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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM
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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)
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Securities registered pursuant to Section 12(b) of the Act: Common Stock,
par value $.01 per share -- New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant was approximately $547,437,042 as of the close of business on
March 20, 1998.
The number of shares of Common Stock, $.01 par value, outstanding as of
March 20, 1998 was 6,840,409.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement to be used in
connection with its Annual Meeting of Stockholders to be held on June 3, 1998
are incorporated by reference into Part III of this Report.
The registrant's fiscal year ends on the last Sunday of December in each
year. For ease of presentation, the registrant has used December 31 as the
fiscal year-end in this Annual Report. Except as otherwise stated, the
information in this Report on Form 10-K is as of December 31, 1997.
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<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL
The Company is engaged in newspaper publishing and television and radio
broadcasting. Its newspaper operations consist of two major metropolitan
dailies: the St. Louis Post-Dispatch (the "Post-Dispatch"), the only major daily
newspaper serving the St. Louis metropolitan area; and The Arizona Daily Star
(the "Star"), serving the Tucson metropolitan area. In addition, the Company's
Pulitzer Community Newspaper group includes 13 dailies which serve smaller
markets, primarily in the West and Midwest. The Company's broadcasting
operations consist of nine network-affiliated television stations located in
Greenville, South Carolina; New Orleans, Louisiana; Lancaster, Pennsylvania;
Winston-Salem, North Carolina; Albuquerque, New Mexico; Louisville, Kentucky;
Omaha, Nebraska; Daytona Beach/Orlando, Florida and Des Moines, Iowa; and five
radio stations located in Phoenix, Arizona; Eden, North Carolina; and
Louisville, Kentucky.
The Pulitzer Publishing Company was founded by the first Joseph Pulitzer in
1878 to publish the original St. Louis Post-Dispatch and has operated
continuously since that time under the direction of the Pulitzer family. Michael
E. Pulitzer, a grandson of the founder, currently serves as Chairman of the
Board, President and Chief Executive Officer of the Company.
1
<PAGE> 3
ITEM 1. BUSINESS -- CONTINUED
The following table sets forth certain historical financial information
regarding the Company's two business segments, publishing and broadcasting, for
the periods and at the dates indicated. Comparability of publishing segment
amounts is affected by the acquisition of the Company's Pulitzer Community
Newspaper group on July 1, 1996 (See "-- Publishing -- Pulitzer Community
Newspapers, Inc.") and the sale of a Chicago publishing subsidiary on December
22, 1994. (See "-- Publishing -- Chicago Publications.") Comparability of
broadcasting segment amounts is affected by the acquisitions of WESH-TV and
KCCI-TV on June 30, 1993 and September 9, 1993, respectively.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Operating revenues -- net:
Publishing.............................. $357,969 $309,096 $269,388 $304,779 $290,146
Broadcasting............................ 227,016 224,992 202,939 180,800 136,839
-------- -------- -------- -------- --------
Total................................... $584,985 $534,088 $472,327 $485,579 $426,985
======== ======== ======== ======== ========
Operating income (loss):
Publishing.............................. $ 47,544 $ 32,577 $ 25,393 $ 30,486 $ 23,702
Broadcasting............................ 82,180 83,246 65,939 47,963 27,947
Corporate............................... (6,007) (5,532) (4,666) (3,871) (3,692)
-------- -------- -------- -------- --------
Total................................... $123,717 $110,291 $ 86,666 $ 74,578 $ 47,957
======== ======== ======== ======== ========
Depreciation and amortization:
Publishing.............................. $ 13,007 $ 8,660 $ 4,307 $ 6,128 $ 6,938
Broadcasting............................ 23,447 22,442 22,843 24,358 16,854
-------- -------- -------- -------- --------
Total................................... $ 36,454 $ 31,102 $ 27,150 $ 30,486 $ 23,792
======== ======== ======== ======== ========
Operating margins (operating income to revenues)
Publishing(1)........................... 18.7% 15.1% 14.1% 14.8% 11.8%
Broadcasting............................ 36.2% 37.0% 32.5% 26.5% 20.4%
Assets:
Publishing.............................. $364,360 $351,685 $141,441 $136,818 $156,398
Broadcasting............................ 255,847 259,114 253,252 254,410 270,250
Corporate............................... 62,749 73,052 100,380 77,084 34,970
-------- -------- -------- -------- --------
Total................................... $682,956 $683,851 $495,073 $468,312 $461,618
======== ======== ======== ======== ========
</TABLE>
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(1) Operating margins for publishing are stated with St. Louis Agency adjustment
(which is recorded as an operating expense for financial reporting purposes)
added back to publishing operating income. See "-- Publishing -- Agency
Agreements."
OPERATING STRATEGY
Pulitzer's long-term operating strategy for its media assets is to maximize
each property's growth and profitability through maintenance of editorial
excellence, leadership in locally-responsive news, and prudent control of costs.
Management believes that editorial excellence and leadership in
locally-responsive news will, over the long-term, allow Pulitzer to maximize its
revenue share in each of its respective markets. Experienced local managers
implement the Company's strategy in each media market, with centralized Pulitzer
management providing oversight and guidance in all areas of planning and
operations.
In addition to internal growth, Pulitzer selectively acquires media
properties which the Company believes are consistent with its operating strategy
and present attractive investment opportunities. Although the Company has no
agreements to acquire additional properties, management believes that the
Company's strong cash flow and conservative capital structure, among other
factors, will enable the Company to pursue additional acquisitions as
opportunities arise. The Company is currently exploring potential strategic
alternatives relating to its broadcasting division, including the potential sale
of that division, among other possibilities. However, at this point the Company
has not entered into any agreement, and there can be no
2
<PAGE> 4
ITEM 1. BUSINESS -- CONTINUED
assurance that any agreement will be reached. The Company decided to explore
potential alternatives for the broadcasting business for various strategic and
financial reasons, including the current strength of and consolidation in the
radio and television market. The Company intends to continue to own and operate
its newspaper properties.
Pulitzer believes that cost controls are an important tool in the
management of media properties which are subject to significant fluctuations in
advertising volume. The Company believes that prudent control of costs permits
it to respond quickly when positive operating conditions offer opportunities to
expand market share and profitability and, alternatively, when deteriorating
operating conditions require cost reductions to protect profitability. The
Company aggressively employs production technology in all of its media
operations in order to minimize production costs and produce the most attractive
and timely news product for its readers, viewers and listeners.
Pulitzer's media operations are geographically diverse, placing the Company
in the Midwest, Southwest, West, Southeast, and Northeast regions of the United
States. Due to the close relationship between economic activity and advertising
volume, the Company believes that geographic diversity provides the Company with
valuable protection from regional economic variances.
PUBLISHING
The Company intends to continue the tradition of reporting and editorial
excellence that has resulted in 17 Pulitzer Prizes* over the years. In addition,
management continues to seek ways to leverage its newspaper assets, such as
electronic publishing, voice services delivered by phone, electronic
dissemination of information via the world wide web/Internet and alternative
newspaper delivery systems to provide advertisers with either targeted or total
market coverage.
The Company publishes two major metropolitan daily newspapers, the St.
Louis-Dispatch and The Arizona Daily Star. Both daily newspapers have weekly
total market coverage sections to provide advertisers with market saturation. In
addition, both newspapers also offer an electronic news, information and
communication web site on the Internet. Full access to these "electronic
publication" web sites, as well as full Internet access, is provided on a
subscription basis. The Star's service, StarNet (www.azstarnet.com), began
operations in May, 1995 and had approximately 10,300 subscribers at December 31,
1997. The service provided by the Post-Dispatch, POSTnet (www.stlnet.com),
started in January 1996 and had approximately 10,500 subscribers as of December
31, 1997.
The Company also owns a group of 13 daily community newspapers (Pulitzer
Community Newspapers, Inc.) that have a combined average daily circulation of
approximately 165,000. The smaller markets served by these newspapers and their
locations provide the Company with further diversification and participation in
several higher growth areas of the western United States. Although smaller in
size than the Company's two metropolitan dailies, a strong focus on local
reporting and editorial excellence is also considered the key to long-term
success in these markets.
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* Pulitzer Prizes are awarded annually at Columbia University by the Pulitzer
Prize Board, an independent entity affiliated with the Columbia University
School of Journalism, founded by the first Joseph Pulitzer.
3
<PAGE> 5
ITEM 1. BUSINESS -- CONTINUED
The Company's publishing revenues are derived primarily from advertising
and circulation, averaging approximately 87 percent of total publishing revenue
over the last five years. Advertising rates and rate structures and resulting
revenues vary among publications based, among other things, on circulation, type
of advertising, local market conditions and competition. The following table
provides a breakdown of the Company's publishing revenues for the past five
years. Comparability is affected by the acquisition of the Company's Pulitzer
Community Newspaper group on July 1, 1996 (See "-- Publishing -- Pulitzer
Community Newspapers, Inc.") and the sale of a Chicago publishing subsidiary on
December 22, 1994. (See "-- Publishing -- Chicago Publications.")
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
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1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Advertising:
Retail............................. $107,916 $ 91,373 $ 78,362 $ 88,450 $ 85,860
General............................ 10,466 10,123 7,645 7,830 7,154
Classified......................... 109,435 90,443 75,925 84,738 75,670
-------- -------- -------- -------- --------
Total...................... 227,817 191,939 161,932 181,018 168,684
Circulation.......................... 87,611 81,434 76,349 77,941 78,661
Other................................ 42,541 35,723 31,107 45,820 42,801
-------- -------- -------- -------- --------
Total...................... $357,969 $309,096 $269,388 $304,779 $290,146
======== ======== ======== ======== ========
</TABLE>
ST. LOUIS POST-DISPATCH
Founded in 1878 by the first Joseph Pulitzer, the Post-Dispatch has a long
history of reporting and editorial excellence and innovation in newspaper
publishing under the direction of the Pulitzer family. The Post-Dispatch is a
morning daily and Sunday newspaper serving primarily the greater St. Louis
metropolitan area. St. Louis is currently the 17th largest metropolitan
statistical area in the United States with a population of approximately 2.6
million (Source: Claritas, Inc.).
Based on Audit Bureau of Circulations ("ABC") Publisher's Statement and
reports for the six-month period ended September 30, 1997, the market
penetration (i.e., percentage of households reached) of the Post-Dispatch's
daily and Sunday editions is 8th and 3rd, respectively, in the United States
among major metropolitan newspapers. The newsstand price is $0.50 for the daily
paper and $1.25 for the Sunday edition.
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<PAGE> 6
ITEM 1. BUSINESS -- CONTINUED
The Post-Dispatch operates under an Agency Agreement between the Company
and The Herald Company, Inc. (the "Herald Company") pursuant to which the
Company performs all activities relating to the day-to-day operations of the
newspaper, but pursuant to which it must share one-half of the Agency's
operating income or one-half of the Agency's operating loss with the Herald
Company. The following table sets forth for the past five years certain
circulation and advertising information for the Post-Dispatch and operating
revenues for the St. Louis Agency, all of which are included in the Company's
consolidated financial statements. See "-- Publishing -- Agency Agreements."
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
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1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Post-Dispatch:
Circulation(1):
Daily (including Saturday)......... 319,887 319,203 323,137 335,819 341,797
Sunday............................. 530,442 540,434 545,882 555,488 564,761
Advertising lineage (in thousands of
inches):
Retail................................ 841 819 880 912 913
General............................... 91 101 75 75 62
Classified............................ 1,003 1,007 1,057 1,039 977
-------- -------- -------- -------- --------
Total............................ 1,935 1,927 2,012 2,026 1,952
Part run.............................. 607 792 594 591 481
-------- -------- -------- -------- --------
Total inches..................... 2,542 2,719 2,606 2,617 2,433
======== ======== ======== ======== ========
Operating revenues (in thousands):
Advertising........................... $147,770 $137,054 $130,600 $125,704 $116,951
Circulation........................... 63,216 63,858 64,862 61,207 62,345
Other(2).............................. 24,276 23,231 24,404 23,490 22,387
-------- -------- -------- -------- --------
Total............................ $235,262 $224,143 $219,866 $210,401 $201,683
======== ======== ======== ======== ========
</TABLE>
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(1) Amounts for 1997 based on Company records for the twelve-month period ended
September 30, 1997. All other years based on ABC Publisher's Statement for
the twelve-month period ended September 30.
(2) Primarily revenues from preprinted inserts.
The Post-Dispatch has consistently been a leader in technological
innovation in the newspaper industry. It was the first major metropolitan
newspaper in the United States to be printed by the offset process. Currently,
sophisticated computer systems are used for writing, editing, composing and
producing the printing plates used in each edition. In the preparation of news
and color sections, the Post-Dispatch utilizes a Scitex graphics system which
automates the processing of film and color separations. This system is part of
an ongoing project intended to give the Post-Dispatch the capability of
full-page pagination. At presstime, a fiber optic link allows the Post-Dispatch
to send full-page images and then print newspapers simultaneously in its
downtown and suburban plants, thereby allowing it to deliver newspapers to
suburban readers earlier in the morning. In the distribution process, certain
sections of the newspaper as well as advertising supplements are handled using a
sophisticated palletized inserting operation. This allows the Post-Dispatch to
efficiently distribute into selected geographic areas as necessary. The
Company's commitment to the ongoing enhancement of its operating systems has
enabled the Post-Dispatch to offer a continually improving product to both
readers and advertisers while also realizing substantial savings in labor cost.
The Company believes the Post-Dispatch has adequate facilities to sustain up to
at least a 35 percent increase in daily circulation without incurring
significant capital expenditures.
The Post-Dispatch is distributed primarily through independent home
delivery carriers and single copy dealers. Home delivery accounted for
approximately 76 percent of circulation for the daily Post-Dispatch and
approximately 55 percent of circulation for the Sunday edition during 1997.
5
<PAGE> 7
ITEM 1. BUSINESS -- CONTINUED
THE ARIZONA DAILY STAR
Founded in 1877, the Star is published in Tucson, Arizona, by the Company's
wholly-owned subsidiary, Star Publishing Company. The Star, a morning and Sunday
newspaper, and the Tucson Citizen (the "Citizen"), an afternoon newspaper owned
by Gannett Co., Inc. ("Gannett"), are southern Arizona's leading dailies. The
Star and the Citizen are published through an agency operation (the "Tucson
Agency") and have a combined weekday circulation of approximately 140,000.
Tucson is currently the 69th largest metropolitan statistical area in the United
States with a population of approximately 781,000 (Source: Claritas, Inc.).
The Tucson Agency operates through TNI Partners, an agency partnership
which is owned half by the Company and half by Gannett. TNI Partners is
responsible for all aspects of the business of the two newspapers other than
editorial opinion and gathering and reporting news. Revenues and expenses are
generally shared equally by the Star and the Citizen. Unlike the St. Louis
Agency, the Company's consolidated financial statements include only its share
of the combined operating revenues and operating expenses of the two newspapers.
See "-- Publishing -- Agency Agreements."
As a result of the Tucson Agency, the financial performance of the
Company's Star Publishing Company subsidiary is directly affected by the
operations and performance of both the Star and the Citizen. The following table
sets forth certain information concerning circulation and combined advertising
linage of the Star and the Citizen and the Company's share of the operating
revenues of the Star and the Citizen for the past five years.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Circulation(1):
Star daily.............................. 96,106 96,198 97,134 98,050 96,926
Citizen daily........................... 43,959 46,062 47,240 48,272 49,560
Star Sunday............................. 175,660 178,820 180,170 179,652 175,321
Combined advertising (in thousands of
inches):
Full run (all zones)
Retail............................... 1,587 1,499 1,565 1,565 1,675
General.............................. 51 45 49 50 45
Classified........................... 1,713 1,684 1,682 1,608 1,462
------- ------- ------- ------- -------
Total.............................. 3,351 3,228 3,296 3,223 3,182
Part run............................. 264 201 171 116 98
------- ------- ------- ------- -------
Total inches....................... 3,615 3,429 3,467 3,339 3,280
======= ======= ======= ======= =======
Operating revenues (in thousands):
Advertising............................. $34,302 $31,765 $31,332 $28,459 $25,562
Circulation............................. 11,023 11,194 11,487 11,434 11,065
Other(2)................................ 7,712 7,139 6,703 5,833 5,298
------- ------- ------- ------- -------
Total.............................. $53,037 $50,098 $49,522 $45,726 $41,925
======= ======= ======= ======= =======
</TABLE>
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(1) Amounts for 1997 based on Company records for the 52 week period ended
December 31. Amounts for 1995 based on ABC Publisher's Statement for the 53
week period ended December 31. All other years based on ABC Publisher's
Statement for the 52 week period ended December 31.
(2) Primarily revenues from preprinted inserts.
In 1997, the Star's daily edition accounted for approximately 69 percent of
the combined daily circulation of the Tucson Agency publications. The Star's
daily and Sunday editions accounted for approximately 60 percent of the agency's
total advertising linage.
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<PAGE> 8
ITEM 1. BUSINESS -- CONTINUED
The Star and the Citizen are printed at TNI Partners' modern, computerized
facility equipped with two, eight-unit Metro offset presses. The writing,
editing and composing functions have been computerized, increasing efficiency
and reducing workforce requirements.
The newsstand prices of the daily editions of the Star and the Citizen are
$0.50 and $0.35, respectively, and the newsstand price of the Sunday edition of
the Star is $1.50. The Star and the Citizen are distributed by independent
contractors.
PULITZER COMMUNITY NEWSPAPERS, INC.
On July 1, 1996, the Company acquired for approximately $216 million all
the stock of Scripps League Newspapers, Inc. (subsequently renamed Pulitzer
Community Newspapers, Inc. ("PCN")), a privately owned publisher of community
newspapers which serve smaller markets, primarily in the West and Midwest. The
PCN group includes 13 daily newspapers which publish morning or afternoon
editions during the week and, generally, morning editions on the weekend. Home
delivery through independent contract carriers accounts for the significant
portion of each newspaper's circulation. With circulations ranging from
approximately 8,000 to 33,000, the ten largest daily circulation newspapers in
the PCN group are:
The Daily Herald...............................Provo, Utah
The Arizona Daily Sun...................Flagstaff, Arizona
The Napa Valley Register..................Napa, California
Santa Maria Times..................Santa Maria, California
The Daily Chronicle.......................DeKalb, Illinois
The Garden Island............................Lihue, Hawaii
The Hanford Sentinel...................Hanford, California
The World.................................Coos Bay, Oregon
The Daily Journal.....................Park Hills, Missouri
The Haverhill Gazette.............Haverhill, Massachusetts
For the year ended December 31, 1997, PCN had consolidated operating
revenues of approximately $69.7 million, of which advertising, preprints and
circulation accounted for approximately 66 percent, 12 percent and 19 percent,
respectively. For the six-month period ended December 31, 1996, PCN had
consolidated operating revenues of approximately $34.9 million, of which
advertising, preprints and circulation accounted for approximately 67 percent,
11 percent and 18 percent, respectively.
CHICAGO PUBLICATIONS
On December 22, 1994, the Company sold its wholly-owned publishing
subsidiary located in the Chicago area. Since 1986, the subsidiary's primary
operations consisted of the publication of a daily suburban newspaper, the Daily
Southtown, and commercial printing services for several national and local
newspapers. The sale completed the Company's exit from the Chicago area after
having closed down and partially sold its weekly community newspaper business in
October 1992.
The Company's 1994 consolidated and publishing segment operating results
included substantially a full year of the subsidiary's operations. During 1994,
advertising, preprints, circulation and contract printing accounted for
approximately 55 percent, 4 percent, 11 percent and 28 percent, respectively, of
the subsidiary's total operating revenues of $48.7 million. The sale did not
have a significant impact on the Company's 1995 earnings results.
AGENCY AGREEMENTS
Newspapers in approximately 17 cities operate under joint operating or
agency agreements. Agency agreements generally provide for newspapers servicing
the same market to share certain printing and other facilities and to pool
certain revenues and expenses in order to decrease aggregate expenses and
thereby allow
7
<PAGE> 9
ITEM 1. BUSINESS -- CONTINUED
the continuing operation of multiple newspapers serving the same market. The
Newspaper Preservation Act of 1970 permits joint operating agreements between
newspapers under certain circumstances without violation of the Federal
antitrust laws.
St. Louis Agency. An agency operation between the Company and the Herald
Company is conducted under the provisions of an Agency Agreement, dated March 1,
1961, as amended. For many years, the Post-Dispatch was the afternoon and Sunday
newspaper serving St. Louis, and the Globe-Democrat was the morning paper and
also published a weekend edition. Although separately owned, from 1961 through
February 1984, the publication of both the Post-Dispatch and the Globe-Democrat
was governed by the St. Louis Agency Agreement. From 1961 to 1979, the two
newspapers controlled their own news, editorial, advertising, circulation,
accounting and promotion departments and Pulitzer managed the production and
printing of both newspapers. In 1979, Pulitzer assumed full responsibility for
advertising, circulation, accounting and promotion for both newspapers. In
February 1984, after a number of years of unfavorable financial results at the
St. Louis Agency, the Globe-Democrat was sold by the Herald Company and the St.
Louis Agency Agreement was revised to eliminate any continuing relationship
between the two newspapers and to permit the repositioning of the daily
Post-Dispatch as a morning newspaper.
Following the renegotiation of the St. Louis Agency Agreement at the time
of the sale of the Globe-Democrat, the Herald Company retained the contractual
right to half the profits or losses (as defined) of the operations of the St.
Louis Agency, which from February 1984 forward consisted solely of the
publication of the Post-Dispatch. The St. Louis Agency Agreement provides for
the Herald Company to share half the cost of, and to share in a portion of the
proceeds from the sale of, capital assets used in the production of the
Post-Dispatch. Under the St. Louis Agency Agreement, Pulitzer supervises,
manages and performs all activities relating to the day-to-day publication of
the Post-Dispatch and is solely responsible for the news and editorial policies
of the newspaper.
The consolidated financial statements of the Company include all the
operating revenues and expenses of the St. Louis Agency. An agency adjustment is
provided as an operating expense which reflects that portion of the operating
income of the St. Louis Agency allocated to the Herald Company. Under the St.
Louis Agency Agreement, for fiscal 1997, 1996, 1995, 1994, and 1993, the Company
paid the Herald Company $19,450,000, $13,972,000, $12,502,000, $14,706,000, and
$10,660,000, respectively, for the Herald Company's share of the operating
income of the St. Louis Agency. As a result of such agency adjustment, the
Company is, and during, the term of the St. Louis Agency will continue to be,
entitled to half the profits (as defined) from the operations of the St. Louis
Agency, the amount of which cannot be determined until the end of each fiscal
year.
The current term of the St. Louis Agency Agreement runs through December
31, 2034, following which either party may elect to renew the agreement for
successive periods of 30 years each.
Tucson Agency. The Tucson Agency Agreement has, since 1940, governed the
joint operations of the Star and Citizen. For financial reporting purposes the
operations of the Tucson Agency are reflected in the Company's consolidated
financial statements differently from the operations of the St. Louis Agency.
The consolidated financial statements of the Company include only the Company's
share of the combined revenues, operating expenses and income of the Star and
Citizen. TNI Partners, as agent for the Company and Gannett, is responsible for
advertising and circulation, printing and delivery and collection of all
revenues of the Star and the Citizen. The Board of Directors of TNI Partners
presently consists of three directors chosen by the Company and three chosen by
Gannett. Budgetary, personnel and other non-news and editorial policy matters,
such as advertising and circulation policies and rates or prices, are determined
by the Board of Directors of TNI Partners. Each newspaper is responsible for its
own news and editorial content. Revenues and expenses are recorded by TNI
Partners, and the resulting profit is split 50-50 between Pulitzer and Gannett.
Both partners have certain administrative costs which are borne separately. As a
result of the Tucson Agency, the Star and the Citizen benefit from increases and
can be adversely affected by decreases in each other's circulation.
8
<PAGE> 10
ITEM 1. BUSINESS -- CONTINUED
The Tucson Agency Agreement runs through June 1, 2015, and contains renewal
provisions for successive periods of 25 years each.
COMPETITION
The Company's publications compete for readership and advertising revenues
in varying degrees with other metropolitan, suburban, neighborhood and national
newspapers and other publications as well as with television, radio, cable,
Internet, direct mail and other news and advertising media. Competition for
advertising is based upon circulation levels, readership demographics, price and
advertiser results, while competition for circulation is generally based upon
the content, journalistic quality and price of the publication. In St. Louis and
its surrounding suburban communities, the Post-Dispatch's closest competition
for circulation and advertising revenues includes paid suburban daily newspapers
as well as a chain of community newspapers and shoppers. These community
newspapers and shoppers target selected geographic markets throughout the St.
Louis metropolitan area.
Due to the agency relationship existing in Tucson, the Star and the Citizen
cannot be viewed as competitors for advertising or circulation revenues. The
Star and the Citizen compete primarily against other media and against
Phoenix-area and suburban, neighborhood and national newspapers and other
publications.
EMPLOYEE RELATIONS
The Company has contracts with substantially all of its production unions
related to the Post-Dispatch, with expiration dates ranging from February 1999
through February 2010. In addition, the Company has a multi-year contract with
the St. Louis Newspaper Guild which expires in January 2003. All of the
Post-Dispatch labor contracts contain no strike provisions.
TNI Partners has a one-year contract, expiring December 31, 1998, with
Tucson Graphic Communications Union Local No. 212, covering certain pressroom
employees.
RAW MATERIALS
The publishing segment's results are significantly impacted by the cost of
newsprint which accounted for approximately 20 percent of the segment's total
1997 operating expenses. During 1997, the Company used approximately 100,900
metric tons of newsprint in its production process at a total cost of
approximately $56.8 million. Consumption at the Post-Dispatch represented
approximately 72,600 metric tons of the Company's total newsprint usage in 1997.
In the last five years, the Company's average cost per ton of newsprint has
varied from a low of $452 per metric ton in 1994 to a high of $675 per metric
ton in 1995. During the first three quarters of 1997, the Company benefited from
newsprint prices at levels below the prior year. However, current year price
increases pushed the company's fourth quarter average cost per metric ton above
the comparable prior year cost. During the first quarter of 1998, the Company's
average cost per metric ton for newsprint has been in the range of $600. The
Company has been informed by some of its suppliers of a plan to increase the
price of newsprint by approximately $40 per metric ton during the second quarter
of 1998.
The Post-Dispatch obtains the newsprint necessary for its operations from
five separate mills, three of which are located in Canada and two in the United
States. The Post-Dispatch has guaranteed the future supply of certain volume
levels through long-term agreements with two of its newsprint suppliers. The
Company believes that the absence of long-term agreements with the remaining
three newsprint suppliers will not affect the Company's ability to obtain
newsprint at competitive prices.
The Company acquired five newsprint contracts with the purchase of the
Company's Pulitzer Community Newspaper group in 1996. Combined with the tonnage
purchased for the Post-Dispatch, the Company has been able to leverage its
pricing power to obtain the best price available for its new community newspaper
group, and to assure adequate supplies for all locations.
9
<PAGE> 11
ITEM 1. BUSINESS -- CONTINUED
TNI Partners obtains the newsprint necessary for the Tucson Agency's
operations pursuant to an arrangement with Gannett, the owner of the Citizen.
Gannett purchases newsprint on behalf of TNI Partners under various contractual
arrangements and agreements. Newsprint is also purchased on the spot market.
BROADCASTING
The Company's broadcasting operations currently consist of the ownership
and operation of eight network-affiliated VHF television stations, one
network-affiliated UHF television station, two satellite network television
stations rebroadcasting KOAT, four AM radio stations and one FM radio station.
The Company has diversified its revenues by purchasing properties in different
geographic regions of the United States, thus insulating itself, somewhat, from
regional economic downturns. The local management of each of the Company's
broadcasting properties is partially compensated based on the cash flow
performance of its respective station. Senior management believes that the
success of a local television station is driven by strong local news
programming, and that the Company has developed a particular strength in local
news programming. As is the case with all Company operations, there is major
emphasis on cost control in the broadcasting segment. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Recent Events."
TELEVISION
The following table sets forth certain information concerning the
television stations which the Company owns and the markets in which they
operate.
<TABLE>
<CAPTION>
COMMERCIAL
DMA-TV STATIONS EXPIRATION
HOUSEHOLDS DMA LOCAL OPERATING DATE OF
CALL NETWORK IN NATIONAL MARKET IN DATE FCC
STATION AND MARKET LETTERS AFFILIATION MARKET(1) RANK(2) RANK(3) MARKET(3) ACQUIRED LICENSE
------------------ ------- ----------- ---------- -------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
VHF STATIONS(4):
Greenville/Spartanburg/
Asheville, SC/NC....... WYFF NBC 717,510 35 2 8 2/28/83 12/01/04
New Orleans, LA.......... WDSU NBC 622,760 41 2 8 12/14/89 6/01/05
Harrisburg/Lancaster/
Lebanon/York, PA....... WGAL NBC 588,310 45 1 7 8/13/79 8/01/99
Greensboro/
Winston-Salem/ High
Point, NC.............. WXII NBC 577,070 46 2 8 2/28/83 12/01/04
Daytona Beach/Orlando/
Melbourne, FL.......... WESH NBC 1,041,380 22 2 11 6/30/93 2/01/05
Albuquerque, NM(5)....... KOAT ABC 560,130 48 1 12 6/1/69 10/01/98
Omaha, NE................ KETV ABC 370,560 74 1 5 4/15/76 6/01/98
Des Moines, IA........... KCCI CBS 383,460 69 1 4 9/9/93 2/01/06
UHF STATIONS(4):
Louisville, KY........... WLKY CBS 554,240 50 1 7 6/23/83 8/01/05
</TABLE>
- -------------------------
(1) Based upon the Designated Market Area ("DMA") for the station as reported in
the November, 1997 Nielsen Station Index ("NSI"). DMA is a geographic area
defined as all counties in which the local stations receive a preponderance
of total viewing hours. DMA data is a primary factor in determining
television advertising rates.
(2) National DMA rank for each market as reported in the November, 1997 NSI.
(3) Based on November, 1997 NSI audience estimates, 7:00 am-1:00 am,
Sunday-Saturday. The number of commercial stations operating in market does
not include public broadcasting stations, satellite stations or translators
which rebroadcast signals from distant stations.
10
<PAGE> 12
ITEM 1. BUSINESS -- CONTINUED
(4) VHF (very high frequency) stations transmit on channels 2 through 13, and
UHF (ultra high frequency) stations transmit on channels 14 through 69.
Technical factors, such as station power, antenna location and height and
topography of the area served, determine geographic market served by a
television station. In general, a UHF station requires greater power or
antenna height to cover the same area as a VHF station.
(5) The Company is also the licensee of KOVT, a satellite TV station licensed to
Silver City, New Mexico and KOCT, a satellite TV station licensed to
Carlsbad, New Mexico. The Company is the holder of a construction permit to
build a satellite TV station, KOFT, in Gallup, New Mexico. On January 15,
1998, the FCC granted an application filed by Pulitzer requesting that the
community of license of KOFT be changed from Gallup to Farmington, New
Mexico. In February 1998, KOB-TV, L.L.C. filed a petition with the FCC
requesting reconsideration of the grant of the Farmington application.
Average audience share, number of stations serving the market and market
rank for each television station which the Company currently owns for the past
five years are shown in the following table.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------------- ------------------- ------------------- ------------------- -------------------
STATIONS STATIONS STATIONS STATIONS STATIONS
SERVING SERVING SERVING SERVING SERVING
MARKET/ MARKET/ MARKET/ MARKET/ MARKET/
AVERAGE LOCAL AVERAGE LOCAL AVERAGE LOCAL AVERAGE LOCAL AVERAGE LOCAL
AUDIENCE MARKET AUDIENCE MARKET AUDIENCE MARKET AUDIENCE MARKET AUDIENCE MARKET
STATION SHARE(1) RANK(2) SHARE(1) RANK(2) SHARE(1) RANK(2) SHARE(1) RANK(2) SHARE(1) RANK(2)
------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WYFF................. 26% 8/2 28% 7/2 26% 7/1 27% 6/1 29% 6/2
WDSU................. 20 8/2 25 8/2 21 8/2 20 6/2 21 5/2
WGAL................. 38 7/1 38 7/1 37 7/1 36 7/1 36 7/1
WXII................. 22 8/2 24 8/2 25 7/2 23 7/3 26 7/3
WESH(3).............. 24 11/2 24 11/2 23 10/2 21 10/2 23 9/2
KOAT................. 30 12/1 29 12/1 32 12/1 30 11/1 32 10/1
KETV................. 28 5/1 27 5/1 31 5/1 27 4/1 29 4/1
KCCI(4).............. 40 4/1 38 4/1 37 4/1 41 4/1 35 4/1
WLKY(5).............. 28 7/1 25 6/2 24 6/3 28 6/3 29 5/1
</TABLE>
- -------------------------
(1) Represents the number of television households tuned to a specific station
9:00 am-Midnight, Sunday-Saturday, as a percentage of Station Total
Households. Source: 1994-1997 data from February, May and November Nielsen
Station Index ("NSI"). Schedules for 1993 include both NSI and Arbitron
Ratings Audience Estimates information. NOTE: The Arbitron Company ceased to
provide local television market reports in 1994.
(2) Stations serving market and local market rank data for 1994-1997 based on
November NSI. Schedules for 1993 include both NSI and Arbitron Ratings
Audience Estimates information.
(3) Acquired June 30, 1993.
(4) Acquired September 9, 1993.
(5) WLKY and WAVE (a competitor station) are tied for first place.
The Company's television stations are affiliated with national television
networks under ten-year contracts which are automatically renewed for successive
five-year terms unless the Company or network exercises its right to cancel.
Prior to executing new contracts in early 1995, the stations' old network
affiliation agreements were for two year periods with automatic renewal
provisions.
The ratings of the Company's television stations are affected by
fluctuations in the national ratings of its affiliated networks. The Company
believes that such network rating fluctuations are normal for the
11
<PAGE> 13
ITEM 1. BUSINESS -- CONTINUED
broadcasting industry and in the past has not sought to change its network
affiliations based on the decline of the national ratings of an affiliated
network.
ADVERTISING REVENUES
The principal source of broadcasting revenues for the Company is the sale
of time to advertisers. The Company derives television broadcasting revenues
from local and national spot advertising and network compensation. Local
advertising consists of short announcements and sponsored programs on behalf of
advertisers in the immediate area served by the station. National spot
advertising generally consists of short announcements and sponsored programs on
behalf of national and regional advertisers. Network revenue is based upon a
contractual agreement with a network and is dependent upon the network programs
broadcast by the stations. The following table sets forth the television
broadcasting revenues received by the Company from each of these types of
advertising during the past five years.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1997 1996 1995 1994 1993(1)
---- ---- ---- ---- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Local..................................... $ 98,638 $ 99,465 $ 88,419 $ 82,463 $ 63,565
National spot............................. 92,907 91,395 80,760 76,925 52,869
Network................................... 17,841 16,788 17,096 6,557 5,840
Other..................................... 1,700 1,691 1,779 1,832 1,665
-------- -------- -------- -------- --------
Total(2)............................. $211,086 $209,339 $188,054 $167,777 $123,939
======== ======== ======== ======== ========
</TABLE>
- ------------------------
(1) The Company acquired television stations WESH and KCCI on June 30, 1993 and
September 9, 1993, respectively.
(2) Automotive advertising is significant and historically has represented
approximately 22 to 25 percent of total broadcast revenues.
The Company believes that its stations are particularly strong in local
news programming, an important revenue source for network-affiliated stations.
Advertising during local news programs accounted for approximately 35 to 50
percent of each station's total revenues in 1997.
Local time spots are sold by the Company's sales personnel at each
broadcast station. Company sales departments make extensive use of computers to
track and schedule all commercial spots sold, to maintain the broadcast station
operating schedule, to determine time spot availability and to record accounts
receivable. National spots are sold by the Company's three national sales
representative firms.
Advertising rates are based primarily on audience size, audience share,
demographics and time availability. The Company's ability to maximize
advertising revenues is dependent upon, among other things, its management of
the inventory of advertising time available for sale.
PROGRAMMING
The national television networks with which the Company's stations are
affiliated offer a variety of sponsored and unsponsored programs to affiliated
stations. The affiliated stations have the right of first refusal before the
programs may be offered to any other television station in the same city.
When not broadcasting network programs, the Company's stations broadcast
local news programs, movies, syndicated programs acquired from independent
sources and public service programs. Movies and syndicated programs have
frequently been shown previously on network or cable television. Syndicated
programs are programs that are licensed to individual stations for one or more
showings in a particular market as distinguished from programs licensed for
national distribution through one of the major networks.
12
<PAGE> 14
ITEM 1. BUSINESS -- CONTINUED
The Company's stations make programming decisions on the basis of a number
of factors, including program popularity and cost. On occasion, the Company has
not renewed a popular program when syndication costs exceeded the level the
Company believed appropriate compared to the potential advertising revenues to
be derived from the program.
RADIO
The Company owns three radio stations serving the Phoenix, Arizona market:
KTAR (AM), KMVP (AM) and KKLT (FM). KMVP was acquired in an asset purchase
transaction for approximately $5 million in December 1996. Phoenix is the 17th
largest Metro Market in the United States, and the Phoenix Radio Metro Area is
served by eleven AM and twenty-one FM radio stations. KTAR (AM) ranks second in
the Phoenix market, KKLT (FM) ranks twelfth and KMVP (AM) ranks twenty-sixth,
with 6.4 percent, 3 percent, and 0.5 percent average quarter hour market shares,
respectively (source: Arbitron Radio Ratings Summary-Fall 1997). KTAR (AM)
operates as a news/talk/sports radio station while KKLT (FM) has an adult
contemporary music format. KMVP (AM) began airing an "all sports" information
format in February 1997. The FCC licenses for KTAR (AM), KMVP (AM) and KKLT (FM)
expire on October 1, 2005.
On June 16, 1997, the Company acquired the assets of WAVG, Louisville,
Kentucky. The station's call letters were subsequently changed to WLKY (AM) and
it currently operates as an all-news station. On August 23, 1997, the Company
acquired the assets of WETR (AM), Eden, North Carolina and changed the call
letters of the station to WXII (AM). On May 18, 1997, the FCC granted an
application to change the city of license of WXII (AM) from Eden to
Kernersville, North Carolina, and to permit the station to operate with 50
kilowatts during the daytime hours and 10 kilowatts at night. It is expected
that WXII (AM) will operate as a news/sports station beginning in mid-1998. The
FCC licenses for WXII (AM) and WLKY (AM) expire on December 1, 2003, and August
1, 2004, respectively.
Advertising rates charged by a radio station are based primarily upon the
number of homes in the station's primary market, the number of persons using
radio in the area and the number of persons listening to the station.
Advertising is sold by a national sales representative and by the stations'
advertising sales personnel. The Company's radio stations manage their inventory
of available advertising time in much the same manner as the television
stations. Radio broadcasting net revenues during each of the past five years
were as follows: 1997 -- $15,930,000; 1996 -- $15,653,000; 1995 -- $14,885,000;
1994 -- $13,023,000 and 1993 -- $12,900,000.
COMPETITION
Competition for television and radio audiences is based primarily on
programming content. Programming content for the Company's television stations
is significantly affected by network affiliation and by local programming
activities. Competition for advertising is based on audience size, audience
share, audience demographics, time availability and price. The Company's
television stations compete for audience and advertising with other television
stations and with radio stations, cable television and other news, advertising
and entertainment media serving the same markets. In addition, the Company's
television stations compete for audience and, to a lesser extent, advertising,
with other forms of home entertainment such as home video recorders and direct
broadcast satellite service. Cable systems, which operate generally on a
subscriber payment basis, compete by carrying television signals from outside
the broadcast market and by distributing signals from outside the broadcast
market and by distributing programming that is originated exclusively for cable
systems. The Company's television stations are also affected by local
competitive conditions, including the number of stations serving a particular
area and the programming content of those stations.
The Company believes that the competitive position of its radio and
television properties is enhanced by the Company's policy of operating its
broadcasting properties with a view to long-term growth. Strong local news
programming is an important factor for the competitive position of the Company's
television stations.
13
<PAGE> 15
ITEM 1. BUSINESS -- CONTINUED
The Company's system for managing advertising inventory of its television and
radio stations is also an important factor in its ability to compete effectively
for advertising revenues.
The Company's radio stations compete for audience and advertising with
other radio and television stations serving the same market area and with other
print, advertising and entertainment media. The Company's radio stations compete
for audience primarily on the basis of their broadcasting format.
FEDERAL REGULATION OF BROADCASTING
Television and radio broadcasting are subject to the jurisdiction of the
Federal Communications Commission ("FCC") pursuant to the Communications Act of
1934, as amended (the "Communications Act"). The Communications Act prohibits
the public dissemination of radio and television broadcasts except in accordance
with a license issued by the FCC and empowers the FCC to issue, revoke, modify
and renew broadcasting licenses and adopt such regulations as may be necessary
to carry out the provisions of the Communication Act. The recently enacted
Telecommunications Act of 1996 ("Telecommunications Act") effected sweeping
changes in the Communications Act, many of which will influence the Company's
broadcasting operations.
BROADCAST LICENSES
Under the amendments to the Communications Act provided for in the new
legislation, broadcasting licenses for both radio and television stations will
now be granted for a maximum period of eight years. Such licenses are renewable
upon application, and the Telecommunications Act fundamentally changed the
manner in which the FCC processes renewal applications. Petitions to deny
license renewals may still be filed against licensees by interested parties,
including members of the public. However, competing applicants no longer may
file for the frequency being used by the renewal applicant during the period
when a renewal application is pending. In addition, the new law provides that
the FCC must grant renewal if it finds that the station has served the public
interest during its previous license term and has not otherwise engaged in
serious violations (or a pattern of lesser violations) of the Communications Act
or the FCC's Rules.
These changes in renewal procedures apply to renewal applications filed
after May 1, 1995. The Company will file applications to renew the licenses of
stations KOAT, Albuquerque, New Mexico, KOCT, Carlsbad, New Mexico, and KOVT,
Silver City, New Mexico on June 1, 1998. There is currently pending before the
FCC an application to renew the license of KETV, Omaha, Nebraska.
MULTIPLE OWNERSHIP
While requiring FCC review every two years, the Telecommunications Act
substantially liberalized the FCC's regulations governing the multiple, common
and cross ownership of broadcast stations. The new law lifts the numerical
restrictions on the number of radio stations a licensee may own nationwide;
however, it restricts the number of stations a licensee may own in any
individual market based upon the total number of stations in the market; the mix
of stations in different services (e.g., AM or FM) that a licensee owns; and, in
the smallest communities, a limitation that a licensee may not own more than 50
percent of all stations in the market.
The Telecommunications Act also eliminates the cap on the number of TV
stations a party may own nationwide, provided that the total number of
households reached by any individual owner's stations does not exceed 35 percent
of the national household audience. For this purpose, only 50 percent of the
television households in a market are counted toward the 35 percent national
audience reach limitation if the owned station is a UHF station. With respect to
the local market, the new law requires the FCC to conduct a proceeding to
determine whether to preserve or eliminate its present rule forbidding the
common ownership of two television stations in the same market. Moreover, the
law permits the use of so-called Local Marketing Agreements (or "LMAs") between
television stations in the same market to the extent they are allowed by the
FCC's rules. The agreements permit one station in a market to lease and program
the broadcast time and
14
<PAGE> 16
ITEM 1. BUSINESS -- CONTINUED
sell the advertising time of another station in the market. Proposals currently
pending before the FCC could substantially alter these standards.
The AM-FM radio ownership rules prohibit granting a license to operate an
AM or FM radio station or television station to an applicant who already owns,
operates or controls or has an interest in a daily newspaper in the community in
which the broadcast license is requested. In addition, they generally prohibit
ownership of a VHF television station and either an AM or FM radio station in
the same market. While the Telecommunications Act left the first restriction in
place, it expanded considerably the FCC's authority to grant waivers of the
television/radio cross-ownership rule in the top 50 markets. The FCC has
instituted a rulemaking proceeding requesting comments on liberalizing its
application of the newspaper/radio cross-ownership rule.
Further, the Telecommunications Act repeals the law which prohibited a
cable television system from carrying the signal of a television broadcast
station if such system owns, operates, controls or has an interest in a
broadcast television station which serves substantially the same area that the
cable television system is serving. Although the FCC rule prohibiting such
cross-ownership remains in place, it is expected that the FCC will undertake a
proceeding to eliminate the rule.
CABLE CARRIAGE
On March 11, 1993, the FCC adopted rules pursuant to the Cable Television
Consumer Protection and Competition Act of 1992 (the "1992 Cable Act")
concerning the mandatory signal carriage ("must carry") rights of commercial and
noncommercial television stations that are local to the area serviced by a cable
system and the requirement prohibiting cable operators and other multichannel
video programming providers from carrying television stations without obtaining
their consent in some circumstances ("retransmission consent"). On March 31,
1997, the Supreme Count upheld the constitutionality of the must-carry
provisions of the 1992 Cable Act. The Supreme Court decision did not expressly
address the issue of must-carry of digital television ("DTV") signals. While the
FCC has not decided whether to adopt must carry rules for DTV broadcasting, it
has announced that this issue will be addressed in a future rulemaking
proceeding. On June 13, 1997, Malrite Communications Group filed a petition with
the FCC seeking to modify the "must carry" rules to require cable systems to
adopt "appropriate" digital technologies, i.e., technologies compatible with
broadcast DTV standards. On February 17, 1998, the FCC decided not to address
the Malrite's request separate from a separate rulemaking proceeding on DTV must
carry, and the FCC affirmed its intention to issue a Notice of Proposed
Rulemaking on DTV must carry.
OTHER RECENTLY ADOPTED RULE CHANGES
It has been the policy of the FCC to rely increasingly upon the interplay
of marketplace forces in lieu of direct government regulation and to encourage
increasing competition among different electronic communication media. This
policy was ratified by the Telecommunications Act which effected other changes
that may affect the competitive environment in the local markets served by the
Company's broadcast stations.
One such change authorizes local telephone companies to provide video
programming to subscribers in their local telephone service areas either as
cable operators or over their own networks known as "open video systems." The
new law provides that a telephone company offering video programming will be
regulated according to the method of delivering programming. However, under the
law, whether the telephone company operates as a cable operator or an open video
system operator, it will be subject to must carry and retransmission consent
obligations and the Commission's rules on sports exclusivity, network
nonduplication, and syndicated exclusivity. In addition, the Telecommunications
Act requires the FCC to adopt certain additional safeguards for broadcasters
which forbid a telephone company that provides video programming from
discriminating against broadcasters in favor of an affiliated programmer in
subscriber communications and placement on any on-screen program guide or menu.
Furthermore, a telephone company video provider must ensure that broadcasters
and other copyright holders are able to identify their programming, and if such
15
<PAGE> 17
ITEM 1. BUSINESS -- CONTINUED
identifying information is carried as part of the programming signal, the
telephone company must transmit it without alteration.
The FCC has granted several applications to establish direct broadcast
satellite systems ("DBS"). Several other new technologies are in their
developmental stages, such as Digital Television capable of transmitting
television pictures with higher resolution, truer color and wider aspect ratios,
and Digital Audio Broadcasting capable of transmitting radio signals on a
terrestrial basis and by space satellites. The potential impact of these
technologies on the Company's business cannot be predicted.
The Telecommunications Act required that if the FCC issued licenses for
Digital Television (DTV) services, only incumbent broadcast licensees and
construction permit holders will be eligible initially for these licenses. Also,
the Telecommunications Act authorized the Commission to adopt regulations that
permit broadcasters to use such digital DTV spectrum for ancillary or
supplementary services, provided that such secondary services may not impair the
quality of the DTV signal and such services would be subject to a fee payable to
the U.S. Treasury. The Balanced Budget Act of 1997 (the "1997 Budget Act")
directed the FCC to reclaim the analog spectrum from existing television
stations by December 31, 2006, subject to the grant of an extension of that date
to a station under a number of specific circumstances set forth in the statute.
On April 21, 1997, the FCC issued initial DTV channel assignments and
licenses simultaneously to all eligible full-power television licensees and
issued related policies and rules. On February 17, 1998, the FCC declined to
reconsider the decision to grant initial DTV channel assignments and licenses
simultaneously to all eligible television licensees, but made adjustments in the
DTV channel assignments and related rules to address various Petitions for
Reconsideration and new test data on DTV interference characteristics. These
adjustments include revisions to the plan for recovery of spectrum after the
analog-to-digital transition is completed so that the spectrum available for DTV
broadcasting after the transition will include channels 2-6; increases in
authorized transmission power for UHF DTV stations; adoption of a de minimis
interference standard; clarification of the rules and procedures for modifying
initial DTV channel assignments and the DTV table of channel allotments; and
adoption of additional guidelines and procedures regarding the displacement of
low power television stations.
These FCC decisions are highly advantageous for incumbent television
station owners such as the Company. It ensures that the Company will not face
competing applications from the general public as it applies for its DTV
licenses in the future. However, licenses for DTV services issued to incumbent
broadcast licensees or permittees must be preconditioned with a requirement that
either the new DTV channel or the original broadcast channel be surrendered to
the FCC for reallocation or reassignment at the end of a transition period. Most
incumbent television stations, including all of the Company's stations, will
have the option of utilizing their current (NTSC) channels for DTV after the
transition.
The new FCC rules require television stations affiliated with ABC, CBS, FOX
and NBC to construct digital facilities in the ten largest television markets by
May 1, 1999. Other stations affiliated with ABC, CBS, FOX and NBC in the top 30
television markets must construct DTV facilities by November 1, 1999. All other
commercial stations must construct DTV facilities by May 1, 2002. Noncommercial
stations must construct their DTV facilities by May 1, 2003. In June, 1997, the
Company applied for DTV construction permits for stations WESH, Daytona Beach,
Florida; KOAT, Albuquerque, New Mexico; KETV, Omaha, Nebraska; and KCCI, Des
Moines, Iowa. These applications request slight modifications of the initial DTV
channel assignments to provide added coverage permitted under the new rules. The
FCC issued public notice of these applications on June 27, 1997, and they remain
pending.
LIMITATIONS ON OWNERSHIP OF THE COMPANY'S STOCK
The Communications Act prohibits the assignment or transfer of broadcasting
licenses, including the transfer of control of any corporation holding such
licenses, without the prior approval of the FCC. The Communications Act would
prohibit the Company from continuing to control broadcast licenses if, in the
absence of FCC approval, more than one-fourth of the Company's capital stock
were acquired or voted
16
<PAGE> 18
ITEM 1. BUSINESS -- CONTINUED
directly or indirectly by alien individuals, corporations, or governments, or if
it otherwise fell under alien influence or control in a manner determined by the
FCC to be contrary to the public interest.
Because of the multiple, common and cross ownership rules, if a holder of
the Company's common stock or Class B common stock acquired an attributable
interest in the Company and had an attributable interest in other broadcast
stations, a cable television operation or a daily newspaper, there could be a
violation of FCC regulations depending upon the number and location of the other
broadcasting stations, cable television operations or daily newspapers
attributable to such holder.
The information contained under this heading does not purport to be a
complete summary of all the provisions of the Communications Act and the rules
and regulations of the FCC thereunder or of pending proposals for the other
regulation of broadcasting and related activities. For a complete statement of
such provisions, reference is made to the Communications Act, to such rules and
regulations and to such pending proposals.
EMPLOYEES
At December 31, 1997, the Company had approximately 3,500 full-time
employees, of whom approximately 2,200 were engaged in publishing and 1,300 in
broadcasting. In St. Louis, a majority of the approximately 1,200 full-time
employees engaged in publishing are represented by unions. In addition, certain
employees of the broadcasting segment, PCN and TNI Partners are represented by
unions. The Company considers its relationship with its employees to be good.
17
<PAGE> 19
ITEM 2. PROPERTIES
The corporate headquarters of the Company is located at 900 North Tucker
Boulevard, Saint Louis, Missouri. The general character, location and
approximate size of the principal physical properties used by the Company at
December 31, 1997, are set forth below. Leases on the properties indicated as
leased by the Company expire at various dates through July 2012.
The Company believes that all of its owned and leased properties are in
good condition, well maintained and adequate for its current and immediately
foreseeable operating needs. The Company, however, currently has a building
project in process to address the long-term operating requirements of its
Louisville broadcasting property.
<TABLE>
<CAPTION>
APPROXIMATE AREA IN
SQUARE FEET
GENERAL CHARACTER --------------------
OF PROPERTY OWNED LEASED
----------------- ----- ------
<S> <C> <C>
Publishing:
Printing plants, business and editorial offices, and
warehouse space located in:
St. Louis, Missouri(1)................................. 579,500 138,700
St. Louis, Missouri.................................... 5,600
Tucson, Arizona(2)..................................... 265,000 41,800
Washington, D.C........................................ 2,250
Provo, Utah............................................ 22,900
Flagstaff, Arizona..................................... 23,200
DeKalb, Illinois....................................... 15,900
Santa Maria, California................................ 20,800
Napa, California....................................... 21,000
Hanford, California.................................... 16,500 3,600
Lihue, Hawaii.......................................... 8,500 20,900
Coos Bay, Oregon....................................... 15,200
Park Hills, Missouri................................... 9,100
Haverhill, Massachusetts............................... 24,500
Rhinelander, Wisconsin................................. 6,400
Hamilton, Montana...................................... 2,900
Petaluma, California................................... 9,000
Farmington, Missouri................................... 11,800
Fredericktown, Missouri................................ 1,800 650
Broadcasting:
Business offices, studios, garages and transmitters
located in:
St. Louis, Missouri.................................... 5,300
Albuquerque, New Mexico................................ 39,700 9,200
Omaha, Nebraska........................................ 37,900 600
Lancaster, Pennsylvania................................ 55,200 2,200
Winston-Salem, North Carolina.......................... 41,100 600
Greenville, South Carolina............................. 53,600 2,300
Louisville, Kentucky................................... 22,500
New Orleans, Louisiana................................. 50,500
Phoenix, Arizona....................................... 23,500
Orlando, Florida....................................... 61,300 1,300
Daytona Beach, Florida................................. 28,100
Des Moines, Iowa....................................... 53,350
</TABLE>
- -------------------------
(1) Property is subject to the provisions of the St. Louis Agency Agreement.
(2) The 265,000 square foot facility in Tucson, Arizona, is used in the
production of the Star and the Citizen and is jointly owned with Gannett
pursuant to the Tucson Agency.
18
<PAGE> 20
ITEM 3. LITIGATION
Subsequent to the Scripps League acquisition, Barry H. Scripps commenced an
action against Edward W. Scripps, Betty Knight Scripps and Pulitzer Community
Newspapers, Inc. Barry H. Scripps is the child of Edward W. Scripps and Betty
Knight Scripps. Barry Scripps alleges that as a former minority shareholder and
executive employee of Scripps League, the defendant Betty Knight Scripps formed
and implemented a wrongful scheme to transfer the ownership of Scripps League
outside the Scripps family in violation of the Scripps League corporate mission
by (1) inducing the defendant Edward W. Scripps to breach their life-long
promises to Barry Scripps to retain the ownership of Scripps League Newspapers
in the family and ultimately turn over its management and control to Barry
Scripps; (2) engineering an unlawful freeze-out of Barry Scripps as a minority
shareholder from Scripps League and its subsidiaries; and (3) tortiously causing
Scripps League to breach its promise to Barry Scripps of permanent employment.
The claims asserted are for breach of promise against Edward W. Scripps and
Betty Knight Scripps, breach of employment contract against Pulitzer Community
Newspapers, Inc. as successor to Scripps League, interference with contract
against Betty Knight Scripps, breach of fiduciary duty against Betty Knight
Scripps, and promissory estoppel against Edward W. and Betty Knight Scripps.
Barry Scripps seeks (1) money damages, together with interest and counsel fees
in the amount to be proven at trial against Edward and Betty Scripps; (2)
judgment rescinding each of the actions that Betty Knight Scripps caused to be
taken that allegedly froze out Barry Scripps as a stockholder in Scripps League;
and (3) damages against Pulitzer Community Newspapers, Inc. for loss of income
plus interest and counsel fees in an amount to be proven at trial for breach of
the purported employment agreement. The Sellers agreed to indemnify the Company
and its affiliates, officers, directors, stockholders, employees, agents,
successors and assigns at all times after the closing for any and all losses
arising from Barry Scripps' claims. On January 8, 1997, the defendants filed
their answers to the complaint in the Action. On January 11, 1997, the Court
entered an order for entry of a Judgment Nisi dismissing the complaint for want
of jurisdictional amount. The Court's judgment noted that the facts on which
Barry Scripps relies to determine money damages present no reasonable likelihood
that recovery will exceed $25,000.00, the Court's minimum jurisdictional amount,
and that a final judgment of dismissal would be entered fourteen days from the
entry of the Judgment Nisi, subject to the right of the parties to file written
responses and request a further hearing. On January 29, 1997, Barry Scripps
filed a written response opposing the Judgment Nisi and requested a hearing on
the issues presented. On February 4, 1997, defendants filed their response in
support of the entry of the Judgment Nisi. On March 26, 1997, the Court declined
to enter an order granting the Judgment Nisi. On October 29, 1997, the
defendants' motion for summary judgment was submitted to the Court. That motion
is under consideration.
The Company becomes 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. In addition, the Company is involved from time to time in
various governmental and administrative proceedings relating, among other
things, to renewal of broadcast licenses.
While the results of litigation cannot be predicted, management believes
the ultimate outcome of such litigation will not have a material adverse effect
on the consolidated financial statements of the Company and its subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
19
<PAGE> 21
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's common stock is listed and traded on the New York Stock
Exchange under the symbol "PTZ."
At March 20, 1998, there were approximately 394 record holders of the
Company's common stock and 2 record holders of its Class B common stock.
The following table sets forth the range of high and low sales prices and
dividends paid for each quarterly period in the past two years:
<TABLE>
<CAPTION>
1997(2) HIGH LOW DIVIDEND(1)
------- ---- --- -----------
<S> <C> <C> <C>
First Quarter...................................... $50.63 $43.38 $0.1300
Second Quarter..................................... 54.25 40.88 0.1300
Third Quarter...................................... 57.50 49.75 0.1300
Fourth Quarter..................................... 63.31 51.81 0.1300
</TABLE>
<TABLE>
<CAPTION>
1996(2) HIGH LOW DIVIDEND(1)
------- ---- --- -----------
<S> <C> <C> <C>
First Quarter...................................... $39.00 $33.38 $0.1125
Second Quarter..................................... 45.19 39.00 0.1125
Third Quarter...................................... 45.56 38.72 0.1125
Fourth Quarter..................................... 49.63 42.75 0.1200
</TABLE>
- -------------------------
(1) In 1997 and 1996, the Company paid cash dividends of $0.5200 and $0.4575
respectively, per share of common stock and Class B common stock (see Note 5
of Notes to Consolidated Financial Statements for restrictions on
dividends).
(2) The high and low sales prices and dividends per share have been restated for
1996 to reflect the impact of a four-for-three stock split, effected in the
form of a 33 1/3 percent common and Class B common stock dividend, declared
by the Company's Board of Directors on September 12, 1996.
20
<PAGE> 22
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Operating Revenues -- net................. $584,985 $534,088 $472,327 $485,579 $426,985
-------- -------- -------- -------- --------
Operating Expenses:
Operations.............................. 214,935 205,885 190,013 191,570 180,998
Selling, general and administrative..... 190,429 172,838 155,996 174,239 163,578
St. Louis Agency adjustment............. 19,450 13,972 12,502 14,706 10,660
Depreciation and amortization........... 36,454 31,102 27,150 30,486 23,792
-------- -------- -------- -------- --------
Total operating expenses............. 461,268 423,797 385,661 411,001 379,028
-------- -------- -------- -------- --------
Operating income.......................... 123,717 110,291 86,666 74,578 47,957
Interest income........................... 4,652 4,522 5,203 1,971 1,090
Interest expense.......................... (16,081) (13,592) (10,171) (12,009) (9,823)
Gain on sale of publishing property....... 2,791
Net other expense......................... (1,203) (5,449) (2,330) (1,461) (1,011)
-------- -------- -------- -------- --------
Income before provision for income taxes
and cumulative effects of changes in
accounting principles................... 111,085 95,772 79,368 65,870 38,213
Provision for income taxes................ 45,057 38,272 30,046 25,960 15,260
-------- -------- -------- -------- --------
Income before cumulative effects of
changes in accounting principles........ 66,028 57,500 49,322 39,910 22,953
Cumulative effects of changes in
accounting principles, net of applicable
income taxes............................ (719) 360
-------- -------- -------- -------- --------
Net income................................ $ 66,028 $ 57,500 $ 49,322 $ 39,191 $ 23,313
======== ======== ======== ======== ========
Basic Earnings Per Share of Stock:
Earnings (loss) per share of stock:(1)
Income before cumulative effects of
changes in accounting
principles...................... $ 2.99 $ 2.62 $ 2.26 $ 1.84 $ 1.13
Cumulative effects of changes in
accounting principles........... (0.03) 0.02
-------- -------- -------- -------- --------
Basic Earnings Per Share.................. $ 2.99 $ 2.62 $ 2.26 $ 1.81 $ 1.15
======== ======== ======== ======== ========
Weighted average number of shares
outstanding -- Basic(1)................. 22,110 21,926 21,800 21,655 20,371
======== ======== ======== ======== ========
Diluted Earnings Per Share of Stock:
Earnings (loss) per share of stock:(1)
Income before cumulative effects of
changes in accounting
principles...................... $ 2.94 $ 2.58 $ 2.23 $ 1.83 $ 1.11
Cumulative effects of changes in
accounting principles........... (0.03) 0.02
-------- -------- -------- -------- --------
Diluted Earnings Per Share................ $ 2.94 $ 2.58 $ 2.23 $ 1.80 $ 1.13
======== ======== ======== ======== ========
Weighted average number of shares
outstanding -- Diluted(1)............... 22,452 22,273 22,097 21,822 20,609
======== ======== ======== ======== ========
Dividends per share of common and Class B
Common stock(1)......................... $ 0.52 $ 0.46 $ 0.41 $ 0.35 $ 0.32
======== ======== ======== ======== ========
OTHER DATA
Cash and cash equivalents................. $ 62,749 $ 73,052 $100,380 $ 77,084 $ 34,970
Working capital........................... 99,322 95,330 128,853 96,729 60,688
Total assets(2)........................... 682,956 683,851 495,073 468,312 461,618
Long-term debt, less current
maturities(3)........................... 172,705 235,410 114,500 128,750 161,920
Stockholders' equity(4)................... 310,777 249,937 198,771 155,019 122,143
</TABLE>
21
<PAGE> 23
ITEM 6. SELECTED FINANCIAL DATA -- CONTINUED
- -------------------------
(1) Shares outstanding, dividends per share and earnings per share have been
adjusted for the Company's four-for-three stock split, on September 12,
1996, five-for-four stock split, on January 4, 1995 and 10 percent stock
dividend on January 4, 1993.
(2) On July 1, 1996, the Company acquired Scripps League Newspapers, Inc.
("Scripps League") for approximately $216 million. During 1993 the Company
acquired television stations WESH and KCCI for approximately $164.7 million.
(3) As of December 31, 1996, approximately $135 million of new long-term debt
financing was outstanding related to the acquisition of Scripps League on
July 1, 1996. As of December 31, 1993, approximately $118.6 million of new
long-term debt financing was outstanding related to the acquisition of WESH
and KCCI during 1993.
(4) On July 9, 1993, the Company sold 1.35 million shares of common stock in a
public offering. The $37 million in net proceeds from the offering was used
to partially finance the acquisition of WESH and KCCI in 1993.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Statements in this Annual Report on Form 10-K 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 Annual Report on Form 10-K.
GENERAL
The Company's operating revenues are significantly influenced by a number
of factors, including overall advertising expenditures, the appeal of
newspapers, television and radio in comparison to other forms of advertising,
the performance of the Company in comparison to its competitors in specific
markets, the strength of the national economy and general economic conditions
and population growth in the markets served by the Company.
The Company's business tends to be seasonal, with peak revenues and profits
generally occurring in the fourth and, to a lesser extent, second quarters of
each year as a result of increased advertising activity during the Christmas and
spring holiday periods. The first quarter is historically the weakest quarter
for revenues and profits.
RECENT EVENTS
The Company is currently exploring potential strategic alternatives
relating to its broadcasting division, including the potential sale of that
division, among other possibilities. However, at this point the Company has not
entered into any agreement, and there can be no assurance that any agreement
will be reached. The Company decided to explore potential alternatives for the
broadcasting business for various strategic and financial reasons, including the
current strength of and consolidation in the radio and television market. The
Company intends to continue to own and operate its newspaper properties.
22
<PAGE> 24
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- CONTINUED
1997 COMPARED WITH 1996
CONSOLIDATED
Operating revenues for the year ended December 31, 1997 increased 9.5
percent to $585 million from $534.1 million in 1996. The revenue comparison was
affected by the acquisition of Scripps League Newspapers, Inc. ("Scripps League"
which was subsequently renamed Pulitzer Community Newspapers, Inc. ("PCN")) on
July 1, 1996. On a comparable basis, excluding PCN from the first six months of
1997, consolidated revenues increased 3.2 percent. The increase reflected gains
in both publishing and broadcasting revenues.
Operating expenses, excluding the St. Louis Agency adjustment, were $441.8
million compared to $409.8 million in 1996, an increase of 7.8 percent. Prior
year operating expenses included approximately $1.8 million of non-recurring
costs related to the acquisition of Scripps League. On a comparable basis,
excluding PCN from the first six months of 1997 and the non-recurring costs from
1996, operating expenses increased 1.4 percent. Major increases in comparable
expenses were overall personnel costs of $10.9 million, circulation distribution
expenses of $1.5 million and promotion expenses of $1.3 million. Partially
offsetting these increases were declines in newsprint expense of $6.0 million
and purchased supplements of $3.1 million.
Operating income for fiscal 1997 increased 12.2 percent to $123.7 million
from $110.3 million in 1996. On a comparable basis, excluding PCN from the first
six months of 1997 and the non-recurring costs from 1996, operating income
increased 5.6 percent. The 1997 increase reflected improvements in publishing
segment profits.
Interest expense increased $2.5 million in 1997 compared to 1996 due to
higher average debt levels in 1997. The Company's average debt level for 1997
increased to $220 million from $186.9 million in the prior year due to new
long-term borrowings related to the July 1, 1996 acquisition of Scripps League.
The Company's average interest rate for 1997 was unchanged from the prior year
rate of 7.3 percent.
The effective income tax rate for 1997 increased to 40.6 percent from 40
percent in the prior year, due to an additional $2.1 million of nondeductible
goodwill amortization related to the Scripps League acquisition. The Company
expects its effective tax rate for 1998 to be similar to its 1997 rate.
Net other expense (non-operating) decreased $4.2 million in 1997 compared
to 1996. The decrease resulted from a 1996 non-recurring charge of approximately
$2.7 million for the write-down in value of a joint venture investment and lower
joint venture losses in 1997.
For the year ended December 31, 1997, the Company reported net income of
$66 million, or $2.99 per share, compared with net income of $57.5 million, or
$2.62 per share, in the prior year. Comparability of the earnings results was
affected by the joint venture write-off in 1996 ($1.6 million after-tax) and
non-recurring costs related to the Scripps League acquisition ($1.1 million
after-tax) in 1996. Excluding the non-recurring items from 1996, 1997 net income
would have increased 9.5 percent to $66 million, or $2.99 per share, from $60.3
million, or $2.74 per share, for the prior year. The gain in net income
reflected increased publishing profits, resulting primarily from higher
advertising revenue and lower newsprint costs.
PUBLISHING
Operating revenues from the Company's publishing segment for 1997 increased
15.8 percent to $358 million from $309.1 million in 1996. On a comparable basis,
excluding PCN from the first six months of 1997, publishing revenues increased
4.9 percent. The comparable increase reflected higher advertising revenues in
1997.
Newspaper advertising revenues, on a comparable basis, increased $13.8
million, or 7.2 percent, in 1997. A significant portion of the current year
increase resulted from higher classified and retail advertising revenue at both
the St. Louis Post-Dispatch ("Post-Dispatch") and The Arizona Daily Star
("Star"). Full run
23
<PAGE> 25
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- CONTINUED
advertising volume (linage in inches) increased 0.4 percent at the Post-Dispatch
and 3.8 percent at Star for 1997. Varying rate increases were implemented at the
Post-Dispatch and most of the Pulitzer Community Newspaper properties in the
first quarter of 1997 while Star increased advertising rates in the fourth
quarters of 1996 and 1997.
Circulation revenues, on a comparable basis, decreased approximately
$390,000, or 0.5 percent, in 1997. The decline reflected slight fluctuations in
paid circulation and average rates at the Post-Dispatch and Star in 1997
compared to the prior year.
Other publishing revenues, on a comparable basis, increased $1.8 million,
or 5.1 percent, in 1997, resulting primarily from higher preprint revenue at the
Post-Dispatch.
Operating expenses (including selling, general and administrative expenses
and depreciation and amortization) for the publishing segment, excluding the St.
Louis Agency adjustment, increased to $291 million in 1997 from $262.5 million
in 1996, an increase of 10.8 percent. On a comparable basis, excluding PCN from
the first six months of 1997 and the non-recurring costs from 1996, operating
expenses increased 0.8 percent. Major increases in comparable expenses were
overall personnel costs of $7.4 million, promotion expense of $1.6 million, and
circulation distribution expenses of $1.5 million. Partially offsetting these
increases were declines in newsprint expense of $6 million and purchased
supplement costs of $3.1 million.
Operating income from the Company's publishing activities increased 45.9
percent to $47.5 million in 1997 from $32.6 million in 1996. On a comparable
basis, excluding PCN from the first six months of 1997 and the non-recurring
costs from 1996, operating income from the publishing segment increased 22.7
percent. The increase resulted primarily from higher advertising revenues and
lower newsprint costs.
Fluctuations in the price of newsprint significantly impact the results of
the Company's publishing segment, where newsprint expense accounts for
approximately 20 percent of the segment's total operating costs. During the
first three quarters of 1997, the publishing segment benefited from newsprint
prices below prior year levels. However, as a result of 1997 price increases and
declining prices in late 1996, the Company's 1997 fourth quarter newsprint
expense increased over the comparable prior year period. For the full year of
1997, the Company's newsprint cost and metric tons consumed, after giving effect
to the St. Louis Agency adjustment, were approximately $36.5 million and 64,600
tons respectively. During the first quarter of 1998, the Company's average cost
per metric ton for newsprint has been in the range of $600, above prior year
levels. In addition, the Company has been informed by some of its suppliers of a
plan to increase the price of newsprint by approximately $40 per metric ton
during the second quarter of 1998.
BROADCASTING
Broadcasting operating revenues for 1997 increased 0.9 percent to $227
million from $225 million in 1996. For the year, a 1.6 percent increase in
national spot advertising and a 6.1 percent increase in network compensation
were partially offset by a 0.5 percent decline in local spot advertising. The
modest increases in current year advertising revenues reflect the impact of
decreased political advertising of approximately $12 million in 1997. In
addition, the Company's five NBC affiliated television stations benefited from
significant Olympic related advertising in the prior year third quarter.
Broadcasting operating expenses (including selling, general and
administrative expenses and depreciation and amortization) increased 2.2 percent
to $144.8 million in 1997 from $141.7 million in 1996. The increase was
attributable to higher overall personnel costs of $3.2 million and higher
depreciation and amortization of $1 million. These increases were partially
offset by decreases in program rights costs of $493,000, promotion costs of
$333,000 and license fees of $246,000.
24
<PAGE> 26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- CONTINUED
Operating income from the broadcasting segment in 1997 decreased 1.3
percent to $82.2 million from $83.2 million in the prior year. The 1997 decrease
reflected the modest overall revenue gain, resulting primarily from the effect
of significant political and Olympic related advertising revenue in the prior
year.
1996 COMPARED WITH 1995
CONSOLIDATED
Operating revenues for the year ended December 31, 1996 increased 13.1
percent to $534.1 million from $472.3 million in 1995. The revenue comparison
was affected by the acquisition of Scripps League Newspapers, Inc. ("Scripps
League" which was subsequently renamed Pulitzer Community Newspapers, Inc.
("PCN")) on July 1, 1996. In addition, the revenue comparison was affected by an
extra week of operations in 1995; fiscal 1995 contained 53 weeks, versus 52
weeks in fiscal 1996. On a comparable basis (i.e., excluding PCN from 1996 and
the extra week from 1995), consolidated revenues increased 7.6 percent. The
increase reflected gains in both broadcasting and publishing revenues.
Operating expenses, excluding the St. Louis Agency adjustment, were $409.8
million compared to $373.2 million in 1995, an increase of 9.8 percent. On a
comparable basis, excluding PCN from 1996 and the extra week from 1995,
operating expenses increased 3.2 percent. Major increases in comparable expenses
were overall personnel costs of $5.2 million, promotion expenses of $1.2
million, national advertising commissions of $951,000 and circulation
distribution expenses of $611,000. Partially offsetting these increases were
declines in newsprint expense of $1.1 million and inducement costs of $798,000.
Operating income for fiscal 1996 increased 27.3 percent to $110.3 million
from $86.7 million in 1995. On a comparable basis, excluding PCN from 1996 and
the extra week from 1995, operating income increased 25.9 percent. The 1996
increase reflected improvements in both the broadcasting and publishing
segments, resulting from increased revenues.
Interest expense increased $3.4 million in 1996 compared to 1995 due to
higher debt levels in the second half of 1996. New long-term borrowings related
to the acquisition of Scripps League added approximately $4.8 million to 1996
interest expense. The Company's average debt level for 1996 increased to $186.9
million from $133.2 million in the prior year. The Company's average interest
rate for 1996 decreased slightly to 7.3 percent from 7.5 percent in the prior
year. Interest income for the year decreased $681,000, due to both lower average
balances of invested funds and lower interest rates in 1996.
The effective income tax rate for 1996 increased to 40 percent from 37.9
percent in the prior year, due to approximately $2.1 million of nondeductible
goodwill amortization related to the Scripps League acquisition. The prior year
rate was affected by the settlement of a state tax examination which reduced
income tax expense by $911,000 in 1995. Excluding the non-recurring tax
settlement from the prior year, the effective income tax rate for 1995 would
have been 39 percent.
The Company's 1996 non-operating expenses included a non-recurring charge
of approximately $2.7 million ($1.6 million after-tax) for the write-down in
value of a joint venture investment.
For the year ended December 31, 1996, the Company reported net income of
$57.5 million, or $2.62 per share, compared with net income of $49.3 million, or
$2.26 per share, in the prior year. Comparability of the earnings results was
affected by the joint venture write-off in 1996, non-recurring costs related to
the Scripps League acquisition ($1.1 million after tax) in 1996, and the
positive income tax adjustment in 1995. Excluding the non-recurring items from
both years, 1996 net income would have increased to $60.3 million, or $2.74 per
share, from $48.4 million, or $2.22 per share, for the prior year. The gain in
net income reflected a significant increase in the broadcasting segment's
operating profits.
25
<PAGE> 27
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- CONTINUED
PUBLISHING
Operating revenues from the Company's publishing segment for 1996 increased
14.7 percent to $309.1 million from $269.4 million in 1995. On a comparable
basis, excluding PCN from 1996 and the extra week from 1995, publishing revenues
increased 3.5 percent. The comparable increase reflected higher advertising
revenues in 1996.
Newspaper advertising revenues, on a comparable basis, excluding PCN from
1996 and the extra week from 1995, increased $9.5 million, or 6 percent, in
1996. The significant portion of the current year increase resulted from higher
classified advertising revenue at the St. Louis Post-Dispatch ("Post-Dispatch").
Increases in advertising rates for most categories and higher volume for zoned
advertising were the primary factors in the 1996 revenue increase. In the fourth
quarter of 1996 and the first quarter of 1997, varying rate increases were
implemented at the Post-Dispatch, The Arizona Daily Star ("Star") and most of
the Company's new community newspaper properties.
Circulation revenues, on a comparable basis, excluding PCN from 1996 and
the extra week from 1995, increased approximately $100,000, or 0.2 percent, in
1996. The Post-Dispatch and Star experienced only slight fluctuations in paid
circulation and average rates in 1996 compared to the prior year.
Operating expenses (including selling, general and administrative expenses
and depreciation and amortization) for the publishing segment, excluding the St.
Louis Agency adjustment, increased to $262.5 million in 1996 from $231.5 million
in 1995, an increase of 13.4 percent. On a comparable basis, excluding PCN from
1996 and the extra week from 1995, operating expenses increased 2.1 percent.
Major increases in comparable expenses were promotion expense of $1.5 million,
circulation distribution expenses of $611,000 and overall personnel costs of
$574,000. Partially offsetting these increases were declines in newsprint
expense of $1.1 million and inducement costs of $798,000.
Operating income from the Company's publishing activities increased 28.3
percent to $32.6 million in 1996 from $25.4 million in 1995. On a comparable
basis, excluding PCN from 1996 and the extra week from 1995, operating income
from the publishing segment increased 12 percent. The increase resulted from
higher advertising revenues on a comparable basis.
BROADCASTING
Broadcasting operating revenues for 1996 increased 10.9 percent to $225
million from $202.9 million in 1995. On a comparable basis, excluding the extra
week from 1995, operating revenues increased 12.9 percent. Local spot
advertising increased 14.2 percent and national spot advertising increased 14.7
percent. The current year increases reflected strong Olympic-related advertising
at the Company's five NBC affiliated stations and significant political
advertising of $13.2 million, an increase of $10.3 million.
Broadcasting operating expenses (including selling, general and
administrative expenses and depreciation and amortization) increased 3.5 percent
to $141.7 million in 1996 from $137 million in 1995. On a comparable basis,
excluding the extra week from 1995, operating expenses increased 4.5 percent.
This increase was primarily attributable to higher overall personnel costs of
$4.2 million and higher national advertising commissions of $951,000.
Operating income from the broadcasting segment in 1996 increased 26.2
percent to $83.2 million from $65.9 million in the prior year. On a comparable
basis, excluding the extra week from 1995, operating income from the
broadcasting segment increased 30.9 percent. The 1996 gain resulted from the
significant increases in both local and national advertising revenues.
LIQUIDITY AND CAPITAL RESOURCES
Outstanding debt, inclusive of the short-term portion of long-term debt, as
of December 31, 1997, was $185.4 million, compared with $250.1 million at
December 31, 1996. The decrease in the outstanding debt
26
<PAGE> 28
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- CONTINUED
balance reflects the final repayment of $14.5 million under the Company's 8.8
percent Senior Note Agreement which matured in 1997 and the repayment of $50
million of credit agreement borrowings with The First National Bank of Chicago,
as Agent, for a group of lenders ("FNBC"). Although, the FNBC credit agreement
borrowings were repaid during 1997, the $50 million line of credit remains
available to the Company through June, 2001. As of December 31, 1997, the
Company's outstanding debt balance consists primarily of fixed-rate senior notes
with The Prudential Insurance Company of America ("Prudential").
The Company's Senior Note Agreements with Prudential and FNBC Credit
Agreement require it to maintain certain financial ratios, place restrictions on
the payment of dividends and prohibit new borrowings, except as permitted
thereunder.
As of December 31, 1997, commitments for capital expenditures were
approximately $13.8 million, relating to normal capital equipment replacements
and the cost of a building project at the Louisville broadcasting property.
Commitments for film contracts and license fees as of December 31, 1997 were
approximately $30 million. In addition, as of December 31, 1997, the Company had
unfunded capital contribution commitments of approximately $13.9 million related
to investments in three limited partnerships.
At December 31, 1997, the Company had working capital of $99.3 million and
a current ratio of 2.32 to 1. This compares to working capital of $95.3 million
and a current ratio of 2.24 to 1 at December 31, 1996.
The Company from time to time considers acquisitions of properties when
favorable investment opportunities are identified. Currently, the Company has no
agreements to acquire additional properties. In the event an investment
opportunity is identified, management expects that it would be able to arrange
financing 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.
INFORMATION SYSTEMS AND THE YEAR 2000
The Year 2000 Issue is the result of information systems being designed
using two digits rather than four 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, the Company initiated the process of preparing its information
systems and applications for the Year 2000. For the Company, this process
involves the replacement of aging hardware and software to address most of its
Year 2000 issues. A significant portion of the Company's information systems
were scheduled to be replaced during the next few years, regardless of the Year
2000 Issue. The Company plans to have substantially all of the system and
application changes completed by March 31, 1999.
The Company expects to incur internal staff costs as well as consulting and
other expenditures to install new information systems and modify existing
systems during the next twelve to fifteen months. The remaining cost of the
Company's Year 2000 project is estimated at approximately $16.1 million, of
which approximately $15.8 million represents the cost of new hardware and
software to be capitalized. These expenditures have been considered in the
Company's normal capital budgeting process and will be funded through operating
cash flows. The remaining maintenance & modification costs (approximately
$300,000) will be expensed as incurred.
27
<PAGE> 29
DIGITAL TELEVISION
The company is required to construct digital television facilities for its
Orlando television station, WESH. The station must be broadcasting digitally by
November 1, 1999 in order to comply with Federal Communications Commission
("FCC") rules. The deadline for constructing digital facilities at the remainder
of the Company's television stations is May 1, 2002. The Company is currently
considering available options to comply with the FCC's timetable and expects
that capital expenditures required over the next several years to construct
digital facilities will be funded through normal operating cash flows.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of Pulitzer Publishing
Company and Subsidiaries are filed as part of this report. Supplementary
unaudited data with respect to the quarterly results of operations of the
Company are set forth in the Notes to Consolidated Financial Statements.
PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
Independent Auditors' Report
Statements of Consolidated Income for each of the Three Years in the Period
Ended December 31, 1997
Statements of Consolidated Financial Position at December 31, 1997 and 1996
Statements of Consolidated Stockholders' Equity for each of the Three Years
in the Period Ended December 31, 1997
Statements of Consolidated Cash Flows for each of the Three Years in the
Period Ended December 31, 1997
Notes to Consolidated Financial Statements for the Three Years in the
Period Ended December 31, 1997
28
<PAGE> 30
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Pulitzer Publishing Company:
We have audited the accompanying statements of consolidated financial
position of Pulitzer Publishing Company and subsidiaries as of December 31, 1997
and 1996, and the related consolidated statements of income, stockholders'
equity, and cash flows for each of the three years in the period ended December
31, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these 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 the 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, such consolidated financial statements present fairly, in
all material respects, the financial position of the companies at December 31,
1997 and 1996, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Saint Louis, Missouri
February 6, 1998
(February 27, 1998 as to the last
paragraph of Note 3)
29
<PAGE> 31
PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1997 1996 1995
---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
OPERATING REVENUES -- NET:
Publishing:
Advertising............................................ $227,817 $191,939 $161,932
Circulation............................................ 87,611 81,434 76,349
Other.................................................. 42,541 35,723 31,107
Broadcasting.............................................. 227,016 224,992 202,939
-------- -------- --------
Total operating revenues.......................... 584,985 534,088 472,327
-------- -------- --------
OPERATING EXPENSES:
Publishing operations..................................... 145,730 139,259 125,811
Broadcasting operations................................... 69,205 66,626 64,202
Selling, general and administrative....................... 190,429 172,838 155,996
St. Louis Agency adjustment (Note 2)...................... 19,450 13,972 12,502
Depreciation and amortization............................. 36,454 31,102 27,150
-------- -------- --------
Total operating expenses.......................... 461,268 423,797 385,661
-------- -------- --------
Operating income.......................................... 123,717 110,291 86,666
Interest income........................................... 4,652 4,522 5,203
Interest expense.......................................... (16,081) (13,592) (10,171)
Net other expense......................................... (1,203) (5,449) (2,330)
-------- -------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES.................... 111,085 95,772 79,368
PROVISION FOR INCOME TAXES (Note 8)......................... 45,057 38,272 30,046
-------- -------- --------
NET INCOME.................................................. $ 66,028 $ 57,500 $ 49,322
======== ======== ========
BASIC EARNINGS PER SHARE OF STOCK (Note 11):
Earnings per share........................................ $2.99 $2.62 $2.26
======== ======== ========
Weighted average number of shares outstanding............. 22,110 21,926 21,800
======== ======== ========
DILUTED EARNINGS PER SHARE OF STOCK (Note 11):
Earnings per share........................................ $2.94 $2.58 $2.23
======== ======== ========
Weighted average number of shares outstanding............. 22,452 22,273 22,097
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE> 32
PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 62,749 $ 73,052
Trade accounts receivable (less allowance for doubtful
accounts of $2,411 and $2,576).......................... 85,882 80,010
Inventory................................................. 5,265 4,976
Prepaid expenses and other................................ 12,847 5,650
Program rights............................................ 7,866 8,452
--------- ---------
Total current assets.................................. 174,609 172,140
--------- ---------
PROPERTIES:
Land...................................................... 16,154 14,692
Buildings................................................. 84,215 78,733
Machinery and equipment................................... 225,113 209,854
Construction in progress.................................. 7,324 2,071
--------- ---------
Total................................................. 332,806 305,350
Less accumulated depreciation............................. 170,992 149,418
--------- ---------
Properties -- net..................................... 161,814 155,932
--------- ---------
INTANGIBLE AND OTHER ASSETS:
Intangible assets -- net of applicable amortization (Notes
3 and 4)................................................ 287,617 298,305
Receivable from The Herald Company (Notes 2 and 7)........ 39,733 39,955
Other..................................................... 19,183 17,519
--------- ---------
Total intangible and other assets..................... 346,533 355,779
--------- ---------
TOTAL.............................................. $ 682,956 $ 683,851
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable.................................... $ 16,158 $ 13,355
Current portion of long-term debt (Note 5)................ 12,705 14,705
Salaries, wages and commissions........................... 15,232 14,897
Income taxes payable...................................... 3,070 1,267
Program contracts payable................................. 7,907 8,916
Interest payable.......................................... 5,677 7,177
Pension obligations (Note 6).............................. 348 2,123
Acquisition payable....................................... 9,804 9,804
Other..................................................... 4,386 4,566
--------- ---------
Total current liabilities............................. 75,287 76,810
--------- ---------
LONG-TERM DEBT (Note 5)..................................... 172,705 235,410
--------- ---------
PENSION OBLIGATIONS (Note 6)................................ 26,709 23,415
--------- ---------
POSTRETIREMENT AND POSTEMPLOYMENT BENEFIT OBLIGATIONS (Note
7)........................................................ 91,906 92,252
--------- ---------
OTHER LONG-TERM LIABILITIES................................. 5,572 6,027
--------- ---------
COMMITMENTS AND CONTINGENCIES (Note 12).....................
STOCKHOLDERS' EQUITY (Note 9):
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 -- 6,797,895 in 1997 and 6,498,215 in
1996.................................................... 68 65
Class B common stock, convertible, $.01 par value;
50,000,000 shares authorized; issued -- 27,125,247 in
1997 and 27,214,842 in 1996............................. 271 272
Additional paid-in capital................................ 135,542 129,173
Retained earnings......................................... 362,828 308,283
--------- ---------
Total................................................. 498,709 437,793
Treasury stock -- at cost; 24,660 and 22,811 shares of
common stock in 1997 and 1996, respectively, and
11,700,850 shares of Class B common stock in 1997 and
1996.................................................... (187,932) (187,856)
--------- ---------
Total stockholders' equity............................ 310,777 249,937
--------- ---------
TOTAL.............................................. $ 682,956 $ 683,851
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
31
<PAGE> 33
PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CLASS B ADDITIONAL TOTAL
COMMON COMMON PAID-IN RETAINED TREASURY STOCKHOLDERS'
STOCK STOCK CAPITAL EARNINGS STOCK EQUITY
------ ------- ---------- -------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1995.................. $44 $206 $122,070 $220,322 $(187,623) $155,019
Issuance of common stock grants............ 218 218
Common stock options exercised............. 2 2,327 2,329
Conversion of Class B common stock to
common stock............................. 1 (1)
Tax benefit from stock options exercised... 924 924
Net income................................. 49,322 49,322
Cash dividends declared and paid $.41 per
share of common and Class B common....... (8,828) (8,828)
Purchase of treasury stock................. (213) (213)
--- ---- -------- -------- --------- --------
BALANCES AT DECEMBER 31, 1995................ 47 205 125,539 260,816 (187,836) 198,771
Issuance of common stock grants............ 76 76
Common stock options exercised............. 1 2,166 2,167
Conversion of Class B common stock to
common stock............................. 1 (1)
Tax benefit from stock options exercised... 1,476 1,476
Net income................................. 57,500 57,500
Cash dividends declared and paid $.46 per
share of common and Class B common....... (10,033) (10,033)
Purchase of treasury stock................. (20) (20)
Four for three stock split in the form of a
33.3 percent stock dividend (Note 9)..... 16 68 (84)
--- ---- -------- -------- --------- --------
BALANCES AT DECEMBER 31, 1996................ 65 272 129,173 308,283 (187,856) 249,937
Issuance of common stock grants............ 70 70
Common stock options exercised............. 2 3,297 3,299
Conversion of Class B common stock to
common stock............................. 1 (1)
Common stock issued under Employee Stock
Purchase Plan............................ 322 322
Tax benefit from stock options exercised... 2,680 2,680
Net income................................. 66,028 66,028
Cash dividends declared and paid $.52 per
share of common and Class B common....... (11,483) (11,483)
Purchase of treasury stock................. (76) (76)
--- ---- -------- -------- --------- --------
BALANCES AT DECEMBER 31, 1997................ $68 $271 $135,542 $362,828 $(187,932) $310,777
=== ==== ======== ======== ========= ========
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCK CLASS B COMMON STOCK
----------------------- -----------------------
HELD IN HELD IN
ISSUED TREASURY ISSUED TREASURY
------ -------- ------ --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
SHARE ACTIVITY:
BALANCES AT JANUARY 1, 1995............................... 4,444 (11) 20,609 (8,776)
Issuance of common stock grants......................... 6
Common stock options exercised.......................... 119
Conversion of Class B common stock to common stock...... 135 (135)
Purchase of treasury stock.............................. (6)
----- --- ------ -------
BALANCES AT DECEMBER 31, 1995............................. 4,704 (17) 20,474 (8,776)
Issuance of common stock grants......................... 2
Common stock options exercised.......................... 140
Conversion of Class B common stock to common stock...... 84 (84)
Four for three split in the form of a 33.3 percent stock
dividend (Note 9)..................................... 1,568 (6) 6,825 (2,925)
----- --- ------ -------
BALANCES AT DECEMBER 31, 1996............................. 6,498 (23) 27,215 (11,701)
Issuance of common stock grants......................... 1
Common stock options exercised.......................... 202
Conversion of Class B common stock to common stock...... 90 (90)
Common stock issued under Employee Stock Purchase
Plan.................................................. 7
Purchase of treasury stock.............................. (2)
----- --- ------ -------
BALANCES AT DECEMBER 31, 1997............................. 6,798 (25) 27,125 (11,701)
===== === ====== =======
</TABLE>
See accompanying notes to consolidated financial statements.
32
<PAGE> 34
PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1996 1995
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 66,028 $ 57,500 $ 49,322
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation............................................ 22,884 20,434 19,281
Amortization of intangibles............................. 13,570 10,668 7,869
Deferred income taxes................................... (3,367) (1,943) (1,847)
Gain on sale of assets.................................. (421)
Changes in assets and liabilities (net of the effects of
the purchase and sale of properties) (Note 3) which
provided (used) cash:
Trade accounts receivable............................. (5,872) (9,737) (1,581)
Inventory............................................. (289) 3,017 (3,121)
Other assets.......................................... (3,766) 7,842 1,150
Trade accounts payable and other liabilities.......... 2,494 3,659 1,594
Income taxes payable.................................. 1,803 (239) (3,713)
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 93,485 90,780 68,954
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (28,191) (17,787) (22,934)
Purchase of publishing properties, net of cash acquired... (203,306)
Purchase of broadcast assets.............................. (3,141) (5,187)
Investment in joint ventures and limited partnerships..... (4,792) (2,983) (3,637)
Sale of assets, net of cash sold.......................... 4,150
(Increase) decrease in notes receivable................... 4,979 (4,904) 1,875
-------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES....................... (31,145) (230,017) (24,696)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt.................. 135,000
Repayments on long-term debt.............................. (64,705) (15,205) (14,250)
Dividends paid............................................ (11,483) (10,033) (8,828)
Proceeds from exercise of stock options................... 3,299 2,167 2,329
Proceeds from employee stock purchase plan................ 322
Purchase of treasury stock................................ (76) (20) (213)
-------- -------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES......... (72,643) 111,909 (20,962)
-------- -------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........ (10,303) (27,328) 23,296
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.............. 73,052 100,380 77,084
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................... $ 62,749 $ 73,052 $100,380
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (received) during the year for:
Interest paid........................................... $ 17,469 $ 9,716 $ 10,147
Interest received....................................... (4,574) (4,872) (4,805)
Income taxes............................................ 45,110 38,530 35,862
Income tax refunds...................................... (1,108) (195) (1,280)
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING
ACTIVITY:
Increase (decrease) in minimum pension liability and
related intangible asset (Notes 4 and 6)................ $ 402 $ (1,059) $ (227)
</TABLE>
See accompanying notes to consolidated financial statements.
33
<PAGE> 35
PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation -- The consolidated financial statements include the
accounts of Pulitzer Publishing Company (the "Company") and its subsidiary
companies, all of which are wholly-owned. All significant intercompany
transactions have been eliminated from the consolidated financial statements.
Fiscal Year -- The Company's fiscal year ends on the last Sunday of the
calendar year, which in 1995 resulted in a 14-week fourth quarter and a 53-week
year. In 1997 and 1996, the fourth quarter was 13 weeks and the year was 52
weeks. For ease of presentation, the Company has used December 31 as the
year-end.
Cash Equivalents -- For purposes of reporting cash flows, the Company
considers all highly liquid investments purchased with an original maturity of
three months or less to be cash equivalents.
Inventory Valuation -- Inventory, which consists primarily of newsprint, is
stated at the lower of cost (determined primarily using the last-in, first-out
method) or market. If the first-in, first-out cost method had been used,
inventory would have been $805,000 and $874,000 higher than reported at December
31, 1997 and 1996, respectively. Ink and other miscellaneous supplies are
expensed as purchased.
Program Rights -- Program rights represent license agreements for the right
to broadcast programs over license periods which generally run from one to five
years. The total cost of each agreement is recorded as an asset and liability
when the license period begins and the program is available for broadcast.
Program rights covering periods greater than one year are amortized over the
license period using an accelerated method as the programs are broadcast. In the
event that a determination is made that programs will not be used prior to the
expiration of the license agreement, unamortized amounts are then charged to
operations. Payments are made in installments as provided for in the license
agreements. Program rights expected to be amortized in the succeeding year and
payments due within one year are classified as current assets and current
liabilities, respectively.
Property and Depreciation -- Property is recorded at cost. Depreciation is
computed using the straight-line method over the estimated useful lives of the
individual assets. Buildings are depreciated over 20 to 50 years and all other
property over lives ranging from 3 to 15 years.
Intangible Assets -- Intangibles consisting of goodwill, FCC licenses and
network affiliations acquired subsequent to the effective date of Accounting
Principles Board Opinion No. 17 ("Opinion No. 17") are being amortized over
lives of either 15 or 40 years while all other intangible assets are being
amortized over lives ranging from 4 to 23 years. Management periodically
evaluates the recoverability of intangible assets by reviewing the current and
projected cash flows of each of its properties. Intangibles in the amount of
$1,520,000, related to acquisitions prior to the effective date of Opinion No.
17, are not being amortized because, in the opinion of management, their value
is of undeterminable duration. In addition, the intangible asset relating to the
Company's additional minimum pension liability under Statement of Financial
Accounting Standards No. 87 is adjusted annually, as necessary, when a new
determination of the amount of the additional minimum pension liability is made
annually.
Long-Lived Assets -- The Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, in
March 1995. This statement became effective for the Company's 1996 fiscal year.
The general requirements of this statement are applicable to the properties and
intangible assets of the Company and require impairment to be considered
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Adoption of this standard on its effective date
of January 1, 1996 had no impact on the Company's financial position or results
of operations.
Employee Benefit Plans -- The Company and its subsidiaries have several
noncontributory pension plans covering substantially all of their employees.
Benefits under the plans are generally based on salary and years
34
<PAGE> 36
PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 -- CONTINUED
of service. The Company's liability and related expense for benefits under the
plans are recorded over the service period of active employees based upon annual
actuarial calculations. Plan funding strategies are influenced by tax
regulations. Plan assets consist primarily of government bonds and corporate
equity securities.
The Company provides retiree medical and life insurance benefits under
varying postretirement plans at several of its operating locations. In addition,
the Company provides postemployment disability benefits to certain former
employee groups prior to retirement. The significant portion of these benefits
results from plans at the St. Louis Post-Dispatch. The Company's liability and
related expense for benefits under the postretirement plans are recorded over
the service period of active employees based upon annual actuarial calculations.
The Company accrues postemployment disability benefits when it becomes probable
that such benefits will be paid and when sufficient information exists to make
reasonable estimates of the amounts to be paid. All of the Company's
postretirement and postemployment benefits are funded on a pay-as-you-go basis.
Income Taxes -- Deferred tax assets and liabilities are recorded for the
expected future tax consequences of events that have been included in either the
financial statements or tax returns of the Company. Under this asset and
liability approach, deferred tax assets and liabilities are determined based on
temporary differences between the financial statement and tax bases of assets
and liabilities by applying enacted statutory tax rates applicable to future
years in which the differences are expected to reverse.
Stock-Based Compensation Plans -- Effective January 1, 1996, the Company
adopted the disclosure requirements of Statement of Financial Accounting
Standards No. 123 ("SFAS 123"), Accounting for Stock-Based Compensation. The new
standard defines a fair value method of accounting for stock options and similar
equity instruments. Under the fair value method, compensation cost is measured
at the grant date based on the fair value of the award and is recognized over
the service period, which is usually the vesting period. Pursuant to the new
standard, companies are encouraged, but not required, to adopt the fair value
method of accounting for employee stock-based transactions. Companies are also
permitted to continue to account for such transactions under Accounting
Principles Board Opinion No. 25 ("APB 25"), Accounting for Stock Issued to
Employees, but are required to disclose pro forma net income and, if presented,
earnings per share as if the company had applied the new method of accounting.
The accounting requirements of the new method are effective for all employee
awards granted after the beginning of the fiscal year of adoption, whereas the
disclosure requirements apply to all awards granted subsequent to December 31,
1994. The Company continues to recognize and measure compensation for its
restricted stock and stock option plans in accordance with the existing
provisions of APB 25.
Earnings Per Share of Stock -- Effective December 15, 1997, the Company
adopted Statement of Financial Accounting Standards No. 128, Earnings per Share
("SFAS 128"). This statement simplifies the standards for computing earnings per
share ("EPS"), making them comparable to international standards, and supersedes
Accounting Principles Board Opinion No. 15, Earnings Per Share ("APB 15"). SFAS
128 replaces the presentation of primary EPS with a presentation of basic EPS.
The statement also requires dual presentation of basic and diluted EPS on the
face of the income statement for all entities with complex capital structures
and requires a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS computation. As
required by SFAS 128, diluted EPS has been computed for all prior periods
presented to conform to the provisions of the new statement. Basic earnings per
share under SFAS 128 for prior periods is the same as earnings per share
previously reported by the Company under APB 15.
Basic earnings per share of stock is computed using the weighted average
number of Common and Class B shares outstanding during the applicable period,
adjusted for the stock splits described in Note 9. Diluted earnings per share of
stock is computed using the weighted average number of Common and Class B shares
outstanding and common stock equivalents. (see Note 11)
35
<PAGE> 37
PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 -- CONTINUED
Use of Management Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires that
management make certain estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements. The reported amounts of
revenues and expenses during the reporting period may also be affected by the
estimates and assumptions management is required to make. Actual results may
differ from those estimates.
Reclassifications -- Certain reclassifications have been made to the 1996
and 1995 consolidated financial statements to conform with the 1997
presentation.
2. AGENCY AGREEMENTS
An agency operation between the Company and The Herald Company is conducted
under the provisions of an Agency Agreement, dated March 1, 1961, as amended.
For many years, the Post-Dispatch (owned by the Company) was the afternoon and
Sunday newspaper serving St. Louis, and the Globe-Democrat (formerly owned by
The Herald Company) was the morning paper and also published a weekend edition.
Although separately owned, from 1961 through February 1984, the publication of
both the Post-Dispatch and the Globe-Democrat was governed by the St. Louis
Agency Agreement. From 1961 to 1979, the two newspapers controlled their own
news, editorial, advertising, circulation, accounting and promotion departments
and Pulitzer managed the production and printing of both newspapers. In 1979,
Pulitzer assumed full responsibility for advertising, circulation, accounting
and promotion for both newspapers. In February 1984, after a number of years of
unfavorable financial results at the St. Louis Agency, the Globe-Democrat was
sold by The Herald Company and the St. Louis Agency Agreement was revised to
eliminate any continuing relationship between the two newspapers and to permit
the repositioning of the daily Post-Dispatch as a morning newspaper. Following
the renegotiation of the St. Louis Agency Agreement at the time of the sale of
the Globe-Democrat, The Herald Company retained the contractual right to receive
one-half the profits (as defined), and the obligation to share one-half the
losses (as defined), of the operations of the St. Louis Agency, which from
February 1984 forward consisted solely of the publication of the Post-Dispatch.
The St. Louis Agency Agreement also provides for The Herald Company to share
one-half the cost of, and to share in a portion of the proceeds from the sale
of, capital assets used in the production of the Post-Dispatch. Under the St.
Louis Agency Agreement, Pulitzer supervises, manages and performs all activities
relating to the day-to-day publication of the Post-Dispatch and is solely
responsible for the news and editorial policies of the newspaper. The
consolidated financial statements of the Company include all the operating
revenues and expenses of the St. Louis Agency relating to the Post-Dispatch.
In Tucson, Arizona, a separate partnership, TNI Partners, ("TNI"), acting
as agent for the Star (a newspaper owned by the Company) and the Citizen (a
newspaper owned by Gannett Co., Inc.), is responsible for printing, delivery,
advertising, and circulation of the Star and the Citizen. TNI collects all of
the receipts and income relating to the Star and the Citizen and pays all
operating expenses incident to the partnership's operations and publication of
the newspapers. Each newspaper is solely responsible for its own news and
editorial content. Net income or net loss of TNI is generally allocated equally
to the Star and the Citizen. The Company's consolidated financial statements
include its share of TNI's revenues and expenses.
3. ACQUISITION AND DISPOSITION OF PROPERTIES
During 1996, the Company acquired in a purchase transaction all of the
stock of Scripps League Newspapers, Inc. ("Scripps League"), a privately owned
publisher of community newspapers serving smaller markets, primarily in the West
and Midwest. The purchase price of approximately $216 million (including
acquisition costs) includes all of the operating assets of the newspapers,
working capital of approximately $6 million and intangibles. The acquisition was
financed by long-term borrowings of $135 million (see Note 5)
36
<PAGE> 38
PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 -- CONTINUED
and cash of approximately $81 million (approximately $69 million net of cash
acquired). The results of the operations of Scripps League for the period
subsequent to June 30, 1996 are included in the Company's Statements of
Consolidated Income.
The following supplemental unaudited pro forma information shows the
results of operations of the Company for the years ended December 31, 1996 and
1995 adjusted for the acquisition of Scripps League, assuming such transaction
and the related debt financing had been consummated at the beginning of each
year presented. The unaudited pro forma financial information is not necessarily
indicative either of results of operations that would have occurred had the
transaction occurred at the beginning of each year presented or of future
results of operations.
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
---- ----
(UNAUDITED)
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Operating revenues -- net................................ $566,915 $536,803
Operating income......................................... $113,660 $ 93,896
Net income............................................... $ 54,519 $ 44,203
Earnings per share of stock:
Basic earnings per share............................... $ 2.49 $ 2.03
Diluted earnings per share............................. $ 2.45 $ 2.00
</TABLE>
In December 1996, the Company acquired in a purchase transaction the assets
of an AM radio station in Phoenix, Arizona for approximately $5,187,000.
On February 27, 1998, the Company announced that its Board of Directors
decided to explore potential strategic alternatives relating to its broadcasting
division, including the potential sale of that division, among other
possibilities. However, the Company has not entered into any agreement, and
there can be no assurance that any agreement will be reached.
4. INTANGIBLE ASSETS
Intangible assets consist of:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
FCC licenses and network affiliations.................... $114,376 $112,161
Goodwill................................................. 178,355 178,327
Intangible pension asset (Note 6)........................ 2,320 1,918
Other.................................................... 63,924 63,914
-------- --------
Total............................................. 358,975 356,320
Less accumulated amortization............................ 71,358 58,015
-------- --------
Total intangible assets -- net........................... $287,617 $298,305
======== ========
</TABLE>
37
<PAGE> 39
PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 -- CONTINUED
5. FINANCING ARRANGEMENTS
Long-term debt consists of:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
Credit Agreement......................................... $ -- $ 50,000
Senior notes maturing in substantially equal annual
installments:
8.8% due through 1997.................................. 14,500
6.76% due 1998-2001.................................... 50,000 50,000
7.22% due 2002-2005.................................... 50,000 50,000
7.86% due 2001-2008.................................... 85,000 85,000
Other.................................................. 410 615
-------- --------
Total............................................. 185,410 250,115
Less current portion..................................... 12,705 14,705
-------- --------
Total long-term debt..................................... $172,705 $235,410
======== ========
</TABLE>
On July 1, 1996, in connection with the acquisition of Scripps League (see
Note 3), the Company issued to The Prudential Insurance Company of America
$85,000,000 principal amount of 7.86 percent Senior Notes due 2008 ("Notes"). In
addition, on July 1, 1996, the Company entered into a credit agreement with The
First National Bank of Chicago, as Agent, for a group of lenders ("FNBC"),
providing for a $50,000,000 five year variable rate revolving credit facility
("Credit Agreement"). The Company immediately borrowed the full amount under the
Credit Agreement and used the proceeds, together with the proceeds from the
Notes, to partially finance the Scripps League acquisition.
The Notes mature in equal annual installments beginning July 25, 2001 and
ending July 25, 2008. All borrowings under the Credit Agreement are due on July
2, 2001, the termination date of the facility. Prior to the credit facility's
termination, loans may be borrowed, repaid and reborrowed by the Company. In
addition, the Company has the option to repay any borrowings and terminate the
credit facility prior to its scheduled maturity. As of December 31, 1997, the
Company had no borrowings under the Credit Agreement.
The Credit Agreement allows the Company to elect an interest rate with
respect to each borrowing under the facility equal to a daily floating rate or
the Eurodollar rate plus 0.225 percent. As of December 31, 1996, the interest
rate on the Credit Agreement borrowings with FNBC was 5.875 percent.
The terms of the various senior note agreements contain certain covenants
and conditions including the maintenance of cash flow and various other
financial ratios, limitations on the incurrence of other debt and limitations on
the amount of restricted payments (which generally includes dividends, stock
purchases and redemptions).
Under the terms of the most restrictive borrowing covenants, in general,
the Company may pay annual dividends not to exceed the sum of $10,000,000, plus
75% of consolidated net earnings commencing January 1, 1993, less the sum of all
dividends paid or declared and redemptions in excess of sales of Company stock
after December 31, 1992. Pursuant to this calculation, approximately
$138,938,000 is available for distribution as dividends at December 31, 1997.
38
<PAGE> 40
PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 -- CONTINUED
Approximate annual maturities of long-term debt for the five years
subsequent to December 31, 1997 are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
-----------
(IN THOUSANDS)
<S> <C>
1998........................................................ $ 12,705
1999........................................................ 12,705
2000........................................................ 12,500
2001........................................................ 23,125
2002........................................................ 23,125
Thereafter.................................................. 101,250
--------
Total................................................ $185,410
========
</TABLE>
6. PENSION PLANS
The pension cost components were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost for benefits earned during the
year.......................................... $ 3,966 $ 4,154 $ 3,834
Interest cost on projected benefit obligation... 8,470 8,185 8,057
Actual loss (return) on plan assets............. (18,785) (12,507) (17,541)
Net amortization and deferrals.................. 10,001 4,833 11,365
-------- -------- --------
Net periodic pension cost....................... $ 3,652 $ 4,665 $ 5,715
======== ======== ========
</TABLE>
The funded status of the Company's pension plans was as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation.............................. $117,854 $107,637
======== ========
Accumulated benefit obligation......................... $118,735 $108,380
======== ========
Projected benefit obligation............................. $128,690 $118,414
Plan assets at fair value................................ 119,353 104,046
-------- --------
Plan assets less than projected benefit obligation....... 9,337 14,368
Unrecognized transition obligation, net.................. (1,318) (1,539)
Unrecognized net gain.................................... 16,507 10,557
Unrecognized prior service cost.......................... 211 234
Additional minimum liability............................. 2,320 1,918
-------- --------
Pension obligations...................................... $ 27,057 $ 25,538
======== ========
</TABLE>
The projected benefit obligation was determined using assumed discount
rates of 7% and 7.5% at December 31, 1997 and 1996, respectively. The expected
long-term rate of return on plan assets was 8.5% for both 1997 and 1996. For
those plans that pay benefits based on final compensation levels, the actuarial
assumptions for overall annual rate of increase in future salary levels was 4.5%
and 5% at December 31, 1997 and 1996, respectively.
39
<PAGE> 41
PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 -- CONTINUED
Certain of the Company's employees participate in multi-employer retirement
plans sponsored by their respective unions. Amounts charged to operations,
representing the Company's required contributions to these plans in 1997, 1996
and 1995, were approximately $844,000, $781,000, and $731,000, respectively.
The Company also sponsors an employee savings plan under Section 401(k) of
the Internal Revenue Code. This plan covers substantially all employees.
Contributions by the Company amounted to approximately $1,899,000, $1,668,000
and $1,494,000 for 1997, 1996 and 1995, respectively.
7. POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
The net periodic postretirement benefit cost components were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1997 1996 1995
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost (for benefits earned during the
year)............................................ $ 970 $ 926 $ 933
Interest cost on accumulated postretirement benefit
obligation....................................... 4,632 4,683 5,799
Net amortization, deferrals and other components... (2,538) (2,308) (1,787)
------- ------- -------
Net periodic postretirement benefit cost........... $ 3,064 $ 3,301 $ 4,945
======= ======= =======
</TABLE>
The Company funds its postretirement benefit obligation on a pay-as-you-go
basis, and, for 1997, 1996 and 1995 made payments of $4,118,000, $4,207,000 and
$4,071,000, respectively.
The status of the Company's postretirement benefit plans was as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
Retirees and surviving beneficiaries....................... $39,549 $37,734
Actives eligible to retire................................. 14,418 13,516
Other actives.............................................. 12,756 11,142
------- -------
Accumulated postretirement benefit obligation.............. 66,723 62,392
Unrecognized prior service gain............................ 6,658 7,990
Unrecognized net gain...................................... 15,351 19,404
------- -------
Accrued postretirement benefit cost........................ $88,732 $89,786
======= =======
</TABLE>
The preceding amounts for the December 31, 1997 and 1996 accrued
postretirement benefit cost and the 1997, 1996 and 1995 net periodic
postretirement benefit expense have not been reduced for The Herald Company's
share of the respective amounts. However, pursuant to the St. Louis Agency
Agreement (see Note 2), the Company has recorded a receivable for The Herald
Company's share of the accrued postretirement benefit cost as of December 31,
1997 and 1996.
For 1997 and 1996 measurement purposes, health care cost trend rates of 9%,
7% and 5% were assumed for indemnity plans, PPO plans and HMO plans,
respectively. For 1997, these rates were assumed to decrease gradually to 5%
through the year 2010 and remain at that level thereafter. For 1996; the
indemnity and PPO rates were assumed to decrease gradually to 5.5% through the
year 2010 and remain at that level thereafter. The health care cost trend rate
assumptions have a significant effect on the amount of obligation and expense
reported. A 1% increase in these annual trend rates would have increased the
accrued postretirement benefit
40
<PAGE> 42
PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 -- CONTINUED
cost at December 31, 1997 by approximately $1,162,000 and the 1997 annual net
periodic postretirement benefit cost by approximately $1,164,000.
Administrative costs related to indemnity plans were assumed to increase at
a constant annual rate of 6% for both 1997 and 1996. The assumed discount rate
used in estimating the accumulated postretirement benefit obligation was 7% and
7.5% for 1997 and 1996, respectively.
The Company's postemployment benefit obligation, representing certain
disability benefits at the St. Louis Post-Dispatch, was $3,174,000 and
$2,466,000 at December 31, 1997 and 1996, respectively.
8. INCOME TAXES
Provisions for income taxes (benefits) consist of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1997 1996 1995
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal......................................... $41,389 $33,465 $28,352
State and local................................. 7,035 5,750 3,541
Deferred:
Federal......................................... (2,878) (805) (1,641)
State and local................................. (489) (138) (206)
------- ------- -------
Total........................................ $45,057 $38,272 $30,046
======= ======= =======
</TABLE>
Factors causing the effective tax rate to differ from the statutory Federal
income tax rate were:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory rate........................................... 35% 35% 35%
Favorable resolution of prior year federal and state tax
issues................................................. (1)
Amortization of intangibles.............................. 2 1
State and local income taxes, net of U.S. Federal income
tax benefit............................................ 4 4 3
Other-net................................................ 1
-- -- --
Effective rate...................................... 41% 40% 38%
== == ==
</TABLE>
41
<PAGE> 43
PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 -- CONTINUED
The Company's deferred tax assets and liabilities, net, which have been
included in other assets in the statements of consolidated financial position
consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Pensions and employee benefits........................... $11,403 $ 9,575
Postretirement benefit costs............................. 19,248 19,284
Other.................................................... 1,561 2,110
------- -------
Total................................................. 32,212 30,969
------- -------
Deferred tax liabilities:
Depreciation............................................. 19,583 19,590
Amortization............................................. 7,765 9,882
------- -------
Total................................................. 27,348 29,472
------- -------
Net deferred tax asset..................................... $ 4,864 $ 1,497
======= =======
</TABLE>
The Company had no valuation allowance for deferred tax assets as of
December 31, 1997, 1996 and 1995.
9. STOCKHOLDERS' EQUITY
Each share of the Company's common stock is entitled to one vote and each
share of Class B common stock is entitled to ten votes on all matters. Holders
of outstanding shares of Class B common stock representing 95.5% of the combined
voting power of the Company have deposited their shares in a voting trust (the
"Voting Trust").
The trustees generally hold all voting rights with respect to the shares of
Class B common stock subject to the Voting Trust; however, in connection with
certain matters, including any proposal for a merger, consolidation,
recapitalization or dissolution of the Company or disposition of all or
substantially all its assets, the calling of a special meeting of stockholders
and the removal of directors, the Trustees may not vote the shares deposited in
the Voting Trust except in accordance with written instructions from the holders
of the Voting Trust Certificates. The Voting Trust may be terminated with the
written consent of holders of two-thirds in interest of all outstanding Voting
Trust Certificates. Unless extended or terminated by the parties thereto, the
Voting Trust expires on January 16, 2001.
On September 12, 1996, the Board of Directors declared a four-for-three
stock split of the Company's common and Class B common stock payable in the form
of a 33.3% stock dividend. The dividend was distributed on November 1, 1996 to
stockholders of record on October 10, 1996. The Company's capital balances and
share amounts were adjusted in 1996 to reflect the split.
On January 4, 1995, the Board of Directors declared a five-for-four stock
split of the Company's common and Class B common stock payable in the form of a
25% stock dividend. The dividend was distributed on January 24, 1995 to
stockholders of record on January 13, 1995. Even though this stock split was
declared subsequent to December 31, 1994, the Company's capital balances and
share amounts were adjusted in 1994 to reflect the split.
42
<PAGE> 44
PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 -- CONTINUED
10. COMMON STOCK PLANS
On May 11, 1994, the Company's stockholders adopted the Pulitzer Publishing
Company 1994 Stock Option Plan (the "1994 Plan"), replacing the Pulitzer
Publishing Company 1986 Employee Stock Option Plan (the "1986 Plan"). The 1994
Plan provides for the issuance to key employees and outside directors of
incentive stock options to purchase up to a maximum of 2,500,000 shares of
common stock. Under the 1994 Plan, options to purchase 1,667 shares of common
stock will be automatically granted to outside directors on the date following
each annual meeting of the Company's stockholders and will vest on the date of
the next annual meeting of the Company's stockholders. Total shares available
for issue to outside directors under this automatic grant feature are limited to
a maximum of 166,667. The issuance of all other options will be administered by
the Compensation Committee of the Board of Directors, subject to the 1994 Plan's
terms and conditions. Specifically, the exercise price per share may not be less
than the fair market value of a share of common stock at the date of grant. In
addition, exercise periods may not exceed ten years and the minimum vesting
period is established at six months from the date of grant. Option awards to an
individual employee may not exceed 250,000 shares in a calendar year.
Prior to 1994, the Company issued incentive stock options to key employees
under the 1986 Plan. As provided by the 1986 Plan, certain option awards were
granted with tandem stock appreciation rights which allow the employee to elect
an alternative payment equal to the appreciation of the stock value instead of
exercising the option. Outstanding options issued under the 1986 Plan have an
exercise term of ten years from the date of grant and vest in equal installments
over a three-year period.
Stock option transactions are summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARES PRICE RANGE PRICE
------ ----------- --------
<S> <C> <C> <C>
Common Stock Options:
Outstanding, January 1, 1995................ 1,198,371 $ 9.27-$21.98 $16.69
Granted................................... 192,853 $30.47-$34.41 $34.31
Canceled.................................. (39,632) $11.73-$21.98 $16.69
Exercised................................. (158,304) $ 9.27-$21.98 $14.71
---------
Outstanding, December 31, 1995.............. 1,193,288 $ 9.27-$34.41 $19.80
Granted................................... 179,809 $41.91-$46.25 $46.03
Canceled.................................. (2,146) $21.53-$34.41 $28.77
Exercised................................. (140,096) $ 9.27-$21.98 $15.47
---------
Outstanding, December 31, 1996.............. 1,230,855 $ 9.27-$46.25 $24.11
Granted................................... 211,231 $45.63-$58.81 $58.41
Canceled.................................. (14,235) $21.53-$47.38 $38.91
Exercised................................. (201,920) $ 9.27-$46.25 $16.34
---------
Outstanding, December 31, 1997.............. 1,225,931 $ 9.27-$58.81 $31.13
=========
Exercisable at:
December 31, 1996......................... 855,445 $ 9.27-$34.41 $18.19
=========
December 31, 1997......................... 849,565 $ 9.27-$46.25 $22.21
=========
Shares Available for Grant at December 31,
1997...................................... 1,712,004
=========
</TABLE>
43
<PAGE> 45
PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 -- CONTINUED
Stock appreciation right transactions are summarized as follows:
<TABLE>
<CAPTION>
SHARES PRICE
------ -----
<S> <C> <C>
Common Stock Appreciation Rights:
Outstanding, January 1, 1995.............................. 37,584 $14.87
Canceled.................................................. (10,183) $14.87
Exercised................................................. (27,401) $14.87
-------
Outstanding, December 31, 1995, 1996 and 1997............... --
=======
</TABLE>
On May 11, 1994, the Company's stockholders also adopted the Pulitzer
Publishing Company 1994 Key Employees' Restricted Stock Purchase Plan (the "1994
Stock Plan") which replaced the Pulitzer Publishing Company 1986 Key Employees'
Restricted Stock Purchase Plan ("1986 Stock Plan"). The 1994 Stock Plan provides
that an employee may receive, at the discretion of the Compensation Committee, a
grant or right to purchase at a particular price, shares of common stock subject
to restrictions on transferability. A maximum of 416,667 shares of common stock
may be granted or purchased by employees. In addition, no more than 83,333
shares of common stock may be issued to an employee in any calendar year.
Prior to 1994, the Company granted stock awards under the 1986 Stock Plan.
For grants awarded under both the 1994 and 1986 Stock Plans, compensation
expense is recognized over the vesting period of the grants. Stock Purchase Plan
transactions are summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARES PRICE RANGE PRICE
------ ----------- --------
<S> <C> <C> <C>
Common Stock Grants:
Outstanding, January 1, 1995............... 4,236 $20.25-$21.38 $20.89
Granted.................................... 8,880 $24.53 $24.53
Vested..................................... (7,460) $20.25-$24.53 $23.93
-------
Outstanding, December 31, 1995............... 5,656 $20.25-$24.53 $22.60
Granted.................................... 2,093 $36.70 $36.70
Vested..................................... (1,864) $20.25-$24.53 $22.12
-------
Outstanding, December 31, 1996............... 5,885 $20.25-$36.70 $27.78
Granted.................................... 1,468 $47.44 $47.44
Canceled................................... (1,393) $20.25-$47.44 $33.13
Vested..................................... (2,272) $20.25-$36.70 $25.56
-------
Outstanding, December 31, 1997............... 3,688 $21.38-$47.44 $34.95
=======
Shares Available for Grant at December 31,
1997....................................... 400,776
=======
</TABLE>
As required by SFAS 123, the Company has estimated the fair value of its
option grants since December 31, 1994 by using the binomial options pricing
model with the following assumptions:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Expected Life (years)....................................... 7 7 7
Risk-free interest rate..................................... 5.8% 6.4% 5.7%
Volatility.................................................. 23.6% 22.5% 19.6%
Dividend yield.............................................. 1.1% 1.2% 1.3%
</TABLE>
44
<PAGE> 46
PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 -- CONTINUED
As discussed in Note 1, the Company accounts for its stock option grants in
accordance with APB 25, resulting in the recognition of no compensation expense
in the consolidated statements of income. Had compensation expense been computed
on the fair value of the option awards at their grant date, consistent with the
provisions of SFAS 123, the Company's net income and earnings per share would
have been reduced to the pro forma amounts below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net income (in thousands):
As reported...................................... $66,028 $57,500 $49,322
Pro forma........................................ $64,487 $56,820 $49,288
Basic earnings per share:
As reported...................................... $2.99 $2.62 $2.26
Pro forma........................................ $2.92 $2.59 $2.26
Diluted earnings per share:
As reported...................................... $2.94 $2.58 $2.23
Pro forma........................................ $2.87 $2.55 $2.23
</TABLE>
Because the provisions of SFAS 123 have not been applied to options granted
prior to January 1, 1995, the pro forma compensation cost may not be
representative of compensation cost to be incurred on a pro forma basis in
future years.
On April 24, 1997, the Company's stockholders approved the adoption of the
Pulitzer Publishing Company 1997 Employee Stock Purchase Plan (the "Plan"). The
Plan allows eligible employees to authorize payroll deductions for the quarterly
purchase of the Company's Common Stock ("Common Stock") at a price generally
equal to 85 percent of the Common Stock's fair market value at the end of each
quarter. The Plan began operations as of July 1, 1997.
In general, other than Michael E. Pulitzer, all employees of the Company
and its subsidiaries are eligible to participate in the Plan after completing at
least one year of service. Subject to appropriate adjustment for stock splits
and other capital changes, the Company may sell a total of 500,000 shares of its
Common Stock under the Plan. Shares sold under the Plan may be authorized and
unissued or held by the Company in its treasury. The Company may purchase shares
for resale under the Plan.
11. EARNINGS PER SHARE
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>
YEARS ENDED DECEMBER 31,
--------------------------
1997 1996 1995
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Weighted average shares outstanding (Basic EPS)....... 22,110 21,926 21,800
Stock option equivalents.............................. 342 347 297
------ ------ ------
Weighted average shares and equivalents (Diluted
EPS)................................................ 22,452 22,273 22,097
====== ====== ======
</TABLE>
Stock option equivalents included in the Diluted EPS calculation were
determined using the treasury stock method. Under the treasury stock method and
SFAS 128, outstanding stock options are dilutive when the average market price
of the Company's common stock exceeds the option price during a period. In
45
<PAGE> 47
PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 -- CONTINUED
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.
12. COMMITMENTS AND CONTINGENCIES
At December 31, 1997, the Company and its subsidiaries had construction and
equipment commitments of approximately $13,779,000 and commitments for program
contracts payable and license fees of approximately $30,025,000.
The Company is an investor in three limited partnerships requiring future
capital contributions. As of December 31, 1997, the Company's unfunded capital
contribution commitment related to these investments was approximately
$13,863,000.
The Company and its subsidiaries are defendants in a number of lawsuits,
some of which claim substantial amounts. While the results of litigation cannot
be predicted, management believes the ultimate outcome of such 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 the Company's Class B
common stock, the Company agreed to make an additional payment to the selling
stockholders in the event that prior to May 13, 2001, the stockholders receive
dividends or distributions in excess of specified amounts in connection with the
sale of more than 85% of the voting securities or equity of the Company, a
merger, or a complete or partial liquidation or similar corporate transaction.
Any payment pursuant to this requirement would be based upon a percentage of the
dividend or distribution per share in excess of $15.72 increased by 15%
compounded annually beginning May 12, 1986.
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has estimated the following fair value amounts for its
financial instruments using available market information and appropriate
valuation methodologies. However, considerable judgment is required in
interpreting market data to develop the estimates of fair value. Accordingly,
the estimates presented herein are not necessarily indicative of the amounts
that the Company could realize in a current market exchange. The use of
different market assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.
Cash and Cash Equivalents, Accounts Receivable, Accounts Payable and
Program Contracts Payable -- The carrying amounts of these items are a
reasonable estimate of their fair value.
Long-Term Debt -- Interest rates that are currently available to the
Company for issuance of debt with similar terms and remaining maturities are
used to estimate fair value. The fair value estimates of the Company's long-term
debt as of December 31, 1997 and 1996 were $195,969,000 and $259,958,000,
respectively.
The fair value estimates presented herein are based on pertinent
information available to management as of December 31, 1997 and 1996. Although
management is not aware of any facts that would significantly affect the
estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since that date, and current
estimates of fair value may differ from the amounts presented herein.
46
<PAGE> 48
PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 -- CONTINUED
14. BUSINESS SEGMENTS
The Company's operations are divided into two business segments, publishing
and broadcasting. The following is a summary of operations, assets and other
data.
<TABLE>
<CAPTION>
AS OF AND FOR THE YEARS ENDED
DECEMBER 31,
--------------------------------
1997 1996 1995
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING REVENUES:
Publishing(a)............................................. $357,969 $309,096 $269,388
Broadcasting.............................................. 227,016 224,992 202,939
-------- -------- --------
Total................................................ $584,985 $534,088 $472,327
======== ======== ========
OPERATING INCOME (LOSS):
Publishing(a)............................................. $ 47,544 $ 32,577 $ 25,393
Broadcasting.............................................. 82,180 83,246 65,939
Corporate................................................. (6,007) (5,532) (4,666)
-------- -------- --------
Total................................................ $123,717 $110,291 $ 86,666
======== ======== ========
TOTAL ASSETS:
Publishing(a)............................................. $364,360 $351,685 $141,441
Broadcasting.............................................. 255,847 259,114 253,252
Corporate................................................. 62,749 73,052 100,380
-------- -------- --------
Total................................................ $682,956 $683,851 $495,073
======== ======== ========
CAPITAL EXPENDITURES:
Publishing(a)............................................. $ 15,215 $ 6,433 $ 6,627
Broadcasting.............................................. 12,976 11,354 16,307
-------- -------- --------
Total................................................ $ 28,191 $ 17,787 $ 22,934
======== ======== ========
DEPRECIATION & AMORTIZATION:
Publishing(a)............................................. $ 13,007 $ 8,660 $ 4,307
Broadcasting.............................................. 23,447 22,442 22,843
-------- -------- --------
Total................................................ $ 36,454 $ 31,102 $ 27,150
======== ======== ========
OPERATING MARGINS:
(Operating income to revenues):
Publishing(a)(b).......................................... 18.7% 15.1% 14.1%
Broadcasting.............................................. 36.2% 37.0% 32.5%
</TABLE>
- -------------------------
(a) Publishing information for 1997 and 1996 includes Scripps League Newspapers,
Inc. (subsequently renamed Pulitzer Community Newspapers, Inc.), which was
acquired on July 1, 1996. (see Note 3)
(b) Operating margins for publishing are stated with St. Louis Agency adjustment
(which is recorded as an operating expense in the accompanying consolidated
financial statements) added back to publishing operating income.
47
<PAGE> 49
PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 -- CONTINUED
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
Operating results for the years ended December 31, 1997 and 1996 by
quarters are as follows:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- -----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
1997
OPERATING REVENUES -- NET:................ $136,006 $151,398 $141,244 $156,337 $584,985
======== ======== ======== ======== ========
NET INCOME................................ $ 12,495 $ 19,681 $ 14,223 $ 19,629 $ 66,028
======== ======== ======== ======== ========
BASIC EARNINGS PER SHARE OF STOCK
(Note 11):
Earnings Per Share...................... $ 0.57 $ 0.89 $ 0.64 $ 0.88 $ 2.99
======== ======== ======== ======== ========
Weighted Average Shares Outstanding..... 22,029 22,081 22,151 22,185 22,110
======== ======== ======== ======== ========
DILUTED EARNINGS PER SHARE OF STOCK
(Note 11):
Earnings Per Share...................... $ 0.56 $ 0.88 $ 0.63 $ 0.87 $ 2.94
======== ======== ======== ======== ========
Weighted Average Shares Outstanding..... 22,378 22,413 22,489 22,526 22,452
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- -----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
1996
OPERATING REVENUES -- NET:................ $115,706 $127,574 $138,865 $151,943 $534,088
======== ======== ======== ======== ========
NET INCOME................................ $ 10,241 $ 16,185 $ 12,964 $ 18,110 $ 57,500
======== ======== ======== ======== ========
BASIC EARNINGS PER SHARE OF STOCK (Note
(Note 11):
Earnings Per Share...................... $ 0.47 $ 0.74 $ 0.59 $ 0.82 $ 2.62
======== ======== ======== ======== ========
Weighted Average Shares Outstanding..... 21,864 21,912 21,949 21,978 21,926
======== ======== ======== ======== ========
DILUTED EARNINGS PER SHARE OF STOCK
(Note 11):
Earnings Per Share...................... $ 0.46 $ 0.73 $ 0.58 $ 0.81 $ 2.58
======== ======== ======== ======== ========
Weighted Average Shares Outstanding..... 22,191 22,271 22,291 22,291 22,273
======== ======== ======== ======== ========
</TABLE>
In the fourth quarter of 1996, the Company determined that the carrying
value of one of its joint venture investments had been impaired. Accordingly,
the investment was reduced by a $2.7 million adjustment resulting in an
after-tax charge of $1.6 million or $0.07 per share. In the fourth quarter of
1995, a state tax examination was settled favorably resulting in a reduction of
income tax expense of approximately $900,000, or $0.04 per share for the
quarter.
Earnings per share are computed independently for each of the quarters
presented. Therefore, the sum of the quarterly earnings per share may not equal
the total for the year.
* * * * * *
48
<PAGE> 50
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the caption "Management" in the Company's
definitive Proxy Statement to be used in connection with the 1998 Annual Meeting
of Stockholders is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the caption "Executive Compensation" in the
Company's definitive Proxy Statement to be used in connection with the 1998
Annual Meeting of Stockholders is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Principal Stockholders" in the
Company's definitive Proxy Statement to be used in connection with the 1998
Annual Meeting of Stockholders is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Compensation Committee
Interlocks and Insider Participation" in the Company's definitive Proxy
Statement to be used in connection with the 1998 Annual Meeting of Stockholders
is incorporated herein by reference.
49
<PAGE> 51
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) DOCUMENT LIST
1. Financial Statements
The following financial statements are set forth in Part II, Item 8 of
this report.
PULITZER PUBLISHING COMPANY AND SUBSIDIARIES:
(i) Independent Auditors' Report.
(ii) Statements of Consolidated Income for each of the Three Years in
the Period Ended December 31, 1997.
(iii) Statements of Consolidated Financial Position at December 31,
1997 and 1996.
(iv) Statements of Consolidated Stockholders' Equity for each of the
Three Years in the Period Ended December 31, 1997.
(v) Statements of Consolidated Cash Flows for each of the Three Years
in the Period Ended December 31, 1997.
(vi) Notes to Consolidated Financial Statements for the Three Years in
the Period Ended December 31, 1997.
2. Supplementary Data and Financial Statement Schedules
(i) Supplementary unaudited data with respect to quarterly results of
operations is set forth in Part II, Item 8 of this Report.
(ii) The following financial statement schedule and opinion thereon
are filed as a part of this Report:
<TABLE>
<CAPTION>
SEQUENTIAL PAGE
---------------
<S> <C>
Independent Auditors' Report................................ 54
Schedule II -- Valuation and Qualifying Accounts and
Reserves.................................................. 55
</TABLE>
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and, therefore have
been omitted.
3. Exhibits Required by Securities and Exchange Commission Regulation S-K
(a) The following exhibits are filed as part of this report:
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<S> <C>
3.2 By-laws of the Company restated as of October 29, 1997
10.8.1 Amendment, dated September 16, 1997, to Pulitzer Retirement
Savings Plan
10.34 Letter Agreement, dated January 26, 1998, between Pulitzer
Publishing Company and Emily Rauh Pulitzer
21 Subsidiaries of Registrant
23 Independent Auditors' Consent
24 Power of Attorney
27.1 Financial Data Schedule for 1997
27.2 Restated Financial Data Schedules for 1995 and 1996
(including 1996 Quarterly Data)
27.3 Restated Financial Data Schedules for 1997 Quarterly Data
</TABLE>
50
<PAGE> 52
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<S> <C>
(b) The following exhibits are incorporated herein by reference:
3.1 -- Restated Certificate of Incorporation of the Company.(iii)
4.1 -- Form of Certificate for Common Stock.(iii)
9.1 -- Voting Trust Agreement, dated June 19, 1995 between the
holders of voting trust certificates and Michael E.
Pulitzer, Emily Rauh Pulitzer, Ronald H. Ridgway, Nicholas
G. Penniman IV, Ken J. Elkins, Cole C. Campbell and David
Moore. (xiii)
9.2 -- Termination Agreement, dated June 19, 1995 between the
holders of voting trust certificates and Michael E.
Pulitzer, Emily Rauh Pulitzer, Ronald H. Ridgway, Nicholas
G. Penniman IV, Ken J. Elkins, Cole C. Campbell and David
Moore.(xiii)
10.1 -- Agreement, dated January 1, 1961, between the Pulitzer
Publishing Company, a Missouri corporation, and the
Globe-Democrat Publishing Company, as amended on September
4, 1975, April 12, 1979 and December 22, 1983.(i)
10.2.1 -- Amended and Restated Joint Operating Agreement, dated
December 30, 1988 between Star Publishing Company and
Citizen Publishing Company.(v)
10.2.2 -- Partnership Agreement, dated December 30, 1988 between Star
Publishing Company and Citizen Publishing Company.(v)
10.3 -- Agreement, dated as of May 12, 1986, among the Pulitzer
Publishing Company, Clement C. Moore, II, Gordon C. Weir,
William E. Weir, James R. Weir, Kenward G. Elmslie, Stephen
E. Nash and Manufacturers Hanover Trust Company, as Trustees
and Christopher Mayer.(i)
10.4 -- Letter Agreement, dated September 29, 1986, among the
Pulitzer Publishing Company, Trust Under Agreement Made by
David E. Moore, Frederick D. Pulitzer, Michael E. Pulitzer,
Jr., Robert S. Pulitzer, Joseph Pulitzer, IV, Joseph
Pulitzer, Jr., Michael E. Pulitzer, Stephen E. Nash and
Manufacturers Hanover Trust Company, as Trustees, Kenward G.
Elmslie, Gordon C. Weir, William E. Weir, James R. Weir,
Peter W. Quesada, T. Ricardo Quesada, Elinor P. Hempelmann,
The Moore Foundation, Inc., Mariemont Corporation, Z Press
Inc. and Clement C. Moore, II.(ii)
10.5 -- Letter Agreement, dated May 12, 1986, among the Pulitzer
Publishing Company, Peter W. Quesada, T. Ricardo Quesada,
Kate Davis Pulitzer Quesada and Elinor P. Hempelmann.(i)
10.6 -- Agreement, dated as of September 29, 1986, among the
Pulitzer Publishing Company, Peter W. Quesada, T. Ricardo
Quesada, Kate Davis Pulitzer Quesada and Elinor
Hempelmann.(ii)
10.7.1 -- Amendment, dated March 9, 1992, to the Pulitzer Publishing
Annual Incentive Plan.(vi)
10.7.2 -- Annual Incentive Compensation Plan.(iii)
10.8.2 -- Amendment, dated January 28, 1997, to Pulitzer Retirement
Savings Plan.(xvii)
10.8.3 -- Amendment, dated October 30, 1996, to Pulitzer Retirement
Savings Plan.(xvii)
10.8.4 -- Amendment, dated July 31, 1996, to Pulitzer Retirement
Savings Plan.(xvii)
10.8.5 -- Amendment, dated October 25, 1995, to Pulitzer Retirement
Savings Plan.(xvii)
10.8.6 -- Amendment, dated October 25, 1995, to Pulitzer Retirement
Savings Plan.(xiii)
10.8.7 -- Amendment, dated January 24, 1995, to Pulitzer Retirement
Savings Plan.(xi)
10.8.8 -- Amended and restated Pulitzer Retirement Savings Plan.(xi)
10.9 -- Amended and restated Joseph Pulitzer Pension Plan.(xi)
10.10.1 -- Amendment, dated October 25, 1995, to Pulitzer Publishing
Company Pension Plan.(xvii)
10.10.2 -- Amended and restated Pulitzer Publishing Company Pension
Plan.(xi)
</TABLE>
51
<PAGE> 53
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<S> <C> <C>
10.11 -- Restated Supplemental Executive Benefit Pension Plan.(vii)
10.12 -- Employment Agreement, dated October 1, 1986, between the
Pulitzer Publishing Company and Joseph Pulitzer, Jr.(i)
10.13 -- Employment Agreement, dated January 2, 1986, between the
Pulitzer Publishing Company and Michael E. Pulitzer.(i)
10.14 -- Pulitzer Publishing Company Senior Executive Deferred
Compensation Plan.(xiii)
10.15 -- Consulting Agreement, dated May 1, 1993, between Pulitzer
Publishing Company and Glenn A. Christopher.(ix)
10.16 -- Supplemental Executive Retirement Pay Agreement dated June
5, 1984, between the Pulitzer Publishing Company and Glenn
A. Christopher.(i)
10.17 -- Letter Agreement, dated October 26, 1984, between the
Pulitzer Publishing Company and Glenn A. Christopher.(i)
10.18 -- Letter Agreement, dated October 21, 1986, between the
Pulitzer Publishing Company and David E. Moore.(i)
10.19 -- Pulitzer Publishing Company 1994 Key Employees' Restricted
Stock Purchase Plan.(x)
10.20.1 -- Amendment, dated April 24, 1996, to Pulitzer Publishing
Company 1994 Stock Option Plan.(xiv)
10.20.2 -- Amendment, dated April 20, 1995, to Pulitzer Publishing
Company 1994 Stock Option Plan.(xii)
10.20.3 -- Pulitzer Publishing Company 1994 Stock Option Plan.(x)
10.21 -- Registration Rights Agreement.(i)
10.22 -- Note Agreement, dated April 22, 1987, between the Pulitzer
Publishing Company and The Prudential Insurance Company of
America.(iv)
10.23 -- Employment Agreement, dated May 10, 1955, between the
Pulitzer Publishing Company and Joseph Pulitzer, Jr.(ii)
10.24 -- Note Agreement, dated June 30, 1993, between Pulitzer
Publishing Company and The Prudential Insurance Company of
America.(viii)
10.25 -- Stock Purchase Agreement by and among Pulitzer Publishing
Company and Mr. Edward W. Scripps, Mrs. Betty Knight
Scripps, and the Edward W. Scripps and Betty Knight Scripps
Charitable Remainder Unitrust dated as of May 4, 1996.(xv)
10.26 -- Note Agreement, dated July 1, 1996, between Pulitzer
Publishing Company and The Prudential Insurance Company of
America.(xvi)
10.27 -- Credit Agreement among Pulitzer Publishing Company, The
Lending Institutions Party Hereto, as Lenders, and The First
National Bank of Chicago, as Agent, dated as of July 1,
1996.(xvi)
10.28 -- Split Dollar Life Insurance Agreement, dated December 27,
1996, between Pulitzer Publishing Company and Richard A.
Palmer, Trustee of the Michael E. Pulitzer 1996 Life
Insurance Trust.(xvii)
10.29 -- Split Dollar Life Insurance Agreement, dated December 31,
1996, between Pulitzer Publishing Company and Rose M.
Elkins, Trustee of the Kennie J. Elkins Insurance
Trust.(xvii)
10.30 -- Split Dollar Life Insurance Agreement, dated December 30,
1996, between Pulitzer Publishing Company and Rebecca H.
Penniman and Nicholas G. Penniman V, Trustees of the
Nicholas G. Penniman IV Irrevocable 1996 Trust.(xvii)
</TABLE>
52
<PAGE> 54
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<S> <C> <C>
10.31 -- Split Dollar Life Insurance Agreement, dated December 30,
1996, between Pulitzer Publishing Company and Doris D.
Ridgway and Boatmen's Trust Company, Trustees of The Ronald
H. Ridgway Insurance Trust.(xvii)
10.32 -- Consulting Agreement, dated May 1, 1996, between Pulitzer
Publishing Company and Glenn A. Christopher.(xvii)
10.33 -- Pulitzer Publishing Company 1997 Employee Stock Purchase
Plan.(xviii)
</TABLE>
- -------------------------
(i) Incorporated by reference to Registration Statement on Form S-1 (No.
33-9953) filed with the Securities and Exchange Commission on November 4,
1986.
(ii) Incorporated by reference to Amendment No. 1 to Registration Statement on
Form S-1 (No. 33-9953) filed with the Securities and Exchange Commission
on December 9, 1986.
(iii) Incorporated by reference to Amendment No. 2 to Registration Statement on
Form S-1 (no. 33-9953) filed with the Securities and Exchange Commission
on December 11, 1986.
(iv) Incorporated by reference to Current Report on Form 8-K dated May 4, 1987.
(v) Incorporated by reference to Annual Report on Form 10-K for the fiscal year
ended December 31, 1988.
(vi) Incorporated by reference to Annual Report on Form 10-K for the fiscal year
ended December 31, 1991.
(vii) Incorporated by reference to Annual Report on Form 10-K for the fiscal
year ended December 31, 1992.
(viii) Incorporated by reference to Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1993.
(ix) Incorporated by reference to Annual Report on Form 10-K for the fiscal year
ended December 31, 1993.
(x) Incorporated by reference to the Company's definitive Proxy Statement used
in connection with the 1994 Annual Meeting of Stockholders.
(xi) Incorporated by reference to Annual Report on Form 10-K for the fiscal year
ended December 31, 1994.
(xii) Incorporated by reference to the Company's definitive Proxy Statement used
in connection with the 1995 Annual Meeting of Stockholders.
(xiii) Incorporated by reference to Annual Report on Form 10-K for the fiscal
year ended December 31, 1995.
(xiv) Incorporated by reference to the Company's definitive Proxy Statement used
in connection with the 1996 Annual Meeting of Stockholders.
(xv) Incorporated by reference to Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1996.
(xvi) Incorporated by reference to Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1996.
(xvii) Incorporated by reference to Annual Report on Form 10-K for the fiscal
year ended December 31, 1996
(xviii) Incorporated by reference to Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1997.
(c) Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the fourth
quarter of fiscal year 1997.
53
<PAGE> 55
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of Pulitzer Publishing Company:
We have audited the consolidated financial statements of Pulitzer Publishing
Company and its subsidiaries as of December 31, 1997 and 1996, and for each of
the three years in the period ended December 31, 1997, and have issued our
report thereon dated February 6, 1998 (February 27, 1998 as to the last
paragraph of Note 3); such report is included elsewhere in this Form 10-K. Our
audits also included the consolidated financial statement schedule of Pulitzer
Publishing Company and its subsidiaries, listed in the accompanying index at
Item 14(a)2.(ii). This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
Saint Louis, Missouri
February 6, 1998
54
<PAGE> 56
SCHEDULE II
PULITZER PUBLISHING COMPANY AND SUBSIDIARIES
SCHEDULE II VALUATION & QUALIFYING ACCOUNTS & RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 & 1995
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS & OTHER AT END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
----------- ---------- ---------- ---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Valuation Accounts:
Allowance for Doubtful Accounts....... $2,576 $1,468 $178(a) $1,811(b) $2,411
Reserves:
Accrued Medical Plan.................. 389 4,714 0 4,060(c) 1,043
Workers Compensation.................. 2,126 1,199 0 1,368 1,957
YEAR ENDED DECEMBER 31, 1996
Valuation Accounts:
Allowance for Doubtful Accounts....... $2,009 $2,131 $321(a) $1,885(b) $2,576
Reserves:
Accrued Medical Plan.................. 561 4,198 0 4,370(c) 389
Workers Compensation.................. 2,005 1,478 0 1,357 2,126
YEAR ENDED DECEMBER 31, 1995
Valuation Accounts:
Allowance for Doubtful Accounts....... $2,135 $1,538 $247(a) $1,911(b) $2,009
Reserves:
Accrued Medical Plan.................. 789 4,907 0 5,135(c) 561
Workers Compensation.................. 2,327 1,192 0 1,514 2,005
</TABLE>
- -------------------------
(a) -- Accounts reinstated, cash recoveries, etc.
(b) -- Accounts written off
(c) -- Amount represents:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Claims paid................ $3,596 $3,830 $4,660
Service fees............... 473 579 548
Cash refunds............... (9) (39) (73)
------ ------ ------
$4,060 $4,370 $5,135
====== ====== ======
</TABLE>
55
<PAGE> 57
SIGNATURES
Pursuant to the requirements of Section 13 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, on the 26th day of March, 1998.
PULITZER PUBLISHING COMPANY
By: /s/ Michael E. Pulitzer
------------------------------------
Michael E. Pulitzer,
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the Registrant in
the capacities indicated on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
/s/ Michael E. Pulitzer Director; Chairman, President and March 26, 1998
- --------------------------------------------- Chief Executive Officer
(Michael E. Pulitzer) (Principal Executive Officer)
/s/ Ronald H. Ridgway Director; Senior Vice President March 26, 1998
- --------------------------------------------- --Finance (Principal Financial
(Ronald H. Ridgway) and Accounting Officer)
/s/ Ken J. Elkins* Director; Senior Vice President March 26, 1998
- --------------------------------------------- --Broadcasting Operations
(Ken J. Elkins)
/s/ David E. Moore* Director March 26, 1998
- ---------------------------------------------
(David E. Moore)
/s/ Nicholas G. Penniman IV* Director; Senior Vice President March 26, 1998
- --------------------------------------------- --Newspaper Operations
(Nicholas G. Penniman IV)
/s/ William Bush* Director March 26, 1998
- ---------------------------------------------
(William Bush)
/s/ Emily Rauh Pulitzer* Director March 26, 1998
- ---------------------------------------------
(Emily Rauh Pulitzer)
/s/ Alice B. Hayes* Director March 26, 1998
- ---------------------------------------------
(Alice B. Hayes)
/s/ James M. Snowden, Jr.* Director March 26, 1998
- ---------------------------------------------
(James M. Snowden, Jr.)
</TABLE>
By: /s/ Ronald H. Ridgway
------------------------------------
Ronald H. Ridgway*
attorney-in-fact
56
<PAGE> 58
PULITZER PUBLISHING COMPANY
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1997
EXHIBIT INDEX
3.2 By-Laws of the Company restated as of October 29, 1997
10.8.1 Amendment, dated September 16, 1997, to Pulitzer Retirement Savings Plan
10.34 Letter Agreement, dated January, 26, 1998, between
Pulitzer Publishing Company and Emily Rauh Pulitzer
21 Subsidiaries of Registrant
23 Independent Auditors' Consent
24 Power of Attorney
27.1 Financial Data Schedule for 1997
27.2 Restated Financial Data Schedules for 1995 and
1996 (including 1996 Quarterly Data)
27.3 Restated Financial Data Schedules for
1997 Quartley Data
<PAGE> 1
EXHIBIT 3.2
PULITZER PUBLISHING COMPANY
BY-LAWS
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The Corporation may also have offices at such other places
both within and without the State of Delaware as the board of directors may
from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Meetings of stockholders may be held at such time and place,
within or without the State of Delaware, as shall be stated in the notice of
the meeting or in a duly executed waiver of notice thereof. The annual meeting
of stockholders may be held at such place, within or without the State of
Delaware, as shall be designated by the board of directors and stated in the
notice of the meeting or in a duly executed waiver of notice
thereof.
Section 2. The annual meeting of stockholders shall be held on the third
Wednesday of April in each year if not a legal holiday, and if a legal holiday,
then on the next secular day following, at 2:00 P.M., or at such other date and
time as shall be designated from time to time by the board of directors and
stated in the notice of the
<PAGE> 2
meeting, at which they shall elect by a plurality vote by written ballot a
board of directors, and transact such other business as may properly be brought
before the meeting.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten nor more than sixty days before the date of the
meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept open at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the affirmative vote of the entire board of
directors, the Chairman of the Board, the Vice Chairman of the Board or the
President and shall be called by the President or Secretary at the request in
writing of the holders of record of at least 50.1% of the aggregate voting
power of all outstanding shares of capital stock of the Corporation
2
<PAGE> 3
entitled to vote generally in the election of Directors, acting together as a
single class. Such request shall state the purpose or purposes of the proposed
meeting.
Section 6. Written notice of a special meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not less than ten nor more than sixty days before the
date of the meeting to each stockholder of record entitled to vote at such
meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the aggregate voting power of the
shares of the capital stock issued and outstanding and entitled to vote
thereat, present in person or represented by proxy, shall constitute a quorum
at all meetings of the stockholders for the transaction of business except as
otherwise provided by statute or by the certificate of incorporation. If,
however, such quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have the power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might
have been transacted at the meeting as originally notified. If the adjournment
is for more than thirty days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
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Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the aggregate voting power of the shares of the
capital stock having voting power present in person or represented by proxy
shall decide any question brought before such meeting, unless the question is
one upon which, by express provision of the statutes or of the certificate of
incorporation, a different vote is required in which case such express
provision shall govern and control the decision of such question.
Section 10. At every meeting of the stockholders, each stockholder shall
be entitled to vote, in person or by proxy executed in writing by the
stockholder or his duly authorized attorney-in-fact, each share of the capital
stock having voting power held by such stockholder in accordance with the
provisions of the certificate of incorporation and, if applicable, the
certificate of designations relating thereto, but no proxy shall be voted or
acted upon after three years from its date, unless the proxy provides for a
longer period.
Section 11. Any action required to be taken at any annual or special
meeting of stockholders of the Corporation, or any action which may be taken at
any annual or special meeting of such stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by stockholders representing
not less than the minimum number of votes that would be necessary to authorize
or take such actions at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of such action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. The Secretary shall file such
consents with the minutes of the meetings of the stockholders
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Section 12. At all meetings of stockholders, the chairman of the meeting
shall have absolute authority over matters of procedure, and there shall be no
appeal from the ruling of the chairman.
Section 13. If the object of a stockholders meeting is to elect directors
or to take a vote of the stockholders on any proposition, then, the chairman of
the meeting shall appoint not less than two persons, who are not directors, as
inspectors to receive and canvass the votes given at such meeting and certify
the result to him.
Section 14. Attendance of a stockholder, in person or by proxy, at any
meeting shall constitute a waiver of notice of such meeting, except where the
stockholder, in person or by proxy, attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened.
ARTICLE III
DIRECTORS
Section 1. (a) The number of directors which shall constitute the whole
board shall not be less than six (6). Commencing with the inception of the
Corporation, the board of directors shall consist of nine (9) directors and
thereafter the number which shall constitute the whole board may be increased
or decreased by resolution of the board of directors, but in no case shall be
less than six (6) directors. Directors shall be nominated only as provided in
the certificate of incorporation, and shall have such qualifications as may be
prescribed by these by-laws. Directors need not be stockholders.
(b) Commencing with the inception of the Corporation, the board of
directors shall be divided into three classes, as nearly equal in number as
possible. In the event of any
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increase or decrease in the number of directors, the additional director(s)
shall be added to or subtracted from such class(es) as the board of directors
may determine, provided that all classes remain as nearly equal in number as
possible.
(c) The first Board of Directors of the Corporation shall be elected by
the sole incorporator, as follows: Class A directors shall be elected for a
term expiring at the 1987 annual meeting of stockholders, Class B directors for
a term expiring at the 1988 annual meeting of stockholders, and Class C
directors for a term expiring at the 1989 annual meeting of stockholders.
(d) Commencing with the 1987 annual meeting of stockholders, the
directors shall be elected at annual meetings of stockholders, except as
provided in Section 2 of this Article, and each director elected shall hold
office until his successor is elected and qualified or until his earlier
resignation or removal. At each annual meeting of stockholders, the successors
to the Class of directors whose term shall then expire shall be elected for a
term expiring at the third succeeding annual meeting of stockholders after such
election.
Section 2. Subject to the rights of the holders of any series of
Preferred Stock or any other class of capital stock of the corporation then
outstanding (other than the Common Stock and the Class B Common Stock),
vacancies in the board of directors for any reason, including by reason of an
increase in the authorized number of directors, shall, if occurring prior to
the expiration of the term of office of the Class in which the vacancy occurs,
be filled by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director, and the directors so chosen shall hold
office until the next annual meeting of stockholders of the corporation or
until their successors
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are duly elected and shall qualify, unless sooner displaced. If there are no
directors in office, then an election of directors may be held in the manner
provided by statute.
Section 3. The property and business of the Corporation shall be managed
by its board of directors which may exercise all such powers of the Corporation
and do all such lawful acts and things as are not by statute or by the
certificate of incorporation or by these by-laws directed or required to be
exercised or done by the stockholders.
Section 4. Directors must be nominated in accordance with the procedure
set out in Section 3 of Article V of the certificate of incorporation. No
person shall be qualified to be elected and to hold office as a director if
such person is determined by the affirmative vote of a majority of the entire
board of directors to have violated either Federal or state law, in a manner
contrary to the best interests of the Corporation, to have interests not
properly authorized in conflict with the interests of the Corporation, or to
have breached any agreement between such director and the Corporation relating
to such director's services as a director or employee of the Corporation.
MEETINGS OF THE BOARD OF DIRECTORS
Section 5. The board of directors of the Corporation, or any committees
thereof, may hold meetings, both regular and special, either within or without
the State of Delaware.
Section 6. A regular annual meeting of the board of directors, including
newly elected directors, shall be held at such time and place as the board of
directors shall determine, and no notice of such meeting to the directors shall
be necessary in order legally to constitute the meeting, provided a quorum
shall be present.
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Section 7. Additional regular meetings of the board of directors shall be
held quarterly in the months of January, July and October upon such notice, or
without notice, and on such date and time and at such place as shall from time
to time be determined by the board of directors.
Section 8. The Chairman of the Board or the President of the Corporation
and the Secretary may call a special meeting of the board of directors at any
time by giving notice, specifying the business to be transacted at and the
purpose or purposes of the meeting, to each member of the board at least
twenty-four (24) hours before the time appointed.
Section 9. At all meetings of the board a majority of the full board of
directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at any meeting at which there is a
quorum shall be the act of the board of directors, except as may be otherwise
specifically provided by statute, the certificate of incorporation or these
by-laws. If a quorum shall not be present at any meeting of the board of
directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 10. The act of at least a majority of the full board of directors
shall be the act of the board of directors with respect to any matter if the
Executive Committee had considered that matter previously and had not acted
unanimously (or as otherwise specified by the board of directors, as provided
in Section 14 of this Article) with respect thereto.
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Section 11. Any action required or permitted to be taken at any meeting
of the board of directors or of any committee thereof may be taken without a
meeting if all members of the board or committee, as the case may be, consent
thereto in writing, setting forth the action so taken, and the writing or
writings are filed with the minutes of proceedings of the board or committee.
Section 12. Unless otherwise restricted by the certificate of
incorporation or these by-laws, members of the board of directors, or any
committee thereof, may participate in a meeting of the board of directors, or
any committee, by means of conference telephone or similar communications
equipment whereby all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at the
meeting.
COMMITTEES OF DIRECTORS
Section 13. There shall be the following six committees of the board
which shall have and may exercise the authority specified in these by-laws: an
Executive Committee, a Finance Committee, a Compensation Committee, a Planning
Committee, an Audit Committee and a Nominating Committee. The board of
directors may from time to time appoint one or more other committees which
shall have such authority and consist of such members as the board may from
time to time determine by resolution adopted by a
majority of the whole board.
Section 14. The Executive Committee shall consist of the four directors
who hold the positions, respectively, of President, Vice President-Finance,
Vice President-Newspaper Operations, Vice President-Broadcasting Operations
and, in the discretion of
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the board, a fifth person, designated by resolution adopted by a majority of
the whole board, who, if he is not a director, shall be an advisory member.
Unless otherwise restricted by statute, the certificate of incorporation or
these by-laws, the Executive Committee shall have and may exercise all of the
authority of the board of directors in the management of the Corporation.
The Executive Committee shall not have authority to (i) recommend to the
stockholders an amendment to the certificate of incorporation and direct the
submission thereof to a vote at a meeting of stockholders, (ii) approve a plan
of merger or consolidation and direct its submission to vote at a meeting of
stockholders, (iii) recommend to the stockholders the sale, lease or exchange
or other disposition of all, or substantially all, of the Corporation's
property and assets, fix the terms and conditions of any such transaction, or
abandon any such transaction after its authorization by a vote of the
stockholders, (iv) recommend to the stockholders a dissolution of the
Corporation or a revocation of a dissolution and direct the submission thereof
to a vote at a meeting of stockholders, (v) alter, repeal or amend the by-laws,
(vi) declare a dividend, (vii) authorize the issuance of shares of capital
stock or (viii) approve expenditures of any nature exceeding the greater of
$10,000,000 or 10% of the consolidated book value of the Corporation and its
subsidiaries as of the last day of the preceding fiscal year as determined by
the Corporation's certified public accountants.
At all meetings of the Executive Committee the presence of a majority of
the full committee shall constitute a quorum for the transaction of business
and (unless otherwise specified by the board of directors in referring or
delegating any matter to the Executive Committee) the unanimous act of all of
the members present at any meeting at which
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there is a quorum shall be the act of the Executive Committee. In the event
the Executive Committee does not act unanimously (or as otherwise specified by
the board of directors) with respect to any matter, it shall refer that matter
to the board of directors.
Section 15. The Finance Committee shall consist of the three directors
who hold the positions, respectively, of President, Vice President-Finance and
Vice President-Newspaper Operations and, in the discretion of the board of
directors, a fourth person, designated by resolution adopted by a majority of
the whole board of directors, who, if he is not a director, shall be an
advisory member. The Finance Committee shall have and may exercise all of the
authority of the board of directors with respect to (i) approval or disapproval
of contracts obligating the Corporation for more than $50,000 but not more than
$500,000 or not more than $1,000,000 if the contract relates to any Agency
expense to be shared equally with The Herald Company, Inc., (ii) designation of
depositories for monies and other valuable effects of the Corporation and (iii)
designation of signatures on all checks, demands for money and bank or other
similar accounts of the Corporation.
Section 16. The Compensation Committee shall consist of the director who
holds the position of President, two directors who do not hold any officer
positions with the Corporation and who are designated by resolution adopted by
a majority of the whole board of directors, and, in the discretion of the board
of directors a fourth person, also designated by resolution adopted by a
majority of the whole board of directors, who, if he is not a director, shall
be an advisory member. The Compensation Committee shall render advice with
respect to compensation matters for officers, directors and key employees of
the Corporation and with respect to other personnel matters.
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Section 17. The Planning Committee shall consist of the four directors
who hold the positions, respectively, of President, Vice President-Finance,
Vice President-Newspaper Operations and Vice President-Broadcasting Operations
and, in the discretion of the board of directors, up to six additional persons,
designated by resolution adopted by a majority of the whole board of directors,
each of whom, if he is not a director, shall be an advisory member. The
Planning Committee shall consider and develop short and long term plans and
strategies for the Corporation and present them to the board of directors for
consideration and appropriate action.
Section 18. The Audit Committee shall consist of at least two directors,
all of whom (i) are determined to be independent of management and free from
any relationship that would interfere with the exercise of independent judgment
as members of the Audit Committee and (ii) are designated by a resolution
adopted by a majority of the whole board of directors. The Audit Committee
shall be responsible to the board of directors for overseeing and reviewing
audit results and monitoring the effectiveness of internal audit functions.
The Audit Committee may retain and consult with legal counsel and such experts
as it deems necessary or appropriate.
Section 19. The Nominating Committee shall consist of two or more
directors who are designated by resolution adopted by a majority of the whole
board. The Nominating Committee shall be responsible to the board of directors
and/or stockholders, as the case may be, for recommending qualified candidates
for election as directors of the Corporation and for recommending candidates
for designation as members of the committee to fill vacancies therein. At all
meetings of the Nominating Committee, the presence of a majority of the members
thereof shall constitute a quorum for the
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transaction of business, and the act of a majority of the members of the whole
committee at which there is a quorum present shall be the act of the Nominating
Committee.
Section 20. Each committee of the board of directors shall keep regular
minutes of its meetings and report the same to the board of directors when
required.
COMPENSATION OF DIRECTORS
Section 21. Unless otherwise restricted by the certificate of
incorporation or these by-laws, the board of directors shall have the authority
to fix the compensation of directors. All directors may be paid their
expenses, if any, of attendance at each meeting of the board of directors, and
directors who are not full-time employees of the Corporation may be paid a
fixed sum for attendance at each meeting of the board of directors and/or a
stated salary as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation and expenses for attending committee meetings.
REMOVAL OF DIRECTORS
Section 22. Subject to the rights of the holders of any series of
Preferred Stock or any other class of capital stock of the Corporation (other
than the Common Stock and the Class B Common Stock) then outstanding, (a) any
director, or the entire board of directors, may be removed from office at any
time prior to the expiration of his term of office, with or without cause, only
by the affirmative vote of the holders of record of outstanding shares
representing at least 66 2/3% of all of the aggregate voting power of
outstanding shares of capital stock of the Corporation then entitled to vote
generally in
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the election of directors, voting together as a single class at a special
meeting of stockholders called expressly for that purpose; provided that, any
director may be removed from office by the affirmative vote of a majority of
the entire board of directors, at any time prior to the expiration of his term
of office, as provided by law, in the event a director fails to meet the
qualifications stated in these by-laws for election as a director or in the
event such director is in breach of any agreement between such director and the
Corporation relating to such director's service as a director or employee of
the Corporation.
INDEMNIFICATION OF DIRECTORS
Section 23. The Corporation shall have the right to indemnify directors,
officers and agents of the Corporation to the fullest extent permitted by the
General Corporation Law of Delaware and by the certificate of incorporation, as
both may be amended from time to time.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these By-laws, notice is required to be
given to any director or stockholder, it shall be construed to mean written or
printed notice given either personally or by mail or wire addressed to such
director or stockholder, at his address as it appears on the records of the
Corporation, with postage or other charges thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be deposited in
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the United States mail or at the appropriate office for transmission by wire.
Notice to directors may also be given by telephone.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be
deemed equivalent thereto.
Section 3. Attendance at a meeting shall constitute a waiver of notice
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called
or convened.
Section 4. Neither the business to be transacted at, nor the purpose of,
any regular meeting of the board of directors need be specified in the notice
or waiver of notice of such meeting.
ARTICLE V
OFFICERS
Section 1. The officers of the Corporation shall be chosen by the board
of directors at its first meeting after each annual meeting of the stockholders
and shall be a Chairman of the Board, a President, a Vice President-Finance, a
Vice President-Newspaper Operations, and a Vice President-Broadcasting
Operations, a Treasurer and a Secretary. The board of directors may also
choose one or more additional Vice Presidents and one or more Assistant
Treasurers and Assistant Secretaries. Any number of offices may be held by the
same person, except that the offices of President and Secretary shall not be
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held by the same person. Vice Presidents may be given distinctive designations
such as Executive Vice President or Senior Vice President.
Section 2. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board of directors.
Section 3. The officers of the Corporation shall hold office until their
successors are chosen and qualify or until their earlier resignation or
removal. Any officer elected or appointed by the board of directors may be
removed at any time with or without cause by the affirmative vote of a majority
of the whole board of directors. Any vacancy occurring in any office of the
Corporation shall be filled by the board of directors.
CHAIRMAN OF THE BOARD
Section 4. The Chairman of the Board shall preside at all meetings of the
board of directors and the stockholders and shall have such other powers and
perform such other duties as may from time to time be assigned to him by the
board of directors.
THE PRESIDENT
Section 5. The President shall be subject to the direction of the board
of directors and shall have general and active management of the business of
the Corporation (except that journalistic decisions with respect to news and
editorial content of the St. Louis Post-Dispatch shall remain under the
authority of the editor thereof) and shall see that all orders and resolutions
of the board of directors are carried into effect. In the absence of
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the Chairman of the Board, or in the case the Chairman of the Board shall
resign, retire, become deceased or otherwise cease or be unable to act, the
President shall also perform the duties and exercise the powers of the Chairman
of the Board.
THE VICE-PRESIDENTS
Section 6. The Vice-Presidents shall have such powers and perform such
duties as may from time to time be assigned to them by the board of directors
or the President.
THE SECRETARY AND ASSISTANT SECRETARY
Section 7. The Secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings
of the meetings of the Corporation and of the board of directors in a book to
be kept for that purpose and shall perform like duties for the standing
committees of the board of directors when required. He shall give, or cause to
be given, notice of all meetings of the stockholders and special meetings of
the board of directors, and shall perform such other duties as may be
prescribed by the board of directors or the President, under whose supervision
he shall be. He shall have custody of the corporate seal of the Corporation
and he, or an Assistant Secretary, shall have authority to affix the same to
any instrument requiring it and when so affixed, it may be attested by his
signature or by the signature of such Assistant Secretary. The board of
directors may give general authority to any other officer to affix the seal of
the Corporation and to attest the affixing by his signature.
Section 8. The Assistant Secretary, or if there be more than one, the
Assistant Secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the Secretary or
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in the event of his inability or refusal to act, perform the duties and
exercise the powers of the Secretary and shall have such other powers and
perform such other duties as may from time to time be assigned to them by the
board of directors.
THE TREASURER AND ASSISTANT TREASURERS
Section 9. The Treasurer, under the supervision of the Vice
President-Finance, shall have charge of all the corporate funds and securities
and shall keep or cause to be kept full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all
monies and other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by or at the direction of
the board of directors or the Finance Committee.
Section 10. He shall disburse or cause to be disbursed the funds of the
Corporation as may be ordered by or at the direction of the Vice
President-Finance or the board of directors, taking proper vouchers for such
disbursements, and subject to the supervision of the Vice President-Finance,
shall render to the President and the board of directors, when they or either
of them so require, an account of his transactions as Treasurer and of the
financial condition of the Corporation.
Section 11. If required by the board of directors, he shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the board of directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
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Section 12. The Assistant Treasurer, or if there shall be more than one,
the Assistant Treasurers in the order determined by the board of directors (of
if there be no such determination, then in the order of their election), shall,
in the absence of the Treasurer or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the Treasurer and shall have
such other powers and perform such other duties as may from time to time be
assigned to them by the board of directors.
Section 13. In addition to the corporate officers elected by the board of
directors pursuant to this Article V, the President may, from time to time,
appoint one or more other persons as appointed officers who shall not be deemed
to be corporate officers, but may, respectively, be designated with such titles
as the President may deem appropriate. The President may prescribe the powers
to be exercised and the duties to be performed by each such appointed officer,
may designate the term for which each such appointment is made, and may, from
time to time, terminate any or all of such appointments. Such appointments and
termination of appointments shall be reported to the board of directors.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Every holder of shares of capital stock in the Corporation
shall be entitled to have a certificate sealed with the seal of the Corporation
and signed by, or in the name of the Corporation by, the Chairman of the Board,
Vice Chairman of the Board or the President and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the
Corporation, certifying the number of shares owned by him in the Corporation.
If the Corporation shall be authorized to issue more than one class of
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stock or more than one series of any class, the designations, preferences and
relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights shall be set forth in full or summarized on the
face or back of the certificate which the Corporation shall issue to represent
such class or series of stock, provided that, except as otherwise provided in
section 202 of the General Corporation Law of Delaware, in lieu of the
foregoing requirements, there may be set forth on the face or back of the
certificate which the Corporation shall issue to represent such class or series
of stock, a statement that the Corporation will furnish without charge to each
stockholder who so requests the designations, preferences and relative,
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 2. Any or all of the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of capital stock to be lost, stolen or destroyed.
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When authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the Corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
TRANSFERS OF STOCK
Section 4. Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of
any other lawful action, the board of directors may fix, in advance, a record
date, which shall not be more than sixty nor less than ten days before the date
of such
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meetings, nor more than sixty days prior to any other action. A determination
of stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the board of directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
Section 6. The Corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the Corporation, subject
to the provisions of the certificate of incorporation, if any, may be declared
by the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to provisions of any statute, the certificate of incorporation and
these by-laws.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
directors from time to
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time, in their absolute discretion, think proper as a reserve or reserves to
meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation, or for such other purpose as the
directors shall think conducive to the interest of the Corporation, and the
directors may modify or abolish any such reserve in the manner in which it was
created.
ANNUAL STATEMENT
Section 3. The board of directors shall present at each annual meeting,
and at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
Corporation.
CHECKS
Section 4. All checks or demands for money of the Corporation shall be
signed by such officer or officers or such person or persons as the board of
directors or the Finance Committee may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the Corporation shall be a 52 to 53 week
period which ends on the last Sunday in December.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of
the Corporation, the year of its organization and the words "Corporate Seal,
Delaware". The
23
<PAGE> 24
seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
CONTRACTS
Section 7. Except as otherwise provided in these by-laws, contracts with
labor unions shall be made or executed by any officer of the Corporation or the
Director/Personnel.
Section 8. An officer of the Corporation may sign any note, bond, or
mortgage of the Corporation in furtherance of the Corporation's ordinary
business and in order to implement any action authorized by these by-laws.
ARTICLE VIII
AMENDMENTS
Section 1. The by-laws of the Corporation may be amended, altered,
changed or repealed, and a provision or provisions inconsistent with the
provisions of the by-laws as they exist from time to time may be adopted, only
by the majority of the entire Board of Directors or by the affirmative vote of
the holders of record representing not less than 66 2/3% of the aggregate
voting power of all outstanding shares of capital stock of the Corporation then
entitled to vote generally in the election of Directors, voting together as a
single class, notwithstanding the fact that a lesser percentage may be
specified by the General Corporation Law of Delaware.
24
<PAGE> 1
EXHIBIT 10.8.1
AMENDMENT
OF THE
PULITZER RETIREMENT SAVINGS PLAN
The second sentence of Section 3.01(a) of the Pulitzer Retirement
Savings Plan is amended to read as follows, effective January 1, 1997:
"The designated percentage must be at least 1% and
not more than 16% (10% in the case of Participants
who are Highly Compensated Employees)."
PULITZER PUBLISHING COMPANY
9/16/97 /s/ Ronald H. Ridgway
- ----------- ------------------------------
Date Ronald H. Ridgway
Senior Vice President - Finance
<PAGE> 1
EXHIBIT 10.34
January 26, 1998
Ms. Emily Rauh Pulitzer
4903 Pershing Place
St. Louis, MO 63108
Dear Emily:
This letter will confirm the mutual agreement between you and Pulitzer
Publishing Company (the "Company") regarding your provision of consulting
services to the Company:
1. From September 1, 1997 through December 31, 1997 (the "Consulting
Period"), you agree to provide consulting and advisory services to the Company
and its subsidiaries as requested by the Chairman of the Board of Directors;
provided, however, that any such request will not interfere with your normal
civic and other commitments. Such services generally will consist of providing
advice regarding the business operations of the Company and its subsidiaries,
particularly their newspaper operations, and general advice regarding long-term
strategic planning, and may be rendered at the Company's office in St. Louis,
Missouri, or at any other mutually agreeable location. The Consulting Period
will be extended automatically on a year-to-year basis unless a party furnishes
written notice to the other party of its intent to terminate this agreement not
later than December 1 of any calendar year.
2. During the Consulting Period, the Company's management will use its
best efforts to cause you to be a member of the Board of Directors and the
Long-Range Planning Committee and will include you on the management slate for
election as a director at every stockholder's meeting at which your term as a
director would otherwise expire. For such service, you will receive the fees,
including reimbursement for expenses, payable to an outside director of the
Company or to members of any such committee, as applicable.
3. In consideration of your services as a consultant as described under
paragraph 1, the Company will pay compensation to you as described below:
(a) The Company will pay you, on a monthly basis, $131,200 per calendar
year. Payments will be made within ten days after the last business day of the
month during which such consulting services are performed. Notwithstanding the
foregoing, for 1997 $43,733.33 will be paid on the execution of this agreement.
(b) Upon the presentation of receipts and other proper documentation, the
Company will reimburse you, as soon as practicable, for all ordinary and
necessary business expenses incurred by you while providing consulting services
to the Company.
<PAGE> 2
(c) The Company will make available suitable office space and secretarial
services at its St. Louis office as you may reasonably require from time to
time in order to provide consulting services.
4. Notwithstanding paragraph 1, the Consulting Period and the mutual
obligations between you and the Company as described herein will terminate upon
your death or disability. For this purpose, "disability" means a mental or
physical condition as determined by the Board of Directors of the Company which
prevents you from providing the consulting services described under paragraph 1
for six consecutive calendar months.
5. During the Consulting Period, you will not be precluded from accepting
employment with an employer unrelated to the Company and its subsidiaries or
from engaging in any business or other consulting arrangements; provided,
however, such other employment, business or arrangement must not be competitive
with any business of the Company and its subsidiaries.
6. Any notice described herein will be sent to the Company, if
applicable, at its office in St. Louis, Missouri, and to you, if applicable, at
your residence at 4903 Pershing Place, St. Louis, Missouri 63108.
7. The mutual obligations described herein will be binding on and inure
to the benefit of the Company and any successor-in-interest to the Company and
be binding on and inure to the benefit of, and be enforceable by, you and your
personal or legal representative and heirs.
8. The mutual obligations described herein may not be modified, except by
a written instrument signed by you and the Company, and will be construed in
accordance with the laws of the State of Missouri.
If the foregoing provisions correctly describe the agreement between you
and the Company regarding your performance of consulting services for the
Company, please sign and return the enclosed copy of this letter.
Sincerely,
/s/ Michael E. Pulitzer
------------------------------------
Michael E. Pulitzer
Chairman and Chief Executive Officer
/s/ Emily Rauh Pulitzer
- -----------------------
Emily Rauh Pulitzer
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
Pulitzer Broadcasting Company
Star Publishing Company
WDSU Television, Inc.
WESH Television, Inc.
KCCI Television, Inc.
Pulitzer Technologies, Inc.
News Information, Inc.
WEJ Investment Company
Pulitzer Ventures, Inc.
Pulitzer Sports, Inc.
Lerner Newspapers, Inc.
Pulitzer Community Newspapers, Inc.
PCN Service Company
Hanford Sentinel, Inc.
Pulitzer Missouri Newspapers, Inc.
Napa Valley Publishing Company
Flagstaff Publishing Company
Santa Maria Times, Inc.
Haverhill Publishing, Inc.
Sonoma-Marin Publishing Company
Kauai Publishing Company
Northern Lakes Publishing Company
Northern Illinois Publishing Company
Southwestern Oregon Publishing Company
Eastern Missouri Publishing Company
Southwest Montana Publishing Company
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
To Pulitzer Publishing Company:
We consent to the incorporation by reference in Registration Statements Nos.
33-14107, 33-14108, 33-56263, 33-56265 and 333-26329 of Pulitzer Publishing
Company on Form S-8 of our reports dated February 6, 1998 (February 27, 1998 as
to the last paragraph of Note 3), appearing in this Annual Report on Form 10-K
of Pulitzer Publishing Company for the year ended December 31, 1997.
DELOITTE & TOUCHE LLP
Saint Louis, Missouri
March 25, 1998
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints MICHAEL E. PULITZER and RONALD H. RIDGWAY, and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his name, place and stead,
in any and all capacities, to sign Pulitzer Publishing Company's Annual Report
on Form 10-K, and to file the same, with all exhibits thereto and other
documents in connection therewith, and any amendments thereto, with the
Securities and Exchange Commission and New York Stock Exchange, Inc., granting
unto said attorneys-in-fact and agents and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or each of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Michael E. Pulitzer Director; Chairman, President and January 26, 1998
- --------------------------------- Chief Executive Officer
(Michael E. Pulitzer) (Principal Executive Officer)
/s/ Ronald H. Ridgway Director; Senior Vice President-Finance January 26, 1998
- --------------------------------- (Principal Financial and Accounting Officer)
(Ronald H. Ridgway)
/s/ Ken J. Elkins Director; Senior Vice President - January 26, 1998
- --------------------------------- Broadcasting Operations
(Ken J. Elkins)
/s/ David E. Moore Director January 26, 1998
- ---------------------------------
(David E. Moore)
/s/ Nicholas G. Penniman IV Director; Senior Vice President - January 26, 1998
- --------------------------------- Newspaper Operations
(Nicholas G. Penniman IV)
/s/ William Bush Director January 26, 1998
- ---------------------------------
(William Bush)
/s/ Emily Rauh Pulitzer Director January 26, 1998
- ---------------------------------
(Emily Rauh Pulitzer)
/s/ Alice B. Hayes Director January 26, 1998
- ---------------------------------
(Alice B. Hayes)
/s/ James M. Snowden Jr. Director January 26, 1998
- ---------------------------------
(James M. Snowden, Jr.)
</TABLE>
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<EPS-DILUTED> 2.23 2.58 0.46 1.19 1.77
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