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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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 SEPTEMBER 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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COMMISSION FILE NUMBER 1-9329
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PULITZER PUBLISHING COMPANY
(Exact name of registrant as specified in its charter)
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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)
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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 / /
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Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
CLASS OUTSTANDING 10/31/96
-------------------- --------------------
COMMON STOCK 6,420,248
CLASS B COMMON STOCK 15,555,492
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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)
Third Quarter Ended Three Quarters Ended
September 30, September 30,
--------------------------- ---------------------------
OPERATING REVENUES - NET: 1996 1995 1996 1995
-------- -------- -------- --------
Publishing: (Unaudited) (Unaudited)
Advertising $ 53,428 $ 39,629 $135,882 $117,940
Circulation 21,910 18,468 59,704 56,057
Other 9,479 7,223 23,941 21,981
Broadcasting 54,048 46,287 162,618 144,778
-------- -------- -------- --------
Total operating revenues 138,865 111,607 382,145 340,756
-------- -------- -------- --------
OPERATING EXPENSES:
Publishing operations 37,454 31,380 103,485 90,972
Broadcasting operations 16,653 15,709 49,396 46,958
Selling, general and administrative 45,603 38,228 125,819 114,448
St. Louis Agency adjustment 3,627 2,079 8,258 8,769
Depreciation and amortization 8,897 6,803 22,383 20,234
-------- -------- -------- --------
Total operating expenses 112,234 94,199 309,341 281,381
-------- -------- -------- --------
Operating income 26,631 17,408 72,804 59,375
Interest income 664 1,253 3,439 3,724
Interest expense (4,543) (2,400) (9,086) (7,605)
Net other expense (821) (491) (1,819) (1,655)
-------- -------- -------- --------
INCOME BEFORE PROVISION FOR
INCOME TAXES 21,931 15,770 65,338 53,839
PROVISION FOR INCOME TAXES 8,967 6,073 25,948 20,973
-------- -------- -------- --------
NET INCOME $ 12,964 $ 9,697 $ 39,390 $ 32,866
======== ======== ======== ========
EARNINGS PER SHARE OF STOCK
(COMMON AND CLASS B COMMON) $ 0.59 $ 0.44 $ 1.80 $ 1.51
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF
SHARES (COMMON AND CLASS B
COMMON STOCK) OUTSTANDING 21,949 21,838 21,908 21,786
======== ======== ======== ========
See notes to consolidated financial statements.
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PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
(IN THOUSANDS)
September 30, December 31,
1996 1995
------------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 54,243 $100,380
Trade accounts receivable (less allowance for doubtful
accounts of $2,451 and $2,009) 70,513 64,524
Inventory 6,268 6,190
Prepaid expenses and other 7,694 7,041
Program rights 11,221 8,824
-------- --------
Total current assets 149,939 186,959
-------- --------
PROPERTIES:
Land 14,840 11,779
Buildings 79,118 60,794
Machinery and equipment 214,534 173,165
Construction in progress 4,203 8,745
-------- --------
Total 312,695 254,483
Less accumulated depreciation 150,078 135,296
-------- --------
Properties - net 162,617 119,187
-------- --------
INTANGIBLE AND OTHER ASSETS:
Intangible assets - net of applicable amortization 294,610 117,470
Receivable from The Herald Company 42,945 43,696
Other 20,958 27,761
-------- --------
Total intangible and other assets 358,513 188,927
-------- --------
TOTAL $671,069 $495,073
======== ========
(Continued)
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PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
(IN THOUSANDS, EXCEPT SHARE DATA)
September 30, December 31,
1996 1995
------------- ------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $ 27,471 $ 14,145
Current portion of long-term debt 14,705 14,250
Salaries, wages and commissions 13,309 11,757
Income taxes payable 1,575 2,618
Program contracts payable 10,612 8,664
Interest payable 3,374 3,415
Pension obligations 1,023 1,023
Other 6,649 2,234
--------- ---------
Total current liabilities 78,718 58,106
--------- ---------
LONG-TERM DEBT 235,410 114,500
--------- ---------
PENSION OBLIGATIONS 25,138 24,631
--------- ---------
POSTRETIREMENT AND POSTEMPLOYMENT
BENEFIT OBLIGATIONS 93,193 92,856
--------- ---------
OTHER LONG-TERM LIABILITIES 8,908 6,209
--------- ---------
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 - 6,416,946 in 1996 and 6,272,357 in 1995 64 47
Class B common stock, convertible, $.01 par value; 50,000,000
shares authorized; issued - 27,256,342 in 1996 and
27,298,732 in 1995 273 205
Additional paid-in capital 127,016 125,539
Retained earnings 290,185 260,816
--------- ---------
Total 417,538 386,607
Treasury stock - at cost; 22,633 and 22,283 shares of common
stock in 1996 and 1995, respectively, and 11,700,850 shares of
Class B common stock in 1996 and 1995 (187,836) (187,836)
--------- ---------
Total stockholders' equity 229,702 198,771
--------- ---------
TOTAL $ 671,069 $ 495,073
========= =========
(Concluded)
See notes to consolidated financial statements.
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PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN THOUSANDS)
Three Quarters Ended
September 30,
-------------------------------
1996 1995
--------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES: (Unaudited)
Net income $ 39,390 $ 32,866
Adjustments to reconcile net income to net cash provided by
operating activities:
Non-cash items:
Depreciation 15,090 14,340
Amortization of intangibles 7,293 5,894
Incremental increase in postretirement and postemployment
benefit obligations 337 1,065
Changes in assets and liabilities (net of the effects of the
purchase of newspaper properties) (Note 4) which
provided (used) cash:
Trade accounts receivable (240) 757
Inventory 1,725 (202)
Other assets 1,969 (3,277)
Trade accounts payable and other liabilities 1,341 (2,849)
Income taxes payable (1,043) (4,710)
Program rights - net of contracts payable 234 85
--------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 66,096 43,969
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (14,853) (15,986)
Purchase of newspaper properties (203,314)
Investment in limited partnerships (2,983) (2,512)
(Increase) decrease in notes receivable (5,052) 1,862
--------- --------
NET CASH USED IN INVESTING ACTIVITIES (226,202) (16,636)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 135,000
Repayments on long-term debt (15,205) (14,250)
Dividends paid (7,387) (6,614)
Proceeds from exercise of stock options 1,561 2,414
Purchase of treasury stock (207)
--------- --------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 113,969 (18,657)
--------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (46,137) 8,676
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 100,380 77,084
--------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 54,243 $ 85,760
========= ========
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, necessary to present fairly
Pulitzer Publishing Company's financial position as of September 30, 1996 and
the results of operations and cash flows for the nine-month periods ended
September 30, 1996 and 1995. 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 third fiscal
quarter end on the Sunday coincident with or prior to December 31 and
September 30, respectively. For ease of presentation, the Company has used
December 31 as the year end and September 30 as the third quarter end.
Shares Outstanding: Weighted average shares and per share amounts have been
restated to reflect the Company's four-for-three stock split (payable in the
form of a stock dividend) declared by the Company's Board of Directors on
September 12, 1996 (See Note 2).
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, adjusted for the stock split
described in Note 2.
Use of Management Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires that
management make certain estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements. The reported amounts of
revenues and expenses during the reporting period may also be affected by the
estimates and assumptions management is required to make. Actual results may
differ from those estimates.
2. DIVIDENDS
In the first quarter of 1995, two dividends of $0.10125 per share were
declared, payable on February 1, 1995 and May 1, 1995. In the second quarter
of 1995, a dividend of $0.10125 per share was declared, payable on August 1,
1995. In the third quarter of 1995, a dividend of $0.10125 per share was
declared, payable on November 1, 1995.
In the first quarter of 1996, two dividends of $0.1125 per share were
declared, payable on February 1, 1996 and May 1, 1996. In the second quarter
of 1996, a dividend of $0.1125 per share was declared, payable on August 1,
1996.
On September 12, 1996, a four-for-three stock split (payable in the form of a
33.3 percent common and Class B common stock dividend) was declared by the
Company's Board of Directors. The dividend was distributed on November 1,
1996 to stockholders of record on October 10, 1996. The Company's capital
balances and share amounts have been adjusted in the third quarter of 1996 to
reflect the split. Also in the third quarter of 1996, a dividend of $0.12
per share was declared, payable on November 1, 1996.
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PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. 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):
Third Quarter Ended Three Quarters Ended
September 30, September 30,
----------------------------- -----------------------------
1996 1995 1996 1995
--------- --------- --------- ---------
Operating revenues: (Unaudited) (Unaudited)
Publishing (a) $ 84,817 $ 65,320 $219,527 $195,978
Broadcasting 54,048 46,287 162,618 144,778
-------- -------- -------- --------
Total $138,865 $111,607 $382,145 $340,756
======== ======== ======== ========
Operating income (loss):
Publishing (a) $ 9,107 $ 5,485 $ 19,571 $ 18,453
Broadcasting 18,850 13,079 57,236 44,210
Corporate (1,326) (1,156) (4,003) (3,288)
-------- -------- -------- --------
Total $ 26,631 $ 17,408 $ 72,804 $ 59,375
======== ======== ======== ========
Depreciation and amortization:
Publishing (a) $ 3,251 $ 1,052 $ 5,498 $ 3,110
Broadcasting 5,646 5,751 16,885 17,124
-------- -------- -------- --------
Total $ 8,897 $ 6,803 $ 22,383 $ 20,234
======== ======== ======== ========
Operating margins
(Operating income to revenues):
Publishing (a) (b) 15.0% 11.6% 12.7% 13.9%
Broadcasting 34.9% 28.3% 35.2% 30.5%
(a) Publishing operations for 1996 include the results of Scripps League
Newspapers, Inc. (subsequently renamed Pulitzer Community Newspapers, Inc.
("PCN")), which was acquired on July 1, 1996. See Note 4.
(b) Operating margins for publishing stated with St. Louis Agency adjustment
added back to publishing operating income.
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PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. ACQUISITION OF PROPERTIES
On July 1, 1996, the Company acquired in a purchase transaction all of the
stock of Scripps League Newspapers, Inc. ("Scripps League"), a privately
owned company that publishes a group of community newspapers, including 14
dailies, which serve smaller markets, primarily in the West and Midwest. The
purchase price of approximately $214 million (excluding acquisition costs)
includes all of the operating assets of the newspapers as well as working
capital of approximately $7 million and intangibles. The September 30, 1996
consolidated balance sheet reflects a preliminary purchase price allocation
subject to certain adjustments based upon final working capital balances and
final appraisals at June 30, 1996. The Scripps League acquisition was
financed by long-term borrowings of $135 million (see Note 5) and cash of
approximately $79 million.
The following supplemental unaudited pro forma information shows the results
of operations of the Company for the nine-month periods ended September 30,
1996 and 1995 adjusted for the acquisition of Scripps League assuming such
transaction and the related debt financing had been consummated at the
beginning of each of the respective years. The unaudited pro forma financial
information is not necessarily indicative either of results of operations
that would have occurred had the transaction occurred at the beginning of the
respective years, or of future results of operations (in thousands, except
per share amounts).
Three Quarters Ended
September 30,
----------------------
1996 1995
---------- ----------
(Unaudited)
Operating revenues - net $414,972 $388,166
======== ========
Operating income $ 76,067 $ 64,211
======== ========
Net income $ 36,302 $ 28,644
======== ========
Earnings per share of stock (common
and Class B common): $ 1.66 $ 1.31
======== ========
Weighted average number of shares (common
and Class B common) outstanding 21,908 21,786
======== ========
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PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. FINANCING ARRANGEMENTS
Long-term debt consists of (in thousands):
September 30, December 31,
1996 1995
------------- ------------
Credit agreement $ 50,000 $ -
Senior notes maturing in equal
annual installments:
8.8% due through 1997 14,500 28,750
6.76% due 1998-2001 50,000 50,000
7.22% due 2002-2005 50,000 50,000
7.86% due 2001-2008 85,000
Other 615
-------- --------
Total 250,115 128,750
Less current portion 14,705 14,250
-------- --------
Total long-term debt $235,410 $114,500
======== ========
On July 1, 1996, in connection with the acquisition of Scripps League (see Note
4), the Company issued to The Prudential Insurance Company of America
$85,000,000 principal amount of 7.86 percent Senior Notes due 2008 ("Notes"). In
addition, on July 1, 1996, the Company entered into a credit agreement with The
First National Bank of Chicago, as Agent, for a group of lenders ("FNBC"),
providing for a $50,000,000 five year variable rate revolving credit facility
("Credit Agreement"). The Company immediately borrowed the full amount under
the Credit Agreement and used the proceeds, together with the proceeds from the
Notes, to partially finance the Scripps League acquisition.
The Notes mature in equal annual installments beginning July 25, 2001. All
borrowings under the Credit Agreement are due on July 2, 2001, the termination
date of the facility. Prior to the credit facility's termination, loans may be
borrowed, repaid and reborrowed by the Company. In addition, the Company has the
option to repay any borrowings and terminate the credit facility prior to its
scheduled maturity.
The Credit Agreement allows the Company to elect an interest rate with respect
to each borrowing under the facility equal to a daily floating rate or the
Eurodollar rate plus 0.225 percent. As of September 30, 1996, the interest rate
on the Credit Agreement borrowings with FNBC was 5.875 percent.
6. LITIGATION
The Company and its subsidiaries are defendants in a number of lawsuits, some
of which claim substantial amounts. While the results of litigation cannot be
predicted, management believes the ultimate outcome of such litigation will
not have a material adverse effect on the consolidated financial statements of
the Company and its subsidiaries.
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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.
RECENT EVENTS
On July 1, 1996, the Company acquired in a purchase transaction all of the
stock of Scripps League Newspapers, Inc. ("Scripps League"), a privately owned
company that publishes a group of community newspapers, including 14 dailies,
which serve smaller markets, primarily in the West and Midwest. The
significant portion of the approximately $214 million purchase price (including
approximately $7 million in working capital) has been allocated to fixed and
intangible assets whose depreciation and amortization, in large part, is not
tax deductible. Such depreciation, and amortization, as well as increased
interest expense and nonrecurring costs resulting from the acquisition, may
negatively impact the Company's net income during the next two years. However,
the Company's after tax cash flow may, depending on the financial performance
of the newspapers and other factors, be favorably impacted. After tax cash
flow is defined as net income plus depreciation and amortization. See Note 4
of Notes to Consolidated Financial Statements for pro forma information
regarding the acquisition.
CONSOLIDATED
Operating revenues for the third quarter and first nine months of 1996
increased 24.4 percent and 12.1 percent, respectively, compared to the
corresponding periods in the preceding year. Revenue comparisons were affected
by the acquisition of Scripps League (subsequently renamed Pulitzer Community
Newspapers, Inc. ("PCN")) on July 1, 1996. Excluding PCN from 1996,
consolidated revenues would have increased 9.1 percent and 7.1 percent,
respectively, for the third quarter and first nine months. The increases
reflected gains in both broadcasting and publishing revenues.
Operating expenses, excluding the St. Louis Agency adjustment, for the
third quarter and first nine months of 1996 increased 17.9 percent and 10.4
percent, respectively, compared to the corresponding periods in the preceding
year. Excluding PCN from 1996, consolidated operating expenses would have
increased 1.9 percent and 5 percent, respectively, for the third quarter and
first nine months. Major factors impacting
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comparable expenses in the third quarter were higher overall personnel costs
of $1.1 million and decreased newsprint costs of $903,000. The year-to-date
increase was primarily attributable to higher overall personnel costs of $5.2
million and increased newsprint costs of $3.7 million.
Operating income for the third quarter and first nine months of 1996
increased to $26.6 million (53 percent) and $72.8 million (22.6 percent),
respectively. Excluding PCN's 1996 third quarter results from the comparison,
operating income would have increased 39.4 percent for the third quarter and
18.6 percent for the year-to-date period. The 1996 third quarter increase
reflected higher operating income in both the broadcasting and publishing
segments while the year-to-date increase was generated by the broadcasting
segment.
Interest expense increased $2.1 million in the 1996 third quarter and $1.5
million in the first nine months due to higher debt levels in the third quarter
of 1996. Interest expense on new long-term borrowings related to the
acquisition of Scripps League amounted to $2.4 million for the third quarter.
The Company's average debt level for the third quarter and the first nine
months of 1996 increased to $251.1 million and $165.9 million from $128.8
million and $134.9 million in the respective periods of the prior year. The
Company's average interest rate for the third quarter and the first nine months
of 1996 decreased slightly to 7.2 percent and 7.3 percent, respectively, from
7.5 percent in both prior year periods. Interest income for the third quarter
and first nine months of 1996 decreased $589,000 and $285,000, respectively,
due to the use of approximately $79 million of cash to partially finance the
Scripps League acquisition on July 1, 1996.
The effective income tax rate for the third quarter and the first nine
months of 1996 increased to 40.9 percent and 39.7 percent, respectively, from
38.5 percent and 39 percent in the respective periods of the prior year. The
higher rates in 1996 reflect approximately $1 million of additional
nondeductible goodwill amortization expense resulting from the acquisition of
Scripps League on July 1, 1996.
Net income in the 1996 third quarter increased 33.7 percent to $13
million, or $0.59 per share, compared with $9.7 million, or $0.44 per share, in
the third quarter of 1995. Net income for the first nine months of 1996
increased 19.9 percent to $39.4 million, or $1.80 per share, compared with
$32.9 million, or $1.51 per share, a year ago. Year-over-year comparisons were
affected by the acquisition of Scripps League on July 1, 1996. Excluding the
acquisition's effect on earnings (i.e., operating results, depreciation and
amortization, non-recurring costs and net interest expense), third quarter
net income increased 43.7 percent to $13.9 million, or $0.63 per share, and
year-to-date net income increased 22.8 percent to $40.4 million, or $1.84 per
share. The gains in net income primarily reflected increases in the
broadcasting segment's operating profits, resulting from higher advertising
revenues.
PUBLISHING
Operating revenues from the Company's publishing segment for the third
quarter and first nine months of 1996 increased 29.8 percent and 12 percent,
respectively, compared to the corresponding periods in the preceding year.
Excluding PCN from 1996, publishing revenues would have increased 3.6 percent
and 3.3 percent, respectively, for
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the third quarter and first nine months. The increases primarily reflected
higher advertising revenues at the St. Louis Post-Dispatch ("Post-Dispatch").
Excluding PCN from 1996, newspaper advertising revenues increased $2.5
million (6.4 percent) in the 1996 third quarter and $6.7 million (5.7 percent)
in the first nine months of 1996. The third quarter and year-to-date increases
resulted primarily from higher classified advertising revenue at the
Post-Dispatch. In the first quarter of 1995, both the 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. In November 1995, additional rate increases, ranging from 7.5
percent to 9.5 percent, were implemented at the Star. On January 1, 1996, rate
increases, averaging 6 percent for most advertising categories, were
implemented at the Post-Dispatch.
Excluding PCN from 1996, circulation revenues for the third quarter of
1996 were unchanged from the prior year at $18.5 million and increased $186,000
(0.3 percent) for the first nine months of 1996. Combined paid circulation
increased 0.5 percent for the third quarter and decreased 1 percent for the
year-to-date period. 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.
Operating expenses (including selling, general and administrative expenses
and depreciation and amortization) for the publishing segment, excluding the
St. Louis Agency adjustment, increased 24.8 percent and 13.6 percent,
respectively, for the third quarter and first nine months of 1996. Excluding
PCN from 1996, publishing operating expenses would have declined 0.8 percent
for the third quarter and increased 4.8 percent for the first nine months. The
third quarter decrease resulted primarily from a decline in newsprint cost of
$903,000. The increase for 1996 year-to-date period was primarily attributable
to increased newsprint costs of $3.7 million and higher overall personnel costs
of $1.8 million.
Operating income from the Company's publishing activities for the third
quarter of 1996 increased 66 percent to $9.1 million from $5.5 million. For
the year-to-date period, operating income increased 6.1 percent to $19.6
million from $18.5 million. Excluding PCN from 1996, third quarter operating
income would have increased 22.8 percent to $6.7 million, reflecting higher
advertising revenue and the current quarter decline in newsprint expense.
Excluding PCN from the first nine months of 1996, operating income would have
declined 6.8 percent to $17.2 million. The year-to-date decline in operating
income resulted primarily from the significant increase in newsprint expense.
After substantial increases during 1995, the Company's purchase price for
newsprint has declined significantly since June 1, 1996, favorably impacting
third quarter results. The lower newsprint prices are expected to continue
through the remainder of 1996 and further benefit the publishing segment's
operating results in the fourth quarter.
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BROADCASTING
Broadcasting operating revenues for the third quarter and first nine
months of 1996 increased 16.8 percent and 12.3 percent over the comparable 1995
periods. Local spot advertising increased 24.1 percent and 14.5 percent,
respectively, for the third quarter and first nine months of 1996, and national
spot advertising increased 13.1 percent and 12.7 percent, respectively, for the
third quarter and nine-month period. The third quarter and first nine months
of 1996 included increased political advertising of approximately $2.5 million
and $5.2 million, respectively. The third quarter also benefited from the
Summer Olympics which was carried on the Company's five NBC affiliated
television stations.
Broadcasting operating expenses (including selling, general and
administrative expenses and depreciation and amortization) for the third
quarter and first nine months of 1996 increased 6 percent and 4.8 percent,
respectively, compared to the prior year periods. The increases were primarily
attributable to higher overall personnel costs of $1.3 million and $3.4 million
for the third quarter and first nine months of 1996, respectively.
Operating income from the broadcasting segment in the 1996 third quarter
increased 44.1 percent to $18.9 million from $13.1 million and in the first
nine months increased 29.5 percent to $57.2 million from $44.2 million. The
increases for both periods resulted from increased advertising revenues.
LIQUIDITY AND CAPITAL RESOURCES
Outstanding debt, inclusive of the short-term portion of long-term debt,
as of September 30, 1996, was $250.1 million, compared with $128.8 million at
December 31, 1995, reflecting the new debt financing incurred for the Scripps
League acquisition on July 1, 1996. The increase was partially offset by a
scheduled repayment of $14.3 million under the Company's Senior Note Agreement
maturing in 1997.
On July 1, 1996, in connection with the acquisition of Scripps League, the
Company issued $85 million of fixed rate senior notes to Prudential and entered
into a $50 million credit agreement with The First National Bank of Chicago, as
Agent, for a group of lenders ("FNBC"). The Company immediately borrowed the
full amount under the FNBC Credit Agreement to partially finance the Scripps
League acquisition. See Notes 4 and 5 of Notes to Consolidated Financial
Statements for additional information regarding the acquisition and long-term
borrowings.
The Company's Senior Note Agreements with Prudential and FNBC Credit
Agreement require it to maintain certain financial ratios, place restrictions
on the payment of dividends and prohibit new borrowings, except as permitted
thereunder.
As of September 30, 1996, commitments for capital expenditures were
approximately $4.4 million, relating to normal capital equipment purchases.
Capital expenditures to be made in fiscal 1996 are estimated to be
approximately $22 million. Commitments for film contracts and license fees as
of September 30, 1996 were approximately $28.4 million. In addition, as of
September 30, 1996, the Company had
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capital contribution commitments of approximately $3.4 million related to
investments in two limited partnerships.
At September 30, 1996, the Company had working capital of $71.2 million
and a current ratio of 1.9 to 1. This compares to working capital of $128.9
million and a current ratio of 3.22 to 1 at December 31, 1995.
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 exhibits are filed as part of this report:
27 Financial Data Schedule
(b) The Company did not file any Reports on Form 8-K during the
current quarter.
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: November 12, 1996 /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
27 Financial Data Schedule
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