<PAGE> 1
================================================================================
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, 1999
--------------
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 1-14541
------------------------------
PULITZER INC.
(Exact name of registrant as specified in its charter)
------------------------------------------------------
DELAWARE 43-1819711
(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 / / NO /X/
---------------------------------------------------
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the
latest practicable date.
CLASS OUTSTANDING 4/30/99
----- -------------------
COMMON STOCK 8,292,447
CLASS B COMMON STOCK 14,339,284
================================================================================
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
PULITZER INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED (LOSS) INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE DATA)
<TABLE>
<CAPTION>
First Quarter Ended
March 31,
------------------------------
1999 1998
----------- ----------
<S> <C> <C>
OPERATING REVENUES - NET:
Advertising $ 61,080 $ 57,721
Circulation 22,042 22,198
Other 11,235 10,310
--------- ---------
Total operating revenues 94,357 90,229
--------- ---------
OPERATING EXPENSES:
Operations 37,957 37,314
Selling, general and administrative 35,377 33,447
General corporate expense 1,810 1,417
Stock option cash-outs and bonuses (Note 6) 26,685
St. Louis Agency adjustment 5,239 5,270
Depreciation and amortization 4,009 3,379
--------- ---------
Total operating expenses 111,077 80,827
--------- ---------
Operating (loss) income (16,720) 9,402
Interest income 2,192 1,042
Net other expense (154) (290)
--------- ---------
(LOSS) INCOME FROM CONTINUING OPERATIONS
BEFORE PROVISION FOR INCOME TAXES (14,682) 10,154
(BENEFIT) PROVISION FOR INCOME TAXES (6,166) 4,383
--------- ---------
(LOSS) INCOME FROM CONTINUING OPERATIONS (8,516) 5,771
(LOSS) INCOME FROM DISCONTINUED
OPERATIONS, NET OF TAX (21,449) 8,194
--------- ---------
NET (LOSS) INCOME $ (29,965) $ 13,965
========= =========
BASIC EARNINGS PER SHARE OF STOCK:
(Loss) income from continuing operations $ (0.38) $ 0.26
(Loss) income from discontinued operations (0.95) 0.37
--------- ---------
(Loss) earnings per share $ 1.33) $ 0.63
========= =========
Weighted average number of shares outstanding 22,604 22,223
========= =========
DILUTED EARNINGS PER SHARE OF STOCK:
(Loss) income from continuing operations $ (0.38) $ 0.26
(Loss) income from discontinued operations (0.95) 0.36
--------- ---------
(Loss) earnings per share $ (1.33) $ 0.62
========= =========
Weighted average number of shares outstanding 22,604 22,615
========= =========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 3
PULITZER INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
-------------- -------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $565,889 $110,171
Trade accounts receivable (less allowance for doubtful
accounts of $1,812 and $1,722) 38,529 42,658
Inventory 7,247 2,587
Income taxes receivable 19,463
Prepaid expenses and other 8,383 12,564
-------- --------
Total current assets 639,511 167,980
-------- --------
PROPERTIES:
Land 5,536 5,536
Buildings 43,862 43,511
Machinery and equipment 105,123 98,848
Construction in progress 5,489 8,442
-------- --------
Total 160,010 156,337
Less accumulated depreciation 74,418 72,186
-------- --------
Properties - net 85,592 84,151
-------- --------
INTANGIBLE AND OTHER ASSETS:
Intangible assets - net of amortization 195,329 197,154
Receivable from The Herald Company 35,074 38,683
Net assets of Broadcasting Business (Note 3) 35,717
Other 20,563 22,708
-------- --------
Total intangible and other assets 250,966 294,262
-------- --------
TOTAL $976,069 $546,393
======== ========
</TABLE>
(Continued)
3
<PAGE> 4
PULITZER INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
-------------- --------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $ 10,483 $ 12,253
Salaries, wages and commissions 8,819 10,911
Income taxes payable 2,832
Acquisition payable 9,707 9,707
Dividends payable 3,395 3,374
Other 4,180 4,228
--------- ---------
Total current liabilities 36,584 43,305
--------- ---------
PENSION OBLIGATIONS 27,804 23,625
--------- ---------
POSTRETIREMENT AND POSTEMPLOYMENT
BENEFIT OBLIGATIONS 89,183 88,397
--------- ---------
OTHER LONG-TERM LIABILITIES 9,827 5,709
--------- ---------
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS' EQUITY (Note 5):
Preferred stock, $.01 par value; shares authorized -
100,000,000 in 1999 and 25,000,000 in 1998; issued and
outstanding - none
Common stock, $.01 par value; shares authorized - 100,000,000
in 1999 and 1998; issued - 8,292,447 in 1999 and 7,242,974
in 1998 83 72
Class B common stock, convertible, $.01 par value; shares
authorized - 100,000,000 in 1999 and 50,000,000 in 1998;
issued - 14,339,284 in 1999 and 27,019,880 in 1998 143 270
Additional paid-in capital 424,391 151,574
Retained earnings 388,969 422,329
Accumulated other comprehensive income (915) (915)
--------- ---------
Total 812,671 573,330
Treasury stock - at cost; 25,519 shares of common stock and
11,700,850 shares of Class B common stock in 1998 (187,973)
--------- ---------
Total stockholders' equity 812,671 385,357
--------- ---------
TOTAL $ 976,069 $ 546,393
========= =========
</TABLE>
(Concluded)
See notes to consolidated financial statements.
4
<PAGE> 5
PULITZER INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
First Quarter Ended
March 31,
--------------------------------
1999 1998
<S> <C> <C>
CONTINUING OPERATIONS
CASH FLOWS FROM OPERATING ACTIVITIES:
(Loss) income from continuing operations $ (8,516) $ 5,771
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 2,157 1,906
Amortization 1,852 1,473
Deferred income taxes (68) 691
Changes in assets and liabilities (net of the effects of the
purchase and sale of properties) which provided (used) cash:
Trade accounts receivable 4,129 698
Inventory (4,660) 1,595
Other assets 8,455 1,070
Trade accounts payable and other liabilities 5,173 (4,913)
Income taxes (22,295) 6,521
--------- ---------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (13,773) 14,812
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,190) (4,788)
Purchase of publishing properties, net of cash acquired (1,998)
Investment in joint ventures and limited partnerships (894) (342)
Decrease in notes receivable 74 45
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (4,010) (7,083)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (3,374) (3,331)
Proceeds from exercise of stock options 2,280 1,613
Proceeds from employee stock purchase plan 335
Purchase of treasury stock (110) (41)
--------- ---------
NET CASH USED IN FINANCING ACTIVITIES (1,204) (1,424)
--------- ---------
CASH (USED IN) PROVIDED BY CONTINUING OPERATIONS (18,987) 6,305
--------- ---------
DISCONTINUED OPERATIONS
Operating activities (21,820) 18,385
Investing activities:
Capital expenditures (1,488) (3,187)
Sale of assets 5,000
Financing activities:
Proceeds from issuance of long-term debt 700,000
Repayments of long-term debt (172,705)
Payment of Spin-off and Merger Transaction costs (31,272)
Payment of estimated working capital adjustment related to Merger (3,010)
--------- ---------
CASH PROVIDED BY DISCONTINUED OPERATIONS 474,705 15,198
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 455,718 21,503
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 110,171 62,749
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 565,889 $ 84,252
========= =========
</TABLE>
(Continued)
5
<PAGE> 6
PULITZER INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
First Quarter Ended
March 31,
--------------------------------
1999 1998
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest paid $ 8,429 $ 6,880
Interest received (2,333) (987)
Income taxes 3,231 2,936
Income tax refunds (141) (49)
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Divestiture of broadcasting business--decrease in Net Liabilities of
Broadcasting Business and increase in Additional Paid-in Capital $ 494,721 $ -
Spin-off and Merger Transaction costs--decrease in Other Assets
and decrease in Additional Paid-in Capital 4,253
Increase in Dividends Payable and decrease in Retained Earnings 3,395 3,338
Cancellation of treasury stock:
Decrease in Treasury Stock and Class B Common Stock 117
Decrease in Treasury Stock and Additional Paid-in Capital 187,966
</TABLE>
(Concluded)
See notes to consolidated financial statements.
6
<PAGE> 7
PULITZER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
On March 18, 1999, the spin-off of the newspaper publishing and new media
businesses formerly operated by Pulitzer Publishing Company ("Pulitzer") was
completed with Pulitzer Inc. (the "Company") commencing operations as an
independent publicly traded publishing company (the "Spin-off"). Following the
Spin-off, Pulitzer with its remaining broadcasting business ("Broadcasting
Business") was merged with and into Hearst-Argyle Television, Inc.
("Hearst-Argyle") in exchange for the issuance to Pulitzer's stockholders of
37,096,774 shares of Hearst-Argyle's Series A common stock (the "Merger"). The
Merger and Spin-off are collectively referred to as the "Transactions."
As a result of the Transactions, the Company is the continuing entity for
financial reporting purposes. Pulitzer's historical basis in its newspaper
publishing and related new media assets and liabilities have been carried over
to the Company. The distribution of the net liabilities of the Broadcasting
Business has been recorded as a capital contribution to the Company (see Notes 4
& 5). The Transactions represent a reverse-spin transaction and, accordingly,
the Company's results of operations for periods prior to the consummation of the
Transactions are identical to the historical results previously reported by
Pulitzer. Results of the Company's newspaper publishing and related new media
businesses are reported as continuing operations in the statements of
consolidated income. The results of the Broadcasting Business prior to the
Merger are reported as discontinued operations (see Note 3).
2. 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 the Company's
financial position as of March 31, 1999 and the results of operations and cash
flows for the three-month periods ended March 31, 1999 and 1998. These financial
statements should be read in conjunction with the consolidated financial
statements and related notes thereto included in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999. 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 - Basic earnings per share of stock is computed
using the weighted average number of common and Class B common shares
outstanding during the applicable period. Diluted earnings per share of stock is
computed using the weighted average number of common and Class B common shares
outstanding and common stock equivalents (outstanding stock options). As a
result of the cash-out of outstanding stock options on March 18, 1999, there are
no common stock equivalents outstanding at the end of the 1999 first quarter
(see Note 6). Weighted average shares of common and Class B common stock and
common stock equivalents used in the calculation of basic and diluted earnings
per share are summarized as follows:
<TABLE>
<CAPTION>
First Quarter Ended
March 31,
-------------------------
1999 1998
(In thousands)
<S> <C> <C>
Weighted average shares outstanding (Basic EPS) 22,604 22,223
Stock option equivalents 392
---------- -----------
Weighted average shares outstanding and
Stock option equivalents (Diluted EPS) 22,604 22,615
=========== ===========
</TABLE>
7
<PAGE> 8
Stock option equivalents included in the diluted earnings per share calculation
were determined using the treasury stock method. Under the treasury stock
method, outstanding stock options are dilutive when the average market price of
the Company's common stock exceeds the option price during a period. In
addition, proceeds from the assumed exercise of dilutive options along with the
related tax benefit are assumed to be used to repurchase common shares at the
average market price of such stock during the period.
Reclassifications - Certain reclassifications have been made to the 1998
consolidated financial statements to conform with the 1999 presentation.
3. DISCONTINUED OPERATIONS
Discontinued operations represent the Broadcasting Business owned by Pulitzer
prior to the Merger including the allocation of all long-term debt balances and
related interest expense amounts of Pulitzer prior to the Merger.
The net liability balance of the Broadcasting Business as of March 18, 1999,
including the $700 million of New Debt, was contributed to "Additional Paid-in
Capital" of the Company at the time of the Merger (see Notes 4 and 5). The net
asset balance of the Broadcasting Business as of December 31, 1998 is classified
in the statement of consolidated financial position as "Net Assets of
Broadcasting Business". The asset and liability balances of the Broadcasting
Business as of March 18, 1999 (immediately prior to the Merger) and as of
December 31, 1998 are included below.
<TABLE>
<CAPTION>
March 18, 1999 December 31,
(Prior to Merger) 1998
------------------ ------------------
ASSETS (In thousands)
<S> <C> <C>
Cash $ 1,860 $--
Trade accounts receivable (less allowance for
Doubtful accounts of $558 and $597) 40,759 47,244
Program rights 5,941 8,425
Other current assets 2,644 1,115
--------- ---------
Total current assets 51,204 56,784
Properties - net 82,843 83,514
Intangible assets - net 93,109 94,817
Other assets 2,019 8,348
--------- ---------
Total assets of Broadcasting Business 229,175 243,463
--------- ---------
LIABILITIES
Trade accounts payable and accrued expenses 7,615 9,255
Current portion of long-term debt (Note 4) 12,705
Interest payable 5,301
Program contracts payable 5,599 7,955
--------- ---------
Total current liabilities 13,214 35,216
Long-term debt (Note 4) 700,000 160,000
Pension obligations 3,267 6,951
Postretirement benefit obligations 1,998 2,762
Other long term liabilities 5,417 2,817
Commitments and contingencies
--------- ---------
Total liabilities of Broadcasting Business 723,896 207,746
--------- ---------
NET (LIABILITIES) ASSETS OF BROADCASTING BUSINESS $(494,721) $ 35,717
========= =========
</TABLE>
8
<PAGE> 9
In connection with the Merger, a cash payment is required by either
Hearst-Argyle or the Company for the difference between $41,000,000 and the
working capital balance of the Broadcasting Business on the date of the Merger
("Working Capital Adjustment"). Based upon the March 18, 1999 asset and
liability balances included above, the Broadcasting Business had a working
capital balance of $37,990,000 resulting in a preliminary Working Capital
Adjustment of $3,010,000. This preliminary amount has been paid to Hearst-Argyle
as of March 31, 1999.
As of March 18, 1999, certain Broadcasting Business asset and liability
balances, including but not limited to accrued expenses, pensions,
postretirement and deferred income taxes, have been recorded based upon
preliminary estimates. As a result, the Working Capital Adjustment and the
capital contribution recorded in the Company's equity section to reflect the
Merger represent preliminary estimates. Subsequent to March 31, 1999, these
preliminary estimates will be adjusted, as necessary, based upon the final
calculation of certain Broadcasting Business asset and liability balances.
Similarly, Transaction costs recorded in the Company's consolidated financial
statements in the 1999 first quarter also include estimates which will be
adjusted subsequent to March 31, 1999 as final billings are received. (see Note
5)
The net (loss) income from operations of the Broadcasting Business, without
allocation of any general corporate expense, is reflected in the statements of
consolidated income as "Income from Discontinued Operations" and is summarized
as follows:
<TABLE>
<CAPTION>
First Quarter Ended
March 31,
-----------------------------
1999(a) 1998
------------ -------------
(In thousands)
<S> <C> <C>
Operating revenues $ 45,622 $ 53,170
-------- --------
Operating expenses:
Operations 15,951 18,109
Selling, general and administrative 11,616 12,595
Stock option cash-outs and bonuses 25,305
Depreciation and amortization 3,881 5,551
-------- --------
Total operating expenses 56,753 36,255
-------- --------
Operating (loss) income (11,131) 16,915
Interest expense 3,128 3,462
Loss on extinguishment of debt (b) 17,955
-------- --------
(Loss) income before income taxes (32,214) 13,453
Income tax (benefit) provision (10,765) 5,259
-------- --------
Net (loss) income $(21,449) $ 8,194
======== ========
</TABLE>
(a) Broadcasting results for 1999 reflect operations only through March 18,
1999, the date of the Merger, and include $25.3 million of stock option
cash-outs and bonus payments to broadcasting employees in connection with
the Merger on March 18, 1999. (see Note 6)
(b) On March 18, 1999, in connection with the Spin-off and Merger, Pulitzer
prepaid its existing long-term debt and incurred a prepayment penalty of
approximately $17.2 million. This prepayment penalty, along with the
write-off of deferred financing fees of approximately $750,000, have been
included in discontinued operations in the first quarter of 1999.
9
<PAGE> 10
4. FINANCING ARRANGEMENTS
On March 17, 1999, Pulitzer borrowed $700 million from Chase Manhattan Bank
pursuant to a short-term borrowing agreement (the "New Debt"). Prior to the
Spin-off and Merger, on March 18, 1999, Pulitzer used a portion of the proceeds
from the New Debt to prepay its existing long-term debt with The Prudential
Insurance Company of America ("Prudential"), pay a related prepayment penalty to
Prudential and pay certain transaction costs resulting from the Spin-off and
Merger. The balance of the proceeds of the New Debt, together with existing cash
balances, was contributed to the Company in the Spin-off and the New Debt was
assumed by Hearst-Argyle at the time of the Merger. Accordingly, all long-term
debt balances and related interest expense are allocated to the Broadcasting
Business and reported as discontinued operations in the consolidated financial
statements (see Note 3).
As a result of the Transactions, the Company has no outstanding debt and a cash
balance of approximately $566 million as of March 31, 1999.
5. STOCKHOLDERS' EQUITY
On March 18, 1999, all common and Class B common shares of treasury stock held
by Pulitzer were canceled. The cancellation of the treasury shares reduced the
number of shares of common and Class B common stock issued but did not change
the number of shares of common and Class B common stock outstanding. In
addition, the cancellation did not change the total balance of stockholders'
equity. Immediately following the Spin-off, on March 18, 1999, the number of
shares of common and Class B common stock of the Company outstanding was
identical to the number of shares of common and Class B common stock of Pulitzer
outstanding immediately prior to the Spin-off.
The net liability balance of the Broadcasting Business as of March 18, 1999,
including the $700 million of New Debt, was contributed to "Additional Paid-in
Capital" of the Company at the time of the Merger (see Notes 3 and 4). This
capital contribution has been recorded net of Transaction costs of approximately
$35.5 million and the estimated Working Capital Adjustment of approximately $3
million related to the Merger. Activity in the Company's stockholders' equity
accounts for the first quarter of 1999 is included below:
<TABLE>
<CAPTION>
Accumulated
Other Total
Class B Additional Compre- Stock-
Common Common Paid-in Retained hensive Treasury holders'
Stock Stock Capital Earnings Income Stock Equity
-------- --------- -------- --------- ----------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1998 $72 $270 $151,574 $422,329 $(915) $(187,973) $385,357
Common stock options 1 2,279 2,280
exercised
Conversion of Class B
common stock to common stock 10 (10)
Tax benefit from stock options
exercised 2,318 2,318
Net loss (29,965) (29,965)
Cash dividends declared
$0.15 per share of common
and Class B common (3,395) (3,395)
Purchase of treasury stock (110) (110)
Cancellation of treasury (117) (187,966) 188,083
stock
Divestiture of Broadcasting
Business, net of
Transaction costs and
Working Adjustment 456,186 456,186
------- --------- -------- --------- ----------- --------- ---------
BALANCES AT MARCH 31, 1999 $83 $143 $424,391 $388,969 $(915) $ -- $812,671
======= ========= ======== ========= =========== ========= =========
</TABLE>
10
<PAGE> 11
In the first quarter of 1999, a dividend of $0.15 per share was declared,
payable on May 3, 1999. In addition, a cash dividend of $0.15 per share which
was declared in December 1998 and paid to stockholders in January 1999
represented the acceleration of Pulitzer's dividend historically declared and
paid in the first quarter of each fiscal year.
In the first quarter of 1998, two dividends of $0.15 per share were declared,
payable on February 2, 1998 and May 1, 1998.
6. STOCK OPTION CASH-OUTS AND BONUSES
On March 18, 1999, immediately prior to the Spin-off and Merger, Pulitzer
redeemed all outstanding stock options, whether or not vested, and terminated
the related option plans. In addition to the stock option cash-outs, bonus
payments due as a result of the Spin-off and Merger were recorded as expense in
the first quarter of 1999. Total stock option cash-out and bonus expense of
approximately $52 million has been recorded in the 1999 first quarter including
approximately $26.7 million related to publishing employees recorded in
continuing operations and approximately $25.3 million related to broadcasting
employees recorded in discontinued operations.
7. COMMITMENTS AND CONTINGENCIES
At March 31, 1999, the Company and its subsidiaries had construction and
equipment commitments of approximately $7,386,000.
The Company is an investor in one limited partnership requiring future capital
contributions. As of March 31, 1999, the Company's unfunded capital contribution
commitment related to this investment was approximately $8,068,000.
The Company and its subsidiaries are involved, from time to time, in various
claims and lawsuits incidental to the ordinary course of its business, including
such maters as libel, slander and defamation actions and complaints alleging
discrimination. While the results of litigation cannot be predicted, management
believes the ultimate outcome of any existing litigation will not have a
material adverse effect on the consolidated financial statements of the Company
and its subsidiaries.
In connection with the September 1986 purchase of Pulitzer Class B common stock
from certain selling stockholders (the "1986 Selling Stockholders"), Pulitzer
agreed, under certain circumstances, to make an additional payment to the 1986
Selling Stockholders in the event of a Gross-Up Transaction. A "Gross-Up
Transaction" was defined to mean, among other transactions, (i) any merger, in
any transaction or series of related transactions, of more than 85 percent of
the voting securities or equity of Pulitzer pursuant to which holders of
Pulitzer common stock receive securities other than Pulitzer common stock and
(ii) any recapitalization, dividend or distribution, or series of related
recapitalizations, dividends or distributions, in which holders of Pulitzer
common stock receive securities (other than Pulitzer common stock) having a Fair
Market Value (as defined herein) of not less than 33 1/3 percent of the Fair
Market Value of the shares of Pulitzer common stock immediately prior to such
transaction. The amount of the additional payment, if any, would equal (x) the
product of (i) the amount by which the Transaction Proceeds (as defined herein)
exceeds the Imputed Value (as defined herein) multiplied by (ii) the applicable
percentage (i.e., 50 percent for the period from May 13, 1996 through May 12,
2001) multiplied by (iii) the number of shares of Pulitzer common stock issuable
upon conversion of the shares of Pulitzer Class B common stock owned by the 1986
Selling Stockholders, adjusted for, among other things, stock dividends and
stock splits; less (y) the sum of any additional payments previously received by
the 1986 Selling Stockholders; provided, however, that in the event of any
recapitalization, dividend or distribution, the amount by which the Transaction
Proceeds exceeds the Imputed Value shall not exceed the amount paid or
distributed pursuant to such recapitalization, dividend or distribution in
respect of one share of Pulitzer common stock.
The term "Transaction Proceeds" was defined to mean, in the case of a merger,
the aggregate Fair Market Value (as defined herein) of the consideration
received pursuant thereto by the holder of one share of Pulitzer common stock,
and, in the case of a recapitalization, dividend or distribution, the aggregate
Fair Market Value of the amounts paid or distributed in respect of one share of
Pulitzer common stock plus the aggregate Fair Market Value of one share of
Pulitzer common stock following such transaction. The "Imputed Value" for one
share of Pulitzer common stock on a given date was defined to mean an amount
equal to $28.82 compounded annually from May 12, 1986 to such given date at the
rate of 15 percent per annum, the result of which is $154.19 at May 12, 1998.
There was no specific provision for adjustment of the $28.82 amount, but if it
were adjusted to reflect all stock dividends and stock splits of Pulitzer since
September 30, 1986, it would now equal $15.72, which if compounded annually from
May 12, 1986 at the rate of 15 percent per annum would equal $84.11 at May 12,
1998.
"Fair Market Value," in the case of any consideration other than cash received
in a Gross-Up Transaction, was defined to mean the fair market value thereof as
agreed to by a valuation firm selected by Pulitzer and a valuation firm selected
by the 1986 Selling Stockholders, or, if the two valuation firms do not agree on
the fair market value, the fair market value of such consideration as determined
by a third valuation firm chosen by the two previously selected valuation firms.
Any such agreement or determination shall be final and binding on the parties.
As a result of the foregoing, the amount of additional payments, if any, that
may be payable by the Company with respect to the Merger and the distribution of
Pulitzer Inc. common and Class B common stock in the Spin-off (the
"Distribution") cannot be determined at this time. However, if the Distribution
were determined to be a Gross-Up Transaction and if the Fair Market Value of the
Transaction Proceeds with respect to the Merger and the Distribution were
determined to exceed the Imputed Value, then the additional payments to the 1986
Selling Stockholders would equal approximately $5.9 million for each $1.00 by
which the Transaction Proceeds exceed the Imputed Value. Accordingly, depending
on the ultimate resolution of the meaning and application of various provisions
of the Gross-Up Transaction agreements, including the determination of Imputed
Value and Fair Market Value of the Transaction Proceeds, in the opinion of the
Company's management, the amount of an additional payment, if any, could be
material to the consolidated financial statements of the Company.
8. NEWSPAPER PUBLISHING REVENUES
The Company's newspaper publishing revenues consist of the following:
<TABLE>
<CAPTION>
First Quarter Ended
March 31,
------------------------
1999 1998
(In thousands)
<S> <C> <C>
St. Louis Post-Dispatch $60,662 $59,559
Star Publishing Company 14,433 13,625
Pulitzer Community Newspaper Group 18,781 16,745
Other publishing revenue 481 300
--------- ---------
Total publishing revenue $94,357 $90,229
========= =========
</TABLE>
11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Statements in this Quarterly Report on Form 10-Q concerning the Company's
business outlook or future economic performance, anticipated profitability,
revenues, expenses or other financial items, together with other statements that
are not historical facts, are "forward-looking statements" as that term is
defined under the Federal Securities Laws. Forward-looking statements are
subject to risks, uncertainties and other factors which could cause actual
results to differ materially from those stated in such statements. Such risks,
uncertainties and factors include, but are not limited to, industry cyclicality,
the seasonal nature of the business, changes in pricing or other actions by
competitors or suppliers, and general economic conditions, as well as other
risks detailed in the Company's filings with the Securities and Exchange
Commission including this Quarterly Report on Form 10-Q.
GENERAL
The Company's operating revenues are significantly influenced by a
number of factors, including overall advertising expenditures, the appeal of
newspapers 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
The Company (the "Company") was organized as a corporation in 1998 and is
engaged in newspaper publishing, operating the newspaper properties operated by
Pulitzer Publishing Company ("Pulitzer") prior to the Spin-off (as defined
below). Prior to the Spin-off, the Company was a wholly-owned subsidiary of
Pulitzer.
As of May 25, 1998, Pulitzer, the Company and Hearst-Argyle Television, Inc.
("Hearst-Argyle") entered into an Amended and Restated Agreement and Plan of
Merger (the "Merger Agreement") pursuant to which Hearst-Argyle agreed to
acquire Pulitzer's television and radio broadcasting operations (collectively,
the "Broadcasting Business") in exchange for the issuance to Pulitzer's
stockholders of 37,096,774 shares of Hearst-Argyle's Series A common stock. The
Broadcasting Business consisted of nine network-affiliated television stations
and five radio stations owned and operated by Pulitzer Broadcasting Company and
its wholly-owned subsidiaries. On March 18, 1999, the Broadcasting Business was
acquired by Hearst-Argyle through the merger (the "Merger") of Pulitzer into
Hearst-Argyle. Prior to the Merger, Pulitzer's newspaper publishing and related
new media businesses were contributed to the Company in a tax-free "spin-off" to
Pulitzer stockholders (the "Spin-off"). The Merger and Spin-off are collectively
referred to as the "Transactions."
Pulitzer's historical basis in its newspaper publishing and related new
media assets and liabilities have been carried over to the Company. The
Transactions represent a reverse-spin transaction and, accordingly, the
Company's results of operations for periods prior to the consummation of the
Transactions are identical to the historical results previously reported by
Pulitzer. Results of the Company's newspaper publishing and related new media
businesses are reported as continuing operations, and the results of the
Broadcasting Business owned by Pulitzer prior to the Merger are reported as
discontinued operations, in the financial statements included in Item 1 of this
Quarterly Report on Form 10-Q.
12
<PAGE> 13
THREE MONTHS ENDED MARCH 31, 1999 COMPARED WITH 1998
CONTINUING OPERATIONS--PUBLISHING
Operating revenues for the first quarter of 1999 increased 4.6 percent,
to $94.4 million from $90.2 million in the first quarter of 1998. The gain
primarily reflected higher advertising revenues.
Newspaper advertising revenues increased $3.4 million, or 5.8 percent,
in the first quarter of 1999. The current year increase included advertising
revenue gains of 13.6 percent at the Pulitzer Community Newspaper Group ("PCN
Group"), 10.3 percent at The Arizona Daily Star ("Star") and 2.6 percent at the
St. Louis Post-Dispatch ("Post-Dispatch"). The increases at the PCN Group and
the Star were primarily in the retail and classified categories while the
Post-Dispatch gain was driven by classified and national advertising increases.
At the PCN Group, volume increases at most locations, along with new advertising
from the Troy Daily News (acquired in October 1998), accounted for a significant
portion of the higher advertising revenue. Similarly, at the Star, higher first
quarter advertising revenue reflected an increase of approximately 13.4 percent
in full run advertising volume (linage in inches). At the Post-Dispatch, rate
increases in the first quarter of 1999 and higher national and part-run
advertising volume accounted for the current year advertising revenue increase.
Circulation revenues decreased 0.7 percent to $22 million in the first
quarter of 1999 from $22.2 million in the prior year quarter. The lower
circulation revenues reflected declines in paid circulation at the Post-Dispatch
and the Star which were partially offset by gains at several of the PCN Group
properties including the Troy Daily News which was acquired in October 1998.
Operating expenses (including selling, general and administrative
expenses, general corporate expense and depreciation and amortization),
excluding the St. Louis Agency adjustment, increased to $105.8 million for the
1999 first quarter from $75.6 million for the same period in the prior year. The
significant increase resulted from $26.7 million of one-time stock option
cash-out and bonus payments to publishing employees in connection with the
Merger. Excluding the one-time Merger costs, operating expenses increased 4.8
percent to $79.2 million in the 1999 first quarter. The increase on a comparable
basis reflected higher overall personnel costs of $2.7 million and higher
depreciation and amortization expense of $630,000, due in part to the
acquisition of the Troy Daily News in October 1998. These expense increases were
partially offset by a decline in newsprint costs of $679,000, reflecting lower
newsprint prices in the current year quarter.
For the first quarter of 1999, the Company reported an operating loss
of $16.7 million compared to operating income of $9.4 million in the prior year
quarter. The current year loss resulted from the one-time Merger costs of $26.7
million. Excluding these one-time costs, operating income increased 6 percent to
$10 million. The increase on a comparable basis reflected the advertising
revenue gains in the current year quarter.
Interest income for the first quarter of 1999 increased to $2.2 million
from $1 million in the prior year quarter. The increase reflected the inflow of
approximately $429 million of net cash in connection with the Spin-off and
Merger on March 18, 1999 (See "Liquidity and Capital Resources").
The effective income tax rate for the first quarter of 1999 was 42
percent compared with a rate of 43.2 percent in the prior year quarter. The
Company expects its effective tax rate related to continuing operations will be
in the 42 to 43 percent range for the full year of 1999.
For the first quarter of 1999, the Company reported a loss from
continuing operations of $8.5 million, or $0.38 per diluted share, compared to
income of $5.8 million, or $0.26 per diluted share, in the prior year quarter.
The current year loss resulted from the one-time Merger costs of $26.7 million.
Excluding these one-time costs, income from continuing operations increased 20.6
percent to $7 million, or $0.31 per diluted share. The increase on a comparable
basis reflected the advertising revenue gains and the higher interest income in
the current year quarter.
13
<PAGE> 14
Fluctuations in the price of newsprint significantly impact the results
of the Company's newspaper operations, where newsprint expense accounts for
approximately 20 percent of the segment's total operating costs. For the first
quarter of 1999, the Company's average cost for newsprint was approximately $570
per metric ton, compared to approximately $600 per metric ton in the 1998 first
quarter. Price decreases implemented by newsprint suppliers since March 1, 1999
have reduced the Company's cost of newsprint to the range of approximately $490
to $530 per metric ton and will benefit the Company's newspaper operations in
the second quarter of 1999.
DISCONTINUED OPERATIONS--BROADCASTING
For the first quarter of 1999, the Company reported a loss from
discontinued operations of $21.4 million, or $0.95 per diluted share, compared
to income of $8.2 million, or $0.36 per diluted share, in the prior year
quarter. The current year loss resulted from a combination of $25.3 million of
one-time stock option cash-out and bonus payments to broadcasting employees in
connection with the Merger and a loss on extinguishment of debt of $18 million.
In addition, the current year quarter included only a partial quarter of
broadcasting operations (through March 18, 1999) compared to a full quarter of
normal broadcasting operations in the prior year. (See Note 3 to the
consolidated financial statements included in Item 1.)
LIQUIDITY AND CAPITAL RESOURCES
On March 17, 1999, Pulitzer borrowed $700 million from Chase Manhattan Bank
pursuant to a short-term borrowing agreement (the "New Debt"). On March 18,
1999, Pulitzer used a portion of the proceeds from the New Debt to prepay
existing long-term debt of approximately $172.7 million and pay a related
prepayment penalty of approximately $17.2 million. Pulitzer made additional
payments related to the Transactions including $47.1 million for stock option
cash-outs and bonuses (net of deferred compensation in the amount of $4.9
million), $31.3 million for professional fees related to the Transactions
(excluding $4.2 million paid prior to March 18, 1999) and a $3 million
preliminary working capital adjustment. The cash balance of the proceeds of the
New Debt was contributed to the Company in the Spin-off while the New Debt was
assumed by Hearst-Argyle at the time of the Merger. As a result, the Company has
no outstanding debt and a cash balance of approximately $566 million as of March
31, 1999. The Company anticipates funding future newspaper acquisitions with a
portion of the available cash as potential investment opportunities are
identified. In the interim, the Company expects to invest its cash in a mixture
of short to mid-term government and corporate debt obligations.
In January 1999, Pulitzer terminated its credit agreement with The First
National Bank of Chicago, as Agent, for a group of lenders, that provided for a
$50,000,000 variable rate revolving credit facility ("Credit Agreement"). The
Credit Agreement provided the option to repay any borrowings and terminate the
Credit Agreement, without penalty, prior to its scheduled maturity. Pulitzer had
no borrowings under the Credit Agreement subsequent to November 1997.
As of March 31, 1999, commitments for capital expenditures were
approximately $7.4 million, relating to normal capital equipment replacements
(including Year 2000 projects in-process). Capital expenditures to be made by
the Company in fiscal 1999 are estimated to be approximately $10 million. In
addition, as of March 31, 1999, the Company had a capital contribution
commitment of approximately $8.1 million related to a limited partnership
investment.
At March 31, 1999, the Company had working capital of $602.9 million and a
current ratio of 17.5 to 1. This compares to working capital of $124.7 million
and a current ratio of 3.9 to 1 at December 31, 1998.
The Company generally expects to generate sufficient cash from operations to
cover ordinary capital expenditures, working capital requirements and dividend
payments.
14
<PAGE> 15
Spin-off Gain
As a result of the Transactions, Pulitzer is required to recognize taxable
gain in an amount equal to the excess of the fair market value of the Company's
common and Class B common stock ("Pulitzer Inc. Stock") distributed to
Pulitzer's stockholders in the Spin-off over Pulitzer's adjusted tax basis in
such Pulitzer Inc. Stock immediately prior to the Spin-off (the "Spin-off
Gain"). In the Merger Agreement, the Company agreed to be liable and indemnify
Hearst-Argyle and its subsidiaries, on an after-tax basis, for any unpaid tax
liabilities of Pulitzer attributable to tax periods ending on or before the date
of the Merger (other than any tax arising as a result of the Merger not
qualifying as a tax-free reorganization by reason of any action or inaction on
the part of Hearst-Argyle after the Merger), including any tax liability of
Pulitzer with respect to the realization of any Spin-off Gain. The Company's
current preliminary estimate indicates that no Spin-off Gain will be realized by
Pulitzer. However, this preliminary estimate is subject to adjustment based upon
the final determination for tax purposes of Pulitzer's adjusted tax basis in the
Pulitzer Inc. Stock immediately prior to the Spin-off.
Gross-Up Transaction
In connection with the September 1986 purchase of Pulitzer Class B common
stock from certain selling stockholders (the "1986 Selling Stockholders"),
Pulitzer agreed, under certain circumstances, to make an additional payment to
the 1986 Selling Stockholders in the event of a Gross-Up Transaction. A
"Gross-Up Transaction" was defined to mean, among other transactions, (i) any
merger, in any transaction or series of related transactions, of more than 85
percent of the voting securities or equity of Pulitzer pursuant to which holders
of Pulitzer common stock receive securities other than Pulitzer common stock and
(ii) any recapitalization, dividend or distribution, or series of related
recapitalizations, dividends or distributions, in which holders of Pulitzer
common stock receive securities (other than Pulitzer common stock) having a Fair
Market Value (as defined herein) of not less than 33 1/3 percent of the Fair
Market Value of the shares of Pulitzer common stock immediately prior to such
transaction. The amount of the additional payment, if any, would equal (x) the
product of (i) the amount by which the Transaction Proceeds (as defined herein)
exceeds the Imputed Value (as defined herein) multiplied by (ii) the applicable
percentage (i.e., 50 percent for the period from May 13, 1996 through May 12,
2001) multiplied by (iii) the number of shares of Pulitzer common stock issuable
upon conversion of the shares of Pulitzer Class B common stock owned by the 1986
Selling Stockholders, adjusted for, among other things, stock dividends and
stock splits; less (y) the sum of any additional payments previously received by
the 1986 Selling Stockholders; provided, however, that in the event of any
recapitalization, dividend or distribution, the amount by which the Transaction
Proceeds exceeds the Imputed Value shall not exceed the amount paid or
distributed pursuant to such recapitalization, dividend or distribution in
respect of one share of Pulitzer common stock.
The term "Transaction Proceeds" was defined to mean, in the case of a
merger, the aggregate Fair Market Value (as defined herein) of the consideration
received pursuant thereto by the holder of one share of Pulitzer common stock,
and, in the case of a recapitalization, dividend or distribution, the aggregate
Fair Market Value of the amounts paid or distributed in respect of one share of
Pulitzer common stock plus the aggregate Fair Market Value of one share of
Pulitzer common stock following such transaction. The "Imputed Value" for one
share of Pulitzer common stock on a given date was defined to mean an amount
equal to $28.82 compounded annually from May 12, 1986 to such given date at the
rate of 15 percent per annum, the result of which is $154.19 at May 12, 1998.
There was no specific provision for adjustment of the $28.82 amount, but if it
were adjusted to reflect all stock dividends and stock splits of Pulitzer since
September 30, 1986, it would now equal $15.72, which if compounded annually from
May 12, 1986 at the rate of 15 percent per annum would equal $84.11 at May 12,
1998.
"Fair Market Value," in the case of any consideration other than cash
received in a Gross-Up Transaction, was defined to mean the fair market value
thereof as agreed to by a valuation firm selected by Pulitzer and a valuation
firm selected by the 1986 Selling Stockholders, or, if the two valuation firms
do not agree on the fair market value, the fair market value of such
consideration as determined by a third valuation firm chosen by the two
previously selected valuation firms. Any such agreement or determination shall
be final and binding on the parties.
As a result of the foregoing, the amount of additional payments, if any,
that may be payable by the Company with respect to the Merger and the
distribution of Pulitzer Inc. common and Class B common stock in the Spin-off
(the "Distribution") cannot be determined at this time. However, if the
Distribution were determined to be a Gross-Up Transaction and if the Fair Market
Value of the Transaction Proceeds with respect to the Merger
15
<PAGE> 16
and the Distribution were determined to exceed the Imputed Value, then the
additional payments to the 1986 Selling Stockholders would equal approximately
$5.9 million for each $1.00 by which the Transaction Proceeds exceed the Imputed
Value. Accordingly, depending on the ultimate resolution of the meaning and
application of various provisions of the Gross-Up Transaction agreements,
including the determination of Imputed Value and Fair Market Value of the
Transaction Proceeds, in the opinion of the Company's management, the amount of
an additional payment, if any, could be material to the consolidated financial
statements of the Company. The additional payment, if any, to the 1986 Selling
Stockholders would be recorded directly to additional paid-in capital as the
payment of this contingent amount would be a direct cost of the disposal of
Pulitzer's Broadcasting Business.
In the opinion of the Company's management, the amount of additional
payment, if any, is not likely to have a material adverse effect on the
Company's existing day-to-day newspaper publishing and related new media
properties. The amount of additional payment, if any, will reduce, however, the
amount of cash available to the Company to finance potential acquisition
opportunities in the future.
Merger Agreement Indemnification
Pursuant to the Merger Agreement, the Company is obligated to indemnify
Hearst-Argyle against losses related to: (i) on an after tax basis, certain tax
liabilities, including (A) any transfer tax liability attributable to the
Spin-off, (B) with certain exceptions, any tax liability of Pulitzer or any
subsidiary of Pulitzer attributable to any tax period (or portion thereof)
ending on or before the closing date of the Merger, including tax liabilities
resulting from the Spin-off, and (C) any tax liability of the Company or any
subsidiary of the Company; (ii) liabilities and obligations under any employee
benefit plans not assumed by Hearst-Argyle; (iii) any liabilities for payments
made pursuant to a Gross-Up Transaction; and (iv) certain other matters as set
forth in the Merger Agreement.
Information Systems and the Year 2000
The Year 2000 issue is the result of information systems being designed
using two digits rather than four digits to define the applicable year. As the
Year 2000 approaches, such information systems may be unable to accurately
process certain date-based information.
In 1995, Pulitzer began reviewing and preparing its computer systems for the
Year 2000. Generally, at Pulitzer's newspaper publishing locations, the
following categories of computer systems were identified for assessment of Year
2000 compliance: pre-press systems, press systems, post-press systems, business
systems, network systems, desktop PC systems, telecommunication systems and
building systems. Significant sub-systems within these categories which were
identified as non-compliant during the assessment phase represented aging
hardware and software which would have required replacement in the near term
irrespective of the Year 2000 issue. Consequently, Pulitzer and the Company
adopted a Year 2000 strategy which will replace the Company's significant
non-compliant systems with new compliant systems prior to December 31, 1999.
Pulitzer and the Company's strategy for achieving Year 2000 compliance was
developed using a five phase plan as follows: (1) educate and plan; (2) assess;
(3) replace and renovate; (4) validate/test; and (5) implement. The Company has
completed the planning and assessment phases and is in the process of replacing,
testing and implementing new compliant systems (with some systems already
implemented). As of March 31, 1999, the Company has implemented substantially
all of its Year 2000 system changes at the Star. The Company expects to have
substantially all of the Year 2000 system changes implemented by September 30,
1999 at the Post-Dispatch and PCN Group properties.
The Company's current estimate of capital expenditures for new hardware and
software to address Year 2000 issues, as well as to replace aging systems, is
approximately $11.5 million. At March 31, 1999, approximately $2.4 million of
the total capital expenditure estimate remains to be spent through the projected
implementation dates. These amounts do not include either the internal staff
costs of the Company's information technology department or the cost of minor
Year 2000 system modifications, both of which are recorded as expense in the
period incurred. Year 2000 modification costs for minor system issues are not
expected to be significant. The Year 2000 related capital expenditures have been
considered in the Company's normal capital budgeting process and will be funded
through operating cash flows.
16
<PAGE> 17
In addition to addressing internal system issues, the Company is
communicating with its major suppliers (including but not limited to newsprint,
ink, telecommunication services and utilities) and selected customers to obtain
assurance of their preparedness for the Year 2000. In general, questionnaires
are being used to identify potential Year 2000 issues at these third parties
which may impact the Company's business operations and require a remedy. In a
significant portion of the responses received to date, material third parties
have indicated that they are aware of the Year 2000 issue and have developed and
are currently implementing their respective plans to address Year 2000 issues.
Throughout 1999, the Company, where appropriate, will follow-up and make more
detailed inquiries of these material third parties as to the status of their
respective Year 2000 plans.
The Company believes that its plan for achieving Year 2000 compliance will
be fully implemented by September 30, 1999. However, as it is not possible to
anticipate all future outcomes, especially where third parties are involved, the
Company is in the process of developing Year 2000 contingency plans for mission
critical business and production systems.
In the event that either the Company or the Company's suppliers and
customers do not successfully implement their Year 2000 plans on a timely basis,
the Company could experience business losses. In the most extreme case,
publication of the Company's newspapers and on-line products, as well as the
sale of advertising, could be interrupted and/or delayed. The extent of losses
under such a scenario have not been estimated by the Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
The primary raw material used in the Company's newspaper publishing
operations is newsprint, representing approximately 20 percent of newspaper
operating expenses. For the full year of 1998, the Company consumed
approximately 100,000 metric tons of newsprint at an average cost of
approximately $577 per metric ton. Historically, newsprint has been subject to
significant price fluctuations from year to year, unrelated in many cases to
general economic conditions. In the last five years, the Company's average cost
per ton of newsprint has varied from a low of $452 per metric ton in 1994 to a
high of $675 per metric ton in 1995. For the first quarter of 1999, the
Company's average cost of newsprint was approximately $570 per metric ton. The
Company attempts to obtain the best price available by combining newsprint
purchases for its different newspaper locations but does not enter into
derivative contracts in an attempt to reduce the impact of year to year price
fluctuations on its consolidated newsprint expense.
As a result of the Transactions, the Company has no outstanding debt
and a cash balance of approximately $566 million as of March 31, 1999. Over
time, the Company anticipates funding potential newspaper acquisitions with a
portion of the available cash. In the interim, the Company expects to invest its
cash in a mixture of short to mid-term government and corporate debt
obligations. These investments will expose the Company to market risks that may
cause the future value of such investments to be different than the original
cost of such investments at the time of purchase.
17
<PAGE> 18
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
(b) On February 1, 1999, by unanimous written consent of the
Company's Board and Pulitzer, as the sole stockholder of the
Company, the following individuals were elected to serve as
directors of the Company:
Term
Expires in
----------
CLASS A DIRECTORS:
Emily Rauh Pulitzer 1999
James M. Snowden Jr. 1999
Nicholas G. Penniman IV 1999
CLASS B DIRECTORS:
William Bush 2000
Michael E. Pulitzer 2000
Ronald H. Ridgway 2000
CLASS C DIRECTORS:
Ken J. Elkins 2001
Alice B. Hayes 2001
David E. Moore 2001
On March 18, 1999, the Company's Board elected Robert C.
Woodworth to succeed Nicholas G. Penniman IV as a Class A
Director of the Company following the resignation of Mr.
Penniman. Mr. Woodworth's term expires in 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of this report:
27-1 Financial Data Schedule
27-2 Restated 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.
All other items of this report are not applicable for 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 INC.
(Registrant)
Date: May 12, 1999 /s/ Ronald H. Ridgway
-------------------------------
(Ronald H. Ridgway)
Director; Senior Vice-President-Finance
(on behalf of the Registrant and
as principal financial officer)
18
<PAGE> 19
EXHIBIT INDEX
EXHIBIT NUMBER TITLE OR DESCRIPTION
27-1 Financial Data Schedule
27-2 Restated Financial Data Schedule
19
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