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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________________to_________________
COMMISSION FILE NUMBER 1-9329
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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 9/30/94
-------------------------------------------------------------
COMMON STOCK 3,534,032
CLASS B COMMON STOCK 9,466,566
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<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE DATA)
<TABLE>
<CAPTION>
Third Quarter Ended Three Quarters Ended
September 30, September 30,
-------------------- --------------------
OPERATING REVENUES - NET: 1994 1993 1994 1993
---- ---- ---- ----
Publishing (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Advertising $ 44,152 $ 41,718 $131,452 $122,984
Circulation 19,131 19,355 58,600 58,963
Other 11,016 10,242 32,921 30,609
Broadcasting 42,645 35,518 128,092 92,197
-------- -------- -------- --------
Total operating revenues 116,944 106,833 351,065 304,753
-------- -------- -------- --------
OPERATING EXPENSES:
Publishing operations 31,651 32,114 94,618 94,963
Broadcasting operations 15,219 14,700 45,587 36,989
Selling, general and administrative 42,378 41,690 128,759 119,097
St. Louis Agency adjustment 3,452 2,145 10,404 7,182
Depreciation and amortization 7,604 7,394 22,746 16,025
-------- -------- -------- --------
Total operating expenses 100,304 98,043 302,114 274,256
-------- ------- -------- --------
Operating income 16,640 8,790 48,951 30,497
-------- -------- -------- --------
Interest income 514 238 1,321 775
Interest expense (2,682) (3,224) (9,082) (6,444)
Equity in joint ventures (128) (330)
Net other expense (219) (293) (710) (819)
-------- -------- -------- --------
Total (2,515) (3,279) (8,801) (6,488)
-------- -------- -------- --------
INCOME BEFORE PROVISION FOR INCOME
TAXES AND CUMULATIVE EFFECTS OF
CHANGES IN ACCOUNTING PRINCIPLES 14,125 5,511 40,150 24,009
PROVISION FOR INCOME TAXES 5,771 2,216 16,413 9,528
-------- -------- -------- --------
INCOME BEFORE CUMULATIVE EFFECTS OF
CHANGES IN ACCOUNTING PRINCIPLES 8,354 3,295 23,737 14,481
CUMULATIVE EFFECTS OF CHANGES IN
ACCOUNTING PRINCIPLES, NET OF
APPLICABLE INCOME TAXES - - (719) 360
-------- -------- -------- --------
NET INCOME $ 8,354 $ 3,295 $ 23,018 $ 14,841
========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
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PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME (CONTINUED)
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE DATA)
<TABLE>
<CAPTION>
Third Quarter Ended Three Quarters Ended
September 30, September 30,
------------------- -------------------
1994 1993 1994 1993
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
EARNINGS PER SHARE OF STOCK
(COMMON AND CLASS B COMMON):
Income before cumulative effects of
changes in accounting principles $ .64 $ .25 $ 1.83 $ 1.21
Cumulative effects of changes in
accounting principles - - (.06) .03
------- ------- ------- -------
Total $ .64 $ .25 $ 1.77 $ 1.24
======= ======= ======= =======
WEIGHTED AVERAGE NUMBER OF SHARES
(COMMON AND CLASS B COMMON
STOCK) OUTSTANDING 12,999 12,952 12,988 11,999
======= ======= ======= =======
</TABLE>
See notes to consolidated financial statements.
3
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PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
(IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $40,071 $34,970
Trade accounts receivable (less allowance for doubtful
accounts of $3,142 and $2,575) 60,439 61,953
Inventory 3,819 5,912
Prepaid expenses and other 5,843 6,959
Program rights 11,671 11,285
---------- ---------
Total current assets 121,843 121,079
---------- ---------
PROPERTIES:
Land 12,204 12,204
Buildings 69,865 69,315
Machinery and equipment 187,260 181,939
Construction in progress 5,594 2,937
---------- ---------
Total 274,923 266,395
Less accumulated depreciation 140,366 125,497
---------- ---------
Properties - net 134,557 140,898
---------- ---------
INTANGIBLE AND OTHER ASSETS:
Intangible assets - net of applicable amortization 136,847 144,140
Receivable from The Herald Company 43,212 40,190
Program rights, long-term portion 3,204 4,305
Other 18,523 12,491
---------- ---------
Total intangible and other assets 201,786 201,126
---------- ---------
TOTAL $458,186 $463,103
========== =========
</TABLE>
See notes to consolidated financial statements.
4
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PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
---------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Trade accounts payable $15,264 $13,292
Current portion of long-term debt 14,844 14,320
Salaries, wages and commissions 11,526 10,314
Income taxes payable 526 4,272
Program contracts payable 11,494 10,899
Interest payable 2,874 4,751
Pension obligations 930 588
Other 5,174 3,440
---------- ---------
Total current liabilities 62,632 61,876
---------- ---------
LONG-TERM DEBT 131,090 161,920
---------- ---------
PROGRAM CONTRACTS PAYABLE 3,073 4,234
---------- ---------
PENSION OBLIGATIONS 25,809 23,377
---------- ---------
POSTRETIREMENT BENEFIT OBLIGATION 90,073 85,928
---------- ---------
OTHER LONG-TERM LIABILITIES 7,277 3,625
---------- ---------
STOCKHOLDERS' EQUITY :
Preferred stock, $.01 par value; 25,000,000 shares
authorized; issued and outstanding - none
Common stock, $.01 par value; 100,000,000 shares authorized;
issued - 3,542,377 in 1994 and 3,510,850 in 1993 35 35
Class B common stock, convertible, $.01 par value; 50,000,000
shares authorized; issued - 15,848,848 in 1994 and
15,849,848 in 1993 158 158
Additional paid-in capital 121,510 120,908
Retained earnings 204,152 188,665
---------- ---------
Total 325,855 309,766
Treasury stock - at cost; 8,345 shares of common stock
and 6,382,282 shares of Class B common stock in
1994 and 1993 (187,623) (187,623)
---------- ---------
Total stockholders' equity
138,232 122,143
---------- ---------
TOTAL $458,186 $463,103
========== ========
</TABLE>
See notes to consolidated financial statements.
5
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PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Quarters Ended
September 30,
--------------------------
1994 1993
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES: (Unaudited)
<S> <C> <C>
Net income $23,018 $14,841
Adjustments to reconcile net income to net cash provided
by operating activities:
Non-cash items:
Cumulative effects of changes in accounting principles,
net of applicable income taxes 719 (360)
Depreciation 15,298 11,276
Amortization of intangibles 7,448 4,749
Incremental increase in postretirement benefit obligation 2,304 2,020
Changes in assets and liabilities (net of the effects of the
acquisition of broadcast properties (Note 5)) which
provided (used) cash:
Trade accounts receivable 1,514 4,193
Inventory 2,093 1,935
Other assets 393 (2,172)
Trade accounts payable and other liabilities 3,221 5,213
Income taxes payable (3,746) (709)
Program rights - net of contracts payable 149 42
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 52,411 41,028
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (8,976) (10,547)
Purchase of broadcasting properties (166,065)
Investment in joint venture (3,000)
Decrease in notes receivable 18 112
------- -------
NET CASH USED IN INVESTING ACTIVITIES (11,958) (176,500)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 160,000
Proceeds form sale of common stock 37,082
Repayments on long-term debt (30,306) (51,712)
Dividends paid (5,648) (4,879)
Proceeds from exercise of stock options 602 668
------- -------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES (35,352) 141,159
------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS 5,101 5,687
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 34,970 29,914
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $40,071 $35,601
======= =======
</TABLE>
See notes to consolidated financial statements.
6
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PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ACCOUNTING POLICIES
Interim Adjustments - In the opinion of management, the accompanying
unaudited consolidated financial statements contain all adjustments,
consisting only of normal recurring adjustments except for the cumulative
effect adjustments discussed in Notes 3 and 4, necessary to present fairly
Pulitzer Publishing Company's financial position as of September 30, 1994
and the results of operations and cash flows for the nine-month periods
ended September 30, 1994 and 1993. Results of operations for interim
periods are not necessarily indicative of the results to be expected for
the full year.
Fiscal Year and Fiscal Quarters - The Company's fiscal year and third
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.
Earnings Per Share of Stock - Earnings per share of stock have been
computed using the weighted average number of common and Class B common
shares outstanding during the applicable period. On July 9, 1993, the
Company issued 1.35 million shares of common stock in a public offering.
Intangible Assets - Management periodically evaluates the
recoverability of the Company's intangible assets based upon the
undiscounted cash flow method. If a permanent impairment in value is
determined to exist, any necessary write-down will be charged to
operations.
2. DIVIDENDS
In the first quarter of 1993, two dividends of $0.135 per share were
declared, payable on February 1, 1993 and May 3, 1993. In the second
quarter of 1993, a dividend of $0.135 per share was declared, payable on
August 2, 1993. In the third quarter of 1993, a dividend of $0.135 per
share was declared, payable on November 1, 1993. In the first quarter of
1994, two dividends of $0.145 per share were declared, payable on February
1, 1994 and May 2, 1994. In the second quarter of 1994, a dividend of
$0.145 per share was declared, payable on August 1, 1994. In the third
quarter of 1994, a dividend of $0.145 per share was declared, payable on
November 1, 1994.
In addition, a 10% stock dividend on the Company's common and Class B
common stock was declared on January 4, 1993, payable on January 22,
1993.
3. POSTEMPLOYMENT BENEFITS
Effective January 1, 1994, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 112, Employers' Accounting for
Postemployment Benefits ("SFAS 112"), to account for certain disability
benefits at the St. Louis Post-Dispatch. SFAS 112 requires that the cost
of these benefits provided to former employees prior to retirement be
recognized on the accrual basis of accounting. Previously, the Company
recognized its
7
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PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
postemployment benefit costs when paid. The cumulative effect of adopting
SFAS 112 was a reduction of 1994 first quarter net income by
approximately $719,000 or $0.06 per share. After recording the cumulative
effect adjustment, the Company's on-going expense under the new standard
will not differ significantly from the prior pay-as-you-go basis.
Under SFAS 112, the Company accrues the disability benefits when it
becomes probable that such benefits will be paid and when sufficient
information exits to make reasonable estimates of the amounts to be paid.
As required by the standard, prior year financial statements have not been
restated to reflect the change in accounting method.
4. INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes. The first
quarter of 1993 included a positive adjustment to income of $360,000, or
$0.03 per share, reflecting the recalculation of certain deferred income
taxes at the current federal statutory rate as opposed to the higher tax
rates which were in effect when certain of the deferred income taxes
originated.
5. ACQUISITION OF PROPERTIES
The third quarter and first nine months of 1994 included the operations
of television stations WESH (Daytona Beach/Orlando, Florida), acquired on
June 30, 1993, and KCCI (Des Moines, Iowa), acquired on September 9, 1993.
After deducting acquisition-related depreciation and amortization ($3.5
million - third quarter and $10.5 million - first nine months) and
interest charges ($1.9 million - third quarter and $5.8 million - first
nine months) from operating cash flow (defined as operating income plus
depreciation and amortization), the negative after-tax effect on earnings
for the 1994 third quarter and first nine months was approximately
$310,000 and $1.4 million, respectively.
6. BUSINESS SEGMENTS
The Company's operations are divided into two business segments,
publishing and broadcasting. The following is a summary of operating data
by segment (in thousands):
<TABLE>
<CAPTION>
Third Quarter Ended Three Quarters Ended
September 30, September 30,
------------------- -------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating revenues:
Publishing $ 74,299 $ 71,315 $222,973 $212,556
Broadcasting (a) 42,645 35,518 128,092 92,197
-------- -------- -------- --------
Total $116,944 $106,833 $351,065 $304,753
======== ======== ======== ========
</TABLE>
8
<PAGE> 9
PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
Third Quarter Ended Three Quarters Ended
September 30, September 30,
------------------- -------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating income (loss):
Publishing $ 7,308 $ 4,889 $ 21,548 $ 16,001
Broadcasting (a) 10,298 4,798 30,327 17,185
Corporate (966) (897) (2,924) (2,689)
--------- --------- -------- --------
Total $ 16,640 $ 8,790 $ 48,951 $ 30,497
========= ========= ======== ========
Depreciation and Amortization:
Publishing $ 1,541 $ 1,807 $ 4,606 $ 5,235
Broadcasting (a) 6,063 5,587 18,140 10,790
--------- --------- -------- --------
Total $ 7,604 $ 7,394 $ 22,746 $ 16,025
========= ========= ======== ========
Operating Margins (Operating
Income to Revenues):
Publishing (b) 14.5% 9.9% 14.3% 10.9%
Broadcasting (a) 24.1% 13.5% 23.7% 18.6%
</TABLE>
(a) Third quarter and three quarters ended September 30, 1994 included
the results of WESH and KCCI. The prior year periods included the
results of WESH and KCCI after their respective acquisition dates
(See Note 5).
(b) Operating margins for publishing stated with St. Louis Agency
adjustment added back to publishing operating income.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's operating revenues are significantly influenced by a
number of factors, including overall advertising expenditures, the appeal of
newspapers, television and radio in comparison to other forms of advertising,
the performance of the Company in comparison to its competitors in specific
markets, the strength of the national economy and general economic conditions
and population growth in the markets served by the Company.
The Company's business tends to be seasonal, with peak revenues and
profits generally occurring in the fourth and, to a lesser extent, second
quarters of each year as a result of increased advertising activity during the
Christmas and spring holiday periods. The first quarter is historically the
weakest quarter for revenues and profits.
CONSOLIDATED
Operating revenues for the third quarter and first nine months of 1994
increased 9.5% and 15.2%, respectively, compared with the corresponding periods
in the preceding year. The revenue comparison for the nine-month period was
affected by the acquisitions of television stations WESH and KCCI on June 30,
1993 and September 9, 1993, respectively, while the third quarter comparison
was only affected by the KCCI acquisition. The Company's 1994 third quarter
and first nine months included full periods of results for WESH and KCCI while
the prior year periods included the results of the two television stations only
after their respective acquisition dates in 1993. Excluding WESH (first six
months only) and KCCI from the comparisons, consolidated revenues would have
increased 7.3% and 7.1% for the third quarter and first nine months of 1994,
respectively. The increases reflected gains in both broadcasting and
publishing revenues.
Operating expenses, excluding the St. Louis Agency adjustment, in the
third quarter and first nine months of 1994 increased 1% and 9.2%,
respectively, over the comparable 1993 periods. Excluding WESH (first six
months only) and KCCI from the comparisons, consolidated operating expenses
would have decreased 1.3% for the third quarter while increasing 0.8% for the
first nine months of 1994. The changes in expenses, on a comparable basis,
were principally attributable to
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a decrease in programming rights expense ($1.1 million - third quarter and $1.7
million - year to date), a decrease in newsprint expense ($556,000 - third
quarter and $1.5 million - year to date), the reversal of an accrual due to the
settlement of a sales tax issue ($437,000 - third quarter and year to date) and
a decrease in one-time termination inducements at the St. Louis Post-Dispatch
(the "Post-Dispatch") ($318,000 - third quarter). Principal expense increases
for the 1994 periods were overall personnel costs ($497,000 - third quarter and
$3.1 million - year to date), circulation delivery expense ($200,000 - third
quarter and $820,000 - year to date) and national advertising representative
commissions ($231,000 - third quarter and $458,000 - year to date).
Operating income in the 1994 third quarter and first nine months was
$16.6 million (89.3% increase) and $49 million (60.5% increase), respectively.
Excluding WESH (first six months only) and KCCI from the comparisons, operating
income would have increased 85.9% and 52.9%, respectively, for the 1994 third
quarter and first nine months. The 1994 increases reflected improvements in
operating income in both the publishing and broadcasting segments due to a
combination of increased revenues and cost control.
Third quarter 1994 interest expense decreased $542,000 principally due
to a decrease in the average debt level to $153.7 million from $165.7
million in the 1993 third quarter. The Company's average interest rate was
7.5% for both the 1994 and 1993 third quarters.
Interest expense for the 1994 nine-month period increased $2.6 million
due to higher debt levels in the current year. The Company's average debt
level increased to $164.8 million for the first nine months of 1994 from $99.7
million for the prior year period, due to borrowings related to the 1993
acquisitions of WESH and KCCI. Lower rates on the WESH and KCCI borrowings
reduced the Company's average interest rate for the first nine months of 1994
to 7.4% from 8.1% in the prior year period. Interest expense also included a
declining interest factor related to annual payments (1990-1994) under a
non-competition agreement entered into in connection with the 1989 acquisition
of television station WDSU in New Orleans.
Interest income for the third quarter and first nine months of 1994
increased $276,000 and $546,000, respectively, due to both higher average
balances of invested funds and higher interest rates.
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The effective income tax rate for both the third quarter and the first
nine months of 1994 increased to 40.9% from 40.2% and 39.7% in the respective
periods of the prior year. The lower rates in the prior year were principally
related to an adjustment to the Company's deferred income tax rates as a result
of the Revenue Reconciliation Act of 1993. The effective tax rates in both
years reflected the effect of approximately $125,000 per quarter of
non-deductible goodwill amortization expense. It is expected that, on an
annual basis, the effective tax rate for 1994 will be approximately 41%
compared to 39.9% for the full year of 1993.
As discussed in Note 3 to the interim financial statements for the
quarter ended September 30, 1994, effective January 1, 1994, the Company
adopted the provisions of Statement of Financial Accounting Standards No. 112,
Employers' Accounting for Postemployment Benefits ("SFAS 112") and recorded its
initial liability thereunder, resulting in a one-time after-tax charge of
$719,000. After recording the one-time charge, the Company's on-going expense
under SFAS 112 will not differ significantly from the prior pay-as-you-go
basis.
Net income in the 1994 third quarter increased 153.5% to $8.4 million,
or $0.64 per share, from $3.3 million, or $0.25 per share, in the third quarter
of 1993. Net income for the first nine months of 1994 increased 55.1% to $23
million, or $1.77 per share, from $14.8 million, or $1.24 per share, a year
ago. The first nine months of 1994 included the non-recurring SFAS 112 charge
of $719,000, or $0.06 per share. In the first quarter of 1993, the Company
adopted Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes, resulting in a positive adjustment to income of $360,000, or
$0.03 per share.
Excluding the cumulative effects of accounting changes from both
years, net income for the first nine months of 1994 increased 63.9% to $23.7
million, or $1.83 per share, from $14.5 million, or $1.21 per share, for the
prior year period.
The 1994 gains in net income reflected improvements in operating
profits in both the publishing and broadcasting segments due to a combination
of increased revenues and cost control. The Company's earnings per share
comparison for the year to date period was affected by the larger number of
shares outstanding in 1994 as a result of the public offering of 1.35 million
shares in July 1993.
The increased depreciation, amortization and, to a lesser extent,
interest expense resulting from the 1993 acquisitions of WESH and KCCI had a
negative impact of $0.02 per share and
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$0.11 per share on the Company's net income for the 1994 third quarter and
first nine months, respectively. It is expected that the per share dilution
will be in the five cent range for the full year of 1994 and minimal thereafter.
PUBLISHING
Operating revenues from the Company's publishing segment for the third
quarter and first nine months of 1994 increased 4.2% and 4.9%, respectively,
over the comparable periods in 1993, primarily reflecting increased revenues
from advertising, particularly classified, at all three newspaper locations.
Newspaper advertising revenues increased $2.4 million (5.8%) in the
third quarter and $8.5 million (6.9%) in the first nine months of 1994. The
third quarter increase resulted from higher advertising volume which
contributed $1.5 million and higher average rates which contributed $875,000.
Similarly, the year to date increase reflected $7.2 million generated by higher
advertising volume and $1.3 million generated by higher average rates.
Effective January 1994, certain categories of advertising rates were increased
at all publishing properties in varying percentages ranging from 3% to 6.5%.
Circulation revenues decreased 1.2% for the third quarter and 0.6% for
the first nine months of 1994. The slight revenue declines for both 1994
periods resulted from average circulation decreases at the Post-Dispatch while
average circulation rates were virtually unchanged from the prior year periods.
Average daily and Sunday circulation of the Post-Dispatch for the
third quarter of 1994 was 329,245 and 543,751 compared to 339,759 and 557,333,
respectively, for the corresponding 1993 period.
Operating expenses (including selling, general and administrative
expenses and depreciation and amortization) for the publishing segment,
excluding the St. Louis Agency adjustment, decreased 1.2% for the third quarter
while increasing 0.9% for the first nine months of 1994. The changes in
expenses were principally attributable to decreases in newsprint expense
($556,000 - third quarter and $1.5 million - year to date), due to lower
newsprint prices, and inducement costs at the Post-Dispatch ($318,000 - third
quarter). Principal expense increases for the 1994 periods
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were overall personnel costs ($1.5 million - year to date) and circulation
delivery expense ($200,000 - third quarter and $820,000 - year to date).
Operating income from the Company's publishing activities in the 1994
third quarter increased 49.5% to $7.3 million from $4.9 million and in the
first nine months increased 34.7% to $21.5 million from $16 million due to a
combination of increased revenues and cost control.
The publishing segment's results for the 1994 third quarter and first
nine months were favorably impacted by a continued downward trend in newsprint
prices which began in the fourth quarter of 1993. The decline in newsprint
prices from the year ago periods was substantial enough to more than offset
higher newsprint consumption generated by increased advertising volumes.
Currently, the Company is experiencing higher newsprint prices in the 1994
fourth quarter and expects newsprint prices to increase in subsequent quarters
through fiscal year 1995. Any material increases in the price of newsprint
would significantly affect the future performance of the publishing segment.
BROADCASTING
Broadcasting operating revenues for the third quarter and first nine
months of 1994 increased 20.1% and 38.9% over the comparable 1993 periods. The
revenue comparison for the nine-month period was affected by the Company's
acquisition of television stations WESH and KCCI on June 30, 1993 and September
9, 1993, respectively, while the third quarter comparison was only affected by
the KCCI acquisition. Excluding WESH (six months only) and KCCI from the
comparisons, broadcasting revenues would have increased 13.5% and 12.2% for the
third quarter and first nine months of 1994, respectively. Exclusive of WESH
(six months only) and KCCI, local spot advertising would have increased 6% and
8.6%, respectively, for the third quarter and first nine months; national spot
advertising would have increased 25.7% and 19%, respectively, for the third
quarter and first nine months; and network compensation would have declined
5.6% and 3%, respectively, for the third quarter and nine-month period.
Political advertising, including WESH and KCCI, increased $1.7 million and $3.9
million, respectively, for the third quarter and first nine months of 1994.
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<PAGE> 15
Broadcasting operating expenses (including selling, general and
administrative expenses and depreciation and amortization) for the third
quarter and first nine months of 1994 increased 5.3% and 30.3%, respectively,
compared to the prior year periods. Excluding WESH (six months only) and KCCI
from the comparisons, operating expenses would have decreased 1.8% for the 1994
third quarter and would have increased 0.4% for the 1994 nine-month period.
The 1994 changes in expenses, on a comparable basis, were due primarily to a
decrease in programming rights expense ($1.1 million - third quarter and $1.7
million - year to date) and the reversal of an accrual due to the settlement of
a sales tax issue ($437,000 - third quarter and year to date). Primary expense
increases for the 1994 periods were increases in overall personnel costs
($589,000 - third quarter and $1.7 million - year to date) and national
advertising representative commissions ($231,000 - third quarter and $458,000 -
year to date).
Operating income from broadcasting operations in the 1994 third
quarter increased 114.6% to $10.3 million from $4.8 million and in the first
nine months increased 76.5% to $30.3 million from $17.2 million. Excluding
WESH (six months only) and KCCI, broadcasting operating income would have
increased 108% and 62.9% in the 1994 third quarter and first nine months,
respectively, due to a combination of increased advertising revenues and cost
control.
LIQUIDITY AND CAPITAL RESOURCES
Outstanding debt, inclusive of the short-term portion of long-term
debt, as of September 30, 1994, was $145.9 million, compared with $176.2
million at December 31, 1993. The decrease since the prior year end reflects a
scheduled repayment of $14.3 million under the Company's Senior Note Agreement
maturing in 1997 and $16 million in prepayments of revolving credit borrowings
under its credit agreement with Canadian Imperial Bank of Commerce as Agent
("CIBC").
As of September 30, 1994, the Company's long-term borrowings,
exclusive of a capital lease, consisted of approximately $143 million of fixed
rate senior notes with The Prudential Insurance Company of America and
approximately $2.6 million of borrowings under the variable rate CIBC credit
agreement. At September 30, 1994, $16 million was unused but available for
borrowing under the revolving credit portion of the CIBC credit agreement.
15
<PAGE> 16
The Company's Senior Note Agreements and bank credit agreement require
it to maintain certain financial ratios, place restrictions on the payment of
dividends and prohibit new borrowings, except as permitted thereunder.
Commitments for capital expenditures as of September 30, 1994, were
approximately $7.8 million, relating to normal capital equipment replacements
and a portion of the costs for new facilities for television station WDSU in
New Orleans and the radio operations in Phoenix. Capital expenditures to be
made in fiscal 1994 are estimated to be approximately $15 million. Commitments
for film contracts and license fees as of September 30, 1994 were approximately
$28.7 million. At September 30, 1994, the Company had working capital of $59.2
million and a current ratio of 1.95 to 1. This compares to working capital of
$59.2 million and a current ratio of 1.96 to 1 at December 31, 1993.
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.
16
<PAGE> 17
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 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: November 1, 1994 /s/ Ronald H. Ridgway
-------------------------------------
(Ronald H. Ridgway)
Director; Senior Vice-President-
Finance
(on behalf of the Registrant
and as principal financial
officer)
17
<PAGE> 18
EXHIBIT INDEX
EXHIBIT NUMBER TITLE OR DESCRIPTION LOCATION
27 Financial Data Schedule Page 19
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 40,071
<SECURITIES> 0
<RECEIVABLES> 63,581
<ALLOWANCES> 3,142
<INVENTORY> 3,819
<CURRENT-ASSETS> 121,843
<PP&E> 274,923
<DEPRECIATION> 140,366
<TOTAL-ASSETS> 458,186
<CURRENT-LIABILITIES> 62,632
<BONDS> 131,090
<COMMON> 193
0
0
<OTHER-SE> 325,662
<TOTAL-LIABILITY-AND-EQUITY> 458,186
<SALES> 351,065
<TOTAL-REVENUES> 351,065
<CGS> 140,205
<TOTAL-COSTS> 140,205
<OTHER-EXPENSES> 22,746
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,082
<INCOME-PRETAX> 40,150
<INCOME-TAX> 16,413
<INCOME-CONTINUING> 23,737
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (719)
<NET-INCOME> 23,018
<EPS-PRIMARY> 1.77
<EPS-DILUTED> 0
</TABLE>
