United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR
----- 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 24, 1995
----- TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____to_____
Commission File Number: 1-10333
--------------------------------
CENTRAL NEWSPAPERS, INC.
(Exact name of registrant as specified in its charter)
Indiana 35-0220660
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
135 North Pennsylvania Street, Suite 1200, Indianapolis, Indiana 46204
(Address of principal executive office)
(317) 231-9200
(Registrant's telephone number)
-------------------------------
Indicate by check mark whether the registrant has (1) 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
--- ---
The number of shares of each class of common stock outstanding as of
September 24, 1995:
CLASS A COMMON STOCK 23,513,850
CLASS B COMMON STOCK 31,553,000
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<PAGE>2
Central Newspapers, Inc.
Index to Form 10-Q
Part I -- FINANCIAL INFORMATION Page
Item 1 -- Financial Statements:
Consolidated Statement of Financial Position 3-4
Consolidated Statement of Income 5
Consolidated Statement of Shareholders' Equity 6
Consolidated Statement of Cash Flows 7
Notes to Consolidated Financial Statements 8-10
Item 2 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-13
Part II -- OTHER INFORMATION 14-15
<PAGE>3
PART I
Item 1. Financial Statements
CENTRAL NEWSPAPERS, INC.
Consolidated Statement of Financial Position
=========================================================================
Sept. 24, Dec. 25,
ASSETS 1995 1994
(In thousands) (Unaudited)
- -------------------------------------------------------------------------
CURRENT ASSETS:
Cash and cash equivalents $22,556 $22,105
Marketable securities 102,929 107,413
Accounts receivable (net of allowances of
$1,104 and $1,071) 53,103 54,625
Inventories 9,280 9,142
Deferred income tax benefits 6,420 7,636
Other current assets 6,987 2,418
- -------------------------------------------------------------------------
Total current assets 201,275 203,339
- -------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT:
Land 16,913 14,665
Buildings and improvements 98,430 99,985
Leasehold improvements 4,097 4,075
Machinery and equipment 319,526 302,333
Construction in progress 33,567 9,934
- -------------------------------------------------------------------------
472,533 430,992
Less accumulated depreciation 200,786 181,675
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271,747 249,317
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OTHER ASSETS:
Land held for development 1,598 4,148
Goodwill 28,996 29,112
Investment in Affiliate 5,595 3,989
Other 14,107 10,539
- -------------------------------------------------------------------------
50,296 47,788
- -------------------------------------------------------------------------
TOTAL ASSETS $523,318 $500,444
=========================================================================
See accompanying notes to consolidated financial statements.
<PAGE>4
CENTRAL NEWSPAPERS, INC.
Consolidated Statement of Financial Position
=========================================================================
Sept. 24, Dec. 25,
LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1994
(In thousands, except share data) (Unaudited)
- -------------------------------------------------------------------------
CURRENT LIABILITIES:
Accounts payable $11,694 $17,134
Accrued compensation 16,359 16,423
Dividends payable 4,534 4,205
Accrued expenses and other liabilities 14,353 18,240
Deferred revenue 16,651 14,430
- -------------------------------------------------------------------------
Total current liabilities 63,591 70,432
- -------------------------------------------------------------------------
DEFERRED INCOME TAXES 23,234 22,216
- -------------------------------------------------------------------------
LONG-TERM DEBT (4 1/2% debentures due
December 1, 1998) 2,678 2,678
- -------------------------------------------------------------------------
POSTRETIREMENT BENEFIT OBLIGATION 79,813 77,802
- -------------------------------------------------------------------------
MINORITY INTEREST IN SUBSIDIARY 8,212 7,554
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SHAREHOLDERS' EQUITY:
Preferred stock--issuable in series:
Authorized--25,000,000 shares
Issued--none
Class A common stock--without par value:
Authorized--75,000,000 shares
Issued--23,513,850 and 23,483,000 shares 18,885 18,182
Class B common stock--without par value:
Authorized--50,000,000 shares
Issued--31,553,000 shares 63 63
Retained earnings 325,901 300,968
Unrealized gain on available-for-sale securities 941 549
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345,790 319,762
- -------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $523,318 $500,444
=========================================================================
See accompanying notes to consolidated financial statements.
<PAGE>5
CENTRAL NEWSPAPERS, INC.
Consolidated Statement of Income
(Unaudited)
===============================================================================
(In thousands, except per share data) 13 Weeks Ended 39 Weeks Ended
Sept. 24, Sept. 25, Sept. 24, Sept. 25,
1995 1994 1995 1994
- -------------------------------------------------------------------------------
OPERATING REVENUES:
Advertising $104,013 $94,947 $317,524 $285,168
Circulation 30,518 29,285 94,528 90,822
Other 973 618 2,806 1,650
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135,504 124,850 414,858 377,640
- ------------------------------------------------------------------------------
OPERATING EXPENSES:
Operating costs 61,959 53,823 187,234 160,671
Distribution and general 48,240 47,616 144,946 138,326
Depreciation 7,273 6,639 21,673 19,959
Work force reduction cost 864 2,622 132
- ------------------------------------------------------------------------------
118,336 108,078 356,475 319,088
- ------------------------------------------------------------------------------
OPERATING INCOME 17,168 16,772 58,383 58,552
OTHER INCOME 2,103 1,578 7,361 4,278
(principally investment income)
OTHER EXPENSE (283) (275) (831) (695)
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INCOME BEFORE INCOME TAXES 18,988 18,075 64,913 62,135
PROVISION FOR INCOME TAXES 7,649 7,347 26,503 25,375
- ------------------------------------------------------------------------------
INCOME BEFORE MINORITY INTEREST AND
EQUITY IN AFFILIATE 11,339 10,728 38,410 36,760
MINORITY INTEREST IN SUBSIDIARY (284) (668) (913) (2,575)
EQUITY IN AFFILIATE, NET OF TAX BENEFITS 79 (753) (569) (2,697)
- ------------------------------------------------------------------------------
NET INCOME $11,134 $9,307 $36,928 $31,488
==============================================================================
NET INCOME PER COMMON SHARE $.42 $.35 $1.39 $1.18
==============================================================================
DIVIDENDS DECLARED PER CLASS A COMMON SHARE $.17 $.14 $.45 $.38
AVERAGE COMMON SHARES OUTSTANDING 26,652 26,625 26,645 26,618
See accompanying notes to consolidated financial statements.
<PAGE>6
CENTRAL NEWSPAPERS, INC.
Consolidated Statement of Shareholders' Equity
(Unaudited)
===============================================================================
(In thousands) Unrealized
Gain on
Class A Class B Available-
Common Common Retained for-Sale
Stock Stock Earnings Securities
- -------------------------------------------------------------------------------
BALANCE AT DECEMBER 27, 1993 $17,137 $63 $273,493
Adoption of SFAS No. 115,
net of deferred income
taxes and minority interest $649
Net income (39 weeks) 31,488
Dividends declared:
Class A common stock (8,917)
Class B common stock (1,200)
Exercise of stock options 801
Change in net unrealized gain on
available-for-sale securities 6
- -------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 25, 1994 17,938 63 294,864 655
Net income (13 weeks) 9,833
Dividends declared:
Class A common stock (3,287)
Class B common stock (442)
Exercise of stock options 244
Change in net unrealized gain on
available-for-sale securities (106)
- -------------------------------------------------------------------------------
BALANCE AT DECEMBER 25, 1994 18,182 63 300,968 549
Net income (39 weeks) 36,928
Dividends declared:
Class A common stock (10,575)
Class B common stock (1,420)
Exercise of stock options 703
Change in net unrealized gain on
available-for-sale securities 392
- -------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 24, 1995 $18,885 $63 $325,901 $941
===============================================================================
See accompanying notes to consolidated financial statements.
<PAGE>7
CENTRAL NEWSPAPERS, INC.
Consolidated Statement of Cash Flows
(Unaudited)
=========================================================================
(In thousands) 39 Weeks Ended
Sept. 24, Sept. 25,
1995 1994
- -------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net income $36,928 $31,488
Items which did not use (provide) cash:
Depreciation and amortization 22,266 20,356
Postretirement and pension benefits 3,386 4,751
Gain on disposition of assets (594) (159)
Minority interest in earnings of subsidiary 912 2,575
Equity in Affiliate 569 2,697
Deferred income taxes 2,353 1,082
Net purchases of trading securities (15,137)
Net change in other current assets and liabilities (9,866) 450
- -------------------------------------------------------------------------
Net cash provided by operating activities 40,817 63,240
- -------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment-net (41,990) (13,748)
Purchases of available-for-sale securities (53,163) (194,678)
Proceeds from available-for-sale securities 73,581 186,728
Purchase of minority interest in subsidiary (500) (36,205)
Investment in Affiliate (2,484) (2,970)
Other (4,539) (774)
- -------------------------------------------------------------------------
Net cash used by investing activities (29,095) (61,647)
- -------------------------------------------------------------------------
FINANCING ACTIVITIES:
Cash dividends paid (11,190) (9,580)
Dividends paid to minority interest (678) (1,937)
Proceeds from exercise of stock options 597 650
- -------------------------------------------------------------------------
Net cash used by financing activities (11,271) (10,867)
- -------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 451 (9,274)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 22,105 22,143
- -------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $22,556 $12,869
=========================================================================
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid during the period $28,017 $24,905
Interest paid during the period 161 161
See accompanying notes to consolidated financial statements.
<PAGE>8
CENTRAL NEWSPAPERS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
1. The accompanying unaudited consolidated financial statements do not
include all of the information and disclosures which are normally included in
Form 10-K and Annual Report to shareholders. These financial statements
should be read in conjunction with the Company's audited consolidated
financial statements and related notes for the year ended December 25, 1994.
The accompanying consolidated financial statements have been prepared in
accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. The consolidated statement of financial position at December 25, 1994
has been derived from audited financial statements. In the opinion of the
Company's management, the unaudited consolidated financial statements reflect
all adjustments which are necessary to present fairly the Company's financial
position, results of operations and cash flows for the interim periods
presented. All adjustments are of a normal recurring nature. Such statements
are not necessarily indicative of the results to be expected for the full
year.
2. The Company's fiscal year ends on the last Sunday of the calendar year.
The years ending December 31, 1995 and December 25, 1994 comprise 53 and 52
weeks, respectively.
3. Net income per common share is computed based on the weighted average
number of common shares outstanding. The Class B common shareholders have the
right to convert their shares into shares of Class A common stock at the ratio
of ten shares of Class B common stock for one share of Class A common stock.
The Class B common stock is included in the computation as if converted into
Class A common stock.
4. During 1995 and 1994, the Company reduced its work force in response to
the advertising environment and technological changes. Certain employees were
offered retirement benefits through a non-qualified supplemental retirement
plan. For the nine month period ended September 24, 1995, work force
reduction costs were $2.6 million. For the nine month period ended September
25, 1994, work force reduction costs were $132,000.
5. The Company, through its subsidiaries, has a 13.5% partnership interest in
Ponderay Newsprint Company (Ponderay), which was formed to own and operate a
newsprint mill in Washington. The Company's investment in Ponderay at
September 24, 1995 and September 25, 1994 was $36.4 million and $31.3 million.
The Company has committed to purchase for use in Phoenix the lesser of 13.5%
of annual newsprint production or 28,400 metric tons on a "take if tendered"
basis until the partnership debt is repaid. During the 39 weeks ended
September 24, 1995 and September 25, 1994 the Company purchased $13.7 million
and $9.8 million of newsprint from Ponderay. For the nine months ended
September 30, 1995, Ponderay's net revenue and net losses were $107.9 million
and $6.5 million, respectively; compared to $72.3 million and $30.8 million
during the first nine months of 1994.
6. The Company's Stock Option Plan has 541,800 options exercisable as of
September 24, 1995. During the nine month period ended September 24, 1995,
options for 31,150 shares of Class A common stock were exercised.
7. During 1993, the Company announced the construction of a new downtown
Phoenix office building. Total costs of the building and related expenditures
are expected to be $32 million with completion anticipated in the first
quarter of 1996. Phoenix Newspapers, Inc. will install a new computer system
with an estimated cost of $20 million. The anticipated completion date is
mid-1997. Formal commitments totaling $36.5 million have been entered into
related to these and other capital projects. Cumulative expenditures on these
commitments were $26.4 million at September 24, 1995.
<PAGE>9
The Company is constructing a production facility in Indianapolis at an
estimated cost of $20 million with completion expected during the fourth
quarter of 1995. Formal commitments of $17.2 million and cumulative
expenditures of $14.2 million have been made on this project.
The Company's wholly-owned subsidiary, Topics Newspapers, Inc., is
constructing a new production facility on the north side of Indianapolis at an
estimated cost of $4.7 million with completion expected in the first quarter
of 1996. Formal commitments of $3.9 million and cumulative expenditures of
$894,000 have been made on this project.
8. The Company adopted SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" effective December 27, 1993. Management
determines the classification of its investments in debt and equity securities
at the time of purchase. Securities classified as available-for-sale are
carried at fair value, with unrealized gains and losses, net of tax, reported
in a separate component of shareholders' equity. Securities classified as
trading securities are carried at fair value with unrealized gains and losses
reported in earnings. The cost of securities sold is based on the specific
identification method. All marketable debt securities are classified as
current assets. All equity securities are classified as noncurrent assets.
Debt and equity securities at September 24, 1995 (in thousands):
September 24, 1995
---------------------
(In thousands) Fair Value Cost
Available-for-sale securities:
- ------------------------------
Debt securities of the U.S.
Treasury and agencies $ 40,062 $ 39,960
Equity securities 2,208 142
Corporate debt securities 513 506
-------- --------
42,783 40,608
-------- --------
Trading securities:
- -------------------
Debt securities of the U.S.
Treasury and agencies 11,226 11,216
Corporate debt securities 13,301 13,110
Mortgaged-backed securities 27,448 26,805
Preferred stock 10,266 10,184
Other 125 191
-------- --------
62,366 61,506
-------- --------
Total $105,149 $102,114
======== ========
The net unrealized gain on trading securities included in earnings during the
first nine months of 1995 amounted to $1.3 million.
9. On June 24, 1994, the Company announced an offer to purchase all of the
Class A common stock (shares) of Indianapolis Newspapers, Inc. (INI) not
already owned for $10,000 net in cash per share. The Company purchased 3,591
shares on September 12, 1994, which increased the Company's ownership in INI
from 71.2% to 89.9%. INI is now considered a part of the Company's
"consolidated group" for income tax reporting purposes.
The total acquisition cost of $36.2 million, including legal, accounting and
consulting fees, was accounted for using the purchase method of accounting.
<PAGE>10
The fair value of assets acquired was $22.9 million, including $19.7 million
of goodwill. The transaction resulted in a reduction of the minority interest
in subsidiary of $13.4 million. The share purchases did not significantly
affect reported net income for the 1994 fiscal year.
On June 1, 1995, the Company purchased 50 shares of Class A common stock of
INI for $10,000 net in cash per share. This transaction increased the
Company's ownership of INI to 90.2%.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
The Company's business is to a certain extent seasonal with peak revenues and
profits generally occurring in the second and fourth quarters.
On September 12, 1994, the Company completed the purchase of 3,591 shares of
the Class A common stock of Indianapolis Newspapers, Inc. (INI) for $10,000
net in cash per share. The transaction increased the Company's ownership in
INI to 89.9% from 71.2%. The increase in ownership will permit INI to be
included in the consolidated group for income tax reporting. On June 1, 1995,
the Company purchased 50 shares of Class A common stock of INI for $10,000 net
in cash per share, which increased its ownership of INI to 90.2%. The Company
does not anticipate the acquisition of shares will have a significant impact
on reported earnings per share for the current fiscal year.
During the first quarter of 1995, INI announced a voluntary buy-out plan to
certain union employees. This offer, which terminated on April 19, 1995, was
accepted by 13 employees. Work force reduction costs associated with this
offer were $527,000. During the second quarter of 1995, INI and Muncie
Newspapers, Inc. completed a second voluntary staff reduction program offered
to employees in certain nonunion departments. This program, which was
accepted by 29 employees, resulted in work force reduction costs of
$1.2 million. INI completed a third voluntary staff reduction program relating
to the transportation department in the third quarter of 1995. This offer was
accepted by 22 employees and resulted in work force reduction costs of
$864,000.
Results of Operations -- Fiscal Third Quarter Comparisons
Operating revenues for the quarter increased $10.7 million, or 8.5%, which
consisted of an increase in advertising revenue of $9.1 million, or 9.6%, and
an increase in circulation revenue of $1.2 million, or 4.2%.
Advertising full run-of-press (ROP) linage was up 7.3% for the quarter.
Retail linage increased 3.4%, national linage decreased 8.5% and classified
linage increased 12.2%. The increase in ROP linage reflects improved economic
conditions in our markets. The volume of preprinted inserts, which includes
local and national advertising supplements inserted into the newspapers,
increased 10.4%.
Advertising revenue at Phoenix increased 10.5%, while full run linage was up
9.2%. At Indianapolis, advertising revenue was up 8.0%, while full run linage
was up 4.6%. Both newspapers increased advertising rates during the first
quarter of 1995 and Indianapolis increased certain classified linage rates
during the third quarter.
Circulation revenue increased 5.7% at Phoenix. Circulation of the Phoenix
morning newspaper was up 2.4%, evening down 3.4% and Sunday circulation
decreased 1.3%. Effective March 12, 1995, the Sunday single-copy price of the
Phoenix newspaper increased to $2.00 from $1.50. On August 21, 1995, the
home-delivered price of the Phoenix daily newspapers increased by an average
<PAGE>11
of $.35 per week. Circulation revenue increased 1.3% at Indianapolis.
Circulation of the Indianapolis morning newspaper was down 1%, evening down
15.4% and Sunday down 1.2%. Effective March 6, 1995, the home-delivered price
of the Indianapolis daily newspapers increased to $1.80 per week from $1.50.
The daily single-copy price increased to $.50 from $.35. Generally, a rate
increase will cause a temporary decline in circulation; however, the evening
newspapers have experienced an ongoing decline in their circulation.
Operating expenses of $118.3 million were up 9.5% for the period.
Compensation expense, which includes fringe benefits, was down 2% for the
period. The decrease in compensation expense reflects slightly higher payroll
costs of 1.4% related to the zoned and total market advertising programs
offset by reductions in expense associated with employee insurance programs
and postretirement expenses. Newsprint expense increased 44.6%, reflecting a
2.9% decrease in consumption offset by significantly higher newsprint prices.
It is anticipated suppliers will further increase newsprint prices during the
first quarter of 1996. Depreciation expense of $7.3 million increased 9.6%.
The Company incurred work force reduction costs of $864,000 during the current
quarter. Other operating, distribution and general expenses were up 6.9%,
reflecting costs associated with production and delivery of the zoned
advertising products and increased promotional expenses.
Operating income increased $396,000, or 2.4%. Other income was up $525,000,
or 33.3%, due to higher earnings on cash investments. Income before provision
for income taxes was up $913,000, or 5.1%. The provision for income taxes
increased $302,000, or 4.1%, and reflects higher income for the period.
Minority interest in subsidiary decreased primarily from the increase in the
Company's ownership of Indianapolis Newspapers, Inc. from 71.2% to 89.9% on
September 12, 1994. The Company also acquired additional shares in June, 1995
that increased the Company's ownership to 90.2%. Equity in Affiliate
(Ponderay Newsprint Company), net of tax benefits, changed from a loss of
$753,000 in the third quarter of 1994 to income of $79,000 in the third
quarter of 1995 and reflects higher newsprint prices resulting in improved
operations by Ponderay.
Net income for the quarter increased $1.8 million, or 19.6%, compared to the
same period the prior year. Earnings per share for the quarter were $.42 for
1995, an increase of 20%, from the $.35 per share the prior year quarter.
Earnings per share for the 1995 quarter included an after-tax charge of $.02
for work force reduction costs.
Results of Operations -- Fiscal Nine Months Comparisons
Operating revenues for the period increased $37.2 million, or 9.9%, which
consisted of an increase in advertising revenue of $32.4 million, or 11.4%,
and an increase in circulation revenue of $3.7 million, or 4.1%.
Advertising full run-of-press (ROP) linage was up 9.2% for the period. Retail
linage increased 6.8%, national linage increased 1.6% and classified linage
increased 12.2%. The increase in ROP linage reflects improved economic
conditions in our markets. The volume of preprinted inserts, which includes
local and national advertising supplements inserted into the newspapers,
increased 14.6%.
Advertising revenue at Phoenix increased 12.6% while full run linage was up
11.7%. At Indianapolis, advertising revenue was up 9.2% while full run linage
was up 5.4%. Both newspapers increased advertising rates during the first
quarter of 1995 and Indianapolis increased certain classified linage rates
during the third quarter.
<PAGE>12
Circulation revenue increased 5.7% at Phoenix. Circulation of the Phoenix
morning newspaper was up 2.5%, evening down 5.6% and Sunday circulation
decreased .7%. Effective March 12, 1995, the Sunday single-copy price of the
Phoenix newspaper increased to $2.00 from $1.50. On August 21, 1995, the
home-delivered price of the Phoenix daily newspapers increased by an average
of $.35 per week. Circulation revenue increased .5% at Indianapolis.
Circulation of the Indianapolis morning newspaper was down 1.6%, evening
down 13.8% and Sunday down 1.9%. Effective March 6, 1995, the home-delivered
price of the Indianapolis daily newspapers increased to $1.80 per week from
$1.50. The daily single-copy price increased to $.50 from $.35. Generally,
a rate increase will cause a temporary decline in circulation; however, the
evening newspapers have experienced an ongoing decline in their circulation.
Operating expenses of $356.5 million were up 11.7% for the period.
Compensation expense, which includes fringe benefits, was up 1.6% for the
period. The increase in compensation expense reflects higher payroll costs of
3.2% related to the zoned and total market advertising program in Indianapolis
and payroll expense related to production volume increases in Phoenix.
Newsprint expense increased 42.9%, reflecting a .3% increase in consumption
and higher newsprint prices. It is anticipated suppliers will further
increase newsprint prices during the first quarter of 1996. Depreciation
expense of $21.7 million increased 8.6%. The Company incurred work force
reduction costs of $2.6 million during the current nine month period compared
to $132,000 last year. Other operating, distribution and general expenses
were up 9.7% reflecting costs associated with production and delivery of the
zoned advertising products, increased promotional expenses and higher
property taxes. General expenses for 1994 included a $951,000 property tax
refund.
Operating income decreased $169,000, or .3%. Other income was up
$3.1 million, or 72.1%, due to higher earnings on cash investments. Income
before provision for income taxes was up $2.8 million, or 4.5%. The provision
for income taxes increased $1.1 million, or 4.5%, and reflects higher income
for the period.
Minority interest in subsidiary decreased primarily from the increase in the
Company's ownership of Indianapolis Newspapers, Inc. from 71.2% to 89.9% on
September 12, 1994. The Company also acquired additional shares in June, 1995
that increased the Company's ownership to 90.2%. Equity in Affiliate
(Ponderay Newsprint Company), net of tax benefits, decreased $2.1 million from
a loss of $2.7 million in 1994 to a loss of $569,000 in 1995 and reflects
higher newsprint prices resulting in improved operations by Ponderay.
Net income for the period increased $5.4 million, or 17.3%, compared to the
same period the prior year. Earnings per share for the period were $1.39 for
1995, an increase of 17.8%, from the $1.18 per share the prior year period.
Earnings per share for the 1995 period included an after-tax charge of $.06
for work force reduction costs while the 1994 period benefited from a property
tax refund of $.02 per share.
Liquidity and Capital Resources
Net cash provided by operating activities of $40.8 million and the net
proceeds from available-for-sale securities of $20.4 million was used
primarily for the purchase of property and equipment, investment in
Affiliate and the payment of dividends. At the end of the period, the
Company's cash and investments in marketable securities totaled $125.5
million, down $4 million from the beginning of the year. Working capital at
September 24, 1995 was $137.7 million, up $4.8 million from the beginning of
the year.
<PAGE>13
Capital expenditures through September 24, 1995 were $42 million. Capital
expenditures for the year are expected to approximate $80 million.
Phoenix Newspapers, Inc. (PNI) is constructing a new downtown Phoenix office
building. Total costs of the building and related expenditures are expected
to be $32 million with completion anticipated in the first quarter of 1996.
PNI will install a new computer system with an estimated cost of $20 million
with completion expected in mid-1997. Formal commitments totaling $36.5
million have been entered into related to these and other capital projects
at PNI. Expenditures on these commitments were $26.4 million at September
24, 1995.
Indianapolis Newspapers, Inc. is building a production facility in
Indianapolis with completion expected during the fourth quarter of 1995 and
plans to acquire a building for their downtown facility. Estimated costs of
these projects are $26 million. Formal commitments of $17.2 million have been
entered into on these projects. Expenditures on these projects were
$14.2 million at September 24, 1995.
The Company's wholly-owned subsidiary, Topics Newspapers, Inc., is
constructing a new facility on the northside of Indianapolis at an estimated
cost of $4.7 million with completion expected in the first quarter of 1996.
Formal commitments of $3.9 million and cumulative expenditures of $894,000
have been made on this project.
In addition, the Board of Directors have approved investments in partnership
business ventures of $12.5 million. As of September 24, 1995, the Company has
cumulatively invested $5.6 million in these partnerships. The Company
currently does not anticipate borrowing any funds for these capital projects
and investments.
The Company invested $472,000 in Ponderay Newsprint Company (Affiliate) during
the current quarter and expects to contribute additional funds to help finance
its operations. The Company currently expects to invest approximately $3
million in its Affiliate during 1995. The debt guarantees related to Ponderay
are discussed in Notes to Consolidated Financial Statements in the 1994 Annual
Report.
Quarterly dividends of $.17 per share on Class A common stock and $.017 per
share on Class B common stock were declared during the quarter. This
represents an increase over the prior quarter of $.03 per share on the Class A
common stock and $.003 on the Class B common stock.
The Company has significant cash balances, a consistent ability to generate
cash flow from operations and credit resources. The Company foresees no
difficulty in maintaining its present financial condition and liquidity.
Funding of current and future capital programs and investments in partnerships
is considered adequate for the foreseeable future.
<PAGE>14
Part II
CENTRAL NEWSPAPERS, INC.
Item 1. Legal Proceedings -- None
Item 2. Changes in Securities -- None
Item 3. Default Upon Senior Securities -- None
Item 4. Submission of Matters to a Vote of Security Holders -- None
Item 5. Other Information -- None
Item 6. Exhibits and Reports on Form 8-K
Exhibit 1 -- Independent Accountant's Report
No reports on Form 8-K were filed during the quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CENTRAL NEWSPAPERS, INC.
Dated: October 30, 1995 By: /s/ Frank E. Russell
----------------------------
Frank E. Russell
President and Chief Executive
Officer
By: /s/ Robert L. Lowry
-----------------------------
Robert L. Lowry
Controller
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains unaudited summary financial information extracted from
the consolidated statement of financial position of Central Newspapers, Inc. as
of September 24, 1995 and the consolidated statements of income, shareholders,
equity and cash flows for the fiscal nine-month period ended September 24, 1995
and is qualified in its entirety by reference to such statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-24-1995
<CASH> 22556
<SECURITIES> 102929
<RECEIVABLES> 53103
<ALLOWANCES> 1104
<INVENTORY> 9280
<CURRENT-ASSETS> 201275
<PP&E> 472533
<DEPRECIATION> 200786
<TOTAL-ASSETS> 523318
<CURRENT-LIABILITIES> 63591
<BONDS> 2678
<COMMON> 18948
0
0
<OTHER-SE> 326842
<TOTAL-LIABILITY-AND-EQUITY> 523318
<SALES> 414858
<TOTAL-REVENUES> 414858
<CGS> 0
<TOTAL-COSTS> 356475
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 161
<INCOME-PRETAX> 64913
<INCOME-TAX> 26503
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36928
<EPS-PRIMARY> 1.39
<EPS-DILUTED> 0
</TABLE>
Exhibit 1
INDEPENDENT ACCOUNTANT'S REPORT
To the Board of Directors
Central Newspapers, Inc.
We have reviewed the consolidated statement of financial position of Central
Newspapers, Inc. as of September 24, 1995, the consolidated statements of
income for the fiscal three-month and fiscal nine-month periods ended
September 24, 1995 and September 25, 1994 and shareholders' equity and cash
flows for the fiscal nine-month periods ended September 24, 1995 and
September 25, 1994. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated statement of financial position as of December 25,
1994, and the related consolidated statements of income, shareholders' equity
and cash flows for the year then ended (not presented herein); and in our
report dated February 24, 1995, we expressed an unqualified opinion on those
consolidated financial statements.
As discussed in Note 8 to the consolidated financial statements, the Company
adopted, effective at the beginning of 1994, Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" (SFAS No. 115).
/s/ Geo. S. Olive & Co. LLC
- ---------------------------
Geo. S. Olive & Co. LLC
Indianapolis, Indiana
October 20, 1995
