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Previous: RICHFOOD HOLDINGS INC, S-8, 1995-10-16 |
Next: ALLIANCE VARIABLE PRODUCTS SERIES FUND INC, 485APOS, 1995-10-16 |
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 2
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: August 1, 1995
MCCLATCHY NEWSPAPERS, INC.
--------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-9824 94-0666175
- -------------------------------- -------------- -------------------------
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification Number)
2100 "Q" Street, CA 95816
- ---------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
(916) 321-1846
---------------------------------
(Registrant's telephone number,
including area code)
Page 1 of 14
<PAGE> 2
Item 7. Financial Statements and Exhibits.
(a) Interim financial statements of The News and Observer Publishing
Company (N & O) as of July 31, 1995 and for the seven-month periods
ended July 31, 1995 and 1994.
(b) Pro forma combined financial statements of the Registrant and N & O.
The interim financial statements and pro forma combined financial statements
should be read in conjunction with the N & O's financial statements and notes
thereto included under Item 7 (a) of Form 8-K/A, Amendment No. 1 dated August 1,
1995 and filed with the Securities and Exchange Commission on August 25, 1995,
and the consolidated financial statements of McClatchy Newspapers, Inc. filed
with the Securities Exchange Commission in the Company's 1994 Form 10-K and 1995
Forms 10-Q.
2
<PAGE> 3
THE NEWS AND OBSERVER PUBLISHING COMPANY
BALANCE SHEET
JULY 31, 1995
(UNAUDITED)
(IN THOUSANDS)
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS:
Cash and temporary investments
(including restricted cash of $5,532) $ 8,182
Trade receivables (less allowance of $986) 9,156
Newsprint, ink and other inventories 930
Deferred taxes 1,932
Other current assets 4,974
---------
Total current assets 25,174
PROPERTY, PLANT AND EQUIPMENT:
Land 6,810
Buildings and improvements 22,674
Equipment 41,526
Construction in progress 28,911
---------
Total 99,921
Accumulated depreciation (41,381)
---------
Net property, plant and equipment 58,540
INTANGIBLES - NET 2,119
DEFERRED TAXES 2,131
OTHER ASSETS 1,525
---------
TOTAL $ 89,489
=========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 4,342
Accrued compensation 6,992
Unearned revenue 4,303
Accrued interest 4,077
Carrier deposits 988
Other accrued liabilities 252
---------
Total current liabilities 20,954
LONG-TERM DEBT 117,000
DEFERRED COMPENSATION AND OTHER 7,439
COMMITMENTS AND CONTINGENCIES (NOTE 3) 700
SHAREHOLDERS' DEFICIT:
Common stock 4,460
Retained deficit (61,064)
---------
Total shareholders' deficit (56,604)
---------
TOTAL $ 89,489
=========
</TABLE>
See notes to interim financial statements
3
<PAGE> 4
THE NEWS AND OBSERVER PUBLISHING COMPANY
STATEMENT OF OPERATIONS
FOR THE SEVEN MONTHS ENDED JULY 31, 1995 AND 1994
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
REVENUES - NET:
Advertising $ 51,887 $ 46,169
Circulation 11,373 10,920
Other 4,133 2,956
-------- --------
Total 67,393 60,045
OPERATING EXPENSES:
Compensation 30,189 24,454
Newsprint and supplements 11,299 8,234
Depreciation and amortization 3,136 2,066
Other operating expenses 18,366 15,384
-------- --------
Total 62,990 50,138
-------- --------
OPERATING INCOME 4,403 9,907
NONOPERATING (EXPENSES) INCOME:
Interest expense (5,551) (5,566)
Interest income 337 252
Other - net 172 22
-------- --------
Total (5,042) (5,292)
-------- --------
(LOSS) INCOME BEFORE INCOME TAX PROVISION (639) 4,615
INCOME TAX PROVISION 24 1,952
-------- --------
NET (LOSS) INCOME $ (663) $ 2,663
======== ========
</TABLE>
See notes to interim financial statements.
4
<PAGE> 5
THE NEWS AND OBSERVER PUBLISHING COMPANY
STATEMENT OF CASH FLOWS
FOR THE SEVEN MONTHS ENDED JULY 31, 1995 AND 1994
(UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Net (loss) income $ (663) $ 2,663
Reconciliation to net cash provided:
Depreciation and amortization 3,136 2,066
Changes in assets and liabilities - net 3,172 1,933
Other 1,263 337
-------- --------
Net cash provided by operating activities 6,908 6,999
CASH (USED) PROVIDED BY INVESTING ACTIVITIES:
Purchase of property, plant and equipment (17,527) (15,407)
Receipts of loans due 147 70
Other 260 (409)
-------- --------
Net cash used in investing activities (17,120) (15,746)
CASH (USED) PROVIDED BY FINANCING ACTIVITIES:
Repayments of long-term debt (813) (187)
Proceeds of long-term debt 11,375 2,000
Dividends (758) (710)
Other 184 --
-------- --------
Net cash provided by financing activities 9,988 1,103
NET CHANGE (224) (7,644)
CASH AND TEMPORARY INVESTMENTS,
BEGINNING OF YEAR 8,406 17,998
-------- --------
CASH AND TEMPORARY INVESTMENTS,
END OF PERIOD $ 8,182 $ 10,354
======== ========
OTHER CASH FLOW INFORMATION:
Cash paid during the year for interest
(net of amounts capitalized) $ 5,551 $ 5,566
</TABLE>
See notes to interim financial statements.
5
<PAGE> 6
THE NEWS AND OBSERVER PUBLISHING COMPANY
NOTES TO INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
1. NON-RECURRING EXPENSES
In the opinion of Management, the interim financial statements contain all
adjustments necessary to present fairly the Company's financial position,
results of operations and cash flows for the interim periods presented. All
entries are normal recurring entries except for the following adjustments in
1995:
- - Special bonuses and lump-sum payments were granted to certain employees and
retirees, respectively, resulting in a pre-tax charge of $2,400,000.
- - A pre-tax charge related to an environmental clean-up (see Note 3) of
$600,000 was recorded.
- - A pre-tax charge of $252,000 related to The Philanthropy Journal, a
newspaper published by the News and Observer Foundation. The News and
Observer Foundation is no longer affiliated with the Company after July 31,
1995.
2. INCOME TAXES
The difference between income tax expense and the amount computed by
applying the statutory federal income tax rate to income before income tax for
the seven months ended July 31, 1995 and 1994 arises primarily from state income
taxes (net of federal benefit), municipal interest income, goodwill amortization
and other nondeductible expenses.
3. COMMITMENTS AND CONTINGENCIES
During 1992, the Company experienced a release of solvent/cleaning agents
at a warehouse location. The Company engaged an independent consultant to
evaluate the potential ground and soil contamination and to develop a plan to
clean up the contamination on site. The resulting interim corrective action plan
was approved by the State of North Carolina, and the Company entered into an
agreement with the independent consultant to implement the approved plan.
Management has estimated and accrued preliminary site clean up costs of $925,000
($225,000 as a current liability) as of July 31, 1995, which are included in
accrued expenses; however, additional costs may be incurred given the
preliminary nature of the estimate.
The Internal Revenue Service has audited the Company's tax returns for
1991-1993, and has proposed assessments primarily relating to taxable gains and
the deductibility of certain expenses. The total amount of the assessments,
including any interest and penalties, is approximately $1,350,000 at July 31,
1995. The Company is protesting the assessments and believes it will prevail. In
the opinion of Management, adequate provision has been made for any taxes and
interest resulting from these assessments and the ultimate outcome of these
matters will not have a material, adverse effect on the Company's results of
operation or financial position.
6
<PAGE> 7
MCCLATCHY NEWSPAPERS, INC.
AND
THE NEWS AND OBSERVER PUBLISHING COMPANY
PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
The accompanying unaudited pro forma combined balance sheet as of July 31,
1995 gives effect to the acquisition of The News and Observer Publishing Company
(N & O) by McClatchy Newspapers, Inc. (McClatchy) as if the acquisition had
occurred on July 31, 1995. The accompanying unaudited pro forma combined
statements of operations give effect to such acquisition as if it had occurred
on January 1st of the applicable year. The pro forma information is based on
historical financial statements after giving effect to the transaction using the
purchase method of accounting and the assumptions and adjustments in the notes
to pro forma combined financial statements. The pro forma combined financial
statements have been prepared on the basis of preliminary estimates of the fair
values of the assets acquired.
The pro forma combined financial statements have been prepared by McClatchy
based upon the N & O's financial statements for the seven months ended July 31,
1995 and the financial statements of the N & O filed under Item 7 (a) of Form
8-K/A, Amendment No. 1 dated August 1, 1995 and filed with the Securities and
Exchange Commission on August 25, 1995, which have been provided by N & O. This
pro forma financial information is not necessarily indicative either of results
of operations that would have occurred had the purchase been made at the
beginning of the applicable year or of the future results of operations of the
combined operations. The pro forma combined financial statements should be read
in conjunction with the N & O's financial statements and notes thereto included
herein and under Item 7 (a) of Form 8-K/A, Amendment No. 1, and the
consolidated financial statements of McClatchy Newspapers, Inc. filed with the
Securities and Exchange Commission in McClatchy's 1994 Form 10-K and 1995 Forms
10-Q.
7
<PAGE> 8
MCCLATCHY NEWSPAPERS, INC. AND
THE NEWS AND OBSERVER PUBLISHING COMPANY
PRO FORMA COMBINED BALANCE SHEET (UNAUDITED)
JULY 31, 1995
(In thousands)
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
MCCLATCHY NEWS & ADJUSTMENTS PRO FORMA
NEWSPAPERS OBSERVER INCREASE (DECREASE) COMBINED
---------- -------- ------------------- --------
CURRENT ASSETS: (see Note 1)
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 121,305 $ 8,182 $ (109,065) (a) $ 20,422
Trade accounts receivable 49,428 9,156 466 (c6) 59,050
Other current assets 26,194 7,836 (3,935) (c2) 30,095
--------- --------- -------------- ----------
Total current assets 196,927 25,174 (112,534) 109,567
PROPERTY, PLANT AND
EQUIPMENT - NET 273,090 58,540 25,202 (c1) 356,832
INTANGIBLES - NET 113,432 2,119 295,346 (b) 410,897
OTHER ASSETS 6,400 3,656 3,963 (c5,c8) 14,019
--------- --------- -------------- ----------
TOTAL ASSETS $ 589,849 $ 89,489 $ 211,977 $ 891,315
========= ========= ============== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES $ 57,925 $ 20,954 $ (337) (c3,c7) $ 78,542
LONG-TERM DEBT -- 117,000 159,500 (a) 276,500
OTHER LONG-TERM OBLIGATIONS 22,241 8,139 (3,790) (c4) 26,590
DEFERRED TAXES 50,537 -- 50,537
STOCKHOLDERS' EQUITY:
Common stock 300 4,460 (4,460) (d) 300
Additional paid-in capital 62,186 -- 62,186
Retained earnings (deficit) 397,031 (61,064) 61,064 (d) 397,031
Treasury stock (371) -- (371)
--------- --------- --------------- ----------
Total stockholders' equity (deficit) 459,146 (56,604) 56,604 459,146
--------- --------- --------------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 589,849 $ 89,489 $ 211,977 $ 891,315
========= ========= =============== ==========
</TABLE>
See notes to pro forma combined financial statements.
8
<PAGE> 9
MCCLATCHY NEWSPAPERS, INC.
AND
THE NEWS AND OBSERVER PUBLISHING COMPANY
PRO FORMA COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
FOR SEVEN MONTHS ENDED JULY 31, 1995
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
PRO FORMA
MCCLATCHY NEWS & ADJUSTMENTS PRO FORMA
NEWSPAPERS OBSERVER INCREASE (DECREASE) COMBINED
---------- -------- ------------------- --------
REVENUES - NET: (see Note 2)
<S> <C> <C> <C> <C>
Advertising $ 214,890 $ 51,887 $ 266,777
Circulation 50,738 11,373 62,111
Other 12,841 4,133 16,974
------------- -------------- -------------
Total 278,469 67,393 345,862
OPERATING EXPENSES:
Compensation 119,326 30,189 $ (3,284) (d) 146,231
Newsprint and supplements 49,840 11,299 61,139
Depreciation and amortization 21,750 3,136 4,856 (a) 29,742
Other operating expenses 53,698 18,366 (718) (e) 71,346
------------- -------------- ------------ -------------
Total 244,614 62,990 854 308,458
------------- -------------- ------------ -------------
OPERATING INCOME 33,855 4,403 (854) 37,404
INTEREST EXPENSE (27) (5,551) (2,450) (b) (8,028)
INTEREST INCOME 3,739 337 (4,076) (c)
OTHER NONOPERATING (808) 172 (636)
------------- -------------- ------------ -------------
INCOME (LOSS) BEFORE
INCOME TAX PROVISION 36,759 (639) (7,380) 28,740
INCOME TAX PROVISION 15,045 24 (870) (f) 14,199
------------- -------------- ------------ -------------
NET INCOME $ 21,714 $ (663) $ (6,510) $ 14,541
============= ============== ============ =============
NET INCOME PER COMMON SHARE $0.72 $0.48
===== =====
WEIGHTED-AVERAGE COMMON SHARES 30,007 30,007
</TABLE>
See notes to pro forma combined financial statements.
9
<PAGE> 10
MCCLATCHY NEWSPAPERS, INC.
AND
THE NEWS AND OBSERVER PUBLISHING COMPANY
PRO FORMA COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
FOR YEAR ENDED DECEMBER 31, 1994
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
PRO FORMA
MCCLATCHY NEWS & ADJUSTMENTS PRO FORMA
NEWSPAPERS OBSERVER INCREASE (DECREASE) COMBINED
---------- -------- ------------------- --------
REVENUES - NET: (see Note 2)
<S> <C> <C> <C> <C>
Advertising $ 368,068 $ 82,930 $ 450,998
Circulation 85,017 18,728 103,745
Other 18,333 5,497 23,830
------------- -------------- -------------
Total 471,418 107,155 578,573
OPERATING EXPENSES:
Compensation 202,368 43,281 $ (1,123) (d) 244,526
Newsprint and supplements 67,505 15,195 82,700
Depreciation and amortization 38,140 4,206 9,480 (a) 51,826
Other operating expenses 91,537 26,944 (409) (e) 118,072
------------- -------------- ------------- -------------
Total 399,550 89,626 7,948 497,124
------------- -------------- ------------- -------------
OPERATING INCOME 71,868 17,529 (7,948) 81,449
INTEREST EXPENSE (33) (9,553) (741) (b) (10,327)
INTEREST INCOME 3,247 363 (3,610) (c)
PARTNERSHIP LOSSES (5,469) (5,469)
OTHER NONOPERATING (48) 111 63
------------- -------------- ------------- -------------
INCOME BEFORE
INCOME TAX PROVISION 69,565 8,450 (12,299) 65,716
INCOME TAX PROVISION 22,920 3,424 (913) (f) 25,431
------------- -------------- ------------- -------------
NET INCOME $ 46,645 $ 5,026 $ (11,386) $ 40,285
============= ============== ============= =============
NET INCOME PER COMMON SHARE $1.58 $1.36
===== =====
WEIGHTED-AVERAGE COMMON SHARES 29,583 29,583
</TABLE>
See notes to pro forma combined financial statements.
10
<PAGE> 11
MCCLATCHY NEWSPAPERS, INC.
AND
THE NEWS AND OBSERVER PUBLISHING COMPANY
NOTES TO PRO FORMA COMBINED
FINANCIAL STATEMENTS (UNAUDITED)
1. PRO FORMA ADJUSTMENTS TO COMBINED BALANCE SHEET
(a) The following amounts reflect McClatchy's investment in N & O,
assuming the refinancing of N & O debt (in thousands):
<TABLE>
<S> <C>
Cash paid $ 109,065
New bank financing 148,000
N & O debt assumed 117,000
N & O debt prepayment penalty 11,500
------------------
Investment in N & O $ 385,565
==================
(b) The pro forma combined balance sheet reflects excess purchase price
over identifiable assets acquired as follows (in thousands):
Investment in N & O $ 385,565
Add: N & O shareholder deficit, as reported 56,604
Add: Elimination of previously recorded
N & O intangible assets 2,119
Less: N & O debt (117,000)
Less: Increase in carrying values of net assets
to adjust to fair value (see "c" below) (45,682)
------------------
Excess purchase price over net assets acquired $ 281,606
==================
The pro forma adjustment to intangibles consists of:
Excess purchase price over net assets acquired $ 281,606
Identifiable intangibles acquired (see "c" below) 15,859
Elimination of previously recorded N & O intangibles (2,119)
------------------
Net adjustment to intangibles $ 295,346
==================
</TABLE>
11
<PAGE> 12
(c) The pro forma combined balance sheet reflects increases (decreases)
to carrying values of net assets as follows (in thousands):
<TABLE>
<S> <C>
Adjust property and equipment to estimated fair value $ 25,202 (c1)
Record identifiable intangibles acquired
(principally customer lists) 15,859 (b)
Reflect collection of notes receivable from
selling shareholders (3,935) (c2)
Adjust pension accounts in accordance
with McClatchy policies:
Current liability 591 (c3)
Long-term liability 3,790 (c4)
Current asset 555 (c5)
Calculate reserve for bad debts in accordance
with McClatchy policies 466 (c6)
Accrue miscellaneous acquisition costs (254) (c7)
Adjust deferred income taxes for above items 3,408 (c8)
------------------
$ 45,682
==================
</TABLE>
(d) In accordance with the purchase method of accounting, N & O's
stockholder accounts are eliminated as of the date of acquisition.
2. PRO FORMA ADJUSTMENTS TO COMBINED STATEMENTS OF OPERATIONS
The following adjustments are incorporated in the pro forma combined
statements of operations for the seven months ended July 31, 1995 and year ended
December 31, 1994 (in thousands):
<TABLE>
<CAPTION>
Increase (Decrease) in Income
-----------------------------
1995 1994
---- ----
<S> <C> <C>
(a) Increase in depreciation and amortization resulting from $ (4,856) $ (9,480)
adjustment of carrying value of property, plant and
equipment and intangibles.
(b) Increase in interest expense on assumed borrowings net (2,450) (741)
of additional interest that would have been capitalized
on construction projects, assuming 6.25% interest rate
in 1995 and 4.6 % in 1994.
(c) Decrease in interest income, as invested cash of (4,076) (3,610)
both operations would have been used to reduce
assumed borrowings.
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
Increase (Decrease) in Income
-----------------------------
1995 1994
---- ----
<S> <C> <C>
(d) Decrease in compensation due to the following:
- Changes in accounting and operating policies 906 1,123
- Bonuses paid to certain employee shareholders
and retirees in connection with the transaction 2,378 N/A
(e) Decrease in other operating expenses due to the following:
- Change in the method of accounting for bad debt expense 466 231
- Costs associated with The Philanthropy Journal 252 178
(f) Decrease in income taxes associated with (a) through (e) above. 870 913
------ ------
Net decrease in income $ (6,510) $(11,386)
========= ========
</TABLE>
13
<PAGE> 14
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
McClatchy Newspapers, Inc.
---------------------------------
(Registrant)
By /s/ Karole Morgan-Prager
---------------------------------
Karole Morgan-Prager
General Counsel and
Corporate Secretary
Date: October 13, 1995
14
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