<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM 8-K
REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): JUNE 24, 1996
PULITZER PUBLISHING COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 1-9329 430496290
(State or other jurisdiction Commission File Number (I.R.S. Employer
of incorporation) Identification No.)
900 NORTH TUCKER BOULEVARD, ST. LOUIS, MISSOURI 63101
(Address of principal executive offices) Zip Code
</TABLE>
(Registrant's telephone number, including area code): (314) 340-8000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
ITEM 5. OTHER EVENTS
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 provides for the possible exclusion of three smaller
daily newspapers and two non-daily publications from the sale and is subject to
various closing conditions. The Company expects that one of the weekly
publications will be excluded from the acquisition. Based upon the exclusion of
this weekly publication and preliminary estimates of working capital balances,
the purchase price is anticipated to be in the $215 million range, including
about $7 million in working capital. The final purchase price will depend upon
the actual number of papers the Company purchases and final working capital
adjustments. The Company anticipates a July 1, 1996 closing date for the
acquisition.
In connection with the planned acquisition of SLN, the Company has entered
into a letter agreement with an institutional lender to issue up to $100 million
of fixed rate senior notes. In addition, the Company has entered into a letter
agreement with a bank to borrow up to $50 million pursuant to a variable rate
five year revolving credit facility. Both financing agreements are contingent
upon a successful closing of the SLN acquisition. It is anticipated that the SLN
acquisition will be funded with some combination of borrowings under the
financing agreements and cash reserves of the Company.
The terms of the purchase are more fully described in the Stock Purchase
Agreement filed as an exhibit to the Company's Report on Form 10-Q for the
quarterly period ended March 31, 1996.
Certain historical financial information of SLN and the pro forma impact of
the acquisition are set forth in Item 7 of this report.
1
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
(1) Audited consolidated balance sheets of Scripps League Newspapers, Inc.
and Subsidiaries as of September 30, 1995 and 1994, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the three
years in the period ended September 30, 1995 (filed as Exhibit 99-1 hereto).
(2) Unaudited consolidated balance sheet of Scripps League Newspapers, Inc.
and Subsidiaries as of March 31, 1996 and unaudited consolidated statements of
income, and cash flows for the six month periods ended March 31, 1996 and 1995
(filed as Exhibit 99-2 hereto).
(B) PRO FORMA FINANCIAL INFORMATION
The following pro forma combined financial statements of Pulitzer
Publishing Company and its pending acquisition are included in this report:
Unaudited pro forma condensed combined statement of financial position
as of March 31, 1996 and the unaudited pro forma condensed combined
statements of income for the year ended December 31, 1995 and for the three
months ended March 31, 1996 (filed as Exhibit 99-3 hereto).
(C) EXHIBITS
See Exhibit Index for a list of exhibits.
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: June 24, 1996 /S/ RONALD H. RIDGWAY
----------------------------------------------------
(Ronald H. Ridgway)
Director; Senior Vice-President-Finance
(on behalf of the Registrant and
as principal financial officer)
2
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE OR DESCRIPTION
- ------ ------------------------------------------------------------------------------------
<C> <S>
99.1 Audited consolidated balance sheets of Scripps League Newspapers, Inc. and
Subsidiaries as of September 30, 1995 and 1994, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the three
years in the period ended September 30, 1995
99.2 Unaudited consolidated balance sheet of Scripps League Newspapers, Inc. and
Subsidiaries as of March 31, 1996 and unaudited consolidated statements of income,
and cash flows for the six month periods ended March 31, 1996 and 1995
99.3 Unaudited pro forma condensed combined statement of financial position as of March
31, 1996 and the unaudited pro forma condensed combined statements of income for the
year ended December 31, 1995 and for the three months ended March 31, 1996
</TABLE>
3
<PAGE> 1
EXHIBIT 99.1
SCRIPPS LEAGUE NEWSPAPERS, INC.,
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1995 AND 1994,
TOGETHER WITH AUDITORS' REPORT
<PAGE> 2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Scripps League Newspapers, Inc., and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Scripps
League Newspapers, Inc. (a Delaware corporation), and Subsidiaries as of
September 30, 1995 and 1994, and the related consolidated statements of income,
stockholders' equity, and cash flows for each of the three years in the period
ended September 30, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Scripps League Newspapers,
Inc., and Subsidiaries as of September 30, 1995 and 1994, and the results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1995, in conformity with generally accepted accounting
principles.
As explained in Notes 2 and 7 to the financial statements, effective
September 30, 1994 and October 1, 1993, respectively, the Company changed its
methods of accounting for investments and income taxes.
/s/ ARTHUR ANDERSEN LLP
--------------------------------------
Arthur Andersen LLP
Washington, D.C.,
November 17, 1995
2
<PAGE> 3
SCRIPPS LEAGUE NEWSPAPERS, INC.,
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------
1995 1994
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash............................................................. $ 4,331,929 $ 3,995,778
Trade accounts receivable, less allowance of $217,000 and
$242,000 in 1995 and 1994, respectively, for discounts and
doubtful accounts................................................ 5,706,500 5,539,681
Income taxes receivable.......................................... 1,058,199 361,794
Deferred income tax asset (Note 7)............................... 742,926 1,447,215
Newsprint inventories............................................ 1,102,507 909,425
Prepaid expenses and other current assets (Note 3)............... 460,442 1,038,839
----------- -----------
Total current assets........................................ 13,402,503 13,292,732
----------- -----------
PROPERTY, PLANT, AND EQUIPMENT, at cost (Notes 2 and 9):
Land and improvements............................................ 2,969,291 2,829,614
Building and leasehold improvements.............................. 13,080,900 13,070,286
Machinery and equipment.......................................... 16,906,852 18,714,258
----------- -----------
32,957,043 34,614,158
Less -- Accumulated depreciation and amortization................ 17,373,911 15,815,741
----------- -----------
Total property, plant, and equipment, net................... 15,583,132 18,798,417
----------- -----------
OTHER ASSETS:
Intangible assets (Note 4)....................................... 6,748,533 6,188,396
Municipal Bonds, amortized cost value of $15,830,711 and
$12,013,377 as of September 30, 1995 and 1994, respectively
(Note 2)................................................... 15,683,725 10,795,756
Deferred income tax asset (Note 7)............................... 1,106,814 516,836
Notes receivable, net of current portion......................... 249,056 222,862
----------- -----------
23,788,128 17,723,850
----------- -----------
Total assets................................................ $52,773,763 $49,814,999
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
3
<PAGE> 4
SCRIPPS LEAGUE NEWSPAPERS, INC.,
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------
1995 1994
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued liabilities (Note 5)................ $ 3,715,479 $ 4,145,936
Deferred subscription revenue.................................... 1,808,151 1,541,664
Current portion of long-term debt (Note 6)....................... 326,685 150,054
----------- -----------
Total current liabilities................................... 5,850,315 5,837,654
LONG-TERM DEBT, net of current portion (Note 6).................... 2,096,065 1,546,312
MINORITY INTERESTS IN SUBSIDIARIES................................. 2,259,084 1,806,185
----------- -----------
Total liabilities........................................... 10,205,464 9,190,151
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 6 and 8)
STOCKHOLDERS' EQUITY:
Common stock
Class A, nonvoting, $1.00 par value; 2,450,000 shares
authorized; 243,843 shares issued and outstanding in 1995 and
1994......................................................... 243,843 243,843
Class B, voting, $1.00 par value; 50,000 shares authorized;
25,896 shares issued and outstanding in 1995 and 1994........ 25,896 25,896
Capital in excess of par value................................... 57,013 57,013
Retained earnings................................................ 42,388,533 41,265,717
Unrealized holding loss on available-for-sale securities......... (146,986) (967,621)
----------- -----------
Total stockholders' equity.................................. 42,568,299 40,624,848
----------- -----------
Total liabilities and stockholders' equity.................. $52,773,763 $49,814,999
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
4
<PAGE> 5
SCRIPPS LEAGUE NEWSPAPERS, INC.,
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-----------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING REVENUES:
Advertising......................................... $50,609,838 $46,352,592 $44,880,850
Circulation......................................... 12,771,303 12,374,053 11,894,655
Job printing........................................ 2,412,059 2,140,860 2,319,399
Sublease income..................................... 408,100 373,549 148,273
----------- ----------- -----------
Total operating revenues......................... 66,201,300 61,241,054 59,243,177
----------- ----------- -----------
OPERATING EXPENSES:
Newspaper operations................................ 46,085,324 42,054,971 41,519,192
General and administrative.......................... 9,309,426 9,297,600 11,450,984
Depreciation and amortization....................... 2,790,940 2,245,662 2,285,778
----------- ----------- -----------
Total operating expenses......................... 58,185,690 53,598,233 55,255,954
----------- ----------- -----------
MINORITY INTEREST..................................... 493,159 529,819 428,366
OPERATING INCOME...................................... 7,522,451 7,113,002 3,558,857
OTHER INCOME AND EXPENSE:
Interest income..................................... 800,095 548,505 830,618
Interest expense.................................... (147,743) (122,747) (353,597)
Charitable contributions............................ (3,482,508) (94,512) (7,384)
Other income........................................ 111,886 86,907 1,527,043
----------- ----------- -----------
INCOME BEFORE PROVISION FOR INCOME TAXES.............. 4,804,181 7,531,155 5,555,537
PROVISION FOR INCOME TAXES (NOTE 7)................... (2,764,252) (3,353,123) (1,983,132)
----------- ----------- -----------
NET INCOME............................................ $ 2,039,929 $ 4,178,032 $ 3,572,405
=========== =========== ===========
NET INCOME PER COMMON SHARE........................... $ 7.56 $ 15.49 $ 12.19
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING......... 269,739 269,739 293,177
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
SCRIPPS LEAGUE NEWSPAPERS, INC.,
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CAPITAL
IN
EXCESS OF RETAINED
CLASS A CLASS B PAR VALUE EARNINGS
-------- ------- --------- -----------
<S> <C> <C> <C> <C>
BALANCE, September 30, 1992......................... $302,054 $25,896 $57,013 $47,863,266
Dividends on Class A and B common stock, $13.15
per share...................................... -- -- -- (3,855,324)
Repurchase of Class A stock....................... (31,250) -- -- (4,968,750)
Retirement of treasury stock...................... (26,961) -- -- (4,606,799)
Net income........................................ -- -- -- 3,572,405
-------- ------- ------- -----------
BALANCE, September 30, 1993......................... 243,843 25,896 57,013 38,004,798
Unrealized holding loss on available-for-sale
securities..................................... -- -- -- --
Dividends on Class A and B common stock, $3.40 per
share.......................................... -- -- -- (917,113)
Net income........................................ -- -- -- 4,178,032
-------- ------- ------- -----------
BALANCE, September 30, 1994......................... 243,843 25,896 57,013 41,265,717
Unrealized holding gain on available-for-sale
securities..................................... -- -- -- --
Dividends on Class A and Class B common stock,
$3.40 per share................................ -- -- -- (917,113)
Net income........................................ -- -- -- 2,039,929
-------- ------- ------- -----------
BALANCE, September 30, 1995......................... $243,843 $25,896 $57,013 $42,388,533
======== ======= ======= ===========
</TABLE>
<TABLE>
<CAPTION>
UNREALIZED HOLDING
LOSS ON AVAILABLE- TOTAL
TREASURY FOR-SALE STOCKHOLDERS'
STOCK SECURITIES EQUITY
----------- ------------------ -------------
<S> <C> <C> <C>
BALANCE, September 30, 1992........................ $(4,633,760) $ -- $ 43,614,469
Dividends on Class A and B common stock, $13.15
per share..................................... -- -- (3,855,324)
Repurchase of Class A stock...................... -- -- (5,000,000)
Retirement of treasury stock..................... 4,633,760 -- --
Net income....................................... -- -- 3,572,405
----------- ---------- ------------
BALANCE, September 30, 1993........................ -- -- 38,331,550
Unrealized holding loss on available-for-sale
securities.................................... -- (967,621) (967,621)
Dividends on Class A and B common stock, $3.40
per share..................................... -- -- (917,113)
Net income....................................... -- -- 4,178,032
----------- ---------- ------------
BALANCE, September 30, 1994........................ -- (967,621) 40,624,848
Unrealized holding gain on available-for-sale
securities.................................... -- 820,635 820,635
Dividends on Class A and Class B common stock,
$3.40 per share............................... -- -- (917,113)
Net income....................................... -- -- 2,039,929
----------- ---------- ------------
BALANCE, September 30, 1995........................ $ -- $ (146,986) $ 42,568,299
=========== ========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE> 7
SCRIPPS LEAGUE NEWSPAPERS, INC.,
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-----------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................................... $ 2,039,929 $ 4,178,032 $ 3,572,405
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation and amortization.................... 2,790,940 2,245,662 2,285,778
Minority interests............................... 493,159 529,819 428,366
Noncash charitable contribution.................. 2,779,870 -- --
Increase in trade accounts receivable, net....... (166,819) (545,663) 258,500
(Increase) decrease in income taxes receivable... (696,405) 1,075,184 (1,015,727)
(Increase) decrease in newsprint inventories..... (193,082) 73,452 (4,390)
Decrease (increase) in prepaid expenses.......... 554,154 (226,629) 42,797
Decrease (increase) in deferred income tax
benefit, net of benefit for unrealized holding
gains on investments........................... (135,689) (654,285) (276,314)
(Decrease) increase in accounts payable and
accrued liabilities............................ (430,457) (886,853) 615,312
Increase in deferred subscription revenue........ 266,487 51,375 189,617
----------- ----------- -----------
Net cash provided by operating activities... 7,302,087 5,840,094 6,096,344
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net payments received on notes receivable and other
investments...................................... (1,951) 1,769,841 (1,821,448)
Capital expenditures, net........................... (2,020,663) (1,437,466) (2,029,372)
Purchase of new publication......................... (75,000) -- --
Purchase of municipal bonds......................... (3,817,334) (3,375,847) (8,637,530)
Sale of U.S. Treasury notes......................... -- -- 18,669,919
----------- ----------- -----------
Net cash provided by (used in) investing
activities................................ (5,914,948) (3,043,472) 6,181,569
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal repayments of long-term debt.............. (93,615) (131,110) (5,038,749)
Net payments to minority interests.................. (40,260) (274,508) (363,684)
Dividends paid...................................... (917,113) (917,113) (3,855,324)
Repurchase of Class A Stock......................... -- -- (5,000,000)
----------- ----------- -----------
Net cash used in financing activities....... (1,050,988) (1,322,731) (14,257,757)
----------- ----------- -----------
NET (DECREASE) INCREASE IN CASH....................... 336,151 1,473,891 (1,979,844)
CASH, beginning of year............................... 3,995,778 2,521,887 4,501,731
----------- ----------- -----------
CASH, end of year..................................... $ 4,331,929 $ 3,995,778 $ 2,521,887
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION --
Cash paid during year for --
Interest......................................... $ 118,863 $ 122,625 $ 1,000,547
Income taxes..................................... $ 3,596,346 $ 2,932,223 $ 3,275,172
=========== =========== ===========
Noncash items --
Noncash charitable contributions................. $ 2,779,870 $ -- $ --
Note payable in exchange for new publication..... $ 820,000 $ -- $ --
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE> 8
SCRIPPS LEAGUE NEWSPAPERS, INC.,
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS DESCRIPTION:
History and Organization
Scripps League Newspapers, Inc., (a Delaware corporation) and Subsidiaries,
(collectively, the "Company"), is a publisher of sixteen daily newspapers
serving smaller cities, primarily in the West and Midwest. The Company also
publishes approximately thirty non-daily publications, including weeklies and
shoppers. The five largest daily publications of the Company represent sixty
percent of the Company's revenues and two-thirds of its operating cash flows for
the year ended September 30, 1995.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation and Basis of Presentation
The accompanying financial statements include the accounts of Scripps
League Newspapers, Inc., and its majority owned subsidiaries. The accompanying
consolidated financial statements are presented on the accrual method of
accounting. All significant transactions between consolidated companies have
been eliminated.
Newsprint Inventories
Inventories consist of newsprint and are stated at the lower of cost or
market. Cost is determined principally on the last-in, first-out method. Had the
first-in, first-out method been used, inventory would have been increased by
approximately $371,000, and $17,000 in 1995 and 1994, respectively.
Depreciation and Amortization
Depreciation and amortization are provided on the straight-line and double
declining-balance methods over the assets' estimated useful lives as follows:
buildings, 20 to 40 years; leasehold improvements, the lesser of the useful life
or the term of the lease; and machinery and equipment, 3 to 11 years.
Intangible Assets
The Company has recorded the cost of acquired businesses in excess of
amounts assigned to certain assets as a noncurrent asset. Net excess costs of
$987,248 arising prior to November 1970 are not being amortized. Costs arising
after that date are being amortized on a straight-line basis (approximately
$273,000 and $309,000 in 1995 and 1994, respectively) over various periods based
upon the underlying estimated lives, not exceeding 40 years.
In May 1995, the Company acquired certain assets for the amount of
$895,000. The Company recorded approximately $845,000 of costs of acquired
businesses in excess of amounts assigned to certain assets in connection with
this purchase.
Pro forma net revenues, net income and net income per share reflecting the
acquisitions described above as if they had occurred on October 1, 1993, 1994
and 1995, respectively, have been omitted because the difference between these
amounts and historical results is not material.
Investments
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." The Company elected to adopt SFAS
No. 115 as of September 30, 1994, which requires investments that are
"available-for-sale" to be stated at their fair market value. The effect of the
adoption was a reduction of the Company's investments and stockholders' equity
as of September 30, 1994, in the amount of $1,217,621, and a corresponding tax
benefit of $250,000. As of September 30, 1995, a reduction of the Company's
investments
8
<PAGE> 9
SCRIPPS LEAGUE NEWSPAPERS, INC.,
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
and stockholders' equity has been made in the amount of $222,706, and a
corresponding tax benefit of $75,720 to reflect an unrealized holding loss on
"available-for-sale" securities.
Investments consist of the following as of September 30, 1995.
<TABLE>
<CAPTION>
FAIR MARKET
VALUE COST
----------- -----------
<S> <C> <C>
Municipal bonds maturing in:
5-10 years........................................ $ 3,827,265 $ 3,455,770
Greater than 10 years............................. 11,780,740 12,374,941
------------ ------------
$15,608,005 $15,830,711
============ ============
</TABLE>
Income Taxes
The Company and its subsidiaries have varying tax fiscal years, and all
subsidiaries file separate income tax returns using the applicable tax year for
the subsidiary. Income taxes have been provided for in the accompanying
financial statements based on an approximation for the financial reporting
fiscal years ended September 30, 1995, 1994 and 1993.
Deferred income taxes have been provided for revenues and expenses accrued
for financial statement purposes but not accrued for tax purposes and for tax
depreciation in excess of that for financial reporting purposes. The Company
accounts for income taxes under SFAS No. 109, "Accounting for Income Taxes."
Retirement and Savings Plan
The Company has a defined contribution retirement and savings plan (the
"Plan"). During 1994, the Plan was amended to eliminate required matching
contributions by the Company. Contributions charged to expense for the Plan were
approximately $153,000 in 1994. No contributions were made to the Plan by the
Company during 1995. All contributions to the Plan are at the discretion of the
Board of Directors.
Net Income Per Common Share
Net income per share has been computed using the weighted-average number of
Class A and Class B common shares outstanding during the applicable period.
Fully-diluted net income per share is not presented as it would not materially
differ from primary net income per share.
3. PREPAID EXPENSES AND OTHER CURRENT ASSETS:
Prepaid expenses and other current assets consist of the following.
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------
1995 1994
-------- ----------
<S> <C> <C>
Prepaid insurance....................................... $318,667 $ 874,579
Prepaid repairs and maintenance......................... 76,800 76,800
Notes receivable........................................ 31,110 55,353
Other................................................... 33,865 32,107
-------- ----------
Total prepaid expenses and other assets............ $460,442 $1,038,839
======== ==========
</TABLE>
9
<PAGE> 10
SCRIPPS LEAGUE NEWSPAPERS, INC.,
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
4. INTANGIBLE ASSETS:
Intangible assets consist of the following.
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------
1995 1994
---------- ----------
<S> <C> <C>
Costs of acquired businesses in excess of amounts
assigned to certain assets (Note 2)................. $6,676,533 $6,104,396
Unamortized noncompetition expense (Note 6)........... 72,000 84,000
---------- ----------
Total intangible assets.......................... $6,748,533 $6,188,396
========== ==========
</TABLE>
5. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:
Accounts payable and accrued liabilities consist of the following.
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------
1995 1994
---------- ----------
<S> <C> <C>
Accounts payable...................................... $2,060,858 $2,039,471
Accrued payroll....................................... 485,097 566,308
Accrued vacation...................................... 629,913 594,499
Accrued litigation expenses........................... -- 799,547
Other accrued expenses................................ 539,611 146,111
---------- ----------
Total accounts payable and accrued liabilities... $3,715,479 $4,145,936
========== ==========
</TABLE>
6. LONG-TERM DEBT:
Long-term debt consists of the following as of September 30.
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------
1995 1994
---------- ----------
<S> <C> <C>
Contracts to purchase businesses, 7.5%, partially
secured by common stock of acquired subsidiaries and
certain real and personal property, maturing on
various dates through 1997.......................... $ 25,500 $ 38,251
Mortgage notes, at rates ranging from 4% to 12%,
including variable rates of prime rate to 2% over
prime rate, maturing on various dates through
2007................................................ 1,016,020 1,111,090
Covenants not to compete, bearing no interest,
maturing in 2001.................................... 72,000 84,000
Note to purchase new publication, 9%, maturing in
1999................................................ 820,000 --
Other notes, rates ranging from 5.0% to 9.0%, maturing
on various dates through 2001....................... 489,230 463,025
---------- ----------
2,422,750 1,696,366
Current portion....................................... (326,685) (150,054)
---------- ----------
Long-term portion..................................... $2,096,065 $1,546,312
========== ==========
</TABLE>
10
<PAGE> 11
SCRIPPS LEAGUE NEWSPAPERS, INC.,
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Long-term debt is due in varying installments through 2007. Maturities of
long-term debt are as follows.
<TABLE>
<S> <C>
1996.............................................................. $ 326,685
1997.............................................................. 708,750
1998.............................................................. 250,215
1999.............................................................. 243,196
2000.............................................................. 36,891
Thereafter........................................................ 857,013
----------
$2,422,750
==========
</TABLE>
7. INCOME TAXES:
The provision for income taxes consists of the following for the years
ended September 30.
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal.................................. $2,579,571 $3,572,264 $1,950,756
State.................................... 320,370 434,877 308,690
---------- ---------- ----------
2,899,941 4,007,141 2,259,446
---------- ---------- ----------
Deferred:
Federal.................................. 9,376 (589,388) (264,227)
State.................................... (145,065) (64,630) (12,087)
---------- ---------- ----------
(135,689) (654,018) (276,314)
---------- ---------- ----------
$2,764,252 $3,353,123 $1,983,132
========== ========== ==========
</TABLE>
Significant components of the Company's deferred tax assets are as follows.
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------
1995 1994
---------- ----------
<S> <C> <C>
Net operating loss carryforwards....................... $1,945,215 $2,231,112
Accruals not currently deductible for tax purposes..... 655,634 464,020
Unrealized holding loss on available-for-sale
securities........................................... -- 250,000
Charitable contribution carryforward................... 1,053,047 --
Depreciation........................................... (177,270) (189,342)
Other.................................................. 153,206 130,559
---------- ----------
Gross deferred tax assets......................... 3,629,832 2,886,349
Valuation allowance.................................... (1,780,092) (922,298)
---------- ----------
Net deferred tax assets........................... $1,849,740 $1,964,051
========== ==========
</TABLE>
11
<PAGE> 12
SCRIPPS LEAGUE NEWSPAPERS, INC.,
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The provision for income taxes results in effective rates that differ from
the Federal statutory rate as follows.
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate....................... 34% 34% 34%
State income taxes...................................... 5 5 2
Losses not benefited, net............................... (1) 4 8
Net operating losses not previously benefited........... -- -- (11)
Contribution not currently benefited.................... 18 -- --
Other................................................... 2 2 3
--- -- --
Effective income tax rate............................... 58% 45% 36%
=== == ==
</TABLE>
At September 30, 1995 and 1994, net operating loss carryforwards were
available to reduce certain subsidiaries' future taxable income in the aggregate
amount of approximately $5.7 million and $6.6 million, respectively. The
carryforwards expire at various dates from 2006 through 2010.
8. COMMITMENTS AND CONTINGENCIES:
Leases
The Company leases newspaper properties, office space and equipment under
noncancellable operating leases with minimum annual rent commitments, exclusive
of insurance and property taxes, as follows.
<TABLE>
<S> <C>
1996.............................................................. $ 833,674
1997.............................................................. 709,558
1998.............................................................. 653,573
1999.............................................................. 587,146
2000.............................................................. 515,638
Thereafter........................................................ 466,530
----------
$3,766,119
==========
</TABLE>
Rent expense included in newspaper operations' expenses in the accompanying
consolidated statements of income is approximately $730,000, $790,000 and
$740,000 for 1995, 1994 and 1993, respectively.
Litigation
As of November 1995, the Company is involved in several litigation matters
arising in the normal course of business. Management believes that the outcome
of pending actions will not have a material adverse impact on the Company's
consolidated financial position or results of operations.
9. TRANSACTIONS WITH RELATED PARTIES:
The Company leases a portion of its corporate headquarters' property to its
principal stockholders for $5,000 per month, its independently appraised fair
market value at the beginning of the lease. Also, the Company leases certain
properties from its principal stockholders for $15,000 per month. Included in
accounts receivable is a receivable due from the principal stockholders for
approximately $15,000 and $34,000 at September 30, 1995 and 1994, respectively.
10. CHARITABLE CONTRIBUTIONS:
In fiscal 1995, certain assets with a carrying value of approximately $2.8
million were donated as a charitable contribution. In connection with this
contribution, the Company agreed to make future donations in the amount of
$249,000. The tax benefit of charitable contributions is subject to certain
limitations. The Company believes that the tax benefit associated with these
contributions will total approximately $1 million and is being recorded as
realized.
12
<PAGE> 1
EXHIBIT 99.2
SCRIPPS LEAGUE NEWSPAPERS, INC.,
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1996 1995
----------- -------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash............................................................. $ 3,783,818 $ 4,331,929
Trade accounts receivable, less allowance of $152,388 and
$217,000 in 1996 and 1995, respectively, for discounts and
doubtful accounts............................................. 5,978,447 5,706,500
Income taxes receivable.......................................... 191,884 1,058,199
Deferred income tax asset........................................ 526,748 742,926
Newsprint inventories............................................ 1,176,680 1,102,507
Prepaid expenses and other current assets........................ 537,625 460,442
------------ ------------
Total current assets........................................ 12,195,202 13,402,503
------------ ------------
PROPERTY, PLANT, AND EQUIPMENT, at cost:
Land and improvements............................................ 2,969,291 2,969,291
Building and leasehold improvements.............................. 13,140,760 13,080,900
Machinery and equipment.......................................... 17,329,471 16,906,852
------------ ------------
33,439,522 32,957,043
Less -- Accumulated depreciation and amortization................ 18,110,041 17,373,911
------------ ------------
Total property, plant, and equipment, net................... 15,329,481 15,583,132
------------ ------------
OTHER ASSETS:
Intangible assets (Note 3)....................................... 8,790,541 6,748,533
Municipal Bonds, amortized cost value of $15,804,732 and
$15,830,711 as of March 31, 1996, and September 30, 1995,
respectively.................................................. 15,507,039 15,683,725
Deferred income tax asset........................................ 1,249,266 1,106,814
Notes receivable, net of current portion......................... 226,404 249,056
------------ ------------
25,773,250 23,788,128
------------ ------------
Total assets................................................ $53,297,933 $ 52,773,763
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
1
<PAGE> 2
SCRIPPS LEAGUE NEWSPAPERS, INC.,
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1996 1995
----------- -------------
(UNAUDITED)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued liabilities (Note 4)................ $ 4,016,452 $ 3,715,479
Deferred subscription revenue.................................... 2,161,192 1,808,151
Current portion of long-term debt................................ 306,925 326,685
----------- ------------
Total current liabilities................................... 6,484,569 5,850,315
LONG-TERM DEBT, net of current portion............................. 2,073,295 2,096,065
MINORITY INTERESTS IN SUBSIDIARIES................................. 1,722,463 2,259,084
----------- ------------
Total liabilities........................................... 10,280,327 10,205,464
----------- ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock --
Class A, nonvoting, $1.00 par value; 2,450,000 shares
authorized; 243,843 shares issued and outstanding in 1996 and
1995......................................................... 243,843 243,843
Class B, voting, $1.00 par value; 50,000 shares authorized;
25,896 shares issued and outstanding in 1996 and 1995........ 25,896 25,896
Capital in excess of par value................................... 57,013 57,013
Retained earnings................................................ 42,988,547 42,388,533
Unrealized holding loss on available-for-sale securities......... (297,693) (146,986)
----------- ------------
Total stockholders' equity.................................. 43,017,606 42,568,299
----------- ------------
Total liabilities and stockholders' equity.................. $53,297,933 $ 52,773,763
=========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
2
<PAGE> 3
SCRIPPS LEAGUE NEWSPAPERS, INC.,
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
--------------------------
1996 1995
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
OPERATING REVENUES:
Advertising...................................................... $25,734,624 $24,762,071
Circulation...................................................... 6,607,319 6,585,178
Job printing..................................................... 1,402,411 1,133,048
Sublease income.................................................. 207,003 212,149
----------- -----------
Total operating revenues.................................... 33,951,357 32,692,446
----------- -----------
OPERATING EXPENSES:
Newspaper operations............................................. 24,604,925 22,345,368
General and administrative....................................... 4,657,011 4,458,218
Depreciation and amortization.................................... 1,217,444 1,616,953
----------- -----------
Total operating expenses.................................... 30,479,380 28,420,539
----------- -----------
MINORITY INTEREST.................................................. 148,091 206,604
OPERATING INCOME................................................... 3,323,886 4,065,303
OTHER INCOME AND EXPENSE:
Interest income.................................................. 426,592 365,363
Interest expense................................................. (91,338) (48,643)
Charitable contributions......................................... (443,958) (3,095,500)
Other income (expense)........................................... 49,140 (25,113)
----------- -----------
INCOME BEFORE PROVISION FOR INCOME TAXES........................... 3,264,322 1,261,410
PROVISION FOR INCOME TAXES......................................... (1,747,194) (1,481,302)
----------- -----------
NET INCOME (LOSS).................................................. $ 1,517,128 $ (219,892)
=========== ===========
NET INCOME (LOSS) PER COMMON SHARE................................. $ 5.62 $ (0.82)
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING...................... 269,739 269,739
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
SCRIPPS LEAGUE NEWSPAPERS, INC.,
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31,
--------------------------
1996 1995
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................................... $ 1,517,128 $ (219,892)
Adjustments to reconcile net income to net cash provided by
operating activities --
Depreciation and amortization................................. 1,217,444 1,616,953
Minority interests............................................ 148,091 206,604
Decrease (increase) in trade accounts receivable, net......... (271,947) 132,049
(Increase) decrease in income taxes receivable................ 866,315 (156,782)
Increase in newsprint inventories............................. (74,173) (293,865)
(Increase) decrease in prepaid expenses....................... (77,316) 501,438
Decrease in deferred income tax benefit, net of benefit of
unrealized holding loss on investments....................... 99,705 511,406
Increase in accounts payable and accrued liabilities.......... 300,973 511,401
Increase in deferred subscription revenue..................... 353,041 --
----------- -----------
Net cash provided by operating activities................ 4,079,261 2,809,312
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net payments made on notes receivable and other investments...... 22,785 25,532
Capital expenditures, net........................................ (690,513) 1,806,410
Payments for purchase of municipal bonds......................... -- (4,359,662)
----------- -----------
Net cash used in investing activities.................... (667,728) (2,527,720)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal repayments of long-term debt........................... (42,530) (77,898)
Dividends paid................................................... (917,114) (755,269)
Purchase of stock in subsidiary.................................. (3,000,000) --
----------- -----------
Net cash used in financing activities.................... (3,959,644) (833,167)
----------- -----------
NET DECREASE IN CASH............................................... (548,111) (551,575)
CASH, beginning of year............................................ 4,331,929 3,995,778
----------- -----------
CASH, end of year.................................................. $ 3,783,818 $ 3,444,203
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION --
Cash paid during year for:
Interest...................................................... $ 491,196 $ 1,000,547
Income taxes.................................................. 701,437 3,275,172
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
SCRIPPS LEAGUE NEWSPAPERS, INC.,
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES:
Scripps League Newspapers, Inc., and Subsidiaries (collectively, the
"Company"), is a publisher of sixteen daily newspapers and approximately thirty
non-daily publications. The condensed interim consolidated financial statements
included herein have been prepared by the Company, without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures made are adequate to make the information
presented not misleading. The condensed interim consolidated financial
statements should be read in conjunction with the financial statements as of and
for the years ended September 30, 1995.
The accompanying condensed interim consolidated financial statements have
been prepared, in all material respects, in conformity with the standards of
accounting measurements set forth in Accounting Principles Board Opinion No. 28
and reflect, in the opinion of management, all adjustments, which are of a
normal recurring nature, necessary to summarize fairly the financial position
and results of operations for such periods. The results of operations for such
interim periods are not necessarily indicative of the results to be expected for
the full year.
2. NET INCOME PER COMMON SHARE:
Net income per share has been computed using the weighted-average number of
Class A and Class B common shares outstanding for the applicable period.
Fully-diluted net income per share is not presented as it would not
materially differ from primary net income per share.
3. INTANGIBLE ASSETS:
Intangible assets consist of the following.
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER
1996 30, 1995
--------- ----------
(UNAUDITED)
<S> <C> <C>
Costs of acquired businesses in excess of amounts assigned to certain
assets............................................................. $8,718,541 $6,676,533
Unamortized noncompetition expense................................... 72,000 72,000
---------- ----------
Total intangible assets....................................... $8,790,541 $6,748,533
========== ==========
</TABLE>
4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:
Accounts payable and accrued liabilities consist of the following.
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER
1996 30, 1995
---------- ----------
(UNAUDITED)
<S> <C> <C>
Accounts payable..................................................... $2,181,724 $2,060,858
Accrued vacation..................................................... 773,461 629,913
Other accrued expenses............................................... 1,061,267 1,024,708
---------- ----------
Total accounts payable and accrued liabilities................ $4,016,452 $3,715,479
========== ==========
</TABLE>
5
<PAGE> 6
SCRIPPS LEAGUE NEWSPAPERS, INC.,
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(UNAUDITED)
5. PULITZER PUBLISHING COMPANY PURCHASE AGREEMENT:
On May 4, 1996, the stockholders of the Company entered into an agreement
to sell their stock in the Company to Pulitzer Publishing Company (the "Purchase
Agreement"). The Purchase Agreement provides for the possible exclusion of three
daily newspapers and two non-daily publications from the sale and is subject to
various conditions. The Company anticipates a July 1, 1996 closing date for the
sale.
Also in May and June, 1996, the Company and certain subsidiaries executed
corporate actions which resulted in minority interests in the respective
corporations being converted into rights to receive cash payments from the
corporations. Amounts paid or payable as a result of these transactions total
approximately $14.5 million.
6
<PAGE> 1
EXHIBIT 99.3
PULITZER PUBLISHING COMPANY
AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
INTRODUCTION
The following unaudited pro forma combined financial statements give effect
to the proposed acquisition by Pulitzer Publishing Company ("Pulitzer" or the
"Company") of all of the issued and outstanding common stock of Scripps League
Newspapers, Inc. ("SLN") pursuant to the Purchase Agreement dated May 4, 1996.
This transaction is expected to close on July 1, 1996 and will be accounted for
as a purchase.
The unaudited pro forma combined statement of financial position combines
the historical balance sheets of the Company and SLN as of March 31, 1996,
assuming that the proposed acquisition of SLN occurred as of that date. The
unaudited pro forma combined statements of income have been prepared assuming
that the proposed acquisition occurred as of the beginning of the periods
presented. The unaudited combined statements of income reflect the historical
results of operations for the Company and SLN for their respective 1995 fiscal
years and first three months of calendar 1996. The Company's 1995 fiscal year
ended on December 31 while SLN's 1995 fiscal year ended on September 30.
The unaudited pro forma combined financial statements give effect to
certain pro forma adjustments which are described in the accompanying notes.
These statements have been prepared based on preliminary estimates of the final
purchase price and the allocation thereof to the fair value of assets acquired.
Certain nonrecurring amounts, which principally include legal fees (related to
negotiating a purchase contract), have not been included in the unaudited pro
forma combined financial statements. These nonrecurring acquisition costs are
not expected to be significant and will be capitalized as part of the final
purchase price. The Company does not anticipate that any additional nonrecurring
operating costs of the combined entity, which are not reflected in the unaudited
pro forma combined statements of income, will be significant. Finally, the
unaudited pro forma combined financial statements do not reflect any projected
cost savings which may result from the proposed acquisition.
The unaudited pro forma financial information is not necessarily indicative
either of the results of operations which would have occurred had the
acquisition been completed as of the beginning of the periods presented or of
the Company's future results of operations or financial position. The unaudited
pro forma combined financial statements should be read in conjunction with the
historical consolidated financial statements of the Company, included in its
1995 Annual Report on Form 10-K and 1996 First Quarter Report on Form 10-Q, and
the historical consolidated financial statements of SLN, included in Item 7(a)
of this Form 8-K.
1
<PAGE> 2
PULITZER PUBLISHING COMPANY
AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF FINANCIAL POSITION
MARCH 31, 1996
(IN THOUSANDS; UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-------------------------
EXCLUDED ACQUISITION
PULITZER SLN PROPERTIES ADJUSTMENTS
NOTE 1 NOTE 1 NOTE 2 NOTE 3 PRO FORMA
-------- ------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............. $112,569 $ 3,784 $ (82) $ (80,237)(a) $ 37,082
15,507(d)
(14,459)(e)
Trade accounts receivable -- net...... 59,885 5,978 (203) 65,660
Other................................. 19,820 2,433 10 22,263
-------- ------- -------- --------- ---------
Total current assets............. 192,274 12,195 (275) (79,189) 125,005
PROPERTIES -- NET....................... 118,983 15,330 (2,904) 34,349(b) 165,758
INTANGIBLES -- NET...................... 115,566 8,791 (173) 26,500(b) 301,414
150,730(g)
RECEIVABLE FROM THE HERALD COMPANY...... 42,918 42,918
DEFERRED INCOME TAX ASSET (LIABILITY)... 16,508 1,249 25 (23,731)(c) (5,949)
OTHER ASSETS............................ 15,492 15,733 (10) (15,507)(d) 15,708
-------- ------- -------- --------- ---------
TOTAL............................ $501,741 $53,298 $ (3,337) $ 93,152 $ 644,854
======== ======= ======== ========= =========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt..... $ 14,250 $ 307 $ (3) $ -- $ 14,554
Other................................. 44,298 6,178 (442) 50,034
-------- ------- -------- ---------
Total current liabilities........ 58,548 6,485 (445) 64,588
-------- ------- -------- ---------
LONG-TERM DEBT.......................... 114,500 2,073 135,000(a) 251,573
-------- ------- --------- ---------
POSTRETIREMENT AND POST-EMPLOYMENT
BENEFIT OBLIGATIONS................... 93,334 93,334
-------- ---------
OTHER LONG-TERM LIABILITIES............. 30,766 1,722 (18) (1,704)(e) 30,766
-------- ------- -------- --------- ---------
STOCKHOLDERS' EQUITY:
Common stock.......................... 47 270 (270)(f) 47
Class B common stock.................. 205 205
Additional paid-in capital............ 126,036 57 (57)(f) 126,036
Retained earnings..................... 266,141 42,691 (2,874) (39,817)(f) 266,141
Treasury stock........................ (187,836) (187,836)
-------- ------- -------- --------- ---------
Total stockholders' equity....... 204,593 43,018 (2,874) (40,144) 204,593
-------- ------- -------- --------- ---------
TOTAL............................ $501,741 $53,298 $ (3,337) $ 93,152 $ 644,854
======== ======= ======== ========= =========
</TABLE>
See notes to unaudited pro forma financial statements.
2
<PAGE> 3
PULITZER PUBLISHING COMPANY
AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE DATA; UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-------------------------
EXCLUDED ACQUISITION
PULITZER SLN PROPERTIES ADJUSTMENTS PRO FORMA
NOTE 1 NOTE 1 NOTE 2 NOTE 4 NOTE 5
-------- ------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES -- NET............... $472,327 $65,793 $ (1,382) $ -- $ 536,738
-------- ------- -------- --------- ---------
OPERATING EXPENSES:
Operations............................ 190,013 46,085 (3,167) 232,931
Selling, general and administrative... 155,996 9,310 (1,215) (3,240)(a) 160,851
St. Louis Agency adjustment........... 12,502 12,502
Depreciation and amortization......... 27,150 2,791 (672) (2,119)(b) 36,398
9,248(c)
-------- ------- -------- --------- ---------
Total operating expenses......... 385,661 58,186 (5,054) 3,889 442,682
-------- ------- -------- --------- ---------
OPERATING INCOME........................ 86,666 7,607 3,672 (3,889) 94,056
INTEREST EXPENSE........................ (10,171) (148) (9,743)(d) (20,062)
OTHER INCOME (EXPENSE) NET.............. 2,873 (2,655) (368) (5,285)(e) (4,942)
493(f)
-------- ------- -------- --------- ---------
INCOME BEFORE PROVISION FOR INCOME
TAXES................................. 79,368 4,804 3,304 (18,424) 69,052
PROVISION FOR INCOME TAXES (BENEFIT).... 30,046 2,764 1,050 (5,352)(g) 28,508
-------- ------- -------- --------- ---------
NET INCOME (LOSS)....................... $ 49,322 $ 2,040 $ 2,254 $ (13,072) $ 40,544
======== ======= ======== ========= =========
EARNINGS PER SHARE OF STOCK (common and
Class B common):...................... $ 3.02 $ 2.48
======== =========
WEIGHTED AVERAGE NUMBER OF SHARES
(common and Class B common)
OUTSTANDING........................... 16,350 16,350
======== =========
</TABLE>
See notes to unaudited pro forma financial statements.
3
<PAGE> 4
PULITZER PUBLISHING COMPANY
AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE DATA; UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-------------------------
EXCLUDED ACQUISITION
PULITZER SLN PROPERTIES ADJUSTMENTS PRO FORMA
NOTE 1 NOTE 1 NOTE 2 NOTE 4 NOTE 5
-------- ------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES -- NET................ $115,706 $16,301 $ (517) $ -- $ 131,490
-------- -------- -------- ------- ---------
OPERATING EXPENSES:
Operations............................. 49,209 11,960 (729) 60,440
Selling, general and administrative.... 39,492 2,392 (391) (854)(a) 40,639
St. Louis Agency adjustment............ 1,758 1,758
Depreciation and amortization.......... 6,741 579 (61) (518)(b) 9,053
2,312(c)
-------- -------- -------- ------- ---------
Total operating expenses.......... 97,200 14,931 (1,181) 940 111,890
-------- -------- -------- ------- ---------
OPERATING INCOME......................... 18,506 1,370 664 (940) 19,600
INTEREST EXPENSE......................... (2,389) (44) (2,436)(d) (4,869)
OTHER INCOME (EXPENSE) NET............... 720 274 (90) (1,229)(e) (249)
76(f)
-------- -------- -------- ------- ---------
INCOME BEFORE PROVISION FOR INCOME
TAXES.................................. 16,837 1,600 574 (4,529) 14,482
PROVISION FOR INCOME TAXES (BENEFIT)..... 6,596 602 236 (1,308)(g) 6,126
-------- -------- -------- ------- ---------
NET INCOME (LOSS)........................ $ 10,241 $ 998 $ 338 $(3,221) $ 8,356
======== ======== ======== ======= =========
EARNINGS PER SHARE OF STOCK
(common and Class B common):........... $ 0.62 $ 0.51
======== =========
WEIGHTED AVERAGE NUMBER OF SHARES (common
and Class B common) OUTSTANDING........ 16,398 16,398
======== =========
</TABLE>
See notes to unaudited pro forma financial statements.
4
<PAGE> 5
PULITZER PUBLISHING COMPANY
AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995 AND THREE MONTHS ENDED MARCH 31, 1996
NOTE 1. BASIS OF PRESENTATION
The unaudited pro forma combined statement of financial position is based
on the historical balance sheets of Pulitzer Publishing Company ("Pulitzer" or
the "Company") and Scripps League Newspapers, Inc. ("SLN") as of March 31, 1996,
assuming that the acquisition occurred as of March 31, 1996.
The unaudited pro forma combined statements of income assume that the
transaction occurred as of the beginning of the period presented. The unaudited
pro forma combined statements of income reflect Pulitzer's historical results of
operations for the year ended December 31, 1995 and for the three month period
ended March 31, 1996. The unaudited pro forma condensed combined statements of
income reflect SLN's historical results of operations for the year ended
September 30, 1995 and for the three month period ended March 31, 1996. As a
result of the different fiscal year end dates for Pulitzer and SLN, SLN's
historical results of operations for the three month period ended December 31,
1995 have not been included in either of the unaudited pro forma combined
statements of income presented herein. For the three month period ended December
31, 1995, SLN had consolidated revenue and net income of $17.4 million and
$500,000, respectively. For comparability, certain SLN amounts have been
reclassified from their presentation in Item 7(a) of this Report on Form 8-K to
conform with Pulitzer's presentation.
The Company believes that the assumptions used in preparing the unaudited
pro forma combined financial statements provide a reasonable basis for
presenting all of the significant effects of the proposed acquisition (other
than any projected cost savings, nonrecurring charges directly attributable to
the acquisition and nonrecurring operating charges that will result from
combining operations), and that the pro forma adjustments give effect to those
assumptions in the unaudited pro forma combined financial statements.
NOTE 2. PRO FORMA ADJUSTMENTS FOR EXCLUDED PROPERTIES
The purchase agreement for the acquisition of SLN excludes several
properties which do not operate in the newspaper industry. In addition, the
agreement also provides for the possible exclusion of up to five specific
newspaper properties based upon various conditions of the contract.
Approximately $10 million of the $215 million contract price has been
individually assigned to these five newspaper properties in the event one or
more are excluded from the acquisition. As of the current date, it appears
likely that only one of the newspaper properties will be excluded from the
acquisition. The pro forma adjustments for excluded properties eliminate the
financial statement amounts for all of the non-newspaper properties and the one
newspaper property currently assumed to be excluded.
NOTE 3. PRO FORMA ACQUISITION ADJUSTMENTS TO STATEMENT OF FINANCIAL POSITION
Pro forma adjustments to the unaudited combined statement of financial
position are made to reflect the following:
(a) Adjustments record the financing of the estimated net purchase price of
approximately $215 million. The estimated purchase price was calculated based
upon the contract price of $215 million and estimated adjustments for cash,
working capital, long-term debt, minority interest buy-outs and excluded
newspaper properties, as defined in the purchase agreement. The final net
purchase price will differ from the estimate depending on the actual number of
newspapers acquired and actual closing date balances of the adjustment items.
(b) Adjustments record the fixed assets and identifiable intangible assets
of SLN at their estimated fair value at the acquisition date. The following
purchase price allocation to fixed and intangible assets is based
5
<PAGE> 6
PULITZER PUBLISHING COMPANY
AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS -- CONTINUED
upon the preliminary valuation of an independent appraisal performed on a
property-by-property basis (in thousands):
<TABLE>
<S> <C>
Land................................................................ $ 4,000
Buildings........................................................... 11,250
Machinery and equipment............................................. 31,525
-------
Total properties............................................... 46,775
Identifiable intangibles (primarily customer lists)................. 26,500
-------
$73,275
=======
</TABLE>
The preliminary allocation to fixed assets and identifiable intangibles is
subject to change pending the completion of all procedures related to the
independent appraisal. The Company expects the allocation to be finalized by the
end of 1996.
(c) Adjustment records the deferred tax liability on the step-up of fixed
assets and identifiable intangible assets, using the Company's combined federal
and state tax rate of 39 percent.
(d) Adjustments record the sale of SLN's investment in municipal bonds,
carried at fair market value on the historical financial statements, as required
by the purchase agreement (prior to the closing date).
(e) Adjustments eliminate SLN's liability for minority interests and record
the purchase of all minority owned shares, as required by the purchase agreement
(prior to the closing date).
(f) Adjustments eliminate the stockholders' equity accounts of SLN, as
required by the purchase method of accounting.
(g) Adjustment records the excess of acquisition cost over the fair value
of assets acquired (goodwill), computed as follows (in thousands):
<TABLE>
<S> <C>
Estimated purchase price........................................... $215,237
Working capital.................................................... (6,928)
Fixed assets and identifiable intangibles.......................... (73,275)
Other assets....................................................... (216)
Net deferred income tax liability.................................. 22,457
Long-term debt..................................................... 2,073
--------
Residual to record as goodwill..................................... 159,348
SLN historical goodwill............................................ (8,618)
--------
Pro forma adjustment............................................... $150,730
========
</TABLE>
NOTE 4. PRO FORMA ACQUISITION ADJUSTMENTS TO STATEMENTS OF INCOME
Pro forma adjustments to the unaudited combined statements of income are
made to reflect the following:
(a) Adjustment reduces operating expenses for the elimination of certain
SLN senior management salaries and director fees, as required by the purchase
agreement (prior to the closing date).
(b) Adjustment eliminates SLN's historical depreciation and amortization
expense.
(c) Adjustment records depreciation and amortization expense based on
estimated fair market values of SLN's fixed and intangible assets (see Notes 3
(b) and 3 (g)). Depreciation expense has been computed using the straight-line
method and based on estimated useful lives ranging from 3 to 35 years.
Amortization
6
<PAGE> 7
PULITZER PUBLISHING COMPANY
AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS -- CONTINUED
expense for identifiable intangibles and goodwill has been computed based on
estimated useful lives ranging from 12 to 40 years.
(d) Adjustment records additional interest expense on long-term borrowings
used to partially finance the acquisition of SLN (see Note 3 (a)). Interest
expense on assumed fixed rate borrowings of $85 million was computed using a
rate of 7.92 percent while interest expense on assumed variable rate borrowings
of $50 million was computed using a rate of 6.03 percent. Interest rates were
computed based upon the terms of letter agreements the Company has with an
institutional lender and a bank and current market conditions.
(e) Adjustment reduces interest income for a decline in pro forma combined
cash balances due to acquisition financing (see Note 3 (a)) and the purchase of
minority owned shares of stock (see Note 3 (e)). The adjustment was computed
based upon an average return on short-term cash investments of 5.6 percent and
5.2 percent for the year ended December 31, 1995 and three month period ended
March 31, 1996, respectively.
(f) Adjustment eliminates minority interest expense due to the purchase of
all outstanding minority owned shares of SLN (see Note 3 (e)).
(g) Adjustment records the income tax effect of pro forma acquisition
adjustments. The effective tax rate on pro forma combined income before taxes
differs from the Company's statutory tax rate of 35 percent due primarily to
non-deductible goodwill and state income taxes.
NOTE 5. NONRECURRING EXPENSES
During the year ended September 30, 1995, SLN made charitable contributions
of approximately $3.5 million. These contributions are reflected in "Net Other
Income (Expense)" in SLN's condensed historical statement of income, included in
the unaudited pro forma combined statement of income for the year ended December
31, 1995. The after-tax impact of these charitable contributions on SLN's net
income for the year ended September 30, 1995 was approximately $3.1 million.
During the year ended September 30, 1995, SLN incurred nonrecurring legal
costs of approximately $1.4 million. These legal costs are reflected in SLN's
historical operating expenses, included in the unaudited pro forma combined
statement of income for the year ended December 31, 1995. The after-tax impact
of these legal costs on SLN's net income for the year ended September 30, 1995
was approximately $854,000.
No adjustments have been made to eliminate either of the above nonrecurring
expenses from the unaudited pro forma combined statement of income for the year
ended December 31, 1995.
7
