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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________________to_________________
COMMISSION FILE NUMBER 1-9329
PULITZER PUBLISHING COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 430496290
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
900 NORTH TUCKER BOULEVARD, ST. LOUIS, MISSOURI 63101
(Address of principal executive offices)
(314) 340-8000
(Registrant's telephone number, including area code)
NO CHANGES
(Former name, former address and former fiscal year, if changed since last
report)
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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
CLASS OUTSTANDING 7/31/94
COMMON STOCK 3,530,719
CLASS B COMMON STOCK 9,466,566
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE DATA)
Second Quarter Ended Two Quarters Ended
June 30, June 30,
------------------------ ------------------------
1994 1993 1994 1993
---- ---- ---- ----
OPERATING REVENUES - NET: (Unaudited) (Unaudited)
Publishing:
Advertising $ 45,691 $ 42,683 $ 87,300 $ 81,266
Circulation 19,509 19,661 39,469 39,608
Other 11,238 10,791 21,905 20,367
Broadcasting 46,292 31,194 85,447 56,679
---------- ----------- ----------- -----------
Total operating revenues 122,730 104,329 234,121 197,920
---------- ----------- ----------- -----------
OPERATING EXPENSES:
Publishing operations 31,529 32,206 62,967 62,849
Broadcasting operations 15,109 11,102 30,368 22,289
Selling, general and administrative 43,448 39,345 86,381 77,407
St. Louis Agency adjustment 4,233 2,835 6,952 5,037
Depreciation and amortization 7,580 4,328 15,142 8,631
---------- ----------- ----------- -----------
Total operating expenses 101,899 89,816 201,810 176,213
---------- ----------- ----------- -----------
Operating income 20,831 14,513 32,311 21,707
---------- ----------- ----------- -----------
Interest income 430 239 807 537
Interest expense (3,084) (1,501) (6,400) (3,220)
Net other expense (445) (302) (693) (526)
----------- ------------ ------------ ------------
Total (3,099) (1,564) (6,286) (3,209)
----------- ------------ ------------ ------------
INCOME BEFORE PROVISION FOR INCOME
TAXES AND CUMULATIVE EFFECTS OF
CHANGES IN ACCOUNTING PRINCIPLES 17,732 12,949 26,025 18,498
PROVISION FOR INCOME TAXES 7,232 5,099 10,642 7,312
---------- ----------- ----------- -----------
INCOME BEFORE CUMULATIVE EFFECTS OF
CHANGES IN ACCOUNTING PRINCIPLES 10,500 7,850 15,383 11,186
CUMULATIVE EFFECTS OF CHANGES IN
ACCOUNTING PRINCIPLES, NET OF
APPLICABLE INCOME TAXES (719) 360
---------- ----------- ----------- -----------
NET INCOME $ 10,500 $ 7,850 $ 14,664 $ 11,546
========== =========== =========== ===========
See notes to consolidated financial statements.
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PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME (CONTINUED)
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE DATA)
Second Quarter Ended Two Quarters Ended
June 30, June 30,
------------------------ ------------------------
1994 1993 1994 1993
---- ---- ---- ----
(Unaudited) (Unaudited)
EARNINGS PER SHARE OF STOCK
(COMMON AND CLASS B COMMON):
Income before cumulative effects of
changes in accounting principles $ .81 $ .68 $ 1.19 $ .97
Cumulative effects of changes in
accounting principles (.06) .03
-------- -------- --------- ---------
Total $ .81 $ .68 $ 1.13 $ 1.00
======== ======== ======== =========
WEIGHTED AVERAGE NUMBER OF SHARES
(COMMON AND CLASS B COMMON
STOCK) OUTSTANDING 12,991 11,599 12,983 11,590
======= ======= ======= =======
See notes to consolidated financial statements.
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PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
(IN THOUSANDS)
JUNE 30, DEC. 31,
1994 1993
---------- ----------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $41,216 $34,970
Trade accounts receivable (less allowance for doubtful
accounts of $3,009 and $2,575) 63,222 61,953
Inventory 4,620 5,912
Prepaid expenses and other 3,932 6,959
Program rights 8,049 11,285
-------- --------
Total current assets 121,039 121,079
-------- --------
PROPERTIES:
Land 12,204 12,204
Buildings 69,816 69,315
Machinery and equipment 184,907 181,939
Construction in progress 4,089 2,937
-------- --------
Total 271,016 266,395
Less accumulated depreciation 135,273 125,497
-------- --------
Properties - net 135,743 140,898
-------- --------
INTANGIBLE AND OTHER ASSETS:
Intangible assets - net of applicable amortization 139,291 144,140
Receivable from The Herald Company 42,598 40,190
Program rights, long-term portion 2,550 4,305
Other 18,038 12,491
-------- --------
Total intangible and other assets 202,477 201,126
-------- --------
TOTAL $459,259 $463,103
======== ========
See notes to consolidated financial statements.
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PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
(IN THOUSANDS, EXCEPT SHARE DATA)
JUNE 30, DEC. 31,
1994 1993
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
CURRENT LIABILITIES:
Trade accounts payable $17,457 $13,292
Current portion of long-term debt 14,325 14,320
Salaries, wages and commissions 10,471 10,314
Income taxes payable 1,821 4,272
Program contracts payable 7,319 10,899
Interest payable 4,032 4,751
Pension obligations 825 588
Other 5,293 3,440
-------- --------
Total current liabilities 61,543 61,876
-------- --------
LONG-TERM DEBT 141,631 161,920
-------- --------
PROGRAM CONTRACTS PAYABLE 2,943 4,234
-------- --------
PENSION OBLIGATIONS 25,633 23,377
-------- --------
POSTRETIREMENT BENEFIT OBLIGATION 88,692 85,928
-------- --------
OTHER LONG-TERM LIABILITIES 7,174 3,625
-------- --------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 25,000,000 shares
authorized; issued and outstanding - none
Common stock, $.01 par value; 100,000,000 shares authorized;
issued - 3,534,164 in 1994 and 3,510,850 in 1993 35 35
Class B common stock, convertible, $.01 par value; 50,000,000
shares authorized; issued - 15,848,848 in 1994 and
15,849,848 in 1993 158 158
Additional paid-in capital 121,392 120,908
Retained earnings 197,681 188,665
-------- --------
Total 319,266 309,766
Treasury stock - at cost; 8,345 shares of common stock
and 6,382,282 shares of Class B common stock in
1994 and 1993 (187,623) (187,623)
-------- --------
Total stockholders' equity 131,643 122,143
-------- --------
TOTAL $459,259 $463,103
======== ========
See notes to consolidated financial statements.
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PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN THOUSANDS)
TWO QUARTERS ENDED
JUNE 30,
---------------------------
1994 1993
---------- ---------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $14,664 $11,546
Adjustments to reconcile net income to net cash provided
by operating activities:
Non-cash items:
Cumulative effects of changes in accounting principles,
net of applicable income taxes 719 (360)
Depreciation 10,196 6,498
Amortization of intangibles 4,946 2,133
Incremental increase in postretirement benefit obligation 1,537 1,347
Changes in assets and liabilities which provided (used) cash:
Trade accounts receivable (1,269) 1,052
Inventory 1,292 (1,189)
Other assets 2,838 (1,646)
Trade accounts payable and other liabilities 4,253 1,570
Income taxes payable (2,451) 260
Program rights - net of contracts payable 120 (155)
---------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 36,845 21,056
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (5,052) (7,713)
Investment in joint venture (2,000)
Decrease in notes receivable 17 111
---------- ---------
NET CASH USED IN INVESTING ACTIVITIES (7,035) (7,602)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments on long-term debt (20,284) (14,279)
Dividends paid (3,764) (3,129)
Proceeds from exercise of stock options 484 608
----------- ----------
NET CASH USED IN FINANCING ACTIVITIES (23,564) (16,800)
----------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 6,246 (3,346)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 34,970 29,914
---------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $41,216 $26,568
========== =========
See notes to consolidated financial statements.
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PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ACCOUNTING POLICIES
Interim Adjustments - In the opinion of management, the accompanying
unaudited consolidated financial statements contain all adjustments,
consisting only of normal recurring adjustments except for the cumulative
effect adjustments discussed in Notes 3 and 4, necessary to present fairly
Pulitzer Publishing Company's financial position as of June 30, 1994 and
the results of operations and cash flows for the six month periods ended
June 30, 1994 and 1993. Results of operations for interim periods are not
necessarily indicative of the results to be expected for the full year.
Fiscal Year and Fiscal Quarters - The Company's fiscal year and second
quarter end on the Sunday coincident with or prior to December 31 and June
30, respectively. For ease of presentation, the Company has used December
31 as the year end and June 30 as the second quarter end.
Earnings Per Share of Stock - Earnings per share of stock have been
computed using the weighted average number of common and Class B common
shares outstanding during the applicable period. On July 9, 1993, the
Company issued 1.35 million shares of common stock in a public offering.
Intangible Assets - Management periodically evaluates the recoverability
of the Company's intangible assets based upon the undiscounted cash flow
method. If a permanent impairment in value is determined to exist, any
necessary write-down will be charged to operations.
2. DIVIDENDS
In the first quarter of 1993, two dividends of $0.135 per share were
declared, payable on February 1, 1993 and May 3, 1993. In the second
quarter of 1993, a dividend of $0.135 per share was declared, payable on
August 2, 1993. In the third quarter of 1993, a dividend of $0.135 per
share was declared, payable on November 1, 1993. In the first quarter of
1994, two dividends of $0.145 per share were declared, payable on February
1, 1994 and May 2, 1994. In the second quarter of 1994, a dividend of
$0.145 per share was declared, payable on August 1, 1994.
In addition, a 10% stock dividend on the Company's common and Class B
common stock was declared on January 4, 1993, payable on January 22, 1993.
3. POSTEMPLOYMENT BENEFITS
Effective January 1, 1994, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 112, Employers' Accounting for
Postemployment Benefits ("SFAS 112"), to account for certain disability
benefits at the St. Louis Post-Dispatch. SFAS 112 requires that the cost
of these benefits provided to former employees prior to retirement be
recognized on the accrual basis of accounting. Previously, the Company
recognized its postemployment benefit costs when paid. The cumulative
effect of adopting SFAS 112 was a reduction of 1994 first quarter net
income by approximately $719,000 or $0.06 per share. After recording the
cumulative effect adjustment, the Company's on-going expense under the new
standard will not differ significantly from the prior pay-as-you-go basis.
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PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Under SFAS 112, the Company accrues the disability benefits when it
becomes probable that such benefits will be paid and when sufficient
information exits to make reasonable estimates of the amounts to be paid.
As required by the standard, prior year financial statements have not been
restated to reflect the change in accounting method.
4. INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes. The first
quarter of 1993 included a positive adjustment to income of $360,000, or
$0.03 per share, reflecting the recalculation of certain deferred income
taxes at the current federal statutory rate as opposed to the higher tax
rates which were in effect when certain of the deferred income taxes
originated.
5. ACQUISITION OF PROPERTIES
The second quarter and first six months of 1994 included the operations of
television stations WESH (Daytona Beach/Orlando, Florida), acquired on
June 30, 1993, and KCCI (Des Moines, Iowa), acquired on September 9, 1993.
After deducting acquisition-related depreciation and amortization ($3.5
million - second quarter and $7 million - first six months) and interest
charges ($1.9 million - second quarter and $3.9 million - first six
months) from operating cash flow (defined as operating income plus
depreciation and amortization), the negative after-tax effect on earnings
for the second quarter and first six months of 1994 was approximately
$91,000 and $1.1 million, respectively.
6. BUSINESS SEGMENTS
The Company's operations are divided into two business segments,
publishing and broadcasting. The following is a summary of operating data
by segment (in thousands):
Second Quarter Ended Two Quarters Ended
June 30, June 30,
--------------------------- ------------------------
1994 1993 1994 1993
---- ---- ---- ----
Operating revenues:
Publishing $ 76,438 $ 73,135 $148,674 $141,241
Broadcasting (a) 46,292 31,194 85,447 56,679
----------- ---------- ----------- -----------
Total $122,730 $ 104,329 $234,121 $197,920
=========== ========== =========== ===========
Operating income (loss):
Publishing $ 8,552 $ 6,558 $ 14,240 $ 11,112
Broadcasting (a) 13,290 8,826 20,029 12,387
Corporate (1,011) (871) (1,958) (1,792)
----------- ---------- ----------- -----------
Total $ 20,831 $ 14,513 $ 32,311 $ 21,707
=========== ========== =========== ===========
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PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Second Quarter Ended Two Quarters Ended
June 30, June 30,
--------------------------- ------------------------
1994 1993 1994 1993
---- ---- ---- ----
Depreciation and Amortization:
Publishing $ 1,538 $ 1,718 $ 3,065 $ 3,428
Broadcasting (a) 6,042 2,610 12,077 5,203
-------- -------- -------- ---------
Total $ 7,580 $ 4,328 $ 15,142 $ 8,631
======== ======== ======== =========
Operating Margins (Operating
Income to Revenues):
Publishing (b) 16.7% 12.8% 14.3% 11.4%
Broadcasting (a) 28.7% 28.3% 23.4% 21.9%
(a) Second quarter and two quarters ended June 30, 1994 included the
results of WESH and KCCI.
(b) Operating margins for publishing stated with St. Louis Agency
adjustment added back to publishing operating income.
7. STOCKHOLDERS' EQUITY
On May 11, 1994, the Company's stockholders adopted the Pulitzer
Publishing Company 1994 Key Employees' Restricted Stock Purchase Plan (the
"Stock Plan") and the Pulitzer Publishing Company 1994 Stock Option Plan
(the "Plan"). The Stock Plan and the Plan replaced the Pulitzer
Publishing Company 1986 Key Employees' Restricted Stock Purchase Plan and
the Pulitzer Publishing Company 1986 Employee Stock Option Plan,
respectively.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's operating revenues are significantly influenced by a
number of factors, including overall advertising expenditures, the appeal of
newspapers, television and radio in comparison to other forms of advertising,
the performance of the Company in comparison to its competitors in specific
markets, the strength of the national economy and general economic conditions
and population growth in the markets served by the Company.
The Company's business tends to be seasonal, with peak revenues and
profits generally occurring in the fourth and, to a lesser extent, second
quarters of each year as a result of increased advertising activity during the
Christmas and spring holiday periods. The first quarter is historically the
weakest quarter for revenues and profits.
CONSOLIDATED
Operating revenues for the second quarter and first six months of 1994
increased 17.6% and 18.3%, respectively, compared with the corresponding
periods in the preceding year. Revenue comparisons were affected by the
acquisitions of television stations WESH and KCCI on June 30, 1993 and
September 9, 1993, respectively. The 1994 second quarter and first six months
included the results of WESH and KCCI's operations while no amounts for the two
stations were included in the prior year periods. Excluding WESH and KCCI from
the comparisons, consolidated revenues would have increased 6% and 7% for the
second quarter and first six months of 1994, respectively. The increases
reflected gains in both broadcasting and publishing revenues.
Operating expenses, excluding the St. Louis Agency adjustment, in the
second quarter and first six months of 1994 increased 12.3% and 13.8%,
respectively, over the comparable 1993 periods. Excluding WESH and KCCI from
the comparisons, consolidated operating expenses would have increased 0.4% and
2%, respectively. These increases, excluding WESH and KCCI, were primarily
attributable to increased overall personnel costs ($774,000 -second quarter and
$2.5 million - year to date), increased circulation delivery expense ($204,000
- - - second quarter and $609,000 - year to date) and an increase in one-time
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termination inducements of $265,000 at the St. Louis Post-Dispatch (the
"Post-Dispatch") for the first six months of 1994. Expense increases were
partially offset by decreased newsprint expense ($899,000 - second quarter
and $943,000 - year to date) and decreased programming rights expense of
$283,000 for the year to date period.
Operating income in the 1994 second quarter and first six months was
$20.8 million (43.5% increase) and $32.3 million (48.9% increase),
respectively. Excluding WESH and KCCI from the comparisons, operating income
would have increased 31.2% and 39.4%, respectively, for the 1994 second quarter
and first six months. The 1994 increases reflected improvements in operating
income in both the publishing and broadcasting segments due to a combination
of increased revenues and modest cost increases.
Interest expense increased $1.6 million in the 1994 second quarter and
$3.2 million in the first six months, due to higher debt levels. Interest
expense on new long-term borrowings related to the WESH and KCCI acquisitions
amounted to $1.9 million in the 1994 second quarter and $3.9 million in the
first six months. The Company's average debt levels for the second quarter and
the first six months of 1994 increased to $164.5 million and $170.4 million from
$61.5 million and $66.8 million in the respective periods in the prior year.
Lower rates on the new long-term borrowings reduced the Company's average
interest rate for both the second quarter and first six months of 1994 to 7.4%
from 8.9% in both prior year periods. Interest expense also included a
declining interest factor related to annual payments (1990-1994) under a non-
competition agreement entered into in connection with the 1989 acquisition of
television station WDSU in New Orleans. Interest income for the second quarter
and first six months of 1994 increased $191,000 and $270,000, respectively, due
to both higher average balances of invested funds and higher interest rates.
The effective income tax rate for the second quarter and the first six
months of 1994 increased to 40.8% and 40.9%, respectively, from 39.4% and 39.5%
in the respective periods of the prior year. The higher rates in 1994 resulted
primarily from the Revenue Reconciliation Act of 1993 which increased the
federal corporate tax rate by 1%. The effective tax rates in both years
reflected the effect of approximately $125,000 per quarter of non-deductible
goodwill amortization expense. It is expected that, on an annual basis, the
effective tax rate for 1994 will be approximately 41%. For the full year 1993,
the effective tax rate was 39.9%.
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As discussed in Note 3 to the interim financial statements for the
quarter ended June 30, 1994, effective January 1, 1994 the Company adopted the
provisions of Statement of Financial Accounting Standards No. 112, Employers'
Accounting for Postemployment Benefits ("SFAS 112") and recorded its initial
liability thereunder, resulting in a one-time after-tax charge of $719,000.
After recording the one-time charge, the Company's on-going expense under SFAS
112 will not differ significantly from the prior pay-as-you-go basis.
Net income in the 1994 second quarter increased 33.8% to $10.5
million, or $0.81 per share, from $7.9 million, or $0.68 per share, in the
second quarter of 1993. Net income for the first six months of 1994 increased
27% to $14.7 million, or $1.13 per share, from $11.5 million, or $1.00 per
share, a year ago. The first six months of 1994 included the non-recurring
SFAS 112 charge of $719,000, or $0.06 per share. In the first quarter of 1993
the Company adopted Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes, resulting in a positive adjustment to income of
$360,000, or $0.03 per share.
Excluding the cumulative effects of accounting changes from both
years, net income for the first six months of 1994 increased 37.5% to $15.4
million, or $1.19 per share, from $11.2 million, or $0.97 per share, for the
first half of the prior year.
The 1994 gains in net income reflected improvements in operating
profits in both the publishing and broadcasting segments due to a combination
of increased revenues and modest cost increases. The Company's earnings per
share comparisons between years were affected by the larger number of shares
outstanding in 1994 as a result of the public offering of 1.35 million shares
in July 1993.
The increased depreciation, amortization and, to a lesser extent,
interest expense resulting from the 1993 acquisitions of WESH and KCCI had a
negative impact of $0.08 per share on the Company's net income for the first
six months of 1994, which all related to the first quarter. It is expected that
the per share dilution will be in the ten to fifteen cent range for the full
year of 1994 and minimal thereafter. The depreciation and amortization is tax
deductible, and the Company's after-tax cash flow will be favorably impacted.
After-tax cash flow is defined as net income plus depreciation and
amortization.
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PUBLISHING
Operating revenues from the Company's publishing segment for the
second quarter and first six months of 1994 increased 4.5% and 5.3%,
respectively, over the comparable periods in 1993, primarily reflecting
increased revenues from advertising, particularly classified, at all three
newspaper locations.
Newspaper advertising revenues increased $3 million (7%) in the second
quarter and $6 million (7.4%) in the first six months of 1994. The second
quarter increase resulted from higher advertising volume which contributed $2.3
million and higher average rates which contributed $700,000. Similarly, the
year to date increase reflected $5.7 million generated by higher advertising
volume and $300,000 generated by higher average rates. Effective January 1994,
certain categories of advertising rates were increased at all publishing
properties in varying percentages ranging from 3% to 6.5%.
Circulation revenues decreased 0.8% for the second quarter and 0.4%
for the first six months of 1994. The slight revenue declines for both 1994
periods resulted from average circulation decreases at the Post-Dispatch while
average circulation rates were virtually unchanged from the prior year periods.
Average daily and Sunday circulation of the Post-Dispatch for the
second quarter of 1994 was 339,413 and 552,913 compared to 345,196 and 562,584,
respectively, for the corresponding 1993 period.
Operating expenses (including selling, general and administrative
expenses and depreciation and amortization) for the publishing segment,
excluding the St. Louis Agency adjustment, decreased 0.1% for the second
quarter while increasing 1.9% for the first six months of 1994. The decrease in
second quarter expenses was principally attributable to decreased newsprint
expense ($899,000), due to lower newsprint prices, which offset increases in
overall personnel costs ($412,000) and circulation delivery expense ($204,000).
The increase in expenses for the first six months resulted primarily from
increases in overall personnel costs ($1.4 million), circulation delivery
expense ($609,000) and inducement costs at the Post-Dispatch ($265,000), which
increases were partially offset by a decline in newsprint expense ($943,000)
due to lower newsprint prices.
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Operating income from the Company's publishing activities in the 1994
second quarter increased 30.4% to $8.6 million from $6.6 million and in the
first six months increased 28.1% to $14.2 million from $11.1 million due to
increased revenues combined with a marginal decline in second quarter expenses
and a modest increase in costs for the sixth-month period.
The publishing segment's results for the 1994 second quarter and first
six months were favorably impacted by a continued downward trend in newsprint
prices which began in the fourth quarter of 1993. The decline in newsprint
prices from the year ago periods was substantial enough to more than offset
higher newsprint consumption generated by increased advertising volumes. The
Company expects newsprint prices to increase for the second half of 1994. Any
material increases in the price of newsprint would significantly effect the
future performance of the publishing segment.
BROADCASTING
Broadcasting operating revenues for the second quarter and first six
months of 1994 increased 48.4% and 50.8% over the comparable 1993 periods.
Revenue comparisons were affected by the Company's acquisition of television
stations WESH and KCCI in the third quarter of 1993. Excluding WESH and KCCI
from the comparisons, broadcasting revenues would have increased 9.5% and 11.3%
for the second quarter and first six months of 1994, respectively. Exclusive
of WESH and KCCI, local spot advertising increased 5.7% and 10.2%,
respectively, for the second quarter and first six months; national spot
advertising increased 15.9% and 14.8%, respectively, for the second quarter and
first six months; and network compensation declined 0.5% and 1.5%,
respectively, for the second quarter and six-month period. Political
advertising, including WESH and KCCI, increased $1.5 million and $2.2 million,
respectively, for the second quarter and first six months of 1994.
Broadcasting operating expenses (including selling, general and
administrative expenses and depreciation and amortization) for the second
quarter and first six months of 1994 increased 47.5% and 47.7%, respectively,
compared to the prior year periods. Excluding WESH and KCCI from the
comparisons, operating expenses would have increased 1.3% and 1.9%,
respectively, for the second quarter and first six months of 1994. These
increases, on a comparable basis, were due primarily to higher overall personnel
costs of $321,000 and $1.1 million, respectively, for the second quarter and
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first six months of 1994. The increase for the first six months was partially
offset by a decrease in programming rights expense of $283,000.
Operating income from broadcasting operations in the 1994 second
quarter increased 50.6% to $13.3 million from $8.8 million and in the first six
months increased 61.7% to $20 million from $12.4 million. Excluding WESH and
KCCI, broadcasting operating income would have increased 30.2% and 45% in the
1994 second quarter and first six months, respectively, due to increased
advertising revenues and modest expense increases.
LIQUIDITY AND CAPITAL RESOURCES
Outstanding debt, inclusive of the short-term portion of long-term
debt, as of June 30, 1994, was $156 million, compared with $176.2 million at
December 31, 1993. The decrease since the prior year end reflects a scheduled
repayment of $14.3 million under the Company's Senior Note Agreement maturing
in 1997 and a $6 million prepayment of revolving credit borrowings under its
credit agreement with Canadian Imperial Bank of Commerce as Agent ("CIBC").
As of June 30, 1994, the Company's long-term borrowings, exclusive of a
capital lease, consisted of approximately $143 million of fixed rate senior
notes with The Prudential Insurance Company of America and approximately $12.6
million of borrowings under the variable rate CIBC credit agreement. At June
30, 1994, $10 million was unused but available for borrowing under the
revolving credit portion of the CIBC credit agreement.
The Company's Senior Note Agreements and bank credit agreement require
it to maintain certain financial ratios, place restrictions on the payment of
dividends and prohibit new borrowings, except as permitted thereunder.
Commitments for capital expenditures as of June 30, 1994, were
approximately $8.4 million, principally relating to normal capital equipment
replacements. Capital expenditures to be made in fiscal 1994 are estimated to
be approximately $14 million. Commitments for film contracts and license fees
as of June 30, 1994 were approximately $22.9 million. At June 30, 1994, the
Company had working capital of $59.5 million and a current ratio of 1.97 to 1.
This compares to working capital of $59.2 million and a current ratio of 1.96
to 1 at December 31, 1993.
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The Company generally expects to generate sufficient cash from
operations to cover ordinary capital expenditures, film contract and license
fees, working capital requirements, debt installments and dividend payments.
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
(a) The Annual Meeting of Stockholders was held on May 11, 1994.
(b) Not applicable.
(c) The following nominees for election as director received the
votes indicated:
For Withheld Abstain
--- -------- -------
Michael E. Pulitzer 97,475,867 0 48,530
Ronald H. Ridgway 97,476,817 0 47,580
Peter J. Repetti 97,476,051 0 48,346
The adoption of the Pulitzer Publishing Company 1994 Key
Employees' Restricted Stock Purchase Plan was approved by the
vote indicated:
For: 96,650,594
Against: 379,970
Broker non-votes: 458,657
Abstain: 35,176
The adoption of the Pulitzer Publishing Company 1994 Stock
Option Plan was approved by the vote indicated:
For: 96,063,808
Against: 965,521
Broker non-votes: 458,657
Abstain: 36,411
The selection of Deloitte & Touche as the Company's
independent auditors was approved by the vote indicated:
For: 97,514,087
Against: 6,219
Abstain: 4,091
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Not applicable.
(b) Reports on Form 8-K. The Company did not file any reports on
Form 8-K during the quarter for which this report was filed.
SIGNATURES
Pursuant to the requirements 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.
PULITZER PUBLISHING COMPANY
(Registrant)
Date: August 10, 1994 /s/ Ronald H. Ridgway
-----------------------------------
(Ronald H. Ridgway)
Director; Senior Vice-President-
Finance
(on behalf of the Registrant
and as principal financial
officer)
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