected and qualified. Except as indicated below, all such
officers were employed by the Company and its predecessor company, Old Times
Mirror, for five years or more.
 
<TABLE>
<CAPTION>
                                                                            OFFICER
          NAME           AGE    POSITIONS AND OFFICES WITH TIMES MIRROR     SINCE(1)
          ----           ---    ---------------------------------------     --------
<S>                      <C> <C>                                            <C>
Mark H. Willes.......... 55  Chairman of the Board, President and Chief       1995(2)
                              Executive Officer
Richard T. Schlosberg    52  Executive Vice President and Publisher Los       1990
 III....................      Angeles Times
Patrick A. Clifford..... 54  Senior Vice President, Chairman Mosby-Year       1990
                              Book
James R. Simpson........ 56  Senior Vice President, Human Resources           1983
Thomas Unterman......... 52  Senior Vice President and Chief Financial        1992(3)
                              Officer
Donald F. Wright........ 62  Senior Vice President, Eastern Newspapers        1988
Horst A. Bergmann....... 58  Vice President, President Jeppesen Sanderson,    1996(4)
                              President Times Mirror Training, Inc.
Shelby Coffey III....... 50  Vice President, Editor Los Angeles Times         1996(5)
Kathryn M. Downing...... 43  Vice President, President Matthew Bender         1996(6)
Debra A. Gastler........ 44  Vice President, Taxes                            1994(7)
Raymond A. Jansen....... 57  Vice President, Publisher Newsday                1996(8)
Mary E. Junck........... 49  Vice President, Publisher The Baltimore Sun      1996(9)
Kathleen G. McGuinness.. 48  Vice President, Secretary and General Counsel    1995(10)
Stephen C. Meier........ 46  Vice President, Public and Government Affairs    1989
Roger H. Molvar......... 41  Vice President and Controller                    1996(11)
Steven J. Schoch........ 38  Vice President and Treasurer                     1995(12)
Michael E. Waller....... 55  Vice President, Publisher The Hartford           1996(13)
                              Courant
Efrem Zimbalist III..... 49  Vice President, President Times Mirror           1993(14)
                              Magazines
</TABLE>
--------
 (1) The date indicated relates to the year in which such person first became
     an officer of Old Times Mirror unless the context suggests otherwise. All
     of the executive officers of the Company, other than Mark H. Willes,
     Thomas Unterman, Horst A. Bergmann, Shelby Coffey III, Kathryn M.
     Downing, Raymond A. Jansen, Mary E. Junck, Kathleen G. McGuinness, Roger
     H. Molvar, Steven J. Schoch and Michael E. Waller, were elected executive
     officers of the Company effective January 30, 1995 and had served as
     executive officers of Old Times Mirror prior to that time. Mr. Unterman
     was elected an executive officer of the Company effective June 3, 1994
     and had served as an executive officer of Old Times Mirror prior to that
     time.
 (2) Mark H. Willes was elected as President and Chief Executive Officer of
     the Company effective June 1, 1995 and Chairman of the Board effective
     January 1, 1996. Prior to joining the Company, Mr. Willes was an
     executive of General Mills, Inc. from 1980 to 1995, serving as Vice
     Chairman upon his departure.
 (3) Thomas Unterman was elected as an executive officer of Old Times Mirror
     effective October 1, 1992. Prior to that time, he had been a partner at
     the law firm of Morrison & Foerster since 1986.
 
                                      10
<PAGE>
 
 (4) Horst A. Bergmann was elected as an executive officer of the Company
     effective May 9, 1996. After joining Jeppesen Sanderson in 1963, he was
     named Flight Information Services Director in 1974 and Managing Director,
     Jeppesen & Co. GmbH in 1977. In 1987, he was appointed Chairman,
     President and Chief Executive Officer of Jeppesen Sanderson, and was also
     named Chief Executive Officer of Times Mirror Training, Inc. in 1996.
 (5) Shelby Coffey III was elected as an executive officer of the Company
     effective May 9, 1996. He joined the Los Angeles Times in 1986 as Deputy
     Associate Editor, became Executive Editor in 1988 and was named Editor
     and Executive Vice President in 1989.
 (6) Kathryn M. Downing was elected as an executive officer of the Company
     effective May 9, 1996. She was named President and Chief Executive
     Officer of Matthew Bender in 1995. Prior to that time, Ms. Downing was
     President and Chief Executive Officer of Lawyers Cooperative Publishing,
     a division of Thomson Legal Publishing, beginning in 1993. From 1990 to
     1993, she was President and Chief Operating Officer of Electronic
     Publishing, a division of Thomson Professional Publishing.
 (7) Debra A. Gastler was elected as an executive officer of Old Times Mirror
     effective January 3, 1994. Prior to that time, she had been Vice
     President, Taxes of Pacific Enterprises since 1990 and Director of Taxes
     of Pacific Enterprises since 1987.
 (8) Raymond A. Jansen was elected as an officer of the Company effective May
     9, 1996. He was named Publisher, President and Chief Executive Officer of
     Newsday in November 1994. Prior to that time, he was Publisher and Chief
     Executive Officer of The Hartford Courant since 1990.
 (9) Mary E. Junck was elected as an officer of the Company effective May 9,
     1996. She was named Publisher and Chief Executive Officer of The
     Baltimore Sun in 1993. Prior to that time, she joined the St. Paul
     Pioneer Press in 1985 and was named Publisher and President of the
     newspaper in 1990.
(10) Kathleen G. McGuinness was elected as an executive officer of the Company
     effective November 1, 1995. Prior to that time, she had been a partner at
     the law firm of O'Melveny & Myers since 1985.
(11) Roger H. Molvar was elected as an executive officer of the Company
     effective May 9, 1996. Prior to that time, he served as Senior Vice
     President and Comptroller of First Interstate Bank of California since
     1989.
(12) Steven J. Schoch was elected as an executive officer of the Company
     effective December 11, 1995. Prior to that time, he had been Vice
     President, Treasurer at EuroDisney S.C.A. from 1994 to 1995 and Vice
     President, Assistant Treasurer of The Walt Disney Company from 1992 to
     1994. Prior to that time, he was Director of Corporate Finance of The
     Walt Disney Company from 1991 to 1992.
(13) Michael E. Waller was elected as an officer of the Company effective May
     9, 1996. Mr. Waller was named Publisher and Chief Executive Officer of
     The Hartford Courant in 1994. He joined The Hartford Courant in 1986 as
     Executive Editor and Vice President, and was named Editor in 1990.
(14) Efrem Zimbalist III was elected as an executive officer of Old Times
     Mirror effective March 4, 1993. Mr. Zimbalist was Chairman and Chief
     Executive Officer of Correia Art Glass, Inc. from 1978 until he joined
     Old Times Mirror in July 1992.
 
 
                                      11
<PAGE>
 
                                    PART II
 
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY STOCK AND RELATED
    STOCKHOLDER MATTERS.
 
  Prior to February 1, 1995, Old Times Mirror Series A Common Stock was traded
principally on the New York Stock Exchange, Inc. ("NYSE") and was also listed
on the Pacific Stock Exchange. The Company's Series A Common Stock is traded
principally on the NYSE and is also listed on the Pacific Stock Exchange. Old
Times Mirror Series C Common Stock was not traded in an established public
trading market but was convertible into Old Times Mirror Series A Common
Stock. Upon the effectiveness of the Cox Merger on February 1, 1995, each
share of Old Times Mirror Series A Common Stock outstanding immediately prior
to the Cox Merger and held by non-controlling shareholders of the Company,
which excludes all Chandler Trust shareholders, was converted into one share
of the Company's Series A Common Stock and a portion of a share of Cox's Class
A Common Stock, par value $1.00 per share ("Cox Class A Common Stock"). In
addition, each share of Old Times Mirror Series C Common Stock outstanding
immediately prior to the Cox Merger and held by non-controlling shareholders
of the Company, which excludes all Chandler Trust shareholders, was converted
into one share of the Company's Series C Common Stock and a portion of a share
of Cox Class A Common Stock. At March 13, 1997, there were approximately 2,367
record holders of the Company's Series A Common Stock and 1,381 record holders
of Series C Common Stock. The price ranges for Old Times Mirror Series A
Common Stock and the Company's Series A Common Stock and the quarterly cash
dividend declared and paid on all Old Times Mirror and Company Common Stock in
1996 and 1995 are listed below.
 
<TABLE>
<CAPTION>
                                                  STOCK PRICE(1)  CASH DIVIDEND
                                                  --------------- --------------
                                                   HIGH     LOW   DECLARED  PAID
                                                  ------- ------- --------  ----
      <S>                                         <C>     <C>     <C>       <C>
      1996
        First Quarter............................ $40 1/8 $30 5/8   $.10    $.06
        Second Quarter...........................  46      36 3/4    .10     .10
        Third Quarter............................  45 1/4  39 1/2     - (2)  .10
        Fourth Quarter...........................  56      43 1/2    .10     .10
      1995
        First Quarter............................ $33 1/2 $17 1/4   $.06    $.27
        Second Quarter...........................  24 3/4  17 5/8    .06     .06
        Third Quarter............................  32 5/8  23 1/4    .06     .06
        Fourth Quarter...........................  35 1/4  28        .06     .06
</TABLE>
--------
(1) On February 1, 1995, the Times Mirror common shareholders received
    distributions having a value of $10.45 per Times Mirror common share. The
    trading prices indicated for the first month of 1995 have not been
    adjusted to reflect these distributions.
(2) During 1996, the Company began declaring and paying common stock dividends
    in the same quarter; previously, dividends were declared in the quarter
    prior to payment. As a result, in the third quarter of 1996, no dividends
    were declared in order to change to the new procedure.
 
  On October 10, 1994 as part of the settlement of certain shareholders'
litigation with respect to the Cox Merger, the Company agreed to pay an annual
dividend to Series A and Series C common shareholders of no less than 24 cents
per share, beginning in June 1995 and continuing for a period of three years,
subject to the fiduciary duties of its Board of Directors. Thereafter, the
payment of dividends on common stock will depend on future earnings, capital
requirements, financial condition and other factors. The Company declared a
quarterly dividend on the common stock of 10 cents per share payable on March
10, 1997 to stockholders of record as of February 21, 1997.
 
 
                                      12
<PAGE>
 
  Pursuant to the Company's acquisition of Apartment Search, Inc. in the third
quarter of 1996, eight shareholders of Apartment Search were issued on August
12, 1996 an aggregate amount of 211,794 shares of the Company's Series A
Common Stock in exchange for 95,899 shares of Apartment Search common stock,
$.01 par value per share. Under the Agreement and Plan of Merger dated as of
July 24, 1996, by and among the Company, Times Mirror Acquisition, Inc.,
Apartment Search and certain of the shareholders of Apartment Search, the
number of shares of the Series A Common Stock to be issued in the acquisition
was based on the closing price of the Series A Common Stock during the period
immediately prior to the closing of the acquisition and on the attainment by
Apartment Search of certain performance objectives. The Company is also
required under the Agreement to issue an additional amount of Series A Common
Stock with a value of approximately $3.6 million on or before March 31, 1997,
based on the achievement of certain 1996 performance measures. The Company
claimed an exemption from registration for the shares of Series A Common Stock
issued for the Apartment Search acquisition under Section 4(2) of the
Securities Act of 1933, as amended (the "Act"), on the basis that the issuance
did not involve any public offering. The Company also filed a Form D pursuant
to Regulation D of the Act on the basis that the offering met the terms and
conditions of Rule 506 of the Act.
 
ITEM 6. SELECTED FINANCIAL DATA.
 
  The following selected financial data has been derived from the Consolidated
Financial Statements that have been audited by Ernst & Young LLP, independent
auditors. The information set forth below is not necessarily indicative of
results of future operations, and should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and related notes
thereto included elsewhere in this Form 10-K.
 
                                      13
<PAGE>
 
          SELECTED CONSOLIDATED FINANCIAL DATA AND OTHER INFORMATION
 
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS
EXCEPT PER COMMON SHARE,
FINANCIAL RATIOS AND         1996         1995          1994          1993          1992
OTHER)                    -----------  -----------  ------------  ------------  ------------
<S>                       <C>          <C>          <C>           <C>           <C>
OPERATING RESULTS
 Revenues...............  $ 3,400,984  $ 3,448,287  $  3,355,761  $  3,243,749  $  3,155,430
 Restructuring,
  impairment and one-
  time charges..........       50,924      634,077                      80,164       202,700
 Operating profit
  (loss)................      312,455     (455,379)      302,508       189,042        63,759
 Net interest expense...       20,904        2,230        66,805        81,366        71,481
 Income (loss) from
  continuing operations
  before income taxes...      403,989     (455,013)      257,899       109,785        (7,102)
 Income (loss) from
  continuing
  operations(1).........      206,444     (338,983)      132,223        51,669       (18,369)
 Net income (loss)(2)...      206,444    1,226,751       173,117       317,159       (66,601)
PER COMMON SHARE
 Primary earnings (loss)
  from continuing
  operations(1).........        $1.55       $(3.74)        $1.03         $ .40         $(.14)
 Primary earnings
  (loss)................         1.55        10.02          1.35          2.46          (.52)
 Fully diluted earnings
  (loss)................         1.53         9.40          1.35          2.46          (.52)
 Fully diluted earnings
  from continuing
  operations excluding
  restructuring charges
  and other special
  items(3)..............         1.51          .84           .95           .77           .82
 Dividends declared(4)..          .30          .24          1.08          1.08          1.08
 Dividends paid.........          .36          .45          1.08          1.08          1.08
FINANCIAL DATA
 Current assets(5)......  $   870,472  $ 1,248,037  $    851,594  $  1,178,880  $    952,593
 Property, plant and
  equipment--net........    1,177,077    1,174,831     1,311,130     1,308,628     1,345,320
 Total assets...........    3,529,862    3,817,159     4,287,208     4,521,047     4,255,196
 Long-term debt.........      459,007      247,934       246,462       795,454     1,114,367
 Shareholders' equity...    1,498,810    1,806,236     1,957,043     1,899,275     1,700,646
 Additions to property,
  plant and
  equipment(6)..........      146,919      128,612       128,167       102,093       110,110
 Operating profit
  margin(7).............         10.7%         7.8%          9.0%          8.3%          8.4%
 Total debt as a % of
  adjusted
  capitalization........         23.5%        12.1%         31.3%         37.3%         41.7%
 Long-term debt as a %
  of shareholders'
  equity................         30.6%        13.7%         12.6%         41.9%         65.5%
 Shareholders' equity
  per common share......        $9.54       $11.64        $15.06        $14.76        $13.23
OTHER
 Adjusted price range of       $56 to   $35 1/4 to  $26 11/16 to  $24 11/16 to  $27 15/16 to
  common stock(8).......       30 5/8       17 1/4       18 5/16      17 13/16       18 1/16
 Number of employees at
  end of year...........       20,803       21,877        26,902        26,936        28,313
 Weighted average common
  and common equivalent
  shares:
  Primary...............  105,085,182  113,797,192   128,807,156   128,740,904   128,818,449
  Fully diluted.........  113,583,401  123,001,445   128,807,156   128,846,720   128,729,990
 Common shares
  outstanding at end of
  year..................   96,729,785  105,698,043   128,617,570   128,609,051   128,572,566
</TABLE>
--------
This summary should be read in conjunction with the consolidated financial
statements and notes thereto.
 
(1) Includes the following after-tax gains (charges) related to continuing
    operations (in thousands except per share amounts):
<TABLE>
<CAPTION>
                                1996       1995      1994     1993      1992
                              --------  ----------  ------- --------  ---------
   <S>                        <C>       <C>         <C>     <C>       <C>
   Restructuring, impairment
    and one-time charges and
    nonrecurring costs......  $(30,305) $ (463,667)         $(47,724) $(123,248)
   Writedowns of assets.....   (12,954)    (40,687)
   Gains on sales of assets.    45,001      25,821  $10,646
                              --------  ----------  ------- --------  ---------
                              $  1,742  $ (478,533) $10,646 $(47,724) $(123,248)
                              ========  ==========  ======= ========  =========
   Earnings (loss) per
    share...................  $    .02  $    (4.20) $   .08 $   (.37) $    (.96)
                              ========  ==========  ======= ========  =========
 
(2) Includes the following after-tax gains (charges) related
    to discontinued operations (in thousands):
 
    Discontinuation costs...            $  (49,627)
    Gain on disposal........             1,634,294          $131,702
                                        ----------          --------
                                        $1,584,667          $131,702
                                        ==========          ========
</TABLE>
 
                                      14
<PAGE>
 
(3) Excludes the gains (charges) set forth in (1) above as well as, for 1995,
    the $.38 per share impact of the cash paid in excess of liquidation value
    on Series B preferred stock repurchases. Earnings per share for 1995 are
    presented on a primary share basis as the fully diluted earnings per share
    was antidilutive.
 
(4) During 1996, the Company began declaring and paying common stock dividends
    in the same quarter; previously, dividends were declared in the quarter
    prior to payment. As a result, in the third quarter of 1996, no dividends
    were declared in order to change to the new procedure.
 
(5) Excludes the net assets of the discontinued cable television operations in
    1994.
 
(6) Excludes capital assets acquired in business combinations accounted for as
    purchases and capital assets acquired by discontinued operations.
 
(7) Excludes restructuring charges as follows (in thousands): 1996--$50,924;
    1995--$724,107; 1993--$80,164; 1992--$202,700.
 
(8) On February 1, 1995, Times Mirror common shareholders received
    distributions having a value of $10.45 per Times Mirror common share. The
    trading prices prior to February 1, 1995 have been adjusted to reflect
    these distributions.
 
                                      15
<PAGE>
 
               FIVE-YEAR SUMMARY OF BUSINESS SEGMENT INFORMATION
 
<TABLE>
<CAPTION>
                              1996        1995        1994        1993        1992
(IN THOUSANDS OF DOLLARS)  ----------  ----------  ----------  ----------  ----------
<S>                        <C>         <C>         <C>         <C>         <C>
REVENUES
 Newspaper Publishing....  $2,080,199  $2,057,596  $2,062,954  $1,980,717  $1,943,229
 Professional
  Information............   1,031,206   1,091,017   1,005,335     992,220     935,448
 Consumer Media..........     289,904     300,723     288,144     271,176     277,757
 Intersegment Revenues...        (325)     (1,049)       (672)       (364)     (1,004)
                           ----------  ----------  ----------  ----------  ----------
                           $3,400,984  $3,448,287  $3,355,761  $3,243,749  $3,155,430
                           ==========  ==========  ==========  ==========  ==========
OPERATING PROFIT
 (LOSS)(1)
 Newspaper Publishing....  $  304,666  $ (109,483) $  194,772  $  107,346  $   19,126
 Professional
  Information............      58,666    (131,429)    173,951     174,855     114,348
 Consumer Media..........       5,864     (75,887)      3,279      (3,785)     (3,527)
 Corporate and Other.....     (56,741)   (138,580)    (69,494)    (89,374)    (66,188)
                           ----------  ----------  ----------  ----------  ----------
                           $  312,455  $ (455,379) $  302,508  $  189,042  $   63,759
                           ==========  ==========  ==========  ==========  ==========
IDENTIFIABLE ASSETS
 Newspaper Publishing....  $1,859,506  $1,840,058  $1,987,752  $2,012,623  $2,036,453
 Professional
  Information............   1,045,104   1,151,830   1,018,357   1,030,586     971,833
 Consumer Media..........     307,117     308,098     382,768     309,955     360,746
 Corporate and Other.....     318,135     517,173     255,954     563,686     317,423
 Discontinued Operations
  Cable Television.......                             642,377     606,678     495,036
  Broadcast Television...                                             285     123,439
 Eliminations............                                          (2,766)    (49,734)
                           ----------  ----------  ----------  ----------  ----------
                           $3,529,862  $3,817,159  $4,287,208  $4,521,047  $4,255,196
                           ==========  ==========  ==========  ==========  ==========
DEPRECIATION AND
 AMORTIZATION
 Newspaper Publishing....  $  105,961  $  110,299  $  114,115  $  113,877  $  105,939
 Professional
  Information............      47,077      51,462      42,928      44,490      40,092
 Consumer Media..........       7,340       8,780       8,761      10,816      10,705
 Corporate and Other.....       1,285       2,156       1,684       1,795       1,753
                           ----------  ----------  ----------  ----------  ----------
                           $  161,663  $  172,697  $  167,488  $  170,978  $  158,489
                           ==========  ==========  ==========  ==========  ==========
CAPITAL EXPENDITURES
 Newspaper Publishing....  $   64,726  $   63,014  $   79,397  $   66,429  $   88,226
 Professional
  Information............      67,316      48,361      43,910      33,006      19,984
 Consumer Media..........      11,078       1,308       1,606       1,718       1,579
 Corporate and Other.....       3,799      15,929       3,254         940         321
                           ----------  ----------  ----------  ----------  ----------
                              146,919     128,612     128,167     102,093     110,110
                           ----------  ----------  ----------  ----------  ----------
 Discontinued Operations
  Cable Television.......                  11,283     118,948     116,914      82,333
  Other(2)...............                     409         264                   3,464
                           ----------  ----------  ----------  ----------  ----------
                           $  146,919  $  140,304  $  247,379  $  219,007  $  195,907
                           ==========  ==========  ==========  ==========  ==========
--------
(1) Includes restructuring-related charges as follows (in thousands):
 
<CAPTION>
                              1996        1995                    1993        1992
                           ----------  ----------              ----------  ----------
<S>                        <C>         <C>         <C>         <C>         <C>
  Newspaper Publishing...              $  316,216              $   33,080  $  106,700
  Professional
   Information...........  $   50,924     267,413                  25,300      96,000
  Consumer Media.........                  74,875
  Corporate and Other....                  65,603                  21,784
                           ----------  ----------              ----------  ----------
                           $   50,924  $  724,107              $   80,164  $  202,700
                           ==========  ==========              ==========  ==========
</TABLE>
 
  The pre-tax charges of $724,107 in 1995 are comprised of restructuring,
  impairment and one-time charges of $634,077 and nonrecurring operating
  costs of $90,030. In addition, other pre-tax restructuring program charges
  in 1995 of $69,755 related to discontinued operations and $43,851 related
  to investment writedowns are described in Notes 2 and 4 to the financial
  statements.
 
(2) Expenditures in 1995 and 1994 are for the discontinued consumer multimedia
    and cable programming operations. Expenditures in 1992 are for the
    discontinued broadcast television operations.
 
                                      16
<PAGE>
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
    RESULTS OF OPERATIONS.
 
CONSOLIDATED RESULTS OF OPERATIONS
 
  During 1996, Times Mirror achieved significant improvement in operating
results led by the outstanding performance in Newspaper Publishing, the
Company's largest business segment. The following table summarizes the
Company's financial results (dollars in millions, except per share amounts):
 
<TABLE>
<CAPTION>
                                                     1996      1995      1994
                                                   --------  --------  --------
   <S>                                             <C>       <C>       <C>
   Revenues......................................  $3,401.0  $3,448.3  $3,355.8
   Restructuring, impairment and one-time
    charges......................................      50.9     634.1
   Operating profit (loss).......................     312.5    (455.4)    302.5
   Interest expense, net.........................     (20.9)     (2.2)    (66.8)
   Asset sales and writedowns, net...............     104.9      (2.4)     22.1
   Equity income (loss), net.....................       4.4       1.5      (1.9)
   Income (loss) from continuing operations......     206.4    (339.0)    132.2
   Net income (loss) from discontinued opera-
    tions........................................               (55.8)     53.1
   Net gain on disposal of discontinued opera-
    tions........................................             1,634.3
   Extraordinary loss from early retirement of
    debt.........................................                         (12.2)
   Cumulative effect of changes in accounting
    principles...................................               (12.7)
   Net income....................................     206.4   1,226.8     173.1
   Preferred dividend requirements...............      43.6      44.0
   Cash paid in excess of liquidation value for
    Series B preferred stock repurchases.........                43.1
   Earnings applicable to common shareholders....  $  162.8  $1,139.7  $  173.1
   Primary earnings (loss) per share from contin-
    uing operations..............................  $   1.55  $  (3.74) $   1.03
   Primary earnings per share....................  $   1.55  $  10.02  $   1.35
   Fully diluted earnings per share..............  $   1.53  $   9.40  $   1.35
   Earnings per share from continuing operations
    excluding restructuring charges and other
    special items................................  $   1.51  $    .84  $    .95
</TABLE>
 
1996 COMPARED WITH 1995
 
  For 1996, the Company reported operating profit of $312.5 million, compared
to an operating loss of $455.4 million in the prior year. Excluding the impact
of restructuring charges and other special items in both years, operating
profit in 1996 increased to $363.4 million, up 35.2 percent from $268.7
million in 1995. The significant improvement in operating profit margin and
overall performance was due largely to cost savings from the 1995
restructuring program as well as ongoing cost control efforts. Newspaper
Publishing achieved higher operating profit in 1996, partially offset by
reduced operating profit in Professional Information stemming from
organizational and distribution system changes undertaken at Mosby-Year Book.
 
  Times Mirror's consolidated revenues declined 1.4 percent to $3.40 billion
in 1996, compared with $3.45 billion in the prior year, mainly due to the
disposition of the Company's college publishing businesses and the
reorganization of distribution channels in health science publishing (see
Professional Information segment for further discussion). The closure of
certain newspaper editions in mid-1995 also contributed to the revenue decline
in 1996. Newspaper Publishing's revenues rose modestly to a record high level
of $2.08 billion for 1996, as improving economic trends in Southern California
contributed to growth at the Los Angeles Times. Looking toward 1997, year-to-
year comparison of revenues may mask revenue growth in the Company's present
businesses due to the recent disposition of the Company's college publishing
and other businesses with approximately $250 million in total revenues.
 
                                      17
<PAGE>
 
  Net income in 1996 of $206.4 million, or $1.53 per share, included the
after-tax gain of $32.0 million on the sale of the college publishing
businesses and certain other professional information companies, largely
offset by after-tax restructuring charges of $30.3 million in that segment.
 
  Earnings applicable to common shareholders were reduced by preferred
dividend requirements of $43.6 million in 1996, and by $44.0 million in 1995.
In addition, earnings applicable to common shareholders in 1995 were further
reduced by $43.1 million for cash paid in excess of liquidation value for the
repurchases of Series B preferred stock. Excluding the impact of gains on
sale, restructuring and other similar charges in both years and the cash paid
in excess of liquidation value for preferred stock repurchases in 1995,
earnings per common share from continuing operations rose to $1.51 in 1996
compared to $.84 per share for 1995. Earnings per share in 1996 benefited from
the lower average number of shares outstanding.
 
  Net interest expense in 1996 rose to $20.9 million from $2.2 million in
1995, reflecting increased 1996 debt levels and reductions in interest earning
investments.
 
RESTRUCTURING CHARGES
 
  The following summarizes restructuring charges and related costs included in
each business segment (dollars in millions):
 
<TABLE>
<CAPTION>
                                1996                       1995
                            ------------- --------------------------------------
                                          RESTRUCTURING,
                                            IMPAIRMENT
                                               AND         NON-        TOTAL
                                             ONE-TIME    RECURRING RESTRUCTURING
                            RESTRUCTURING    CHARGES       COSTS      PROGRAM
                            ------------- -------------- --------- -------------
   <S>                      <C>           <C>            <C>       <C>
   Newspaper Publishing....                   $291.5       $24.7      $316.2
   Professional Informa-
    tion...................     $50.9          222.8        44.6       267.4
   Consumer Media..........                     70.4         4.5        74.9
   Corporate and Other.....                     49.4        16.2        65.6
                                -----         ------       -----      ------
                                $50.9         $634.1       $90.0      $724.1
                                =====         ======       =====      ======
</TABLE>
 
  During 1996, the Company recorded pre-tax restructuring charges of $50.9
million, or $30.3 million after-tax, as discussed in further detail in the
Professional Information segment.
 
  Based on a comprehensive review of its operations, the Company recorded
charges of $724.1 million, or $463.7 million after-tax, in 1995 for actions
which included closure and discontinuation of certain operations and product
lines, staff reductions, union renegotiations, consolidation of selected
offices and asset writedowns. Additional pre-tax charges of $69.8 million
related to discontinued operations and $43.9 million related to investment
writedowns were part of the Company's 1995 restructuring program.
 
1995 CABLE MERGER AND RELATED TRANSACTIONS
 
  In the first quarter of 1995, the Company completed the disposal of its
cable television operations and also completed related transactions, including
the issuance of two new series of preferred stock and the retirement of nearly
75 percent of total debt outstanding at year end 1994. Results for 1995
benefited from the $1.63 billion gain on the disposal of the cable television
operations as well as from lower interest expense due to debt reductions and
higher interest income from the investment of the cash proceeds from the
disposal.
 
FOURTH QUARTER 1996 COMPARED WITH FOURTH QUARTER 1995
 
  Revenues for the fourth quarter of 1996 declined 9.9 percent to $871.4
million from $966.7 million in the prior year's quarter due to the disposition
of the college publishing businesses and changes in distribution channels at
Mosby. Fourth quarter year-over-year comparisons were also affected by the
1996 Newspaper Publishing segment fiscal calendar, which contained five fewer
days of operations in 1996's fourth quarter compared to the 1995 fourth
quarter. (The first quarter of 1996 had benefited from six extra days due to
the calendar difference.)
 
                                      18
<PAGE>
 
  In the fourth quarter of 1996, the Company reported operating profit of
$67.7 million reflecting strong profit growth in Newspaper Publishing, offset
by Professional Information's restructuring charges of $50.9 million and lower
overall operating profit. In the 1995 fourth quarter, the Company reported an
operating loss of $206.3 million as a result of the restructuring program
charges. Excluding restructuring charges in the fourth quarter of both years,
the fourth quarter 1996 operating profit would have risen to $118.6 million or
5.5 percent, from $112.4 million in the prior year.
 
  Net income for the 1996 fourth quarter was $78.7 million, or $.64 per share,
compared with the fourth quarter 1995 net loss of $141.6 million, or $1.62 per
share. Excluding restructuring charges, asset sales and writedowns and other
special items in both years, 1996 fourth quarter earnings per share would have
been $.63 per share compared with $.42 per share in the 1995 fourth quarter.
Earnings per share in the fourth quarter of 1996 also benefited from the lower
average number of shares outstanding.
 
  For the fourth quarter of 1996, Newspaper Publishing's operating profit rose
31.8 percent to $105.5 million, excluding restructuring program charges,
benefited by ongoing cost controls and significantly lower newsprint expense
for the quarter. The segment's operating profit margin increased to 18.7
percent for the quarter, the highest profit margin level achieved since the
fourth quarter of 1987. Revenues in the 1996 fourth quarter declined to $565.2
million from $568.5 million in the prior year, largely due to the difference
in the number of days in the fourth quarters. Advertising revenue in the 1996
fourth quarter was virtually unchanged from the prior year's quarter at $434.5
million. Circulation revenues declined 7.0 percent for the 1996 fourth quarter
to $111.1 million, as circulation growth in Southern California and Long
Island, New York was more than offset by pricing and promotional actions.
 
  In Professional Information, 1996 fourth quarter revenues declined 27.4
percent to $233.2 million, primarily reflecting the absence of the college
publishing businesses, the closure of the international distribution division
and the changes in Mosby's domestic distribution channels. The decline in
revenues was partially offset by revenue increases in the fourth quarter at
Matthew Bender, Jeppesen Sanderson and Times Mirror Training. Operating
profit, excluding restructuring charges in both years, declined significantly
to $19.8 million from $56.6 million in 1995, due principally to changes in
Mosby's international and domestic distribution channels.
 
  In Consumer Media, revenues declined 5.3 percent to $73.1 million in the
1996 fourth quarter from $77.3 million in 1995, as a reduction in advertising
pages and lower subscription revenues at Times Mirror Magazines affected
segment results overall. However, the segment reported operating profit for
the 1996 fourth quarter of $2.0 million compared to an operating loss of $1.0
million in 1995, excluding restructuring program charges, due to overall
expense reductions at Times Mirror Magazines.
 
1995 COMPARED WITH 1994
 
  Times Mirror's consolidated revenues rose 2.8 percent in 1995 compared with
the prior year, reflecting growth in the Professional Information and Consumer
Media segments of the Company's businesses. Growth in health information
services (including international sales and consumer medical information), the
flight information business and magazine advertising, coupled with additional
revenues from acquisitions made early in 1995, contributed to the revenue
increase. These improvements were partially offset by a slight decline in
Newspaper Publishing revenues, reflecting the closure of certain newspaper
editions.
 
  An operating loss of $455.4 million was reported for the full year 1995 as a
result of the Company's restructuring program. Operating profit, excluding the
1995 restructuring program charges, was $268.7 million, a decrease of 11.2
percent from $302.5 million in 1994. This decline was largely due to reduced
profits at Matthew Bender as well as considerably higher expense levels at
higher education and the training companies due to marketing and product
improvement efforts while the impact of higher newsprint prices was offset by
cost reductions in the Newspaper Publishing segment. In 1995, Consumer Media
reported an operating loss of $1.0 million, excluding restructuring charges,
compared to an operating profit of $3.3 million in 1994 as a result of
increased promotional and marketing costs and overall higher paper and postage
costs.
 
                                      19
<PAGE>
 
  The 1995 loss from continuing operations reflects an after-tax restructuring
program charge of $504.4 million and after-tax gains on asset sales of $25.8
million. Income from continuing operations in 1994 included after-tax gains on
asset sales of $10.6 million. Excluding the impact of restructuring program
charges and the cash paid in excess of liquidation value for preferred stock
repurchases in 1995, as well as net gains on asset sales and writedowns in
both years, earnings per share from continuing operations was $.84 per share
for 1995, compared to $.95 per share in 1994. Earnings per share in 1995
benefited from the lower average number of shares outstanding.
 
  Net income of $1.23 billion for 1995 includes the $1.63 billion gain on the
disposition of the Company's discontinued cable television operations, which
more than offset charges for the Company's 1995 restructuring program. In
addition, 1994 net income of $173.1 million included an extraordinary loss of
$12.2 million, net of taxes from the early retirement of debt.
 
  Net interest expense in 1995 declined to $2.2 million from $66.8 million in
1994. Debt levels were reduced early in the year, using proceeds from the
disposition of the Company's cable television operations, and interest income
was generated from the investment of the remaining proceeds.
 
ANALYSIS BY SEGMENT
 
  The following sections discuss the segment results of the Company's
principal lines of businesses excluding restructuring charges of $50.9 million
and $724.1 million for 1996 and 1995, respectively.
 
NEWSPAPER PUBLISHING
 
  Newspaper Publishing revenue and operating profit (loss) were as follows
(dollars in millions):
 
<TABLE>
<CAPTION>
                                       1996   CHANGE    1995    CHANGE     1994
                                     -------- ------  --------  ------   --------
<S>                                  <C>      <C>     <C>       <C>      <C>
Revenues
 Advertising.......................  $1,574.4   1.0 % $1,558.2    (.4)%  $1,564.1
 Circulation.......................     447.6  (1.5)     454.5     .9       450.3
 Other.............................      58.2  29.4       44.9   (7.6)       48.6
                                     --------         --------           --------
                                     $2,080.2   1.1 % $2,057.6    (.3)%  $2,063.0
                                     ========         ========           ========
Operating profit (loss)............  $  304.7  100+ % $ (109.5) (100+)%  $  194.8
                                     ========         ========           ========
Operating profit excluding restruc-
 turing charges....................  $  304.7  47.4 % $  206.7    6.1 %  $  194.8
                                     ========         ========           ========
</TABLE>
 
1996 RESULTS
 
  Newspaper Publishing's revenues rose in 1996 as strength in key advertising
categories, including classified help-wanted and national advertising, more
than offset continued soft retail advertising in certain markets and revenues
lost from edition closures in 1995. Overall, advertising revenue gains at The
Times, Hartford Courant, Morning Call and the Southern Connecticut newspapers
more than offset declines in advertising revenues at Newsday and The Baltimore
Sun primarily associated with edition closures at both papers in 1995.
Advertising growth was restrained by weak retail advertising volume in major
markets, due in part to department store and supermarket consolidations and
store closures, most notably affecting the Southern California market.
 
  Circulation revenues declined slightly due largely to edition closures in
1995 as well as competitive pricing and other promotional activities
undertaken during 1996. At The Times, a mid-year price decrease on daily
single-copy sales affected about 10 percent of the total daily circulation
base. These aggressive marketing and promotional campaigns contributed to
circulation gains by year end 1996, with The Times and Newsday reporting daily
circulation growth in core markets for the first time in five years.
 
  Other revenues benefited from new media products and services and new
businesses such as Apartment Search, a consumer-oriented real estate rental
information business.
 
                                      20
<PAGE>
 
  Driven by substantial cost reductions, the segment's 1996 operating profit
increased due to savings achieved from the 1995 restructuring program, ongoing
cost controls and a moderate decline in newsprint expense. In 1996, the
segment's operating profit margin improved, reaching 14.6 percent, the highest
annual margin achieved since 1989. While the 1996 average price per ton of
newsprint was nearly the same as the 1995 average, newsprint expense declined
somewhat due largely to lower consumption following the closure of certain
editions. Newsprint consumption declined to 552,000 metric tons in 1996 from
582,000 in 1995.
 
1995 RESULTS
 
  Newspaper Publishing's revenues in 1995 fell slightly from 1994 due
primarily to the closure of New York Newsday and the sluggish advertising
environment in Southern California, which continued to impact The Times.
Advertising revenues declined in 1995, as increases at most of the Company's
eastern newspapers were more than offset by declines due to lost revenues
resulting from the closure of New York Newsday as well as a drop in retail and
national advertising revenues at The Times. Circulation revenues rose slightly
as higher street and home delivery prices at certain newspapers offset a year-
over-year decline in total circulation.
 
  Higher operating profit and profit margins were achieved despite slightly
lower revenues and a sharp increase in newsprint expense of nearly 30 percent,
largely through productivity improvements and a reduction in other operating
costs. Excluding newsprint expense, all other expenses declined about 10
percent in 1995.
 
PROFESSIONAL INFORMATION
 
  Professional Information revenue and operating profit (loss) were as follows
(dollars in millions):
 
<TABLE>
<CAPTION>
                                       1996   CHANGE    1995    CHANGE     1994
                                     -------- ------  --------  ------   --------
<S>                                  <C>      <C>     <C>       <C>      <C>
Revenues...........................  $1,031.2  (5.5)% $1,091.0    8.5 %  $1,005.3
                                     ========         ========           ========
Operating profit (loss)............  $   58.7   100+% $ (131.4) (100+)%  $  174.0
                                     ========         ========           ========
Operating profit excluding restruc-
 turing charges....................  $  109.6 (19.4)% $  136.0  (21.8)%  $  174.0
                                     ========         ========           ========
</TABLE>
 
1996 RESULTS
 
  Through a series of strategic moves in 1996, the Professional Information
segment was refocused on businesses in which the Company has a leadership
position: Matthew Bender, the country's leading analytical legal publisher;
Jeppesen Sanderson, the world's foremost flight information company; Mosby-
Year Book, the world's largest health science publisher; and Times Mirror
Training, the country's largest skills training company.
 
  During the 1996 fourth quarter, the Company completed the exchange of its
college publishing businesses for Shepard's, the nation's premier legal
citation service, and established a joint venture with Reed Elsevier, Inc. for
the ownership and management of Shepard's. This venture as well as a broader
strategic alliance with Reed Elsevier's subsidiary, LEXIS-NEXIS, significantly
strengthens Matthew Bender's position in the legal publishing market.
 
  In the fourth quarter of 1996, the Company also completed the disposition of
Doyma Libros, its Spanish language medical book publisher; closed Times Mirror
International Publishers, the Company's unprofitable international book
distributor; and signed an agreement for the sale of CRC Press, Inc., which
was completed on January 10, 1997. Giving effect to the fourth quarter items,
the Company recorded a pre-tax gain of $104.9 million which, due to
differences in the book and tax basis of the assets, resulted in an after-tax
gain of $32.0 million. Partially offsetting the gain were restructuring
efforts in the segment, which resulted in pre-tax charges of $50.9 million, or
$30.3 million after-tax. These charges included the establishment of reserves
related to replacement of Mosby's third party domestic distribution
arrangements with direct distribution to book stores, consolidation, closure
and downsizing of selected offices, as well as additional fourth quarter
restructuring efforts undertaken at Times Mirror Training to further integrate
Kaset International, Learning International and Zenger Miller. Additionally,
during the 1996 third quarter, the Company appointed Harcourt Brace as its
exclusive distributor of Mosby's professional medical publications in most
international markets.
 
                                      21
<PAGE>
 
  Professional Information revenues in 1996 declined reflecting the Company's
strategic decision to exchange its college publishing businesses for
Shepard's. The revenue decline was partially offset by revenue growth at
Jeppesen Sanderson and Times Mirror Training. Pro forma revenues for the
Professional Information segment, excluding the Company's college publishing
businesses, Doyma Libros, and CRC Press, Inc. are as follows (dollars in
millions):
 
<TABLE>
<CAPTION>
                                               1996  CHANGE  1995  CHANGE  1994
                                              ------ ------ ------ ------ ------
<S>                                           <C>    <C>    <C>    <C>    <C>
Pro forma revenues for ongoing businesses.... $809.1  1.8%  $795.1  8.1%  $735.5
                                              ======        ======        ======
</TABLE>
 
  Operating profit for the segment declined substantially to $109.6 million in
1996 from $136.0 million in 1995 primarily due to the realignment of domestic
and international distribution channels in health science publishing mentioned
above.
 
  Segment operating profit does not include $3.2 million of equity income from
the Shepard's partnership.
 
  The Company continues to pursue cost reductions and re-engineering
opportunities at Mosby and its international training locations.
 
1995 RESULTS
 
  Professional Information revenues in 1995 increased, reflecting double-digit
revenue growth in professional and academic health science publishing,
consumer health information and flight information, as well as the revenues
from several small health science information companies which were acquired
early in 1995. These revenue gains were tempered by a revenue decline at
Matthew Bender due to subscriber attrition in print products.
 
  Operating profit for the segment declined from the prior year largely
reflecting the lower revenues at Matthew Bender. Higher education publishing
and the Company's health science information businesses had lower operating
profit due to higher expenses in key areas including: increasing international
sales and marketing efforts in Southeast Asia, the development of new products
and product improvement efforts in health information services, including an
online medical service, and the costs associated with expanding product lists
in the higher education businesses. These investment efforts increased costs
faster than revenues and reduced profitability for the health science and
higher education companies. Times Mirror Training reported reduced operating
profit in 1995 due to weaknesses in certain markets, as well as higher
marketing, acquisition and other costs. Jeppesen Sanderson, the Company's
flight information publisher, reported strong operating profit growth for the
1995 year, further benefiting from favorable foreign currency fluctuations.
 
CONSUMER MEDIA
 
  Consumer Media revenue and operating profit (loss) were as follows (dollars
in millions):
 
<TABLE>
<CAPTION>
                                             1996  CHANGE   1995   CHANGE   1994
                                            ------ ------  ------  ------  ------
<S>                                         <C>    <C>     <C>     <C>     <C>
Revenues..................................  $289.9 (3.6)%  $300.7    4.4 % $288.1
                                            ======         ======          ======
Operating profit (loss)...................  $  5.9  100+%  $(75.9) (100+)% $  3.3
                                            ======         ======          ======
Operating profit (loss) excluding restruc-
 turing charges...........................  $  5.9  100+%  $ (1.0) (100+)% $  3.3
                                            ======         ======          ======
</TABLE>
 
1996 RESULTS
 
  For 1996, Consumer Media revenues declined modestly, due to lower
advertising and circulations revenues at Times Mirror Magazines as well as a
weakness in the art book market which affected Harry N. Abrams, a prestigious
art book publisher. In September 1996, the Company announced its plan to
explore divestiture alternatives for Abrams in order to concentrate on its
core businesses in newspapers, professional information
 
                                      22
<PAGE>
 
and magazines. Despite lower revenues, the segment reported improved operating
results, as lower paper and printing costs, staff reductions, office space
consolidation and overall cost controls more than offset the revenue
shortfall.
 
1995 RESULTS
 
  Each of the companies in the Consumer Media segment reported higher revenues
in 1995 compared with 1994. These revenue gains were generated largely from
new titles and publications, fees related to the licensing of certain magazine
titles and an acquisition made in the latter part of 1994. For the year, the
magazines reported a 6.6 percent increase in advertising revenue over 1994,
reflecting improved advertising trends industry-wide. This increase was mostly
offset by lower circulation revenues at some of the magazines. Consumer Media
reported an operating loss for 1995 due to increased year end promotional and
marketing expenses at the magazines and overall higher paper and postage
costs.
 
CORPORATE AND OTHER
 
  Corporate and Other operating costs were as follows (dollars in millions):
 
<TABLE>
<CAPTION>
                                          1996   CHANGE  1995    CHANGE   1994
                                         ------  ------ -------  ------  ------
<S>                                      <C>     <C>    <C>      <C>     <C>
Operating Costs........................  $(56.7)  59.1% $(138.6) (99.4)% $(69.5)
                                         ======         =======          ======
Operating Costs Excluding Restructuring
 Charges...............................  $(56.7)  22.2% $ (73.0)  (5.0)% $(69.5)
                                         ======         =======          ======
</TABLE>
 
1996 RESULTS
 
  Operating costs in this segment primarily reflect the ongoing expenses
associated with corporate administrative functions, including executive
office, legal and treasury operations among other costs. For 1996, Corporate
and Other operating expenses declined substantially from the prior year as a
result of staff reductions and other restructuring efforts undertaken in 1995.
 
1995 RESULTS
 
  Operating costs for the Corporate and Other segment increased slightly in
1995 due to the development of a company-wide digital network of product,
marketing and administrative data bases. This project was abandoned in the
third quarter of 1995.
 
LIQUIDITY AND CAPITAL RESOURCES
 
  The Company's operating cash requirements are funded by its operations. In
1996, the Company's major cash inflows totaled over $800 million, consisting
of cash generated from its continuing operating activities, issuance of long-
term debt, and proceeds from the fourth quarter 1996 sale of a 50 percent
interest in Shepard's. These funds were used primarily to fund common share
repurchases and costs related to a strategic realignment of the Professional
Information segment. At year end 1996, the Company had a $400 million long-
term revolving line of credit, available through a group of domestic and
international banks. This line of credit is used to support a commercial paper
program which is available for short-term cash requirements. Additionally, a
shelf registration statement for $250 million of securities is expected to be
filed in the near future.
 
  In 1997, the Company announced that it will redeem the remaining 7.8 million
outstanding shares of Series B preferred stock, which have been called for
conversion into common stock on April 2, 1997 at an exchange ratio pursuant to
the original terms of the Series B preferred stock. In addition, forward
purchase contracts for 3.9 million shares of Series B preferred stock were
outstanding on February 28, 1997, largely due to contracts for approximately
3.3 million shares entered into subsequent to December 31, 1996. These
contracts, which mature in 1998 but may be terminated prior to maturity, may
be settled on a net share basis in Series B preferred stock or in Series A
common stock if the Series B preferred stock is redeemed prior to the maturity
of the contracts.
 
                                      23
<PAGE>
 
  The following table sets forth certain items from the Consolidated
Statements of Cash Flows (in millions):
 
<TABLE>
<CAPTION>
                                                             1996      1995
                                                            -------  --------
   <S>                                                      <C>      <C>
   Net cash provided by operating activities of continuing
    operations............................................. $ 388.8  $  262.8
   Proceeds from disposal of cable television operations...           1,225.0
   Proceeds from sales of assets...........................   190.4      83.3
   Capital expenditures....................................  (146.9)   (128.6)
   Repurchases of common stock.............................  (496.8)   (218.1)
   Net issuances (repayments) of debt......................   194.5    (588.8)
</TABLE>
 
  Cash generated by operating activities of continuing operations in 1996
increased approximately 48 percent from the prior year due largely to higher
operating profit partially offset by restructuring-related expenditures. In
addition to restructuring expenditures, 1995 cash flow from continuing
operations was impacted by substantial expenditures for newsprint as higher
inventory levels were established to mitigate the 1995 newsprint price
increases.
 
  During 1996, capital expenditures were higher as a result of increased
capital costs associated with consolidation and relocation of offices. Capital
expenditures in 1997 are expected to decrease somewhat as capital costs
associated with real estate relocations are expected to be lower.
 
  Total debt at December 31, 1996 increased to $459.0 million from $248.2
million in 1995. Proceeds from the issuance of debt securities as well as
funds generated from operations and cash received from the exercise of stock
options were used for share repurchases. The Company repurchased 11.4 million
and 7.0 million shares of its common stock during 1996 and 1995, respectively.
 
  Common share repurchases are intended to offset dilution from the shares of
common stock issued under the Company's stock-based employee compensation and
benefit programs as well as to enhance shareholder value. The remaining
aggregate repurchase authorization at year end 1996 totaled approximately 10.8
million shares. Repurchases are expected to be made in the open market or in
private transactions, depending on market conditions, and may be discontinued
at any time. In connection with this program, the Company from time to time
sells put options on its common stock. These contracts have been entered into
based on market conditions as well as other factors.
 
DIVIDENDS
 
  Cash dividends of $.30 and $.24 per share of common stock were declared for
the years ended December 31, 1996 and 1995, respectively.
 
FORWARD-LOOKING STATEMENTS
 
  The forward-looking statements set forth above and elsewhere in this Annual
Report on Form 10-K are subject to uncertainty and could be adversely affected
by a number of factors. Some of these factors are described in Note 17 to the
consolidated financial statements.
 
                                      24
<PAGE>
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 
                         INDEX TO FINANCIAL STATEMENTS
                       AND FINANCIAL STATEMENT SCHEDULES
 
<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
Report of Ernst & Young LLP, Independent Auditors.........................   26
Consolidated Statements of Operations--Years Ended December 31, 1996, 1995
 and 1994.................................................................   27
Consolidated Balance Sheets--December 31, 1996 and December 31, 1995......   28
Consolidated Statements of Shareholders' Equity--Years Ended December 31,
 1996, 1995 and 1994......................................................   29
Consolidated Statements of Cash Flows--Years Ended December 31, 1996, 1995
 and 1994.................................................................   30
Notes to Consolidated Financial Statements................................   31
Financial Statement Schedule:
  Schedule II--Valuation and Qualifying Accounts and Reserves.............   54
</TABLE>
 
  All other schedules are omitted because they are not required by the
regulations or related instructions or are not applicable.
 
                                       25
<PAGE>
 
               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
 
To the Shareholders and Board of Directors
The Times Mirror Company
 
  We have audited the accompanying consolidated balance sheets of The Times
Mirror Company as of December 31, 1996 and 1995, and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
three years in the period ended December 31, 1996. Our audits also included
the financial statement schedule listed in the Index to Financial Statements
and Financial Statement Schedules. These financial statements and schedule are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedule based on our
audits.
 
  We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
  In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of The Times
Mirror Company at December 31, 1996 and 1995, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
 
  As discussed in Notes 1 and 5 to the consolidated financial statements, in
1995 the Company changed its method of accounting for the impairment of long-
lived assets and for long-lived assets to be disposed of.
 
                                          ERNST & YOUNG LLP
 
Los Angeles, California
February 5, 1997
 
                                      26
<PAGE>
 
                            THE TIMES MIRROR COMPANY
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                   YEAR ENDED DECEMBER 31
                                              ----------------------------------
(IN THOUSANDS OF DOLLARS                         1996        1995        1994
EXCEPT PER SHARE AMOUNTS)                     ----------  ----------  ----------
<S>                                           <C>         <C>         <C>
REVENUES....................................  $3,400,984  $3,448,287  $3,355,761
                                              ----------  ----------  ----------
COSTS AND EXPENSES
 Cost of sales..............................   1,782,711   1,843,475   1,778,205
 Selling, general and administrative
  expenses..................................   1,254,894   1,426,114   1,275,048
 Restructuring, impairment and one-time
  charges...................................      50,924     634,077
                                              ----------  ----------  ----------
  Total costs and expenses..................   3,088,529   3,903,666   3,053,253
                                              ----------  ----------  ----------
OPERATING PROFIT (LOSS).....................     312,455    (455,379)    302,508
 Interest expense...........................     (27,047)    (29,467)    (69,322)
 Interest income............................       6,143      27,237       2,517
 Asset sales and writedowns, net............     104,921      (2,416)     22,099
 Equity income (loss).......................       4,379       1,515      (1,858)
 Other, net.................................       3,138       3,497       1,955
                                              ----------  ----------  ----------
 Income (loss) from continuing operations
  before income tax provision (benefit).....     403,989    (455,013)    257,899
 Income tax provision (benefit).............     197,545    (116,030)    125,676
                                              ----------  ----------  ----------
 Income (loss) from continuing operations...     206,444    (338,983)    132,223
 Discontinued operations:
  Net income (loss) from operations.........                 (55,836)     53,126
  Net gain on disposal......................               1,634,294
 Extraordinary loss on early retirement of
  debt, net of income tax benefit of $8,517.                             (12,232)
 Cumulative effect of changes in accounting
  principles, net of income tax benefit of
  $8,817....................................                 (12,724)
                                              ----------  ----------  ----------
NET INCOME..................................  $  206,444  $1,226,751  $  173,117
                                              ==========  ==========  ==========
Preferred dividend requirements.............  $   43,645  $   44,003
                                              ==========  ==========  ==========
Cash paid in excess of liquidation value for
 Series B preferred stock repurchases.......              $   43,085
                                              ==========  ==========  ==========
Earnings applicable to common shareholders..  $  162,799  $1,139,663  $  173,117
                                              ==========  ==========  ==========
Primary earnings (loss) per share:
 Continuing operations......................  $     1.55  $    (3.74) $     1.03
 Discontinued operations:
  Net income (loss) from operations.........                    (.49)        .41
  Net gain on disposal......................                   14.36
 Extraordinary loss.........................                                (.09)
                                              ----------  ----------  ----------
 Income before cumulative effect of changes
  in accounting principles..................        1.55       10.13        1.35
 Cumulative effect of changes in accounting
  principles................................                    (.11)
                                              ----------  ----------  ----------
Primary earnings per share..................  $     1.55  $    10.02  $     1.35
                                              ==========  ==========  ==========
Fully diluted earnings per share:
 Income before cumulative effect of changes
  in accounting principles..................  $     1.53  $     9.50  $     1.35
 Cumulative effect of changes in accounting
  principles................................                    (.10)
                                              ----------  ----------  ----------
Fully diluted earnings per share............  $     1.53  $     9.40  $     1.35
                                              ==========  ==========  ==========
</TABLE>
See notes to consolidated financial statements
 
                                       27
<PAGE>
 
                            THE TIMES MIRROR COMPANY
 
                          CONSOLIDATED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                                   DECEMBER 31
                                                              ---------------------
                                                                 1996       1995
(IN THOUSANDS OF DOLLARS)                                     ---------- ----------
<S>                                                           <C>        <C>
ASSETS
Current Assets
 Cash and cash equivalents..................................  $  145,105 $  182,901
 Marketable securities......................................      31,740     72,806
 Accounts receivable, less allowances for doubtful accounts
  and returns of $79,540 and $79,536........................     488,572    561,828
 Recoverable income taxes...................................         916     56,792
 Inventories................................................     103,648    173,568
 Deferred income taxes......................................      49,248    134,395
 Prepaid expenses...........................................      42,630     44,066
 Other current assets.......................................       8,613     21,681
                                                              ---------- ----------
   Total current assets.....................................     870,472  1,248,037
Property, plant and equipment...............................   1,177,077  1,174,831
Goodwill....................................................     530,142    651,745
Other intangibles...........................................      46,039     84,186
Deferred charges............................................     153,454    199,188
Equity investments..........................................     273,349     27,254
Prepaid pension cost........................................     326,935    296,492
Other assets................................................     152,394    135,426
                                                              ---------- ----------
   Total assets.............................................  $3,529,862 $3,817,159
                                                              ========== ==========
LIABILITIES
Current Liabilities
 Accounts payable...........................................  $  304,983 $  395,292
 Employees' compensation....................................     112,570    118,111
 Unearned income............................................     233,021    222,893
 Other current liabilities..................................     158,573    298,894
                                                              ---------- ----------
   Total current liabilities................................     809,147  1,035,190
Long-term debt..............................................     459,007    247,934
Deferred income taxes.......................................     129,491    140,087
Postretirement benefits.....................................     240,397    243,331
Unearned income.............................................      59,112     60,412
Other liabilities...........................................     295,726    283,969
                                                              ---------- ----------
   Total liabilities........................................   1,992,880  2,010,923
Common stock subject to put options.........................      38,172
Commitments and contingencies
SHAREHOLDERS' EQUITY
Series A preferred stock, $1 par value; 900,000 shares
 authorized; 824,000 shares issued and outstanding; stated
 at liquidation value.......................................     411,784    411,784
Series B preferred stock, $1 par value; 25,000,000 shares
 authorized; 7,789,000 shares issued and outstanding; stated
 at liquidation value; convertible to Series A common stock.     164,595    164,595
Preferred stock, $1 par value; 7,100,000 shares authorized;
 no shares issued or outstanding
Common stock
 Series A, $1 par value; 500,000,000 shares authorized;
  69,757,000 and 77,765,000 shares issued and outstanding...      69,757     77,765
 Series B, $1 par value; 100,000,000 shares authorized; no
  shares issued or outstanding
 Series C, convertible, $1 par value, 300,000,000 shares
  authorized; 26,973,000 and 27,933,000 shares issued and
  outstanding...............................................      26,973     27,933
Additional paid-in capital..................................     225,934    192,266
Retained earnings...........................................     533,131    875,981
Net unrealized gain on securities...........................      66,636     55,912
                                                              ---------- ----------
   Total shareholders' equity...............................   1,498,810  1,806,236
                                                              ---------- ----------
   Total liabilities and shareholders' equity...............  $3,529,862 $3,817,159
                                                              ========== ==========
</TABLE>
 
See notes to consolidated financial statements
 
                                       28
<PAGE>
 
                            THE TIMES MIRROR COMPANY
 
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 
<TABLE>
<CAPTION>
                                                           THREE YEARS ENDED DECEMBER 31, 1996
                           --------------------------------------------------------------------------------------------------------
 (IN THOUSANDS OF DOLLARS                                                                   NET
 EXCEPT PER SHARE           PREFERRED STOCK     COMMON STOCK      ADDITIONAL             UNREALIZED
 AMOUNTS)                  -----------------  ------------------   PAID-IN    RETAINED    GAIN ON   TREASURY  GUARANTEED
                           SERIES A SERIES B  SERIES A  SERIES C   CAPITAL    EARNINGS   SECURITIES  STOCK    ESOP DEBT    TOTAL
                           -------- --------  --------  --------  ---------- ----------  ---------- --------  ---------- ----------
 <S>                       <C>      <C>       <C>       <C>       <C>        <C>         <C>        <C>       <C>        <C>
 BALANCE AT
  DECEMBER 31,
  1993...........                             $97,588   $32,366    $167,490  $1,687,574             $(61,543)  $(24,200) $1,899,275
  Conversion of
   Series C
   shares to
   Series A
   shares........                               1,442    (1,442)
  Transactions
   related to
   stock option
   and restricted
   stock plans...                                  (6)       15         408                                                     417
  Dividends on
   common stock;
   $1.08 per
   share.........                                                              (138,904)                                   (138,904)
  Net income.....                                                               173,117                                     173,117
  Reduction of
   guaranteed
   ESOP debt.....                                                                                                24,200      24,200
  Translation
   gains and
   other.........                                                                (1,062)                                     (1,062)
                           -------- --------  -------   -------    --------  ----------   -------   --------   --------  ----------
 BALANCE AT
  DECEMBER 31,
  1994...........                              99,024    30,939     167,898   1,720,725              (61,543)             1,957,043
  Conversion of
   Series C
   shares to
   Series A
   shares........                               1,462    (1,462)
  Exchange of
   common stock
   for Series B
   preferred
   stock.........                   $349,954  (14,965)   (1,596)               (333,393)
  Retirement of
   treasury
   stock.........                              (1,345)                          (60,198)              61,543
  Issuance of
   Series A
   preferred
   stock.........          $411,784                                            (411,784)
  Repurchases of
   stock.........                   (185,359)  (7,023)      (19)               (254,135)                                   (446,536)
  Partial
   redemption of
   certain
   shareholder
   interests.....                                                              (932,000)                                   (932,000)
  Transactions
   related to
   stock option
   and restricted
   stock plans...                                 612        71      24,368                                                  25,051
  Dividends on
   common stock;
   $.24 per
   share.........                                                               (26,524)                                    (26,524)
  Dividends on
   preferred
   stock.........                                                               (52,921)                                    (52,921)
  Net income.....                                                             1,226,751                                   1,226,751
  Net unrealized
   gain on
   securities....                                                                         $55,912                            55,912
  Translation
   losses and
   other.........                                                                  (540)                                       (540)
                           -------- --------  -------   -------    --------  ----------   -------   --------   --------  ----------
 BALANCE AT
  DECEMBER 31,
  1995...........           411,784  164,595   77,765    27,933     192,266     875,981    55,912                         1,806,236
  Conversion of
   Series C
   shares to
   Series A
   shares........                                 871      (871)
  Stock issued
   for
   acquisition...                                 212                 6,900                                                   7,112
  Repurchases of
   common stock..                             (11,236)     (126)               (484,546)                (872)              (496,780)
  Transactions
   related to
   stock option
   and restricted
   stock plans...                               2,190        37      61,325                              872                 64,424
  Sale of put
   options.......                                                     3,645                                                   3,645
  Exercise of put
   options.......                                 (45)                 (30)      (1,879)                                     (1,954)
  Redemption
   value of put
   options.......                                                  (38,172)                                                 (38,172)
  Dividends on
   common stock;
   $.30 per
   share.........                                                               (30,067)                                    (30,067)
  Dividends on
   preferred
   stock.........                                                               (32,734)                                    (32,734)
  Net income.....                                                               206,444                                     206,444
  Change in net
   unrealized
   gain on
   securities....                                                                          10,724                            10,724
  Translation
   losses and
   other.........                                                                   (68)                                        (68)
                           -------- --------  -------   -------    --------  ----------   -------   --------   --------  ----------
 BALANCE AT
  DECEMBER 31,
  1996...........          $411,784 $164,595  $69,757   $26,973    $225,934  $  533,131   $66,636                        $1,498,810
                           ======== ========  =======   =======    ========  ==========   =======   ========   ========  ==========
</TABLE>
 
See notes to consolidated financial statements
 
                                       29
<PAGE>
 
                            THE TIMES MIRROR COMPANY
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                   YEAR ENDED DECEMBER 31
                                               --------------------------------
                                                 1996        1995       1994
(IN THOUSANDS OF DOLLARS)                      ---------  ----------  ---------
<S>                                            <C>        <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
 Income (loss) from continuing operations..... $ 206,444  $ (338,983) $ 132,223
 Adjustments to derive cash flows from contin-
  uing operating activities:
  Depreciation and amortization...............   161,663     172,697    167,488
  Restructuring:
   Impairments and other non-cash charges.....    39,113     386,447
   Net change in restructuring liability......   (64,943)    188,175    (64,492)
  Amortization of product costs...............    52,906      61,526     59,574
  Gains on asset sales, net...................  (121,649)    (41,435)   (22,099)
  Provision for doubtful accounts.............    30,180      25,184     20,554
  Provision (benefit) for deferred income
   taxes......................................    58,648    (144,740)    14,978
  Changes in assets and liabilities:
   Trade accounts receivable..................    (2,115)    (50,688)   (43,648)
   Inventories................................    19,869     (23,401)     6,039
   Accounts payable...........................    (6,074)     28,284     11,812
   Income taxes...............................    59,451     (21,553)     3,790
  Other, net..................................   (44,650)     21,299     35,072
                                               ---------  ----------  ---------
  Net cash provided by continuing operating
   activities.................................   388,843     262,812    321,291
  Net cash provided by (used in) discontinued
   operating activities.......................   (28,354)    (13,066)   164,725
                                               ---------  ----------  ---------
   Net cash provided by operating activities..   360,489     249,746    486,016
                                               ---------  ----------  ---------
CASH FLOWS FROM INVESTING ACTIVITIES
 Proceeds from disposal of cable television
  operations..................................             1,225,013
 Capital expenditures.........................  (146,919)   (128,612)  (128,167)
 Capitalization of product costs..............   (78,686)    (90,903)   (66,817)
 Proceeds from sales of assets................   190,424      83,345    340,035
 Marketable and noncurrent securities, net....    79,845     (79,845)
 Acquisitions, net of cash acquired...........   (17,841)    (64,070)   (25,368)
 Other, net...................................    (4,324)    (26,295)   (16,851)
                                               ---------  ----------  ---------
  Net cash provided by investing activities of
   continuing operations......................    22,499     918,633    102,832
  Net cash used in investing activities of
   discontinued operations....................               (31,497)  (155,649)
                                               ---------  ----------  ---------
   Net cash provided by (used in) investing
    activities................................    22,499     887,136    (52,817)
                                               ---------  ----------  ---------
CASH FLOWS FROM FINANCING ACTIVITIES
 Repurchase of common stock...................  (496,780)   (218,091)
 Repurchase of Series B preferred stock.......   (91,182)   (137,263)
 Proceeds from issuance of debt...............   194,877                363,680
 Dividends paid...............................   (80,001)    (96,972)  (138,901)
 Proceeds from exercise of stock options......    51,178       5,122
 Principal repayments of other debt...........      (363)   (100,792)  (344,357)
 Repayment of commercial paper and short-term
  borrowings, net.............................              (488,010)  (233,901)
 Repayment of guaranteed ESOP debt............                          (24,200)
 Other, net...................................     1,487          81    (20,332)
                                               ---------  ----------  ---------
   Net cash used in financing activities......  (420,784) (1,035,925)  (398,011)
                                               ---------  ----------  ---------
Increase (decrease) in cash and cash
 equivalents..................................   (37,796)    100,957     35,188
Cash and cash equivalents at beginning of
 year.........................................   182,901      81,944     46,756
                                               ---------  ----------  ---------
Cash and cash equivalents at end of year...... $ 145,105  $  182,901  $  81,944
                                               =========  ==========  =========
</TABLE>
See notes to consolidated financial statements
 
                                       30
<PAGE>
 
                           THE TIMES MIRROR COMPANY
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Principles of Consolidation. The consolidated financial statements include
the accounts of the Company and its subsidiaries after elimination of all
significant intercompany transactions and balances. Affiliated companies in
which the Company owns a 20 percent to 50 percent interest are accounted for
by the equity method.
 
  Presentation. Certain amounts in previously issued financial statements have
been reclassified to conform to the 1996 presentation. Financial information
for 1995 and 1994, presented in the Notes to Consolidated Financial
Statements, excludes discontinued operations except where noted.
 
  Changes in Accounting Principles. Effective January 1, 1995, the Company
changed its method of accounting for certain contract-related revenues from
the licensing and sale of training programs and related materials. Prior to
1995, revenues were recognized for licensing fees, as well as the sale of
training products and seminars. However, the majority of these contract-
related revenues were recognized as licensing fees on the date a non-
cancelable agreement was signed and a master copy of the training materials
was delivered to the customer. As of January 1, 1995, revenues are recognized
either when the training products are delivered or the seminars presented,
with no revenues recognized for licensing fees. The Company believes that this
provides for consistent accounting treatment among its professional training
companies. The Company recorded a cumulative charge of $7,372,000 ($4,511,000
net of taxes) as of January 1, 1995. The effect of this change on 1995 net
income before cumulative effect of changes in accounting principles was not
significant.
 
  Effective January 1, 1995, the Company adopted the Financial Accounting
Standards Board's Practice Bulletin 13, "Direct Response Advertising and
Probable Future Benefits," which clarified the accounting for direct response
advertising costs. The Company's accounting practice prior to 1995 was to
capitalize magazine subscription-related direct response advertising costs to
the extent that such costs did not exceed estimated future revenues from
magazine subscriptions and advertising for the specific direct response
efforts. Under the Practice Bulletin 13 interpretation, future estimated
advertising revenues may not be included in estimating probable future
revenues for purposes of determining whether direct response advertising costs
should be capitalized or expensed. The Company recorded a cumulative charge of
$14,169,000 ($8,213,000 net of taxes) as of January 1, 1995. The effect of
this change on 1995 net income before cumulative effect of changes in
accounting principles was not significant.
 
  Effective July 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" (SFAS 121). Long-lived
assets, such as plant and equipment, identifiable intangibles and goodwill,
are reviewed for impairment whenever events or changes in circumstances
indicate that the net book value of these assets may not be recoverable. As a
result of the adoption of SFAS 121, the Company has changed its methodology
for assessing the recoverability of long-lived assets, including goodwill.
Prior to SFAS 121, the Company recognized the difference between future
undiscounted cash flows and net book value as an impairment loss. Impairment
losses under SFAS 121 are determined based on the difference between fair
value, which would generally approximate estimated future cash flows
discounted at the Company's cost of capital, and net book value. An impairment
loss on certain assets, as described in Note 5, was recorded in 1995. Prior
period financial statements were not affected by the adoption of SFAS 121.
 
  Cash and Cash Equivalents. Cash equivalents consist of investments that are
readily convertible into cash and have original maturities of three months or
less. Cash equivalents of $91,796,000 and $129,471,000 at December 31, 1996
and 1995, respectively, were primarily commercial paper, money market funds
and repurchase agreements.
 
  Under the Company's cash management system, the bank notifies the Company
daily of checks presented for payment against its primary disbursing accounts.
The Company transfers funds from other sources such as
 
                                      31
<PAGE>
 
                           THE TIMES MIRROR COMPANY
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
short-term investments or commercial paper issuance to cover the checks
presented for payment. This program results in a book cash overdraft in the
primary disbursing accounts as a result of checks outstanding. The book
overdraft, which was reclassified to accounts payable, was $37,897,000 and
$33,009,000 at December 31, 1996 and 1995, respectively.
 
  Inventories. Inventories are carried at the lower of cost or market and are
determined under the first-in, first-out method for books and certain finished
products, and under the last-in, first-out method for newsprint, paper and
certain other inventories.
 
  Property, Plant and Equipment. Property, plant and equipment are carried on
the basis of cost. Maintenance and repairs are charged to expense as incurred.
Additions, improvements and replacements are capitalized.
 
  Depreciation is provided on a straight-line basis over the estimated useful
lives as follows:
 
<TABLE>
        <S>                                  <C>
        Buildings........................... 15-45 years
        Machinery and equipment............. 3-20 years
        Leasehold improvements.............. Lesser of useful life or lease term
</TABLE>
 
  Goodwill and Other Intangibles. Goodwill recognized in business combinations
accounted for as purchases subsequent to October 31, 1970 ($516,689,000 at
December 31, 1996 and $638,292,000 at December 31, 1995 net of accumulated
amortization of $158,506,000 and $167,399,000, respectively) is being
amortized primarily over 15 to 40 years, with a weighted average amortization
period of 37 years. Goodwill arising from business combinations consummated
prior to November 1, 1970 is not being amortized because, in the opinion of
management, it has not diminished in value. Goodwill amortization expense
amounted to $23,259,000 for 1996, $25,219,000 for 1995 and $22,330,000 for
1994.
 
  Other intangibles arising in connection with acquisitions are being
amortized on a straight-line basis over their estimated useful lives ranging
from 2 to 21 years, with a weighted average life of 13 years. Amortization
expense amounted to $14,055,000 for 1996, $20,753,000 for 1995 and $22,387,000
for 1994. Accumulated amortization was $60,309,000 and $95,105,000 at December
31, 1996 and 1995, respectively.
 
  The Company assesses on an ongoing basis the recoverability of goodwill,
based on estimates of future undiscounted cash flows for the applicable
business compared to net book value. If the future undiscounted cash flow
estimate were less than net book value, net book value would then be reduced
to fair value based on an estimate of discounted cash flow. The Company also
evaluates the amortization periods of assets, including goodwill and other
intangible assets, to determine whether events or circumstances warrant
revised estimates of useful lives.
 
  Deferred Charges. Certain expenses for books and training materials are
capitalized and charged to expense over the estimated product life as the
products are sold. Magazine subscription procurement costs are charged to
expense over the same period as the related revenue is earned.
 
  Derivative Financial Instruments. Interest rate swaps and forward interest
rate swaps are used to manage exposure to market risk associated with changes
in interest rates. Interest rate swaps are accounted for on the accrual basis.
Payments made or received are recognized as an adjustment to interest expense
related to the debt. Amounts received in connection with forward swaps and
terminated swaps are amortized on a straight-line basis as a reduction in
interest expense over the term of the swaps.
 
  The Company's exposure to market risk associated with fluctuations in the
value of foreign currencies relative to the U.S. dollar may be managed with
foreign currency forward contracts, currency options, currency
 
                                      32
<PAGE>
 
                           THE TIMES MIRROR COMPANY
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
swaps or other risk management instruments permitted by the Company's internal
policy guidelines. The Company's practice over the last few years has been to
enter into forward contracts at the beginning of each year, with maturities
occurring at various times during the year. The gains and losses on the
forward contracts, which have not qualified as accounting hedges, are
recognized currently in earnings.
 
  Put options are used as an alternative to open market purchases in
connection with the Company's common stock repurchase program. Forward
purchase contracts for the Company's Series B preferred stock are used to
commit holders to make future sales to the Company of shares of its Series B
preferred stock (or additional common stock, once the Series B stock is
converted into common shares). See Note 21. These contracts are entered into
based on market conditions as well as other factors. The costs or benefits
derived from these equity-based financial instruments are recorded in equity
on the date of the transaction.
 
  Revenue Recognition. Revenues from certain products sold with the right of
return, principally books, are recognized net of a provision for estimated
returns. Revenues from newspaper and magazine subscriptions and professional
service fee annual subscriptions are deferred as unearned income at the time
of the sale. A pro rata share of the newspaper and magazine subscription price
is included in revenue as products are delivered to subscribers. Professional
service fee annual subscription revenues are recognized on a straight-line
basis over the life of the subscription service.
 
  Earnings Per Share. Primary earnings per share is computed by dividing net
income, less preferred dividend requirements and, for 1995, cash paid in
excess of liquidation value on Series B preferred stock repurchases, by the
weighted average number of shares of common stock and common stock equivalents
outstanding during the period, except when the common stock equivalents are
antidilutive. The weighted average number of shares used for primary earnings
per share totaled 105,085,000 and 113,797,000 for the years ended December 31,
1996 and 1995, respectively.
 
  Fully diluted earnings per share is computed by dividing net income, less
preferred dividend requirements for Series A preferred stock and, for 1995,
cash paid in excess of liquidation value for Series B preferred stock
repurchases, by the weighted average number of shares of common stock and
dilutive common stock equivalents outstanding, assuming that the Series B
preferred stock outstanding at December 31, 1996 and 1995 was converted to
common stock on a one-for-one basis on January 1, 1996 and March 1, 1995,
respectively. The weighted average number of shares used for fully diluted
earnings per share is 113,583,000 and 123,001,000 for the years ended December
31, 1996 and 1995, respectively.
 
  Stock Options. Employee stock options are accounted for under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees,"
which requires the recognition of expense when the option price is less than
the fair value of the stock at the date of grant. The Company awards options
for a fixed number of shares at an option price equal to the fair value at the
date of grant. Accordingly, the financial statements do not include any
expense related to employee stock option awards. The Company has adopted the
disclosure-only provisions of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation." See Note 13.
 
  Retirement Plans and Postretirement Benefits. The Company has defined
benefit pension plans and various other contributory and noncontributory
retirement plans covering substantially all employees. In general, benefits
under the defined benefit plans are based on years of service and the
employee's compensation during the last five years of employment. Effective
January 1, 1996, pension plan benefits for most employees will be limited to
30 years of benefit service beginning January 1, 2006. In determining net
periodic pension expense (income), prior service costs are amortized on a
straight-line basis over 10 years. The defined benefit plans are generally
funded on a current basis in accordance with the Employee Retirement Income
Security Act of 1974. The majority of the Company's employees are covered by
one defined benefit plan. Funding is not expected to be
 
                                      33
<PAGE>
 
                           THE TIMES MIRROR COMPANY
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
required for this plan in the near future as this plan is overfunded. An
Employee Stock Ownership Plan (ESOP), which was frozen effective January 1,
1995, provides benefits in conjunction with certain defined benefits. The fair
value of ESOP assets is recognized as an offset to required funding.
 
  Postretirement health care benefits provided by the Company are unfunded and
cover certain employees hired before January 1, 1993, or approximately half of
the Company's current employees. The various plans have significantly
different provisions for lifetime maximums, retiree cost-sharing, health care
providers, prescription drug coverage and other benefits. Postretirement life
insurance benefits are generally insured by life insurance policies and cover
employees who retired on or before December 31, 1993. Life insurance benefits
vary by plan, ranging from $1,000 to $250,000. Certain employees become
eligible for the postretirement health care benefits if they meet minimum age
and service requirements and retire from full-time, active service.
 
NOTE 2--ACQUISITIONS, DISPOSITIONS AND WRITEDOWNS
 
  During the fourth quarter of 1996, the Company recognized a gain of
$121,649,000 on the exchange of its college publishing businesses and the sale
of its Spanish language medical book publisher, Doyma Libros, and recorded a
writedown of $16,728,000 for the January 1997 disposal of certain net assets
of CRC Press, Inc. The net gain of $104,921,000 was $32,047,000 after
applicable income taxes, primarily due to permanent differences related to
goodwill. Revenues of these businesses represented approximately 7% and 9% of
consolidated revenues of the Company for the years ended December 31, 1996 and
1995.
 
  On October 15, 1996, the Company and Mosby-Year Book, Inc. (Mosby), a
wholly-owned subsidiary of the Company, completed an exchange pursuant to
which The McGraw-Hill Companies, Inc. sold all of the outstanding shares of
the capital stock of its subsidiary, Shepard's/McGraw-Hill, Inc. (Shepard's),
to the Company in exchange for (i) the stock of Times Mirror Higher Education
Group, Inc., (ii) the assets and related liabilities of Mosby's college-level
life and physical science text business, (iii) certain assets and liabilities
of Times Mirror International Publishers U.S., Inc. and affiliated entities
relating to the Company's college text business and (iv) certain cash
consideration expected to be less than 10% of the fair value of the exchange
transaction.
 
  In late November 1996, Shepard's was contributed to a new 50/50 joint
venture between the Company and Reed Elsevier Inc. (Reed) as part of a broader
strategic alliance between Matthew Bender, Times Mirror's legal publisher, and
LEXIS-NEXIS, a Reed subsidiary and a provider of full-text online information
services in the legal, news, business and government areas. The Company
received $242,500,000 from Reed for the 50% interest in the Shepard's joint
venture. This transaction did not result in a gain or loss.
 
  During 1996, the Company had several other small acquisitions which were
accounted for by the purchase method. The operations of these companies are
reflected in the Company's financial statements from the date of acquisition.
These acquisitions resulted in goodwill of $21,399,000, which is being
amortized from 8 to 15 years.
 
  During 1995, asset sales resulted in a gain of $41,435,000, or $25,821,000
after applicable income taxes. Gains on the sale of securities, including
equity securities in Graphic Holdings, Inc. and a newsprint manufacturer, were
partially offset by losses on the disposal of newspaper-related equipment, the
sale of The Sporting Goods Dealer and the sale of a small book printing
business. Restructuring-related writedowns and charges of $43,851,000, or
$40,687,000 after applicable income taxes, were recorded in 1995 to state
certain investments at their net realizable value and record certain
investment-related commitments.
 
  During 1994, the Company recognized a gain of $22,099,000, or $10,646,000
after applicable income taxes, on the divestiture of a small elementary-high
school book publishing operation and the sale of preferred stock and common
stock warrants, obtained as part of the 1992 settlement of a note receivable
related to the 1987 sale of the Denver Post.
 
                                      34
<PAGE>
 
                           THE TIMES MIRROR COMPANY
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 3--REORGANIZATION
 
  New TMC, Inc. was an entity formed, in connection with the 1995 tax-free
reorganization, to facilitate the merger of the Company's cable television
operations with Cox Communications, Inc. (Cox). The Company's corporate
predecessor transferred all of its non-cable operations to New TMC, Inc.
simultaneously with the February 1, 1995 merger of its cable television
operations with Cox. Subsequent to the merger, New TMC, Inc. was renamed The
Times Mirror Company. Financial statement references to the Company apply to
New TMC, Inc.'s predecessor for events and transactions occurring prior to the
merger. As a result of the merger, Cox assumed approximately $1.36 billion of
debt, of which $1.31 billion was borrowed by the Company shortly before the
merger. New TMC, Inc. received cash proceeds of $1.23 billion, primarily from
the debt issuance, and used the funds to retire $588,010,000 of commercial
paper, short-term borrowings and other debt.
 
  As additional consideration, Cox issued 54,904,000 shares of its Class A
common stock to the non-controlling shareholders of the Company, which group
excludes all Chandler Trust shareholders. This stock had a fair value of
$932,000,000. Due to certain constraints imposed by the terms of the Chandler
Trusts, in lieu of common stock of Cox, the Chandler Trusts received Series A
preferred stock. In connection with the settlement of reorganization-related
litigation, all non-controlling shareholders were offered the opportunity to
exchange shares of Series A or Series C common stock for shares of Series B
preferred stock. Accordingly, 16,561,178 shares of Series B preferred stock
were issued pursuant to this settlement offer.
 
  As a result of this reorganization and merger, the Company recognized a
nontaxable gain of $1.63 billion on the disposal of its cable television
operations.
 
NOTE 4--DISCONTINUED OPERATIONS
 
  Discontinued operations include cable programming, consumer multimedia, an
electronic shopping joint venture and cable television. The cable programming
business, consumer multimedia business and the joint venture were discontinued
during the third quarter of 1995. The cable television operations were
disposed of on February 1, 1995.
 
  The combined results of operations of these businesses have been reported as
discontinued operations for all periods presented. The income (loss) from
discontinued operations is as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                              1995       1994
                                                           ----------  --------
      <S>                                                  <C>         <C>
      Revenues............................................ $   42,673  $499,775
                                                           ----------  --------
      Income (loss) before income tax provision (bene-
       fit)(1)............................................    (77,507)   96,592
      Income tax provision (benefit)......................    (21,671)   43,466
                                                           ----------  --------
      Income (loss) after taxes(1)........................    (55,836)   53,126
      Net gain on disposal................................  1,634,294
                                                           ----------  --------
      Total discontinued operations....................... $1,578,458  $ 53,126
                                                           ==========  ========
</TABLE>
--------
(1) Included in the loss before income taxes and loss after taxes for 1995
    were estimated operating costs during the exit period, writedowns of
    assets to net realizable value, and severance and other closure costs
    aggregating $69,755,000, or $49,627,000 after income tax benefits, related
    to the discontinuance of cable programming, consumer multimedia and a
    joint venture.
 
                                      35
<PAGE>
 
                           THE TIMES MIRROR COMPANY
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
  During the year ended December 31, 1996, expenditures for prior commitments
related to discontinued cable programming and consumer multimedia companies
aggregated $28,354,000. The major components of cash flow for discontinued
operations for the years ended December 31, 1995 and 1994 are as follows (in
thousands):
 
<TABLE>
<CAPTION>
                                                             1995      1994
                                                           --------  ---------
   <S>                                                     <C>       <C>
   Income (loss) from discontinued operations............. $(55,836) $  53,126
   Depreciation and amortization..........................    8,459     99,714
   Other, net.............................................   34,311     11,885
                                                           --------  ---------
   Net cash provided by (used in) discontinued operating
    activities............................................ $(13,066) $ 164,725
                                                           ========  =========
   Capital expenditures................................... $(11,692) $(119,212)
   Acquisitions, net of cash acquired.....................  (10,442)   (22,308)
   Other, net.............................................   (9,363)   (14,129)
                                                           --------  ---------
   Net cash used in investing activities of discontinued
    operations............................................ $(31,497) $(155,649)
                                                           ========  =========
</TABLE>
 
NOTE 5--RESTRUCTURING
 
  During 1996, the Company recorded restructuring charges of $50,924,000, or
$30,305,000 after applicable income taxes, which included reserves related to
changing the domestic distribution channels and consolidating and closing
selected offices for the medical publishing operations as well as costs and
asset writeoffs to further integrate the training companies. The remaining
1996 restructuring liability at December 31, 1996 was $10,205,000.
 
  During 1995, the Company recorded restructuring, impairment and one-time
charges of $634,077,000, or $410,623,000 after applicable income taxes.
Additional charges of $90,030,000 were also included in 1995 results. These
charges did not meet the accounting criteria for inclusion in restructuring
charges, but were part of the Company's 1995 restructuring program, along with
additional pre-tax charges of $69,755,000 related to discontinued operations
(see Note 4) and $43,851,000 related to investment writedowns (see Note 2).
The remaining 1995 restructuring liability at December 31, 1996 was
$148,520,000. The 1995 charges were comprised of the following:
 
  Restructuring: Restructuring costs aggregating $409,238,000 consisted of
$153,764,000 for termination benefit costs, $126,412,000 for estimated
sublease and lease abandonment losses, $117,152,000 for asset write-offs and
$11,910,000 for other costs. The termination benefits were largely severance
costs that covered approximately 2,700 full-time equivalent employees company-
wide, of which 1,900 were in the Newspaper Publishing segment. Severance
payments were $45,846,000 and $92,755,000 during 1996 and 1995, respectively.
Some terminated employees are receiving severance payments over time. The
remaining liability for severance costs at December 31, 1996 aggregated
$18,230,000. The sublease and lease abandonment losses primarily covered
office space in New York City, largely related to the closure of New York
Newsday on July 17, 1995 and the consolidation of office space. Approximately
268,000 square feet has been abandoned and 21,000 square feet has been
subleased. The asset write-offs were primarily goodwill and other intangibles
related to the closure of Baltimore's Evening Sun on September 15, 1995, the
abandonment of the magazines' sports marketing business and the abandonment of
other products or product lines, primarily in the health sciences and college
publishing businesses.
 
  Impairment: In connection with the restructuring of operations at Times
Mirror Magazines, magazine titles that historically had operating losses, and
that did not have the estimated future earnings necessary to recover asset
values, were reviewed for impairment in accordance with SFAS 121 (see Note 1).
The net book value of
 
                                      36
<PAGE>
 
                           THE TIMES MIRROR COMPANY
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
the primary long-lived asset, goodwill, exceeded the undiscounted estimated
future cash flows for certain magazine titles. The $36,096,000 difference
between the net book value and the fair value was recorded as an impairment
loss in 1995. The fair value was based on estimated future cash flows
discounted at the Company's cost of capital. In connection with the 1995
restructuring of its college publishing business, the Company recorded an
impairment loss of $24,797,000 on certain printing, fulfillment and
distribution facilities.
 
  One-Time Charges: One-time charges aggregating $163,946,000 were primarily
related to employee benefit costs incurred in the renegotiation of union
agreements at Newsday and the writedown of certain idle facilities and
equipment.
 
  The balance sheet classification of restructuring liabilities is as follows
(in thousands):
 
<TABLE>
<CAPTION>
                                                                DECEMBER 31
                                                             -----------------
                                                               1996     1995
                                                             -------- --------
     <S>                                                     <C>      <C>
     Other current liabilities
      1995 Restructuring.................................... $ 69,111 $151,165
      1996 Restructuring....................................    7,341
     Other liabilities
      1995 Restructuring....................................   79,409  106,584
      1996 Restructuring....................................    2,864
                                                             -------- --------
                                                             $158,725 $257,749
                                                             ======== ========
</TABLE>
 
  The current portion of the restructuring liabilities relates primarily to
severance and other employee benefit-related costs while the noncurrent
portion principally relates to lease payments which will be paid over lease
periods extending to 2004.
 
NOTE 6--INTEREST, SUPPLEMENTAL CASH FLOW AND OTHER INFORMATION
 
  Cash payments during the years ended December 31, 1996, 1995 and 1994
included interest, net of amounts capitalized, of $24,609,000, $29,218,000 and
$71,654,000, respectively, and income taxes of $74,164,000, $84,968,000 and
$107,865,000, respectively. Interest capitalized during the years ended
December 31, 1996, 1995 and 1994 was not significant.
 
  Non-cash transactions were as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                1996     1995
                                                              -------- --------
   <S>                                                        <C>      <C>
   Exchange of college publishing businesses for Shepard's... $457,839
   Liabilities assumed in connection with acquisitions.......   14,618
   Fair value of Cox Class A common stock issued to
    noncontrolling shareholders and accounted for as a
    partial redemption of certain shareholder interests......          $932,000
   Transfer of debt, related interest and other liabilities
    to Cox...................................................           133,257
   Exchange of debentures....................................           246,965
   Issuance of Series A preferred stock......................           411,784
   Exchange of common stock for Series B preferred stock.....           349,954
   Retirement of treasury stock..............................            61,543
</TABLE>
 
  Advertising and promotion costs, which are expensed as incurred, amounted to
$107,832,000 for 1996, $106,420,000 for 1995 and $98,557,000 for 1994.
 
                                      37
<PAGE>
 
                           THE TIMES MIRROR COMPANY
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 7--FINANCIAL INSTRUMENTS
 
  Financial instruments consist of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                        DECEMBER 31
                                            -----------------------------------
                                                   1996             1995
                                            ----------------- -----------------
                                            CARRYING   FAIR   CARRYING   FAIR
                                             VALUE    VALUE    VALUE    VALUE
                                            -------- -------- -------- --------
   <S>                                      <C>      <C>      <C>      <C>
   Assets
    Short-term assets...................... $665,417 $665,417 $817,535 $817,535
    Long-term equity securities............  102,415  102,415  102,663  102,663
   Liabilities
    Short-term liabilities.................  304,983  304,983  395,292  395,292
    Long-term debt.........................  459,007  463,788  247,934  273,582
   Off Balance Sheet
    Unrealized net gain on interest rate
     swaps.................................            12,182            19,478
</TABLE>
 
  Short-Term Assets and Liabilities: The fair value of cash and cash
equivalents, marketable securities, accounts receivable and accounts payable
approximates their carrying value due to the short-term nature of these
financial instruments. Marketable securities at December 31, 1996 are
available-for-sale equity securities with a cost of $4,050,000. The unrealized
gain is included as a separate component of shareholders' equity, net of
applicable income taxes.
 
  Long-Term Equity Securities: Available-for-sale equity securities which are
classified as long-term are stated at fair value based on estimated or quoted
market prices and are included in "Other assets" in the consolidated balance
sheets. The cost of the securities was $4,000,000 and $7,937,000 at December
31, 1996 and 1995, respectively. The unrealized gain is included as a separate
component of shareholders' equity, net of applicable income taxes.
 
  Long-Term Debt: The fair value of long-term debt is based primarily on the
Company's current refinancing rates for publicly issued fixed rate debt with
comparable maturities except for the premium equity participating securities
whose fair value is the current maturity value determined by a formula based
on quoted market prices of the underlying common stock.
 
  Interest Rate Swap: An interest rate swap agreement for a notional amount of
$100,000,000, expiring in 2023, effectively converts a portion of the
Company's long-term fixed rate debt to a variable rate obligation based on
LIBOR. The fair value of the swap is the amount at which it could be settled
based on estimates of market rates. In May 1996, the Company terminated an
interest rate swap as well as its two forward swap agreements.
 
NOTE 8--INVENTORIES
 
  Inventories consist of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                 DECEMBER 31
                                                              -----------------
                                                                1996     1995
                                                              -------- --------
   <S>                                                        <C>      <C>
   Newsprint, paper and other raw materials.................. $ 36,822 $ 53,051
   Books and other finished products.........................   46,508   91,206
   Work-in-progress..........................................   20,318   29,311
                                                              -------- --------
                                                              $103,648 $173,568
                                                              ======== ========
</TABLE>
 
  Inventories determined on the last-in, first-out method were $24,104,000 and
$31,137,000 at December 31, 1996 and 1995, respectively, and would have been
higher by $10,929,000 in 1996 and $27,647,000 in 1995 had the first-in, first-
out method (which approximates current cost) been used.
 
                                      38
<PAGE>
 
                           THE TIMES MIRROR COMPANY
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 9--PROPERTY, PLANT AND EQUIPMENT
 
  Property, plant and equipment consists of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                               DECEMBER 31
                                                          ---------------------
                                                             1996       1995
                                                          ---------- ----------
   <S>                                                    <C>        <C>
   Land.................................................. $   90,283 $   91,118
   Buildings.............................................    560,846    550,057
   Machinery and equipment...............................  1,376,435  1,334,916
   Leasehold improvements................................     40,340     36,006
   Construction-in-progress..............................     50,976     66,342
                                                          ---------- ----------
                                                           2,118,880  2,078,439
   Less accumulated depreciation and amortization........    941,803    903,608
                                                          ---------- ----------
                                                          $1,177,077 $1,174,831
                                                          ========== ==========
</TABLE>
 
NOTE 10--INCOME TAXES
 
  Income tax expense (benefit) from continuing operations consists of the
following (in thousands):
 
<TABLE>
<CAPTION>
                                                      1996     1995       1994
                                                    -------- ---------  --------
   <S>                                              <C>      <C>        <C>
   Current
    Federal........................................ $ 92,892 $  12,617  $ 74,675
    State..........................................   32,887     1,048    23,762
    Foreign........................................   13,118    15,045    12,261
   Deferred
    Federal........................................   50,116  (106,660)    6,375
    State..........................................    8,240   (37,171)    8,579
    Foreign........................................      292      (909)       24
                                                    -------- ---------  --------
                                                    $197,545 $(116,030) $125,676
                                                    ======== =========  ========
</TABLE>
 
  The difference between actual income tax expense (benefit) and the U.S.
Federal statutory income tax expense for continuing operations is reconciled
as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                    1996      1995       1994
                                                  --------  ---------  --------
   <S>                                            <C>       <C>        <C>
   Income (loss) from continuing operations be-
    fore income taxes:
    United States...............................  $423,240  $(469,310) $231,684
    Foreign.....................................   (19,251)    14,297    26,215
                                                  --------  ---------  --------
                                                  $403,989  $(455,013) $257,899
                                                  ========  =========  ========
   Federal statutory income tax rate............        35%        35%       35%
   Federal statutory income tax expense (bene-
    fit)........................................  $141,396  $(159,255) $ 90,265
   Increase (decrease) in income taxes resulting
    from:
    State and local income tax expense
     (benefit), net of Federal effect...........    26,732    (23,421)   21,021
    Basis difference in asset sales.............    28,203     (6,391)    3,017
    Goodwill amortization not deductible for tax
     purposes...................................     7,294      7,947     7,569
    Writedown of assets.........................               44,291
    Foreign tax differentials...................     4,490      7,147       416
    Other.......................................   (10,570)    13,652     3,388
                                                  --------  ---------  --------
                                                  $197,545  $(116,030) $125,676
                                                  ========  =========  ========
</TABLE>
 
 
                                      39
<PAGE>
 
                           THE TIMES MIRROR COMPANY
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  The tax effect of temporary differences results in deferred income tax
assets (liabilities) and balance sheet classifications as follows (in
thousands):
 
<TABLE>
<CAPTION>
                                                             DECEMBER 31
                                                         --------------------
                   TEMPORARY DIFFERENCES                   1996       1995
                   ---------------------                 ---------  ---------
   <S>                                                   <C>        <C>
   Depreciation and other property, plant and equipment
    differences......................................... $(167,547) $(172,308)
   Retirement and health benefits.......................  (150,359)  (132,226)
   Postretirement benefits..............................   110,701    111,954
   Valuation and other reserves.........................    38,449     61,717
   Other employee benefits..............................    59,746     62,918
   Unrealized investment gains..........................   (46,152)   (38,805)
   State and local income taxes.........................    33,483     29,798
   Restructuring charges................................    32,683     83,645
   Intangible asset differences.........................    12,178     12,615
   Other deferred tax assets............................    31,123     19,045
   Other deferred tax liabilities.......................   (33,769)   (40,038)
                                                         ---------  ---------
                                                         $ (79,464) $  (1,685)
                                                         =========  =========
</TABLE>
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31
                                                          --------------------
               BALANCE SHEET CLASSIFICATIONS                1996       1995
               -----------------------------              ---------  ---------
   <S>                                                    <C>        <C>
   Current deferred tax assets........................... $  49,248  $ 134,395
   Noncurrent deferred tax assets........................       779      4,007
   Noncurrent deferred tax liabilities...................  (129,491)  (140,087)
                                                          ---------  ---------
                                                          $ (79,464) $  (1,685)
                                                          =========  =========
</TABLE>
 
  Noncurrent deferred tax assets are included in "Other assets."
 
NOTE 11--DEBT
 
  Long-term debt consists of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                DECEMBER 31
                                                             ------------------
                                                               1996      1995
                                                             --------  --------
   <S>                                                       <C>       <C>
   7 1/4% Debentures due March 1, 2013.....................  $148,215  $148,215
   7 1/2% Debentures due July 1, 2023......................    98,750    98,750
   7 1/4% Debentures due November 15, 2096.................   148,000
   4 1/4% PEPS due March 15, 2001;
     1,305,000 securities stated at current maturity value.    64,543
   Others at various interest rates, maturing through 2001.        84     1,222
                                                             --------  --------
                                                              459,592   248,187
   Unamortized discount....................................      (570)
   Less current maturities.................................       (15)     (253)
                                                             --------  --------
                                                             $459,007  $247,934
                                                             ========  ========
</TABLE>
 
  In March 1996, the Company issued 1,305,000 securities, designated as 4 1/4%
Premium Equity Participating Securities (PEPS), for gross proceeds of
$51,221,000 or $39.25 per security. This obligation hedges a significant
portion of the Company's investment in the common stock of Netscape
Communications Corporation (Netscape).
 
                                      40
<PAGE>
 
                           THE TIMES MIRROR COMPANY
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
The amount payable at maturity is determined by reference to the fair market
value of the Netscape stock. As a result, the maturity value will generally
move in tandem with changes in the fair market value of the Netscape stock.
The PEPS obligation is recorded (a) at the issuance price of $39.25 if the
fair market value of Netscape common stock is between $39.25 and $45.13 or (b)
at 86.96% of the fair market value when the Netscape common stock exceeds
$45.13. At December 31, 1996, the fair market value of Netscape common stock
was $56.875 per share, resulting in a maturity value of approximately $49.46
per security at that date. Changes in the maturity value of the PEPS are
included as a separate component of shareholders' equity, net of applicable
income taxes.
 
  Interest rate swaps converted the weighted average interest rate on the
debentures due in 2013 and 2023 from 7.35% to 6.09% for the year ended
December 31, 1996. The unamortized discount at December 31, 1996 relates to
the 100-year debentures issued in 1996.
 
  The Company has an agreement with several domestic and foreign banks for
unsecured long-term revolving lines of credit that expire in September 2000.
This agreement provides for borrowings up to $400,000,000 at interest rates
based on, at the Company's option, the banks' base rates, Eurodollar rates or
competitive bid rates. The commitment fee is approximately 8/100 of one
percent per annum. The lines of credit are used to support a commercial paper
program. Commercial paper was issued during the last half of 1996 but was
repaid prior to December 31, 1996. During 1996, the weighted average interest
rate and weighted average commercial paper borrowings were 5.40% and
$63,959,000, respectively. In addition, the Company has $69,078,000 of undrawn
standby letters of credit at December 31, 1996.
 
  The Company's revolving lines of credit contain restrictive provisions
relating primarily to the level of consolidated net worth. At December 31,
1996, consolidated net worth was required to be not less than approximately
$1.37 billion.
 
  The Company completed a tender offer in December 1994 for $345,179,000 of
its Medium-Term Notes and its three other notes due 1999 thru 2001. The
premium and related costs of the tender, aggregating $20,749,000, or
$12,232,000 after taxes, were recorded as an extraordinary loss in 1994.
 
  At December 31, 1996, the aggregate principal maturities of the Company's
debt are as follows (in thousands):
 
<TABLE>
      <S>                                                               <C>
      1997-2000........................................................ $     67
      2001.............................................................   64,560
      Thereafter.......................................................  394,395
</TABLE>
 
NOTE 12--CAPITAL STOCK AND STOCK REPURCHASE PROGRAM
 
  The Series A preferred stock is cumulative, non-voting stock and has an
annual dividend rate of 8% of its liquidation value of $411,784,000. The
Series B preferred stock is cumulative, voting stock and has an annual
dividend rate of $1.374 per share. Both series of preferred stock were
entitled to dividends effective March 1, 1995. The Series B preferred stock is
mandatorily convertible into the Company's Series A common stock on April 1,
1998, or earlier under certain circumstances (see Note 21). The conversion
rate fluctuates with the value of the common stock, but it will not exceed a
one-for-one conversion rate. Preferred stock is issuable in series under such
terms and conditions as the Board of Directors may determine.
 
  Shares of Series A and Series C common stock are identical, except with
respect to voting rights, restrictions on transfer of Series C shares and the
right to convert Series C shares into Series A shares. Series A shares are
entitled to one vote per share and Series C shares are entitled to ten votes
per share. Series C shares are subject
 
                                      41
<PAGE>
 
                           THE TIMES MIRROR COMPANY
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
to mandatory conversion into Series A shares upon transfer to any person other
than a "Permitted Transferee" as defined in the Company's Certificate of
Incorporation or upon the occurrence of certain regulatory events. Series B
common stock is entitled to one-tenth vote per share and is available for
common stock issuance transactions, such as underwritten public offerings and
acquisitions.
 
  During 1996, the Company repurchased 11,362,000 common shares for a total
cost of $496,780,000. An additional 45,000 common shares were repurchased for
$1,954,000 as a result of the exercise of a put option. There were 2,500,000
put options issued by the Company during 1996 with a weighted average strike
price of $43.15 per common share. The cash received from the issuance of these
put options was not significant. The put options entitle the holder to sell
shares of Times Mirror Series A common stock to the Company at the strike
price on the expiration date of the put option. The potential obligation under
the 800,000 put options outstanding at December 31, 1996 has been transferred
from shareholders' equity to "Common stock subject to put options." The
unexpired put options are at strike prices ranging from $44.54 to $52.48.
These put options expire at various times thru April 1997.
 
  Also in 1996, as part of its share repurchase efforts, the Company entered
into a series of forward purchase agreements on 552,000 shares of its Series B
preferred stock. These contracts, which mature in 1998 but may be terminated
prior to maturity, may be settled on a net share basis in Series B preferred
stock or in Series A common stock if the Series B preferred stock is redeemed
prior to maturity of the contracts. The Company may also elect to settle the
contracts in cash. See Note 21.
 
  During 1995, the Company repurchased 7,042,000 common shares and 8,772,000
Series B preferred shares for a total cost of $446,536,000. Some of the Series
B preferred shares were acquired through a tender offer which ended on
December 29, 1995. "Other current liabilities" in the consolidated balance
sheet at December 31, 1995 include $91,182,000 for settlement of the tender
offer on January 6, 1996.
 
  In connection with the Company's ongoing stock repurchase program, in
October 1996, the Company's Board of Directors authorized the repurchase over
the next three years of an additional 12 million shares of common stock and
Series B preferred stock. The aggregate remaining shares authorized for
repurchase at December 31, 1996 is approximately 10.8 million shares. The
common shares purchased under this program are intended to offset dilution
from shares of common stock issued under the Company's stock-based employee
compensation and benefit program as well as to enhance shareholder value.
 
NOTE 13--STOCK OPTION AND AWARD PLANS
 
  The Company has various stock option plans under which options may be
granted to purchase shares of Series A common stock at a price equal to the
fair market value at the date of grant. Options that are not exercised expire
ten years from the date of grant. Options granted to key employees generally
vest over a four-year period. Grants made under a broad-based stock option
plan, for employees not eligible for other stock option grants, are fully
vested three years after the date of grant. Restricted stock is also awarded
to key employees. The number of restricted stock awards, including matching
awards in connection with the annual incentive bonus program, is not material.
 
                                      42
<PAGE>
 
                           THE TIMES MIRROR COMPANY
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
  Options granted, exercised and forfeited were as follows:
<TABLE>
<CAPTION>
                                                                        WEIGHTED
                                                                        AVERAGE
                                                            NUMBER OF   EXERCISE
                                                              SHARES     PRICE
                                                            ----------  --------
     <S>                                                    <C>         <C>
     Options Outstanding December 31, 1993.................  4,011,548   $31.14
      Granted..............................................    961,255    30.91
      Exercised............................................   (134,135)   26.26
      Forfeited............................................   (306,011)   31.85
                                                            ----------   ------
     Options Outstanding December 31, 1994.................  4,532,657    31.16
      Adjustment due to reorganization.....................  3,065,245
      Granted..............................................  2,845,649    33.62
      Exercised............................................ (1,207,180)   17.71
      Forfeited............................................   (584,714)   15.68
                                                            ----------   ------
     Options Outstanding December 31, 1995.................  8,651,657    23.29
      Granted..............................................  1,613,851    33.22
      Exercised............................................ (1,911,082)   18.86
      Forfeited............................................   (582,937)   26.61
                                                            ----------   ------
     Options Outstanding December 31, 1996.................  7,771,489   $26.12
                                                            ==========   ======
</TABLE>
 
  In connection with the reorganization described in Note 3, the number of
options and the option price were adjusted in 1995 based on the average market
price for the five days before and after the reorganization was completed. The
adjustment increased the number of options outstanding and decreased the
option exercise price in order to preserve the economic value of the then
outstanding options.
 
  Information regarding stock options outstanding and exercisable as of
December 31, 1996 is as follows:
 
<TABLE>
<CAPTION>
                                                      PRICE RANGE
                                         --------------------------------------
                                          $11.43    $17.70    $30.06
                                         TO $17.29 TO $23.94 TO $44.94  $52.06
                                         --------- --------- --------- --------
     <S>                                 <C>       <C>       <C>       <C>
     Options Outstanding:
      Number............................  305,288  3,595,330 3,865,671    5,200
      Weighted average exercise price...   $16.62     $18.77    $33.68   $52.06
      Weighted average remaining
       contractual life.................  4 years    7 years   9 years 10 years
     Options Exercisable:
      Number............................  305,288  1,778,557   587,574
      Weighted average exercise price...   $16.62     $19.15    $33.95
</TABLE>
 
  At December 31, 1996 and 1995, there were 16,800,309 shares and 18,389,660
shares, respectively, reserved for future grants and awards under the various
plans.
 
  If the Company recognized employee stock option-related compensation expense
in accordance with SFAS 123 and used the Black-Scholes option valuation model
for determining the weighted average fair value of options granted after
December 31, 1994, its net income and earnings per share would have been as
follows (in thousands, except per share amounts):
 
<TABLE>
<CAPTION>
                                                             1996       1995
                                                           --------  ----------
     <S>                                                   <C>       <C>
     Net income........................................... $206,444  $1,226,751
     Pro forma stock compensation expense, net............   (4,959)       (456)
                                                           --------  ----------
     Pro forma net income................................. $201,485  $1,226,295
                                                           ========  ==========
     Pro forma primary earnings per share................. $   1.49  $    10.01
                                                           ========  ==========
     Pro forma fully diluted earnings per share........... $   1.48  $     9.40
                                                           ========  ==========
</TABLE>
 
 
                                      43
<PAGE>
 
                           THE TIMES MIRROR COMPANY
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  For purposes of the pro forma expense, the weighted average fair value of
the options is amortized over the vesting period. The pro forma effect on net
income for 1995 through 1998 will not be representative of future years'
impact because options granted prior to 1995 are excluded from the pro forma
calculations. Options are granted every year and the pro forma expense in
future years will grow due to the added layers of amortization for succeeding
grants. By 1999, however, the pro forma results will include a full four
years' worth of option grants.
 
  The weighted average fair values of $8.87 for 1996 stock option grants and
$8.72 for 1995 stock option grants were estimated at the date of grant using
the following assumptions and the Black-Scholes option valuation model:
 
<TABLE>
<CAPTION>
                                                                1996     1995
                                                               -------  -------
     <S>                                                       <C>      <C>
     Risk-free interest rate..................................     5.4%     6.0%
     Expected life............................................ 5 years  7 years
     Expected volatility......................................     .26      .27
     Expected dividend yield..................................    2.00%    2.93%
</TABLE>
 
  The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options. The Company's employee stock options have
characteristics significantly different from those of traded options such as
vesting restrictions and lack of transferability. In addition, the assumptions
used in option valuation models are highly subjective, particularly the
expected stock price volatility for the underlying stock. Because changes in
these subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not provide a
reliable single measure of the fair value of its employee stock options.
 
NOTE 14--RETIREMENT PLANS AND POSTRETIREMENT BENEFITS
 
  Net periodic pension income for the defined benefit plans is as follows (in
thousands):
 
<TABLE>
<CAPTION>
                                                     1996      1995      1994
                                                   --------  --------  --------
   <S>                                             <C>       <C>       <C>
   Service cost--benefits earned during period...  $(36,866) $(39,448) $(45,777)
   Interest cost on projected benefit obligation.   (47,552)  (61,225)  (58,613)
   Return on plan assets.........................    88,731    92,626    98,223
   Net amortization and deferral.................    19,995    14,619    14,480
                                                   --------  --------  --------
   Net periodic pension income...................  $ 24,308  $  6,572  $  8,313
                                                   ========  ========  ========
</TABLE>
 
  Curtailment gains in 1996 and 1995 did not exceed the net unrecognized loss
in the defined benefit plans and, as a result, were not recognized in
earnings.
 
  Assumptions used in the actuarial computations were as follows:
 
<TABLE>
<CAPTION>
                                                                DECEMBER 31
                                                               ----------------
                                                               1996  1995  1994
                                                               ----  ----  ----
   <S>                                                         <C>   <C>   <C>
   Discount rate.............................................. 8.0 % 7.5 % 8.25%
   Rate of increase in compensation levels.................... 5.0 % 5.0 % 6.0 %
   Expected long-term rate of return on assets................ 9.75% 9.75% 9.5 %
</TABLE>
 
                                      44
<PAGE>
 
                           THE TIMES MIRROR COMPANY
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
  The following sets forth the plans' funded status and amounts recognized in
the consolidated balance sheets (in thousands):
 
<TABLE>
<CAPTION>
                                                            DECEMBER 31, 1996
                                                         -----------------------
                                                           ASSETS    ACCUMULATED
                                                           EXCEED     BENEFITS
                                                         ACCUMULATED   EXCEED
                                                          BENEFITS     ASSETS
                                                         ----------- -----------
   <S>                                                   <C>         <C>
   Actuarial present value of benefit obligations:
    Vested.............................................   $467,063    $ 40,947
    Nonvested..........................................      4,422         360
                                                          --------    --------
   Accumulated benefit obligations.....................   $471,485    $ 41,307
                                                          ========    ========
   Projected benefit obligations.......................   $555,036    $ 45,541
   Plan assets at fair value...........................    965,057      10,327
                                                          --------    --------
   Plan assets greater (less) than projected benefit
    obligations........................................    410,021     (35,214)
   Unrecognized net (gain) loss from past experience
    different from that assumed........................    (19,058)      4,863
   Prior service cost not yet recognized...............    (17,252)      7,350
   Unrecognized net transition asset...................    (46,776)
   Adjustment to recognize additional minimum
    liability..........................................                 (8,558)
                                                          --------    --------
   Prepaid pension cost (liability)....................   $326,935    $(31,559)
                                                          ========    ========
<CAPTION>
                                                            DECEMBER 31, 1995
                                                         -----------------------
                                                           ASSETS    ACCUMULATED
                                                           EXCEED     BENEFITS
                                                         ACCUMULATED   EXCEED
                                                          BENEFITS     ASSETS
                                                         ----------- -----------
   <S>                                                   <C>         <C>
   Actuarial present value of benefit obligations:
    Vested.............................................   $480,991    $ 35,840
    Nonvested..........................................      2,632         447
                                                          --------    --------
   Accumulated benefit obligations.....................   $483,623    $ 36,287
                                                          ========    ========
   Projected benefit obligations.......................   $606,467    $ 42,723
   Plan assets at fair value...........................    897,462       9,681
                                                          --------    --------
   Plan assets greater (less) than projected benefit
    obligations........................................    290,995     (33,042)
   Unrecognized net loss from past experience different
    from that assumed..................................     68,529       6,116
   Prior service cost not yet recognized...............      2,765       8,687
   Unrecognized net transition asset...................    (65,797)
   Adjustment to recognize additional minimum
    liability..........................................                (10,107)
                                                          --------    --------
   Prepaid pension cost (liability)....................   $296,492    $(28,346)
                                                          ========    ========
</TABLE>
 
  Projected benefit obligations decreased by approximately $76,286,000 and
$19,123,000 at December 31, 1996 due to the change in the discount rate and
the 30-year limitation on years of benefit service, respectively.
 
  Plan assets include the Company's common and Series B preferred stocks,
other listed stocks, and corporate and government fixed-income securities. The
plan assets at December 31, 1996 include 632,000 shares of the Company's
Series C common stock and 270,000 shares of Series B preferred stock with an
aggregate fair value of $38,951,000.
 
  Benefits provided by the ESOP are coordinated with certain pension benefits
and, as a result, the defined benefit plan obligations are net of the
actuarially equivalent value of the benefits earned under the ESOP, with the
maximum offset equal to the value of the benefits earned under the defined
benefit plan. The fair value of the
 
                                      45
<PAGE>
 
                           THE TIMES MIRROR COMPANY
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
ESOP assets was $273,753,000 and $221,576,000 as of December 31, 1996 and
1995, respectively. At December 31, 1996, the ESOP held 2,536,000 shares of
Series A common stock, 1,753,000 shares of Series C common stock, and
2,570,000 shares of Cox Class A common stock. The Cox common stock, which was
received in connection with the reorganization described in Note 3, is
expected to be sold by the end of 1997 and the proceeds will be reinvested.
The ESOP currently covers approximately one-half of the Company's employees.
The last contribution to the ESOP was in 1994 and the plan has been amended to
eliminate contributions by the Company. There are no unallocated shares in the
ESOP at December 31, 1996.
 
  Substantially all employees over age 21 with one year of service are
eligible to participate in the Company's Savings Plus Plan. Eligible employees
may contribute from 1 percent to 13 percent of their basic compensation. The
Company makes matching contributions equal to 50 percent of employee before-
tax contributions from 1 percent to 6 percent. Employees may choose among five
investment options, including a Company common stock fund, for investing their
contributions and the Company's matching contribution. Defined contribution
plan expense, primarily related to the Savings Plus Plan, was $20,293,000 for
1996, $21,347,000 for 1995, and $21,553,000 for 1994.
 
  Net periodic postretirement benefit expense is as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                      1996     1995     1994
                                                     -------  -------  -------
   <S>                                               <C>      <C>      <C>
   Service cost--benefits earned during period...... $ 3,190  $ 3,315  $ 3,307
   Interest cost on accumulated projected benefit
    obligation......................................   9,361   12,707   12,431
   Net amortization.................................  (8,396)  (8,627)  (7,712)
                                                     -------  -------  -------
   Net periodic postretirement benefit expense...... $ 4,155  $ 7,395  $ 8,026
                                                     =======  =======  =======
</TABLE>
 
  In addition, curtailment gains related to postretirement benefit plans
totaling $12,044,000 were recorded in 1995 as a result of the workforce
reductions. These gains reduced the reported restructuring charges.
 
  Assumptions used in the actuarial computations were as follows:
 
<TABLE>
<CAPTION>
                                                                DECEMBER 31
                                                              -----------------
                                                              1996  1995  1994
                                                              ----  ----  -----
   <S>                                                        <C>   <C>   <C>
   Discount rate............................................. 8.0%   7.5%  8.25%
   Health care cost trend rate............................... 9.0%  10.0% 11.0 %
</TABLE>
 
  At December 31, 1996, the health care cost trend rate of 9.0 percent was
assumed to ratably decline to 5.5 percent by 2008 and remain at that level.
 
  The following table sets forth the plans' unfunded obligations and amounts
recognized in the consolidated balance sheets (in thousands):
 
<TABLE>
<CAPTION>
                                                                 DECEMBER 31
                                                              -----------------
                                                                1996     1995
                                                              -------- --------
   <S>                                                        <C>      <C>
   Actuarial present value of benefit obligations:
    Retirees................................................. $ 92,694 $ 97,690
    Other fully eligible participants........................    6,309    8,039
    Other active participants................................   30,289   37,259
                                                              -------- --------
   Accumulated postretirement benefit obligations............  129,292  142,988
   Unrecognized net decrease in prior service cost...........   63,708   74,753
   Unrecognized net gain from past experience different from
    that assumed.............................................   47,397   25,590
                                                              -------- --------
   Postretirement benefit liability.......................... $240,397 $243,331
                                                              ======== ========
</TABLE>
 
 
                                      46
<PAGE>
 
                           THE TIMES MIRROR COMPANY
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
  The assumed health care cost trend rate can significantly affect
postretirement expense and liabilities. An increase of 1 percent in the health
care cost trend rate would increase 1996 net periodic postretirement expense
by $1,496,000 and increase the accumulated postretirement benefit obligations
as of December 31, 1996 by $9,712,000.
 
  A Voluntary Employee Beneficiary Association (VEBA) trust funds certain
health care benefits. Funding of the VEBA is generally made on a pay-as-you-
go-basis, which leaves minimal cash in the VEBA trust.
 
NOTE 15--LEASES
 
  Rental expense under operating leases was $58,909,000, $66,539,000 and
$61,440,000 for the years ended December 31, 1996, 1995 and 1994,
respectively. Capital leases, contingent rentals and sublease income are not
significant. The future net minimum lease payments as of December 31, 1996 for
all noncancelable operating leases, excluding future obligations included in
the restructuring liabilities on the consolidated balance sheets, are as
follows (in thousands):
 
<TABLE>
      <S>                                                               <C>
      1997............................................................. $ 39,548
      1998.............................................................   35,476
      1999.............................................................   32,892
      2000.............................................................   28,316
      2001.............................................................   25,082
      Later years......................................................  137,487
                                                                        --------
      Total............................................................ $298,801
                                                                        ========
</TABLE>
 
NOTE 16--BUSINESS SEGMENTS
 
  Financial data for the Company's three business segments, Newspaper
Publishing, Professional Information and Consumer Media, presented on page 16
of this report, are incorporated herein by reference. Revenues derived from
these business segments represent approximately 61%, 30% and 9%, respectively,
of the Company's consolidated 1996 revenues. The Newspaper Publishing segment
publishes daily metropolitan newspapers in the east coast and west coast
regions of the United States, as well as several weekly newspapers. The
Professional Information segment publishes various books and other media,
including legal and health information services publications, aeronautical
charts and flight information, sales and management training programs and,
prior to October 15, 1996, higher education textbooks. The Consumer Media
segment publishes special interest and trade magazines and art books (see Note
20). Total revenue by industry segment includes sales to unaffiliated
customers and intersegment sales, which are accounted for at market price.
 
NOTE 17--USE OF ESTIMATES AND OTHER UNCERTAINTIES
 
  Financial statements prepared in accordance with generally accepted
accounting principles require management to make estimates and judgments that
affect amounts and disclosures reported in the financial statements. Actual
results could differ from those estimates, although management does not
believe that any differences would materially affect the Company's financial
position or reported results.
 
  The Company's future results could be adversely affected by a number of
factors, including (a) an increase in paper, printing and distribution costs
over the levels anticipated; (b) increased consolidation among major retailers
or other events depressing the level of display advertising; (c) an economic
downturn in the Company's principal newspaper markets or other occurrences
leading to decreased circulation and diminished revenues from both display and
classified advertising; (d) competitive pressures arising from increased
consolidation in the legal information industry; (e) an increase in expenses
related to new initiatives and product improvement efforts in the legal
information, flight information and health information operating units; (f)
unfavorable foreign currency fluctuations; and (g) a general economic downturn
resulting in decreased professional or corporate spending on discretionary
items such as information or training and in decreased consumer spending on
discretionary items such as magazines or newspapers.
 
                                      47
<PAGE>
 
                           THE TIMES MIRROR COMPANY
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 18--QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
 
  A summary of the unaudited quarterly results of operations follows (in
thousands, except per share amounts):
 
<TABLE>
<CAPTION>
                                               1996 QUARTERS ENDED
                                     ------------------------------------------
                                      MAR. 31    JUNE 30   SEPT. 30    DEC. 31
                                     ----------  --------  ---------  ---------
<S>                                  <C>         <C>       <C>        <C>
Revenues...........................  $  806,759  $837,295  $ 885,561  $ 871,369
Costs and expenses
 Cost of sales.....................     446,276   434,746    456,237    445,452
 Selling, general and administra-
  tive expenses....................     310,255   318,260    319,044    307,335
 Restructuring charges.............                                      50,924
                                     ----------  --------  ---------  ---------
Operating profit...................      50,228    84,289    110,280     67,658
Interest income (expense), net.....      (5,451)   (7,408)   (12,277)     4,232
Asset sales and writedowns, net....                                     104,921
Equity income (loss)...............         626      (245)      (237)     4,235
Other, net.........................       2,668     2,839        780     (3,149)
                                     ----------  --------  ---------  ---------
Income from continuing operations
 before income taxes...............      48,071    79,475     98,546    177,897
Income tax provision...............      22,034    33,452     42,841     99,218
                                     ----------  --------  ---------  ---------
Net income.........................  $   26,037  $ 46,023  $  55,705  $  78,679
                                     ==========  ========  =========  =========
Primary earnings per share.........  $      .14  $    .33  $     .43  $     .67
                                     ==========  ========  =========  =========
Fully diluted earnings per share...           *         *  $     .42  $     .64
                                     ==========  ========  =========  =========
--------
*Antidilutive
 
<CAPTION>
                                               1995 QUARTERS ENDED
                                     ------------------------------------------
                                      MAR. 31    JUNE 30   SEPT. 30    DEC. 31
                                     ----------  --------  ---------  ---------
<S>                                  <C>         <C>       <C>        <C>
Revenues...........................  $  773,670  $843,078  $ 864,797  $ 966,742
Costs and expenses
 Cost of sales.....................     422,200   458,419    473,127    489,729
 Selling, general and administra-
  tive expenses....................     321,989   329,533    342,651    431,941
 Restructuring, impairment and one-
  time charges.....................       3,223              379,451    251,403
                                     ----------  --------  ---------  ---------
Operating profit (loss)............      26,258    55,126   (330,432)  (206,331)
Interest income (expense), net.....      (2,340)    3,483       (534)    (2,839)
Asset sales and writedowns, net....       7,163    (3,645)     2,825     (8,759)
Other, net.........................         371       997      2,499      1,145
                                     ----------  --------  ---------  ---------
Income (loss) from continuing oper-
 ations before income tax provision
 (benefit).........................      31,452    55,961   (325,642)  (216,784)
Income tax provision (benefit).....      15,102    26,750    (82,730)   (75,152)
                                     ----------  --------  ---------  ---------
Income (loss) from continuing oper-
 ations............................      16,350    29,211   (242,912)  (141,632)
Discontinued operations, net.......   1,637,642    (3,165)   (56,019)
Cumulative effect of accounting
 changes, net......................     (12,724)
                                     ----------  --------  ---------  ---------
Net income (loss)..................  $1,641,268  $ 26,046  $(298,931) $(141,632)
                                     ==========  ========  =========  =========
Primary earnings (loss) per share..  $    13.26  $    .11  $   (2.98) $   (1.62)
                                     ==========  ========  =========  =========
Fully diluted earnings per share...  $    12.70         *          *          *
                                     ==========  ========  =========  =========
</TABLE>
--------
*Antidilutive
 
                                      48
<PAGE>
 
                           THE TIMES MIRROR COMPANY
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
 
NOTE 19--COMMITMENTS AND CONTINGENCIES
 
  The Company and its subsidiaries are defendants in actions for libel and
other matters arising out of their business operations. In addition, from time
to time, the Company and its subsidiaries are involved as parties in various
governmental and administrative proceedings, including environmental matters.
The Company does not believe that any such proceedings currently pending will
have a material adverse effect on its consolidated financial position,
although an adverse resolution in any reporting period of one or more of these
matters could have a material impact on results of operations for that period.
 
  To assure a long-term supply of newsprint for the Los Angeles Times, the
Company has an agreement with a supplier to purchase specified quantities of
newsprint at prevailing market prices. The specified quantities represent a
majority of The Times' newsprint requirements.
 
NOTE 20--PENDING SALE OF ASSETS
 
  On September 4, 1996, the Company announced its intention to sell Harry N.
Abrams, Inc., which completes the Company's plan to exit the trade book
business. Harry N. Abrams is the premier publisher of art and illustrated
books in the U.S. and also publishes textbooks, children's books and
calendars. The sale is expected to close in the first half of 1997.
 
NOTE 21--EVENTS SUBSEQUENT TO DATE OF AUDITORS' REPORT
 
  On February 28, 1997, the Company announced that it would redeem all of its
outstanding Series B preferred stock on April 2, 1997. Each share of Series B
preferred stock will be exchanged for .57083 of a share of Series A common
stock. The exchange ratio was determined pursuant to the original terms of the
Series B preferred stock. Forward purchase contracts for 3,900,000 shares of
Series B preferred stock were outstanding on February 28, 1997, largely due to
contracts for 3,348,000 shares entered into subsequent to December 31, 1996.
The Company expects that these forward contracts will be settled in net shares
of Series A common stock as they mature. At February 28, 1997, the forward
purchase contracts had a weighted average forward price of $28.475 per
Series B share and, if settled in Series A common shares based on the exchange
ratio, the Company would be entitled to receive approximately 2,226,000 Series
A common shares.
 
                                      49
<PAGE>
 
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
 
  Not applicable.
 
                                   PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
 
  The Company's principal officers, including executive officers, are listed
in Part I hereof. The information under the heading "Election of Directors" in
the definitive Proxy Statement for the Company's 1997 Annual Meeting of
Shareholders to be filed by the Company with the Securities and Exchange
Commission pursuant to Regulation 14A within 120 days after the end of the
Company's fiscal year is incorporated herein by reference.
 
ITEM 11. EXECUTIVE COMPENSATION.
 
  The information contained under the headings "Compensation of Directors" and
"Executive Compensation" in the definitive Proxy Statement for the Company's
1997 Annual Meeting of Shareholders is incorporated herein by reference.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
 
  The information contained under the heading "Ownership of Voting Securities"
in the definitive Proxy Statement for the Company's 1997 Annual Meeting of
Shareholders is incorporated herein by reference.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
 
  The information contained under the headings "Executive Compensation" and
"Compensation Committee Interlocks and Insider Participation" in the
definitive Proxy Statement for the Company's 1997 Annual Meeting of
Shareholders is incorporated herein by reference.
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
 
  (a)(1) and (2) Financial Statements and Financial Statement Schedules filed
  as part of this report:
 
    As listed in the Index to Financial Statements and Financial Statement
    Schedules on page 25 hereof.
 
  (a)(3) Exhibits filed as part of this report:
 
    As listed in the Exhibit Index beginning on page 55 hereof.
 
  (b) Reports on Form 8-K:
 
    During the last quarter of 1996, Times Mirror filed current reports on
    Form 8-K as follows:
 
  (1)Current Report on Form 8-K dated October 30, 1996, relating to the
  acquisition by Times Mirror of Shepard's from McGraw-Hill in exchange for
  all of the stock of Times Mirror Higher Education Group and certain
  additional consideration, and the contribution by Times Mirror of the
  assets of Shepard's to a new joint venture and the anticipated sale of a
  50% interest in the joint venture to Reed.
 
  (2) Current Report on Form 8-K dated November 13, 1996, relating to the
  issuance of $148,000,000 of Times Mirror's 7 1/4% Debentures due November
  15, 2096, and including as exhibits under Item 7 the Purchase Agreement, an
  officers' certificate and an opinion of counsel.
 
  (3) Current Report on Form 8-K/A dated December 30, 1996, providing the pro
  forma financial information required by Item 7(b) of the Current Report on
  Form 8-K dated October 30, 1996 previously filed by Times Mirror.
 
                                      50
<PAGE>
 
                                  SIGNATURES
 
  Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
 
                                          THE TIMES MIRROR COMPANY
 
 
                                           By     /s/ Mark H. Willes
                                          _____________________________________
                                                     Mark H. Willes
                                            Chairman of the Board, President
                                               and Chief Executive Officer
 
 
Dated: March 17, 1997
 
  Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant in
the capacities indicated:
 
<TABLE>
<CAPTION>
             SIGNATURE                           TITLE                    DATE
             ---------                           -----                    ----
 
 
<S>                                  <C>                           <C>
         /s/ Mark H. Willes          Chairman of the Board,          March 17, 1997
____________________________________  President, Chief Executive
           Mark H. Willes             Officer and Director
                                      (Principal Executive
                                      Officer)
 
 
 
        /s/ Thomas Unterman          Senior Vice President and       March 17, 1997
____________________________________  Chief Financial Officer
          Thomas Unterman             (Principal Financial and
                                      Accounting Officer)
 
   /s/ Richard T. Schlosberg III     Executive Vice President and    March 17, 1997
____________________________________  Director
     Richard T. Schlosberg III
 
 
      /s/ C. Michael Armstrong       Director                        March 17, 1997
____________________________________
        C. Michael Armstrong
 
 
   /s/ Gwendolyn Garland Babcock     Director                        March 17, 1997
____________________________________
     Gwendolyn Garland Babcock
</TABLE>
 
                                      51
<PAGE>
 
<TABLE>
<CAPTION>
             SIGNATURE                           TITLE                    DATE
             ---------                           -----                    ----
 
 
 
<S>                                  <C>                           <C>
        /s/ Donald R. Beall          Director                        March 17, 1997
____________________________________
          Donald R. Beall
 
 
 
         /s/ John E. Bryson          Director                        March 17, 1997
____________________________________
           John E. Bryson
 
 
         /s/ Bruce Chandler          Director                        March 17, 1997
____________________________________
           Bruce Chandler
 
 
         /s/ Otis Chandler           Director                        March 17, 1997
____________________________________
           Otis Chandler
 
 
        /s/ Robert F. Erburu         Director                        March 17, 1997
____________________________________
          Robert F. Erburu
 
 
      /s/ Clayton W. Frye, Jr.       Director                        March 17, 1997
____________________________________
        Clayton W. Frye, Jr.
 
 
        /s/ David Laventhol          Director                        March 17, 1997
____________________________________
          David Laventhol
 
 
     /s/ Alfred E. Osborne, Jr.      Director                        March 17, 1997
____________________________________
       Alfred E. Osborne, Jr.
 
 
         /s/ Joan A. Payden          Director                        March 17, 1997
____________________________________
           Joan A. Payden
</TABLE>
 
                                       52
<PAGE>
 
<TABLE>
<CAPTION>
             SIGNATURE                           TITLE                    DATE
             ---------                           -----                    ----
 
 
 
<S>                                  <C>                           <C>
     /s/ William Stinehart, Jr.      Director                        March 17, 1997
____________________________________
       William Stinehart, Jr.
 
 
 
       /s/ Harold M. Williams        Director                        March 17, 1997
____________________________________
         Harold M. Williams
 
 
      /s/ Warren B. Williamson       Director                        March 17, 1997
____________________________________
        Warren B. Williamson
 
 
         /s/ Edward Zapanta          Director                        March 17, 1997
____________________________________
           Edward Zapanta
</TABLE>
 
                                       53
<PAGE>
 
                            THE TIMES MIRROR COMPANY
 
          SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                           (IN THOUSANDS OF DOLLARS)
 
<TABLE>
<CAPTION>
                                    ADDITIONS/(DEDUCTIONS)
                                    ------------------------
                         BALANCE AT  CHARGED TO   CHARGED        DEDUCTIONS  BALANCE
                         BEGINNING   COSTS AND    TO OTHER          FROM    AT END OF
                         OF PERIOD    EXPENSES    ACCOUNTS        RESERVES   PERIOD
                         ---------- ------------ -----------     ---------- ---------
<S>                      <C>        <C>          <C>             <C>        <C>
Year ended 12/31/96
 Allowance for doubtful
  accounts..............  $32,187    $   30,180  $    (1,270)     $(25,054)  $36,043
 Allowance for returns..   47,349         6,019       (9,871)                 43,497
                          -------    ----------  -----------      --------   -------
                          $79,536    $   36,199  $   (11,141)(A)  $(25,054)  $79,540
                          =======    ==========  ===========      ========   =======
Year ended 12/31/95
 Allowance for doubtful
  accounts..............  $29,249    $   25,184  $        49      $(22,295)  $32,187
 Allowance for returns..   43,068         4,528         (247)                 47,349
                          -------    ----------  -----------      --------   -------
                          $72,317    $   29,712  $      (198)     $(22,295)  $79,536
                          =======    ==========  ===========      ========   =======
Year ended 12/31/94
 Allowance for doubtful
  accounts..............  $29,666    $   20,554  $       694      $(21,665)  $29,249
 Allowance for returns..   41,200           517        1,351                  43,068
                          -------    ----------  -----------      --------   -------
                          $70,866    $   21,071  $     2,045(B)   $(21,665)  $72,317
                          =======    ==========  ===========      ========   =======
</TABLE>
--------
(A) Primarily allowances of businesses sold.
(B) Primarily acquisitions of businesses accounted for as purchase business
    combinations.
 
                                       54
<PAGE>
 
                                 EXHIBIT INDEX
 
  Exhibits marked with an asterisk (*) are incorporated by reference to
documents previously filed by Times Mirror, or its predecessor Old Times
Mirror, with the Securities and Exchange Commission, as indicated. All other
documents listed are filed with this report, unless otherwise indicated.
 
<TABLE>
<CAPTION>
 EXHIBIT
   NO.
 -------
 <C>     <S>
 *2.1    Agreement and Plan of Merger by and among Old Times Mirror, New TMC
         Inc. (subsequently changed to The Times Mirror Company), Cox Cable
         Communications, Inc. and Cox Enterprises, Inc., dated as of June 5,
         1994 (Annex IV to Old Times Mirror's definitive Proxy Statement for
         Special Meeting of Stockholders, dated December 16, 1994)
 *2.2    Contribution and Assumption Agreement by and between Old Times Mirror
         and New TMC Inc. (subsequently changed to The Times Mirror Company) as
         of February 1, 1995
 *2.3    Amendment No. 1 to Agreement and Plan of Merger by and among Old Times
         Mirror, New TMC Inc. (subsequently changed to The Times Mirror
         Company), Cox Communications, Inc. and Cox Enterprises, Inc. dated as
         of December 16, 1994 (Annex V to Old Times Mirror's definitive Proxy
         Statement for Special Meeting of Stockholders, dated December 16,
         1994)
 *2.4    Exchange Agreement dated as of July 3, 1996, and Amendment to Exchange
         Agreement dated as of October 15, 1996, by and among Times Mirror,
         Mosby-Year Book, Inc. and The McGraw-Hill Companies, Inc. (Exhibits
         2.1 and 2.2, respectively, to Times Mirror's Current Report on Form 8-
         K, dated October 30, 1996)
 *3.1    Restated Certificate of Incorporation of Times Mirror, as filed with
         the Secretary of State of the State of Delaware on January 23, 1995
         (Exhibit to Times Mirror's Registration Statement on Form S-4 (File
         No. 33-87482))
 *3.2    Certificate of Amendment to Certificate of Incorporation of Times
         Mirror, as filed with the Secretary of State of the State of Delaware
         on February 1, 1995 (Exhibit to Times Mirror's Registration Statement
         on Form S-4 (File No. 33-87482))
 *3.3    Certificate of Designations of Series C Common Stock, as filed with
         the Secretary of State of the State of Delaware on January 23, 1995
         (Exhibit to Times Mirror's Registration Statement on Form S-4 (File
         No. 33-87482))
 *3.4    Bylaws of Times Mirror (Exhibit 3.4 to Times Mirror's 1995 Annual
         Report on Form 10-K)
 *3.5    Certificate of Designations of Series A Preferred Stock (Exhibit 3.5
         to Times Mirror's 1995 Annual Report on Form 10-K)
 *3.6    Certificate of Designations of Series B Preferred Stock (Exhibit 3.6
         to Times Mirror's 1995 Annual Report on Form 10-K)
 *4.1    Indenture by and between New TMC Inc. (subsequently changed to The
         Times Mirror Company) and Wells Fargo Bank (successor to First
         Interstate Bank of California), as Trustee for the 7 1/4% Debentures
         due 2013 and 7 1/2% Debentures due 2023, dated January 30, 1995
         (Exhibit 4.1 to Times Mirror's 1995 Annual Report on Form 10-K)
 *4.2    Specimen Note for 7 1/4% Debenture due March 1, 2013 (New TMC Inc.,
         subsequently changed to The Times Mirror Company) (Exhibit 4.2 to
         Times Mirror's 1995 Annual Report on Form 10-K)
 *4.3    Specimen Note for 7 1/2% Debenture due July 1, 2023 (New TMC Inc.,
         subsequently changed to The Times Mirror Company) (Exhibit 4.3 to
         Times Mirror's 1995 Annual Report on Form 10-K)
 *4.4    Indenture dated March 19, 1996, by and between The Times Mirror
         Company and Citibank, N.A., as Trustee for the 4 1/4% PEPS due March
         15, 2001 and the 7 1/4% Debentures due November 15, 2096 (Exhibit 4.1
         to Times Mirror's Current Report on Form 8-K, dated March 19, 1996)
</TABLE>
 
                                      55
<PAGE>
 
<TABLE>
<CAPTION>
 EXHIBIT
   NO.
 -------
 <C>     <S>
  *4.5   Officers' Certificate dated as of March 19, 1996 establishing the
         terms of the PEPS and attaching the Specimen Certificate for the 4
         1/4% PEPS due March 15, 2001 and the Specimen Certificate of Global
         PEPS (Exhibit 4.2 to Times Mirror's Current Report on Form 8-K, dated
         March 19, 1996)
  *4.6   Officers' Certificate dated November 13, 1996 establishing the terms
         of the 7 1/4% Debentures due November 15, 2096 and attaching the
         specimen Form of Debenture (Exhibit 4.2 to Times Mirror's Current
         Report on form 8-K, dated November 13, 1996)
 *10.1   Deferred Compensation Plan for Executives (Exhibit 10.1 to Times
         Mirror's 1994 Annual Report on Form 10-K)
 *10.2   1987 Restricted Stock Plan (Exhibit II to Old Times Mirror's
         definitive Proxy Statement, dated March 27, 1987)
 *10.3   1984 Executive Stock Option Plan (Exhibit A to Old Times Mirror's
         definitive Proxy Statement, dated April 23, 1984)
 *10.4   1988 Executive Stock Option Plan (Exhibit A to Old Times Mirror's
         Proxy Statement, dated March 30, 1988)
 *10.5   Deferral Plan for Director's Fees (Exhibit 10.8 to Old Times Mirror's
         1981 Annual Report on Form 10-K)
 *10.6   The Times Mirror Pension Plan for Directors, as Amended and Restated
         on March 5, 1987 (Exhibit 10.11 to Old Times Mirror's 1986 Annual
         Report on Form 10-K)
 *10.7   Deferred Compensation Plan for Non-Employee Directors (Exhibit 10.7 to
         Times Mirror's 1994 Annual Report on Form 10-K)
 *10.8   Non-Employee Director Stock Option Plan (Appendix A to Old Times
         Mirror's definitive Proxy Statement, dated March 21, 1994)
 *10.9   Agreement dated April 29, 1985 between Old Times Mirror and Otis
         Chandler (Exhibit 10.10 to Old Times Mirror's 1985 Annual Report on
         Form 10-K)
 *10.10  Letter Agreement amended and restated as of August 28, 1995 between
         Times Mirror and Mark H. Willes (Exhibit 10.10 to Times Mirror's 1995
         Annual Report on Form 10-K)
 *10.11  1992 Key Employee Long-Term Incentive Plan (Appendix A to Old Times
         Mirror's Proxy Statement, dated March 20, 1992)
 *10.12  1996 Management Incentive Plan (Exhibit 10.12 to Times Mirror's 1995
         Annual Report on Form 10-K)
 *10.13  Non-Employee Directors Stock Plan (Exhibit 10.13 to Times Mirror's
         1995 Annual Report on Form 10-K)
  10.14  The Times Mirror Company Non-Employee Directors Stock Plan As Amended
         and Restated Effective January 1, 1997
  10.15  The Times Mirror Company 1997 Directors Stock Option Plan
  11     Computation of Earnings Per Share
  12     Computation of Ratio of Earnings to Fixed Charges and Computation of
         Ratio of Earnings to Fixed Charges and Preferred Stock Dividends
  21     Subsidiaries of the Registrant
  23     Consent of Ernst & Young LLP, Independent Auditors
  27     Financial Data Schedule
</TABLE>
 
                                       56