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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 MARCH 31, 1995
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 4/30/95
COMMON STOCK 4,524,158
CLASS B COMMON STOCK 11,829,194
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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)
FIRST QUARTER ENDED
MARCH 31,
-----------------
1995 1994
---- ----
(Unaudited)
OPERATING REVENUES - NET:
Publishing:
Advertising $37,954 $41,609
Circulation 18,776 19,960
Other 7,071 10,667
Broadcasting 44,722 39,155
------- -------
Total operating revenues 108,523 111,391
------- -------
OPERATING EXPENSES:
Publishing operations 28,576 31,438
Broadcasting operations 15,613 15,259
Selling, general and administrative 37,871 42,933
St. Louis Agency adjustment 3,288 2,719
Depreciation and amortization 6,709 7,562
------- -------
Total operating expenses 92,057 99,911
------- -------
Operating income 16,466 11,480
------- -------
Interest income 1,259 377
Interest expense (2,712) (3,316)
Equity in net (loss) income of joint ventures (188) 4
Net other expense (269) (252)
------- -------
INCOME BEFORE PROVISION FOR INCOME
TAXES AND CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE 14,556 8,293
PROVISION FOR INCOME TAXES 5,703 3,410
------- -------
INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 8,853 4,883
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE, NET OF
APPLICABLE INCOME TAXES (719)
------- -------
NET INCOME $8,853 $4,164
======= =======
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)
FIRST QUARTER ENDED
MARCH 31,
-------------------
1995 1994
---- ----
(Unaudited)
EARNINGS PER SHARE OF STOCK
(COMMON AND CLASS B COMMON):
Income before cumulative effect of
change in accounting principle $0.54 $0.30
Cumulative effect of change in
accounting principle (0.04)
------ ------
Total $0.54 $0.26
------ ------
WEIGHTED AVERAGE NUMBER OF SHARES
(COMMON AND CLASS B COMMON STOCK)
OUTSTANDING 16,290 16,221
====== ======
See notes to consolidated financial statements.
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PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
(IN THOUSANDS)
MAR. 31, DEC. 31,
1995 1994
-------- --------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $86,346 $77,084
Trade accounts receivable (less allowance for doubtful
accounts of $2,280 and $2,135) 58,758 62,943
Inventory 5,065 3,069
Prepaid expenses and other 8,617 6,783
Program rights 6,478 9,263
-------- --------
Total current assets 165,264 159,142
-------- --------
PROPERTIES:
Land 11,261 11,261
Buildings 58,965 58,795
Machinery and equipment 162,817 161,305
Construction in progress 8,086 4,444
-------- --------
Total 241,129 235,805
Less accumulated depreciation 124,770 119,911
-------- --------
Properties - net 116,359 115,894
-------- --------
INTANGIBLE AND OTHER ASSETS:
Intangible assets - net of applicable amortization 123,500 125,415
Receivable from The Herald Company 42,508 44,059
Program rights, long-term portion 1,854 1,997
Other 21,672 21,805
-------- --------
Total intangible and other assets 189,534 193,276
-------- --------
TOTAL $471,157 $468,312
======== ========
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)
MAR. 31, DEC. 31,
1995 1994
-------- --------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $12,706 $14,458
Current portion of long-term debt 14,250 14,250
Salaries, wages and commissions 9,767 11,541
Income taxes payable 6,667 6,331
Program contracts payable 6,194 8,864
Interest payable 2,663 3,480
Pension obligations 2,885 2,827
Other 4,155 662
-------- --------
Total current liabilities 59,287 62,413
-------- --------
LONG-TERM DEBT 128,750 128,750
-------- --------
PROGRAM CONTRACTS PAYABLE 1,933 2,109
-------- --------
PENSION OBLIGATIONS 24,120 23,593
-------- --------
POSTRETIREMENT AND POSTEMPLOYMENT
BENEFIT OBLIGATIONS 92,484 91,966
-------- --------
OTHER LONG-TERM LIABILITIES 4,340 4,462
-------- --------
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 - 4,480,678 in 1995 and 4,444,099 in 1994 44 44
Class B common stock, convertible, $.01 par value; 50,000,000
shares authorized; issued - 20,608,832 in 1995 and 1994 182 182
Additional paid-in capital 122,879 122,094
Retained earnings 224,765 220,322
-------- --------
Total 347,870 342,642
Treasury stock - at cost; 11,591 and 11,462 shares of common
stock in 1995 and 1994, respectively, and 8,775,638 shares of
Class B common stock in 1995 and 1994 (187,627) (187,623)
-------- --------
Total stockholders' equity 160,243 155,019
-------- --------
TOTAL $471,157 $468,312
======== ========
See notes to consolidated financial statements.
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PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN THOUSANDS)
FIRST QUARTER ENDED
MARCH 31,
-------------------
1995 1994
---- ----
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $8,853 $4,164
Adjustments to reconcile net income to net cash provided by
operating activities:
Non-cash items:
Cumulative effect of change in accounting principle, net of
applicable income taxes 719
Equity in net loss (income) of joint ventures 188 (4)
Depreciation 4,743 5,091
Amortization of intangibles 1,966 2,471
Incremental increase in postretirement and postemployment
benefit obligations 518 769
Changes in assets and liabilities which provided (used) cash:
Trade accounts receivable 4,185 7,178
Inventory (1,996) 1,212
Other assets (568) 1,626
Trade accounts payable and other liabilities (2,588) 142
Income taxes payable 336 281
Program rights - net of contracts payable 82 (3)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 15,719 23,646
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (5,247) (1,645)
Investment in joint venture (1,000)
Increase in notes receivable 215 (9)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (5,032) (2,654)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments on long-term debt (17)
Dividends paid (2,206) (1,881)
Proceeds from exercise of stock options 781 376
-------- --------
NET CASH USED IN FINANCING ACTIVITIES (1,425) (1,522)
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 9,262 19,470
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 77,084 34,970
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $86,346 $54,440
======== ========
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 adjustment discussed in Note 3, necessary to present fairly Pulitzer
Publishing Company's financial position as of March 31, 1995 and the results
of operations and cash flows for the three month periods ended March 31,
1995 and 1994. 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 first fiscal
quarter end on the Sunday coincident with or prior to December 31 and March
31, respectively. For ease of presentation, the Company has used December
31 as the year end and March 31 as the first 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.
2. DIVIDENDS
In the first quarter of 1994, two dividends of $0.115 per share were
declared, payable on February 1, 1994 and May 2, 1994. In the second
quarter of 1994, a dividend of $0.115 per share was declared, payable on
August 1, 1994. In the third quarter of 1994, a dividend of $0.115 per
share was declared, payable on November 1, 1994. In the first quarter of
1995, two dividends of $0.135 per share were declared, payable on February
1, 1995 and May 1, 1995.
In addition, a five-for-four stock split (payable in the form of a 25
percent common and Class B common stock dividend) was declared by the
Company's Board of Directors on January 4, 1995. The dividend was
distributed on January 24, 1995 to stockholders of record on January 13,
1995. Shares outstanding, dividends per share and earnings per share have
been restated for 1994 to reflect the stock split.
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 $0.04 per share. After recording the
cumulative effect adjustment, the Company's ongoing expense under the new
standard does 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)
4. 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):
FIRST QUARTER ENDED
MARCH 31,
-------------------
1995 1994
----- -----
Operating revenues: (Unaudited)
Publishing (a) $63,801 $72,236
Broadcasting 44,722 39,155
-------- --------
Total $108,523 $111,391
======== ========
Operating income (loss):
Publishing (a) $6,154 $5,688
Broadcasting 11,372 6,739
Corporate (1,060) (947)
-------- --------
Total $16,466 $11,480
======== ========
Depreciation and amortization:
Publishing (a) $1,017 $1,527
Broadcasting 5,692 6,035
-------- --------
Total $6,709 $7,562
======== ========
Operating margins
(Operating income to revenues):
Publishing (a) (b) 14.8% 11.6%
Broadcasting 25.4% 17.2%
(a) Publishing operations for 1994 include the results of Pulitzer Community
Newspapers, Inc., which was sold on December 22, 1994.
(b) Operating margins for publishing stated with St. Louis Agency adjustment
added back to publishing operating income.
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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 first quarter of 1995 decreased 2.6 percent, to
$108.5 million from $111.4 million for the first quarter of 1994. The revenue
comparison was affected by the sale of Pulitzer Community Newspapers, Inc.
("PCN") on December 22, 1994. The first quarter of 1994 included the results
of PCN, but due to the sale in December 1994, no amounts for PCN were included
in the first quarter of 1995. On a comparable basis (i.e., excluding PCN from
1994), consolidated revenues increased 8.5 percent for the 1995 first quarter.
This increase reflected gains in both broadcasting and publishing revenues.
Operating expenses, excluding the St. Louis Agency adjustment, for the 1995
first quarter decreased 8.7 percent, to $88.8 million from $97.2 million in the
first quarter of 1994. On a comparable basis, excluding PCN from 1994,
operating expenses increased 3.6 percent for the 1995 first quarter. This
increase was primarily attributable to increased newsprint costs of $2.5
million, higher overall personnel costs of $449,000 and increased promotion
expense of $395,000. Expense increases were partially offset by lower
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depreciation and amortization of $357,000 and a decline in programming rights
expense of $295,000.
Operating income in the 1995 first quarter increased 43.4 percent, to $16.5
million from $11.5 million in the first quarter of 1994. The 1995 increase
reflected improvements in operating income in both the publishing and
broadcasting segments, resulting from increased revenues. The sale of PCN did
not have a significant impact on the consolidated operating income comparison.
Interest expense decreased to $2.7 million in the 1995 first quarter from
$3.3 million in the first quarter of 1994 due to lower debt levels. The
Company's average debt level for the 1995 first quarter decreased to $143
million from $176.2 million in the first quarter of 1994. The Company's
average interest rate for the first quarter of 1995 increased slightly to 7.6
percent from 7.4 percent in the 1994 first quarter due to the repayment and
elimination of lower variable rate borrowings in the fourth quarter of 1994.
Interest income increased $882,000, reflecting both a higher average balance of
invested funds and higher short-term interest rates for the 1995 first quarter.
The effective income tax rate for the first quarter of 1995 decreased to 39.2
percent from 41.1 percent for the 1994 first quarter. The lower rate in 1995
reflected the Company's reduced exposure to further tax adjustments for open
tax years, following the settlement of the 1990-1992 federal tax examinations
during 1994, and the impact of the 1993 tax law changes in the deductibility of
the amortization of intangibles. It is expected that, on an annual basis, the
effective tax rate for 1995 will be in the 39 percent range, approximately the
same as the effective rate for the full year of 1994.
As discussed in Note 3 to the interim financial statements, 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 does not differ
significantly from the prior pay-as-you-go basis.
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Net income in the 1995 first quarter increased 112.6 percent to $8.9 million,
or $0.54 per share, compared with $4.2 million, or $0.26 per share, in the
first quarter of 1994. The first quarter of 1994 included the non-recurring
SFAS 112 charge of $719,000, or $0.04 per share. Excluding the non-recurring
charge from 1994, net income for the 1995 first quarter would have increased
81.3 percent. The gain in net income reflected improvements in operating
profits in both the publishing and broadcasting segments, primarily as a result
of increased revenues.
PUBLISHING
Operating revenues from the Company's publishing segment for the first
quarter of 1995 decreased 11.7 percent, to $63.8 million from $72.2 million in
the first quarter of 1994. On a comparable basis, excluding PCN from 1994,
publishing revenues increased 4.8 percent for the 1995 first quarter. The
increase reflected higher advertising revenues, particularly classified, at
both newspaper properties.
Newspaper advertising revenues, on a comparable basis, increased $2.5 million
(7.2 percent) in the first quarter of 1995. Higher average rates generated
$2.1 million of the 1995 first quarter increase while higher advertising volume
contributed approximately $400,000. In the first quarter of 1995, both the St.
Louis Post-Dispatch ("Post-Dispatch") and The Arizona Daily Star ("Star")
implemented rate increases for most advertising categories, ranging from 4
percent to 6 percent and 6 percent to 8 percent, respectively.
Circulation revenues, on a comparable basis, increased $177,000 (1 percent)
in the first quarter of 1995. The benefit ($677,000) of circulation price
increases was offset by revenue declines ($500,000) due to average circulation
decreases at the Post-Dispatch. Average daily and Sunday circulation of the
Post-Dispatch for the first quarter of 1995 was 333,212 and 555,693 compared to
346,046 and 567,680 for the corresponding 1994 period, decreases of 3.7 percent
and 2.1 percent, respectively. Effective February 5, 1995, the home-delivered
price of the Sunday Post-Dispatch was increased $1.00 per month. In addition,
the home-delivered price of the daily Star was increased $0.80 per month,
effective March 27, 1995.
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Operating expenses (including selling, general and administrative expenses
and depreciation and amortization) for the publishing segment, excluding the
St. Louis Agency adjustment, decreased 14.8 percent to $54.4 million for the
1995 first quarter compared to $63.8 million for the same period in the prior
year. On a comparable basis, excluding PCN from 1994, operating expenses
increased 3.9 percent for the 1995 first quarter. The higher expense, on a
comparable basis, resulted primarily from increased newsprint cost of $2.5
million, reflecting the impact of newsprint price increases.
Operating income from the Company's publishing activities for the first
quarter of 1995 increased 8.2 percent to $6.2 million from $5.7 million due
primarily to increased advertising revenues. On a comparable basis, excluding
PCN from 1994, first quarter operating income from the publishing segment
increased 4.7 percent.
The publishing segment's 1995 first-quarter results were negatively impacted
by increasing newsprint prices, which added approximately $2.5 million to
newsprint expense ($1.4 million after giving effect to the St. Louis Agency
Adjustment and excluding PCN from 1994). Based on a newsprint price increase
effective May 1, 1995, the Company's average costs per metric ton for the
second quarter and the balance of the year (assuming no further price
increases) are estimated to be approximately $625 and $680, respectively.
These estimated higher newsprint prices for the remainder of fiscal year 1995
are expected to have a significant effect on the performance of the publishing
segment. No assurance, however, can be given that the estimated newsprint
average cost increases for fiscal 1995 will be as projected, and actual average
cost increases may be higher or lower. For the full year of 1994, the
Company's newsprint cost and metric tons of consumption, after giving effect to
the St. Louis Agency adjustment and excluding PCN, were approximately $22.8
million and 50,600 metric tons, respectively.
BROADCASTING
Broadcasting operating revenues for the first quarter of 1995 increased 14.2
percent, to $44.7 million from $39.2 million in the first quarter of 1994.
Local and national spot advertising increased 5.7 percent and 11.8 percent,
respectively. In addition,
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network compensation revenue increased $2.4 million, reflecting the impact of
new ten-year network affiliation agreements executed in early 1995. For the
full year of 1995, the new agreements are expected to add approximately $10.5
million to the Company's annual network compensation revenue. The Company
anticipates, however, that approximately $2 million of this revenue increase
will be invested back into its stations to strengthen their local news
operations. These costs will be reflected in the ongoing annual expenses of
the broadcasting operations.
Broadcasting operating expenses (including selling, general and
administrative expenses and depreciation and amortization) for the first
quarter of 1995 increased 2.9 percent, to $33.4 million from $32.4 million in
the first quarter of the prior year. Major increases in comparable expenses
were overall personnel costs ($575,000) and promotion expense ($330,000).
Partially offsetting these increases were declines in depreciation and
amortization ($343,000) and programming rights expense ($295,000).
Operating income from the broadcasting segment increased 68.7 percent to
$11.4 million from $6.7 million, principally due to increased advertising
revenues and network compensation.
LIQUIDITY AND CAPITAL RESOURCES
Outstanding debt, inclusive of the short-term portion of long-term debt, as
of March 31, 1995, was $143 million, unchanged from the balance at December 31,
1994. On April 21, 1995, the Company made a scheduled repayment of $14.3
million under its Senior Note Agreement maturing in 1997.
As of March 31, 1995, the Company's long-term borrowings consisted of $143
million of fixed-rate senior notes with The Prudential Insurance Company of
America.
The Company's Senior Note Agreements require it to maintain certain financial
ratios, place restrictions on the payment of dividends and prohibit new
borrowings, except as permitted thereunder.
As of March 31, 1995, commitments for capital expenditures were approximately
$14.9 million, relating to normal capital equipment replacements and a portion
of the costs
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for new facilities for television station WDSU in New Orleans and the radio
operations in Phoenix. Capital expenditures to be made in fiscal 1995 are
estimated to be approximately $26 million, of which approximately $11.2 million
represents the amount to substantially complete the building projects in New
Orleans and Phoenix. Commitments for film contracts and license fees as
of March 31, 1995 were approximately $31.2 million.
At March 31, 1995, the Company had working capital of $106 million and a
current ratio of 2.79 to 1. This compares to working capital of $96.7 million
and a current ratio of 2.55 to 1 at December 31, 1994.
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 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibit is filed as part of this report:
27 Financial Data Schedule
(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: May 5, 1995 /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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EXHIBIT INDEX
EXHIBIT NUMBER TITLE OR DESCRIPTION LOCATION
27 Financial Data Schedule Page 17
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