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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 MARCH 31, 1996
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
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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 4/30/96
-------------------- --------------------------
COMMON STOCK 4,742,432
CLASS B COMMON STOCK 11,669,412
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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,
-----------------------
OPERATING REVENUES - NET: 1996 1995
------ ----
Publishing: (Unaudited)
Advertising $39,913 $37,954
Circulation 19,039 18,776
Other 7,237 7,071
Broadcasting 49,517 44,722
------- -------
Total operating revenues 115,706 108,523
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OPERATING EXPENSES:
Publishing operations 32,938 28,576
Broadcasting operations 16,271 15,613
Selling, general and administrative 39,492 37,871
St. Louis Agency adjustment 1,758 3,288
Depreciation and amortization 6,741 6,709
------- -------
Total operating expenses 97,200 92,057
------- -------
Operating income 18,506 16,466
Interest income 1,428 1,259
Interest expense (2,389) (2,712)
Net other expense (708) (457)
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INCOME BEFORE PROVISION FOR INCOME
TAXES 16,837 14,556
PROVISION FOR INCOME TAXES 6,596 5,703
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NET INCOME $10,241 $8,853
======= ======
EARNINGS PER SHARE OF STOCK
(COMMON AND CLASS B COMMON): $ 0.62 $ 0.54
======= ======
WEIGHTED AVERAGE NUMBER OF SHARES
(COMMON AND CLASS B COMMON STOCK)
OUTSTANDING 16,398 16,290
======= ======
See notes to consolidated financial statements.
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PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
(IN THOUSANDS)
March 31, December 31,
1996 1995
----------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $112,569 $100,380
Trade accounts receivable (less allowance for doubtful
accounts of $2,192 and $2,009) 59,885 64,524
Inventory 4,987 6,190
Prepaid expenses and other 8,624 7,041
Program rights 6,209 8,824
-------- --------
Total current assets 192,274 186,959
-------- --------
PROPERTIES:
Land 11,781 11,779
Buildings 60,999 60,794
Machinery and equipment 174,550 173,165
Construction in progress 11,722 8,745
-------- --------
Total 259,052 254,483
Less accumulated depreciation 140,069 135,296
-------- --------
Properties - net 118,983 119,187
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INTANGIBLE AND OTHER ASSETS:
Intangible assets - net of applicable amortization 115,566 117,470
Receivable from The Herald Company 42,918 43,696
Other 32,000 27,761
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Total intangible and other assets 190,484 188,927
-------- --------
TOTAL $501,741 $495,073
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(Continued)
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PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
(IN THOUSANDS, EXCEPT SHARE DATA)
March 31, December 31,
1996 1995
---------- -----------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $12,627 $14,145
Current portion of long-term debt 14,250 14,250
Salaries, wages and commissions 9,822 11,757
Income taxes payable 7,275 2,618
Program contracts payable 6,386 8,664
Interest payable 2,287 3,415
Pension obligations 1,023 1,023
Other 4,878 2,234
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Total current liabilities 58,548 58,106
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LONG-TERM DEBT 114,500 114,500
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PENSION OBLIGATIONS 25,362 24,631
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POSTRETIREMENT AND POSTEMPLOYMENT
BENEFIT OBLIGATIONS 93,334 92,856
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OTHER LONG-TERM LIABILITIES 5,404 6,209
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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 - 4,754,340 in 1996 and 4,704,268 in 1995 47 47
Class B common stock, convertible, $.01 par value; 50,000,000
shares authorized; issued - 20,445,050 in 1996 and
20,474,050 in 1995 205 205
Additional paid-in capital 126,036 125,539
Retained earnings 266,141 260,816
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Total 392,429 386,607
Treasury stock - at cost; 16,975 and 16,712 shares of common
stock in 1996 and 1995, respectively, and 8,775,638 shares of
Class B common stock in 1996 and 1995 (187,836) (187,836)
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Total stockholders' equity 204,593 198,771
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TOTAL $501,741 $495,073
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(Concluded)
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,
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1996 1995
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(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $10,241 $8,853
Adjustments to reconcile net income to net cash provided by
operating activities:
Non-cash items:
Depreciation 4,781 4,743
Amortization of intangibles 1,960 1,966
Incremental increase in postretirement and postemployment
benefit obligations 478 518
Changes in assets and liabilities which provided (used) cash:
Trade accounts receivable 4,640 4,185
Inventory 1,203 (1,996)
Other assets (414) (380)
Trade accounts payable and other liabilities (3,787) (2,588)
Income taxes payable 4,657 336
Program rights - net of contracts payable (46) 82
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 23,713 15,719
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,570) (5,247)
Increase in notes receivable (4,993) 215
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (9,563) (5,032)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (2,458) (2,206)
Proceeds from exercise of stock options 497 781
-------- --------
NET CASH USED IN FINANCING ACTIVITIES (1,961) (1,425)
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 12,189 9,262
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 100,380 77,084
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $112,569 $ 86,346
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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 March 31,
1996 and the results of operations and cash flows for the three month
periods ended March 31, 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 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 1995, two dividends of $0.135 per share were
declared, payable on February 1, 1995 and May 1, 1995. In the second
quarter of 1995, a dividend of $0.135 per share was declared, payable on
August 1, 1995. In the third quarter of 1995, a dividend of $0.135 per
share was declared, payable on November 1, 1995. In the first quarter of
1996, two dividends of $0.15 per share were declared, payable on February
1, 1996 and May 1, 1996.
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.
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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):
First Quarter Ended
March 31,
-----------------------
1996 1995
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(Unaudited)
Operating revenues:
Publishing $ 66,189 $ 63,801
Broadcasting 49,517 44,722
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Total $115,706 $108,523
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Operating income (loss):
Publishing $ 4,798 $ 6,154
Broadcasting 14,995 11,372
Corporate (1,287) (1,060)
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Total $ 18,506 $ 16,466
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Depreciation and amortization:
Publishing $ 1,122 $ 1,017
Broadcasting 5,619 5,692
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Total $ 6,741 $ 6,709
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Operating margins
(Operating income to revenues):
Publishing (a) 9.9% 14.8%
Broadcasting 30.3% 25.4%
(a) 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
Subsequent to the end of the first quarter, on May 4, 1996, the Company
entered into an agreement to purchase the stock of Scripps League
Newspapers, Inc. ("SLN"), a privately owned company that publishes 16 daily
newspapers serving smaller cities, primarily in the West and Midwest, and a
number of non-daily publications. The purchase includes all of the
operating assets of the newspapers as well as working capital and
intangibles. The agreement gives SLN the option of excluding three smaller
daily newspapers and two non-daily publications from the sale and is
subject to various closing conditions. Depending upon the actual number of
papers the Company purchases, the purchase price will range from $230
million to $240 million, including about $25 million in working capital. It
is anticipated that the SLN acquisition will be financed by a combination
of cash and borrowings from banks and an institutional lender. The Company
anticipates a July 1, 1996 closing date for the acquisition.
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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 1996 increased 6.6 percent, to
$115.7 million from $108.5 million for the first quarter of 1995. The increase
reflected gains in both broadcasting and publishing revenues.
Operating expenses, excluding the St. Louis Agency adjustment, for the
1996 first quarter increased 7.5 percent, to $95.4 million from $88.8 million
in the first quarter of 1995. The increase was primarily attributable to
increased newsprint costs of $3.1 million and higher overall personnel costs of
$2.1 million.
Operating income in the 1996 first quarter increased 12.4 percent, to
$18.5 million from $16.5 million in the first quarter of 1995. The 1996
increase reflected higher operating income in the broadcasting segment,
resulting from increased advertising revenues.
Interest expense decreased to $2.4 million in the 1996 first quarter from
$2.7 million in the first quarter of 1995 due to lower debt levels. The
Company's average debt level for the 1996 first quarter decreased to $128.8
million from $143 million in the first
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quarter of 1995. The Company's average interest rate for the first quarter of
1996 decreased slightly to 7.4 percent from 7.6 percent in the 1995 first
quarter. Interest income increased $169,000 due to a higher average balance of
invested funds in the 1996 first quarter.
The effective income tax rate for the first quarter of 1996 was 39.2
percent, unchanged from the prior year first quarter. It is expected that, on
an annual basis, the effective tax rate for 1996 will be in the 39 percent
range, approximately the same as the effective rate for the full year of 1995.
Net income in the 1996 first quarter increased 15.7 percent to $10.2
million, or $0.62 per share, compared with $8.9 million, or $0.54 per share, in
the first quarter of 1995. The gain in net income reflected an increase in the
broadcasting segment's operating profits, primarily as a result of higher
advertising revenues.
PUBLISHING
Operating revenues from the Company's publishing segment for the first
quarter of 1996 increased 3.7 percent, to $66.2 million from $63.8 million in
the first quarter of 1995. The increase reflected higher advertising revenues,
particularly classified, at both newspaper properties.
Newspaper advertising revenues increased $2 million (5.2 percent) in the
first quarter of 1996. Higher advertising volume generated $1.9 million of the
1996 first quarter increase while slightly higher average rates contributed
approximately $100,000. The average rates for the 1996 first quarter were
affected by a significant increase in part run advertising inches which more
than offset declines in full run inches. 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.
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
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most advertising categories, were implemented at the Post-Dispatch.
Circulation revenues increased $263,000 (1.4 percent) in the first quarter
of 1996. The benefit ($785,000) of circulation price increases was offset by
revenue declines ($522,000) due to average circulation decreases. Average
daily and Sunday circulation of the Post-Dispatch for the first quarter of 1996
was 322,221 and 540,850 compared to 333,212 and 555,693 for the corresponding
1995 period, decreases of 3.3 percent and 2.7 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. Operating
expenses (including selling, general and administrative expenses and
depreciation and amortization) for the publishing segment, excluding the St.
Louis Agency adjustment, increased 9.7 percent to $59.6 million for the 1996
first quarter compared to $54.4 million for the same period in the prior year.
The higher expense resulted primarily from increased newsprint cost of $3.1
million, reflecting the impact of newsprint price increases, and higher overall
personnel costs of $1.2 million. Operating income from the Company's publishing
activities for the first quarter of 1996 decreased 22 percent to $4.8 million
from $6.2 million due primarily to increased newsprint cost which exceeded
revenue gains for the quarter .
Higher newsprint prices added approximately $3.1 million to 1996
first-quarter newsprint expense ($1.7 million after giving effect to the St.
Louis Agency adjustment). Since the most recent price increase on September 1,
1995, the Company's average cost per metric ton for newsprint has remained in
the range of $745. The Company has negotiated somewhat lower prices with some
of its newsprint suppliers effective June 1, 1996. On a 52-week basis, the
Company's 1995 annual newsprint cost and metric tons consumed, after giving
effect
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to the St. Louis Agency adjustment, were approximately $31.5 million and 46,700
tons, respectively.
BROADCASTING
Broadcasting operating revenues for the first quarter of 1996 increased
10.7 percent, to $49.5 million from $44.7 million in the first quarter of 1995.
Local and national spot advertising increased 8.8 percent and 15.4 percent,
respectively. The first quarter of 1996 included increased political
advertising of approximately $1.2 million.
Broadcasting operating expenses (including selling, general and
administrative expenses and depreciation and amortization) for the first
quarter of 1996 increased 3.5 percent, to $34.5 million from $33.4 million in
the first quarter of the prior year. The increase was primarily attributable to
higher overall personnel costs of $1 million.
Operating income from the broadcasting segment increased 31.9 percent to
$15 million from $11.4 million, due to increased advertising revenues.
LIQUIDITY AND CAPITAL RESOURCES
Outstanding debt, inclusive of the short-term portion of long-term
debt, as of March 31, 1996, was $128.8 million, unchanged from the balance at
December 31, 1995. The Company's borrowings consisted of fixed-rate senior
notes with The Prudential Insurance Company of America ("Prudential"). On
April 22, 1996, the Company made a scheduled repayment of $14.3 million under
its Senior Note Agreement maturing in 1997.
The Company's Senior Note Agreements with Prudential require it to
maintain certain financial ratios, place restrictions on the payment of
dividends and prohibit new borrowings, except as permitted thereunder.
On May 4, 1996, the Company entered into an agreement to purchase the
stock of Scripps League Newspapers, Inc. ("SLN"), a privately owned company
that publishes 16 daily newspapers serving smaller cities, primarily in the
West and Midwest, and a
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number of non-daily publications. The agreement gives SLN the option
of excluding three smaller daily newspapers and two non-daily publications from
the sale and is subject to various closing conditions. Depending upon the
actual number of papers the Company purchases, the purchase price will range
from $230 million to $240 million, including about $25 million in working
capital. It is anticipated that the SLN acquisition will be financed by a
combination of cash and borrowings from banks and an institutional lender.
As of March 31, 1996, commitments for capital expenditures were
approximately $8.2 million, relating to normal capital equipment replacements.
Capital expenditures to be made in fiscal 1996 are estimated to be
approximately $22 million. Commitments for film contracts and license fees as
of March 31, 1996 were approximately $27.3 million. In addition, as of March
31, 1996, the Company had capital contribution commitments of approximatley
$6.3 million related to investments in two limited partnerships.
At March 31, 1996, the Company had working capital of $133.7 million
and a current ratio of 3.28 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 5. OTHER INFORMATION
On May 4, 1996, the Company entered into an agreement to purchase the
stock of Scripps League Newspapers, Inc. ("Scripps League"). Summary
information concerning the acquisition is included in Note 4 to the
Consolidated Financial Statements included in Item 1 of this report. The terms
of the purchase are more fully described in the Stock Purchase Agreement filed
as Exhibit 2 of this report.
Financial statements and pro forma financial information related to the
Scripps League acquisition required by Item 7. (a) and (b) of the Securities
and Exchange Act Form 8-K are not available at the time of this filing but will
be filed within 60 days.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of this report:
2 Stock Purchase Agreement by and among Pulitzer Publishing Company
and Mr. Edward W. Scripps, Mrs. Betty Knight Scripps, and the
Edward W. Scripps and Betty Knight Scripps Charitable Remainder
Unitrust dated as of May, 4, 1996
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 15, 1996 /s/ Ronald H. Ridgway
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(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
2 Stock Purchase Agreement by and among Pulitzer Publishing
Company and Mr. Edward W. Scripps, Mrs. Betty Knight
Scripps,and The Edward W. Scripps and Betty Knight Scripps
Charitable Remainder Unitrust dated as of May 4, 1996.
27 Financial Data Schedule
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