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TIME INCORPORATED
1981 ANNUAL REPORT
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TIME INCORPORATED
A diversified company in the publishing, forest products, and video fields
PUBLISHING FOREST PRODUCTS VIDEO
Magazines Temple-Eastex American Television and
Communications
Time Inland Container
Home Box Office
Sports illustrated Lumbermen's Investment Corp.
WOTV
People AFCO Industries
Time-Life Video
Fortune Temple Associates
Life Eastex Packaging
Money Georgia Kraft (50%)
Discover
Books
Time-Life Books
Book-of-the-Month Club
Little, Brown
Other Activities
Selling Areas-Marketing, Inc.
(SAMI)
Pioneer Press
© 1982 Time Inc. All rights reserved.
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FINANCIAL
HIGHLIGHTS
Total Revenues
1981 1980
$Billions 3.3
(in thousands except for per share data)
Revenues . . . . . . . . . . . . .. $3,296,382 $2,800,013
Income from Continuing
Operations ......... . 184,568 162,073
Net Income ...... ..... . 148,821 141,203
Capital Expenditures 404,000 261,000
1.2
iliill
Per Share:
Income from Continuing
Operations ....... . $ 3.02 $ 2.88
Net Income ......... . 2.43 2.51
72 73 74 75 76 77 78 79 80 81 Dividends per common
share ............ . .95 .8825
Price Range
(Common Stock) 26%-413/s 19-3l9/16
Common shares
outstanding (000) 49,765 46,561
Net Income
The number of common shareholders of record as of
$Millions February 1, 1982, was 13,557.
TABLE OF
CONTENTS
iii I
Letter to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . 2
1981: A Journalistic Retrospective .............. 6
Review of Operations . . . . . . . . . . . . . . . . . . . . . . . . 8
Executive Appointments ...................... 34
72 73 74 75 76 77 78 79 80 81
Management's Discussion and Analysis ......... 36
Financial Statements ......................... 43
Officers and Operating Executives ............. 56
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LETTER TO
SHAREHOLDERS
D
uring the 1970's, Time Inc. not only
expanded its publishing activities but
also made tremendous strides in diversifying
its operations, ending the decade as a truly
broad-based communications and natural
resource company. Last year, as the new dec
ade began, the benefits of this diversification
program were becoming evident. We were
able to report record earnings in a recession
ary year, despite the fact that several of our
operations had disappointing earnings.
In further pursuit of our diversification
program, we undertook record capital
expenditures last year, with a large share of
the outlay going to the Video Group, pri
marily for the expansion of cable television
operations. We also felt it was in our share
holders' best interest to discontinue two activ
ities-Time-Life Films, which produced
feature motion pictures and television pro
grams, and The Washington Star, our daily
newspaper in Washington, D.C.
We are now a participant in three major
industries: publishing, video, and forest prod
ucts. Last year Time Inc. subsidiaries in all
three of these fields contributed to the Com than two million subscribers for an increase
pany's growth in revenues and profits, and of nearly 40 percent and a universe of more
a surprising number of operating divisions than 8.5 million homes.
turned in record performances, despite the Cinemax, a second pay service launched in
state of the economy. 1980, performed even more spectacularly.
By the end of 1981, after less than 18 months,
Video Cinemax was serving more than a million
Our fastest growing operation in recent years subscribers in over 600 cable systems.
has been the Video Group. Time Inc. compa Having taken an early lead in the cable and
nies now rank No. 1 in both the cable and the pay-TV businesses, we are now actively
pay-television businesses. American Televi exploring other opportunities in the video
sion and Communications Corp. (ATC) is the field. Last summer, for example, we acquired
largest cable television system operating com a one-third interest in the USA Network, an
pany, while Home Box Office (HBO) is the advertiser-supported cable program service
largest pay-TV programming service. Both of that reaches about 10 million homes. Our
these companies grew impressively in 1981, equal partners in this venture are two major
ATC increasing its subscriber count to more entertainment companies, Paramount and
than 1. 8 million, and HBO adding more
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(from the left)
J. Richard Munro,
president and
chief executive officer;
Clifford J. Grum,
executive vice president;
Ralph P. Davidson,
chairman of the board.
MCA. Not only does the USA Network give both ATC and HBO in the coming decade.
us a strong entree to the television advertis For the past ten years ATC has concentrated
ing market, it may also eventually serve as on acquiring and developing cable franchises.
a vehicle for going down yet another video In the next ten it will continue these efforts,
profit path-marketing programs on a pay but more emphasis will be placed on market
per-view basis. ing new and additional services to an
We are experimenting with many non expanding base of cable customers. HBO will
entertainment applications of cable, such as continue its innovative ways and strive to
home security systems, energy controls, stay in the forefront of the pay-TV program
shopping by cable, electronic banking and ming industry.
ticket buying. One such service that we will Five years ago, it is worth recalling, Time
begin field-testing this year is a form of tele Inc.'s video operations were still in the devel
text in which thousands of "pages" of useful opmental stage and barely breaking even.
textual and graphic information, ranging In 1981, Video caught up with our other
from hard news to leisure guides, will be major groups as a contributor to operating
made available to subscribers on a call-up income, and in 1982 it will probably become
basis. the largest profit source of all.
We also anticipate further growth from
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Publishing but Time-Life Books had a very bad year.
Our magazines had an exceptionally good TLB, one of the world's largest marketers of
year in 1981. Their operating profits rose 81 books by mail, was seriously affected by the
percent to a record $102 million on revenues recessionary economy, the adverse impact
of $870 million. of currency exchange rates on its foreign
Our advertising revenues should continue sales, which now account for more than half
to grow as magazines are increasingly recog its revenues, and by the fact that a major new
nized as the most cost-efficient method of series introduced during the year did not
promoting the sale of a wide variety of con sell as well initially as expected. While we are
sumer products. As the television dial offers not happy about the current hiatus in our
an ever larger and more varied menu of Books Group's growth, we are reassessing
programs, there will be more fractionating of the marketing and editorial policies of this
the television audience, including more view major subsidiary and feel confident the pres
ership of pay channels without any advertis ent downtrend in its earnings will be
ing. Commercial television will no longer reversed.
offer the concentration of viewers it does
today. Forest Products
Magazine advertising will increasingly be Our Forest Products Group turned in a
perceived as a better buy. Magazines gener remarkably strong performance in 1981, par
ally have already benefited from this trend ticularly in view of the virtual collapse of
and Time Inc.'s have fared particularly well. the U.S. housing market. Our building prod
Today nearly one of every five magazine dol ucts operations actually showed a small profit
lars goes to Time Inc.'s publications. in 1981 as compared with a loss the previous
The continuing circulation growth of our year, and our two paper operations did
magazines is a reflection of their enduring exceptionally well.
vitality. Our flagship magazine, Time, shows The Forest Products Group as a whole,
no signs of aging; one issue of Time last consequently, turned in profits of $107 mil
year carried over $10 million of advertising, lion in 1981 on revenues of $1.2 billion. The
an all-time record for any weekly magazine. group's profits were up a healthy 22 percent
We have raised both the single copy and sub and set a new record.
scription prices of all our publications in The compensating effect of product diversi
recent years and our readers have accepted fication should continue to serve the Forest
these higher prices. Our circulation revenues Products Group well when some markets
consequently have risen even faster than soften and others remain strong. There was a
our advertising revenues, and subscription continuing strong demand for paper during
renewals remain strong. the first three quarters of 1981, for example,
The Magazine Group's bravura perform enabling our Pulp and Paperboard Division
ance last year more than made up for a sharp to turn out a record tonnage of product.
decline in the earnings of our Books Group. Inland Container, one of the largest pro
Little, Brown had a good year in 1981 and ducers of containerboard and corrug?ted con-
Book-of-the-Month Club did extremely well,
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tainers in the country, enjoyed another record subscribe to the theory that the telecommuni
year in production, revenues, and operating cations revolution is just getting under way,
profits. Inland has contributed larger operat and we intend to keep Time Inc. in its
ing profits to Time Inc. every year since its forefront.
acquisition in 1978. As for our forest products operations,
In the final months of 1981, however, all their profit potential currently lies at least
paper markets began to soften and demand is partially dormant. But like the renewable
currently still declining. We do not anticipate resource on which they are based, their
any substantial recovery in this area until growth will resume. In the past, building
the economy itself begins to recover, perhaps products have contributed more than $40 mil
later in the year. lion to Time Inc.'s profits in a single year.
We expect they will do so again. The housing
* * * market, more than any other, creates its own
Outlook backlog of deferred demand. Household for
In 1979 Time Inc.'s management initiated a mation continues even during recessions,
five-year program of growth and develop and at some point the pent-up demand for
ment. We are happy to report that the 1981 housing will have to be satisfied.
financial results have put this development So, while we have some misgivings
program well ahead of schedule. The Com about the immediate economic outlook and
pany was, therefore, able once again to raise are taking the necessary belt-tightening steps,
the quarterly dividend rate last year, this just in case the recession gets worse, we are
time from 22.5 cents to 25 cents. In October, highly optimistic for the long term.
Time Inc.'s common stock was split two-for Time Inc. can no longer be said to be a
one. company whose assets ride down in the ele
We enter 1982 with a sense of immense vators every evening; it is now well endowed
anticipation. We have strong managements in with more conventional assets. Nevertheless,
all of our operating groups, and we think we recognize that the people in those eleva
we are well positioned for further growth in tors and in our offices, plants, and forests are
all of them. Our seven magazines are unsur still our most important assets. With their
passed in editorial excellence, and are the continued help we look forward to another
most consistently and dramatically profitable record year in 1982.
in the history of magazine publishing. Our
newest magazine, Discover, has enjoyed initial
circulation acceptance and growth well 9/f
{J ./!~-- k!_ ~ ~
beyond our expectations. We expect to add
one or more new publications to this impres
sive array in the years immediately ahead. ;:;:; J. Richard Munro
In the video field, Time Inc.'s rise to President and Chief Executive Officer
eminence has been meteoric. We intend to
maintain our present leadership in this area February 17, 1982
by continuing to innovate and to invest. We
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1981:
A JOURNALISTIC
RETROSPECTIVE
F
or both the United States and Time
Incorporated, 1981 began with thoughts
of renewal.
In a special journalistic effort, all Time Inc.
magazines joined together for the first time
to work on a single project. It was called
American Renewal and was prompted by the
conviction that something must and can be
done to reverse the growing self-doubt and
sense of failure America has experienced
in recent years. In 25 separate articles, our
seven magazines simultaneously examined Henry A. Grunwald, editor-in-chief
the nation's major problems and offered pos
sible remedies: ways to rebuild the American ment spending. At year's end, as deficit pro
economy, to restore American power in the jections grew alarmingly, doubts about
world, and to revive at least in some measure "Reaganomics" increased.
America's morale. The press as a whole emphasized the
Public reaction was gratifying. It ranged recession. Here journalism faced a dilemma
from the ceremonial (the governor of Alaska and a considerable responsibility: how to
proclaimed March American Renewal month) report the situation without rushing to a pre
to the comic (National Lampoon printed a par mature judgment of the Administration's
ody of the project). From our readers we had program. Americans' notorious impatience,
requests for 52,000 reprints of all the articles, their insistence on quick results, were again
and unusually thoughtful letters, including very much in evidence.
many from business leaders, academics, Cabi
* * *
net members, Senators, and Representatives.
In his inaugural address President Reagan The story of new beginnings had its
also called for renewal and for new begin ghastly counterpoint in terrorism. There were
nings. Some of our proposals paralleled his; the assassination attempts, fortunately unsuc
many differed sharply. Throughout the year, cessful, on the Pope and on President
the Administration's efforts to set a new Reagan, as well as the murder of Anwar
course for the country were reported by the Sadat. In the press coverage of these events, it
Time Inc. magazines, each bringing its own was especially the photojournalists who dis
approach to the story. Money stressed "What tinguished themselves. One photographer,
Reagan Economics Means to You~' Time ran called "the crazy man" in Egypt because he
three cover stories on Ronald Reagan's eco has gambled his life so many times to docu
nomic policies, observing that "no President ment a story, captured at a distance of only
since FDR has done so much so quickly to yards the full sequence of Sadat's assassina
change the basic path of the American econ tion. Life devoted its large pages to key
omy. " Nevertheless, only one month after frames of these pictures, with extraordinary
Reagan took office, Fortune warned that his impact.
program, of which the magazine approved in Other events as well made it the year of the
general, would run into trouble if taxes were camera: the return of the hostages, the extrav
cut without commensurate cuts in govern- aganza of Britain's royal wedding, and the
launch of the space shuttle (Time was on the
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newsstands with its five-page story, including could be shot.. .And perhaps not tomorrow,
an award-winning photograph of the launch, but the day after we will overcome~'
the day after the event). It was specifically the
still camera which reasserted its ability to
freeze. moments of life and death with a Journalism in 1981 had its inglorious
power that often eludes the fleeting images moments. Notable was the case of Janet
on the television screen. Cooke, a young reporter on the Washington
But the interaction between print and video Post who fabricated her dramatic story about
journalism at Time Inc. continued in promis a nonexistent eight-year-old drug user. When
ing ways. A 40-member staff, including a the story won the Pulitzer Prize, it was
former Time correspondent as managing edi exposed as a fake. Most professionals argued
tor, prepared to test a teletext service that that the editorial carelessness that allowed
allows a viewer to select and call up this story to reach print was not typical of the
hundreds of different kinds of news and American press. But the incident did not
information on his TV screen. Throughout contribute to the credibility of journalists.
the year, the magazines prepared various There were fewer attempts than in recent
television projects, including a Money show years to restrain the press through legal
for HBO and a Discover program for action, except for some major libel verdicts
syndication. that were clearly punitive if not vengeful. The
In its second year, Discover proved itself a press was found suspect by Senator Jeremiah
unique newsmagazine of science. Encouraged Denton, chairman of a new Senate Subcom
by its success and by the continued vitality mittee on Security and Terrorism. At sub
of its other magazines, Time Inc. reconsti committee hearings, he declared that Soviet
tuted a Magazine Development Group, disinformation tactics had had a "measure of
charged with exploring and preparing future success" in deceiving "a story-hungry and
magazine projects. sometimes gullible press"- a blanket and
In October Time conducted the latest of its undocumented charge.
Newstours. For nearly two decades, on an During his first year in office President
average of once every three years, these tours Reagan had generally good relations with the
have taken the chief executives of leading press, but in the fall he made a dubious sug
American businesses, as well as educators gestion: that newsmen censor themselves.
and civic leaders, to areas of major news Before printing certain stories, he said, jour
importance and introduced them to world nalists ought to reflect whether they would
leaders. The 1981 tour went to Eastern have a good or bad effect on American for
Europe, including Poland, and the Middle eign policy. Even if newsmen could guess
East. It began with an interview with Lech what effect their stories would have, a free
Walesa, two months before the imposition of press in peacetime cannot accept such a
martial law in Poland, and ended with an standard.
interview with Egyptian President Hosni
Mubarak, three weeks after he took over
from the assassinated Anwar Sadat. Perhaps
prophetically, Walesa told the Newstour par
ticipants, "We can be defeated. Half of us
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PUBLISHING Magazine profits rose 81 percent
Time magazine set industry records
Time-Life Books had disappointing
year
Other Activities did well
8