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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1998
------------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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COMMISSION FILE NUMBER 1-9329
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PULITZER PUBLISHING COMPANY
(Exact name of registrant as specified in its charter)
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DELAWARE 430496290
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
900 NORTH TUCKER BOULEVARD, ST. LOUIS, MISSOURI 63101
(Address of principal executive offices)
(314) 340-8000
(Registrant's telephone number, including area code)
NO CHANGES
(Former name, former address and former fiscal year, if changed since last
report)
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES /X/ NO / /
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
CLASS OUTSTANDING 10/31/98
--------------------------- ---------------------------
COMMON STOCK 7,102,022
CLASS B COMMON STOCK 15,382,780
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE DATA)
<TABLE>
<CAPTION>
Third Quarter Ended Nine Months Ended
September 30, September 30,
------------------------ -----------------------
1998 1997 1998 1997
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
OPERATING REVENUES - NET:
Advertising $58,438 $55,872 $178,245 $168,245
Circulation 22,172 21,573 66,194 65,762
Other 10,153 10,061 30,768 29,639
----------- ----------- ---------- ----------
Total operating revenues 90,763 87,506 275,207 263,646
----------- ----------- ---------- ----------
OPERATING EXPENSES:
Operations 37,141 36,393 111,667 106,437
Selling, general and administrative 33,595 32,597 101,991 97,490
General corporate expense 1,319 1,454 3,959 4,210
St. Louis Agency adjustment 5,063 4,320 15,926 14,749
Depreciation and amortization 3,415 3,077 10,238 9,813
----------- ---------- ---------- ----------
Total operating expenses 80,533 77,841 243,781 232,699
----------- ----------- ---------- ----------
Operating income 10,230 9,665 31,426 30,947
Interest income 1,385 972 3,541 3,473
Net other expense (127) (307) (1,303) (867)
----------- ----------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS
BEFORE PROVISION FOR INCOME TAXES 11,488 10,330 33,664 33,553
PROVISION FOR INCOME TAXES 4,891 4,417 14,388 14,311
----------- ----------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS 6,597 5,913 19,276 19,242
INCOME FROM DISCONTINUED OPERATIONS,
NET OF TAX (Note 3) 8,810 8,310 32,797 27,157
----------- ----------- ---------- ----------
NET INCOME $15,407 $14,223 $52,073 $46,399
=========== =========== ========== ==========
BASIC EARNINGS PER SHARE OF STOCK:
Income from continuing operations $0.30 $0.27 $0.86 $0.87
Income from discontinued operations 0.39 0.37 1.47 1.23
----------- ----------- ---------- ----------
Earnings per share $0.69 $0.64 $2.33 $2.10
=========== =========== ========== ==========
Weighted average number of shares
outstanding 22,449 22,151 22,343 22,088
=========== =========== ========== ==========
DILUTED EARNINGS PER SHARE OF STOCK:
Income from continuing operations $0.29 $0.26 $0.85 $0.86
Income from discontinued operations 0.39 0.37 1.44 1.21
----------- ----------- ---------- ----------
Earnings per share $0.68 $0.63 $2.29 $2.07
=========== =========== ========== ==========
Weighted average number of shares
outstanding 22,806 22,489 22,726 22,427
=========== =========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
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PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
-------------- ---------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $107,291 $62,749
Trade accounts receivable (less allowance for
doubtful accounts of $1,823 and $1,626) 36,893 35,002
Inventory 2,427 5,265
Prepaid expenses and other 7,359 11,587
-------------- ---------------
Total current assets 153,970 114,603
-------------- ---------------
PROPERTIES:
Land 5,650 5,991
Buildings 42,072 39,446
Machinery and equipment 94,446 89,484
Construction in progress 8,660 4,042
-------------- ---------------
Total 150,828 138,963
Less accumulated depreciation 69,971 64,166
-------------- ---------------
Properties - net 80,857 74,797
-------------- ---------------
INTANGIBLE AND OTHER ASSETS:
Intangible assets - net of amortization 180,404 185,124
Receivable from The Herald Company 37,339 39,733
Net assets of Broadcasting Business (Note 3) 34,043 36,069
Other 21,552 13,985
-------------- ---------------
Total intangible and other assets 273,338 274,911
-------------- ---------------
TOTAL $508,165 $464,311
============== ===============
(Continued)
</TABLE>
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PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
-------------- ---------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $11,563 $12,193
Salaries, wages and commissions 8,608 10,523
Income taxes payable 881 3,070
Acquisition payable 9,804 9,804
Other 6,815 3,183
-------------- ---------------
Total current liabilities 37,671 38,773
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PENSION OBLIGATIONS 22,092 21,165
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POSTRETIREMENT AND POSTEMPLOYMENT
BENEFIT OBLIGATIONS 88,784 89,350
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OTHER LONG-TERM LIABILITIES 3,680 4,246
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COMMITMENTS AND CONTINGENCIES
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 - 7,116,359 in 1998
and 6,797,895 in 1997 71 68
Class B common stock, convertible, $.01 par value;
50,000,000 shares authorized; issued - 27,083,630
in 1998 and 27,125,247 in 1997 271 271
Additional paid-in capital 142,077 135,542
Retained earnings 401,492 362,828
-------------- ---------------
Total 543,911 498,709
Treasury stock - at cost; 25,519 and 24,660 shares of
common stock in 1998 and 1997, respectively, and
11,700,850 shares of Class B common stock in
1998 and 1997 (187,973) (187,932)
-------------- ---------------
Total stockholders' equity 355,938 310,777
-------------- ---------------
TOTAL $508,165 $464,311
============== ===============
(Concluded)
</TABLE>
See notes to consolidated financial statements.
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PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------
1998 1997
----------- -----------
CONTINUING OPERATIONS
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $19,276 $19,242
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 5,839 5,446
Amortization 4,399 4,367
Changes in assets and liabilities (net of the effects of
the purchase and sale of properties) which
provided (used) cash:
Trade accounts receivable (1,891) 88
Inventory 2,838 (659)
Other assets 3,286 (5,991)
Trade accounts payable and other liabilities (2,488) 939
Income taxes payable (2,189) (184)
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 29,070 23,248
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (12,680) (9,546)
Purchase of publishing properties (2,051)
Investment in joint ventures and limited partnerships (3,788) (2,675)
Sale of publishing property 2,590
Decrease in notes receivable 111 4,976
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (15,818) (7,245)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (10,029) (8,599)
Proceeds from exercise of stock options 5,521 3,108
Proceeds from employee stock purchase plan 1,017
Purchase of treasury stock (41) (28)
---------- ----------
NET CASH USED IN FINANCING ACTIVITIES (3,532) (5,519)
---------- ----------
CASH PROVIDED BY CONTINUING OPERATIONS 9,720 10,484
---------- ----------
DISCONTINUED OPERATIONS
Operating activities 55,211 43,086
Investing activities (7,684) (13,987)
Financing activities (12,705) (50,705)
---------- ----------
CASH PROVIDED BY (USED IN) DISCONTINUED OPERATIONS 34,822 (21,606)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 44,542 (11,122)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 62,749 73,052
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $107,291 $61,930
========== ==========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
On May 25, 1998, Pulitzer Publishing Company (the "Company" or "Pulitzer"),
Pulitzer Inc., (a newly-organized, wholly-owned subsidiary of the Company ("New
Pulitzer")), and Hearst-Argyle Television, Inc. ("Hearst-Argyle") entered into
an Agreement and Plan of Merger (the "Merger Agreement") pursuant to which
Hearst-Argyle will acquire the Company's Broadcasting Business (see Note 3)
through the merger of the Company into Hearst-Argyle (the "Merger"). Prior to
the Spin-off (as defined below), the Company intends to borrow $700 million,
which may be secured by the assets of the Broadcasting Business. Out of the
proceeds of this new debt, the Company will pay the existing Company debt and
any costs arising as a result of the Merger and related transactions. Prior to
the Merger, the balance of the proceeds of this new debt, together with the
Company's publishing assets and liabilities, will be contributed by the Company
to New Pulitzer pursuant to a Contribution and Assumption Agreement (the
"Contribution"). Pursuant to the Merger Agreement, Hearst-Argyle will assume the
new debt following the consummation of the Spin-off and Merger.
Immediately following the Contribution, the Company will distribute to each
holder of Company Common Stock one fully-paid and nonassessable share of New
Pulitzer Common Stock for each share of Company Common Stock held and to each
holder of Company Class B Common Stock one fully-paid and nonassessable share of
New Pulitzer Class B Common Stock for each share of Company Class B Common Stock
held (the "Distribution"). The Contribution and Distribution are collectively
referred to as the "Spin-off." The Spin-off and the Merger are collectively
referred to as the "Transactions."
The Company's obligation to consummate the Transactions is subject, among other
things, to the receipt of various regulatory approvals and approval by the
stockholders of both the Company and Hearst-Argyle. The Company has received a
favorable letter ruling from the Internal Revenue Service confirming that the
Spin-off will be tax-free to Pulitzer stockholders. In addition, early
termination of the initial waiting period under the Hart-Scott-Rodino Antitrust
Improvement Act of 1976 has been granted. The Company and Hearst-Argyle are
awaiting approval by the Federal Communications Commission of the transfer of
station licenses and related waiver requests. The Transactions are anticipated
to be completed in January 1999.
Following the consummation of the Transactions, New Pulitzer will be engaged
primarily in the business of newspaper publishing and related new media
businesses. For financial reporting purposes, New Pulitzer is the continuing
stockholder interest and will retain the Pulitzer name.
Results of the Company's newspaper publishing and related new media businesses
are reported as continuing operations in the statements of consolidated income.
The results of the Company's Broadcasting Business are reported as "Discontinued
Operations" (see Note 3).
2. ACCOUNTING POLICIES
Interim Adjustments - In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly Pulitzer Publishing
Company's financial position as of September 30, 1998, results of operations for
the three-month and nine-month periods ended September 30, 1998 and 1997 and
cash flows for the nine-month periods ended September 30, 1998 and 1997. These
financial statements should be read in conjunction with the audited consolidated
financial statements and related notes thereto contained in the Company's
Current Report on Form 8-K dated September 4, 1998 and in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997, as filed with the
Securities and Exchange Commission. Results of operations for interim periods
are not necessarily indicative of the results to be expected for the full year.
Fiscal Year and Fiscal Quarters - The Company's fiscal year and third fiscal
quarter end on the Sunday coincident with or prior to December 31 and September
30, respectively. For ease of presentation, the Company has used December 31 as
the year end and September 30 as the third quarter end.
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Earnings Per Share of Stock - Basic earnings per share of stock is computed
using the weighted average number of common and Class B common shares
outstanding during the applicable period. Diluted earnings per share of stock is
computed using the weighted average number of common and Class B common shares
outstanding and common stock equivalents (outstanding stock options). Weighted
average shares of common and Class B common stock and common stock equivalents
used in the calculation of basic and diluted earnings per share are summarized
as follows:
<TABLE>
<CAPTION>
Third Quarter Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
1998 1997 1998 1997
(In thousands)
<S> <C> <C> <C> <C>
Weighted average shares outstanding 22,449 22,151 22,343 22,088
(Basic EPS)
Stock option equivalents 357 338 383 339
--------- -------- --------- --------
Weighted average shares outstanding and
stock option equivalents (Diluted EPS) 22,806 22,489 22,726 22,427
========= ======== ========= ========
</TABLE>
Stock option equivalents included in the diluted earnings per share calculation
were determined using the treasury stock method. Under the treasury stock
method, outstanding stock options are dilutive when the average market price of
the Company's common stock exceeds the option price during a period. In
addition, proceeds from the assumed exercise of dilutive options along with the
related tax benefit are assumed to be used to repurchase common shares at the
average market price of such stock during the period.
Comprehensive Income - In June 1997, the Financial Accounting Standards Board
issued statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income. This statement established standards for the reporting and
display of Comprehensive Income and its components. This statement is required
to be implemented in financial statements issued for periods ending after
December 15, 1997. For the nine-month periods ended September 30, 1998 and 1997,
the Company did not incur items to be reported in "Comprehensive Income" that
were not already included in reported "net income". As a result, comprehensive
income and net income were the same for these periods.
Reclassifications - Certain reclassifications have been made to the 1997
consolidated financial statements to conform with the 1998 presentation.
3. DISCONTINUED OPERATIONS
Discontinued operations represent the Company's Broadcasting Business as
follows: Pulitzer Broadcasting Company, a wholly-owned subsidiary of the
Company, and its wholly-owned subsidiaries, WESH Television, Inc.; WDSU
Television, Inc.; and KCCI Television, Inc.; (collectively "Broadcasting" or
"Broadcasting Business"), own and operate nine network-affiliated television
stations and five radio stations. Broadcasting's television properties represent
market sizes from Omaha, Nebraska to Orlando, Florida and include operations in
the northeast, southeast, midwest and southwest. Three of Broadcasting's five
radio stations, representing the significant portion of its radio operations,
are located in Phoenix, Arizona.
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The assets and liabilities of the Broadcasting Business are classified in the
statements of consolidated financial position as "Net Assets of Broadcasting
Business" and consist of the following:
September 30, December 31,
1998 1997
(In thousands)
Trade accounts receivable - net $41,770 $50,880
Program rights 10,283 7,866
Other current assets 1,405 1,260
------------- ------------
Total current assets 53,458 60,006
Properties - net 82,806 87,017
Intangible assets 96,744 102,493
Other assets 9,100 7,172
------------- ------------
Total assets of Broadcasting Business 242,108 256,688
------------- ------------
Trade accounts payable and accrued expenses 10,237 10,226
Current portion of long-term debt 12,705 12,705
Interest payable 2,088 5,677
Program contracts payable 9,846 7,907
------------- ------------
Total current liabilities 34,876 36,515
Long-term debt 160,000 172,705
Long term employee benefit obligations 9,301 8,100
Other long term liabilities 3,888 3,299
------------- ------------
Total liabilities of Broadcasting
Business 208,065 220,619
------------- ------------
Net assets of Broadcasting Business $34,043 $36,069
============= ============
The net income from operations of the Broadcasting Business, without allocation
of any general corporate expense, is reflected in the statements of consolidated
income as "Income from Discontinued Operations" and is summarized as follows:
<TABLE>
<CAPTION>
Third Quarter Ended Nine Months Ended
September 30, September 30,
----------------------- ------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Operating revenues $53,908 $53,738 $173,681 $165,002
Operating income 17,796 17,494 64,086 57,131
Interest expense 3,330 3,854 10,255 12,553
Income before provision
for income taxes 14,466 13,643 53,831 44,581
Provision for income
taxes 5,656 5,333 21,034 17,424
Net income 8,810 8,310 32,797 27,157
Depreciation and amortization 5,461 5,938 16,512 17,622
</TABLE>
Pursuant to the Merger Agreement, the Company's existing long-term debt will be
repaid with new borrowings prior to the Merger. In addition, the new borrowings
will be assumed by Hearst-Argyle at the time of the Merger. Accordingly, all of
the Company's long-term debt balances and related interest expense are allocated
to the Broadcasting Business and reported as discontinued operations in the
consolidated financial statements (see Note 1).
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4. DIVIDENDS
In the first quarter of 1998, two dividends of $0.15 per share were declared,
payable on February 2, 1998 and May 1, 1998. In the second quarter of 1998, a
dividend of $0.15 per share was declared, payable on August 3, 1998. In the
third quarter of 1998, a dividend of $0.15 per share was declared, payable on
November 2, 1998.
In the first quarter of 1997, two dividends of $0.13 per share were declared,
payable on February 3, 1997 and May 1, 1997. In the second quarter of 1997, a
dividend of $0.13 per share was declared, payable on August 1, 1997. In the
third quarter of 1997, a dividend of $0.13 per share was declared, payable on
November 1, 1997.
5. COMMITMENTS AND CONTINGENCIES
At September 30, 1998, the Company and its subsidiaries had construction and
equipment commitments of approximately $10,318,000 related to continuing
operations and $2,024,000 related to discontinued operations. The Company's
commitment for broadcasting program contracts payable and license fees at
September 30, 1998 was approximately $17,908,000.
The Company is an investor in two limited partnerships requiring future capital
contributions. As of September 30, 1998, the Company's unfunded capital
contribution commitment related to these investments was approximately
$9,075,000.
The Company and its subsidiaries are involved, from time to time, in various
claims and lawsuits incidental to the ordinary course of its business,
including such matters as libel, slander and defamation actions and complaints
alleging discrimination. While the results of litigation cannot be predicted,
management believe the ultimate outcome of such existing litigation will not
have a material adverse effect on the consolidated financial statements of the
Company and its subsidiaries.
In connection with the September 1986 purchase of Pulitzer Class B common
stock from certain selling stockholders (the "1986 Selling Stockholders"),
Pulitzer agreed, under certain circumstances, to make an additional payment to
the 1986 Selling Stockholders in the event of a Gross-Up Transaction (as defined
herein). A "Gross-Up Transaction" was defined to mean, among other transactions,
(i) any merger, in any transaction or series of related transactions, of more
than 85 percent of the voting securities or equity of Pulitzer pursuant to which
holders of Pulitzer common stock receive securities other than Pulitzer common
stock and (ii) any recapitalization, dividend or distribution, or series of
related recapitalizations, dividends or distributions, in which holders of
Pulitzer common stock receive securities (other than Pulitzer common stock)
having a Fair Market Value (as defined herein) of not less than 33 1/3 percent
of the Fair Market Value of the shares of Pulitzer common stock immediately
prior to such transaction. The amount of the additional payment, if any, would
equal (x) the product of (i) the amount by which the Transaction Proceeds (as
defined herein) exceeds the Imputed Value (as defined herein) multiplied by (ii)
the applicable percentage (i.e., 50 percent for the period from May 13, 1996
through May 12, 2001) multiplied by (iii) the number of shares of Pulitzer
common stock issuable upon conversion of the shares of Pulitzer Class B common
stock owned by the 1986 Selling Stockholders, adjusted for, among other things,
stock dividends and stock splits; less (y) the sum of any additional payments
previously received by the 1986 Selling Stockholders; provided, however, that in
the event of any recapitalization, dividend or distribution, the amount by which
the Transaction Proceeds exceeds the Imputed Value shall not exceed the amount
paid or distributed pursuant to such recapitalization, dividend or distribution
in respect of one share of Pulitzer common stock.
The term "Transaction Proceeds" was defined to mean, in the case of a merger,
the aggregate Fair Market Value (as defined herein) of the consideration
received pursuant thereto by the holder of one share of Pulitzer common stock,
and, in the case of a recapitalization, dividend or distribution, the aggregate
Fair Market Value of the amounts paid or distributed in respect of one share of
Pulitzer common stock plus the aggregate Fair Market Value of one share of
Pulitzer common stock following such transaction. The "Imputed Value" for one
share of Pulitzer common stock on a given date was defined to mean an amount
equal to $28.82 compounded annually from May 12, 1986 to such given date at the
rate of 15 percent per annum, the result of which is $154.19 at May 12, 1998.
There was no specific provision for adjustment of the $28.82 amount, but if it
were adjusted to reflect all stock dividends and stock splits of Pulitzer since
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<PAGE> 10
September 30, 1986, it would now equal $15.72, which if compounded annually from
May 12, 1986 at the rate of 15 percent per annum would now equal $84.11.
"Fair Market Value," in the case of any consideration other than cash received
in a Gross-Up Transaction, was defined to mean the fair market value thereof as
agreed to by a valuation firm selected by Pulitzer and a valuation firm selected
by the 1986 Selling Stockholders, or, if the two valuation firms do not agree on
the fair market value, the fair market value of such consideration as determined
by a third valuation firm selected by the two other valuation firms. Any such
agreement or determination shall be final and binding on the parties.
As a result of the foregoing, the amount of additional payments, if any, that
may be payable by New Pulitzer with respect to the Merger and the distribution
of New Pulitzer Stock in the Spin-off (the "Distribution") cannot be determined
at this time. However, if the Distribution were determined to be a Gross-Up
Transaction and if the Fair Market Value of the Transaction Proceeds with
respect to the Merger and the Distribution were determined to exceed the Imputed
Value, then the additional payments to the 1986 Selling Stockholders would equal
approximately $5.9 million for each $1.00 by which the Transaction Proceeds
exceed the Imputed Value. Accordingly, depending on the ultimate resolution of
the meaning and application of various provisions of the Gross-Up Transaction
agreements, including the determination of Imputed Value and Fair Market Value
of the Transaction Proceeds, in the opinion of Pulitzer's management, the amount
of an additional payment, if any, could be material to the consolidated
financial statements of Pulitzer.
6. SUBSEQUENT EVENT
On October 30, 1998, the Company acquired, in a purchase transaction, Troy
Daily News, Inc., the publisher of a daily afternoon and Sunday morning
newspaper located in Troy, Ohio, for approximately $20 million.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Statements in this Quarterly Report on Form 10-Q concerning the Company's
business outlook or future economic performance, anticipated profitability,
revenues, expenses or other financial items, together with other statements that
are not historical facts, are "forward-looking statements" as that term is
defined under the Federal Securities Laws. Forward-looking statements are
subject to risks, uncertainties and other factors which could cause actual
results to differ materially from those stated in such statements. Such risks,
uncertainties and factors include, but are not limited to, industry cyclicality,
the seasonal nature of the business, changes in pricing or other actions by
competitors or suppliers, and general economic conditions, as well as other
risks detailed in the Company's filings with the Securities and Exchange
Commission including this Quarterly Report on Form 10-Q.
GENERAL
The Company's operating revenues are significantly influenced by a
number of factors, including overall advertising expenditures, the appeal of
newspapers in comparison to other forms of advertising, the performance of the
Company in comparison to its competitors in specific markets, the strength of
the national economy and general economic conditions and population growth in
the markets served by the Company.
The Company's business tends to be seasonal, with peak revenues and
profits generally occurring in the fourth and, to a lesser extent, second
quarters of each year as a result of increased advertising activity during the
Christmas and spring holiday periods. The first quarter is historically the
weakest quarter for revenues and profits.
RECENT EVENTS
On May 25, 1998, Pulitzer Publishing Company (the "Company" or
"Pulitzer"), Pulitzer Inc. (a newly-organized, wholly-owned subsidiary of the
Company ("New Pulitzer")), and Hearst-Argyle Television, Inc. ("Hearst-Argyle")
entered into an Agreement and Plan of Merger (the "Merger Agreement") pursuant
to which Hearst-Argyle will acquire the Company's Broadcasting Business through
the merger ("Merger") of the Company into Hearst-Argyle. The Merger is subject
to the satisfaction or waiver of certain closing conditions enumerated in the
Merger Agreement. The Company's newspaper publishing and related new media
businesses will continue as New Pulitzer, which will be distributed in a
tax-free "spin-off" to the Company's stockholders (the "Spin-off") prior to the
Merger.
The Company's historical basis in its non-broadcasting assets and
liabilities will be carried over to New Pulitzer. The Merger, the Spin-off and
the related transactions will be recorded as a reverse-spin transaction, and,
accordingly, New Pulitzer's results of operations for periods reported prior to
the consummation of the Merger, the Spin-off and related transactions will
represent the historical results of operations previously reported by the
Company. Because the Broadcasting Business represents an entire business segment
that will be divested, its results are reported as discontinued operations in
the Company's Consolidated Financial Statements. (See Notes 1 and 3 to the
Consolidated Financial Statements included in Item 1 of this Report on Form
10-Q.)
CONTINUING OPERATIONS--PUBLISHING
Operating revenues for the third quarter and first nine months of 1998
increased 3.7 percent and 4.4 percent, respectively, compared to the
corresponding periods in the prior year. The gains primarily reflected higher
advertising revenues.
Newspaper advertising revenues increased $2.6 million (4.6 percent) in
the third quarter and $10 million (5.9 percent) in the first nine months of 1998
compared to the corresponding periods in the prior year. The current year
increases resulted from advertising gains at the St. Louis Post-Dispatch
("Post-Dispatch"), The Arizona Daily Star ("Star") and the Pulitzer Community
Newspaper group ("PCN"). In general, the current year advertising gains
reflected higher advertising rates at all newspaper properties and increases
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<PAGE> 12
in advertising volume at the Star. Full run advertising volume (linage in
inches) declined 1.8 percent at the Post-Dispatch and increased 5 percent at the
Star for the third quarter of 1998. For the first nine months of 1998, full run
advertising volume increased 0.3 percent at the Post-Dispatch and 4 percent at
the Star. In the fourth quarter of 1997 and the first quarter of 1998, varying
rate increases were implemented at the Post-Dispatch, the Star and most of the
PCN properties.
Circulation revenues increased $599,000 (2.8 percent) in the third
quarter and $432,000 (0.7 percent) in the first nine months of 1998. The third
quarter increase resulted from higher circulation volume at the Post-Dispatch
due to fan interest in Mark McGwire's pursuit of the single season home run
record in Major League Baseball. The year-to-date increase resulted primarily
from gains at PCN properties during the first half of 1998.
Other publishing revenues increased $92,000 (0.9 percent) in the third
quarter and $1.1 million (3.8 percent) in the first nine months of 1998. The
increase for the nine-month period resulted primarily from higher preprint
revenues and Internet subscriber fees.
Operating expenses (including selling, general and administrative
expenses, general corporate expense and depreciation and amortization),
excluding the St. Louis Agency adjustment, for the third quarter and first nine
months of 1998 increased 2.7 percent and 4.5 percent, respectively, compared to
the corresponding periods in the prior year. The third quarter increase was
primarily attributable to higher overall personnel costs of $1.5 million while
the year-to-date increase reflected increases in both overall personnel costs
($4.6 million) and newsprint costs ($2.6 million).
Operating income in the 1998 third quarter increased 5.8 percent to
$10.2 million and in the first nine months increased 1.5 percent to $31.4
million. The increases for both periods reflected the current year revenue
gains.
Interest income for the third quarter and first nine months of 1998
increased $413,000 (42.5 percent) and $68,000 (2 percent), respectively, due to
higher average balances of invested funds in the current year periods.
Net other expense for the third quarter declined $180,000 due primarily
to capital gains related to limited partnership investments. The year-to-date
increase of $436,000 reflected a one-time charge of $869,000 related to the sale
of the Haverhill Gazette on June 1, 1998 partially offset by current year
capital gains related to limited partnership investments.
The effective income tax rates for the third quarter and first nine
months of 1998 were 42.6 percent and 42.7 percent, respectively, compared to
42.8 percent and 42.7 percent, respectively, in the corresponding prior year
periods. The Company expects that its effective tax rate related to continuing
operations will be in the 42 to 43 percent range for the full year of 1998
(exclusive of any non-recurring items related to the Spin-off and Merger).
Income from continuing operations in the 1998 third quarter increased
11.6 percent to $6.6 million, or $0.29 per diluted share, compared with $5.9
million, or $0.26 per diluted share, in the third quarter of 1997. Income from
continuing operations for the first nine months of 1998 was $19.3 million, or
$0.85 per diluted share, compared with $19.2 million, or $0.86 per diluted
share, a year ago. The increases reflected the revenue gains and higher interest
income in the current year.
Fluctuations in the price of newsprint significantly impact the results
of the Company's newspaper operations, where newsprint expense accounts for
approximately 20 percent of total operating costs. For the first nine months of
1998, the Company's average cost for newsprint was approximately $590 per metric
ton, compared to approximately $555 per metric ton in 1997. On September 1,
1998, most of Pulitzer's suppliers increased the price of newsprint to
approximately $615 per metric ton. This price increase will begin to impact
Pulitzer's newsprint costs in the fourth quarter of 1998. In the fourth quarter
of 1997, the Company's average cost of newsprint was approximately $585 per
metric ton.
12
<PAGE> 13
DISCONTINUED OPERATIONS--BROADCASTING
Broadcasting operating revenues for the third quarter and first nine
months of 1998 increased 0.3 percent and 5.3 percent, respectively, over the
comparable 1997 periods. Local spot advertising increased 2.7 percent and 5.6
percent, respectively, for the third quarter and first nine months of 1998,
while national spot advertising declined 2.1 percent for the third quarter
and increased 5.8 percent for the nine-month period. The current year
comparisons reflect the impact of increased political advertising of
approximately $2.4 million and $6.6 million, respectively, in the third quarter
and first nine months of 1998.
Broadcasting operating expenses (including selling, general and
administrative expenses and depreciation and amortization) for the third quarter
of 1998 decreased to $36.1 million (0.4 percent) and for the first nine months
increased to $109.6 million (1.6 percent) compared to the prior year periods.
The third quarter decrease resulted primarily from declines in depreciation and
amortization expense of $477,000 and national advertising representative fees of
$219,000 which were partially offset by higher overall personnel costs of
$255,000. The increase for the nine-month period was primarily attributable to
higher overall personnel costs of $2.9 million which were partially offset by
declines in depreciation and amortization expense of $1.1 million and promotion
costs of $436,000.
Broadcasting operating income in the 1998 third quarter increased 1.7
percent to $17.8 million and in the first nine months increased 12.2 percent to
$64.1 million. The third quarter increase resulted from a combination of modest
revenue gains and a slight decline in expenses while the year-to-date gain
reflected higher advertising revenues.
Interest expense declined $524,000 in the 1998 third quarter and $2.3
million in the first nine months due to lower average debt levels. The Company's
average debt level for the third quarter and first nine months of 1998 decreased
to $177.2 million and $182.6 million from $210.9 million and $229.6 million in
the respective periods of the prior year. The Company's average interest rate
for both the third quarter and first nine months of 1998 increased to 7.5
percent from 7.3 percent in both prior year periods. The lower average debt
levels and higher average interest rates in the first half of 1998 reflected the
payment of variable rate credit agreement borrowings during the last three
quarters of 1997.
The effective income tax rates for the third quarter and first nine
months of 1998 were 39.1 percent, unchanged from the corresponding periods in
the prior year. The Company expects that the effective tax rate related to
broadcasting operations will be approximately 39 percent for the full year of
1998.
Income from discontinued operations in the 1998 third quarter increased
6 percent to $8.8 million, or $0.39 per diluted share, compared with $8.3
million, or $0.37 per diluted share, in the third quarter of 1997. Income from
discontinued operations for the first nine months of 1998 increased 20.8 percent
to $32.8 million, or $1.44 per diluted share, compared with $27.2 million, or
$1.21 per diluted share, a year ago. The gains reflected a combination of
revenue increases, declines in depreciation and amortization expense and lower
interest expense in the current year periods.
LIQUIDITY AND CAPITAL RESOURCES
Pursuant to the Merger Agreement, the Company's existing long-term debt
will be repaid with new borrowings prior to the Merger. In addition, the new
borrowings will be assumed by Hearst-Argyle at the time of the Merger.
Accordingly, all of the Company's long-term debt balances are allocated to the
Broadcasting Business and included in "Net Assets of the Broadcasting Business"
in the consolidated statements of financial position (see Item 1 of this Report
on Form 10-Q). Outstanding debt, inclusive of the short-term portion of
long-term debt, as of September 30, 1998, was $172.7 million compared to $185.4
million at December 31, 1997. The decrease since the prior year end reflects a
scheduled repayment of $12.5 million in the third quarter of 1998. The Company's
borrowings consist primarily of fixed-rate senior notes with The Prudential
Insurance Company of America (the "Prudential Senior Note Agreements"). Under a
variable rate credit agreement with The First National Bank of Chicago, as
Agent, for a group of lenders, the Company has a $50 million line of credit
available through June, 2001 (the "FNBC Credit Agreement"). No amount is
currently borrowed under the FNBC Credit Agreement.
13
<PAGE> 14
The Prudential Senior Note Agreements and the FNBC Credit Agreement
require the Company to maintain certain financial ratios, place restrictions on
the payment of dividends and prohibit new borrowings, except as permitted
thereunder. Borrowings pursuant to the Prudential Senior Note Agreements will be
repaid with new borrowings prior to the Merger, and the Prudential Senior Note
Agreements and FNBC Credit Agreement will be terminated. The Company's new
borrowings will be assumed by Hearst-Argyle at the time of the Merger.
Accordingly, New Pulitzer will have no long-term borrowings immediately after
the Spin-off and Merger.
As of September 30, 1998, commitments for capital expenditures were
approximately $12.3 million, relating to normal capital equipment replacements
(including Year 2000 projects in-process). Capital expenditures to be made in
fiscal 1998 are estimated to be in the range of $25 to $30 million. Commitments
for film contracts and license fees at broadcasting locations as of September
30, 1998 were approximately $17.9 million. In addition, as of September 30,
1998, the Company had capital contribution commitments of approximately $9.1
million related to investments in two limited partnerships.
At September 30, 1998, the Company had working capital of $116.3 million
and a current ratio of 4.09 to 1. This compares to working capital of $75.8
million and a current ratio of 2.96 to 1 at December 31, 1997.
On October 30, 1998, the Company acquired, in a purchase transaction,
Troy Daily News, Inc., the publisher of a daily afternoon and Sunday morning
newspaper located in Troy, Ohio, for approximately $20 million. The Company
expects to consider further acquisitions of newspaper properties when favorable
investment opportunities are identified. In the event an investment opportunity
is identified, management expects that it would be able to arrange financing, if
necessary, on terms and conditions satisfactory to the Company.
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.
SPIN-OFF AND MERGER
Prior to the Spin-off and Merger (collectively referred to as the
"Transactions"), the Company intends to borrow $700 million which will provide
sufficient funds to pay the existing Company debt and the costs of the
Transactions discussed below. Pursuant to the Merger Agreement, Hearst-Argyle
will assume the new debt following the consummation of the Transactions. (See
Note 1 to the Company's Consolidated Financial Statements included in Item 1 of
this Report on Form 10-Q.)
In connection with the Transactions, the Company will incur new
borrowings, prepay existing Company debt and make several one-time payments near
the dates of the Transactions. The Company will incur a prepayment penalty
related to the prepayment of the existing borrowings under the Prudential Senior
Note Agreements. Based upon current interest rates, the prepayment penalty would
be approximately $23.9 million. Professional fees to be incurred related to the
Transactions are estimated in the range of $37 million. Management bonuses to be
paid at the date of the Merger are estimated at approximately $12.1 million.
Pursuant to the Merger Agreement, the Company will cash-out all outstanding
stock options at the date of the Merger. Based upon outstanding options
(962,691) and the Company's common stock market price ($79.00) as of October 31,
1998, payments to employee option holders of approximately $43.1 million would
have been required. It is anticipated that a portion of the option cash-out and
bonus payments will be deferred at the time of the Merger and paid at a future
date. The Company expects to realize tax benefits related to the long-term debt
prepayment penalty, stock option cash-out payments and bonus payments. The
preceding amounts represent estimates based upon current information available
to management of the Company. The final actual amounts will likely differ from
the estimates.
To the extent a gain is generated by the Transactions, a corporate-level
income tax ("Spin-off Tax") will be due. The gain is measured by the excess, if
any, of the fair market value of New Pulitzer stock distributed by the Company
to its stockholders in the Spin-off over the Company's adjusted tax basis in
such New Pulitzer stock immediately prior to the distribution. On October 31,
1998, the fair market value of New Pulitzer stock would be estimated as the
difference between the closing price of the Company's common stock on October
31, 1998 ($79.00) and the fair market value for the Broadcasting Business of
$51.15 per share, assuming the value ($1.15 billion) Hearst-Argyle is exchanging
for the
14
<PAGE> 15
Company's common stock (22,484,802 shares at October 31, 1998). Using a fair
market value of $27.85 (the excess of $79.00 over $51.15) per common share for
the New Pulitzer stock, no gain (or tax) would result from the Transactions
because the adjusted tax basis of the New Pulitzer stock would be approximately
$34.20 per share. However, if the fair market value of the New Pulitzer stock
would exceed the adjusted tax basis of such stock at the time of the Spin-off,
the Spin-off Tax will increase by approximately $9.1 million for each $1.00 per
share that the fair market value exceeds the adjusted tax basis. The actual gain
and related income tax will depend on the fair market value and the Company's
adjusted tax basis in the New Pulitzer stock at the time of the Spin-off.
In connection with the September 1986 purchase of Pulitzer Class B
common stock from certain selling stockholders (the "1986 Selling
Stockholders"), Pulitzer agreed, under certain circumstances, to make an
additional payment to the 1986 Selling Stockholders in the event of a Gross-Up
Transaction (as defined herein). A "Gross-Up Transaction" was defined to mean,
among other transactions, (i) any merger, in any transaction or series of
related transactions, of more than 85 percent of the voting securities or equity
of Pulitzer pursuant to which holders of Pulitzer common stock receive
securities other than Pulitzer common stock and (ii) any recapitalization,
dividend or distribution, or series of related recapitalizations, dividends or
distributions, in which holders of Pulitzer common stock receive securities
(other than Pulitzer common stock) having a Fair Market Value (as defined
herein) of not less than 33 1/3 percent of the Fair Market Value of the shares
of Pulitzer common stock immediately prior to such transaction. The amount of
the additional payment, if any, would equal (x) the product of (i) the amount by
which the Transaction Proceeds (as defined herein) exceeds the Imputed Value (as
defined herein) multiplied by (ii) the applicable percentage (i.e., 50 percent
for the period from May 13, 1996 through May 12, 2001) multiplied by (iii) the
number of shares of Pulitzer common stock issuable upon conversion of the shares
of Pulitzer Class B common stock owned by the 1986 Selling Stockholders,
adjusted for, among other things, stock dividends and stock splits; less (y) the
sum of any additional payments previously received by the 1986 Selling
Stockholders; provided, however, that in the event of any recapitalization,
dividend or distribution, the amount by which the Transaction Proceeds exceeds
the Imputed Value shall not exceed the amount paid or distributed pursuant to
such recapitalization, dividend or distribution in respect of one share of
Pulitzer common stock.
The term "Transaction Proceeds" was defined to mean, in the case of a
merger, the aggregate Fair Market Value (as defined herein) of the consideration
received pursuant thereto by the holder of one share of Pulitzer common stock,
and, in the case of a recapitalization, dividend or distribution, the aggregate
Fair Market Value of the amounts paid or distributed in respect of one share of
Pulitzer common stock plus the aggregate Fair Market Value of one share of
Pulitzer common stock following such transaction. The "Imputed Value" for one
share of Pulitzer common stock on a given date was defined to mean an amount
equal to $28.82 compounded annually from May 12, 1986 to such given date at the
rate of 15 percent per annum, the result of which is $154.19 at May 12, 1998.
There was no specific provision for adjustment of the $28.82 amount, but if it
were adjusted to reflect all stock dividends and stock splits of Pulitzer since
September 30, 1986, it would now equal $15.72, which if compounded annually from
May 12, 1986 at the rate of 15 percent per annum would now equal $84.11.
"Fair Market Value," in the case of any consideration other than cash
received in a Gross-Up Transaction, was defined to mean the fair market value
thereof as agreed to by a valuation firm selected by Pulitzer and a valuation
firm selected by the 1986 Selling Stockholders, or, if the two valuation firms
do not agree on the fair market value, the fair market value of such
consideration as determined by a third valuation firm selected by the two other
valuation firms. Any such agreement or determination shall be final and binding
on the parties.
As a result of the foregoing, the amount of additional payments, if any,
that may be payable by New Pulitzer with respect to the Merger and the
distribution of New Pulitzer Stock in the Spin-off (the "Distribution") cannot
be determined at this time. However, if the Distribution were determined to be a
Gross-Up Transaction and if the Fair Market Value of the Transaction Proceeds
with respect to the Merger and the Distribution were determined to exceed the
Imputed Value, then the additional payments to the 1986 Selling Stockholders
would equal approximately $5.9 million for each $1.00 by which the Transaction
Proceeds exceed the Imputed Value. Accordingly, depending on the ultimate
resolution of the meaning and application of various provisions of the Gross-Up
Transaction agreements, including the determination of Imputed Value and Fair
Market Value of the Transaction Proceeds, in the opinion of Pulitzer's
management, the amount of an additional payment, if any, could be material to
the consolidated financial statements of Pulitzer.
15
<PAGE> 16
Pursuant to the Merger Agreement, New Pulitzer will indemnify
Hearst-Argyle against losses related to: (i) on an after tax basis, certain tax
liabilities, including (A) any transfer tax liability attributable to the
Spin-off, (B) with certain exceptions, any tax liability of Pulitzer or any
subsidiary of Pulitzer attributable to any tax period (or portion thereof)
ending on or before the closing date of the Merger, including tax liabilities
resulting from the Spin-off, and (C) any tax liability of New Pulitzer or any
subsidiary of New Pulitzer; (ii) liabilities and obligations under any employee
benefit plans not assumed by Hearst-Argyle; (iii) any liabilities for payments
made pursuant to a Gross-Up Transaction; and (iv) certain other matters as set
forth in the Merger Agreement.
INFORMATION SYSTEMS AND THE YEAR 2000
The Year 2000 Issue is the result of information systems being designed
using two digits rather than four digits to define the applicable year. As the
year 2000 approaches, such information systems may be unable to accurately
process certain date-based information.
In 1995, Pulitzer began reviewing and preparing its computer systems for
the Year 2000. Generally, at Pulitzer's newspaper publishing locations, the
following categories of computer systems were identified for assessment of Year
2000 compliance: pre-press systems, press systems, post-press systems, business
systems, network systems, desktop PC systems, telecommunication systems and
building systems. Significant sub-systems within these categories which were
identified as non-compliant during the assessment phase represented aging
hardware and software which would have required replacement in the near term
irrespective of the Year 2000 Issue. Consequently, Pulitzer adopted a Year 2000
strategy which will replace its significant non-compliant systems with new
compliant systems prior to December 31, 1999.
Pulitzer's strategy for achieving Year 2000 compliance was developed
using a five phase plan as follows: (1) educate and plan; (2) assess; (3)
replace and renovate; (4) validate/test; and (5) implement. As of June 30, 1998,
Pulitzer has completed the planning and assessment phases and is in the process
of replacing, testing and implementing new compliant systems (with some systems
already implemented). Pulitzer and New Pulitzer expect to have substantially all
of the Year 2000 system changes implemented by December 31, 1998 at The Arizona
Daily Star, March 31, 1999 at the St. Louis Post-Dispatch and September 30, 1999
at the PCN properties.
Pulitzer's current estimate of capital expenditures for new hardware and
software to address Year 2000 issues, as well as to replace aging systems, is
approximately $11.6 million for its newspaper publishing locations. At September
30, 1998, approximately $4.6 million of the total capital expenditure estimate
remains to be spent through the projected implementation dates. These amounts do
not include either the internal staff costs of Pulitzer's information technology
department or the cost of minor Year 2000 system modifications, both of which
are recorded as expense in the period incurred. Year 2000 modification costs for
minor system issues are not expected to be significant. The Year 2000 related
capital expenditures have been considered in Pulitzer's normal capital budgeting
process and will be funded through operating cash flows.
In addition to addressing internal system issues, Pulitzer is
communicating with its major suppliers (including but not limited to newsprint,
ink, telecommunication services and utilities) and selected customers to obtain
assurance of their preparedness for the Year 2000. In general, questionnaires
are being used to identify potential Year 2000 issues at these third parties
which may impact Pulitzer's business operations and require a remedy.
As of September 30, 1998, Pulitzer believes that its plan for achieving
Year 2000 compliance will be fully implemented by September 30, 1999 and,
consequently, the development of contingency plans for Year 2000 issues has not
been undertaken at this time. The possible need for contingency plans will be
monitored, and if necessary such plans will be developed, as Pulitzer proceeds
with the implementation of its overall Year 2000 plan.
The preceding discussion relates to Pulitzer's continuing publishing
operations only. Pulitzer does not expect to incur significant costs to address
Year 2000 issues at its broadcasting locations prior to the Merger, which is
anticipated to close in January 1999.
16
<PAGE> 17
DIGITAL TELEVISION
The Company's Orlando television station, WESH, is required to construct
digital television facilities in order to broadcast digitally by November 1,
1999 and comply with Federal Communications Commission ("FCC") rules. The
deadline for constructing digital facilities at the Company's other television
stations is May 1, 2002. The Company is currently considering available options
to comply with the FCC's timetable but does not expect to incur significant
capital expenditures to construct digital facilities prior to the Merger.
17
<PAGE> 18
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------------
(a) The following exhibits are filed as part of this report:
27-1 Financial Data Schedule for 1998 Third Quarter
27-2 Restated Financial Data Schedule for 1997 Third Quarter
(b) Reports on Form 8-K. The Company filed a Current Report on Form 8-K
on September 4, 1998 relating to the restatement of its
consolidated financial statements to reflect the reclassification
of the Broadcasting Business as a discontinued operation; these
restated consolidated financial statements were filed with the
Report.
All other items of this report are not applicable for the current quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PULITZER PUBLISHING COMPANY
(Registrant)
Date: November 12, 1998 /s/ Ronald H. Ridgway
---------------------------------------
(Ronald H. Ridgway)
Director; Senior Vice-President-Finance
(on behalf of the Registrant and
as principal financial officer)
18
<PAGE> 19
EXHIBIT INDEX
EXHIBIT NUMBER TITLE OR DESCRIPTION
27-1 Financial Data Schedule for 1998 Third Quarter
27-2 Restated Financial Data Schedule for 1997 Third Quarter
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