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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, 1998           COMMISSION FILE NUMBER 1-13492
                            ------------------------
 
                            THE TIMES MIRROR COMPANY
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
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<S>                                            <C>
                  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)
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       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (213) 237-3700
                            ------------------------
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
 
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<S>                                       <C>
TITLE OF EACH CLASS                       NAME OF EACH EXCHANGE ON WHICH REGISTERED
----------------------------------------  ---------------------------------------------------
Series A Common Stock                     New York Stock Exchange and Pacific Stock Exchange
Premium Equity Participating Securities   New York Stock Exchange
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                            ------------------------
 
          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. [X]
     The aggregate market value of the voting stock of the Registrant held by
non-affiliates of the Registrant on March 10, 1999 was approximately $2.4
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 Series A Common Stock outstanding at March 10, 1999:
47,515,394, excluding 18,237,864 shares held by subsidiaries of the Registrant,
4,001,067 common shares held by TMCT, LLC, representing 80% of the common shares
held by TMCT, LLC; 13,400,200 shares held by Eagle New Media Investments, LLC
and 3,787,613 shares held as treasury shares.
     Number of shares of Series C Common Stock outstanding at March 10, 1999:
25,176,553.
                      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 1999
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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<PAGE>   2
 
                                     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 magazine
publishing 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 aviation and health
improvement markets, publishes magazines and also provides training information
and services.
 
     During 1998, Times Mirror engaged in several strategic transactions
including the divestiture of Matthew Bender & Company, Incorporated, a publisher
of legal information, the Company's 50% interest in Shepard's, a legal citation
provider, and Mosby, Inc., a publisher of health science information. The
Company retained the consumer health information businesses of Mosby and
combined such businesses in a subsidiary, The StayWell Company. The Company also
acquired the Los Angeles area publications of E Z Buy & E Z Sell Recycler
Corporation and invested in a new company, Target Media Partners, which is
jointly owned with former Recycler management and others. In February 1999, an
investment affiliate of the Company acquired Newport Media, Inc., a publisher of
shopper publications in the Long Island and New Jersey areas.
 
     The Company continued to have an active share purchase program with a total
of 16.7 million shares of Series A Common Stock acquired by the Company or its
affiliates during 1998, which more than offset the 2.1 million shares of Series
A Common Stock issued as a result of the exercise of stock options. In 1998, the
Company, in anticipation of the expected impact of divestitures, also began a
comprehensive review of its business configurations, operating systems and other
investments to determine economic actions it could take to prepare for future
growth. This review produced pretax restructuring and one-time charges of $200.8
million and additional pretax charges of $32.7 million that did not meet the
accounting criteria for classification as restructuring and one-time charges.
 
NEWSPAPER PUBLISHING SEGMENT
 
     Times Mirror publishes the Los Angeles Times, Newsday, The Baltimore Sun,
The Hartford Courant, The Morning Call, The (Stamford) Advocate, Greenwich Time
and several other daily and weekly newspapers. Local management operates each
daily newspaper substantially independently in order to meet most effectively
the needs of the area each newspaper serves. Editorial policies are also
established by local management. The Company continues to move toward
centralizing the back-office operations of its eastern newspapers and certain of
its other business units. 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.
 
  LOS ANGELES TIMES
 
     The Los Angeles Times has been published continuously since 1881. It is
published every morning and, for the six-month period ended September 30, 1998,
as reported by the Company to the Audit Bureau of Circulations, ranked as the
largest metropolitan newspaper in the United States in weekday circulation based
on five-day averages, and the second largest in Sunday circulation. In 1998, its
annual average unaudited circulation was 1,097,079 for Monday through Friday,
1,017,321 for Saturday and 1,384,933 for Sunday, compared with 1,069,968,
1,003,939 and 1,373,389, respectively, in 1997. Approximately 75%, 79% and 78%
of the Monday through Friday, Saturday and Sunday circulation, respectively, was
home-delivered in 1998, compared with 76%, 80% and 77% of the circulation,
respectively, in 1997.
 
     In 1998, the Los Angeles Times recorded full-run billed advertising volume
of 3,212,104 standard advertising unit inches (hereinafter "inches"), part-run
volume of 4,037,737 inches, and preprinted inserts of 1,155.2 million pieces,
compared with 3,138,624 inches, 3,918,910 inches and 1,098.5 million pieces,
 
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respectively, in 1997. In addition, the Los Angeles Times derived revenue from
advertising supplements distributed to non-subscribers equivalent to 1,138.5
million pieces in 1998, compared with 1,048.6 million pieces in 1997.
 
     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. In October 1998, the Los Angeles Times started
publishing a daily national edition that is distributed primarily in Northern
California, New York and Washington, D.C.
 
     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 syndicates material to other newspapers
throughout the world. The Los Angeles Times and La Opinion, the largest Spanish-
language daily newspaper in Southern California in 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 Corporation, which publishes daily newspapers including the
Newport Beach/Costa Mesa Daily Pilot and the Huntington Beach/Fountain Valley
Independent, which are distributed in Orange County, the Glendale News-Press,
which is distributed in Los Angeles County, and the Foothill Leader and the
Burbank Leader, which are semiweekly newspapers distributed in Los Angeles
County. The Los Angeles Times won two Pulitzer Prizes in 1998.
 
     As part of a strategy of supplementing its newspapers with strategic
acquisitions and internal growth, in the second quarter of 1998, the Company
acquired the Los Angeles area publications of E Z Buy & E Z Sell Recycler
Corporation, a collection of 24 alternative classified papers in Southern
California. Titles include The Recycler, AutoBuys, CycleBuys, BoatBuys, RV Buys,
EZ Ads, Auto Pix, Trade Express, Auto Seller and the Renter. In addition, in
1998, California Community News Corporation launched eight daily and weekly
community newspaper sections for distribution with the Los Angeles Times under
the banner Our Times.
 
     Net revenues for the Los Angeles Times, including California Community News
Corporation and E Z Buy & E Z Sell Recycler Corporation, were $1,137,324,000 in
1998, $1,088,539,000 in 1997 and $1,053,813,000 in 1996, representing 37.8%,
37.8% and 38.0% of the Company's consolidated revenues from continuing
operations for such years.
 
     In its primary markets of Los Angeles, Orange, Ventura, San Bernardino and
Riverside counties, the Los Angeles Times competes with 21 local daily
newspapers, with the largest having approximately 360,000 total average daily
circulation, and three daily regional editions of national newspapers. In
addition, there are more than several hundred 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. In 1998, Newsday ranked as the sixth largest metropolitan
daily newspaper in the country for Monday through Friday circulation, and as the
twelfth largest for Sunday circulation. In 1998, Newsday's annual average
unaudited circulation was 567,227 for Monday through Friday, 459,732 for
Saturday, and 658,351 for Sunday, compared with 563,994, 485,126 and 655,269,
respectively, in 1997. Newsday also publishes Distinction, a bimonthly magazine
designed to serve Long Island's upscale community, which is supported by
advertising revenues and paid subscriptions, and This Week, a free distribution
shopper with 80 editions. Newsday has won sixteen Pulitzer Prizes.
 
     In 1998, Newsday recorded full-run billed advertising volume of 1,644,283
inches, part-run volume of 1,495,782 inches, and preprinted inserts of 796.5
million pieces, compared with 1,576,392 inches, 1,399,538 inches, and 671.3
million pieces, respectively, in 1997. In addition, Newsday, together with its
alternate distribution company, Distribution Systems of America, derived revenue
from advertising supplements distributed to non-subscribers equivalent to
1,197.2 million pieces in 1998, compared with 1,028.8 million pieces in 1997.
 
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     In 1999, an investment affiliate of the Company acquired Newport Media,
Inc., a publisher of shopper publications in the Long Island and New Jersey
areas.
 
     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.
 
  THE BALTIMORE SUN
 
     The Baltimore Sun primarily serves the Baltimore-Annapolis metropolitan
area, including Anne Arundel, Baltimore, Carroll, Harford and Howard counties.
The Baltimore Sun publishes a morning newspaper seven days a week. In 1998, The
Sun had an annual average unaudited circulation of 320,138 for Monday through
Saturday, compared with 319,899 for 1997. Annual average unaudited circulation
for Sunday was 475,644 in 1998 compared with 477,439 in 1997.
 
     In 1998, The Baltimore Sun newspapers recorded full-run billed advertising
volume of 1,761,972 inches, part-run volume of 456,434 inches, and preprinted
inserts of 671.9 million pieces, compared with 1,684,631 inches, 416,292 inches
and 643.6 million pieces, respectively, in 1997. In addition, The Baltimore Sun
newspapers derived revenues from advertising supplements delivered to
non-subscribers equivalent to 110.9 million pieces in 1998, compared with 104.3
million pieces in 1997.
 
     The Baltimore Sun publishes a variety of weekly newspapers throughout Anne
Arundel, Baltimore, Carroll, Harford and Howard counties. The Baltimore Sun
competes with the Washington Post in Anne Arundel and Howard counties, with The
Annapolis Capital in Anne Arundel County and with The Carroll County Times in
Carroll 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 twelve regional
editions on a daily basis, which provide local news and advertising. In 1998,
the annual average unaudited circulation was 212,606 for Monday through
Saturday, and 302,493 for Sunday, compared with 213,783 and 301,865,
respectively, in 1997.
 
     In 1998, The Hartford Courant recorded full-run billed advertising volume
of 1,435,662 inches, part-run volume of 610,391 inches, and preprinted inserts
of 446.2 million pieces, compared with 1,526,022 inches, 650,027 inches and
420.3 million pieces, respectively, in 1997. In addition, The Hartford Courant
derived revenues from advertising supplements distributed to non-subscribers
equivalent to 80.5 million pieces in 1998, compared with 73.4 million pieces in
1997.
 
     The Hartford Courant competes with a number of 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
1998, annual average unaudited circulation was 127,561 for Monday through
Friday, 142,182 for Saturday, and 175,722 for Sunday, compared with 126,807,
141,936 and 177,138, respectively, in 1997.
 
     In 1998, The Morning Call recorded full-run billed advertising volume of
1,421,851 inches, part-run volume of 242,775 inches, and preprinted inserts of
264.2 million pieces, compared with 1,385,293 inches, 245,350 inches and 232.2
million pieces, respectively, in 1997. In addition, The Morning Call derived
revenues
 
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<PAGE>   5
 
from advertising supplements distributed to non-subscribers equivalent to 19.4
million pieces in 1998, compared with 19.8 million pieces in 1997.
 
     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 1998, The Advocate had an annual average unaudited
circulation of 28,408 for Monday through Friday, 26,647 for Saturday and 39,047
for Sunday, compared with 28,530, 27,099 and 39,506, respectively, in 1997. In
1998, Greenwich Time had an annual average unaudited circulation of 12,872 for
Monday through Friday, 11,834 for Saturday and 14,097 for Sunday, compared with
12,863, 11,847 and 14,059, respectively, in 1997.
 
     In 1998, The Advocate recorded full-run billed advertising volume of
801,666 inches, and preprinted inserts of 43.5 million pieces, compared with
792,599 inches and 39.2 million pieces, respectively, in 1997. In 1998,
Greenwich Time recorded full-run billed advertising volume of 801,636 inches and
preprinted inserts of 14.5 million pieces, compared with 791,201 inches and 13.4
million pieces, respectively, in 1997. In addition, the newspapers derived
revenues from advertising supplements distributed to non-subscribers equivalent
to 23.0 million pieces in 1998, compared with 20.0 million pieces in 1997.
 
     Both The Advocate and Greenwich Time compete with a number of larger daily
newspapers which serve the New York City metropolitan area and outlying regions.
 
  ELECTRONIC PUBLISHING
 
     Times Mirror offers, through its operating companies, over 25 Web sites.
The Los Angeles Times operates the Web site latimes.com, a leading online news
and advertising service. Newsday (newsday.com), The Hartford Courant
(courant.com), The Baltimore Sun (sunspot.net) and The Morning Call (mcall.com)
each maintain Web sites that provide news and other information on a daily
basis. The Advocate and Greenwich Time maintain an arts and entertainment Web
site, goodtogo.com. During 1998, Times Mirror continued to support
CareerPath.com, a national employment online service with an extensive listing
of jobs on the Internet. CareerPath.com, founded by Times Mirror and five other
leading newspaper companies, now has over 80 affiliate newspapers, including all
of Times Mirror's newspapers. The Los Angeles Times, through Recycler, also
provides extensive alternative classified listings on recycler.com.
 
     In 1998, the Company sold its ownership interests in ListingLink, LLC, an
operator of interactive real estate listing databases on the Internet, and
Auction Universe, a software company with technology that allows real-time
Internet auctions, to Classified Ventures, LLC. The Company retained the printed
weekly real estate listing business of ListingLink and combined that business
with the Company's Recycler publications. During 1998, the Company continued to
invest in Classified Ventures, a company that seeks to use the Internet to
expand the founding companies' positions as leading suppliers of classified
advertising. Classified Ventures operates business units in the apartment
(apartments.com), auto (cars.com), new home (newhomenetwork.com) and resale real
estate (homehunter.com) categories. The companies participating in Classified
Ventures include Central Newspapers, Inc., Gannett Co., Inc., Knight-Ridder,
Inc., The McClatchy Company, The New York Times Company, Times Mirror, Tribune
Company and The Washington Post Company.
 
     During 1998, the Company determined that Apartment Search, Inc., its
apartment location business, would be discontinued. The Company expects to sell
the business in the first half of 1999. In 1999, Times Mirror agreed to sell
Hollywood Online Inc., an online provider of movie-related information for
consumers, to Big Entertainment, Inc.
 
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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, direct mail and the Internet.
 
  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, Canadian and overseas sources
unaffiliated with Times Mirror. The average price of newsprint for 1998
increased by approximately 8.0% from 1997, which in turn increased Times
Mirror's 1998 newsprint costs.
 
  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
1998, the quarterly revenues expressed as a percentage of total annual revenues
for the Company's Newspaper Publishing segment were 23.5% for the first quarter,
25.4% for the second quarter, 24.1% for the third quarter and 27.0% for the
fourth quarter.
 
PROFESSIONAL INFORMATION SEGMENT
 
     Times Mirror produces a variety of information products in the areas of
aeronautical charts and flight information, consumer health information products
and services and professional training. During 1998, Times Mirror completed the
divestiture of Matthew Bender & Company, Incorporated and its 50% ownership
interest in Shepard's to an affiliate of Reed Elsevier, plc and the divestiture
of Mosby, Inc. to Harcourt General, Inc. The results of Matthew Bender,
Shepard's and Mosby are included in discontinued operations.
 
  JEPPESEN
 
     Through Jeppesen Sanderson, Inc. and its European sister company, Jeppesen
& Co. GmbH, Times Mirror publishes aeronautical charts, flight information,
pilot training materials and other navigational and operational information
worldwide. Jeppesen DataPlan, Inc., a subsidiary of Jeppesen Sanderson, also
provides computerized flight plans, weather information and other flight
services. Jeppesen Sanderson offers a service called OnSight, a sophisticated
operations control workstation combining its flight planning, weather and flight
tracking display software. Jeppesen also delivers electronic aircraft
maintenance information to air carriers. The Jeppesen 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.
 
  ACHIEVEGLOBAL
 
     Times Mirror provides sales, customer service and management training
programs for professionals in business and industry throughout the world through
AchieveGlobal, formerly known as Times Mirror Training. In 1998, AchieveGlobal
substantially completed the consolidation of the three separate companies that
formerly comprised Times Mirror Training: Zenger Miller, Learning International
and Kaset International. During 1998, AchieveGlobal introduced new services and
products and discontinued its multimedia product line. Times Mirror, however,
continues to provide multimedia training services through Allen Communication, a
division of AchieveGlobal.
 
     Generally, quarterly revenues for AchieveGlobal 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.
 
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     AchieveGlobal competes with many organizations worldwide, including such
enterprises as Development Dimensions International, Forum Corporation, Provant,
Wilson Learning Corporation and a myriad of smaller local and national
businesses.
 
  THE STAYWELL COMPANY
 
     Times Mirror is a provider of integrated health promotion, behavior change
and training programs for organizations through its subsidiary, The StayWell
Company. During 1998, the operations of Krames Communications Incorporated,
Madison Publishing Corporation, StayWell Health Management Systems, Inc. and the
Consumer Health Division of Mosby, Inc. were combined to form StayWell.
StayWell's products and services include health and safety education and
training materials, newsletters, health risk assessments, health fairs, seminars
and screenings and telephonic health counseling. StayWell provides such products
and services to a wide variety of organizations, including managed care
organizations, employers, health care organizations, governmental entities,
health care professionals and pharmaceutical companies. StayWell also has a
publishing arrangement with the American Red Cross to produce materials for its
training programs. During 1998, programs designed and delivered by StayWell to
DaimlerChrysler employees, with the support of the United Auto Workers, received
23 Gold Awards from the Wellness Councils of America.
 
     StayWell competes with several large companies providing health information
and services, including Johnson & Johnson Health Care Systems, Coffey
Communications, Vitality, Channing L. Bete and Wellsource, as well as numerous
smaller publishers, professional associations, advertising agencies and
nonprofit organizations.
 
MAGAZINE PUBLISHING SEGMENT
 
     Times Mirror publishes a number of special interest and trade magazines
through its subsidiary, Times Mirror Magazines, Inc. The approximate six-month
average paid circulation figures per issue for the magazines for 1998 were
1,550,000 for Popular Science (a consumer-oriented magazine about science and
related issues); 1,750,000 for Field & Stream (a magazine about fishing and
outdoor recreation); 1,350,000 for Outdoor Life (a magazine about hunting and
outdoor recreation that is published 10 times a year); 950,000 for Today's
Homeowner (a magazine for homeowners about all aspects of maintaining and
improving a home that is published 10 times a year); 1,400,000 for Golf Magazine
(a magazine for golf enthusiasts); 400,000 for Ski Magazine (a magazine about
skiing targeted at families that is published 8 times a year); 400,000 for
Skiing (a magazine about skiing targeted at younger skiers that is published 7
times a year); 144,000 for TransWorld SNOWboarding (a magazine about
snowboarding targeted at the 15 to 18 year old market that is published 8 times
a year); 100,000 for TransWorld SKATEboarding (a magazine about skateboarding
targeted at the 15 to 18 year old market); 40,000 for Warp (a magazine about
skateboarding, snowboarding and music targeted at the 15 to 18 year old market
that is published 6 times a year); 35,000 for Snap BMX (a magazine about
competitive racing for bike motor-cross that is published 9 times a year);
37,000 for Ride BMX (a magazine about tricks and stunts for bike motor-cross
that is published 6 times a year); 133,000 for Yachting (a magazine about
yachting and boating); 150,000 for Saltwater Sportsman (a magazine about
salt-water fishing); and 75,000 for Snowboard Life (a magazine about
snowboarding targeted at the 19 to 25 year old market that is published 6 times
a year). Each of these magazines is published monthly unless otherwise noted.
 
     In addition, Times Mirror Magazines publishes The Sporting News, a national
sports weekly which was relaunched in December 1997 with a new format and more
extensive research and coverage. The approximate six-month average paid
circulation figure per issue for The Sporting News in 1998 was 540,000. Times
Mirror Magazines also publishes Skiing Trade News, TransWorld SNOWboarding
Business, TransWorld SKATEboarding Business and BMX Business News,
controlled-circulation business magazines, and other related publications. These
magazines are primarily intended for specialized markets. In the first half of
1998, Times Mirror Magazines discontinued publishing Verge, a quarterly men's
magazine that was started in 1997. Also during 1998, Times Mirror Magazines
acquired Senior Golfer, a consumer-oriented magazine aimed at baby boomers, and
InterZine Productions, a company operating Web sites affiliated with Times
Mirror Magazines' titles.
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     The primary raw material used by Times Mirror Magazines is coated paper.
For 1998, the prices for the grades of papers used by its magazines increased
moderately. In 1998, Times Mirror Magazines centrally purchased coated paper for
all of its magazines to obtain more favorable terms and reduced inventory levels
due to the improved availability of coated paper.
 
     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, direct
mail and the Internet.
 
INTELLECTUAL PROPERTY
 
     In recognition of the fact that intellectual property (e.g., trademarks,
copyrights, licenses and the like) is an important asset, the Company has
dedicated internal resources to protect its intellectual property and develop
these rights. The Company expects that these resources will support its ongoing
efforts to grow its businesses internally, especially in the realm of electronic
and online publishing activities.
 
EMPLOYEES
 
     At December 31, 1998, Times Mirror's businesses had 20,619 employees,
14,787 of whom were full-time employees. Approximately 9,790 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.
 
ADDITIONAL INFORMATION
 
     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 Times
Mirror's 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.
 
     See Selected Financial Data -- Five-Year Summary of Business Segment
Information and the Consolidated Financial Statements and notes thereto for
financial information about industry segments.
 
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
uncertainties 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) an increase in the use of alternate media such as the Internet
for classified and other advertising; (e) an increase in expenses related to new
initiatives and product improvement efforts in the 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.
 
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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, 1998 are listed below.
 
<TABLE>
<CAPTION>
                                                         APPROXIMATE AREA IN
                                                             SQUARE FEET
                                                      -------------------------
           GENERAL CHARACTER OF PROPERTY                OWNED      LEASED(1)(2)
           -----------------------------              ---------    ------------
<S>                                                   <C>          <C>
NEWSPAPER PUBLISHING
  Printing plants, business and editorial offices,
     garages and warehouse space located in:
     Los Angeles, California........................  1,714,724     2,066,598
     Hartford, Connecticut..........................    161,872       383,782
     Baltimore, Maryland............................     10,000     1,223,753
     Melville, New York.............................         --     1,132,741
     Other locations................................    603,789       108,984
PROFESSIONAL INFORMATION
  Business offices and warehouses in California,
     Colorado, New York and other locations.........    235,208       598,518
MAGAZINE PUBLISHING
  Business and editorial offices in Connecticut, New
     York, Missouri and other locations.............         --       223,993
CORPORATE
  Corporate offices and garages located in
     California and New York........................         --       496,262
</TABLE>
 
---------------
(1) Excludes 74,523 square feet of undeveloped land, 455,497 square feet of
    space sublet to unrelated third parties and 158,731 square feet of vacant
    space which is available for subleasing. Also excludes 99,440 square feet of
    space used by Apartment Search, Inc., the Company's apartment location
    business, which has been discontinued in anticipation of its sale in the
    first half of 1999.
 
(2) The Company's material lease agreements expire at various dates through
    2011. In August 1997, the Company completed a transaction with its largest
    stockholders, the Chandler Trusts, pursuant to which, among other things,
    the Company contributed eight real properties with an aggregate market value
    of $225,850,000, constituting 3,030,000 square feet, to a limited liability
    company formed by the Company and the Chandler Trusts. The Company is
    leasing such properties from the limited liability company under a lease
    with an initial term of 12 years.
 
ITEM 3. LEGAL PROCEEDINGS.
 
     Times Mirror and its subsidiaries are defendants in actions for various
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. 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 1998.
 
                                        8
<PAGE>   10
 
EXECUTIVE AND KEY OFFICERS OF THE REGISTRANT
 
     The executive and key officers of the Company as of March 10, 1999 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.........  57    Chairman of the Board, President and Chief         1995(2)
                               Executive Officer, and Publisher, Los Angeles
                               Times
Horst A. Bergmann......  60    Executive Vice President, and Chairman,            1996(3)
                               President and Chief Executive Officer, Jeppesen
                               Sanderson and AchieveGlobal
Kathryn M. Downing.....  45    Executive Vice President, and President and        1996(4)
                               Chief Executive Officer, Los Angeles Times
Mary E. Junck..........  51    Executive Vice President, and President,           1996(5)
                               Eastern Newspapers
Thomas Unterman........  54    Executive Vice President and Chief Financial       1992(6)
                               Officer
Raymond A. Jansen......  59    Executive Vice President, and Publisher,           1996(7)
                               President and Chief Executive Officer, Newsday
Efrem Zimbalist, III...  51    Executive Vice President, and President and        1993(8)
                               Chief Executive Officer, Times Mirror Magazines
James R. Simpson.......  58    Senior Vice President, Human Resources             1983(9)
John S. Carroll........  57    Vice President, and Editor and Senior Vice         1998(10)
                               President, The Baltimore Sun
Janet Clayton..........  43    Vice President, and Editor of the Editorial        1998(11)
                               Pages and Vice President, Los Angeles Times
Robert G. Magnuson.....  47    Vice President, and Senior Vice President,         1998(12)
                               Regions, Los Angeles Times
Anthony Marro..........  57    Vice President, and Editor of Newsday              1998(13)
John C. McKeon.........  42    Vice President, and Senior Vice President of       1999(14)
                               Advertising, Los Angeles Times
Michael Parks..........  55    Vice President, and Editor and Executive Vice      1998(15)
                               President, Los Angeles Times
Marty Petty............  46    Vice President, and Publisher and Chief            1998(16)
                               Executive Officer, The Hartford Courant
William J. Rowe........  63    Vice President, and Publisher and Chief            1998(17)
                               Executive Officer, The (Stamford) Advocate and
                               Greenwich Time
Gary K. Shorts.........  48    Vice President, and Publisher and Chief            1998(18)
                               Executive Officer, The Morning Call
Nancy Walker...........  39    Vice President, and President and Chief            1999(19)
                               Executive Officer, The StayWell Company
Michael E. Waller......  57    Vice President, and Publisher and Chief            1996(20)
                               Executive Officer, The Baltimore Sun
Edward L. Blood........  53    Vice President, Strategic Planning                 1997(21)
Debra A. Gastler.......  46    Vice President, Taxes                              1994(22)
Bonnie Guiton Hill.....  57    Vice President, and President and Chief            1997(23)
                               Executive Officer, The Times Mirror Foundation
                               and Senior Vice President, Community Relations,
                               Los Angeles Times
Stephen C. Meier.......  48    Vice President, Public and Government Affairs,     1989(24)
                               and Corporate Secretary
Roger H. Molvar........  43    Vice President and Controller                      1996(25)
William A. Niese.......  62    Vice President, General Counsel and Assistant      1990(26)
                               Secretary
</TABLE>
 
                                        9
<PAGE>   11
 
---------------
 (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.
 
 (2) Mark H. Willes was elected as President and Chief Executive Officer of the
     Company effective June 1995 and Chairman of the Board effective January
     1996. In September 1997, he became Publisher of the Los Angeles Times.
     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) Horst A. Bergmann was elected as an executive officer of the Company
     effective May 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., now known as
     AchieveGlobal, in 1996.
 
 (4) Kathryn M. Downing was elected as an executive officer of the Company
     effective May 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.
 
 (5) Mary E. Junck was elected as an executive officer of the Company effective
     May 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. Ms. Junck is resigning from her positions with the Company in April
     1999.
 
 (6) Thomas Unterman was elected as an executive officer of Old Times Mirror
     effective October 1992. Prior to that time, he had been a partner at the
     law firm of Morrison & Foerster since 1986.
 
 (7) Raymond A. Jansen was elected as an officer of the Company effective May
     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.
 
 (8) Efrem Zimbalist III was elected as an officer of Old Times Mirror effective
     March 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.
 
 (9) James R. Simpson was elected as an executive officer of the Company
     effective January 1995 and had served as an executive officer of Old Times
     Mirror prior to that time.
 
(10) John S. Carroll was elected as an officer of the Company effective July
     1998. He has been Editor and Senior Vice President of The Baltimore Sun
     since 1991.
 
(11) Janet Clayton was elected as an officer of the Company effective July 1998.
     She has been Editor of the Editorial Pages of the Los Angeles Times since
     1995 and a Vice President of the Los Angeles Times since 1997. From 1990 to
     1995, she was Assistant Editor, Editorial Pages, of the Los Angeles Times.
 
(12) Robert G. Magnuson was elected as an officer of the Company effective July
     1998. He has been Senior Vice President, Regional Editions, of the Los
     Angeles Times since 1997. From 1990 to 1997, he was Vice President of the
     Los Angeles Times and President of the Orange County Edition of the Los
     Angeles Times.
 
(13) Anthony Marro was elected as an officer of the Company effective July 1998.
     He has been Editor of Newsday since 1987.
 
(14) John C. McKeon was elected as an officer of the Company effective February
     1999. He has been Senior Vice President of Advertising of the Los Angeles
     Times since November 1998. From 1994 to November 1998, he served as Senior
     Vice President of Advertising and Chief Innovation Officer at Newsday. From
     1992 to 1994, he was Vice President of Advertising at Newsday.
 
(15) Michael Parks was elected as an officer of the Company in February 1998. He
     was named editor of the Los Angeles Times in October 1997. Prior to that
     time, he had been managing editor since 1996 after serving as deputy
     foreign editor and as a correspondent for the Los Angeles Times.
 
                                       10
<PAGE>   12
 
(16) Marty Petty was elected as an officer of the Company in February 1998. She
     was named Chief Executive Officer and Publisher, The Hartford Courant, in
     September 1997. She had previously served as Senior Vice President and
     General Manager of that paper since 1994. From 1992 to 1994, she was Vice
     President, Sales and Marketing of The Hartford Courant.
 
(17) William J. Rowe was elected as an officer of the Company effective July
     1998. He has been Publisher and Chief Executive Officer of The (Stamford)
     Advocate and Greenwich Time since 1986.
 
(18) Gary K. Shorts was elected as an officer of the Company effective July
     1998. He has been Publisher and Chief Executive Officer of The Morning Call
     since 1987.
 
(19) Nancy Walker was elected as an officer of the Company effective February
     1999. She has been President and Chief Executive Officer of The StayWell
     Company, the Company's health improvement unit, since February 1998. From
     1997 until February 1998, she was Vice President and General Manager of
     Mosby Consumer Health. From 1995 to 1997, she held a variety of positions
     at Times Mirror Magazines. From 1990 to 1994, she served as crisis manager
     at Argus Management Corporation.
 
(20) Michael E. Waller was elected as an officer of the Company effective May
     1996. Mr. Waller was named Publisher and Chief Executive Officer of The
     Baltimore Sun in May 1996. He previously served as Editor and Vice
     President of The Hartford Courant since 1990, joining the newspaper in 1986
     as Executive Editor and Vice President.
 
(21) Edward L. Blood was elected as an executive officer of the Company in July
     1997. Prior to that time, he was Senior Vice President, Investor Relations
     and Strategic Planning at Darden Restaurants since 1995. Prior to that
     time, he had been Vice President, Strategic Planning and Analysis at
     General Mills.
 
(22) Debra A. Gastler was elected as an executive officer of Old Times Mirror
     effective January 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.
 
(23) Bonnie Guiton Hill was elected as an officer of the Company effective
     January 1997. From 1992 to 1996, she served as dean and professor of
     commerce at the McIntyre School of Commerce at the University of Virginia.
 
(24) Stephen C. Meier was elected as an officer of the Company effective January
     1995 and served as an officer of Old Times Mirror prior to that time.
 
(25) Roger H. Molvar was elected as an executive officer of the Company
     effective May 1996. Prior to that time, he served as Senior Vice President
     and Comptroller of First Interstate Bank of California since 1989.
 
(26) William A. Niese was elected as an executive officer of the Company in July
     1997. Prior to August 1998, he had been Senior Vice President and General
     Counsel of the Los Angeles Times since 1990.
 
                                       11
<PAGE>   13
 
                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
 
     The Company's Series A Common Stock is traded principally on the New York
Stock Exchange ("NYSE") and is also listed on the Pacific Stock Exchange. Times
Mirror Series C Common Stock is not traded in an established public trading
market but is convertible into Times Mirror Series A Common Stock. At March 10,
1999, there were approximately 3,032 record holders of the Company's Series A
Common Stock and 1,204 record holders of Series C Common Stock. The price ranges
for the Company's Series A Common Stock and the quarterly cash dividends
declared and paid on all Company Common Stock in 1998 and 1997 are listed below.
 
<TABLE>
<CAPTION>
                                           STOCK PRICE         CASH DIVIDEND
                                          -------------      ------------------
                                          HIGH      LOW      DECLARED      PAID
                                          ----      ---      --------      ----
<S>                                       <C>       <C>      <C>           <C>
1998
  First Quarter.........................  $64 9/16  $56 15/16  $.18        $.18
  Second Quarter........................   65 13/16  58 1/16    .18         .18
  Third Quarter.........................   63 11/16  52 5/16    .18         .18
  Fourth Quarter........................   61 7/16   48 15/16   .18         .18
1997
  First Quarter.........................  $59 3/8   $46 1/8    $.10        $.10
  Second Quarter........................   58 7/8    52 7/8     .15         .15
  Third Quarter.........................   58 13/16  49 1/16    .15         .15
  Fourth Quarter........................   61 3/4    52 1/8     .15         .15
</TABLE>
 
     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. As that period
expired in June 1998, the payment of future dividends on common stock will
depend on future earnings, capital requirements, financial condition and other
factors.
 
                                       12
<PAGE>   14
 
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.
 
           SELECTED CONSOLIDATED FINANCIAL DATA AND OTHER INFORMATION
 
<TABLE>
<CAPTION>
   (IN THOUSANDS OF DOLLARS EXCEPT PER
COMMON SHARE, FINANCIAL RATIOS AND OTHER)     1998          1997           1996           1995           1994
-----------------------------------------  -----------   -----------   ------------   ------------   ------------
<S>                                        <C>           <C>           <C>            <C>            <C>
OPERATING RESULTS
  Revenues..............................    $3,009,085    $2,882,017     $2,775,820     $2,728,497     $2,667,302
  Restructuring and one-time charges....       200,806            --         17,348        445,180             --
  Operating profit (loss)...............       212,563       399,187        290,932       (302,082)       192,783
  Interest income (expense), net........       (36,001)      (39,207)       (14,498)         4,653        (51,645)
  Income (loss) from continuing
    operations before income taxes......       200,852       365,865        280,167       (288,638)       140,166
  Income (loss) from continuing
    operations..........................        93,414       220,900        169,203       (233,792)        79,266
  Net income(1).........................     1,417,338       250,312        206,444      1,226,751        173,117
PER COMMON SHARE
  Basic earnings (loss) from continuing
    operations..........................         $ .85         $2.03          $1.23         $(2.82)         $ .62
  Basic earnings........................         16.46          2.35           1.59          10.02           1.35
  Diluted earnings (loss) from continuing
    operations(2).......................           .83          1.98           1.19          (2.82)           .62
  Diluted earnings......................         16.06          2.29           1.54          10.02           1.34
  Dividends declared(3).................           .72           .55            .30            .24           1.08
  Dividends paid........................           .72           .55            .36            .45           1.08
FINANCIAL DATA
  Current assets(4)(5)..................    $1,629,259      $573,504       $642,871       $836,502       $534,001
  Property, plant and equipment, net....       915,992       934,700      1,101,862      1,097,288      1,206,699
  Total assets(5).......................     4,218,306     3,238,620      3,227,004      3,496,296      3,992,389
  Long-term debt........................       941,423       925,404        459,007        247,062        245,522
  Shareholders' equity..................     1,342,453       875,999      1,498,810      1,806,236      1,957,043
  Capital expenditures(6)...............       138,358       116,984        108,456        100,187        100,294
  Operating profit margin(7)............          14.8%         14.8%          11.1%           7.2%           7.2%
  Total debt as a % of adjusted
    capitalization......................          48.3%         54.9%          23.5%          12.1%          31.3%
  Shareholders' equity per common
    share(8)............................        $13.45         $5.90          $9.54         $11.64         $15.06
OTHER
  Adjusted price range of common             $65 13/16
    stock(9)............................            to    $61 3/4 to         $56 to     $35 1/4 to   $26 11/16 to
                                              48 15/16        46 1/8         30 5/8         17 1/4        18 5/16
  Number of employees at end of year....        20,619        21,567         20,803         21,877         26,902
  Weighted average shares:
    Basic...............................    84,813,581    92,571,618    102,113,298    113,797,192    128,611,404
    Diluted.............................    86,927,815    97,013,301    105,372,495    113,797,192    128,810,745
  Common shares outstanding at end of
    year(10)............................    73,381,279    87,903,444     96,729,785    105,698,043    128,617,570
</TABLE>
 
                                       13
<PAGE>   15
 
---------------
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 discontinued
     operations (in thousands):
 
<TABLE>
<CAPTION>
                                             1998         1996         1995
                                          ----------    --------    ----------
<S>                                       <C>           <C>         <C>
Restructuring, one-time and other
  charges...............................          --    $(19,969)   $ (186,307)
Net gain on disposal....................  $1,316,686      32,047     1,634,294
                                          ----------    --------    ----------
                                          $1,316,686    $ 12,078    $1,447,987
                                          ==========    ========    ==========
</TABLE>
 
 (2) Includes the $.38 per share impact of the cash paid in excess of
     liquidation value on Series B preferred stock repurchases in 1995.
 
 (3) 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.
 
 (4) Excludes net assets of discontinued operations.
 
 (5) Includes proceeds from reorganization in 1998 as described in Notes 3 and 4
     to the consolidated financial statements.
 
 (6) Excludes capital expenditures related to discontinued operations.
 
 (7) Excludes restructuring, one-time and other charges as follows (in
     thousands): 1998 -- $231,991; 1997 -- $26,656; 1996 -- $17,348;
     1995 -- $498,409.
 
 (8) Based on the common shares outstanding as described in (10) below.
 
 (9) 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.
 
(10) Excludes treasury shares of 38,707,883, 24,151,014 and 1,345,075 at
     December 31, 1998, 1997 and 1994, respectively.
 
                                       14
<PAGE>   16
 
               FIVE-YEAR SUMMARY OF BUSINESS SEGMENT INFORMATION
 
<TABLE>
<CAPTION>
    (IN THOUSANDS OF DOLLARS)         1998         1997         1996         1995         1994
    -------------------------      ----------   ----------   ----------   ----------   ----------
<S>                                <C>          <C>          <C>          <C>          <C>
REVENUES
  Newspaper Publishing...........  $2,308,178   $2,179,244   $2,074,692   $2,057,596   $2,062,954
  Professional Information.......     437,729      432,866      410,398      371,416      317,134
  Magazine Publishing............     262,683      248,712      234,192      242,864      236,183
  Corporate and Other............       1,198       21,845       56,938       57,928       51,961
  Intersegment Revenues..........        (703)        (650)        (400)      (1,307)        (930)
                                   ----------   ----------   ----------   ----------   ----------
                                   $3,009,085   $2,882,017   $2,775,820   $2,728,497   $2,667,302
                                   ==========   ==========   ==========   ==========   ==========
OPERATING PROFIT (LOSS)(1)
  Newspaper Publishing...........  $  297,433   $  402,207   $  307,512   $ (109,483)  $  194,772
  Professional Information.......       8,623       63,568       35,764       21,868       64,226
  Magazine Publishing............     (14,232)      18,309        8,753      (73,904)       3,884
  Corporate and Other............     (79,261)     (84,897)     (61,097)    (140,563)     (70,099)
                                   ----------   ----------   ----------   ----------   ----------
                                   $  212,563   $  399,187   $  290,932   $ (302,082)  $  192,783
                                   ==========   ==========   ==========   ==========   ==========
IDENTIFIABLE ASSETS
  Newspaper Publishing...........  $1,999,880   $1,792,286   $1,836,158   $1,840,058   $1,987,752
  Professional Information.......     344,636      392,852      328,775      330,913      204,931
  Magazine Publishing............     271,457      263,521      244,254      255,358      279,884
  Corporate and Other............   1,602,333      362,239      453,781      592,400      355,974
  Discontinued Operations........          --      427,722      364,036      477,567    1,163,848
                                   ----------   ----------   ----------   ----------   ----------
                                   $4,218,306   $3,238,620   $3,227,004   $3,496,296   $3,992,389
                                   ==========   ==========   ==========   ==========   ==========
DEPRECIATION AND AMORTIZATION
  Newspaper Publishing...........  $  116,116   $  106,919   $  104,743   $  110,299   $  114,115
  Professional Information.......      18,947       18,880       17,340       14,520       10,269
  Magazine Publishing............       7,740        7,040        6,050        8,112        8,140
  Corporate and Other............       4,467        3,457        2,990        2,824        2,305
                                   ----------   ----------   ----------   ----------   ----------
                                   $  147,270   $  136,296   $  131,123   $  135,755   $  134,829
                                   ==========   ==========   ==========   ==========   ==========
CAPITAL EXPENDITURES
  Newspaper Publishing...........  $  107,479   $   78,760   $   63,698   $   63,014   $   79,922
  Professional Information.......      22,635       13,438       28,920       19,936       15,480
  Magazine Publishing............       1,651        2,243       10,849        1,060          800
  Corporate and Other............       6,593       22,543        4,989       16,177        4,092
                                   ----------   ----------   ----------   ----------   ----------
                                   $  138,358   $  116,984   $  108,456   $  100,187   $  100,294
                                   ==========   ==========   ==========   ==========   ==========
</TABLE>
 
---------------
(1) Includes restructuring, one-time and other charges as follows (in
    thousands):
 
<TABLE>
<CAPTION>
                                           1998      1997      1996       1995
                                         --------   -------   -------   --------
<S>                                      <C>        <C>       <C>       <C>
     Newspaper Publishing..............  $116,388   $18,000        --   $316,216
     Professional Information..........    69,510     8,656   $17,348     41,715
     Magazine Publishing...............    29,072        --        --     71,672
     Corporate and Other...............    17,021        --        --     68,806
                                         --------   -------   -------   --------
                                         $231,991   $26,656   $17,348   $498,409
                                         ========   =======   =======   ========
</TABLE>
 
    The pre-tax charges in 1998 are comprised of restructuring and one-time
    charges of $200,806 and other charges that did not qualify for accounting
    classification as restructuring charges of $31,185. Total restructuring,
    one-time and other charges in 1998 are $233,491, of which $1,500 is included
    in Other, net.
 
    The pre-tax charges in 1995 are comprised of restructuring and one-time
    charges of $445,180 and other charges that did not qualify for accounting
    classification as restructuring charges of $53,229.
 
                                       15
<PAGE>   17
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.
 
OVERVIEW
 
     The Company achieved record earnings in 1998 with net income of $1.42
billion, or $16.06 per share on a diluted basis, compared with 1997 net income
of $250.3 million, or $2.29 per share. The 1998 results reflect:
 
     - An after-tax gain of $1.35 billion, or $15.50 per share, on the
       disposition of Matthew Bender/Shepard's and Mosby and $30.8 million, or
       $.35 per share, of after-tax losses associated with discontinuance of
       certain other businesses.
 
     - Completion of the Company's business operations review which resulted in
       pretax charges of $200.8 million, or $1.61 per share, and additional
       pretax charges of $32.7 million, or $.22 per share, that did not qualify
       for accounting classification as restructuring charges.
 
     - Income from continuing operations for 1998 of $253.0 million, or $2.66
       per share, excluding these charges. Including the charges, income from
       continuing operations was $93.4 million, or $.83 per share.
 
     - Growth in revenues at all three of the Company's business segments
       contributing to an increase in revenues of 4.4% to $3.01 billion in 1998
       compared with $2.88 billion in the prior year.
 
     - Income from discontinued operations for 1998, net of taxes, of $7.2
       million, or $.08 per share, compared to $29.4 million, or $.31 per share,
       for 1997.
 
     - Share purchases in 1998 which reduced the number of shares of common
       stock outstanding for financial reporting purposes to 73.4 million at
       December 31, 1998 compared with 87.9 million at December 31, 1997.
 
     The Company's operating performance improved modestly in 1998, with growth
in both revenues and operating profit, excluding restructuring, one-time and
other charges. The Company's performance reflects an increasing focus on its
core Newspaper Publishing segment, which now represents more than 75% of the
Company's revenues and operating profit, following the disposition of its two
largest professional information businesses. In 1998, revenues and operating
profit at the Company's Eastern Newspapers, excluding restructuring, one-time
and other charges, reached record highs and offset slow revenue growth and a
decline in operating earnings at the Los Angeles Times, the Company's largest
newspaper. To address these issues at The Times, significant changes were
initiated in the second half of 1998 to improve operating performance.
 
     For 1998, income from continuing operations rose to $253.0 million, or
$2.66 per share, excluding restructuring, one-time and other charges. In 1997,
the Company reported income from continuing operations of $220.9 million, or
$1.98 per share, including fourth-quarter pre-tax charges of $26.7 million, or
$.17 per share, for specifically identified cost reduction programs that were
not classified as restructuring charges. Excluding these charges, income from
continuing operations for 1997 was $236.8 million, or $2.15 per share. The
increase in earnings per share was due largely to share purchases in 1998 that
reduced the number of average shares outstanding for financial reporting
purposes, as well as a reduction in preferred dividend requirements due to a
recapitalization in the third quarter of 1997 and the Company's redemption of
its Series B preferred stock.
 
DISCONTINUED OPERATIONS
 
     On July 31, 1998, the Company completed the divestiture of Matthew Bender &
Company, Incorporated and its 50% ownership in legal citation provider Shepard's
to an affiliate of Reed Elsevier, Inc. in a transaction valued at $1.65 billion.
Additionally, on October 9, 1998, the Company completed the divestiture of
Mosby, Inc., its health science and medical publisher, to Harcourt General, Inc.
in a transaction valued at $415.0 million.
 
     On August 26, 1998, the Company determined that Apartment Search, Inc., its
apartment location business, would be discontinued. The Company anticipates
selling that business in the first half of 1999 and has recorded an estimated
loss on disposal of $28.2 million, including a provision for operating losses
through
 
                                       16
<PAGE>   18
 
the expected date of disposal. The total estimated loss is included in
discontinued operations within "Net gain on disposal, net of income taxes".
Results of discontinued operations primarily include Matthew Bender, Mosby, the
Shepard's joint venture and Apartment Search, Inc. Prior year results have been
restated accordingly. (See Note 3 to the consolidated financial statements for
further information).
 
SHARE PURCHASES
 
     Share purchases continued in 1998 through open market transactions,
accelerated purchases and purchases by an affiliated limited liability company.
A total of 16.7 million Series A common shares were acquired during 1998 which
more than offset 2.1 million shares issued as a result of the exercise of stock
options.
 
CONSOLIDATED RESULTS OF OPERATIONS
 
     The following table summarizes the Company's financial results (dollars in
millions, except per share and share amounts):
 
<TABLE>
<CAPTION>
                                                         1998        1997        1996
                                                       --------    --------    --------
<S>                                                    <C>         <C>         <C>
Revenues.............................................  $3,009.1    $2,882.0    $2,775.8
Restructuring and one-time charges...................     200.8          --        17.3
Operating profit.....................................     212.6       399.2       290.9
Interest expense, net................................     (36.0)      (39.2)      (14.5)
Other, net...........................................      24.3         5.9         3.7
Income from continuing operations, net of income
  taxes..............................................      93.4       220.9       169.2
Discontinued operations:
  Income from operations, net of income taxes........       7.2        29.4         5.2
  Net gain on disposal, net of income taxes..........   1,316.7          --        32.0
Net income...........................................   1,417.3       250.3       206.4
Preferred dividend requirements......................      21.7        32.5        43.6
Earnings applicable to common shareholders...........  $1,395.6    $  217.8    $  162.8
Basic earnings per share:
  Continuing operations..............................  $    .85    $   2.03    $   1.23
  Discontinued operations............................     15.61         .32         .36
                                                       --------    --------    --------
Basic earnings per share.............................  $  16.46    $   2.35    $   1.59
                                                       ========    ========    ========
Diluted earnings per share:
  Continuing operations..............................  $    .83    $   1.98    $   1.19
  Discontinued operations............................     15.23         .31         .35
                                                       --------    --------    --------
Diluted earnings per share...........................  $  16.06    $   2.29    $   1.54
                                                       ========    ========    ========
Weighted average shares:
  Basic..............................................    84,814      92,572     102,113
                                                       ========    ========    ========
  Diluted............................................    86,928      97,013     105,372
                                                       ========    ========    ========
</TABLE>
 
1998 COMPARED WITH 1997
 
     Revenues in 1998 reached record highs, increasing 4.4% over the prior year
due primarily to higher revenues in the Newspaper Publishing segment. The rate
of growth slowed in the second half, reflecting some weakening in certain
markets and advertising categories.
 
     Operating profit totaled $444.6 million in 1998 compared to $425.8 million
in 1997, excluding restructuring, one-time and other charges. The increase in
1998 operating profit was due to improved performance in the Professional
Information segment, as well as reduced expense levels in Corporate and
 
                                       17
<PAGE>   19
 
Other, which was partially offset by decreases in operating profit in the
Newspaper and Magazine Publishing segments. Including restructuring, one-time
and other charges, operating profit decreased to $212.6 million in 1998.
 
     Earnings per share for 1998 benefited principally from the net gain on
divestitures, as well as a reduction in the average number of common shares
outstanding and lower preferred dividend requirements. Preferred dividend
requirements in 1998 declined due to the 1997 recapitalization and the Company's
redemption of its Series B preferred stock.
 
     Net interest expense declined in 1998 due to an increase in interest income
resulting from investment activity of the affiliated limited liability companies
created as part of the Matthew Bender and Mosby transactions. Higher interest
income more than offset a rise in interest expense primarily due to increased
debt levels attributable to common stock purchases, the 1997 third quarter
recapitalization and new acquisitions.
 
1997 COMPARED WITH 1996
 
     The Company's revenues grew 3.8% in 1997 primarily due to strong
advertising revenue growth in the Newspaper Publishing segment.
 
     Operating profit increased 38.1% in 1997, excluding restructuring and other
charges, reflecting improvements in each of the Company's business segments.
Including restructuring and other charges, operating profit increased 37.2% in
1997 compared to the prior year.
 
     Net income in 1997 rose $43.9 million, or 21.2%, from 1996. The 1996 net
income included a $32.0 million net gain on the sale of the college publishing
businesses and certain other professional information companies. The results of
the Company's college publishing businesses are included as discontinued
operations for 1996.
 
     Earnings per share in 1997 benefited from higher earnings and lower
preferred dividend requirements, as well as a reduction in average number of
common shares outstanding due to share repurchases and the 1997
recapitalization.
 
     Net interest expense rose to $39.2 million in 1997, an increase of $24.7
million, primarily due to the issuance of commercial paper and long-term debt
which generated proceeds of $537.6 million in 1997 as well as lower interest
income compared to 1996.
 
ANALYSIS BY SEGMENT
 
     The following sections discuss the segment results of the Company's
principal lines of business excluding restructuring, one-time and other charges
of $232.0 million, $26.7 million and $17.3 million for 1998, 1997 and 1996,
respectively, unless specifically stated otherwise:
 
NEWSPAPER PUBLISHING
 
     Newspaper Publishing revenues and operating profit were as follows (dollars
in millions):
 
<TABLE>
<CAPTION>
                                      1998      CHANGE      1997      CHANGE      1996
                                    --------    ------    --------    ------    --------
<S>                                 <C>         <C>       <C>         <C>       <C>
Revenues
  Advertising.....................  $1,787.3      6.2%    $1,682.8      6.9%    $1,574.4
  Circulation.....................     434.4     (0.2)       435.3     (2.7)       447.6
  Other...........................      86.5     41.6         61.1     16.0         52.7
                                    --------              --------              --------
                                    $2,308.2      5.9%    $2,179.2      5.0%    $2,074.7
                                    ========              ========              ========
Operating profit..................  $  297.4    (26.0)%   $  402.2     30.8%    $  307.5
                                    ========              ========              ========
Operating profit excluding
  restructuring, one-time and
  other charges...................  $  413.8     (1.5)%   $  420.2     36.6%    $  307.5
                                    ========              ========              ========
</TABLE>
 
                                       18
<PAGE>   20
 
1998 Results
 
     In 1998, the Eastern Newspapers, including Newsday and The Baltimore Sun,
achieved record high revenues and operating profit results, but the Newspaper
Publishing segment's operating profit overall was reduced by sluggish
advertising revenues and higher expense levels at the Los Angeles Times related
to ongoing growth initiatives. Accordingly, the Newspaper Publishing's operating
profit margin decreased to 17.9% in 1998 from 19.3% in 1997.
 
     Newspaper Publishing revenues rose to a record high in 1998 due primarily
to classified advertising revenue growth at the Eastern Newspapers as well as
incremental revenues from acquisitions. Excluding incremental revenues related
to the acquisitions of This Week in October 1997 and The Recycler in May 1998,
advertising revenues rose 3.9%.
 
     For 1998, newsprint expense rose 15.1%, as the average price per ton
increased by 8.1%. In addition, daily circulation gains at the Company's largest
newspapers and acquisitions contributed to an increase in newsprint consumption
of 6.5%. Non-newsprint expense rose 2.4% for 1998, excluding acquisitions as
well as restructuring, one-time and other charges.
 
     Total circulation averages for the Newspaper Publishing segment for the
six-month period ended September 30, 1998, as reported by the Company to the
Audit Bureau of Circulations, were 2,335,767 daily, an increase of 22,235, or
1.0%, and 3,043,004 Sunday, an increase of 3,550, or 0.1%. At The Times, average
daily circulation for the six-month period ended September 30, 1998 was
1,067,540, an increase of 17,364, or 1.7%, and Sunday, 1,361,201, basically even
with the level reported for the six-month period ended September 30, 1997. At
Newsday, average daily circulation was 572,444, an increase of 3,603, or 0.6%,
and Sunday was 671,214, an increase of 6,226, or 0.9%. Circulation revenues for
1998 were slightly lower compared to 1997 as marketing strategies involving
pricing and promotional discounts reduced circulation revenues but resulted in
circulation volume gains.
 
     In 1998, the Newspaper Publishing segment recorded $102.5 million of
restructuring and one-time charges and $13.9 million of additional charges that
did not qualify for accounting classification as restructuring charges. These
charges consisted primarily of termination benefits, contract termination costs
and asset write-offs.
 
1997 Results
 
     The Newspaper Publishing segment achieved steady growth in 1997 with gains
in total revenues and operating profit led by strong advertising revenues. In
addition, average circulation increases were achieved at The Times, Newsday, The
Baltimore Sun, The Hartford Courant, The (Stamford) Advocate and Greenwich Time
for the six-month period ended September 30, 1997, as reported by the Company to
the Audit Bureau of Circulations. The operating profit margin for 1997 expanded
to 19.3%, up from 14.8% in the prior year.
 
     Newspaper Publishing segment revenues in 1997 rose on the strength of
higher advertising revenues. Advertising revenues were up in every category,
with particular strength in national and classified advertising. Higher
advertising revenues in 1997 were partly offset by a modest decline in
circulation revenue as the marketing strategies involving pricing and
promotional discounts helped stimulate circulation volume gains but resulted in
lower overall circulation revenues.
 
     Newsprint expense declined 9.7% in 1997 compared to 1996, as lower average
newsprint prices were partly offset by increased consumption resulting from
gains in circulation and advertising volume.
 
     In 1997, the Newspaper Publishing segment's operating profit was impacted
by $18.0 million of charges that were not classified as restructuring charges.
These charges primarily related to the reorganization of the circulation
department and the absorption of the corporate human resources and information
systems functions at The Times.
 
                                       19
<PAGE>   21
 
PROFESSIONAL INFORMATION
 
     Professional Information revenues and operating profit were as follows
(dollars in millions):
 
<TABLE>
<CAPTION>
                                          1998     CHANGE     1997     CHANGE     1996
                                         ------    ------    ------    ------    ------
<S>                                      <C>       <C>       <C>       <C>       <C>
Revenues...............................  $437.7      1.1%    $432.9      5.5%    $410.4
                                         ======              ======              ======
Operating profit.......................  $  8.6    (86.4)%   $ 63.6     77.7%    $ 35.8
                                         ======              ======              ======
Operating profit excluding
  restructuring,
  one-time and other charges...........  $ 78.1      8.2%    $ 72.2     36.0%    $ 53.1
                                         ======              ======              ======
</TABLE>
 
1998 Results
 
     The Professional Information segment's results reflect the discontinuation
of Matthew Bender/Shepard's and Mosby which are included in discontinued
operations. Prior year results have been restated accordingly. Revenues for 1998
increased primarily due to improved performance at Jeppesen Sanderson and The
StayWell Company which was partially offset by lower revenues at AchieveGlobal.
The segment's 1998 operating profit increased primarily due to improved
performance at StayWell resulting from the 1997 third quarter acquisition of
Krames Communications Incorporated.
 
     In 1998, the Company recorded $53.3 million of restructuring and one-time
charges which consisted of goodwill impairment and business exit costs. The
Company recorded additional charges of $16.2 million that did not qualify for
accounting classification as restructuring charges. These charges related to
product development and other asset write-offs largely at AchieveGlobal and
StayWell.
 
1997 Results
 
     The Professional Information segment's revenues increased due largely to
improvements at Jeppesen Sanderson and the acquisition of Krames Communications
Incorporated. Operating profit for 1997 increased primarily due to improvements
at AchieveGlobal.
 
     Professional Information segment's 1997 operating profit was affected by
$8.7 million of other charges that were not classified as restructuring charges.
These charges were recorded to further consolidate the Company's training
operations and to launch its brand name, AchieveGlobal. The 1996 restructuring
charges totaled $17.3 million for efforts undertaken at AchieveGlobal to
integrate the training companies.
 
MAGAZINE PUBLISHING
 
     Magazine Publishing revenues and operating profit (loss) were as follows
(dollars in millions):
 
<TABLE>
<CAPTION>
                                          1998    CHANGE       1997    CHANGE       1996
                                         ------   ------      ------   ------      ------
<S>                                      <C>      <C>         <C>      <C>         <C>
Revenues...............................  $262.7     5.6%      $248.7    6.2%       $234.2
                                         ======               ======               ======
Operating profit (loss)................  $(14.2)   (100+)%    $ 18.3    100+%      $  8.8
                                         ======               ======               ======
Operating profit excluding
  restructuring and one-time charges...  $ 14.8   (18.9)%     $ 18.3    100+%      $  8.8
                                         ======               ======               ======
</TABLE>
 
1998 Results
 
     Revenues increased in 1998 due to higher advertising revenues at most of
the magazines. The acquisitions of TransWorld Skateboarding and Warp in April
1997, Ride BMX and SNAP in January 1998, InterZine Productions, Inc. in February
1998 and Senior Golfer in October 1998 also contributed to higher advertising
revenues. Excluding incremental revenues related to acquisitions, revenues rose
4.2%. Magazine Publishing segment's 1998 operating profit decreased from 1997
due to ongoing investment in the relaunch of The Sporting News, higher paper
costs, as well as the acquisitions of Interzine and Senior Golfer.
 
     Magazine Publishing segment's 1998 restructuring and one-time charges
totaled $29.1 million which consisted primarily of goodwill impairment related
to two titles acquired in 1977 and 1987.
 
                                       20
<PAGE>   22
 
1997 Results
 
     For 1997, Magazine Publishing segment's operating profit more than doubled
due to strong advertising revenues at nearly all magazines as well as operating
improvements at Outdoor Life and The Skiing Company. The acquisitions of
TransWorld SKATEboarding and Warp in April 1997 also contributed to higher
revenues.
 
CORPORATE AND OTHER
 
     Corporate and Other revenues and operating loss were as follows (dollars in
millions):
 
<TABLE>
<CAPTION>
                                              1998    CHANGE     1997    CHANGE     1996
                                             ------   -------   ------   -------   ------
<S>                                          <C>      <C>       <C>      <C>       <C>
Revenues...................................  $  1.2   (94.5)%   $ 21.8   (61.6)%   $ 56.9
                                             ======             ======             ======
Operating loss.............................  $(79.3)   (6.6)%   $(84.9)   39.0 %   $(61.1)
                                             ======             ======             ======
Operating loss excluding restructuring,
  one-time and other charges...............  $(62.2)  (26.7)%   $(84.9)   39.0 %   $(61.1)
                                             ======             ======             ======
</TABLE>
 
1998 Results
 
     For 1998, revenues declined due to the disposition of Harry N. Abrams,
Incorporated and National Journal, Inc. in the second and third quarters of
1997, respectively. Operating loss decreased in 1998 from 1997 primarily due to
lower employee benefit costs. Additionally, information systems costs were lower
in 1998 due to substantial completion of the Company's conversion to common
financial systems in 1997.
 
     Corporate and Other's 1998 restructuring and one-time charges totaled $15.9
million and $1.1 million for other charges that did not qualify for accounting
classification as restructuring charges. These charges consisted primarily of
termination benefits and lease termination costs.
 
1997 Results
 
     Revenues for 1997 are lower compared to the prior year due to the
divestitures of Harry N. Abrams, Incorporated and National Journal, Inc. For
1997, Corporate and Other operating loss increased primarily due to higher
severance, employee benefits and information systems conversion costs.
 
OTHER, NET
 
1998 Results
 
     In the second half of 1998, the Company sold 441,900 shares of its holdings
in Netscape Communications Corporation (Netscape) stock and purchased an equal
proportion of its 4 1/4% Premium Equity Participating Securities (PEPS)
obligation in the open market. The PEPS hedge the Company's investment in
Netscape. A $16.0 million pre-tax gain, previously included as a separate
component of shareholders' equity, was recognized on these transactions. Such
transactions may continue from time to time in the future.
 
     For 1998, the Company recorded gains on the disposition of excess real
estate and other assets which were partially offset by equity losses related to
new media and other partnership investments as well as other expenses.
 
1997 Results
 
     During 1997, the Company sold certain equity investments, including Tejon
Ranch Co.; WebTV Network, Inc.; Netscape Communications Corporation; Access
Health, Inc.; Speedvision Network, LLC and Outdoor Life Network, LLC, which were
partially offset by writedowns and expenses related to non-operating items as
well as losses on the sale of Harry N. Abrams Inc.; National Journal, Inc. and
other assets.
 
RESTRUCTURING, ONE-TIME AND OTHER CHARGES
 
     In 1998, the Company undertook a comprehensive review of its business
operations to determine areas where operational efficiencies could be achieved
through either product and/or facility consolidation, headcount reductions,
product abandonments, contract terminations or through other measures. The Com-
 
                                       21
<PAGE>   23
 
pany began this review in anticipation of the impact of its significant 1998
divestitures and to better align its overall cost structure and business
configurations. The Company's review led to a major restructuring program that
resulted in the recording of $39.7 million, $80.0 million, and $81.1 million of
charges in the second, third and fourth quarters of 1998, respectively. A
summary of the significant components of the 1998 restructuring program is as
follows (dollars in millions):
 
<TABLE>
<CAPTION>
                                       NEWSPAPER    PROFESSIONAL     MAGAZINE    CORPORATE
                                       PUBLISHING    INFORMATION    PUBLISHING   AND OTHER    TOTAL
                                       ----------   -------------   ----------   ----------   ------
<S>                                    <C>          <C>             <C>          <C>          <C>
Termination benefits.................    $ 43.4         $ 3.4         $ 0.2        $10.2      $ 57.2
Contract terminations................      51.4            --           4.3           --        55.7
Goodwill impairments.................       0.3          28.9          19.7           --        48.9
Lease termination costs..............       2.3           4.8           1.5          3.1        11.7
Technology asset write-offs..........       4.8           4.2           0.1          1.5        10.6
Business exit and other costs........       0.3          12.0           3.3          1.1        16.7
                                         ------         -----         -----        -----      ------
          Total......................    $102.5         $53.3         $29.1        $15.9      $200.8
                                         ======         =====         =====        =====      ======
</TABLE>
 
     The Company anticipates that the restructuring and one-time charges will
result in future annual expense reductions of at least $30.0 million, beginning
in 1999. These savings are predominately due to reductions in wage-related and
contract payment costs, carrying costs of property and equipment, rent charges,
and a decrease in goodwill amortization. Cost savings may be partially offset by
costs of outsourcing. However, the Company does not believe that the
restructuring plan will result in a significant increase in other expenses or a
reduction in revenues. There are no significant costs that have not been
recognized related to the Company's plans. A discussion of the specific
restructuring activities follows:
 
TERMINATION BENEFITS
 
     Staff reductions were implemented at substantially all operating units with
the majority of these actions performed within the Newspaper Publishing segment.
The Times recorded severance charges related to 358 full-time and 534 part-time
employees through either voluntary or involuntary programs, primarily occurring
in the fourth quarter of 1998. The Baltimore Sun's termination charges included
81 full-time employees and Newsday determined that 23 full-time and 26 part-time
employees would be released. The staff reductions within the Newspaper
Publishing segment were the result of identified efficiencies from outsourcing
opportunities, elimination of duplicate functions and technological improvements
to the Company's processes. In total, termination benefits, which were largely
severance costs, covered 616 full-time and 578 part-time employees company-wide,
of which 224 employees had been released by the end of 1998 with the majority of
employees expected to be released by the second quarter of 1999. As of December
31, 1998, $5.1 million has been paid out under this program with the remaining
liability (shown below) expected to be substantially paid by the end of 1999.
Certain employees will, however, receive payments over a longer period of time.
 
CONTRACT TERMINATIONS
 
     In reviewing the Company's processes, supply contracts and strategic
alliances, the Company identified certain long-term contracts and relationships
which were no longer providing benefits to the Company's current operations. As
a result, the Company recorded charges for contract terminations which included
(i) the termination of a long-term contract related to Newsday's pre-print
distribution business for $34.3 million; (ii) the termination of The Hartford
Courant's long-standing bonus arrangement for $12.0 million and (iii) the
termination of 56 distribution contracts with outside agents at The Times for
$4.9 million.
 
GOODWILL IMPAIRMENTS
 
     In connection with the Company's divestiture of Mosby, Inc., the Company
retained the consumer health publishing businesses of Mosby which were combined
with its health information provider, The StayWell Company. In reorganizing
these operations and making significant fundamental business and structural
changes, revised forecasts of undiscounted cash flows related to these
enterprises were prepared which
 
                                       22
<PAGE>   24
 
identified that the entity may not have the estimated future cash flows
necessary to recover asset values. The Company recorded a write-off based on the
difference between the net book value of goodwill, the entity's primary
long-lived asset, and the fair value, measured by discounted estimated cash
flows from future operations. In addition, an impairment charge was taken
related to goodwill associated with two of the Company's magazine titles. These
charges were taken as the result of disappointing market penetration and
operating results and were also determined based on discounted estimated cash
flows from future operations.
 
LEASE TERMINATION COSTS
 
     In connection with the Company's consolidation of its training companies
under one entity, AchieveGlobal, and its downsizing and/or relocation of other
operating units, the Company has recorded charges for future operating lease
payments and write-offs of leasehold improvements related to facilities it will
vacate. The total lease payment accrual for periods through 2010 is net of
estimated sublease income of $5.8 million. No amounts have been included for any
period in which the operating units will continue to occupy the premises.
 
TECHNOLOGY ASSET WRITE-OFFS
 
     During mid-1998, the Company determined that its long standing policy of
allowing each operating unit to independently determine its technology
requirements and make related equipment and software purchases was both
inefficient as well as expensive in terms of maintenance, helpdesk, networking
and other support costs. In connection with this decision, the Company
established common hardware and software configurations to provide consistency
across all business units. As a result, many operating units were required to
dispose of a significant amount of technology resources to conform to the common
platform. Total asset write-offs of technology-related equipment were taken in
the quarter in which the equipment was replaced.
 
BUSINESS EXIT AND OTHER COSTS
 
     In performing a detailed review of its business and related product
offerings, AchieveGlobal recorded a $8.5 million charge to reflect the
termination of its direct sales business line due to poor financial results and
to record an estimated loss on the sale of its Canadian operations. Charges
taken for the direct sales business were primarily for asset write-offs. The
Company's estimated loss related to the Canadian operations uses an estimate of
proceeds based on recent sales transactions of its other foreign entities. The
estimated loss includes both the basis of the assets to be sold as well as costs
required to sell the enterprise and a change to a franchise arrangement.
Management anticipates that the franchising of these operations will be
completed by the second quarter of 1999. The revenues and operating profits from
those businesses that the Company plans to exit are not significant to total
operations. Other costs were recognized at Jeppesen Sanderson, Inc. for the
abandonment of certain projects and at The StayWell Company for the
consolidation of processes.
 
                                       23
<PAGE>   25
 
     The following table summarizes the restructuring charges by cash versus
non-cash charges and provides information as to 1998 activity in the
restructuring liability account as well as estimated cash flows for the
following years (dollars in millions):
 
<TABLE>
<CAPTION>
                                                                                       ESTIMATED CASH FLOWS
                                                                                    ---------------------------
                                       CASH       1998       1998       BALANCE                       2001 AND
              DESCRIPTION            NON-CASH    CHARGE    ACTIVITY     12/31/98    1999     2000    THEREAFTER
              -----------            --------    ------    ---------    --------    -----    ----    ----------
    <S>                              <C>         <C>       <C>          <C>         <C>      <C>     <C>
    Termination benefits...........  Cash        $ 57.2     $  (5.1)     $52.1      $48.1    $0.4       $3.6
    Contract terminations..........  Cash          55.7       (24.4)      31.3       22.8     3.7        4.8
    Goodwill impairments...........  Non-cash      48.9       (48.9)        --         --      --         --
    Lease termination..............  Cash           7.9         0.3        8.2        5.7     1.1        1.4
      costs........................  Non-cash       3.8        (3.8)        --         --      --         --
    Technology asset...............  Cash           1.6        (0.9)       0.7        0.7      --         --
      write-offs...................  Non-cash       9.0        (9.0)        --         --      --         --
    Business exit and..............  Cash           4.3        (3.6)       0.7        0.7      --         --
      other costs..................  Non-cash      12.4        (8.1)       4.3        4.3      --         --
                                                 ------     -------      -----      -----    ----       ----
             Total.................              $200.8     $(103.5)     $97.3      $82.3    $5.2       $9.8
                                                 ======     =======      =====      =====    ====       ====
</TABLE>
 
     The Company believes that cash flows from operations will be adequate to
cover future cash outflows under the restructuring program.
 
OTHER PROGRAM CHARGES
 
     In addition to the charges listed above, the Company also recorded $32.7
million for certain asset write-offs that did not meet the accounting criteria
for classification as "restructuring and one-time charges." These charges, which
principally included inventory and other operating asset write-offs, have been
classified within "Cost of sales," "Selling, general and administrative
expenses" or "Other, net" in the Consolidated Statements of Income.
 
PRIOR YEAR RESTRUCTURING AND OTHER CHARGES
 
     In the fourth quarter of 1997, the Company recorded pretax charges of $26.7
million for specifically identified cost reduction programs that were not
classified as restructuring charges. In 1996, the Company recorded $17.3 million
of restructuring charges for efforts undertaken at AchieveGlobal to integrate
the training companies. As of December 31, 1998, these efforts were
substantially complete.
 
     In 1995, the Company recorded restructuring, impairment and one-time
charges. A summary of the activity with respect to the 1995 restructuring
liability is as follows (dollars in millions):
 
<TABLE>
<CAPTION>
                                                                       1998          1998
                                                        12/31/97   CASH PAYMENTS   OTHER(1)   12/31/98
                                                        --------   -------------   --------   --------
    <S>                                                 <C>        <C>             <C>        <C>
    1995 Restructuring................................   $45.7        $(19.9)       $(1.4)     $24.4
</TABLE>
 
---------------
(1) Represents transfers to 1998 restructuring liability.
 
     The remaining 1995 restructuring liability relates primarily to lease
payments on unoccupied properties which will be paid over lease periods
extending to 2005.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     The Company's operating cash requirements are funded primarily by its
operations. Cash generated from operating activities and proceeds from
borrowings have been used primarily to fund acquisitions and capital
expenditures.
 
     At December 31, 1998, the Company had a $400.0 million long-term revolving
line of credit through a group of domestic and international banks. This line of
credit is used to support a commercial paper program which is available for
short-term cash requirements. The Company had $298.6 million of commercial paper
outstanding at December 31, 1998 under this credit facility. At March 10, 1999,
the Company had
 
                                       24
<PAGE>   26
 
$321.0 million of commercial paper outstanding under this credit facility.
Additionally, the Company has a shelf registration statement for $300.0 million
of securities which has not been utilized.
 
     During the second quarter of 1998, the Company entered into an uncommitted
bank line of credit which provides for unsecured borrowings up to $250.0 million
of which there were no amounts outstanding at December 31, 1998. At March 10,
1999, the Company had $60.0 million of borrowings outstanding under this line of
credit.
 
ACQUISITIONS
 
     On April 30, 1998, the Company acquired the Los Angeles area business of EZ
Buy & EZ Sell Recycler Corporation (Recycler), consisting primarily of the
Recycler publications in the Los Angeles, Orange, Riverside, San Bernardino and
Ventura counties and a portion of Santa Barbara County for $188.7 million. The
Company also invested in preferred stock and provided a term loan to Target
Media Partners, a new entity that owns all of the non-Los Angeles area assets of
Recycler for a total amount of $34.8 million.
 
     In February 1999, Eagle New Media Investments, LLC, an investment affiliate
of the Company, acquired Newport Media, Inc., a publisher of shopper
publications in the Long Island and New Jersey areas, for $132 million.
 
DISPOSITIONS
 
     On July 31, 1998, the Company completed the divestiture of Matthew Bender
in a tax-free reorganization and the sale of the Company's 50% ownership
interest in Shepard's to Reed Elsevier plc. The two transactions were valued at
$1.65 billion in the aggregate. Proceeds from the sale of Shepard's were used to
pay down commercial paper and short-term borrowings of $222.4 million.
Concurrently with the closing of the Matthew Bender transaction, the Company
became the sole manager of Eagle New Media Investments, LLC (Eagle New Media).
At December 31, 1998, the assets of Eagle New Media were $605.8 million of cash
and cash equivalents, $753.0 million of Times Mirror stock, $15.0 million of
marketable securities and $22.3 million of other assets. On October 9, 1998, the
Company completed the divestiture of Mosby, Inc. to Harcourt General, Inc. in a
transaction valued at $415.0 million. Concurrently with the closing of the
Mosby, Inc. transaction, the Company became the sole manager of Eagle Publishing
Investments, LLC (Eagle Publishing). At December 31, 1998, the assets of Eagle
Publishing were $377.2 million of cash and cash equivalents, $34.5 million of
marketable securities and $20.1 million of other assets. While the Company
believes that the Matthew Bender and Mosby transactions were completed on a
tax-free basis, this position may be subject to review by the Internal Revenue
Service. The Company intends to deploy the assets of both LLCs to finance
acquisitions and investments, including purchases of the Company's common stock,
and does not intend to use those funds for the Company's general working capital
purposes. For financial reporting purposes, Eagle New Media and Eagle Publishing
are consolidated with the financial results of the Company.
 
     The Company signed a definitive agreement on January 11, 1999 with Big
Entertainment, Inc. to divest Hollywood Online, Inc., and its Web site,
hollywood.com. Pursuant to the agreement, Big Entertainment, Inc. will issue
newly-issued restricted stock to the Company with a then current quoted market
value of $31.0 million. Big Entertainment, Inc. also has the right, under
certain circumstances, to pay up to $1.0 million of the merger consideration in
cash. The transaction is subject to customary regulatory and shareholder
approval.
 
     During the 1996 fourth quarter, the Company completed the exchange of its
college publishing businesses for Shepard's, a primary legal citation service.
The Company recognized a gain of $121.6 million 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 $16.7 million for the
January 1997 disposal of certain net assets of CRC Press, Inc. The pre-tax net
gain on disposal of $104.9 million amounted to $32.0 million after applicable
taxes, primarily related to differences in the book and tax bases of the assets,
and is included within "Net gain on disposal, net of income taxes."
 
                                       25
<PAGE>   27
 
COMMON SHARE PURCHASES
 
     Share purchases of the Company's Series A common shares continued in 1998
through a combination of open market transactions, accelerated purchases and
purchases by Eagle New Media. The Company and Eagle New Media purchased 16.7
million shares of its Series A common stock during 1998. In 1997, the Company
purchased 9.0 million shares of its Series A common stock.
 
     Included in the 1998 purchases are 13.3 million shares of Series A common
stock acquired by Eagle New Media. The 1998 share purchases also include 4.0
million shares that were purchased by Eagle New Media in the fourth quarter of
1998 as part of an accelerated purchase agreement. The shares were purchased at
the closing price on the date of the agreement for $54.69 per share. The
agreement provides for a purchase price adjustment based on a pro-rata
settlement over a one-year period. The agreement, which is due to mature in the
fourth quarter of 1999, provides for settlement of the purchase price adjustment
on a net share basis. Additionally, in February 1999, the Company purchased 1.0
million Series A common stock at a price of $63.35 per share in connection with
a forward purchase agreement entered into in 1998.
 
     The Company believes that the purchase of shares of its common stock is an
attractive investment for Eagle New Media which will also enhance Times Mirror
shareholder value as well as offset dilution from shares of common stock issued
under the Company's stock-based employee compensation and benefit programs. In
October 1998, the Board of Directors authorized the purchase of an additional
amount of up to 6.0 million shares of its Series A common stock either directly
or in the Company's capacity as manager of affiliated limited liability
companies. In February 1999, the Board of Directors authorized the purchase of
an additional amount of up to 6.0 million shares of its Series A common stock.
As of March 10, 1999, the Company and its affiliates are authorized to purchase
5.8 million Series A common stock. The purchases by the Company and its
affiliates are expected to be made during the next two years 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. At December 31, 1998, on a
consolidated basis for financial reporting purposes, the number of shares of
common stock outstanding totaled 73.4 million compared with 87.9 million at
December 31, 1997.
 
1997 RECAPITALIZATION
 
     In August 1997, the Company completed a recapitalization transaction with
its largest shareholders, the Chandler Trusts. The transaction resulted in a net
effective reduction in the number of shares of Series A common stock by 6.0
million shares and in the stated value of Series A preferred stock by $367.5
million, as well as the issuance of two new series of preferred stock, Series
C-1 and Series C-2. The changes in preferred stock resulted in a reduction of
preferred dividend requirements to $21.7 million annually. In connection with
the recapitalization transaction, the Company entered into a property financing
arrangement, which added net debt of $57.8 million, and issued $250.0 million of
6.61% Debentures due September 15, 2027 (See Note 2 to the consolidated
financial statements for further information).
 
CASH FLOW
 
     The following table sets forth certain items from the Consolidated
Statements of Cash Flows (dollars in millions):
 
<TABLE>
<CAPTION>
                                                                1998       1997
                                                              --------    -------
<S>                                                           <C>         <C>
Net cash provided by operating activities of continuing
  operations................................................  $  287.3    $ 337.0
Proceeds from reorganization as described in Notes 3 and
  4.........................................................   2,022.2         --
Acquisitions, net of cash acquired..........................    (200.8)    (124.8)
Capital expenditures........................................    (138.4)    (117.0)
Purchase of Times Mirror's common stock, including exercise
  of put options, net of premiums received..................    (964.7)    (468.5)
Net issuance of commercial paper, short-term borrowings and
  long-term debt............................................     213.0      537.6
</TABLE>
 
                                       26
<PAGE>   28
 
     Cash generated by operating activities of continuing operations for 1998
was lower compared to 1997 due primarily to restructuring expenditures as well
as lower operating profit.
 
     Capital expenditures for 1998 were higher compared to 1997 largely
reflecting building renovations in the Newspaper Publishing segment and costs
related to Year 2000 requirements. Capital expenditures for 1999 are expected to
be approximately $200.0 million due to the Company's continuing investments for
future growth, particularly in the Newspaper Publishing segment, which includes
facility renovations and conversion to a 50-inch web at The Times. In addition,
the Company expects to increase spending related to information technology
projects, including Year 2000 requirements.
 
     Total debt at December 31, 1998 rose to $1.25 billion from $1.06 billion at
December 31, 1997 primarily due to the issuance of commercial paper.
 
DIVIDENDS
 
     Cash dividends of $.72 and $.55 per share of common stock were declared for
the years ended December 31, 1998 and 1997, respectively. In February 1999, the
Board of Directors approved an increase in the quarterly dividend on its common
stock to $.20 per share, from $.18 per share, beginning with the March 10, 1999
payment date.
 
MARKET RISK
 
     The Company enters into contractual agreements in the ordinary course of
business to hedge its exposure to changes in interest rates, the value of
foreign currencies relative to the U.S. dollar and newsprint prices.
Counterparties to these agreements are major institutions. Such agreements are
not entered into for trading purposes.
 
     The Company's debt portfolio is managed to maintain a balance of fixed and
variable rate obligations. The Company utilizes interest rate swap agreements to
help maintain the overall interest rate parameters set by management. During
1998, the Company entered into interest rate swap agreements on the 6.61%
Debentures and 7 1/4% Debentures for notional amounts of $250.0 million and
$148.0 million, respectively, to match potential exposure related to over $1.0
billion of variable rate investments held by Eagle New Media and Eagle
Publishing. As a result of this interest rate mix, a hypothetical 10% change in
interest rates would not have a material impact on the Company's results of
operations or the fair values of its market risk sensitive financial instruments
for the years ended December 31, 1998 and 1997.
 
     The Company periodically enters into foreign exchange forward contracts or
uses other hedging strategies to substantially limit its exposure to changes in
foreign currency rates. As such, changes in currency rates would not have a
material impact on the Company's results of operations for the years ended
December 31, 1998 and 1997.
 
     The Company periodically enters into newsprint hedging contracts not
exceeding five years to manage the Company's exposure to newsprint price
fluctuations. A hypothetical 10% change in newsprint prices would not have a
material impact on the Company's results of operations, financial position or
cash flows for the years ended December 31, 1998 and 1997.
 
IMPACT OF YEAR 2000
 
     The Company is preparing for the impact of the arrival of the Year 2000 on
its business, as well as on the businesses of its customers, suppliers and
business partners. The "Year 2000 Issue" is the result of computer programs
written using two digits rather than four to define the applicable year. The
Company's computer equipment and software and devices with embedded technology
that are time-sensitive may recognize a date using "00" as the year 1900 rather
than the year 2000 or process dates prior to or after the year 2000 in error.
This could result in a system failure or miscalculations causing disruptions of
operations including, among other things, a temporary inability to receive and
process advertising orders, prepare editorial content, operate press facilities,
package and deliver products, issue invoices, or engage in similar normal
business activities.
 
                                       27
<PAGE>   29
 
STATE OF READINESS
 
     The Company has instituted a comprehensive program to address potential
Year 2000 impacts for information technology and non-information technology
systems. This program involves the following phases:
 
     Inventory -- This phase entails a comprehensive inventory of all items that
may be affected by the Year 2000 issue. These items include hardware and
software (e.g., business and operational applications, operating systems and
third-party products), production facilities that may be at risk, and key
third-party services whose Year 2000 failures may significantly impact the
Company. The inventory phase is substantially complete.
 
     Assessment/Planning -- Items identified in the inventory phase are assessed
based on criticality to the Company's business operations and potential impact
of failure. This phase is targeted to be substantially complete by March 31,
1999.
 
     Remediation -- This phase involves reprogramming or replacing inventoried
items to ensure they are Year 2000 ready in accordance with the plans identified
during the Assessment/Planning phase. For those systems that are not expected to
be operational after January 1, 2000, detailed manual workaround plans will be
developed. Remediation is targeted to be substantially complete by June 30,
1999.
 
     Testing -- This phase includes defining test plans, establishing a test
environment, developing test cases, performing testing (with third parties if
necessary), and certifying and documenting the results. The certification
process entails having subject matter experts (users) review test results,
including computer screens and printouts against pre-established criteria to
ensure system compliance. Testing and production implementation is targeted to
be substantially complete by September 30, 1999.
 
     Contingency Planning -- This phase focuses on reducing the risk of Year
2000-induced business disruptions to help ensure the Company's ability to
produce a minimum acceptable level of outputs and services in the event of
internal or external critical systems failures. The Company has begun to develop
contingency plans aimed at ensuring the continuity of critical business
functions before and after December 31, 1999. The plans include increasing
levels of consumable inventory, such as newsprint, ink and printing plates.
Furthermore, the Company has begun to develop reasonably likely failure
scenarios for its critical information technology systems, external
relationships and the embedded systems in its critical facilities. Once these
scenarios are identified, the Company will develop plans that are designed to
reduce the impact on the Company, and provide methods of returning to normal
operations, if one or more of those scenarios occur. Contingency Planning is
targeted to be substantially complete by September 30, 1999.
 
     The Company believes that its Year 2000 project is on schedule. The table
below lists the percentage complete for each project phase as of December 31,
1998. The project has been designated as the highest priority of the Company's
information technology departments.
 
<TABLE>
<CAPTION>
                                                 PERCENT COMPLETE AS OF     TARGETED DATE FOR
                 PROJECT PHASE                     DECEMBER 31, 1998      SUBSTANTIAL COMPLETION
                 -------------                   ----------------------   ----------------------
<S>                                              <C>                      <C>
Inventory......................................            97%            March 1999
Assessment/Planning............................            93%            March 1999
Remediation....................................            64%            June 1999
Testing........................................            42%            September 1999
Contingency Planning...........................            14%            September 1999
</TABLE>
 
EXTERNAL RELATIONSHIPS
 
     The Company also faces the risk that one or more of its significant
suppliers or other third-party businesses ("external relationships") will not be
able to interact with the Company due to the third party's inability to resolve
its own Year 2000 issues. The Company has completed its inventory of external
relationships and is evaluating each relationship based upon the potential
business impact, available alternatives and cost of substitution. The Company is
also attempting to determine the overall Year 2000 readiness of its external
relationships. In the case of mission critical suppliers such as newsprint,
banks, telecommunications providers and other utilities and information
technology vendors, the Company is engaged
 
                                       28
<PAGE>   30
 
in discussions with such third parties and is attempting to obtain detailed
information as to their Year 2000 plans and state of readiness. Risk assessment,
readiness evaluation and action plans related to these third parties are
expected to be complete in the second quarter of 1999.
 
YEAR 2000 COSTS
 
     Internal and external resources have been utilized to perform all phases of
the Year 2000 project. Currently, total capital costs are estimated at $35.0
million for the purchase of systems and total expenses, excluding internal costs
of employees listed below, are estimated at $11.0 million. These estimates
include information technology and non-information technology systems including
costs associated with planned replacements that have been accelerated due to the
Year 2000 issue. Through December 31, 1998, the Company had capitalized $16.9
million for the replacement of mainframe computers, editorial and advertising
systems, and expensed $4.3 million for project management, contract programming,
and consulting services. An average of 70 employees worked on Year 2000 efforts
during 1998. This represents estimated internal costs of $5.0 million. During
1999, the Company expects an average of 85 employees will work on the project
with related costs expected to approximate $6.6 million. Year 2000 costs are
funded through operating cash flows. Although priorities have been realigned,
the Company has not deferred significant systems enhancements to become Year
2000 ready.
 
YEAR 2000 RISKS
 
     Management believes that it has an effective program in place to address
its Year 2000 issues in a timely manner and anticipates the necessary
modifications, replacement and testing of critical systems to be substantially
complete in the third quarter of 1999, subject to uncertainties as discussed
below. As a result, the Year 2000 issue is not expected to pose significant
operational or financial issues for the Company. The Company's expectations
regarding its Year 2000 efforts are subject to various uncertainties that could
cause the actual results to differ materially from the discussion above. These
uncertainties include the success of the Company in identifying systems that are
not Year 2000 ready; the nature and amount of programming required to upgrade or
replace each of the affected systems; the availability, rate and magnitude of
related labor and consulting costs; and the success of vendors, suppliers and
other third parties with which the Company interacts in addressing the Year 2000
issue. If the Company, its vendors, suppliers or such other parties are unable
to resolve the Year 2000 issue on schedule, the Company may not be able to
prepare and distribute its publications in a timely manner, which may have a
material adverse effect on the Company's results of operations.
 
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 18 to the
consolidated financial statements.
 
DISCUSSIONS EXCLUDING RESTRUCTURING, ONE-TIME AND OTHER CHARGES
 
     Management's discussion and analysis of its results of operations presents
information regarding operating profit as well as operating profit excluding the
impact of restructuring, one-time and other charges. The Company believes that
the financial information which excludes restructuring, one-time and other
charges is necessary to an understanding of its operations and provides for a
more comparable analysis of historical results as well as indications of future
financial performance.
 
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 
     The information required to be furnished pursuant to this item is set forth
in Management's Discussion and Analysis of Financial Condition and Results of
Operations under the caption "Liquidity and Capital Resources -- Market Risk."
 
                                       29
<PAGE>   31
 
                           [INTENTIONALLY LEFT BLANK]
 
                                       30
<PAGE>   32
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 
                         INDEX TO FINANCIAL STATEMENTS
                        AND FINANCIAL STATEMENT SCHEDULE
 
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Report of Ernst & Young LLP, Independent Auditors...........   32
Consolidated Statements of Income -- Years Ended December
  31, 1998, 1997 and 1996...................................   33
Consolidated Balance Sheets -- December 31, 1998 and
  December 31, 1997.........................................   34
Consolidated Statements of Shareholders' Equity -- Years
  Ended December 31, 1998, 1997 and 1996....................   36
Consolidated Statements of Cash Flows -- Years Ended
  December 31, 1998, 1997 and 1996..........................   38
Notes to Consolidated Financial Statements..................   39
Financial Statement Schedule:
  Schedule II -- Valuation and Qualifying Accounts and
     Reserves...............................................   67
</TABLE>
 
     All other schedules are omitted because they are not required by the
regulations or related instructions or are not applicable.
 
                                       31
<PAGE>   33
 
               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, 1998 and 1997, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1998. Our audits also include the
financial statement schedule listed in the Index to Financial Statements and
Financial Statement Schedule. 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, 1998 and 1997, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1998, 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.
 
                                          ERNST & YOUNG LLP
 
Los Angeles, California
February 8, 1999
 
                                       32
<PAGE>   34
 
                            THE TIMES MIRROR COMPANY
 
                       CONSOLIDATED STATEMENTS OF INCOME
               (IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31
                                                         --------------------------------------
                                                            1998          1997          1996
                                                         ----------    ----------    ----------
<S>                                                      <C>           <C>           <C>
REVENUES...............................................  $3,009,085    $2,882,017    $2,775,820
                                                         ----------    ----------    ----------
COSTS AND EXPENSES:
  Cost of sales........................................   1,518,611     1,476,348     1,495,566
  Selling, general and administrative expenses.........   1,077,105     1,006,482       971,974
  Restructuring and one-time charges...................     200,806            --        17,348
                                                         ----------    ----------    ----------
          Total costs and expenses.....................   2,796,522     2,482,830     2,484,888
                                                         ----------    ----------    ----------
OPERATING PROFIT.......................................     212,563       399,187       290,932
  Interest expense.....................................     (76,154)      (41,681)      (20,153)
  Interest income......................................      40,153         2,474         5,655
  Equity income (loss).................................      (8,191)       (1,878)        1,455
  Other, net...........................................      32,481         7,763         2,278
                                                         ----------    ----------    ----------
  Income from continuing operations before income
     taxes.............................................     200,852       365,865       280,167
  Income tax provision.................................     107,438       144,965       110,964
                                                         ----------    ----------    ----------
  Income from continuing operations....................      93,414       220,900       169,203
  Discontinued operations:
     Income from operations, net of income taxes.......       7,238        29,412         5,194
     Net gain on disposal, net of income taxes.........   1,316,686            --        32,047
                                                         ----------    ----------    ----------
NET INCOME.............................................  $1,417,338    $  250,312    $  206,444
                                                         ==========    ==========    ==========
Preferred dividend requirements........................  $   21,697    $   32,481    $   43,645
                                                         ==========    ==========    ==========
Earnings applicable to common shareholders.............  $1,395,641    $  217,831    $  162,799
                                                         ==========    ==========    ==========
Basic earnings per share:
  Continuing operations................................  $      .85    $     2.03    $     1.23
  Discontinued operations..............................       15.61           .32           .36
                                                         ----------    ----------    ----------
Basic earnings per share...............................  $    16.46    $     2.35    $     1.59
                                                         ==========    ==========    ==========
Diluted earnings per share:
  Continuing operations................................  $      .83    $     1.98    $     1.19
  Discontinued operations..............................       15.23           .31           .35
                                                         ----------    ----------    ----------
Diluted earnings per share.............................  $    16.06    $     2.29    $     1.54
                                                         ==========    ==========    ==========
</TABLE>
 
See notes to consolidated financial statements
 
                                       33
<PAGE>   35
 
                            THE TIMES MIRROR COMPANY
 
                          CONSOLIDATED BALANCE SHEETS
                           (IN THOUSANDS OF DOLLARS)
 
<TABLE>
<CAPTION>
                                                                    DECEMBER 31
                                                              ------------------------
                                                                 1998          1997
                                                              ----------    ----------
<S>                                                           <C>           <C>
ASSETS
  Current assets:
     Cash and cash equivalents..............................  $1,056,341    $   48,659
     Marketable securities..................................      49,438            --
     Accounts receivable, less allowances for doubtful
      accounts and returns of $44,988 and $42,769...........     368,740       363,252
     Inventories............................................      39,282        44,896
     Deferred income taxes..................................      44,012        58,018
     Net assets of discontinued operations..................          --       427,722
     Prepaid expenses.......................................      32,763        22,081
     Other current assets...................................      38,683        36,598
                                                              ----------    ----------
          Total current assets..............................   1,629,259     1,001,226
  Property, plant and equipment, net........................     915,992       934,700
  Goodwill, net.............................................     564,324       502,886
  Other intangibles, net....................................     168,629       104,550
  Deferred charges..........................................     131,091       133,290
  Equity investments........................................     141,454       101,448
  Prepaid pension costs.....................................     419,471       366,807
  Investments and other assets..............................     248,086        93,713
                                                              ----------    ----------
          Total assets......................................  $4,218,306    $3,238,620
                                                              ==========    ==========
</TABLE>
 
See notes to consolidated financial statements
 
                                       34
<PAGE>   36
 
                            THE TIMES MIRROR COMPANY
 
                    CONSOLIDATED BALANCE SHEETS (CONTINUED)
          (IN THOUSANDS OF DOLLARS EXCEPT SHARE AND PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                     DECEMBER 31
                                                              --------------------------
                                                                 1998           1997
                                                              -----------    -----------
<S>                                                           <C>            <C>
LIABILITIES
  Current liabilities:
     Accounts payable.......................................  $   194,224    $   212,444
     Short-term debt........................................      312,610        139,067
     Employees' compensation................................      102,204        109,585
     Unearned income........................................      148,997        145,728
     Restructuring..........................................       98,789         18,662
     Net liabilities of discontinued operations.............       11,605             --
     Other current liabilities..............................      105,063        115,032
                                                              -----------    -----------
          Total current liabilities.........................      973,492        740,518
  Long-term debt............................................      941,423        925,404
  Deferred income taxes.....................................      374,679        175,187
  Postretirement benefits...................................      226,018        234,375
  Unearned income...........................................       72,457         65,843
  Other liabilities.........................................      265,224        207,694
                                                              -----------    -----------
          Total liabilities.................................    2,853,293      2,349,021
Common stock subject to put options.........................       22,560         13,600
Commitments and contingencies
SHAREHOLDERS' EQUITY
  Preferred stock, $1 par value; stated at liquidation
     value;
     convertible to Series A common stock:
       Series A: 900,000 shares authorized; 824,000 shares
        issued and outstanding..............................      411,784        411,784
       Series C-1: 381,000 shares authorized, issued and
        outstanding.........................................      190,486        190,486
       Series C-2: 245,000 shares authorized, issued and
        outstanding.........................................      122,550        122,550
  Preferred stock, $1 par value; 23,035,000 shares
     authorized,
     no shares issued or outstanding
  Common stock, $1 par value:
     Series A: 500,000,000 shares authorized; 86,831,000 and
      86,552,000 shares issued and outstanding..............       86,831         86,552
     Series B: 100,000,000 shares authorized; no shares
      issued or outstanding
     Series C: convertible to Series A common stock;
      300,000,000 shares authorized, 25,258,000 and
      25,503,000 shares issued and outstanding..............       25,258         25,503
  Additional paid-in capital................................    1,278,916      1,253,142
  Retained earnings.........................................    1,653,736        384,503
  Accumulated other comprehensive income....................       26,491         12,804
                                                              -----------    -----------
                                                                3,796,052      2,487,324
  Less treasury stock at cost:
     Series A common stock, 38,708,000 and 24,151,000
      shares; and Series A preferred stock, 735,000
      shares................................................   (2,453,599)    (1,611,325)
                                                              -----------    -----------
          Total shareholders' equity........................    1,342,453        875,999
                                                              -----------    -----------
          Total liabilities and shareholders' equity........  $ 4,218,306    $ 3,238,620
                                                              ===========    ===========
</TABLE>
 
See notes to consolidated financial statements
 
                                       35
<PAGE>   37
 
                            THE TIMES MIRROR COMPANY
 
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
               (IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                               THREE YEARS ENDED DECEMBER 31, 1998
---------------------------------------------------------------------------------------------------------------------------------
                                                                             PREFERRED STOCK                     COMMON STOCK
                                                              ---------------------------------------------   -------------------
                                                              SERIES A   SERIES B   SERIES C-1   SERIES C-2   SERIES A   SERIES C
                                                              --------   --------   ----------   ----------   --------   --------
<S>                                                           <C>        <C>        <C>          <C>          <C>        <C>
BALANCE AT DECEMBER 31, 1995................................  $411,784   $164,595          --           --    $ 77,765   $ 27,933
  Conversion of Series C common to Series A common..........        --         --          --           --         871       (871)
  Common stock issuances related to:
    Stock options and restricted stock......................        --         --          --           --       2,190         37
    Acquisition.............................................        --         --          --           --         212         --
  Purchases of common stock.................................        --         --          --           --     (11,236)      (126)
  Put options:
    Sale....................................................        --         --          --           --          --         --
    Exercise................................................        --         --          --           --         (45)        --
    Change in redemption value..............................        --         --          --           --          --         --
  Dividends declared:
    Common stock; $.30 per share............................        --         --          --           --          --         --
    Preferred stock.........................................        --         --          --           --          --         --
  Comprehensive income:
    Net income..............................................        --         --          --           --          --         --
    Other comprehensive income, net of income taxes:
      Minimum pension liability adjustment..................        --         --          --           --          --         --
      Net unrealized gains on securities....................        --         --          --           --          --         --
      Foreign currency translation adjustments..............        --         --          --           --          --         --
  Comprehensive income......................................        --         --          --           --          --         --
                                                              --------   --------    --------     --------    --------   --------
BALANCE AT DECEMBER 31, 1996................................   411,784    164,595          --           --      69,757     26,973
  Conversion to Series A common related to:
    Series C common.........................................        --         --          --           --      11,127    (11,127)
    Series B preferred......................................        --   (164,595)         --           --       4,446         --
  Common stock issuances related to:
    Stock options and restricted stock......................        --         --          --           --       1,070          1
    Acquisition.............................................        --         --          --           --          45         --
  Merger with Chandis Securities............................        --         --    $190,486     $122,550       6,582      9,656
  Purchases of stock:
    Stock purchase program..................................        --         --          --           --      (6,475)        --
    LLC contributed shares..................................        --         --          --           --          --         --
  Put options:
    Sale....................................................        --         --          --           --          --         --
    Exercise................................................        --         --          --           --          --         --
    Change in redemption value..............................        --         --          --           --          --         --
  Dividends declared:
    Common stock; $.55 per share............................        --         --          --           --          --         --
    Preferred stock.........................................        --         --          --           --          --         --
  Comprehensive income:
    Net income..............................................        --         --          --           --          --         --
    Other comprehensive income, net of income taxes:
      Minimum pension liability adjustment..................        --         --          --           --          --         --
      Net unrealized losses on securities...................        --         --          --           --          --         --
      Foreign currency translation adjustments..............        --         --          --           --          --         --
  Comprehensive income......................................        --         --          --           --          --         --
                                                              --------   --------    --------     --------    --------   --------
BALANCE AT DECEMBER 31, 1997................................   411,784         --     190,486      122,550      86,552     25,503
  Conversion of Series C common to Series A common..........        --         --          --           --         245       (245)
  Common stock issuances related to stock options and
    restricted stock........................................        --         --          --           --          34         --
  Purchases of common stock.................................        --         --          --           --          --         --
  Put options:
    Sale....................................................        --         --          --           --          --         --
    Exercise................................................        --         --          --           --          --         --
    Change in redemption value..............................        --         --          --           --          --         --
  Dividends declared:
    Common stock; $.72 per share............................        --         --          --           --          --         --
    Preferred stock.........................................        --         --          --           --          --         --
  Comprehensive income:
    Net income..............................................        --         --          --           --          --         --
    Other comprehensive income, net of income taxes:
      Minimum pension liability adjustment..................        --         --          --           --          --         --
      Net unrealized gains on securities....................        --         --          --           --          --         --
      Foreign currency translation adjustments..............        --         --          --           --          --         --
  Comprehensive income......................................        --         --          --           --          --         --
                                                              --------   --------    --------     --------    --------   --------
BALANCE AT DECEMBER 31, 1998................................  $411,784   $     --    $190,486     $122,550    $ 86,831   $ 25,258
                                                              ========   ========    ========     ========    ========   ========
</TABLE>
 
See notes to consolidated financial statements
 
                                       36
<PAGE>   38
 
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
                                ACCUMULATED
     ADDITIONAL                    OTHER
      PAID-IN      RETAINED    COMPREHENSIVE    TREASURY
      CAPITAL      EARNINGS       INCOME          STOCK        TOTAL
     ----------   ----------   -------------   -----------   ----------
<S>  <C>          <C>          <C>             <C>           <C>
     $  192,266   $  889,817     $ 42,076               --   $1,806,236
             --           --           --               --           --
         61,325           --           --      $       872       64,424
          6,900           --           --               --        7,112
             --     (484,700)                         (872)    (496,934)
          3,645           --           --               --        3,645
            (30)      (1,879)          --               --       (1,954)
        (38,172)          --           --               --      (38,172)
             --      (30,067)          --               --      (30,067)
             --      (32,734)          --               --      (32,734)
             --      206,444           --               --      206,444
             --           --          898               --          898
             --           --       10,724               --       10,724
             --           --         (812)              --         (812)
                                                             ----------
             --           --           --               --      217,254
     ----------   ----------     --------      -----------   ----------
        225,934      546,881       52,886               --    1,498,810
             --           --           --               --           --
        160,119           (8)          --               --          (38)
         45,711      (17,509)          --           32,741       62,014
          2,354           --           --               --        2,399
        807,834           --           --       (1,125,064)      12,044
        (16,190)    (309,734)          --         (132,382)    (464,781)
             --           --           --         (380,093)    (380,093)
          3,227           --           --               --        3,227
           (419)          --           --           (6,527)      (6,946)
         24,572           --           --               --       24,572
             --      (50,885)          --               --      (50,885)
             --      (34,554)          --               --      (34,554)
             --      250,312           --               --      250,312
             --           --        1,902               --        1,902
             --           --      (38,170)              --      (38,170)
             --           --       (3,814)              --       (3,814)
                                                             ----------
             --           --           --               --      210,230
     ----------   ----------     --------      -----------   ----------
      1,253,142      384,503       12,804       (1,611,325)     875,999
             --           --           --               --           --
         31,906      (65,952)          --          125,229       91,217
             --           --           --         (947,203)    (947,203)
          2,891           --           --               --        2,891
            (63)          --           --          (20,300)     (20,363)
         (8,960)          --           --               --       (8,960)
             --      (60,456)          --               --      (60,456)
             --      (21,697)          --               --      (21,697)
             --    1,417,338           --               --    1,417,338
             --           --       (1,169)              --       (1,169)
             --           --       16,106               --       16,106
             --           --       (1,250)              --       (1,250)
                                                             ----------
             --           --           --               --    1,431,025
     ----------   ----------     --------      -----------   ----------
     $1,278,916   $1,653,736     $ 26,491      $(2,453,599)  $1,342,453
     ==========   ==========     ========      ===========   ==========
</TABLE>
 
                                       37
<PAGE>   39
 
                              TIMES MIRROR COMPANY
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (IN THOUSANDS OF DOLLARS)
 
<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31
                                                              ------------------------------------
                                                                 1998         1997         1996
                                                              ----------    ---------    ---------
<S>                                                           <C>           <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Income from continuing operations.........................  $   93,414    $ 220,900    $ 169,203
  Adjustments to derive cash flows from continuing operating
    activities:
    Depreciation and amortization...........................     147,270      136,296      131,123
    Restructuring and other charges:
      Impairments and other asset write-offs................      98,036           --       12,217
      Net change in restructuring liability.................      75,890      (21,355)     (67,296)
    Amortization of debt discount...........................      16,998        9,299           --
    Amortization of product costs...........................       6,260        6,871        9,755
    Gain on asset sales and writedowns, net.................     (31,665)      (3,712)          --
    Provision for doubtful accounts.........................      24,879       24,180       25,944
    Provision for deferred income taxes.....................      11,319       37,771       61,742
    Changes in assets and liabilities:
      Accounts receivable...................................     (29,539)     (47,377)     (38,369)
      Inventories...........................................       4,574         (147)       9,787
      Prepaid pension costs.................................     (52,664)     (39,872)     (30,443)
      Accounts payable......................................     (18,233)       3,558       (1,366)
      Income taxes..........................................       8,645        1,054       22,539
    Other, net..............................................     (67,898)       9,540       10,953
                                                              ----------    ---------    ---------
    Net cash provided by continuing operating activities....     287,286      337,006      315,789
    Net cash provided by discontinued operating
      activities............................................      36,408        8,967       48,072
                                                              ----------    ---------    ---------
      Net cash provided by operating activities.............     323,694      345,973      363,861
                                                              ----------    ---------    ---------
CASH FLOWS FROM INVESTING ACTIVITIES
  Proceeds from reorganization as described in Notes 3 and
    4.......................................................   2,022,224           --           --
  Acquisitions, net of cash acquired........................    (200,786)    (124,842)     (17,841)
  Capital expenditures......................................    (138,358)    (116,984)    (108,456)
  Notes receivable..........................................     (69,120)          --           --
  Sale (purchase) of marketable securities, net.............     (49,438)          --       79,845
  Investment in equity affiliates...........................     (51,761)      (5,811)        (885)
  Purchases of investments..................................     (25,957)      (5,000)     (10,312)
  Proceeds from sales of other assets.......................      24,847       72,523      193,035
  Proceeds from sales of investments........................      13,637       48,790           --
  Capitalization of product costs...........................      (8,196)      (8,756)     (18,020)
  Other, net................................................      11,842       (1,284)       4,262
                                                              ----------    ---------    ---------
    Net cash provided by (used in) investing activities of
      continuing operations.................................   1,528,934     (141,364)     121,628
    Net cash used in investing activities of discontinued
      operations............................................     (16,333)     (44,149)     (99,129)
                                                              ----------    ---------    ---------
      Net cash provided by (used in) investing activities...   1,512,601     (185,513)      22,499
                                                              ----------    ---------    ---------
CASH FLOWS FROM FINANCING ACTIVITIES
  Purchases of Times Mirror common stock....................    (947,203)    (464,781)    (496,934)
  Net proceeds of commercial paper and short-term
    borrowings..............................................     212,983       92,187           --
  Dividends paid............................................     (82,153)     (85,439)     (80,001)
  Proceeds from exercise of stock options...................      59,277       36,431       51,178
  Principal repayments of other debt........................     (54,206)      (5,769)        (363)
  Exercise of put options, net of premiums received.........     (17,472)      (3,719)       1,691
  Proceeds from issuance of long-term debt..................          --      445,429      198,651
  Contribution to TMCT, LLC.................................          --     (249,266)          --
  Repurchase of Series B preferred stock....................          --           --      (91,182)
  Other, net................................................         161      (17,098)      (3,824)
                                                              ----------    ---------    ---------
      Net cash used in financing activities.................    (828,613)    (252,025)    (420,784)
                                                              ----------    ---------    ---------
  Increase (decrease) in cash and cash equivalents..........   1,007,682      (91,565)     (34,424)
  Cash and cash equivalents at beginning of year............      48,659      140,224      174,648
                                                              ----------    ---------    ---------
  Cash and cash equivalents at end of year..................  $1,056,341    $  48,659    $ 140,224
                                                              ==========    =========    =========
</TABLE>
 
See notes to consolidated financial statements
 
                                       38
<PAGE>   40
 
                              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 as well as affiliates that are
controlled by the Company, as described in Note 4, after elimination of all
significant intercompany transactions and balances. Other affiliated companies
in which the Company owns a 20% to 50% interest are accounted for by the equity
method.
 
     Presentation. Certain amounts in previously issued financial statements
have been reclassified to conform to the 1998 presentation. Financial
information presented in the Notes to Consolidated Financial Statements excludes
discontinued operations except where noted.
 
     Changes in Accounting Principles. Effective December 31, 1998, the Company
adopted Statement of Financial Accounting Standards No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits" (SFAS 132).
Pension plans and postretirement benefit information for all prior periods has
been restated to conform with the revised disclosures under SFAS 132 (see Note
15).
 
     Effective December 31, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information," which establishes standards under which companies report
information about operating segments in financial statements (see Note 17).
 
     As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130). SFAS
130 requires unrealized gains or losses on the Company's available-for-sale
securities, minimum pension liability adjustments and foreign currency
translation adjustments to be included in other comprehensive income. Prior year
financial statements have been reclassified to conform to the requirements of
SFAS 130.
 
     Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" (SFAS 128). SFAS 128
simplified the calculation of earnings per share by replacing primary and fully
diluted earnings per share with basic and diluted earnings per share,
respectively.
 
     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 $997,670,000 and $9,911,000 at December 31, 1998 and
1997, respectively, consist of commercial paper, money market funds, auction
rate securities or certificates of deposit. The Company has an investment policy
for short-term investments covering eligible types of instruments, maximum
investment terms, credit quality and individual issuer limits.
 
     Under the Company's cash management system, the bank notifies the Company
daily of checks presented for payment against its primary disbursement account.
The Company transfers funds from other sources such as 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 $46,866,000 and $32,862,000 at December 31, 1998 and 1997,
respectively.
 
     Marketable Securities. Marketable securities consist of investments in
commercial paper with original maturities over three months but less than one
year.
 
     Inventories. Inventories are stated at the lower of cost or market.
Newsprint is valued under the last-in, first-out (LIFO) method and paper and
certain finished products are valued primarily under the weighted average cost
method.
 
     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.
 
                                       39
<PAGE>   41
                              TIMES MIRROR COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     Depreciation is provided on a straight-line basis over the estimated useful
lives as follows:
 
<TABLE>
<S>                                            <C>
Buildings....................................  10-45 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 ($554,617,000 and $493,179,000 at
December 31, 1998 and 1997, respectively, net of accumulated amortization of
$131,170,000 and $160,066,000, respectively) is being amortized on a
straight-line basis primarily over periods of 15 to 40 years, with a weighted
average amortization period of 36 years. Goodwill amortization expense was
$21,821,000, $19,086,000 and $18,237,000 for the years ended December 31, 1998,
1997 and 1996, respectively.
 
     Other intangibles arising in connection with acquisitions are being
amortized on a straight-line basis over their estimated useful lives ranging
primarily from 4 to 30 years, with a weighted average life of 25 years.
Amortization expense was $13,833,000, $8,665,000 and $7,919,000 for the years
ended December 31, 1998, 1997 and 1996, respectively. Accumulated amortization
was $66,246,000 and $62,183,000 at December 31, 1998 and 1997, 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 flows estimate were
less than net book value, net book value would then be reduced to fair value
based on an estimate of discounted cash flows. 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. Magazine subscription procurement costs are charged to
expense over the same period as the related revenue is earned. Certain expenses
for training materials and consumer health publications are capitalized and
charged to expense over the estimated product lives as the products are sold.
 
     Derivative Financial Instruments. Interest rate swaps (see Note 8) 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. Amounts received
in connection with initiating or terminating swaps are amortized on a
straight-line basis as a reduction in interest expense over the term of the
swaps.
 
     Premium equity participating debt securities (see Note 12) are used to
manage the Company's exposure to market risk associated with changes in the fair
values of the Company's investment in the common stock of Netscape
Communications Corporation (Netscape).
 
     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 swaps or other
risk management instruments permitted by the Company's internal policy
guidelines. During 1998, 1997 and 1996, the Company's forward contracts and
other risk management instruments were not significant.
 
     Commodity price hedging contracts (see Note 8) are used to manage the
Company's exposure to market risk associated with fluctuations in newsprint
prices. These contracts are accounted for on the accrual basis. Periodic
settlement payments made or received are recognized as an adjustment to the cost
basis of newsprint inventory. Amounts paid in connection with initiating these
contracts are amortized on a straight-line basis as an adjustment to the cost
basis of newsprint inventory over the term of the contracts.
 
     Put options are used in conjunction with the Company's common stock
purchase program. These contracts are entered into based on market conditions as
well as other factors. The costs or benefits derived
 
                                       40
<PAGE>   42
                              TIMES MIRROR COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
from these equity-based financial instruments are recorded in shareholders'
equity on the date of the transaction. The potential obligation under these put
options outstanding at December 31, 1998 and 1997 has been transferred from
shareholders' equity to "Common stock subject to put options."
 
     Revenue Recognition. Revenues from certain products sold with the right of
return, 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.
 
     Advertising and Promotion Costs. Advertising and promotion costs, which are
expensed as incurred, amounted to $69,725,000, $73,578,000 and $74,487,000 for
the years ended December 31, 1998, 1997 and 1996, respectively.
 
     Earnings Per Share. The following table sets forth the calculation of basic
and diluted earnings per share (in thousands except per share amounts):
 
<TABLE>
<CAPTION>
                                                       1998        1997        1996
                                                     --------    --------    --------
<S>                                                  <C>         <C>         <C>
Earnings:
Income from continuing operations..................  $ 93,414    $220,900    $169,203
  Preferred stock dividends........................   (21,697)    (32,481)    (43,645)
                                                     --------    --------    --------
  Earnings applicable to common shareholders for
     basic earnings per share......................    71,717     188,419     125,558
  Effect of dilutive securities:
     LYONs interest expense, net of tax............        --       3,925          --
                                                     --------    --------    --------
  Earnings applicable to common shareholders for
     diluted earnings per share....................  $ 71,717    $192,344    $125,558
                                                     ========    ========    ========
Shares:
  Weighted average shares for basic earnings per
     share.........................................    84,814      92,572     102,113
  Effect of dilutive securities:
     Stock options.................................     2,114       2,358       3,259
     LYONs convertible debt........................        --       2,083          --
                                                     --------    --------    --------
                                                        2,114       4,441       3,259
                                                     --------    --------    --------
  Adjusted weighted average shares and assumed
     conversions for diluted earnings per share....    86,928      97,013     105,372
                                                     ========    ========    ========
  Basic earnings per share from continuing
     operations....................................  $    .85    $   2.03    $   1.23
                                                     ========    ========    ========
  Diluted earnings per share from continuing
     operations....................................  $    .83    $   1.98    $   1.19
                                                     ========    ========    ========
</TABLE>
 
     The Company has convertible preferred stock and certain stock options
outstanding which are not included in the calculation of diluted earnings per
share because the effects are antidilutive. The convertible preferred stock,
stock options and the Liquid Yield Option Notes (LYONs(TM)) are described in
Note 13, Note 14 and Note 12, respectively.
 
                                       41
<PAGE>   43
                              TIMES MIRROR COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     Other Comprehensive Income. Other comprehensive income primarily consists
of unrealized gains (losses) on securities for the years ended December 31,
1998, 1997 and 1996 as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                        1998        1997       1996
                                                       -------    --------    -------
<S>                                                    <C>        <C>         <C>
Unrealized holding gains (losses) arising during
  period, net of taxes of $17,712, $(12,929) and
  $7,428, respectively...............................  $25,753    $(18,850)   $10,724
Reclassification adjustments for gains realized in
  net income, net of taxes of $6,703, $13,398 and $0,
  respectively.......................................   (9,647)    (19,320)        --
                                                       -------    --------    -------
Net unrealized gains (losses) on securities..........  $16,106    $(38,170)   $10,724
                                                       =======    ========    =======
</TABLE>
 
     Accumulated other comprehensive income for each classification is as
follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                              --------------------
                                                                1998        1997
                                                              --------    --------
<S>                                                           <C>         <C>
Minimum pension liability adjustment........................  $ (4,396)   $ (3,227)
Net unrealized gains on securities..........................    44,572      28,466
Foreign currency translation adjustments....................   (13,685)    (12,435)
                                                              --------    --------
                                                              $ 26,491    $ 12,804
                                                              ========    ========
</TABLE>
 
     Stock Options. Employee stock options (see Note 14) 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" (SFAS 123).
 
NOTE 2 -- RECAPITALIZATION
 
     During the third quarter of 1997, the Company completed a transaction
(Transaction) involving agreements with its largest shareholders, Chandler Trust
No. 1 and Chandler Trust No. 2 (Chandler Trusts). The Transaction consisted of
two components: (a) the merger of Chandis Securities Company (Chandis), a
holding company owned by Chandler Trust No. 2 and affiliated minority investors,
into Chandis Acquisition Corporation (CAC), a Delaware corporation and
wholly-owned subsidiary of the Company (Merger) and (b) the formation of a new
limited liability company by the Chandler Trusts and the Company.
 
     On August 8, 1997, Chandis merged with and into CAC. Pursuant to the Merger
Agreement, the Chandis shareholders received 6,582,000 shares of Series A common
stock, 9,656,000 shares of Series C common stock, 381,000 shares of new Series
C-1 preferred stock, and 245,000 shares of new Series C-2 preferred stock. At
the time of the Merger, Chandis owned 8,582,000 shares of Series A common stock,
9,656,000 shares of Series C common stock, and 381,000 shares of Series A
preferred stock as well as an interest in undeveloped real estate and certain
other assets and liabilities. CAC is not a "permitted transferee" as defined in
the Company's Certificate of Incorporation, therefore, the Series C common stock
was converted to Series A common stock as a result of the Merger. The Company's
shares owned by CAC are reported as treasury stock for financial reporting
purposes. The Merger was a tax-free transaction.
 
     Concurrent with the consummation of the Merger, the Company (including
certain of its subsidiaries) and the Chandler Trusts formed TMCT, LLC (TMCT), a
Delaware limited liability company, and the following capital contributions were
made to TMCT:
 
        1. the Company contributed $249,266,000 in cash and 8 real properties
           (Real Properties) with an aggregate market value of $225,850,000;
 
                                       42
<PAGE>   44
                              TIMES MIRROR COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
        2. the Chandler Trusts contributed 5,001,000 shares of Series A common
           stock and 443,000 shares of Series A preferred stock (Contributed
           Shares).
 
     The cash contributed by the Company was used by TMCT to purchase a
portfolio of securities (Portfolio). The Company has leased the Real Properties
from TMCT under a lease with minimum lease payments equal to the fair values and
with an initial term of 12 years. During 1998 and 1997, the Company made lease
payments to TMCT of $24,166,000 and $9,599,000. The lease is accounted for as a
financing arrangement and, accordingly, the Real Properties' book value remains
on the Company's consolidated balance sheet and continues to be depreciated at
the rates in effect prior to the contribution of the Real Properties to TMCT.
The depreciation, along with a reduction of property, plant and equipment of
$168,021,000, which represents the estimated net book value of the Real
Properties at the end of the lease term, will result in a net book value of zero
for the Real Properties at August 8, 2009. At that time, the Company has the
option to purchase all the Real Properties for their fair market value. If the
Real Properties are not purchased by the Company, they will remain the assets of
TMCT and may be leased by the Company at a fair value rent as provided for under
the terms of the lease agreement. The lease provides for two additional 12-year
lease terms with fair value purchase options at the end of each lease term. The
lease is included as a property financing in the Company's outstanding debt
obligations (see Note 12).
 
     The Company and the Chandler Trusts share in the cash flow, profits and
losses of the various assets held by TMCT. The cash flow from the Real
Properties and the Portfolio is largely allocated to the Chandler Trusts and the
cash flow from the Contributed Shares is largely allocated to the Company. Due
to the allocations of the economic benefits in the TMCT, 80% of the Contributed
Shares are included in treasury stock for financial reporting purposes and 80%
of the preferred dividends on the Series A preferred stock are excluded from the
preferred dividend requirements. The Company accounts for the investment in TMCT
under the equity method. This net investment was $96,416,000 and $95,487,000 at
December 31, 1998 and 1997, respectively, and is included in "Equity
investments" in the consolidated balance sheets. During 1998 and 1997, the
Company recognized $3,739,000 and $1,268,000 of equity income on this
investment.
 
     As a result of the Transaction, for financial reporting purposes and
earnings per share calculations, the number of shares of Series A common stock
outstanding was reduced by 6,001,000, the number of shares of Series A preferred
stock outstanding was reduced by 735,000 and the annual preferred dividend
requirements were reduced to $21,697,000 beginning in 1998. Preferred dividend
requirements for 1997 were reduced by $3,168,000.
 
NOTE 3 -- DISCONTINUED OPERATIONS
 
     During the second quarter of 1998, the Company reached agreements to divest
Matthew Bender & Company, Incorporated (Matthew Bender), the Company's legal
publisher, in a tax-free reorganization (see Note 4) and its 50% ownership
interest in legal citation provider Shepard's. The two transactions were valued
at $1,649,650,000 in the aggregate and were completed in the third quarter of
1998. The disposition of the Company's 50% interest in Shepard's was consummated
by a transfer of the respective partnership interests owned by two subsidiaries
of the Company to affiliates of Reed Elsevier plc for a cash consideration of
$274,650,000. The Company recorded a net gain on these two transactions in the
amount of $1,108,452,000, net of expenses and $163,585,000 of income taxes,
primarily consisting of tax reserves as disclosed in Note 11. Also during the
second quarter of 1998, the Company reached agreements to divest Mosby, Inc.
(Mosby), the Company's health science/medical publisher, in a tax-free
reorganization (see Note 4). The transaction was valued at $415,000,000 and was
completed in the fourth quarter of 1998. The Company recorded a net gain on this
transaction in the amount of $239,023,000, net of expenses and $55,635,000 of
income taxes, primarily consisting of tax reserves as disclosed in Note 11.
While the Company believes that the Matthew Bender and Mosby transactions were
completed on a tax-free basis, this position may be subject to review by the
Internal Revenue Service.
 
                                       43
<PAGE>   45
                              TIMES MIRROR COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     These divestitures represent the final dispositions of the Company's
professional and higher education publishing businesses and, as such, have been
reflected as discontinued operations in the accompanying financial statements
for all periods presented. The Company's Consolidated Statements of Income have
been restated to reflect the operations and the related gains and losses
associated with these and certain other previous dispositions as discontinued
operations.
 
     During the third quarter of 1998, the Company decided to discontinue
Apartment Search, Inc., its apartment location business. The Company anticipates
selling the business in the first half of 1999 and has recorded an estimated
loss on disposal including a provision for operating losses of $3,420,000 during
the phase-out period. The total estimated loss of $47,623,000, or $28,217,000
after applicable tax benefit, is included in discontinued operations in "Net
gain on disposal, net of income taxes" in the consolidated statements of income.
 
     During 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 on disposal of $104,921,000, or $32,047,000 after applicable taxes, which
is primarily related to differences in the book and tax bases of the assets, is
reflected in the consolidated statements of income as discontinued during 1996.
 
     A summary of the combined results of operations and net gain on disposal
for all discontinued entities for the years ended December 31, 1998, 1997 and
1996, are as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                       1998         1997        1996
                                                    ----------    --------    --------
<S>                                                 <C>           <C>         <C>
Revenues..........................................  $  282,378    $436,511    $625,164
                                                    ==========    ========    ========
Income before income taxes (1)....................  $   18,631    $ 51,442    $ 18,901
Income tax provision..............................      11,393      22,030      13,707
                                                    ----------    --------    --------
Income from discontinued operations...............       7,238      29,412       5,194
Net gain on disposal, net of income taxes (2).....   1,316,686          --      32,047
                                                    ----------    --------    --------
          Total discontinued operations...........  $1,323,924    $ 29,412    $ 37,241
                                                    ==========    ========    ========
</TABLE>
 
---------------
(1) It is the Company's policy to allocate interest expense among operating
    segments including discontinued operations. The allocation to discontinued
    operations is based on the ratio of net assets of discontinued operations
    plus consolidated debt, other than debt of the discontinued operations that
    will be assumed by the buyer and debt that can be directly attributed to the
    discontinued operations. Income before income taxes includes a charge for
    interest expense of $10,407,000, $11,065,000 and $6,145,000 for the years
    ended December 31, 1998, 1997 and 1996, respectively.
 
(2) Net of income taxes of $198,045,000 and $72,874,000 in 1998 and 1996,
    respectively.
 
                                       44
<PAGE>   46
                              TIMES MIRROR COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     The assets and liabilities of discontinued operations have been classified
in the consolidated balance sheets as net assets (liabilities) of discontinued
operations and consist of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                  DECEMBER 31
                                                              --------------------
                                                                1998        1997
                                                              --------    --------
<S>                                                           <C>         <C>
Accounts receivable, net....................................  $  1,429    $138,932
Other current assets........................................    22,463      67,039
Property, plant and equipment, net..........................     2,329      62,730
Equity investments..........................................        --     249,123
Other assets................................................       510     128,028
                                                              --------    --------
          Total assets......................................    26,731     645,852
                                                              --------    --------
Current liabilities.........................................    36,779     196,796
Non-current liabilities.....................................     1,557      21,334
                                                              --------    --------
          Total liabilities.................................    38,336     218,130
                                                              --------    --------
Net assets (liabilities) of discontinued operations.........  $(11,605)   $427,722
                                                              ========    ========
</TABLE>
 
     The major components of cash flow for discontinued operations for the years
ended December 31, 1998, 1997 and 1996 are as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                       1998        1997        1996
                                                     --------    --------    --------
<S>                                                  <C>         <C>         <C>
Income from discontinued operations................  $  7,238    $ 29,412    $  5,194
Depreciation and amortization......................    13,477      19,087      30,540
Amortization of product costs......................    10,677      16,980      43,151
Other, net.........................................     5,016     (56,512)    (30,813)
                                                     --------    --------    --------
Net cash provided by discontinued operating
  activities.......................................  $ 36,408    $  8,967    $ 48,072
                                                     ========    ========    ========
Capitalization of product costs....................  $(10,073)   $(13,855)   $(60,666)
Capital expenditures...............................    (4,675)    (12,933)    (38,463)
Other, net.........................................    (1,585)    (17,361)         --
                                                     --------    --------    --------
Net cash provided by (used in) investing activities
  of discontinued operations.......................  $(16,333)   $(44,149)   $(99,129)
                                                     ========    ========    ========
</TABLE>
 
NOTE 4 -- REORGANIZATION
 
     During the third quarter of 1998, the Company completed the disposition of
Matthew Bender in a tax-free reorganization with Reed Elsevier plc. The
disposition of Matthew Bender was accomplished through the merger of an
affiliate of Reed Elsevier with and into Matthew Bender with Matthew Bender as
the surviving corporation in the merger. As a result of the merger, TMD, Inc., a
wholly-owned subsidiary of Times Mirror, received all of the issued and
outstanding common stock of CBM Acquisition Parent Co. (MB Parent). MB Parent is
a holding company that owns controlling voting preferred stock of Matthew Bender
with a stated value of $61,616,000 and participating stock of Matthew Bender. MB
Parent is also the sole member of Eagle New Media Investments, LLC (Eagle New
Media). Affiliates of Reed Elsevier own voting preferred stock of MB Parent with
a stated value of $68,750,000 which affords them voting control over MB Parent,
subject to certain rights held by Times Mirror with respect to Eagle New Media.
Concurrently, with the closing of the merger, the Company became the sole
manager of Eagle New Media and controls its operations and assets. At December
31, 1998, the assets of Eagle New Media were $605,786,000 of cash and cash
equivalents, $752,956,000 (13,262,000 shares) of Series A common stock of Times
Mirror, $14,952,000 of marketable securities and $22,270,000 of other assets.
The consolidated financial statements of the Company include the accounts of
Eagle New Media.
 
                                       45
<PAGE>   47
                              TIMES MIRROR COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     During the fourth quarter of 1998, the Company completed the disposition of
Mosby in a tax-free reorganization with Harcourt General, Inc. The disposition
of Mosby was accomplished through the merger of an affiliate of Harcourt
General, Inc. with and into Mosby, with Mosby as the surviving corporation in
the merger. As a result of the merger, the Company received all of the issued
and outstanding common stock of Mosby Parent Corp. (Mosby Parent). Mosby Parent
is also the sole member of Eagle Publishing Investments, LLC (Eagle Publishing).
An affiliate of Harcourt General, Inc. owns voting preferred stock of Mosby
Parent with a stated value of $50,000,000 which affords it voting control over
Mosby Parent, subject to certain rights held by the Company with respect to
Eagle Publishing. Concurrently with the closing of the merger, the Company
became the sole manager of Eagle Publishing and controls its operations and
assets. At December 31, 1998, the assets of Eagle Publishing were $377,152,000
of cash and cash equivalents, $34,486,000 of marketable securities and
$20,129,000 of other assets. The consolidated financial statements of the
Company include the accounts of Eagle Publishing.
 
     The Company intends to deploy the assets of both LLCs to finance
acquisitions and investments, including purchases of the Company's common stock,
and does not intend to use those funds for the Company's general working capital
purposes.
 
NOTE 5 -- ACQUISITIONS, DISPOSITIONS AND WRITEDOWNS
 
     On April 30, 1998, the Company acquired the Los Angeles area business of EZ
Buy & EZ Sell Recycler Corporation (Recycler), consisting primarily of the
Recycler publications in the Los Angeles, Orange, Riverside, San Bernardino and
Ventura counties and a portion of Santa Barbara county for $188,696,000. This
acquisition resulted in goodwill of $119,242,000 and other intangible assets of
$69,430,000, which are being amortized primarily over 30 years. The Company also
invested in preferred stock and provided a term loan to Target Media Partners, a
new entity which owns all of the non-Los Angeles area assets of Recycler, for a
total amount of $34,800,000. The Company also had several other small
acquisitions during 1998. Goodwill of $13,994,000 related to these small
acquisitions is being amortized primarily over 15 years.
 
     During the third and fourth quarters of 1997, the Company acquired Krames
Communications Incorporated, a publisher of consumer-oriented health education
information; Patuxent Publishing Company, a publisher of 13 community weeklies
in Maryland and This Week Publications, Inc., a free weekly shopper distributed
in Queens and Long Island, New York. These and several other small acquisitions
resulted in goodwill of $75,319,000, which is being amortized over periods of 15
to 30 years. During 1996, the Company had several small acquisitions which
resulted in goodwill of $11,419,000, which is being amortized over periods of 8
to 15 years.
 
     These acquisitions were accounted for by the purchase method with the
results of operations included in the Company's financial statements from the
dates of acquisition. Pro forma results for 1998 and 1997, assuming these
acquisitions occurred on January 1 of the respective year, are not materially
different from the results reported.
 
     During 1998, the Company sold 441,900 shares of its holdings in Netscape
common stock and purchased an equal proportion of its 4 1/4% Premium Equity
Participating Securities (PEPS) obligation in the open market. The PEPS hedge
the Company's investment in Netscape. The sales resulted in a gain of
$16,025,000 or $9,495,000 after applicable income taxes. Also, the Company
disposed of various excess real estate and other assets for an aggregate gain of
$16,110,000 or $9,554,000 after applicable income taxes. The total aggregate
gain of $32,135,000 is included in "Other, net" in the consolidated statements
of income.
 
     During 1997, the Company sold certain equity investments, including Tejon
Ranch Co.; WebTV Network, Inc.; Netscape Communications Corporation; Access
Health, Inc.; Speedvision Network, LLC and Outdoor Life Network, LLC, for an
aggregate gain of $81,984,000 or $53,759,000 after applicable income taxes. This
gain was offset by $78,272,000, or $48,417,000 after applicable income taxes,
for writedowns and
 
                                       46
<PAGE>   48
                              TIMES MIRROR COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
expenses related to non-operating items as well as losses on the sale of Harry
N. Abrams, Inc.; National Journal, Inc. and other assets. The aggregate gain of
$3,712,000 is included in "Other, net" in the consolidated statements of income.
 
NOTE 6 -- RESTRUCTURING, ONE-TIME AND OTHER CHARGES
 
     1998 Restructuring Charges. In 1998, the Company undertook a comprehensive
review of its business operations to determine areas where operational
efficiencies could be achieved through either product and/or facility
consolidation, headcount reductions, product abandonments, contract terminations
or through other measures. The Company began this review in anticipation of the
impact of its significant 1998 divestitures and to better align its overall cost
structure and business configurations. The Company's review led to a major
restructuring program that resulted in the recording of $39,697,000, $80,012,000
and $81,097,000 of charges in the second, third and fourth quarters of 1998,
respectively. A summary of the significant components of the 1998 restructuring
program is as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                          CORPORATE
                              NEWSPAPER     PROFESSIONAL     MAGAZINE        AND
                              PUBLISHING    INFORMATION     PUBLISHING      OTHER       TOTAL
                              ----------    ------------    ----------    ---------    --------
<S>                           <C>           <C>             <C>           <C>          <C>
Termination benefits........   $ 43,406       $ 3,408        $   156       $10,270     $ 57,240
Contract terminations.......     51,386            --          4,330            --       55,716
Goodwill impairments........        324        28,922         19,715            --       48,961
Lease termination costs.....      2,307         4,757          1,500         3,045       11,609
Technology asset
  write-offs................      4,772         4,212            100         1,504       10,588
Business exit and other
  costs.....................        310        12,000          3,271         1,111       16,692
                               --------       -------        -------       -------     --------
                               $102,505       $53,299        $29,072       $15,930     $200,806
                               ========       =======        =======       =======     ========
</TABLE>
 
     A discussion of the specific restructuring activities follows:
 
     Termination benefits. Staff reductions were implemented at substantially
all operating units with the majority of these actions performed within the
Newspaper Publishing segment. The Los Angeles Times recorded severance charges
related to 358 full-time and 534 part-time employees through either voluntary or
involuntary programs, primarily occurring in the fourth quarter of 1998. The
Baltimore Sun's termination charges included 81 full-time employees and Newsday
determined that 23 full-time and 26 part-time employees would be released. The
staff reductions within the Newspaper Publishing segment were the result of
identified efficiencies from outsourcing opportunities, elimination of duplicate
functions and technological improvements to the Company's processes. In total,
termination benefits, which were largely severance costs, covered 616 full-time
and 578 part-time employees company-wide of which 224 employees had been
released by the end of 1998 with the majority of employees expected to be
released by the second quarter of 1999. As of December 31, 1998, $5,126,000 has
been paid out under this program with the remaining liability expected to be
substantially paid by the end of 1999. Certain employees will, however, receive
payments over a longer period of time.
 
     Contract Terminations. In reviewing the Company's processes, supply
contracts and strategic alliances, the Company identified certain long-term
contracts and relationships which were no longer providing benefits to the
Company's current operations. As a result, the Company recorded charges for
contract terminations which included (i) the termination of a long-term contract
related to Newsday's pre-print distribution business for $34,250,000; (ii) the
termination of The Hartford Courant's long-standing bonus arrangement for
$12,000,000 and (iii) the termination of 56 distribution contracts with outside
agents at the Los Angeles Times for $4,904,000.
 
     Goodwill Impairments. In connection with the Company's divestiture of
Mosby, the Company retained the consumer health publishing businesses of Mosby
which were combined with its health information
 
                                       47
<PAGE>   49
                              TIMES MIRROR COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
provider, The StayWell Company. In reorganizing these operations and making
significant fundamental business and structural changes, revised forecasts of
undiscounted cash flows related to these enterprises were prepared which
identified that the entity may not have the estimated future cash flows
necessary to recover asset values. The Company recorded a write-off based on the
difference between the net book value of goodwill, the entity's primary
long-lived asset, and the fair value, measured by discounted estimated cash
flows from future operations. In addition, an impairment charge was taken
related to goodwill associated with two of the Company's magazine titles. These
charges were taken as the result of disappointing market penetration and
operating results and were also determined based on discounted estimated cash
flows from future operations. The valuation of goodwill was made in accordance
with Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
 
     Lease Termination Costs. In connection with the Company's consolidation of
its training companies under one entity, AchieveGlobal, and its downsizing
and/or relocation of other operating units, the Company has recorded charges for
future operating lease payments and write-offs of leasehold improvements related
to facilities it will vacate. The total lease payment accrual for periods
through 2010 is net of estimated sublease income of $5,786,000. No amounts have
been included for any period in which the operating units will continue to
occupy the premises.
 
     Technology Asset Write-offs. During mid-1998, the Company determined that
its long standing policy of allowing each operating unit to independently
determine its technology requirements and make related equipment and software
purchases was both inefficient as well as expensive in terms of maintenance,
helpdesk, networking and other support costs. In connection with this decision,
the Company established common hardware and software configurations to provide
consistency across all business units. As a result, many operating units were
required to dispose of a significant amount of technology resources to conform
to the common platform. Total asset write-offs of technology-related equipment
were taken in the quarter in which the equipment was replaced.
 
     Business Exit and Other Costs. In performing a detailed review of its
business and related product offerings, AchieveGlobal recorded a $8,547,000
charge to reflect the termination of its direct sales business line due to poor
financial results and to record an estimated loss on the sale of its Canadian
operations. Charges taken for the direct sales business were primarily for asset
write-offs. The Company's estimated loss related to the Canadian operations uses
an estimate of proceeds based on recent sales transactions of its other foreign
entities. The estimated loss includes both the basis of the assets to be sold as
well as costs required to sell the enterprise and a change to a franchise
arrangement. Management anticipates that the franchising of these operations
will be completed by the second quarter of 1999. The revenues and operating
profits from those businesses that the Company plans to exit are not significant
to total operations. Other costs were recognized at Jeppesen Sanderson, Inc. for
the abandonment of certain projects and at The StayWell Company for the
consolidation of processes.
 
     Other Program Charges. In addition to the charges listed above, the Company
also recorded $32,685,000 for certain asset write-offs that did not meet the
accounting criteria for classification as "restructuring and one-time charges."
These charges, which principally included inventory and other operating asset
write-offs have been classified within "Cost of sales," "Selling, general and
administrative expenses" or "Other, net" in the consolidated statements of
income.
 
     1996 Restructuring Charges. The 1996 restructuring charges totaled
$17,348,000 for efforts undertaken at AchieveGlobal to integrate the training
companies. As of December 31, 1998, these efforts were substantially complete.
 
                                       48
<PAGE>   50
                              TIMES MIRROR COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     A summary of the activity in the restructuring liabilities for the three
years ended December 31, 1998, 1997 and 1996 is as follows (in thousands):
 
<TABLE>
<CAPTION>
                                              1998            1996            1995
                                          RESTRUCTURING   RESTRUCTURING   RESTRUCTURING    TOTAL
                                          -------------   -------------   -------------   --------
<S>                                       <C>             <C>             <C>             <C>
Balance at December 31, 1995............          --              --        $134,448      $134,448
  Charged to costs and expenses.........          --        $ 17,348              --        17,348
  Cash payments.........................          --            (738)        (77,243)      (77,981)
  Asset write-offs......................          --         (12,217)             --       (12,217)
  Other(1)..............................          --              --           5,554         5,554
                                            --------        --------        --------      --------
Balance at December 31, 1996............          --           4,393          62,759        67,152
  Cash payments.........................          --          (4,180)        (25,809)      (29,989)
  Other(2)..............................          --             (85)          8,719         8,634
                                            --------        --------        --------      --------
Balance at December 31, 1997............          --             128          45,669        45,797
  Charged to costs and expenses.........    $200,806              --              --       200,806
  Cash payments.........................     (34,465)           (298)        (19,942)      (54,705)
  Asset write-offs......................     (70,666)             --              --       (70,666)
  Other.................................       1,589             189          (1,323)          455
                                            --------        --------        --------      --------
Balance at December 31, 1998............    $ 97,264        $     19        $ 24,404      $121,687
                                            ========        ========        ========      ========
</TABLE>
 
---------------
(1) Primarily includes transfers from discontinued operations.
 
(2) Primarily includes transfers from discontinued operations for restructuring
    liabilities not assumed by purchasers of discontinued operations.
 
     The balance sheet classification of restructuring liabilities is as
follows:
 
<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                1998       1997
                                                              --------    -------
<S>                                                           <C>         <C>
Restructuring -- current liabilities
  1995 Restructuring........................................  $ 16,464    $18,534
  1996 Restructuring........................................        19        128
  1998 Restructuring........................................    82,306         --
Other liabilities
  1995 Restructuring........................................     7,940     27,135
  1998 Restructuring........................................    14,958         --
                                                              --------    -------
                                                              $121,687    $45,797
                                                              ========    =======
</TABLE>
 
     The current portion of restructuring liabilities relates primarily to
severance and contract termination payments while the non-current portion
principally relates to lease payments which will be paid over lease periods
extending to 2005. The Company made severance payments under all programs which
totaled $8,532,000, $6,228,000 and $40,886,000 during 1998, 1997 and 1996,
respectively. At December 31, 1998, the remaining liability for severance costs
aggregated $53,831,000.
 
     The Company periodically assesses the adequacy of its remaining
restructuring liabilities and makes adjustments if required. During 1998 and
1997, these adjustments resulted in recoveries of prior year's restructuring
reserves which were largely offset by restructuring requirements in those years.
The net change in the restructuring liabilities as a result of these reviews was
not significant.
 
                                       49
<PAGE>   51
                              TIMES MIRROR COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 7 -- SUPPLEMENTAL CASH FLOW AND OTHER INFORMATION
 
     Supplemental cash flow information is as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                           1998        1997       1996
                                                          -------   ----------   -------
<S>                                                       <C>       <C>          <C>
Interest paid...........................................  $69,241   $   22,346   $17,715
Income taxes paid.......................................   50,049      139,022    70,196
Merger with Chandis
  Times Mirror stock received...........................       --    1,116,058        --
  Other assets received.................................       --       21,050        --
  Times Mirror stock issued.............................       --    1,137,108        --
Fair value of properties contributed to TMCT............       --      225,850        --
Property financing obligation, net of original issue
  discount..............................................       --       57,829        --
Liabilities assumed in connection with acquisitions.....    6,680       20,698    14,618
Notes issued in connection with an acquisition..........       --       39,209        --
</TABLE>
 
NOTE 8 -- FINANCIAL INSTRUMENTS
 
     Financial instruments consist of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31
                                             ---------------------------------------------
                                                      1998                    1997
                                             -----------------------   -------------------
                                              CARRYING       FAIR      CARRYING     FAIR
                                               VALUE        VALUE       VALUE      VALUE
                                             ----------   ----------   --------   --------
<S>                                          <C>          <C>          <C>        <C>
Short-term assets..........................  $1,474,519   $1,474,519   $411,911   $411,911
Long-term investments......................     129,364      129,364     47,738     47,738
Notes receivable...........................      75,265       75,265      8,761      8,761
Short-term liabilities.....................     506,834      506,834    351,511    351,511
Long-term debt.............................     941,423    1,017,245    925,404    982,647
Unrealized net gain on interest rate
  swaps....................................          --       43,246         --     27,583
</TABLE>
 
     Short-Term Assets and Liabilities. The fair values of cash and cash
equivalents, marketable securities, accounts receivable, accounts payable and
short-term debt approximate their carrying values due to the short-term nature
of these financial instruments.
 
     Long-Term Investments. Investments are primarily stated at fair value based
on quoted market prices and are classified as available-for-sale securities. The
investments are included in "Investments and other assets" in the consolidated
balance sheets. The cost of the investments was $55,764,000 and $18,865,000 at
December 31, 1998 and 1997, respectively. The unrealized gain is included in
accumulated other comprehensive income in the consolidated statements of
shareholders' equity, net of applicable income taxes.
 
     Notes Receivable. The carrying value of notes receivable is estimated to
approximate fair values. Although there are no quoted market prices available
for these instruments, the fair value estimates were based on the change in
interest rates and risk related interest rate spreads since the notes
origination date.
 
     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 PEPS securities whose fair value is the
current maturity value determined by a formula based on quoted market prices of
the underlying common stock whose market risk it modifies.
 
     Interest Rate Swaps. Interest rate swap agreements outstanding at December
31, 1998 were for notional amounts of $148,000,000, $250,000,000, $170,111,000
and $100,000,000 expiring in 1999, 1999, 2002 and 2023, respectively, with the
$170,111,000 and $100,000,000 notional amounts also outstanding at Decem-
 
                                       50
<PAGE>   52
                              TIMES MIRROR COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
ber 31, 1997. These swaps effectively convert a portion of the Company's
long-term fixed rate debt to a variable rate obligation based on LIBOR or the
Commercial Paper rate. The fair values of the interest rate swaps are the
amounts at which they could be settled based on estimates of market rates.
 
     Commodity Hedging Contracts. The Company enters into various commodity
hedging contracts to manage the Company's exposures to fluctuations in newsprint
prices. As of December 31, 1998, the Company had newsprint swap agreements for a
total notional amount of 261,000 metric tons per year expiring in 2002 and 2003
at a weighted average contract price of $609 per metric ton. Also, the Company
has a newsprint option contract for a total notional amount of 30,000 metric
tons per year expiring in 2001 at a contract price of $585 per metric ton. At
December 31, 1998, the index rate used for these contracts was $585 per metric
ton. This option contract limits the maximum payment to $115 per metric ton
above the contract price on an annual basis. In addition to the newsprint
hedging contracts, the Company has a swap contract for coated paper used in its
Magazine Publishing activities for a total notional amount of 5,000 short tons
per year expiring in 2000 at a contract price of $1,047 per short ton. As no
liquid forward market for newsprint or coated paper exists, it was not
practicable to estimate the fair value of the commodity hedging contracts.
 
     New Accounting Pronouncement. In June 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" (SFAS 133), which
the Company is required to adopt effective January 1, 2000. SFAS 133 will
require the Company to record all derivatives as assets or liabilities at fair
value. Changes in derivative fair values will either be recognized in earnings,
offset against changes in the fair value of the related hedged assets,
liabilities and firm commitments or, for forecasted transactions, recorded as a
component of other comprehensive income in shareholders' equity until the hedged
transactions occur and are recognized in earnings. The ineffective portion of a
hedging derivative's change in fair value will be recognized in earnings
immediately. The impact of SFAS 133 on the Company's financial statements will
depend on a variety of factors, including, the extent of the Company's hedging
activities, the types of hedging instruments used and the effectiveness of such
instruments. The Company expects to adopt SFAS 133 as of January 1, 2000. The
effect of adopting the Statement is currently being evaluated, however, the
Company does not believe the effects of adoption will be material to its
financial position or results of operations.
 
NOTE 9 -- INVENTORIES
 
     Inventories consist of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                 DECEMBER 31
                                                              ------------------
                                                               1998       1997
                                                              -------    -------
<S>                                                           <C>        <C>
Newsprint, paper and other raw materials....................  $23,404    $27,561
Finished products...........................................   13,967     16,609
Work-in-progress............................................    1,911        726
                                                              -------    -------
                                                              $39,282    $44,896
                                                              =======    =======
</TABLE>
 
     Inventories determined by the last-in, first-out method were $13,669,000
and $17,053,000 at December 31, 1998 and 1997, respectively, and would have been
higher by $16,100,000 in 1998 and $17,271,000 in 1997 had the first-in,
first-out method (which approximates current cost) been used.
 
                                       51
<PAGE>   53
                              TIMES MIRROR COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 10 -- PROPERTY, PLANT AND EQUIPMENT
 
     Property, plant and equipment consists of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                    DECEMBER 31
                                                              ------------------------
                                                                 1998          1997
                                                              ----------    ----------
<S>                                                           <C>           <C>
Land........................................................  $   45,065    $   46,459
Buildings...................................................     433,860       425,683
Machinery and equipment.....................................   1,341,583     1,339,958
Leasehold improvements......................................      30,297        28,577
Construction-in-progress....................................      41,362        36,084
                                                              ----------    ----------
                                                               1,892,167     1,876,761
Less accumulated depreciation and amortization..............    (976,175)     (942,061)
                                                              ----------    ----------
                                                              $  915,992    $  934,700
                                                              ==========    ==========
</TABLE>
 
     In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" (SOP 98-1). SOP 98-1 will
require the capitalization of certain costs incurred after the date of adoption
in connection with developing or obtaining software for internal use. The
Company adopted SOP 98-1 on January 1, 1999 and does not believe the effects of
adoption will be material to its financial position or results of operations.
 
NOTE 11 -- INCOME TAXES
 
     Income tax expense from continuing operations consists of the following (in
thousands):
 
<TABLE>
<CAPTION>
                                                       1998        1997        1996
                                                     --------    --------    --------
<S>                                                  <C>         <C>         <C>
Current:
  Federal..........................................  $ 72,255    $ 80,798    $ 21,730
  State............................................    10,670      12,558      15,262
  Foreign..........................................    13,194      13,838      12,230
Deferred:
  Federal..........................................      (849)     27,722      53,231
  State............................................    12,168      10,064       8,219
  Foreign..........................................        --         (15)        292
                                                     --------    --------    --------
                                                     $107,438    $144,965    $110,964
                                                     ========    ========    ========
</TABLE>
 
                                       52
<PAGE>   54
                              TIMES MIRROR COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     The difference between actual income tax expense and the U.S. Federal
statutory income tax expense for continuing operations is reconciled as follows
(in thousands):
 
<TABLE>
<CAPTION>
                                                        1998        1997        1996
                                                      --------    --------    --------
<S>                                                   <C>         <C>         <C>
Income from continuing operations before income
  taxes:
  United States.....................................  $173,329    $339,489    $258,287
  Foreign...........................................    27,523      26,376      21,880
                                                      --------    --------    --------
                                                      $200,852    $365,865    $280,167
                                                      ========    ========    ========
Federal statutory income tax rate...................        35%         35%         35%
Federal statutory income tax expense................  $ 70,298    $128,053    $ 98,058
Increase (decrease) in income taxes resulting from:
  State and local income tax expense, net of Federal
     effect.........................................    14,845      14,704      15,263
  Basis difference in asset sales...................    (2,193)      1,328          --
  Goodwill amortization not deductible for tax
     purposes.......................................     7,166       5,554       6,412
  Writedown of assets...............................    17,023          --          --
  Foreign tax differentials.........................    (3,433)      1,695       1,849
  Other.............................................     3,732      (6,369)    (10,618)
                                                      --------    --------    --------
                                                      $107,438    $144,965    $110,964
                                                      ========    ========    ========
</TABLE>
 
     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
                                                              ----------------------
                                                                1998         1997
                                                              ---------    ---------
<S>                                                           <C>          <C>
TEMPORARY DIFFERENCES
Depreciation and other property, plant and equipment
  differences...............................................  $(156,453)   $(172,579)
Retirement and health benefits..............................   (154,151)    (138,309)
Postretirement benefits.....................................     86,609      104,782
Valuation and other reserves................................     12,552        5,140
Other employee benefits.....................................     56,046       49,440
Unrealized investment gains.................................    (33,055)     (21,168)
State and local income taxes................................     26,400       25,654
Restructuring and one-time charges..........................     31,118       18,851
Intangible asset differences................................     (5,087)       2,190
Transaction tax reserve.....................................   (176,585)          --
Other deferred tax assets...................................      5,156       14,349
Other deferred tax liabilities..............................    (23,217)      (5,519)
                                                              ---------    ---------
                                                              $(330,667)   $(117,169)
                                                              =========    =========
BALANCE SHEET CLASSIFICATIONS
Current deferred tax assets.................................  $  44,012    $  58,018
Noncurrent deferred tax liabilities.........................   (374,679)    (175,187)
                                                              ---------    ---------
                                                              $(330,667)   $(117,169)
                                                              =========    =========
</TABLE>
 
     In connection with the disposition of Matthew Bender and Mosby as discussed
in Notes 3 and 4, the Company has recorded a tax reserve of $176,585,000. While
the Company believes that these transactions were completed on a tax-free basis,
this position may be subject to review by the Internal Revenue Service. The
results of such a review are unpredictable and could result in a tax liability
that is significantly higher or lower than that which has been provided by the
Company.
 
                                       53
<PAGE>   55
                              TIMES MIRROR COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 12 -- DEBT
 
     Short-term debt consists of the following (in thousands except
percentages):
 
<TABLE>
<CAPTION>
                                                                  DECEMBER 31
                                                              --------------------
                                                                1998        1997
                                                              --------    --------
<S>                                                           <C>         <C>
Commercial paper at weighted average interest rates of 5.3%
  and 5.9%..................................................  $298,603    $ 86,448
Notes payable at 6.125% due January 2, 1998.................        --      39,209
Current maturities of long-term debt........................     7,440       7,671
Other notes payable at interest rates of 5.42% and 6.04%....     6,567       5,739
                                                              --------    --------
     Total short-term debt..................................  $312,610    $139,067
                                                              ========    ========
</TABLE>
 
     Long-term debt consists of the following (in thousands except percentages):
 
<TABLE>
<CAPTION>
                                                                  DECEMBER 31
                                                              --------------------
                                                                1998        1997
                                                              --------    --------
<S>                                                           <C>         <C>
6.61% Debentures due September 15, 2027, net of unamortized
  discount of $98 and $101..................................  $249,902    $249,899
4.75% Liquid Yield Option Notes due April 15, 2017, net of
  unamortized discount of $288,129 and $297,845.............   211,871     202,155
7 1/4% Debentures due March 1, 2013.........................   148,215     148,215
7 1/4% Debentures due November 15, 2096, net of unamortized
  discount of $559 and $565.................................   147,441     147,435
7 1/2% Debentures due July 1, 2023..........................    98,750      98,750
Property financing obligation expiring on August 8, 2009,
  net of unamortized discount of $158,080 and $165,353, with
  an effective interest rate of 4.3%........................    47,088      54,743
4 1/4% PEPS due March 15, 2001; 863,100 and 1,305,000
  securities stated at current maturity value...............    45,596      31,809
Others at various interest rates, maturing through 2001.....        --          69
                                                              --------    --------
                                                               948,863     933,075
Less current maturities.....................................    (7,440)     (7,671)
                                                              --------    --------
     Total long-term debt...................................  $941,423    $925,404
                                                              ========    ========
</TABLE>
 
     Interest rate swaps outstanding at December 31, 1998 converted the weighted
average interest rate on the 7 1/4% Debentures due November 15, 2096, the 6.61%
Debentures, the 7 1/2% Debentures and the Liquid Yield Option Notes (LYONS) from
6.32% to 5.62% for the year ended December 31, 1998.
 
     In September 1997, the Company issued $250,000,000 of 6.61% Debentures due
September 15, 2027 (Debentures) with interest payable semiannually commencing
March 15, 1998. The Debentures are redeemable at the option of the Company, in
whole or in part, at any time after September 15, 2004 at a redemption price
equal to the greater of (a) 100% of the principal amount or (b) the sum of the
present values of the remaining scheduled payments of principal and interest
discounted to the redemption date. The Debentures may be put to the Company on
September 15, 2004 at 100% of face value plus accrued interest.
 
     In April 1997, the Company received gross proceeds of $195,530,000 from the
issuance of the LYONs. The LYONs are zero coupon subordinated notes with an
aggregate face value of $500,000,000 and a yield to maturity of 4.75%. Each LYON
has a $1,000 face value and is convertible at the option of the holder any time
prior to maturity. If conversion is elected, the Company will, at its option,
deliver (a) 5.828 shares of Series A common stock per each LYON or (b) cash
equal to the market value of such shares. On or after April 15, 2002, the LYONs
may be redeemed at any time by the Company for cash equal to the issuance price
plus accrued original discount through the date of redemption. In addition, each
LYON may be redeemed for cash
 
                                       54
<PAGE>   56
                              TIMES MIRROR COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
at the option of the holder on April 15, 2002, 2007 or 2012. The cash payable
for each LYON at these redemption dates is approximately $495, $625 and $791,
respectively, which is equal to the issuance price plus accrued original
discount through the date of redemption. The Company has an interest rate swap
agreement for a notional amount of $170,111,000, expiring April 15, 2002, to
exchange a fixed interest rate of 4.75% for a variable rate based on six-month
LIBOR less 2.458%.
 
     The 4 1/4% PEPS hedge the Company's investment in the common stock of
Netscape. The amount payable at maturity is determined by reference to the fair
market value of the Netscape common stock. As a result, the maturity value will
generally move in tandem with changes in the fair market value of Netscape
stock. Changes in the current maturity value of the PEPS are included in
accumulated other comprehensive income, net of applicable income taxes. At
December 31, 1998 and 1997, the fair market value of Netscape common stock was
$60.75 and $24.375 per share, respectively. The PEPS are redeemable at the
option of the Company, in whole or in part, at any time after December 15, 2000.
The redemption price is based on the market value of the Netscape common stock
adjusted in accordance with a predetermined formula which allocates a portion of
the appreciation, if any, to the Company. During 1998, the Company sold 441,900
shares of Netscape stock and purchased an equal proportion of its PEPS in the
open market (see Note 5).
 
     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 0.065% per annum. The
lines of credit are used to support a commercial paper program. The Company's
revolving lines of credit contain restrictive provisions relating primarily to
interest expense coverage. The Company's earnings before interest expense,
income taxes, depreciation and amortization, divided by interest expense, must
be greater than or equal to 5.0. The weighted average interest rates and
weighted average commercial paper borrowings were 5.3% and 5.6% and $243,095,000
and $72,561,000 during 1998 and 1997, respectively.
 
     At December 31, 1998, the Company had an uncommitted bank line of credit
which provides for unsecured borrowings up to $250,000,000 of which there were
no amounts outstanding. In February 1999, the Company borrowed $60,000,000 under
this line of credit.
 
     The Company has $20,820,000 of undrawn standby letters of credit at
December 31, 1998.
 
     At December 31, 1998, the aggregate principal maturities of the Company's
debt are as follows (in thousands):
 
<TABLE>
<S>                                                         <C>
1999......................................................  $  7,440
2000......................................................     7,150
2001......................................................    52,367
2002......................................................     6,292
2003......................................................     5,699
Thereafter................................................   869,915
                                                            --------
                                                            $948,863
                                                            ========
</TABLE>
 
NOTE 13 -- CAPITAL STOCK AND STOCK PURCHASE PROGRAM
 
     Preferred Stocks. Series A, Series C-1 and Series C-2 preferred stocks are
cumulative, non-voting stocks with annual dividends of 8%, 5.8% and 5.8%,
respectively, based on liquidation value. Series A was entitled to dividends
effective March 1, 1995. Dividends on Series C-1 and Series C-2 may increase
commencing in 2001 to a maximum annual dividend of 8.4%, based on the percentage
increases, if any, in the dividends paid by the Company on its common stock.
Series A, Series C-1 and Series C-2 are convertible into Series A common stock
in 2025 at the earliest. The conversion factor is calculated by dividing $500
plus accrued and unpaid
 
                                       55
<PAGE>   57
                              TIMES MIRROR COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
dividends by the average closing prices of Series A common stock for the 20
trading days immediately preceding the conversion date. The maximum number of
shares of Series A common stock into which Series C-2 can be converted is
limited to 2,957,000 shares.
 
     On February 28, 1997, the Series B preferred stock was called for
redemption and was redeemed on April 2, 1997 for 4,446,000 shares of Series A
common stock. The conversion ratio, determined pursuant to the original terms of
the Series B, was .57083 of a share of Series A common stock. At the redemption
date, the Company had forward purchase contracts for 3,900,000 shares of Series
B preferred stock with a weighted average forward price of $28.475 per share.
These contracts provided for early termination and, in May 1997, the termination
of the contract resulted in the purchase by the Company of 2,226,000 shares of
Series A common stock for an aggregate cost of $111,530,000.
 
     Preferred stock is issuable in series under such terms and conditions as
the Board of Directors may determine.
 
     Common Stocks. 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 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.
 
     Cash dividends of $.72 and $.55 per share of common stock were declared for
the years ended December 31, 1998 and 1997, respectively. In February 1999, the
Board of Directors approved an increase in the quarterly dividend on its common
stock to $.20 per share, from $.18 per share, beginning with the March 10, 1999
payment date.
 
     Treasury Stock. Treasury stock includes shares of Series A common stock and
Series A preferred stock owned by affiliates as well as Series A common stock
purchased by the Company as part of the stock purchase program. Approximately
13,262,000, 4,001,000 and 18,238,000 shares of Series A common stock included in
treasury stock are owned by Eagle New Media, TMCT and CAC, respectively, and
$177,039,000 and $192,023,000 stated value of Series A preferred stock, which
are owned by TMCT and CAC, respectively, are included in treasury stock at
December 31, 1998.
 
     Stock Purchases. During 1998, the Company and Eagle New Media purchased
16,355,000 common shares for a total cost of $947,203,000. An additional 350,000
common shares were purchased for $17,472,000, net of premiums received, as a
result of the exercise of put options. At December 31, 1998, the Company had
400,000 put options outstanding with a weighted average strike price of $56.40
per common share. The cash received from the issuance of put options during 1998
and 1997 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 unexpired put options are at strike
prices ranging from $55.81 to $58.00. These put options expire on various dates
through April 1999.
 
     Included in the 1998 share purchases were 4,000,000 shares that were
purchased in the fourth quarter of 1998 as part of an accelerated purchase
agreement. The shares were purchased at the closing price on the date of the
agreement for $54.69 per share. The agreement provides for a purchase price
adjustment based on a pro-rata settlement over a one-year period. The agreement,
which is due to mature in the fourth quarter of 1999, provides for settlement of
the purchase price adjustment on a net share basis.
 
     In August 1998, the Company entered into a forward purchase agreement to
acquire 1,000,000 shares of Series A common stock. The Company settled this
agreement in February 1999 at a price of $63.35 per share in cash.
 
                                       56
<PAGE>   58
                              TIMES MIRROR COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     During 1997, the Company purchased 8,882,000 shares of Series A common
stock for a total cost of $464,781,000. An additional 120,000 shares of Series A
common stock were purchased for $3,719,000, net of premiums received, as a
result of the exercise of put options.
 
     In connection with the Company's ongoing stock purchase program, in October
1998, the Company's Board of Directors authorized the purchase over the next two
years of an additional 6,000,000 shares of common stock. The aggregate remaining
shares authorized for purchase at December 31, 1998 was approximately 1,100,000
shares. The Company believes that the purchase of shares of its common stock is
an attractive investment for Eagle New Media which will enhance Times Mirror
shareholder value as well as to offset dilution from shares of common stock
issued under the Company's stock-based employee compensation and benefit
program. In February 1999, the Board of Directors authorized the purchase of an
additional amount of up to 6,000,000 shares of its Series A common stock.
 
NOTE 14 -- 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.
 
     Options granted, exercised and forfeited were as follows:
 
<TABLE>
<CAPTION>
                                                                            WEIGHTED
                                                                NUMBER      AVERAGE
                                                                  OF        EXERCISE
                                                                SHARES       PRICE
                                                              ----------    --------
<S>                                                           <C>           <C>
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
  Granted...................................................   4,686,643      47.85
  Exercised.................................................  (1,617,045)     22.47
  Forfeited.................................................    (571,732)     34.03
                                                              ----------     ------
Options Outstanding December 31, 1997.......................  10,269,355      36.17
  Granted...................................................   4,370,240      59.58
  Exercised.................................................  (2,145,260)     27.58
  Forfeited.................................................  (1,084,989)     50.00
                                                              ----------     ------
Options Outstanding December 31, 1998.......................  11,409,346     $45.44
                                                              ==========     ======
</TABLE>
 
                                       57
<PAGE>   59
                              TIMES MIRROR COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     Information regarding stock options outstanding and exercisable as of
December 31, 1998 is as follows:
 
<TABLE>
<CAPTION>
                                                          PRICE RANGE
                                      ---------------------------------------------------
                                       $11.43        $18.06        $30.06        $46.56
                                      TO $17.29    TO $23.94     TO $44.94     TO $64.22
                                      ---------    ----------    ----------    ----------
<S>                                   <C>          <C>           <C>           <C>
Options Outstanding:
  Number............................    45,979      1,170,163     2,452,916     7,740,288
  Weighted average exercise price...   $ 16.75     $    18.57    $    33.59    $    53.43
  Weighted average remaining
     contractual life...............    3years         5years        7years        9years
Options Exercisable:
  Number............................    45,979        798,192     1,160,230       697,755
  Weighted average exercise price...   $ 16.75     $    18.79    $    34.67    $    48.69
</TABLE>
 
     At December 31, 1998 and 1997 shares reserved for future grants and awards
were 9,707,503 and 13,057,372, respectively.
 
     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>
                                                       1998         1997        1996
                                                    ----------    --------    --------
<S>                                                 <C>           <C>         <C>
Net income -- as reported.........................  $1,417,338    $250,312    $206,444
Pro forma stock compensation expense, net.........     (18,709)    (13,000)     (4,959)
                                                    ----------    --------    --------
Pro forma net income..............................  $1,398,629    $237,312    $201,485
                                                    ==========    ========    ========
Pro forma basic earnings per share................  $    15.86    $   2.18    $   1.54
                                                    ==========    ========    ========
Pro forma diluted earnings per share..............  $    15.48    $   2.11    $   1.49
                                                    ==========    ========    ========
</TABLE>
 
     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 1996 through 1998 may 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 value of stock options on the date of grant, and
the assumptions used to estimate the fair value using the Black-Scholes option
valuation model, were as follows:
 
<TABLE>
<CAPTION>
                                                         1998        1997        1996
                                                       --------    --------    --------
<S>                                                    <C>         <C>         <C>
Weighted average fair value of stock options
  granted............................................  $  12.78    $  11.90    $   8.87
Risk-free interest rate..............................       5.5%        6.2%        5.4%
Expected life........................................   5 years     5 years     5 years
Expected volatility..................................       .20         .22         .26
Expected dividend yield..............................      2.33%       2.33%       2.00%
</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 with respect to the expected stock price volatility for the
underlying stock. Because changes in these subjective input assumptions can
materially affect the fair
 
                                       58
<PAGE>   60
                              TIMES MIRROR COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
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 15 -- PENSION 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. The majority of the Company's employees are covered by one defined
benefit plan. Funding for this plan is not expected to be required in the near
future as the plan is overfunded.
 
     Postretirement health care benefits provided by the Company are unfunded
and cover certain employees hired before January 1, 1993. 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.
 
                                       59
<PAGE>   61
                              TIMES MIRROR COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     The following sets forth the changes in benefit obligations and in plan
assets and the funded status of the plans (in thousands):
 
<TABLE>
<CAPTION>
                                          PENSION PLANS          POSTRETIREMENT BENEFITS
                                     ------------------------    ------------------------
                                        1998          1997          1998          1997
                                     ----------    ----------    ----------    ----------
<S>                                  <C>           <C>           <C>           <C>
CHANGE IN PROJECTED BENEFIT
  OBLIGATIONS
Benefit obligations at January
  1................................  $  662,385    $  600,577    $ 132,601     $ 129,292
Service cost.......................      37,377        33,164        3,052         2,732
Interest cost......................      49,367        47,287        7,909         8,204
Plan amendments....................       2,813           957           --            --
Participant contributions..........          --            --        2,073         1,998
Actuarial losses (gains)(1)........      86,647        23,856        4,996          (879)
Curtailment gains..................      (8,898)           --         (327)           --
Benefits paid......................     (42,600)      (43,456)      (8,626)       (8,746)
                                     ----------    ----------    ---------     ---------
Benefit obligations at December
  31...............................  $  787,091    $  662,385    $ 141,678     $ 132,601
                                     ==========    ==========    =========     =========
CHANGE IN PLAN ASSETS
Fair value of plan assets at
  January 1........................  $1,080,160    $  975,384    $      --     $      --
Actual return on plan assets.......     102,355       148,056           --            --
Acquisitions.......................       3,310            --           --            --
Dispositions.......................          --        (3,328)          --            --
Company contributions..............       2,943         3,504        6,553         6,748
Participant contributions..........          --            --        2,073         1,998
Benefits paid......................     (42,600)      (43,456)      (8,626)       (8,746)
                                     ----------    ----------    ---------     ---------
Fair value of plan assets at
  December 31......................  $1,146,168    $1,080,160    $      --     $      --
                                     ==========    ==========    =========     =========
FUNDED STATUS
Funded status (underfunded) at
  December 31......................  $  359,077    $  417,775    $(141,678)    $(132,601)
Unrecognized net actuarial losses
  (gains)(1).......................      40,896       (41,551)     (49,356)      (45,426)
Unrecognized prior service cost....      (4,309)       (8,677)     (34,984)      (56,348)
Unrecognized net transition
  asset............................      (3,656)      (25,216)          --            --
                                     ----------    ----------    ---------     ---------
Net amount recognized..............  $  392,008    $  342,331    $(226,018)    $(234,375)
                                     ==========    ==========    =========     =========
</TABLE>
 
---------------
(1) The increases in actuarial losses relate primarily to changes in the assumed
    discount rate.
 
     Amounts applicable to the Company's pension plans with accumulated benefit
obligations in excess of plan assets are (in thousands):
 
<TABLE>
<CAPTION>
                                                                 DECEMBER 31
                                                              ------------------
                                                               1998       1997
                                                              -------    -------
<S>                                                           <C>        <C>
Projected benefit obligations...............................  $61,044    $49,267
Accumulated benefit obligations.............................   51,134     43,232
Fair value of plan assets...................................   13,348     12,031
</TABLE>
 
                                       60
<PAGE>   62
                              TIMES MIRROR COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     The following sets forth the amounts recognized in the consolidated balance
sheets (in thousands):
 
<TABLE>
<CAPTION>
                                               PENSION PLANS       POSTRETIREMENT BENEFITS
                                            -------------------    -----------------------
                                                DECEMBER 31              DECEMBER 31
                                            -------------------    -----------------------
                                              1998       1997         1998         1997
                                            --------   --------    ----------   ----------
<S>                                         <C>        <C>         <C>          <C>
Prepaid pension cost......................  $419,471   $366,807    $      --    $      --
Accrued benefit liability.................   (40,319)   (29,923)    (226,018)    (234,375)
Intangible asset..........................     5,545         --           --           --
Deferred income taxes.....................     2,915      2,220           --           --
Accumulated other comprehensive income....     4,396      3,227           --           --
                                            --------   --------    ---------    ---------
Net amount recognized.....................  $392,008   $342,331    $(226,018)   $(234,375)
                                            ========   ========    =========    =========
</TABLE>
 
     Net periodic benefit cost (income) is as follows (in thousands):
 
<TABLE>
<CAPTION>
                                      PENSION PLANS               POSTRETIREMENT BENEFITS
                             -------------------------------    ---------------------------
                               1998        1997       1996       1998      1997      1996
                             ---------   --------   --------    -------   -------   -------
<S>                          <C>         <C>        <C>         <C>       <C>       <C>
Service cost...............  $  37,377   $ 33,164   $ 36,866    $ 3,052   $ 2,732   $ 3,190
Interest cost..............     49,367     47,287     47,552      7,909     8,204     9,361
Expected return on plan
  assets...................   (103,857)   (93,753)   (88,731)        --        --        --
Amortization of transition
  asset....................    (21,560)   (21,560)   (21,560)        --        --        --
Amortization of prior
  service cost.............        620        (44)       152     (6,992)   (6,992)   (7,368)
Recognized net actuarial
  loss (gain)..............        241        (47)     1,413     (5,446)   (3,218)   (1,028)
                             ---------   --------   --------    -------   -------   -------
Benefit cost (income)......    (37,812)   (34,953)   (24,308)    (1,477)      726     4,155
Curtailment gains..........     (8,898)        --         --       (327)       --        --
                             ---------   --------   --------    -------   -------   -------
Benefit cost (income) after
  curtailments.............  $ (46,710)  $(34,953)  $(24,308)   $(1,804)  $   726   $ 4,155
                             =========   ========   ========    =======   =======   =======
</TABLE>
 
     Assumptions used in the actuarial computations were as follows:
 
<TABLE>
<CAPTION>
                                            PENSION PLANS          POSTRETIREMENT BENEFITS
                                         --------------------      -----------------------
                                             DECEMBER 31                 DECEMBER 31
                                         --------------------      -----------------------
                                         1998    1997    1996      1998     1997     1996
                                         ----    ----    ----      -----    -----    -----
<S>                                      <C>     <C>     <C>       <C>      <C>      <C>
Discount rate..........................  6.75%   7.50%   8.00%     6.75%    7.50%    8.00%
Expected return on plan assets.........  9.75%   9.75%   9.75%      N/A      N/A      N/A
Rate of compensation increase..........  5.00%   5.00%   5.00%     5.00%    5.00%    5.00%
</TABLE>
 
     At December 31, 1998, the health care trend rate of 8.5% was assumed to
ratably decline to 4.25% by 2011 and remain at that level. The assumed health
care cost trend rate can significantly affect postretirement expense and
liabilities. A change of 1% in the health care cost trend rate would have the
following effects (in thousands):
 
<TABLE>
<CAPTION>
                                                           1-PERCENTAGE-     1-PERCENTAGE-
                                                           POINT INCREASE    POINT DECREASE
                                                           --------------    --------------
<S>                                                        <C>               <C>
Effect on total service and interest cost component......     $ 1,307           $ (1,319)
Effect on postretirement benefit obligation..............      13,579            (11,454)
</TABLE>
 
     Benefits provided by the Employee Stock Option Plan (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
 
                                       61
<PAGE>   63
                              TIMES MIRROR COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
defined benefit plan. The fair value of the ESOP assets was $264,715,000 and
$307,188,000 as of December 31, 1998 and 1997, respectively. At December 31,
1998, the ESOP held 3,148,000 shares of Series A common stock, and 1,507,000
shares of Series C common stock. The final contribution to the ESOP was in 1994
and the ESOP has been amended to discontinue contributions by the Company. There
are no unallocated shares in the ESOP at December 31, 1998.
 
     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% to 15% of their basic compensation. The Company makes
matching contributions equal to 50% of employee before-tax contributions from 1%
to 6%. Employees may choose among eight 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 $16,665,000, $19,151,000, and $16,867,000 for the years
ended December 31, 1998, 1997 and 1996, respectively.
 
     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 16 -- LEASES
 
     Rental expense under operating leases was $41,627,000, $45,371,000 and
$46,487,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
Capital leases, contingent rentals and sublease income are not significant. The
future net minimum lease payments as of December 31, 1998 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>
1999......................................................  $ 33,579
2000......................................................    28,618
2001......................................................    28,158
2002......................................................    25,361
2003......................................................    21,099
Later years...............................................    77,937
                                                            --------
          Total...........................................  $214,752
                                                            ========
</TABLE>
 
NOTE 17 -- SEGMENT INFORMATION
 
     The Company has three reportable operating segments, Newspaper Publishing,
Professional Information and Magazine Publishing. 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 information and other media,
including aeronautical charts and flight information, sales and management
training programs and consumer health information. The Magazine Publishing
segment publishes special interest and trade magazines.
 
     The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The Company evaluates
performance based on several factors, of which the primary financial measure is
segment operating profit. Total revenue by industry segment includes sales to
unaffiliated customers and intersegment sales, which are accounted at market
price. Revenues are attributed to geographic areas based on the location of the
assets producing the revenues.
 
     Corporate and Other includes operations not directly related to the
operating segments and general corporate activities including corporate overhead
expenses, corporate investment income, interest expense on
 
                                       62
<PAGE>   64
                              TIMES MIRROR COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
corporate debt and the activities of the Company's affiliates, Eagle New Media
and Eagle Publishing. The Corporate and Other assets are principally comprised
of cash and cash equivalents, marketable securities and other investments.
Substantially all of the Company's investments accounted for under the equity
method are in Corporate and Other.
 
     Financial data for the Company's segments is as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                    1998          1997          1996
                                                 ----------    ----------    ----------
<S>                                              <C>           <C>           <C>
REVENUES
  Newspaper Publishing.........................  $2,308,178    $2,179,244    $2,074,692
  Professional Information.....................     437,729       432,866       410,398
  Magazine Publishing..........................     262,683       248,712       234,192
                                                 ----------    ----------    ----------
     Total reportable segments.................   3,008,590     2,860,822     2,719,282
  Corporate and Other..........................       1,198        21,845        56,938
  Intersegment Revenues........................        (703)         (650)         (400)
                                                 ----------    ----------    ----------
                                                 $3,009,085    $2,882,017    $2,775,820
                                                 ==========    ==========    ==========
OPERATING PROFIT (LOSS)(1)
  Newspaper Publishing.........................  $  297,433    $  402,207    $  307,512
  Professional Information.....................       8,623        63,568        35,764
  Magazine Publishing..........................     (14,232)       18,309         8,753
                                                 ----------    ----------    ----------
     Total reportable segments.................     291,824       484,084       352,029
  Corporate and Other..........................     (79,261)      (84,897)      (61,097)
                                                 ----------    ----------    ----------
                                                 $  212,563    $  399,187    $  290,932
                                                 ==========    ==========    ==========
IDENTIFIABLE ASSETS
  Newspaper Publishing.........................  $1,999,880    $1,792,286    $1,836,158
  Professional Information.....................     344,636       392,852       328,775
  Magazine Publishing..........................     271,457       263,521       244,254
                                                 ----------    ----------    ----------
     Total reportable segments.................   2,615,973     2,448,659     2,409,187
  Corporate and Other..........................   1,602,333       362,239       453,781
  Discontinued Operations......................          --       427,722       364,036
                                                 ----------    ----------    ----------
                                                 $4,218,306    $3,238,620    $3,227,004
                                                 ==========    ==========    ==========
DEPRECIATION AND AMORTIZATION
  Newspaper Publishing.........................  $  116,116    $  106,919    $  104,743
  Professional Information.....................      18,947        18,880        17,340
  Magazine Publishing..........................       7,740         7,040         6,050
                                                 ----------    ----------    ----------
     Total reportable segments.................     142,803       132,839       128,133
  Corporate and Other..........................       4,467         3,457         2,990
                                                 ----------    ----------    ----------
                                                 $  147,270    $  136,296    $  131,123
                                                 ==========    ==========    ==========
CAPITAL EXPENDITURES
  Newspaper Publishing.........................  $  107,479    $   78,760    $   63,698
  Professional Information.....................      22,635        13,438        28,920
  Magazine Publishing..........................       1,651         2,243        10,849
                                                 ----------    ----------    ----------
     Total reportable segments.................     131,765        94,441       103,467
  Corporate and Other..........................       6,593        22,543         4,989
                                                 ----------    ----------    ----------
                                                 $  138,358    $  116,984    $  108,456
                                                 ==========    ==========    ==========
</TABLE>
 
                                       63
<PAGE>   65
                              TIMES MIRROR COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
---------------
(1) Includes restructuring, one-time and other charges as follows (in
    thousands):
 
<TABLE>
<CAPTION>
                                                     1998          1997          1996
                                                   --------       -------       -------
<S>                                                <C>            <C>           <C>
Newspaper Publishing...........................    $116,388       $18,000            --
Professional Information.......................      69,510         8,656       $17,348
Magazine Publishing............................      29,072            --            --
                                                   --------       -------       -------
  Total reportable segments....................     214,970        26,656        17,348
Corporate and Other............................      17,021            --            --
                                                   --------       -------       -------
                                                   $231,991       $26,656       $17,348
                                                   ========       =======       =======
</TABLE>
 
    The pre-tax charges in 1998 are comprised of restructuring and one-time
    charges of $200,806 and charges that did not qualify for accounting
    classification as restructuring charges of $31,185. Total restructuring,
    one-time and other charges in 1998 are $233,491, of which $1,500 is included
    in Other, net.
 
     Substantially all revenue and assets of the Company's reportable segments
are attributed to or located in the United States. Non-U.S. revenues represent
less than 3% of total revenues and are principally related to the Company's
flight information business in Germany.
 
     Significant non-cash items excluding depreciation and amortization, were
non-cash restructuring, one time and other charges in 1998 as follows (in
thousands):
 
<TABLE>
<CAPTION>
                                                              1998
                                                            --------
<S>                                                         <C>
Newspaper Publishing......................................  $ 19,043
Professional Information..................................    61,447
Magazine Publishing.......................................    20,718
                                                            --------
  Total reportable segments...............................   101,208
Corporate and Other.......................................     6,055
                                                            --------
                                                            $107,263
                                                            ========
</TABLE>
 
     A reconciliation of operating profit to income from continuing operations
before income taxes is set forth in the Company's Consolidated Statements of
Income on page 33.
 
     The Company does not have a single external customer who represents 10% or
more of its revenue.
 
NOTE 18 -- 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) an increase in the use of alternate media such as
the Internet for classified and other advertising; (e) an increase in expenses
related to new initiatives and product improvement efforts in the 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.
 
                                       64
<PAGE>   66
                              TIMES MIRROR COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 19 -- QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
 
     A summary of the unaudited quarterly results of operations restated for
discontinued operations (see Note 3) follows (in thousands except per share
amounts):
 
<TABLE>
<CAPTION>
                                                                  1998 QUARTERS ENDED
                                                      -------------------------------------------
                                                      MAR. 31    JUNE 30     SEPT. 30    DEC. 31
                                                      --------   --------   ----------   --------
    <S>                                               <C>        <C>        <C>          <C>
    Revenues........................................  $714,130   $755,818   $  729,399   $809,738
    Costs and expenses:
      Cost of sales.................................   383,603    388,770      385,249    360,989
      Selling, general and administrative
         expenses...................................   240,580    242,199      260,400    333,926
      Restructuring and one-time charges............        --     39,697       80,012     81,097
                                                      --------   --------   ----------   --------
    Operating profit................................    89,947     85,152        3,738     33,726
    Interest expense, net...........................   (10,295)   (16,388)      (6,448)    (2,870)
    Equity income (loss)............................    (4,884)    (2,204)       1,223     (2,326)
    Other, net......................................     4,400     10,026        6,451     11,604
                                                      --------   --------   ----------   --------
    Income from continuing operations before income
      taxes.........................................    79,168     76,586        4,964     40,134
    Income tax provision............................    33,201     30,751       24,536     18,950
                                                      --------   --------   ----------   --------
    Income (loss) from continuing operations........    45,967     45,835      (19,572)    21,184
    Discontinued operations, net....................      (706)     3,366    1,096,121    225,143
                                                      --------   --------   ----------   --------
    Net income......................................  $ 45,261   $ 49,201   $1,076,549   $246,327
                                                      ========   ========   ==========   ========
    Basic earnings (loss) per share:
      Continuing operations.........................  $    .46   $    .46   $     (.30)  $    .20
      Discontinued operations.......................      (.01)       .04        13.01       2.85
                                                      --------   --------   ----------   --------
    Basic earnings per share........................  $    .45   $    .50   $    12.71   $   3.05
                                                      ========   ========   ==========   ========
    Diluted earnings (loss) per share:
      Continuing operations.........................  $    .45   $    .45   $     (.30)  $    .20
      Discontinued operations.......................      (.01)       .04        13.01       2.79
                                                      --------   --------   ----------   --------
    Diluted earnings per share......................  $    .44   $    .49   $    12.71   $   2.99
                                                      ========   ========   ==========   ========
</TABLE>
 
                                       65
<PAGE>   67
                              TIMES MIRROR COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
<TABLE>
<CAPTION>
                                                                  1997 QUARTERS ENDED
                                                      -------------------------------------------
                                                      MAR. 31    JUNE 30     SEPT. 30    DEC. 31
                                                      --------   --------   ----------   --------
    <S>                                               <C>        <C>        <C>          <C>
    Revenues........................................  $677,322   $714,237   $  699,067   $791,391
    Costs and expenses:
      Cost of sales.................................   352,892    359,046      368,139    396,271
      Selling, general and administrative
         expenses...................................   240,287    241,919      233,218    291,058
                                                      --------   --------   ----------   --------
    Operating profit................................    84,143    113,272       97,710    104,062
    Interest expense, net...........................    (6,785)    (7,522)     (11,058)   (13,842)
    Equity income (loss)............................      (974)      (160)         336     (1,080)
    Other, net......................................       104      1,256        3,192      3,211
                                                      --------   --------   ----------   --------
    Income from continuing operations before income
      taxes.........................................    76,488    106,846       90,180     92,351
    Income tax provision............................    32,978     44,991       36,118     30,878
                                                      --------   --------   ----------   --------
    Income from continuing operations...............    43,510     61,855       54,062     61,473
    Discontinued operations, net....................     1,723      4,131       12,862     10,696
                                                      --------   --------   ----------   --------
    Net income......................................  $ 45,233   $ 65,986   $   66,924   $ 72,169
                                                      ========   ========   ==========   ========
    Basic earnings per share:
      Continuing operations.........................  $    .35   $    .56   $      .50   $    .64
      Discontinued operations.......................       .02        .04          .14        .12
                                                      --------   --------   ----------   --------
    Basic earnings per share........................  $    .37   $    .60   $      .64   $    .76
                                                      ========   ========   ==========   ========
    Diluted earnings per share:
      Continuing operations.........................  $    .34   $    .54   $      .49   $    .62
      Discontinued operations.......................       .02        .04          .13        .11
                                                      --------   --------   ----------   --------
    Diluted earnings per share......................  $    .36   $    .58   $      .62   $    .73
                                                      ========   ========   ==========   ========
</TABLE>
 
NOTE 20 -- COMMITMENTS AND CONTINGENCIES
 
     The Company and its subsidiaries are defendants in actions for 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. 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 21 -- SUBSEQUENT EVENTS
 
     The Company signed a definitive agreement in January 1999 with Big
Entertainment, Inc. to sell Hollywood Online, Inc., and its Web site,
hollywood.com. Pursuant to the agreement, Big Entertainment, Inc. will issue
newly-issued stock to the Company with a then current quoted market value of
$31,000,000. Big Entertainment, Inc. also has the right, under certain
circumstances, to pay up to $1,000,000 of the merger consideration in cash. The
transaction is subject to customary regulatory and shareholder approval.
 
     In February 1999, Eagle New Media Investments, Inc. LLC, an investment
affiliate of the Company, acquired Newport Media, Inc., a publisher of shopper
publications in the Long Island and New Jersey areas, for approximately
$132,000,000.
 
                                       66
<PAGE>   68
 
                            THE TIMES MIRROR COMPANY
 
         SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                           (IN THOUSANDS OF DOLLARS)
 
<TABLE>
<CAPTION>
                                                          CHARGED TO
                                             BALANCE AT    COSTS AND    CHARGED      DEDUCTIONS   BALANCE AT
                                             BEGINNING     EXPENSES     TO OTHER        FROM        END OF
                                             OF PERIOD    OR REVENUES   ACCOUNTS      RESERVES      PERIOD
                                             ----------   -----------   --------     ----------   ----------
<S>                                          <C>          <C>           <C>          <C>          <C>
Year ended 12/31/98
  Allowance for doubtful accounts..........   $31,511       $24,879      $1,348       $(24,563)    $33,175
  Allowance for returns....................    11,258        60,055         176        (59,676)     11,813
                                              -------       -------      ------       --------     -------
                                              $42,769       $84,934      $1,524(A)    $(84,239)    $44,988
                                              =======       =======      ======       ========     =======
Year ended 12/31/97
  Allowance for doubtful accounts..........   $28,825       $24,180      $  704       $(22,198)    $31,511
  Allowance for returns....................    13,796        53,935      (1,506)       (54,967)     11,258
                                              -------       -------      ------       --------     -------
                                              $42,621       $78,115      $ (802)(A)   $(77,165)    $42,769
                                              =======       =======      ======       ========     =======
Year ended 12/31/96
  Allowance for doubtful accounts..........   $24,475       $25,944      $  185       $(21,779)    $28,825
  Allowance for returns....................    12,125        58,919          --        (57,248)     13,796
                                              -------       -------      ------       --------     -------
                                              $36,600       $84,863      $  185       $(79,027)    $42,621
                                              =======       =======      ======       ========     =======
</TABLE>
 
---------------
(A) Primarily allowances of businesses acquired and sold.
 
Note: A detailed schedule of restructuring liabilities has been provided in Note
      6 of the notes to consolidated financial statements.
 
                                       67
<PAGE>   69
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.
 
     Not applicable.
 
                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
 
     The Company's principal officers, including executive officers, are listed
in Part I hereof. The information under the headings "Election of Directors,"
"Nominees for Directors," "Continuing Directors," "Certain Relationships and
Related Transactions" and "Section 16(a) Beneficial Ownership Reporting
Compliance" in the definitive Proxy Statement for the Company's 1999 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
1999 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 1999 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
"Certain Relationships and Related Transactions" in the definitive Proxy
Statement for the Company's 1999 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 (a)(2) Financial Statements and Financial Statement Schedules
filed as part of this report:
 
        As listed in the Index to Financial Statements and Financial Statement
        Schedule on page 31 hereof.
 
     (a)(3) Exhibits filed as part of this report:
 
        As listed in the Exhibit Index beginning on page 71 hereof.
 
     (b) Reports on Form 8-K:
 
        The Company filed a report on Form 8-K dated October 9, 1998 announcing
        the completion of the acquisition by Harcourt General, Inc. of the
        Company's health science publisher, Mosby, Inc.
 
        The Company filed a report on Form 8-K dated October 9, 1998 relating to
        the disposition of Mosby, Inc.
 
        The Company filed a report on Form 8-K dated December 21, 1998
        announcing purchases of the Company's Series A Common Stock.
 
                                       68
<PAGE>   70
 
                                   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 4, 1999
 
     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 and on the dates indicated:
 
<TABLE>
<CAPTION>
                      SIGNATURE                                     TITLE                    DATE
                      ---------                                     -----                    ----
<S>                                                    <C>                               <C>
                 /s/ MARK H. WILLES                         Chairman of the Board,       March 4, 1999
-----------------------------------------------------     President, Chief Executive
                   Mark H. Willes                      Officer and Director (Principal
                                                              Executive Officer)
 
                 /s/ THOMAS UNTERMAN                     Executive Vice President and    March 4, 1999
-----------------------------------------------------      Chief Financial Officer
                   Thomas Unterman                         (Principal Financial and
                                                             Accounting Officer)
 
            /s/ GWENDOLYN GARLAND BABCOCK                          Director              March 4, 1999
-----------------------------------------------------
              Gwendolyn Garland Babcock
 
                 /s/ DONALD R. BEALL                               Director              March 4, 1999
-----------------------------------------------------
                   Donald R. Beall
 
                 /s/ JOHN E. BRYSON                                Director              March 4, 1999
-----------------------------------------------------
                   John E. Bryson
 
                 /s/ BRUCE CHANDLER                                Director              March 4, 1999
-----------------------------------------------------
                   Bruce Chandler
 
              /s/ CLAYTON W. FRYE, JR.                             Director              March 4, 1999
-----------------------------------------------------
                Clayton W. Frye, Jr.
 
                  /s/ ROGER GOODAN                                 Director              March 4, 1999
-----------------------------------------------------
                    Roger Goodan
 
                 /s/ SHERRY LANSING                                Director              March 4, 1999
-----------------------------------------------------
                   Sherry Lansing
 
                /s/ DAWN GOULD LEPORE                              Director              March 4, 1999
-----------------------------------------------------
                  Dawn Gould Lepore
 
             /s/ ALFRED E. OSBORNE, JR.                            Director              March 4, 1999
-----------------------------------------------------
               Alfred E. Osborne, Jr.
</TABLE>
 
                                       69
<PAGE>   71
 
<TABLE>
<CAPTION>
                      SIGNATURE                                     TITLE                    DATE
                      ---------                                     -----                    ----
<S>                                                    <C>                               <C>
                /s/ ROBERT W. SCHULT                               Director              March 4, 1999
-----------------------------------------------------
                  Robert W. Schult
 
             /s/ WILLIAM STINEHART, JR.                            Director              March 4, 1999
-----------------------------------------------------
               William Stinehart, Jr.
 
              /s/ WARREN B. WILLIAMSON                             Director              March 4, 1999
-----------------------------------------------------
                Warren B. Williamson
 
                 /s/ EDWARD ZAPANTA                                Director              March 4, 1999
-----------------------------------------------------
                   Edward Zapanta
</TABLE>
 
                                       70
<PAGE>   72
 
                                 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.
    -------
    <S>        <C>
     *2.1      Agreement and Plan of Merger by and among Times Mirror,
               Chandis Acquisition Corporation, Chandis Securities Company,
               and the shareholders of Chandis Securities Company, dated
               August 8, 1997 (Exhibit 2.1 to Times Mirror's Current Report
               on Form 8-K, dated August 8, 1997)
     *2.2      Contribution Agreement among Times Mirror, certain
               subsidiaries thereof, Chandler Trust No. 1 and Chandler
               Trust No. 2, dated August 8, 1997 (Exhibit 10.2 to Current
               Report on Form 8-K, dated August 8, 1997)
     *2.3      Amended and Restated Agreement and Plan of Merger, dated as
               of April 27, 1998, by and among Reed Elsevier U.S. Holdings
               Inc., Reed Elsevier Overseas BV, CBM Acquisition Parent Co.,
               CBM MergerSub Corp., Times Mirror, TMD, Inc. and Matthew
               Bender Company, Incorporated (Exhibit 2.1 to Times Mirror's
               Current Report on Form 8-K, dated July 31, 1998)
     *2.4      Partnership Interest Purchase Agreement, dated as of April
               26, 1998, by and among Times Mirror, Shepard's Inc., TM
               ShepCo, Inc., Reed Elsevier Inc. and Reed Books Inc.
               (Exhibit 2.2 to Times Mirror's Current Report on Form 8-K
               dated July 31, 1998)
     *2.5      Amended and Restated Agreement and Plan of Merger, dated as
               of October 8, 1998 by and among Harcourt Brace & Company,
               Mosby Parent Corp., Mosby Acquisition Corp., Times Mirror
               and Mosby, Inc. (Exhibit 2.1 to Times Mirror's Current
               Report on Form 8-K, dated October 9, 1998)
     *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      Amended and Restated Bylaws of Times Mirror
     *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)
     *3.7      Certificate of Designation of Series C-1 Preferred Stock
               (Exhibit 4.1 to Times Mirror's Current Report on Form 8-K,
               dated August 8, 1997)
     *3.8      Certificate of Designation of Series C-2 Preferred Stock
               (Exhibit 4.2 to Times Mirror's Current Report on Form 8-K,
               dated August 8, 1997)
     *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)
</TABLE>
 
                                       71
<PAGE>   73
 
<TABLE>
<CAPTION>
    EXHIBIT
      NO.
    -------
    <S>        <C>
     *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)
     *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)
     *4.7      Indenture dated April 15, 1997 between Times Mirror and
               Citibank, N.A., as trustee (Exhibit 4.1 to Times Mirror's
               Current Report on Form 8-K, dated April 9, 1997)
     *4.8      Officer's Certificate dated September 9, 1997 establishing
               the terms of the 6.61% Debentures due September 15, 2027 and
               attaching the specimen Form of Debenture (Exhibit 4.2 to
               Times Mirror's Current Report on Form 8-K, dated September
               9, 1997)
    *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 Directors' 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)
</TABLE>
 
                                       72
<PAGE>   74
 
<TABLE>
<CAPTION>
    EXHIBIT
      NO.
    -------
    <S>        <C>
    *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 (Exhibit
               10.14 to Times Mirror's 1996 Annual Report on Form 10-K)
    *10.15     The Times Mirror Company 1997 Directors Stock Option Plan
               (Exhibit 10.15 to Times Mirror's 1996 Annual Report on Form
               10-K)
    *10.16     Limited Liability Company Agreement of TMCT, LLC, dated
               August 8, 1997 (Exhibit 10.1 to Times Mirror's Current
               Report on Form 8-K, dated August 8, 1997)
    *10.17     Registration Rights Agreement by and among Times Mirror and
               the shareholders of Chandis Securities Company, dated August
               8, 1997 (Exhibit 10.3 to Times Mirror's Current Report on
               Form 8-K, dated August 8, 1997)
    *10.18     Lease Agreement between TMCT, LLC and Times Mirror, dated
               August 8, 1997 (Exhibit 10.4 to Times Mirror's Current
               Report on Form 8-K, dated August 8, 1997)
     11        Computation of Earnings Per Share
     12        Computation of Ratio of Earnings to Fixed Charges and Ratio
               of Earnings to Fixed Charges and Preferred Dividends
     21        Subsidiaries of the Registrant
     23        Consent of Ernst & Young LLP, Independent Auditors
     27        Financial Data Schedule
</TABLE>
 
                                       73