UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
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 Identification Number)
of incorporation or organization)
135 North Pennsylvania Street, Suite 1200, Indianapolis, Indiana 46204
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (317) 231-9200
Securities registered pursuant to Section 12(b) of the Act:
Name of each
Title of each class exchange on which registered
------------------- ----------------------------
Class A Common Stock, without par value New York Stock Exchange
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 .
--- ---
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. [ ]
The aggregate market value of the voting stock held by non-affiliates on
February 29, 1996, based on the closing price for the Company's Class A Common
Stock on the New York Stock Exchange on such date and assuming the conversion of
all outstanding shares of Class B Common Stock into shares of Class A Common
Stock at a ratio of one-tenth (.1) of a share of Class A Common Stock for each
share of Class B Common Stock: approximately $420,846,000. For purposes of the
foregoing calculation only, required by Form 10-K, the Registrant has included
as shares owned by affiliates, the shares of Class A Common Stock and Class B
Common Stock beneficially owned by officers and directors of the registrant
and by holders of 10% or more of either class. Such inclusion shall not be
construed as an admission that any such person is an affiliate for any purpose.
Shares outstanding at February 29, 1996:
Class A Common Stock -- 23,561,111 shares
Class B Common Stock -- 31,553,000 shares
Documents incorporated by reference:
Portions of the Company's 1995 Annual Report to Shareholders (incorporated in
Part II to the extent provided in items 5, 6, 7 and 8 hereof) and the definitive
Proxy Statement for the Company's 1996 Annual Meeting of Shareholders (to be
held April 17, 1996) filed pursuant to Rule 14a-6 of the Securities Exchange
Act of 1934 (incorporated in Part III to the extent provided in items 10, 11,
12 and 13 hereof).
Exhibit Index on Page 11 Page 1 of 17 Pages
<PAGE>2
FORM 10-K TABLE OF CONTENTS
Page
Part I
Item 1 - Business 3
Item 2 - Properties 9
Item 3 - Legal Proceedings 10
Item 4 - Submission of Matters to a Vote of
Security Holders 10
Part II
Item 5 - Market for Registrant's Common
Equity and Related Stockholder
Matters 10
Item 6 - Selected Financial Data 10
Item 7 - Management's Discussion and
Analysis of Results of Operations
and Financial Condition 10
Item 8 - Financial Statements and
Supplementary Data 11
Item 9 - Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 11
Part III
Item 10 - Directors and Executive Officers of
the Registrant 11
Item 11 - Executive Compensation 11
Item 12 - Security Ownership of Certain
Beneficial Owners and
Management 11
Item 13 - Certain Relationships and Related
Transactions 11
Part IV
Item 14 - Exhibits, Financial Statement
Schedules and Reports on
Form 8-K 11
Signatures 15
<PAGE>3
PART I
Item 1. Business.
Central Newspapers, Inc. (the "Company") is engaged, through its subsidiaries,
in newspaper publishing primarily in the metropolitan areas of Phoenix, Arizona
and Indianapolis, Indiana. The Company is an Indiana corporation organized in
1934. Through its wholly-owned subsidiary, Phoenix Newspapers, Inc., the
Company publishes The Arizona Republic (mornings and Sunday), The Phoenix
Gazette (evenings) and the Arizona Business Gazette (weekly). Through its
90.2%-owned subsidiary, Indianapolis Newspapers, Inc., the Company publishes The
Indianapolis Star (mornings and Sunday) and The Indianapolis News (evenings).
The Company also publishes several daily and weekly newspapers serving smaller
communities in Indiana. The Company is a partner (13.5% interest) in Ponderay
Newsprint Company, a general partnership that owns and operates a newsprint mill
in the state of Washington.
The Company has published its newspapers in its two primary markets for more
than forty-six years. The Company has managed its newspapers with the objective
of long-term growth and believes that this philosophy has contributed to the
stability of the Company's operations. The Company's ability to establish and
maintain its daily newspapers as the only major newspapers in their respective
markets has promoted its growth and is of primary importance in attracting and
maintaining advertising, the principal source of revenue for the Company. Each
of the Company's newspapers has substantial autonomy over editorial policy.
PHOENIX NEWSPAPERS, INC.
Phoenix Newspapers, Inc. ("PNI") was formed in 1946 by a group of investors,
including the Company, to purchase The Arizona Republic and The Phoenix Gazette.
The Company originally owned a 30% interest in PNI and has owned 100% of the
common stock of PNI since 1977. The newspapers published by PNI are The Arizona
Republic (mornings and Sunday), The Phoenix Gazette (evenings) and the Arizona
Business Gazette (weekly).
Circulation
As of December 31, 1995, approximately 84% of the daily and 71% of the Sunday
circulation of The Arizona Republic and 89% of the daily circulation of The
Phoenix Gazette were home delivered. Single copy sales account for
approximately 29% of Sunday newspaper sales and approximately 15% of combined
daily newspaper sales.
The Arizona Business Gazette contains business news and legal notices relating
to the Phoenix metropolitan area. The average paid circulation of the Arizona
Business Gazette was 9,599, 10,340 and 10,351 for 1993, 1994 and 1995.
The circulation levels of The Arizona Republic and The Phoenix Gazette are
seasonal due to the large number of part-year residents of the Phoenix area.
Historically, circulation for The Arizona Republic and The Phoenix Gazette
achieves its highest levels in February and decreases during the late spring and
summer months. During 1995, the seasonal variation in combined daily
circulation and Sunday circulation was approximately 86,500 and 103,000,
respectively. The following table shows the average paid circulation for The
Arizona Republic and The Phoenix Gazette for the last three fiscal years. The
figures for 1993 and 1994 are based upon annual reports issued by the Audit
Bureau of Circulations ("ABC"), an independent agency which audits the
circulation of daily and Sunday newspapers and include circulation outside the
Phoenix metropolitan statistical area ("MSA"). The figures for 1995 are based
upon the records of the Company because, as of the date of this report, the ABC
<PAGE>4
annual report for 1995 has not been released. Net circulation revenue for the
last three fiscal years is based upon the records of the Company.
52 Weeks 52 Weeks 53 Weeks
Dec. 26 Dec. 25 Dec. 31
Fiscal Years Ended 1993 1994 1995
The Arizona Republic (Sunday) 573,497 587,919 585,226
The Arizona Republic (Daily) 365,544 379,093 388,800
The Phoenix Gazette (Daily) 81,118 75,494 72,301
Net Circulation Revenue
(in thousands) $74,368 $77,537 $84,212
Effective June 1994, the home delivery pricing structure for seven day
subscriptions is based on length of subscription. Effective August 1995, the
home-delivered price for The Arizona Republic (seven days) in the Phoenix MSA,
ranges from $3.25 per week for a fifty-two week subscription to $3.50 per week
for an eight week subscription. There is also a four week bank withdrawal
option of $3.25 per week. The home-delivered price for The Phoenix Gazette
(seven days) in the Phoenix MSA, which includes six evenings and one Sunday
paper, ranges from $3.00 per week for a fifty-two week subscription to $3.25 per
week for an eight week subscription with a four week bank withdrawal option of
$3.00 per week. The home-delivered price for The Arizona Republic (six days) is
$2.10 per week for all subscription terms. The home-delivered price for The
Phoenix Gazette (six days) is $1.80 per week for all subscription terms. A
weekend package comprising the Sunday paper and the Friday and Saturday edition
of either the morning or evening paper is offered at $2.50 per week. During
January 1993, the single copy price of the morning paper increased by $.15 to
$.50. The single copy price of the afternoon paper is $.35. During March 1995,
the single copy price of the Sunday paper increased by $.50 to $2.00.
Advertising
The newspapers generate revenue from two primary types of advertisements, "run
of paper," which are printed in the body of the newspaper, and "preprinted,"
which are furnished by the advertiser and inserted into the newspaper. PNI
derives the majority of its advertising revenue from run of paper
advertisements. However, like other major newspapers, The Arizona Republic and
The Phoenix Gazette have experienced an increase in advertisers use of
preprinted advertisements in recent years. Because preprinted advertisements
are furnished by the advertisers and can be distributed by alternate means,
revenues and profits from preprinted advertisements are generally lower than
would be derived if an advertiser had chosen to use run of paper advertisements.
To encourage use of run of paper advertisements, PNI structures its advertising
rates to provide more favorable rates to high volume and frequent run of paper
advertisers.
PNI also structures its advertising format to accommodate the numerous
communities that comprise the Phoenix metropolitan area. The Arizona Republic
and The Phoenix Gazette publish a common "Community" section that is inserted in
up to twelve zoned editions on certain days of the week. Zoned editions, which
include news stories and advertisements targeted to specific communities or
geographic areas, provide an important means of competing with news coverage of
local newspapers and thereby promote circulation. Other part run sections are
also provided to accommodate the needs of advertisers for more targeted
distribution.
The combined run of paper advertising linage for The Arizona Republic, The
Phoenix Gazette and the Arizona Business Gazette for the past three fiscal years
and the combined advertising revenues of the newspapers for such periods are set
forth in the following table:
<PAGE>5
52 Weeks 52 Weeks 53 Weeks
Dec. 26 Dec. 25 Dec. 31
Fiscal Years Ended 1993 1994 1995
Advertising Linage--Run of Paper
(in thousands of six-
column inches):
Full run 3,562 4,014 4,513
Part run 2,239 2,350 2,278
Weekly 278 269 245
Net Advertising Revenue
(in thousands) $218,092 $248,528 $284,468
Distribution
PNI distributes The Arizona Republic and The Phoenix Gazette primarily by home
delivery through a network of independent contractors that deliver newspapers
pursuant to agreements with PNI. PNI has implemented a centralized billing
system which removes the responsibility for billing and collection from the
independent contractors. Newspapers are distributed to the independent
contractor network by an outside company which has been under contract with PNI
for over forty years.
Production
The Arizona Republic and The Phoenix Gazette merged the editorial news staffs in
1995 and share production facilities and equipment. The editing and composing
functions are performed primarily at PNI's facility in downtown Phoenix. To
increase efficiency and reduce work force requirements, the editing and
composing functions have been computerized. Electronic pagination allows entire
pages of the newspaper to be formatted at a computer terminal. Composed pages
are electronically transmitted from PNI's downtown facility to its two satellite
production facilities.
PNI's two satellite production facilities are located in Deer Valley which is
north of downtown Phoenix and in Mesa, Arizona. Construction of the Deer Valley
facility began in 1990 and was completed in 1992. This facility includes four
new offset presses and related production equipment as well as circulation,
advertising and editorial offices. Production began during the first quarter of
1992 with full operation commencing in the third quarter of 1992. The Mesa
facility began operation in 1982 and has been expanded and upgraded since that
date. It has three offset presses and related production equipment.
Because of the growth expected in the Phoenix area, PNI owns an additional site
in western Maricopa County for a future satellite production facility.
INDIANAPOLIS NEWSPAPERS, INC.
Indianapolis Newspapers, Inc. ("INI") was formed by the Company in 1948. The
Company owns all of the issued and outstanding Class B Common Stock of INI. On
September 12, 1994 and June 1, 1995, the Company purchased 3,591 shares and 50
shares, respectively, of Class A Common Stock of INI which increased the Company
ownership of Class A Common Stock to 67.2% from 4.1%. The Company now owns
90.2% of the voting power and equity and has the right to elect INI's Board of
Directors. Prior to these purchases, the Company owned 71.2% of the voting
power and equity of INI. The remaining 9.8% of the voting power and equity of
INI is held either directly or through trusts by members of the family which
previously owned The Indianapolis News. The primary newspapers published by INI
<PAGE>6
are The Indianapolis Star (mornings and Sunday) and The Indianapolis News
(evenings).
Circulation
As of December 31, 1995, approximately 82% of the daily and 80% of the Sunday
circulation of The Indianapolis Star and 82% of the daily circulation of The
Indianapolis News were home delivered. Single copy sales account for
approximately 19% of Sunday newspaper sales and 16% of combined daily newspaper
sales.
The following table shows the average paid circulation for The Indianapolis Star
and The Indianapolis News for the last three fiscal years. The figures for 1993
and 1994 are based upon annual reports issued by the ABC and include circulation
outside the Indianapolis MSA. The figures for 1995 are based upon records of
the Company because, as of the date of this report, the ABC annual report for
1995 has not been released. Net circulation revenue for the last three fiscal
years is based upon the records of the Company.
52 Weeks 52 Weeks 53 Weeks
Dec. 26 Dec. 25 Dec. 31
Fiscal Years Ended 1993 1994 1995
The Indianapolis Star (Sunday) 411,260 404,468 399,347
The Indianapolis Star (Daily) 231,150 229,876 229,510
The Indianapolis News (Daily) 93,256 87,468 72,628
Net Circulation Revenue
(in thousands) $38,523 $38,886 $ 39,507
The home delivery price for The Indianapolis Star (seven days) in the
Indianapolis MSA is $3.30 per week which includes a $.30 price increase during
March 1995. The home delivery price for The Indianapolis News (six days) is
$1.80 per week which includes a $.30 price increase during March 1995. The
single copy price is $.50 for each daily paper which includes a $.15 price
increase during March 1995. The home delivery price of the Sunday newspaper is
$1.50, which includes a $.25 price increase during May 1993. The single copy
price of the Sunday newspaper is $1.50 which includes a $.25 price increase
during September 1991.
Advertising
Newspapers generate revenue from two primary types of advertisements, "run of
paper," which are printed in the body of the newspaper, and "preprinted," which
are furnished by the advertiser and inserted into the newspaper. INI derives
the majority of its advertising revenue from run of paper advertisements.
Like the Company's Phoenix newspapers, The Indianapolis Star and The
Indianapolis News have experienced an increase in advertisers use of preprinted
advertisements in recent years. To encourage use of run of paper
advertisements, INI structures its advertising rates to provide more favorable
rates to high volume and frequent run of paper advertisers. The combined run of
paper advertising linage for The Indianapolis Star and The Indianapolis News for
the past three fiscal years and the combined advertising revenue of the
newspapers for such periods are set forth in the following table:
<PAGE> 7
52 Weeks 52 Weeks 53 Weeks
Dec. 26 Dec. 25 Dec. 31
Fiscal Years Ended 1993 1994 1995
Advertising Linage--Run of Paper
(in thousands of six-
column inches):
Full run 2,458 2,716 2,937
Part run 62 125 96
Net Advertising Revenue
(in thousands) $114,004 $131,288 $145,267
Distribution
INI distributes The Indianapolis Star and The Indianapolis News primarily by
home delivery through a network of approximately 3,200 carriers. Carriers are
independent contractors who purchase newspapers from INI and resell them to
their customers.
Production
The Indianapolis Star and The Indianapolis News merged the editorial news staffs
in 1995 and share production and distribution facilities. All editorial and
production functions are handled from INI's facility in downtown Indianapolis.
Distribution functions are performed at both the downtown production facility
and at the satellite facility which was completed in 1995 at a cost of $20
million. INI's downtown production facility is equipped with six offset
presses, after the conversion of four letterpress presses and the installation
of two new offset presses during the period 1988 through 1992 at a cost of $57.7
million.
SMALLER NEWSPAPERS
The Company also publishes several smaller newspapers. Through Muncie
Newspapers, Inc., which is 88% owned by INI and 12% owned by the Company, the
Company publishes The Muncie Star (mornings and Sunday) and The Muncie Evening
Press (evenings). These two daily newspapers serve the Muncie, Indiana area,
which has a population of approximately 119,000. As of December 31, 1995, the
average paid circulation of The Muncie Star was 28,157 daily, and 35,694 Sunday
and the average paid circulation of The Muncie Evening Press was 12,092 daily.
The Company publishes the Vincennes Sun-Commercial, a daily newspaper which
serves the city of Vincennes, Indiana, with a population of approximately
19,800. As of December 31, 1995, the average paid circulation of the Vincennes
Sun-Commercial was 13,465 daily (five days) and 15,524 Sunday. In October 1995,
the Company acquired certain assets of Transcontinental Media Inc., including
The Knox County News, The Knox County Shopping News and The Green County
Shopping News. The circulation of the Knox County News, renamed the North Knox
News is approximately 1,200.
During January 1993, the Company formed Topics Newspapers, Inc. as a wholly-
owned subsidiary to purchase the net assets of two daily newspapers, one weekly
newspaper and twelve controlled circulation newspapers that serve the fastest
growing area of metropolitan Indianapolis. As of December 31, 1995, the average
paid circulation of The Daily Ledger was 10,175 (six days) and the combined
weekly circulation was 90,833.
<PAGE>8
The revenues received by the Company from these smaller publications represented
approximately 4% of the total revenues of the Company in each of its last three
fiscal years.
RAW MATERIALS - PONDERAY NEWSPRINT COMPANY
The Company consumed approximately 165,000 metric tons of newsprint in fiscal
year 1995 and estimates that consumption will be unchanged in fiscal year 1996.
The Company currently obtains its newsprint from a number of suppliers, both
foreign and domestic, under long-term contracts, standard in the industry, which
offer dependable sources of newsprint at current market rates.
To provide the Company with an additional source of newsprint for a portion of
its needs, the Company formed Central Newsprint Company, Inc. and Bradley Paper
Company (the "Newsprint Subsidiaries"), both of which are wholly-owned
subsidiaries of the Company. The Newsprint Subsidiaries, together with four
other newspaper publishing companies and a Canadian newsprint manufacturer, are
partners in Ponderay Newsprint Company ("Ponderay"), a general partnership
formed to own and operate a newsprint mill in Usk, Washington. The mill began
operations in December 1989. PNI has committed to purchase in 1996 the lesser
of 13.5% of Ponderay's newsprint production or 34,900 metric tons on a "take if
tendered" basis until the debt of Ponderay is repaid.
COMPETITION
The Company faces competition for advertising revenue from television, radio and
direct mail programs, as well as competition for advertising and circulation
from suburban neighborhood and national newspapers and other publications.
Competition for advertising is based upon circulation levels, readership
demographics, price and advertiser results. Competition for circulation is
generally based upon the content, journalistic quality and price of the
newspaper.
In Indianapolis, the Company's newspapers do not receive significant direct
competition from suburban newspapers. In Phoenix, several suburban newspapers
owned by major media corporations operate in cities that are part of the Phoenix
metropolitan area and compete with The Arizona Republic and The Phoenix Gazette
for advertising and circulation.
EMPLOYEES - LABOR
As of January 31, 1996, the Company had approximately 5,188 employees
(including 1,450 part-time employees), 44% of whom were covered by collective
bargaining agreements. The Company has never had a significant strike or
work stoppage at its operations and considers its labor relationships with
its employees to be good.
EXECUTIVE OFFICERS OF THE REGISTRANT
As of February 29, 1996, the executive officers of the Company and their ages
are as follows:
Name Age Positions
Malcolm W. Applegate 60 Director; President and
General Manager of INI
Thomas K. MacGillivray 35 Treasurer and Chief Financial Officer
<PAGE>9
John F. Oppedahl 51 Publisher and Chief Executive Officer
of Phoenix Newspapers, Inc.
Eugene S. Pulliam 81 Director and Executive
Vice President; President
of PNI; Publisher of
The Indianapolis Star and
The Indianapolis News
Frank E. Russell 75 Director; Chairman of the Board and
Assistant Secretary
Louis A. Weil, III 54 Director; President and Chief
Executive Officer; Chairman of the Board of
Phoenix Newspapers, Inc.
Malcolm W. Applegate has been President since May 1993 and General Manager since
July 1990 of Indianapolis Newspapers, Inc. From 1985 until assuming his current
position with Indianapolis Newspapers, Inc., Mr. Applegate was publisher of the
Lansing (Michigan) State Journal. He has been a director of the Company since
1991.
Thomas K. MacGillivray has been Chief Financial Officer since January 4, 1996.
Previously, he was Director of Investments since April, 1993. He was Vice
President and Equity Portfolio Manager for Sovran Capital Management from
January 1989 until March 1993.
John F. Oppedahl has been Publisher and Chief Executive Officer of Phoenix
Newspapers, Inc. since January 1996. Previously, he was Executive Editor of
Phoenix Newspapers, Inc. since 1993 and Managing Editor of the Arizona Republic
from 1989 to 1993.
Eugene S. Pulliam has been the Publisher of The Indianapolis Star and The
Indianapolis News since 1975 and President of Phoenix Newspapers, Inc. since
1979. He has been a director of the Company since 1954. Mr. Pulliam is a
brother-in-law of James C. Quayle and the uncle of Dan Quayle, both of whom are
directors of the Company.
Frank E. Russell has been Chairman of the Board and Assistant Secretary since
January 1996. Previously, he was President of the Company since 1979. He has
been a director of the Company since 1974.
Louis A. Weil, III has been President and Chief Executive Officer since January
1996. He served as Publisher and Chief Executive Officer of The Arizona
Republic and The Phoenix Gazette and Executive Vice President of Phoenix
Newspapers, Inc. between July 1991 and January 1996. Mr. Weil served as
Publisher of Time from May 1989 to July 1991 and President and Publisher of The
Detroit News from May 1987 to May 1989. Mr. Weil serves as a member of the
Board of Directors of Global Government Plus Fund, Inc. as well as eleven
investment companies within the Prudential family of mutual funds. He has been
a director of the Company since 1991.
Each executive officer will serve as such until his successor is chosen and
qualified. No family relationships exist among the Company's executive
officers.
Item 2. Properties.
The corporate headquarters of the Company is located at 135 North Pennsylvania
Street Suite 1200, Indianapolis, Indiana 46204. The general character, location
and approximate size of the principal physical properties owned by the Company
<PAGE>10
at the end of fiscal year 1995 are set forth below. In addition to those
listed, the Company owns employee recreational facilities and other real estate
aggregating approximately 130 acres.
Approximate Area
in Square Feet
Printing plants, business and editorial
offices and warehouse space
Owned Leased
Phoenix, Arizona 940,176 145,881
Mesa, Arizona 160,815 ---
Indianapolis, Indiana 693,152 157,640
Muncie, Indiana 67,658 ---
Vincennes, Indiana 19,350 ---
Noblesville, Indiana 7,500 5,412
Carmel, Indiana 13,460 ---
Bicknell, Indiana --- 2,500
The Company believes that its current and planned facilities are adequate to
meet the present needs of its newspapers.
Item 3. Legal Proceedings.
The Company becomes involved from time to time in various claims and lawsuits
incidental in the ordinary course of its business, including such matters as
libel and invasion of privacy actions and is involved from time to time in
various governmental and administrative proceedings. Management believes that
the outcome of any pending claims or proceedings will not have a significant
adverse effect on the Company and its subsidiaries, taken as a whole.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of shareholders during the quarter ended
December 31, 1995 through the solicitation of proxies and otherwise.
PART II
Item 5. Markets for Registrant's Common Equity and Related Stockholder Matters.
The information set forth under the caption "Shareholder Information" on page 31
of the Company's 1995 Annual Report to Shareholders is incorporated herein by
reference.
Item 6. Selected Financial Data.
The information set forth under the caption "Ten-Year Financial Highlights" on
page 28 of the Company's 1995 Annual Report to Shareholders is incorporated
herein by reference.
Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
The information set forth under the caption "Management's Discussion and
Analysis of Results of Operations and Financial Condition" beginning on page 10
of the Company's 1995 Annual Report to Shareholders is incorporated herein by
reference.
<PAGE>11
Item 8. Financial Statements and Supplementary Data.
The Company's Consolidated Financial Statements and Notes thereto, together with
the report thereon of Geo. S. Olive & Co. LLC dated February 7, 1996, appearing
on pages 14 through 27 of the Company's 1995 Annual Report to Shareholders, and
the information contained under the heading "Quarterly Financial Information
(unaudited)" on page 30 of such Annual Report to Shareholders are incorporated
herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Incorporated herein by reference is the information set forth under the captions
"Election of Directors," on page 4 and "Committees of the Board of Directors and
Compensation of Directors" on page 5 and "Compliance with Section 16(a) of the
Securities Exchange Act of 1934" on page 13 of the Company's definitive Proxy
Statement to be used in connection with the 1996 Annual Meeting of
Shareholders. See Part I, Item 1 of this report for information regarding the
executive officers of the Company.
Item 11. Executive Compensation.
Incorporated herein by reference is the information set forth under the captions
"Compensation of Executive Officers" on page 6 of the Company's definitive Proxy
Statement to be used in connection with the 1996 Annual Meeting of Shareholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Incorporated herein by reference is the information set forth under the captions
"Voting Securities And Principal Holders Thereof" on page 1 and "Security
Ownership of Management" on page 3 of the Company's definitive Proxy Statement
to be used in connection with the 1996 Annual Meeting of Shareholders.
Item 13. Certain Relationships and Related Transactions.
Incorporated herein by reference is the information set forth under the captions
"Transactions With Certain Related Persons" and "Compensation Committee
Interlocks and Insider Participation" on page 13 of the Company's definitive
Proxy Statement to be used in connection with the 1996 Annual Meeting of
Shareholders.
<PAGE> 12
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) List of Documents Included in this Report.
1. Financial Statements.
The following financial statements are incorporated into this report
by reference to the Company's 1995 Annual Report to Shareholders:
(i) Independent Auditor's Report
(ii) Consolidated Statement of Income for each of the three fiscal years
in the period ended December 31, 1995
(iii) Consolidated Statement of Financial Position as of December 31, 1995
and December 25, 1994
(iv) Consolidated Statement of Shareholders' Equity for each of the three
fiscal years in the period ended December 31, 1995
(v) Consolidated Statement of Cash Flows for each of the three fiscal
years in the period ended December 31, 1995
(vi) Notes to Consolidated Financial Statements
2. Supplementary Data and Financial Statement Schedules.
(i) Incorporated herein by reference is the information set forth under
the caption "Quarterly Financial Information (Unaudited)" appearing
on page 30 of the Company's 1995 Annual Report to Shareholders
(ii) The following financial statement schedule and report with respect
thereto are filed as a part of this Report:
Page in
this filing
Independent Auditor's Report 16
Schedule II Valuation Accounts 17
Schedules other than those referred to above have been omitted
because they are not required or because the information is included
elsewhere in the Consolidated Financial Statements of the Company.
3. Exhibits Required by Securities and Exchange Commission Regulation
S-K.
(i) The following exhibits are filed as a part of this report:
Exhibit
Number Description of Document
3.2 Amended and Restated Code of By-Laws of Central Newspapers,
Inc.
*10.13 Termination Benefits Agreement dated as of February 23, 1996
between Central Newspapers, Inc. and Louis A. Weil, III
*10.14 Amended and Restated Central Newspapers, Inc. Stock
Compensation Plan
13 Portions of the 1995 Annual Report to Shareholders of
Central Newspapers, Inc. incorporated by reference into the
1995 Annual Report on Form 10-K
* Represents a contract, plan or arrangement providing for executive officer
or director benefits.
<PAGE>13
23 Consent of Geo. S. Olive & Co. LLC
27 Financial Data Schedule
(ii) The following exhibits are incorporated herein by reference to
documents previously filed with the Securities and Exchange
Commission as indicated.
Exhibit
Number Description of Document
3.1 Amended and Restated Articles of Incorporation of Central
Newspapers, Inc. (Filed August 10, 1989 with Form S-1
Registration Statement, No. 33-30436)
4.1 Form of Certificate for Class A Common Stock (Filed August
10, 1989 with Form S-1 Registration Statement,
No. 33-30436)
4.2 Indenture between Indianapolis Newspapers, Inc. and the
Indiana Trust Company, as trustee, dated as of December 1,
1948 (Filed August 10, 1989 with Form S-1 Registration
Statement, No. 33-30436)
10.1 Indenture creating the Eugene C. Pulliam Trust, dated as of
December 9, 1965, as amended (Filed August 10, 1989 with
Form S-1 Registration Statement, No. 33-30436)
10.2 Newsprint Purchase Agreement between Ponderay Newsprint
Company and Phoenix Newspapers, Inc., dated as of
November 18, 1987 (Filed August 10, 1989 with Form S-1
Registration Statement, No. 33-30436)
*10.3 The Phoenix Newspapers, Inc. Non-Qualified Supplemental
Retirement Plan (Filed with Form 10-K for year ended
December 30, 1990)
10.4 Ponderay Newsprint Company Partnership Agreement between
Lake Superior Forest Products Inc. and Central Newsprint
Company, Inc. dated as of September 12, 1985 (Filed August
10, 1989 with Form S-1 Registration Statement,
No. 33-30436)
10.5 Amendment to Ponderay Newsprint Company Partnership
Agreement between Lake Superior Forest Products Inc.,
Central Newsprint Company, Inc., Bradley Paper Company,
Copley Northwest, Inc., Puller Paper Company, Newsprint
Ventures, Inc., Wingate Paper Company, Tribune Newsprint
Company and Nimitz Paper Company, dated as of June 30, 1987
(Filed August 10, 1989 with Form S-1 Registration
Statement, No. 33-30436)
10.6 Guarantee by Central Newspapers, Inc. dated as November 18,
1987 (Filed August 10, 1989 with Form S-1 Registration
Statement, No. 33-30436)
* Represents a contract, plan or arrangement providing for executive officer
or director benefits.
<PAGE>14
*10.7 Form of Split-Dollar Life Insurance Agreement for Executive
Officers between the Registrant and Malcolm W. Applegate
and Louis A. Weil, III (Filed with Form 10-K for year ended
December 27, 1992)
*10.8 Form of Split-Dollar Life Insurance Agreement for Outside
Directors between the Registrant and Kent E. Agness,
William A. Franke and Dan Quayle (Filed with Form 10-K for
year ended December 27, 1992)
*10.9 Form of Death Benefit Only Insurance Plan Agreement between
the Registrant and Frank E. Russell, Eugene S. Pulliam and
James C. Quayle (Filed with Form 10-K for year ended
December 27, 1992)
*10.10 Central Newspapers, Inc. Unfunded Supplemental Retirement
Plan (Filed with Form 10-K for the year ended December
25, 1994)
*10.11 Central Newspapers, Inc. Non-Qualified Savings Plan, as
amended (Filed with Form 10-K for the year ended December
25, 1994)
*10.12 Central Newspapers, Inc. Director's and Officer's
Charitable Award Program (Filed with form 10-K for the year
ended December 25, 1994)
21 Subsidiaries of the Registrant (Filed with Form 10-K for
year ended December 26, 1993)
* Represents a contract, plan or arrangement providing for executive officer
or director benefits.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the fourth quarter of
1995.
<PAGE>15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in the city of
Indianapolis, state of Indiana, on this 19th day of March, 1996.
CENTRAL NEWSPAPERS, INC.
By: /s/ Louis A. Weil, III
--------------------------
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities indicated on this 19th day of March, 1996.
Signature Title
(1) Principal Executive Officer
/s/ Louis A. Weil, III President, Chief Executive
----------------------- Officer and Director
Louis A. Weil, III
(2) Principal Financial and
Accounting Officer
/s/ Thomas K. MacGillivray Treasurer and Chief Financial Officer
----------------------------
Thomas K. MacGillivray
(3) A majority of the Board of Directors
/s/ Kent E. Agness Director
----------------------
Kent E. Agness
/s/ Malcolm W. Applegate Director
----------------------
Malcolm W. Applegate
/s/ William A. Franke Director
----------------------
William A. Franke
/s/ Eugene S. Pulliam Director
----------------------
Eugene S. Pulliam
/s/ Dan Quayle Director
----------------------
Dan Quayle
/s/ James C. Quayle Director
-----------------------
James C. Quayle
/s/ Frank E. Russell Director, Chairman of the Board and
----------------------- Assistant Secretary
Frank E. Russell
<PAGE>16
INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENT SCHEDULE
Board of Directors and Shareholders
Central Newspapers, Inc.
We have audited the consolidated financial statements of Central Newspapers,
Inc. and Subsidiaries at December 31, 1995 and December 25, 1994 and for each of
the three fiscal years in the period ended December 31, 1995 and have issued our
report dated February 7, 1996. Such financial statements and reports are
included in the 1995 Annual Report to Shareholders and are incorporated herein
by reference.
Our audits also included the financial statement schedule listed under Item 14
(a)(2)(ii). The 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, the financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information included in the schedule.
/s/ Geo. S. Olive & Co. LLC
- ---------------------------
GEO. S. OLIVE & CO. LLC
Indianapolis, Indiana
February 7, 1996
<PAGE>17
Schedule II
CENTRAL NEWSPAPERS, INC. AND SUBSIDIARIES
Valuation Accounts
Column A Column B Column C Column D Column E
----------------------
Additions
Balance at Charged to Charged to Balance at
Beginning Costs and Other End
Description of Period Expense Accounts Deductions of Period
----------- --------- ---------- ---------- ---------- ---------
Year Ended December 31,
1995 (53 Weeks):
Provision for doubtful
accounts and advertising
refunds $1,071,387 $5,796,378 $(5,800,562) $1,067,203
Year Ended December 25,
1994 (52 Weeks):
Provision for doubtful
accounts and advertising
refunds $1,141,957 $4,569,894 $(4,640,464) $1,071,387
Year Ended December 26,
1993 (52 Weeks):
Provision for doubtful
accounts and advertising
refunds $779,346 $3,334,553 $(2,971,942) $1,141,957
Adopted July 12, 1988
Revised July 28, 1989
Revised Dec. 18, 1991
Revised April 8, 1994
Revised December 13, 1995
AMENDED AND RESTATED
CODE OF BY-LAWS
OF
CENTRAL NEWSPAPERS. INC.
ARTICLE 1
Identification, Records, Seal and Fiscal Year
Section 1.01. Name. The name of the Corporation is Central
Newspapers, Inc. (the "Corporation").
Section 1.02. Place of Keeping Corporate Books and Records.
The Corporation shall keep at its principal office a copy of (a)
its Articles of Incorporation and all amendments thereto
currently in effect (the "Articles"); (b) its Code of By-Laws and
all amendments thereto currently in effect (the "By-Laws"); (c)
resolutions adopted by the Board of Directors (the "Board") with
respect to one or more classes or series of shares and fixing
their relative rights, preferences, and limitations, if shares
issued pursuant to these resolutions are outstanding; (d) minutes
of all meetings of the shareholders of the Corporation (the
"Shareholders") and records of all actions taken by the
Shareholders without a meeting (collectively, "Shareholders
Minutes") for the prior three years; (e) all written
communications by the Corporation to the Shareholders including
the financial statements furnished by the Corporation to the
Shareholders for the prior three years; (f) a list of the names
and business addresses of the current directors of the
Corporation (the "Directors") and the current officers of the
Corporation (the "Officers"); and (g) the most recent Annual
Report of the Corporation as filed with the Secretary of State of
Indiana. The Corporation shall also keep and maintain at its
principal office, or at such other place or places within or
without the State of Indiana as may be provided, from time to
time, in these By-Laws, (a) minutes of all meetings of the Board
and of each committee, and records of all actions taken by the
Board and by each committee without a meeting; (b) Shareholders
Minutes; (c) appropriate accounting records of the Corporation;
and (d) a record of the Shareholders in a form that permits
preparation of a list of the names and addresses of all the
Shareholders, in alphabetical order by class of shares, stating
the number and class of shares held by each Shareholder. All of
the records of the Corporation described in this Section shall be
maintained in written form or in another form capable of
conversion into written form within a reasonable time.
Section 1.03. Seal. The corporate seal of the Corporation
shall be in circular form and mounted upon a metal die, suitable
for impressing upon paper, and about the upper periphery of the
seal shall appear the words "Central Newspapers, Inc." and about
the lower periphery thereof shall appear the word "Indiana" and
in the center thereof shall appear the word "Seal" and the year
"1934". The corporate seal shall be used for ceremonial or
traditional purposes in such circumstances as the Secretary or
Assistant Secretary shall deem appropriate. The Corporation
shall not be required to use the corporate seal for any purpose
whatsoever, and the absence of the impression of the corporate
seal from any document shall not affect in any way the validity
or effect of such document.
Section 1.04. Fiscal Year. Each fiscal year of the
Corporation shall end on the last Sunday of each calendar year,
and the next fiscal year shall begin on the Monday following the
last Sunday in each calendar year.
ARTICLE 2
Shares
Section 2.01. Certificates for Shares. Each holder of the
shares of the Corporation shall be entitled to a certificate in
such form as the Board may prescribe from time to time. However,
unless the Articles provide otherwise, the Board may authorize
the issue of some or all of the shares of any or all of the
Corporation's classes or series without certificates. Within a
reasonable time after the issue or transfer of shares without
certificates, the Corporation shall send the Shareholder a
written statement of the information required on certificates by
the Indiana Business Corporation Law, as amended from time to
time (the "Act"), and the information required by the Indiana
Uniform Commercial Code, as in effect from time to time. A holder
of such shares may request that a certificate be provided to him
by giving notice to the Secretary of the Corporation. The
certificate shall be provided in the form prescribed by the
Board.
Section 2.02. Transfer of Shares. The shares of the
Corporation shall be transferable only on the books of the
Corporation upon delivery to the Corporation of the
certificate(s) representing the same or, in the case of shares
without certificates, an instrument of assignment in respect of
the shares being transferred, in form and substance satisfactory
to the Corporation, properly endorsed by the registered holder or
by his duly authorized attorney, such endorsement to be
guaranteed by a bank or registered securities broker or dealer.
The requirement for such guarantee may be waived in writing upon
the form of endorsement by the President of the Corporation.
Section 2.03. Lost, Stolen or Destroyed Certificates. The
Corporation may issue a new certificate for shares in the place
of any certificate theretofore issued and alleged to have been
lost, stolen or destroyed, but the Board may require the owner of
such lost, stolen or destroyed certificate, or his legal
representative, to furnish affidavit as to such loss, theft or
destruction and to give a bond in such form and substance, and
with such surety or sureties, with fixed or open penalty, as it
may direct to indemnify the Corporation against any claim that
may be made on account of the alleged loss, theft or destruction
of such certificate. A new certificate may be issued without
requiring any bond when, in the judgment of the Board, it is not
imprudent to do so.
Section 2.04. Issue and Consideration for Shares. The
Board may authorize shares to be issued for consideration
consisting of any tangible or intangible property or benefit to
the Corporation, including cash, promissory notes, services
performed, contracts for services to be performed, or other
securities of the Corporation. If shares are issued for
promissory notes or for promises to render services in the
future, the Corporation shall report in writing to the
Shareholders the number of shares authorized to be so issued with
or before the notice of the next Shareholders' meeting. However,
if the Corporation is subject to the Securities Exchange Act of
1934, as amended (the "Exchange Act"), these reporting
requirements are satisfied by complying with the proxy disclosure
provisions of the Exchange Act. The adequacy of the consideration
is to be determined by the Board, and that determination is
conclusive insofar as the adequacy of the shares relates to
whether the shares are validly issued, fully paid, and
nonassessable. Once the Corporation receives the consideration
for which the Board authorized the issuance of the shares, the
shares are fully paid and nonassessable.
ARTICLE 3
Meetings of Shareholders
Section 3.01. Place of Meetings. All meetings of
Shareholders shall be held at the principal office of the
Corporation or at such other place, within or without the State
of Indiana, as may be specified in the respective notices or
waivers of notice thereof.
Section 3.02. Annual Meeting. Unless otherwise determined
by the Board, the annual meeting of the Shareholders for the
election of Directors, and for the transaction of such other
business as may properly come before the meeting, shall be held
at 10:00 in the forenoon of the second Wednesday in May of each
year, if such day is not a legal holiday, and if a holiday then
on the first following day that is not a legal holiday. Failure
to hold the Annual Meeting at the designated time does not affect
the validity of any corporate action.
Section 3.03. Special Meetings. Special meetings, for any
purpose or purposes (unless otherwise prescribed by law), may be
called by the Board or the President, and shall be called by the
President or any Vice-President at (a) the request in writing of
a majority of the Board, or (b) at the written demand, delivered
to the Secretary, of Shareholders holding of record not less than
25% of the voting power of all the shares of the Corporation
issued and outstanding and entitled by the Articles to vote on
the business proposed to be transacted thereat. All requests or
demands for special meetings shall state the purpose or purposes
thereof, and the business transacted at such meeting shall be
confined to the purposes stated in the call and matters germane
thereto.
Section 3.04. Record Date. The Board may fix a record
date, not exceeding seventy (70) days prior to the date of any
meeting of the Shareholders, for the purpose of determining the
Shareholders entitled to notice of and to vote at such meeting.
In the absence of action by the Board fixing a record date as
herein provided, the record date shall be the fourteenth (14th)
day prior to the date of the meeting. A new record date must be
fixed if a meeting of Shareholders is adjourned to a date more
than 120 days after the date fixed for the original meeting.
Section 3.05. Notice of Meetings. A written or printed
notice, stating the place, day and hour of the meeting, and, in
the case of a special meeting or when otherwise required by any
provision of the Act, the Articles or these By-Laws, the purpose
or purposes for which the meeting is called, shall be delivered
or mailed by the Secretary or by the persons calling the meeting
to each Shareholder at the time entitled to vote, at such address
as appears on the records of the Corporation, at least ten (10)
and not more than sixty (60) days before the date of the meeting.
Notice of any special meeting called at the written demand of
Shareholders shall be delivered or mailed within sixty (60) days
of the Secretary's receipt of such demand. Each Shareholder who
has in the manner provided in Section 3.06 of these By-Laws
waived notice of a Shareholders' meeting, or who personally
attends a Shareholders' meeting, or is represented thereat by a
proxy duly authorized to appear by an instrument of proxy
complying with the requirements hereinafter set forth, shall be
conclusively presumed to have been given due notice of such
meeting.
Section 3.06. Waiver of Notice. Notice of any annual or
special meeting may be waived in writing by any Shareholder,
before or after the date and time of the meeting specified in the
notice thereof, by a written waiver delivered to the Corporation
for inclusion in the minutes or filing with the corporate
records. A Shareholder's attendance at any meeting in person or
by proxy shall constitute a waiver of any objection to (a) notice
of such meeting, unless the Shareholder at the beginning of the
meeting objects to the holding of or the transaction of business
at the meeting, and (b) consideration at such meeting of any
business that is not within the purpose or purposes described in
the meeting notice, unless the Shareholder objects to considering
the matter when it is presented.
Section 3.07 Proxies. A Shareholder entitled to vote at
any meeting may vote either in person or by proxy executed in
writing by the Shareholder or a duly authorized attorney-in-fact
of such Shareholder. For purposes of this Section, a proxy
granted by telegram, telex, telecopy or other document
transmitted electronically for or by a Shareholder shall be
deemed "executed in writing by the Shareholder." The general
proxy of a fiduciary shall be given the same effect as the
general proxy of any other Shareholder. No proxy shall be valid
after eleven months from the date of its execution unless a
longer or shorter time is expressly provided therein. An
appointment of a proxy is revocable by a Shareholder unless the
appointment form conspicuously states that it is irrevocable and
the appointment is coupled with an interest.
Section 3.08. Quorum. At any meeting of Shareholders, the
holders of outstanding shares representing a majority of the
votes entitled to be cast with respect to the business to be
transacted at such meeting, represented thereat in person or by
proxy, shall constitute a quorum, and a majority vote of such
quorum shall be necessary for the transaction of any business by
the meeting, unless a greater number is required by law, the
Articles or these By-Laws. In case a quorum shall not be present
at any meeting, the holders of record representing a majority of
the votes so present in person or by proxy may adjourn the
meeting from time to time, without notice, other than
announcement at the meeting, unless the date of the adjourned
meeting requires that the Board fix a new record date therefore,
in which case notice of the adjourned meeting shall be given. At
any 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 scheduled.
Section 3.09. Shareholder List. The Secretary shall cause
to be prepared before each meeting of Shareholders a complete
list of the Shareholders entitled to notice of such meeting,
arranged in alphabetical order by class of shares (and each
series within a class), and showing the address of, and the
number of shares entitled to vote held by, each Shareholder (the
"Shareholder List"). Beginning five business days before the
meeting and continuing throughout the meeting, the Shareholder
List shall be on file at the principal office or at a place
identified in the meeting notice as the city where the meeting
will be held, and shall be available for inspection by any
Shareholder entitled to vote at the meeting. On written demand,
made in good faith and for a proper purpose and describing with
reasonable particularity the Shareholder's purpose, and if the
Shareholder List is directly connected with the Shareholder's
purpose, a Shareholder (or such Shareholder's agent or attorney
authorized in writing) shall be entitled to inspect and to copy
the Shareholder List, during regular business hours and at the
Shareholder's expense, during the period the Shareholder List is
available for inspection. The original stock register or transfer
book, or a duplicate thereof kept in the State of Indiana, shall
be the only evidence as to who are the Shareholders entitled to
examine the Shareholder List, or to notice of or to vote at any
meeting.
Section 3.10. Action Without Meeting. Any action required
or permitted to be taken at any meeting of the Shareholders may
be taken without a meeting if the action is taken by all the
Shareholders entitled to vote on the action. The action must be
evidenced by one (1) or more written consents describing the
action taken, signed by all the Shareholders entitled to vote on
the action, and delivered to the Corporation for inclusion in the
minutes or filing with the corporate records. Action taken under
this Section is effective when the last Shareholder signs a
written consent, unless the consent specifies a different prior
or subsequent effective date.
Section 3.11. Voting Rights of Shareholders. The
Shareholders of the Corporation shall have the voting rights set
forth in the Articles.
Section 3.12. Order of Business. The order of business at
the annual meetings, and so far as practicable at all other
meetings, of Shareholders, shall be:
Item (1). Proof of due notice of meeting.
Item (2). Call of roll.
Item (3). Reading and disposal of any unapproved
minutes.
Item (4). Annual reports of Officers and
Committees.
Item (5). Unfinished business.
Item (6). New business.
Item (7). Election of Directors.
Item (8). Adjournment.
Section 3.13. Notice of Shareholder Business. At any
meeting of the Shareholders, only such business or proposals
("Business") may be conducted as shall have been properly brought
before the meeting, and as shall have been determined to be
lawful and appropriate for consideration by Shareholders at the
meeting. To be properly brought before a meeting, Business must
be (a) specified in the notice of meeting (or supplement thereto)
given in accordance with Section 3.05 of these By-Laws,
(b) brought before the meeting by or at the direction of the
Board or the President, or (c) brought before the meeting by a
Shareholder after giving timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a Shareholder's
notice must be delivered to or mailed and received at the
principal office of the Corporation, not less than ten (10) days
prior to the meeting. A Shareholder's notice to the Secretary
shall set forth as to each matter the Shareholder proposes to
bring before the meeting (a) a brief description of the Business
desired to be brought before the meeting, (b) the name and
address, as they appear on the Corporation's Shareholder List, of
the Shareholder proposing such Business, (c) the class and number
of shares of the Corporation which are beneficially owned by the
Shareholder, and (d) any interest of the Shareholder in such
Business. The person presiding at the meeting shall, if the
facts warrant, determine and declare to the meeting that Business
was not properly brought before the meeting in accordance with
the By-Laws, or that Business was not lawful or appropriate for
consideration by Shareholders at the meeting, and if he should so
determine, he shall so declare to the meeting, and any such
Business shall not be transacted. (Section added December 18,
1991)
Section 3.14. Notice of Shareholder Nominees. Nominations
of persons for election to the Board may be made at any meeting
of Shareholders by or at the direction of the Board or by any
Shareholder of the Corporation entitled to vote for the election
of Directors at the meeting. Shareholder nominations shall be
made pursuant to timely notice given in writing to the Secretary
of the Corporation in accordance with Section 3.13 of this By-
Laws. Such Shareholder's notice shall set forth as to each
person whom the Shareholder proposes to nominate for election or
re-election as a Director, (a) the name, age, business address
and residence address of such person, (b) the principal
occupation or employment of such person, (c) the class and number
of shares of the Corporation which are beneficially owned by such
person, (d) any other information relating to such person that is
required to be disclosed in solicitation of proxies for election
of Directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as
amended (including without limitation such person's written
consent to being named in the proxy statement as a nominee and to
serving as a Director if elected), and (e) the qualifications of
the nominee to serve as a Director of the Corporation. The
Corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the
Corporation to determine the eligibility of such proposed nominee
to serve as a Director of the Corporation. No Shareholder
nomination shall be effective unless made in accordance with the
procedures set forth in this Section 3.14. The person presiding
at the meeting shall, if the facts warrant, determine and declare
to the meeting that a Shareholder nomination was not made in
accordance with the By-Laws, and if he should so determine, he
shall so declare to the meeting and the defective nomination
shall be disregarded. (Section added December 18, 1991)
ARTICLE 4
Board of Directors
Section 4.01. Duties and Number. The business and affairs
of the Corporation shall be managed under the direction of a
Board of eight (8) Directors.
Section 4.02. Election, Term of Office and Qualification.
Directors shall be elected at each annual meeting by the
Shareholders entitled by the Articles to elect Directors.
Directors shall be elected for a term of one year and shall hold
office until their respective successors are elected and
qualified. Directors need not be residents of the State of
Indiana or Shareholders of the Corporation. No decrease in the
number of Directors at any time provided for by these By-Laws
shall have the effect of shortening the term of any incumbent
Director.
Section 4.03. Powers of Directors. The Board shall
exercise all the powers of the Corporation, subject to the
restrictions imposed by law, the Articles, or these By-Laws.
Section 4.04. Annual Meeting. Unless otherwise determined
by the President or the Board, the Board shall meet each year
immediately after the annual meeting of the Shareholders, at the
place where such meeting of the Shareholders has been held, for
the purpose of organization, election of Officers, and
consideration of any other business that may properly be brought
before the meeting. No notice shall be necessary for the holding
of this annual meeting. If such meeting is not held as above
provided, the election of Officers may be held at any subsequent
duly constituted meeting of the Board.
Section 4.05. Regular Board Meetings. Regular meetings of
the Board may be held at stated times or from time to time, and
at such place, either within or without the State of Indiana, as
the Board may determine, without call and without notice.
Section 4.06. Special Board Meetings. Special meetings of
the Board may be called at any time or from time to time, and
shall be called on the written request of at least two Directors
or the President, by causing the Secretary or any Assistant
Secretary to give to each Director, either personally or by mall,
telephone, telegraph, teletype or other form of wire or wireless
communication at least two days' notice of the date, time and
place of such meeting. Special meetings shall be held at the
principal office or at such other place, within or without the
State of Indiana, as shall be specified in the respective notices
or waivers of notice thereof. A Director may waive notice of any
special meeting of the Board before or after the date and time
stated in the notice by a written waiver signed by the Director
and filed with the minutes or corporate records. A Director's
attendance at or participation in a special meeting waives any
required notice to the Director of the meeting unless the
Director at the beginning of the meeting (or promptly upon the
Director's arrival) objects to holding the meeting or transacting
business at the meeting and does not thereafter vote for or
assent to action taken at the meeting.
Section 4.07. Meeting by Telephone, etc. Any or all of the
members of the Board or of any committee designated by the Board
may participate in a meeting of the Board or the committee, or
conduct a meeting through the use of, any means of communication
by which all persons participating may simultaneously hear each
other during the meeting, and participation in a meeting using
these means constitutes presence in person at the meeting.
Section 4.08. Quorum. At all meetings of the Board, a
majority of the number of Directors designated for the full Board
shall be necessary to constitute a quorum for the transaction of
any business, except (a) that for the purpose of filling of
vacancies of the Board a majority of Directors then in office
shall constitute a quorum, and (b) that a lesser number may
adjourn the meeting from time to time until a quorum is present.
The affirmative vote of a majority of the Directors present at a
meeting at which a quorum is present shall be the act of the
Board, unless the act of a greater number is required by law, the
Articles or these By-Laws.
Section 4.09. Action Without Meeting. Any action required
or permitted to be taken at any meeting of the Board or of any
committee thereof may be taken without a meeting if the action is
taken by all members of the Board or of such committee. The
action must be evidenced by one (1) or more written consents
describing the action taken, signed by each member of the Board
or of the committee, and included in the minutes or filed with
the corporate records reflecting the action taken. Action taken
under this Section is effective when the last member of the Board
or of the committee signs a written consent, unless the consent
specifies a different prior or subsequent effective date.
Section 4.10. Resignations. Any Director may resign at any
time by delivering written notice to the Board, its Chairman, the
President, or the Secretary. Such resignation shall take effect
when the notice is delivered unless the notice specifies a later
effective date. If the resignation specifies a later effective
date, the Board may fill the pending vacancy before the effective
date, but the new Director may not take office until the vacancy
occurs.
Section 4.11. Removal. Any Director may be removed, with
or without cause, at any meeting of the Shareholders by the vote
specified in the Articles, if notice of the intention to act upon
such matter shall have been given in the notice calling such
meeting.
Section 4.12. Vacancies. Any vacancy occurring in the
Board, including a vacancy resulting from an increase in the
number of Directors, may be filled by the Board, or if the
Directors remaining in office constitute fewer than a quorum of
the Board, they may fill the vacancy by the affirmative vote of a
majority of all the Directors remaining in office. Each Director
so chosen shall hold office until the expiration of the term of
the Director, if any, whom he has been chosen to succeed, or, if
none, until the expiration of the term designated by the Board
for the directorship to which he has been elected, or until his
earlier removal, resignation, death, or other incapacity.
Section 4.13. Compensation of Directors. The Board is
empowered and authorized to fix and determine the compensation of
Directors for attendance at meetings of the Board and additional
compensation for such additional services any of such Directors
may perform for the Corporation.
Section 4.14. Interest of Directors in Contracts. Any
contract or other transaction between the Corporation and (a) any
Director, or (b) any corporation, unincorporated association,
business trust, estate, partnership, trust, joint venture,
individual or other legal entity ("Legal Entity") (1) in which
any Director has a material financial interest or is a general
partner, or (2) of which any Director is a director, officer or
trustee (collectively, a "Conflict Transaction"), shall be valid
for all purposes, if the material facts of the Conflict
Transaction and the Director's interest were disclosed or known
to the Board,' a committee with authority to act thereon, or the
Shareholders entitled to vote thereon, and the Board, such
committee, or such Shareholders authorized, approved, or ratified
the Conflict Transaction. A Conflict Transaction is authorized,
approved or ratified:
(a) By the Board or such committee, if it receives the
affirmative vote of a majority of the Directors who have no
interest in the Conflict Transaction, notwithstanding the
fact that such majority may not constitute a quorum or a
majority of the Board or such committee or a majority of the
Directors present at the meeting, and notwithstanding the
presence or vote of any Director who does have such an
interest; provided, however, that no Conflict Transaction
may be authorized, approved or ratified by a single
Director; or
(b) By such Shareholders, if it receives the vote of a
majority of the shares entitled to be counted, in which vote
shares owned or voted under the control of any Director who,
or of any Legal Entity that, has an interest in the Conflict
Transaction may be counted.
This Section shall not be construed to require authorization,
ratification or approval by the Shareholders of any Conflict
Transaction, or to invalidate any Conflict Transaction that would
otherwise be valid under the common and statutory law applicable
thereto.
ARTICLE 5
Executive Committee and Other Committees
Section 5.01. Designation of Committees. The Board may, by
resolution adopted by a majority of the actual number of
Directors elected and qualified, from time to time, designate (i)
any two (2) or more of its members to constitute an Executive
Committee, and (ii) any one (1) or more of its members to
constitute any other Committee. The Board shall have the power at
any time to increase or decrease the number of members of the
Executive Committee or any other Committee, to fill vacancies
thereon, to change any member thereof and to change the functions
or terminate the existence thereof.
Section 5.02. Powers of Committees. During the intervals
between meetings of the Board, and subject to such limitations as
may be required by law or by resolution of the Board, the
Executive Committee shall have and may exercise all of the
authority of the Board, and any other Committee shall have and
may exercise such authority of the Board as may be provided in
the resolution designating such Committee; provided, however,
that neither the Executive Committee nor any other Committee
shall have authority to do any of the following:
(a) authorize dividends or other distributions, except
that the Executive Committee (or an Officer designated by
the Board) may authorize or approve a reacquisition of
Shares if done according to a formula or method prescribed
by the Board;
(b) approve or propose to the Shareholders action
required by the law to be submitted to the Shareholders for
approval;
(c) fill vacancies on the Board or any Committee;
(d) amend the Articles, except to the extent
authorized in subsection (g);
(e) adopt, amend or repeal these By-Laws;
(f) approve a plan of merger not requiring Shareholder
approval; or
(g) authorize or approve the issuance or sale or of
Shares, or determine the designation and relative rights,
preferences and limitations of a class or series of Shares,
except that the Executive Committee (or an Officer
designated by the Board) may take the actions described in
this subsection within limits prescribed by the Board.
The members of any Committee shall act only as a Committee, and
the individual members shall have no power as such. All minutes
of Committee Meetings shall be submitted to the next succeeding
Board Meeting; but failure to submit the same shall not
invalidate any completed or incomplete action taken by the
Corporation upon proper authorization by such Committee prior to
the time when the same should have been or were submitted as
above provided.
Section 5.03. Meetings; Procedure; Quorum. Sections 4.05
through 4.09 of these By-Laws dealing with meetings, action
without a meeting, notice and waiver of notice, and quorum and
voting requirements of the Board apply to the committees and
their members as well.
ARTICLE 6
Officers
Section 6.01. Number. The Officers of the Corporation
shall consist of the President, the Executive Vice President, one
(1) or more Vice-Presidents, the Secretary, the Treasurer, and
such other officers as may be chosen by the Board at such time
and in such manner and for such terms as the Board may prescribe.
Any two (2) or more offices may be held by the same person.
Section 6.02. Election and Term of Office. The Officers
shall be chosen by the Board or by an Officer duly elected or
appointed and duly authorized by the Board. Each Officer shall
hold office until his successor is chosen and qualified, until
his death, until he shall have resigned, or until he shall have
been removed pursuant to Section 6.04 of these By-Laws.
Section 6.03. Resignations. Any Officer may resign at any
time by delivering written notice to the Board, its Chairman, the
President, or the Secretary. Such resignation shall take effect
when the notice is delivered unless the notice specifies a later
effective date. If a resignation is made effective at a later
date and the Corporation accepts the future effective date, the
Board may fill the pending vacancy before the effective date if
the Board provides that the successor does not take office until
the effective date.
Section 6.04. Removal. Any Officer may be removed either
with or without cause, at any time, by the vote of a majority of
the actual number of Directors elected and qualified from time to
time, or by the Officer who appointed that Officer.
Section 6.05. Vacancies. Whenever any vacancy shall occur
in any office, the same shall be filled by the Board, the
President, or by an Officer duly appointed by the Board, and the
Officer so chosen shall hold office during the remainder of the
term for which his predecessor was chosen or as otherwise
provided herein.
Section 6.06. President. Subject to the general control of
the Board, the President shall manage and supervise all the
affairs and personnel of the Corporation and shall discharge all
the usual functions of the chief executive officer of a
corporation. He shall preside at all meetings of Shareholders and
Directors, discharge all the duties which devolve upon a
presiding officer, and shall exercise and perform such other
powers and duties as these By-Laws or the Board may prescribe.
The President shall have full authority to execute proxies in
behalf of the Corporation, to vote stock owned by it in any other
corporation, and to execute, with the Secretary, powers of
attorney appointing other corporations, partnerships, or
individuals the agent of the Corporation, all subject to the
provisions of the Act, the Articles and these By-Laws.
Section 6.07. The Executive Vice-President and Vice-
Presidents. The Executive Vice-President shall perform all
duties incumbent upon the President during the absence or
disability of the President, and perform such other duties as the
By-Laws may require or the Board of Directors or President may
prescribe. The Vice-Presidents shall perform all duties incumbent
upon the Executive Vice-President during the absence or
disability of the Executive Vice-President, and perform such
other duties as these By-Laws may require or the Board of
Directors or President may prescribe.
Section 6.08 Secretary. The Secretary shall attend all
meetings of the Shareholders and of the Board, and shall keep or
cause to be kept in a book provided for the purpose a true and
complete record of the proceedings of such meetings, and shall
perform a like duty, when required, for all committees created by
the Board. He shall authenticate the records of the Corporation
when necessary and shall exercise and perform such other powers
and duties as these By-Laws, the Board, or the President may
prescribe. He shall give all notices of the Corporation and, in
case of his absence, negligence, or refusal so to do, any notice
may be given by a person so directed by the President or by the
requisite number of Directors or Shareholders upon whose request
the meeting is called as provided by these By-Laws.
Section 6.09. Treasurer. The Treasurer shall keep correct
and complete records of account, showing accurately at all times
the financial condition of the Corporation. He shall be the legal
custodian of all moneys, notes, securities and other valuables
that may from time to time come into the possession of the
Corporation. He shall immediately deposit all funds of the
Corporation coming into his hands in some reliable bank or other
depository to be designated by the Board, and shall keep such
bank account in the name of the Corporation. He shall furnish at
meetings of the Board, or whenever requested thereby, a statement
of the financial condition of the Corporation, and shall exercise
and perform such other powers and duties as these By-Laws, the
Board, or the President may prescribe. The Treasurer may be
required to furnish bond in such amount as shall be determined by
the Board.
Section 6.10. Chairman of the Board. The Chairman of the
Board shall be elected from the Directors of the Corporation and
shall have the usual duties of a Chairman of the Board.
Section 6.11. Assistant Officers. The Board or an Officer
duly appointed by the Board may from time to time designate
assistant Officers who shall exercise and perform such powers and
duties as the Officers whom they are elected to assist shall
specify and delegate to them, and such other powers and duties as
these By-Laws, the Board, or the President may prescribe. An
Assistant Secretary may, in the absence or disability of the
Secretary, attest the execution of all documents by the
Corporation.
Section 6.12. Delegation of Authority. In case of the
absence of any Officer of the Corporation, or for any other
reason that the Board may deem sufficient, the Board may delegate
the powers or duties of such Officer to any other Officer or to
any Director, for the time being.
ARTICLE 7
Negotiable Instruments, Deeds, Contracts,
Stock and Limitation of Liability
Section 7.01. Execution of Negotiable Instruments. All
checks, drafts, bills of exchange and orders for the payment of
money by the Corporation shall, unless otherwise directed by the
Board, or unless otherwise required by law, be signed by any two
of the following Officers: the President, the Executive Vice-
President, any Vice-President, the Secretary or the Treasurer.
The Board may, however, authorize any one or more of such
Officers to sign checks, drafts, bills of exchange and orders for
the payment of money by the Corporation singly and without
necessity of countersignature; and the Board may designate any
other employee or employees of the Corporation, who may, in the
name of the Corporation, execute checks, drafts, bills of
exchange and orders for the payment of money by the Corporation
or in its behalf.
Section 7.02. Execution of Deeds, Contracts, Etc. All
deeds, notes, bonds and mortgages made by the Corporation and all
other written contracts and agreements, other than those executed
in the ordinary course of corporate business, to which the
Corporation shall be a party shall be executed in its name by the
President, the Executive Vice-President, a Vice-President or by
any other Officer so authorized by the Board, acting by
resolution; and the Secretary, when necessary or required, shall
attest the execution thereof.
Section 7.03. Ordinary Contracts and Agreements. All
written contracts and agreements into which the Corporation
enters in the ordinary course of business operations shall be
executed by any Officer or by any other employee of the
Corporation designated by the President to execute such contracts
and agreements.
Section 7.04. Endorsement of Certificates for Shares.
Unless otherwise directed by the Board, any share or shares
issued by any corporation and owned by the Corporation (including
reacquired shares of the Corporation) may, for sale or transfer,
be endorsed in the name of the Corporation by the President, the
Executive Vice-President or a Vice-President, and the Secretary,
when necessary or required, shall attest such endorsement.
Section 7.05. Voting of Shares Owned by Corporation.
Unless otherwise directed by the Board, any share or shares
issued by any other corporation and owned or controlled by the
Corporation may be voted at any shareholders' meeting of such
other corporation by the President of the Corporation, or in his
absence by the Executive Vice-President of the Corporation.
Whenever, in the judgment of the President, it is desirable for
the Corporation to execute a proxy or give a shareholder's
consent in respect to any share or shares issued by any other
corporation and owned by the Corporation, such proxy or consent
shall be executed in the name of the Corporation by the President
or the Executive Vice-President of the Corporation. Any person or
persons designated in the manner above stated as the proxy or
proxies of the Corporation shall have full right, power and
authority to vote the share or shares issued by such other
corporation and owned by the Corporation in the same manner as
such share or shares might be voted by the Corporation.
Section 7.06. Limitation of Liability. The following
provisions apply with respect to liability on the part of a
Director, a member of any committee appointed by the Board (an
"Appointed Committee"), Officer, employee or agent of the
Corporation (collectively, "Corporate Persons," and individually,
a "Corporate Person") for any loss or damage suffered on account
of any action taken or omitted to be taken by a Corporate Person:
(a) General Limitation. No Corporate Person shall be
liable for any loss or damage if, in taking or omitting to
take any action causing such loss or damage, either (1) such
Corporate Person acted (A) in good faith, (B) with the care
an ordinarily prudent person in a like position would have
exercised under similar circumstances, and (C) in a manner
such Corporate Person reasonably believed was in the best
interests of the Corporation, or (2) such Corporate Person's
breach of or failure to act in accordance with the standards
of conduct set forth in Clause (a)(1) above (the "Standards
of Conduct") did not constitute willful misconduct or
recklessness.
(b) Reliance on Corporate Records and Other
Information. Any Corporate Person shall be fully protected,
and shall be deemed to have complied with the Standards of
Conduct, in relying in good faith, with respect to any
information contained therein, upon (1) the Corporation's
records, or (2) information, opinions, reports or statements
(including financial statements and other financial data)
prepared or presented by (A) one or more other Corporate
Persons whom such Corporate Person reasonably believes to be
competent in the matters presented, (B) legal counsel,
public accountants or other persons as to matters that such
Corporate Person reasonably believes are within such
person's professional or expert competence, (C) an Appointed
Committee, of which such Corporate Person is not a member,
if such Corporate Person reasonably believes such Appointed
Committee merits confidence, or (D) the Board, if such
Corporate Person is not a Director and reasonably believes
that the Board merits confidence.
ARTICLE 8
Amendments
Section 8.01. Amendment of By-Laws. The power to make,
alter, amend or repeal these By-Laws is vested in the Board, but
the affirmative vote of a number of Directors equal to a majority
of the number who would constitute a full Board of Directors at
the time of such action shall be necessary to take any action for
the making, alteration, amendment or repeal of these By-Laws.
INDS01 KEA 18110
TERMINATION BENEFITS AGREEMENT
In consideration of Louis A. Weil, III (the "Executive")
accepting employment effective January 1, 1996, as President and
Chief Executive Officer of Central Newspapers, Inc., an Indiana
corporation (the "Company"), the Company hereby agrees to pay to
the Executive the termination benefits specified in Section 1 below
if the Company terminates the employment of the Executive (or
restructures it in any way without his consent so that he is no
longer the chief executive officer) for any reason other than
"cause" (as defined in Section 2 below) or the Executive's death,
total disability or attainment of age 65. This Agreement
supersedes a Termination Benefits Agreement dated August 1, 1991,
between the Executive and Phoenix Newspapers, Inc.
Section 1. Termination Benefits. If the Executive is
entitled to termination benefits pursuant to this agreement:
(a) Within thirty (30) days after the termination, the
Company shall pay the Executive a lump sum equal to 200% of
his annual base salary on the date of termination, and
(b) On or before March 31 of the calendar year following
the termination, the Company shall pay the Executive an amount
equal to 200% of a pro-rata portion of the bonus he would have
received if he had been employed on the last day of the year
with the pro-rata portion based on the actual number of days
that he was employed by the Company during the year, and
(c) For a period of two years after the Termination
Date, the Company will provide continued medical insurance
coverage for the Executive and his dependents at substantially
the same benefit levels and costs (if any) to the Executive
that were being provided immediately prior to the date of
termination.
For purposes of calculating the termination benefits and insurance
costs and benefits described in this Section 1, any reduction in
salary, bonus goals or opportunities or medical insurance benefits
made by the Company within 90 days prior to the date of termination
shall be ignored.
Section 2. Definition of Cause. For purposes of the
Agreement, the Executive shall be considered to be terminated for
"cause" and shall not be entitled to any termination benefits if
the termination results from (a) an act of dishonesty by the
Executive intending to result directly or indirectly in personal
gain to the Executive at the Company's expense, (b) the intentional
and continuing refusal by the Executive to devote his Executive's
best full-time efforts to the affairs of the Company or (c) the
conviction of the Executive of a felony involving moral turpitude.
Section 3. Indemnification. The Company shall indemnify
the Executive against any judgment, settlement, penalty, fine or
reasonable expenses incurred with respect to any proceeding in
which the Executive is made a party because he is or was an officer
or director of the Company or any of its subsidiaries or affiliates
so long as (1) the Executive's conduct was in good faith, (2) the
Executive reasonably believed that his conduct was not opposed to
the best interests of the Company, and (3) in the case of a
criminal proceeding, the Executive had no reasonable cause to
believe that his conduct was unlawful. The termination of a
proceeding by a judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent is not, of itself,
determinative that the Executive did not meet the standard of
conduct described herein. If the Executive is wholly successful,
on the merits or otherwise, in such proceeding, then it shall be
conclusively presumed that the Executive did meet the standard of
conduct for indemnification. Otherwise, the determination shall be
made by the Board of Directors by a majority vote of a quorum
consisting of directors not parties to the proceeding or, if a
quorum cannot be obtained, then by special counsel selected by a
majority of the Board of Directors, without regard to whether those
directors are parties to the proceeding. The Company shall also
pay for or reimburse the reasonable expenses incurred by the
Executive in advance of a final disposition of any proceeding to
which he is made a party upon receipt of (a) a written affirmation
of the Executive's good faith belief that he has met the standard
of conduct described above, (b) a written undertaking by the
Executive to repay the advance if it is ultimately determined that
he did not meet the standard of conduct and (c) a determination is
made by the Board of Directors that the facts then known would not
preclude indemnification under this Section. All references in
this Section to the "Executive" shall include his heirs, estate,
executors, administrators and personal representatives.
Section 4. Miscellaneous. Nothing in the Agreement is
intended to create an employment agreement between the Company and
the Executive or limit the rights of the Company to terminate the
Executive's employment at any time. This Agreement shall not
affect any stock options, restricted stock, retirement plans or
other employee benefits the Executive is provided by the Company,
and his rights with respect to those benefits upon termination
shall be governed by the terms of those plans. This agreement is
personal to the Executive and is not assignable by the Executive.
This Agreement can not be amended or terminated except by a writing
signed by both the parties hereto. This Agreement shall be
governed by the laws of the State of Indiana.
EXECUTED and EFFECTIVE this 23rd day of February, 1996.
CENTRAL NEWSPAPERS, INC.
By: /s/ Frank E. Russell /s/ Louis A. Weil III
-------------------------- -----------------------
Frank E. Russell, Chairman of Louis A. Weil III
the Board and Assistant Secretary
By: /s/ Thomas K. MacGillivray
---------------------------
Thomas K. MacGillivray, Treasurer
and Chief Financial Officer
AMENDED AND RESTATED
CENTRAL NEWSPAPERS, INC.
STOCK COMPENSATION PLAN
1. Purpose. The purpose of the Central Newspapers, Inc.
Stock Option Plan (the "Plan") is to provide to certain key
employees and non-employee directors of Central Newspapers, Inc.
(the "Corporation") and other key employees of any of the 50% or
greater owned subsidiaries of the Corporation or 50% or greater
owned subsidiaries of a 50% or greater owned subsidiary of the
Corporation (individually a "Subsidiary" and collectively the
"Subsidiaries") who are materially responsible for the management
or operation of the business of the Corporation or a Subsidiary,
a favorable opportunity to acquire Class A Common Stock without
par value of the Corporation ("Common Stock"), thereby providing
them with an increased incentive to work for the success of the
Corporation and the Subsidiaries and better enabling the
Corporation and the Subsidiaries to attract and retain capable
executive personnel. The three means by which an individual may
acquire Common Stock are:
(a) the grant to a key employee of an option to
acquire shares of Common Stock (an "Option") in accordance
with Section 5 or Section 8;
(b) the award to a key employee of shares of Common
Stock without the payment of consideration therefor (an
"Award") in accordance with Section 6 or Section 8; and
(c) the grant to a member of the Board of Directors of
the Corporation who is not employed by the Corporation (an
"Outside Director") of an option to acquire shares of Common
Stock (a "Director Option") in accordance with Section 7.
2. Administration of the Plan. Except with respect to
Director Options granted pursuant to Section 7, the Plan shall be
administered, construed and interpreted by a committee (the
"Committee"), consisting of at least three (3) members of the
Board of Directors of the Corporation, who shall be designated
from time to time by the Board of Directors of the Corporation.
No member of the Committee shall be eligible, at any time when he
or she is such a member or within one (1) year prior to his or
her appointment to the Committee, to be granted an Option or
Award under the Plan or to be selected as a person to whom stock,
stock options, or stock appreciation rights may be allocated or
granted under any other plan of the Corporation or a Subsidiary.
The decision of a majority of the members of the Committee shall
constitute the decision of the Committee, and the Committee may
act either at a meeting at which a majority of the members of the
Committee is present or by a written consent signed by all
members of the Committee. The Committee shall have the sole,
final and conclusive authority to determine, consistent with and
subject to the provisions of the Plan:
(a) the individuals (the "Optionees") to whom Options
or successive Options shall be granted under the Plan;
(b) the individuals ("Recipients") to whom Awards
shall be granted under the Plan;
(c) the time when Options and/or Awards shall be
granted hereunder;
(d) the number of shares of Common Stock of the
Corporation to be covered under each Option;
(e) the number of shares of Common Stock of the
Corporation to be awarded under each Award;
(f) the option price to be paid upon the exercise of
each Option;
(g) the period within which each Option may be
exercised;
(h) the extent to which an Option is an incentive
stock option or a non-qualified stock option;
(i) the terms and conditions of the respective option
agreements by which Options granted shall be evidenced; and
(j) the terms and conditions of the respective stock
award agreements by which Awards shall be evidenced.
The Committee shall also have authority to prescribe, amend and
rescind rules and regulations relating to the Plan and to make
all other determinations necessary or advisable in the
administration of the Plan.
Those members of the Committee who are currently "outside
directors" as defined in Prop. Reg. Sec. 1.162-27(e)(3) shall
constitute a subcommittee (the "Incentive Compensation
Subcommittee") which shall administer and interpret the
provisions of Section 8 of this Plan. In the event that there
are, at any time, fewer than two members of the Incentive
Compensation Subcommittee, the Board of Directors shall appoint,
from its remaining members, one or more additional Incentive
Compensation Subcommittee members so that the Incentive
Compensation Subcommittee shall include at least two "outside
directors" as defined in Prop. Reg. Sec. 1.162-27(e)(3).
Those provisions of the Plan (including, but not limited to,
Section 7) that are applicable to the administration,
construction or interpretation of Director Options (the "Director
Option Provisions") shall be administered, construed and
interpreted by those members of the Board of Directors of the
Corporation who are not Outside Directors (the "Inside
Directors"). The decision of a majority of the Inside Directors
shall constitute the decision of the Inside Directors in the
aggregate, and the Inside Directors may act either at a meeting
at which a majority of the Inside Directors is present or by a
written consent signed by all the Inside Directors. The Inside
Directors shall have the sole, final and conclusive authority to
interpret and construe the Director Option Provisions and to
prescribe, amend and rescind rules and regulations relating to
the Director Option Provisions.
3. Eligibility. The Committee may, consistent with the
purposes of the Plan, grant Options or make Awards to officers
and other key employees of the Corporation or of a Subsidiary
who, in the opinion of the Committee, are from time to time
materially responsible for the management or operation of the
business of the Corporation or of a Subsidiary; provided,
however, that in no event may any employee who owns (after
application of the ownership rules in Sec. 425(d) of the Internal
Revenue Code of 1986, as amended, and any rules or regulations
promulgated thereunder (the "Code")) shares of stock possessing
more than 10% of the total combined voting power of all classes
of stock of the Corporation be granted an incentive stock option
hereunder unless, at the time such incentive stock option is
granted, the option price is at least 110% of the fair market
value of the Common Stock subject to the incentive stock option
and such incentive stock option by its terms is not exercisable
after the expiration of five (5) years from the date such
incentive stock option is granted. Subject to the provisions of
Section 4 hereof, an individual who has been granted an Option or
Award under the Plan, if otherwise eligible, may be granted
additional Options or Awards if the Committee shall so determine.
4. Stock Subject to the Plan. There shall be reserved for
issuance upon the exercise of Options granted, or for the purpose
of making Awards, under the Plan, three million (3,000,000)
shares of the Corporation's Class A Common Stock which will be
authorized but unissued shares of the Corporation. Subject to
Section 10 hereof, the shares granted pursuant to an Award and/or
for which Options and/or Director Options may be granted under
the Plan shall not exceed that number. If any Option or Director
Option shall expire or terminate for any reason without having
been exercised in full or if any shares of Common Stock awarded
pursuant to an Award are forfeited, the unpurchased or forfeited
shares subject thereto shall (unless the Plan shall have
terminated) become available for other Options, Director Options
or Awards under the Plan.
5. Terms of Option. Each Option granted under the Plan
shall be evidenced by a Stock Option Agreement between the
Corporation and the Optionee and shall be subject to the
following terms and conditions and to such other terms and
conditions not inconsistent therewith as the Committee may deem
appropriate in each case:
(a) Option Price. The price to be paid for shares of
Common Stock upon the exercise of each Option shall be
determined by the Committee at the time such Option is
granted, but such price in no event shall be less than the
fair market value, as determined by the Committee consistent
with the requirements of Sec. 422A of the Code, of the Common
Stock on the date on which such Option is granted.
(b) Period for Exercise of Option. An Option shall
not be exercisable after the expiration of such period as
shall be fixed by the Committee at the time such Option is
granted, but such period in no event shall exceed ten (10)
years from the date on which such Option is granted;
provided, however, that no incentive stock option shall be
exercisable prior to the date on which the Plan is approved
by the shareholders of the Corporation as required by Sec. 422A
of the Code.
(c) Exercise of Options. The option price of each
share of Common Stock purchased upon exercise of an Option
shall be paid in full in cash at the time of such exercise;
provided, however, that an Optionee may, with the approval
of the Committee, exercise an Option in whole or in part by
tendering to the Corporation whole shares of Common Stock or
any combination of whole shares of Common Stock and cash,
having a fair market value equal to the cash exercise price
of the shares with respect to which the Option is being
exercised. For this purpose, the fair market value of the
shares tendered by the Optionee shall be computed as of the
exercise date in such manner as determined by the Committee
consistent with the requirements of Sec. 422A of the Code. The
Committee shall have the authority to grant Options
exercisable in full at any time during their term or
exercisable in such quotas as the Committee shall determine.
An Option may be exercised at any time or from time to time
during the term of the Option as to any or all whole shares
which have become subject to purchase pursuant to the terms
of the Option (including, without limitation, any quotas
with respect to Option exercise) or the Plan.
(d) Termination of Option. Any Option granted to an
Optionee shall terminate as of the date the Optionee ceases
to be an employee of the Corporation or of the Subsidiaries
for any reason other than retirement, permanent and total
disability (within the meaning of Sec. 105(d)(4) of the Code),
or death. Leave of absence approved by the Committee shall
not constitute cessation of employment. If an Optionee
ceases to be an employee of the Corporation or the
Subsidiaries by reason of retirement, any Option granted to
that Optionee may be exercised by the Optionee in whole or
in part within three (3) years after the date of the
Optionee's retirement whether or not the Option was
otherwise exercisable at the date of such retirement. (The
term "retirement" as used herein means such termination of
employment on or after attaining age 60). If an Optionee
ceases to be an employee of the Corporation or the
Subsidiaries by reason of permanent and total disability
(within the meaning of Sec. 105(d)(4) of the Code), any Option
granted to that Optionee may be exercised by the Optionee in
whole or in part within three (3) years after the date of
the Optionee's termination of employment by reason of such
disability whether or not the Option was otherwise
exercisable at the date of such termination of employment.
If an Optionee dies while in the employ of the Corporation
or the Subsidiaries, any Option granted to that Optionee may
be exercised in whole or in part by the executor or
administrator of the Optionee's estate or by the person or
persons entitled to the Option by will or by applicable laws
of descent and distribution within three (3) years after the
date of the Optionee's death, whether or not the Option was
otherwise exercisable at the date of the Optionee's death.
Notwithstanding the foregoing provisions of this subsection
(d), no Option shall in any event be exercisable after the
expiration of the period fixed by the Committee in
accordance with subsection (b) above.
(e) Nontransferability of Option. An Option may not
be transferred by the Optionee otherwise than by will or the
laws of descent and distribution, and during the lifetime of
the Optionee shall be exercisable only by the Optionee,
except that any non-qualified stock options granted
hereunder may be transferred by an Optionee who is not
subject to the provisions of Section 16 of the Securities
Exchange Act of 1934, as amended, to a revocable trust or
any other trust qualifying as a "grantor trust" under
Sections 671-677 of the Code to be held during the lifetime
of the Optionee for his or her benefit.
(f) Maximum Incentive Stock Options. The aggregate
fair market value (determined as of the time the incentive
stock option is granted) of Common Stock subject to
incentive stock options that are exercisable for the first
time by an employee during any calendar year under the Plan
or any other plan of the Corporation or any Subsidiary shall
not exceed $100,000. For this purpose, the fair market
value of such shares shall be determined as of the date the
incentive stock option is granted and shall be computed in
such manner as shall be determined by the Committee
consistent with the requirements of Sec. 422A of the Code. If
the immediate exercisability of incentive stock options
arising from the retirement, death or permanent and total
disability of an Optionee pursuant to Section 5(d) above
would cause this $100,000 limitation to be exceeded for an
Optionee, the Committee shall convert as of the date on
which such incentive stock options become exercisable all or
a portion of the outstanding incentive stock options held by
such Optionee to non-qualified stock options to the extent
necessary to comply with the $100,000 limitation.
(g) Tax Benefit. The Committee may, in its sole
discretion, include a provision in any non-qualified stock
option agreement that provides for an additional cash
payment from the Corporation to the Optionee of such
non-qualified option as soon as practicable after the
exercise date of such non-qualified stock option equal to
all or a portion of the tax benefit to be received by the
Corporation attributable to its federal income tax deduction
resulting from the exercise of such non-qualified stock
option.
(h) Certificates. The certificate or certificates for
the shares issuable upon an exercise of an Option shall be
issued as promptly as practicable after such exercise. An
Optionee shall not have any rights of a shareholder in
respect to the shares of Common Stock subject to an Option
until the date of issuance of a stock certificate for such
shares. In no case may a fraction of a share be purchased
or issued under the Plan, but if, upon the exercise of an
Option, a fractional share would otherwise be issuable, then
the Corporation shall pay cash in lieu thereof.
(i) No Right to Continued Service. Nothing in this
Plan or in any agreement entered into pursuant hereto shall
confer on any person any right to continue in the employ of
the Corporation or its Subsidiaries or affect any rights the
Corporation, a Subsidiary or the shareholders of the
Corporation may have to terminate that person's service at
any time.
6. Terms of Award. Each Award made under the Plan shall
be evidenced by a Stock Award Agreement between the Corporation
and the Recipient and shall be subject to the following terms and
conditions and to such other terms and conditions not
inconsistent therewith as the Committee may deem appropriate in
each case:
(a) Number of Shares. The Stock Award Agreement shall
evidence the number of shares of Common Stock subject to the
Award.
(b) Transfer Restrictions. None of the shares of
Common Stock subject to an Award may be sold, assigned,
pledged or otherwise transferred, voluntarily or
involuntarily, by the Recipient except upon the lapse of
those restrictions and/or the attainment of those objective
performance goals specified in the Stock Award Agreement.
The shares of Common Stock subject to an Award shall be
forfeited to the Corporation upon the Recipient's
termination of employment with the Corporation or its
Subsidiaries (other than termination of employment due to
the Recipient's permanent and total disability (within the
meaning of Sec. 105(d)(4) of the Code) or death) prior to the
date any restrictions lapse or objective performance goals
are achieved in accordance with the preceding sentence.
Leave of absence approved by the Committee shall not
constitute cessation of employment.
(c) Death or Disability. Upon the Recipient's death
or permanent and total disability (within the meaning of
Sec. 105(d)(4) of the Code) prior to the date any restrictions
lapse or objective performance goals are achieved in
accordance with Section 6(b), the shares of Common Stock
subject to an Award shall become freely transferable by the
Recipient or the executor or administrator of the
Recipient's estate or by the person or persons entitled to
the shares by will or by applicable laws of descent and
distribution.
(d) Tax Benefit. The Committee may, in its sole
discretion, include a provision in any Stock Award Agreement
that provides for an additional cash payment from the
Corporation to the Recipient as soon as practicable after an
Award is no longer subject to a substantial risk of
forfeiture under Sec. 83(b) of the Code (or such other time as
the Recipient first becomes subject to federal income tax as
the result of the receipt of an Award) equal to all or a
portion of the tax benefit to be received by the Corporation
attributable to its federal income tax deduction resulting
from the Award.
(e) Certificates. The certificate or certificates for
the shares subject to an Award shall be issued as promptly
as practicable after such Award. Subject to the
restrictions set forth in Section 6(b), a Recipient shall
have all rights of a shareholder (including any voting
rights and the right to receive dividends) with respect to
the shares of Common Stock subject to an Award as of the
date of issuance of a stock certificate for such shares.
(f) No Right to Continued Service. Nothing in this
Plan or in any agreement entered into pursuant hereto shall
confer on any person any right to continue in the employ of
the Corporation or its Subsidiaries or affect any rights of
the Corporation or a Subsidiary may have to terminate that
person's service at any time.
7. Director Options. Director Options shall be granted as
of the first day following each annual meeting of the
Corporation's shareholders (a "Grant Date"). As of each Grant
Date, each Outside Director serving as a director of the
Corporation on that Grant Date shall automatically be granted a
Director Option to purchase 1,000 shares of Common Stock. Each
Director Option granted under the Plan shall be a non-qualified
stock option and shall be evidenced by a Director Stock Option
Agreement between the Corporation and the Outside Director. The
Director Stock Option Agreement shall specify the number of
shares of Common Stock subject to the Director Option and shall
also be subject to the following terms and conditions:
(a) Director Option Price. The price to be paid for
shares of Common Stock upon the exercise of each Director
Option shall be the average of the high and low prices of
the Common Stock as traded on the New York Stock Exchange on
the Grant Date; provided, however, that if the Grant Date
falls on a day when shares of Common Stock are not traded,
the option price of the Director Option shall be determined
as of the first day following the Grant Date on which such
shares are traded on the New York Stock Exchange.
(b) Period for Exercise of Director Option. A
Director Option shall be exercisable any time during the
period that begins six months after the Grant Date on which
such Director Option is granted and that ends on the ten
(10) year anniversary of that Grant Date.
(c) Exercise of Director Options. The option price of
each share of Common Stock purchased upon exercise of a
Director Option shall be paid in full in cash at the time of
such exercise; provided, however, that an Outside Director
may exercise a Director Option in whole or in part by
tendering to the Corporation whole shares of Common Stock or
any combination of whole shares of Common Stock and cash,
having a fair market value equal to the cash exercise price
of the shares with respect to which the Director Option is
being exercised. For this purpose, the fair market value of
the shares tendered by the Outside Director shall be the
average of the high and low prices of the Common Stock as
traded on the New York Stock Exchange on the exercise date
(or, if the Common Stock is not traded on that date, the
first preceding date on which the Common Stock was traded on
the New York Stock Exchange). A Director Option may be
exercised at any time or from time to time during the term
of the Director Option as to any or all whole shares which
have become subject to purchase pursuant to the terms of the
Director Option or the Plan.
(d) Termination of Director Option. If an Outside
Director ceases to be a director of the Corporation for any
reason other than death, any Director Option granted to that
Outside Director may be exercised in whole or in part at any
time within the three (3) year period immediately following
the date on which his or her status as a director
terminated. Leave of absence approved by the Inside
Directors shall not constitute termination of status as
director. In the event of the death of an Outside Director
while serving as a director of the Corporation, any Director
Option granted to that Outside Director may be exercised in
whole or in part by the executor or administrator of the
Outside Director's estate or by the person or persons
entitled to the Director Option by will or by applicable
laws of descent and distribution within three (3) years
after the date of the Outside Director's death, whether or
not the Director Option was otherwise exercisable at such
date of death. Notwithstanding the foregoing provisions of
this subsection (d), no option shall in any event be
exercisable after the expiration of the period set forth in
Section 7(b) above.
(e) Nontransferability of Director Option. A Director
Option may not be transferred by the Outside Director
otherwise than by will or the laws of descent and
distribution, and during the lifetime of the Outside
Director shall be exercisable only by that Outside Director.
(f) Certificates. The certificate or certificates for
the shares issuable upon an exercise of a Director Option
shall be issued as promptly as practicable after such
exercise. An Outside Director shall not have any rights of
a shareholder in respect to the shares of Common Stock
subject to a Director Option until the date of issuance of a
stock certificate for such shares. In no case may a
fraction of a share be purchased or issued under the Plan,
but if, upon the exercise of a Director Option, a fractional
share would otherwise be issuable, then the Corporation
shall pay cash in lieu thereof.
(g) No Right to Continued Service. Nothing in this
Plan or in any agreement entered into pursuant hereto shall
confer on any person any right to continue as a director of
the Corporation or affect any rights the Corporation or the
shareholders of the Corporation may have to terminate that
person's status as a director at any time.
8. Section 162(m) Compliance. The purpose of this Section
8 is to permit the Incentive Compensation Subcommittee to grant
Options or make Awards to a key employee who is a "covered
employee" as defined in Prop. Reg. Sec. 1.162-27(c)(2) (a "Covered
Employee") in a manner that causes such Options or Awards to be
treated as qualified performance-based compensation excluded from
the deduction limits of Sec. 162(m) of the Code. Options or Awards
may be granted or made to a Covered Employee under this Section 8
in lieu of or in addition to Options or Awards granted or made
under Section 5 or Section 6.
Any Options granted under this Section 8 shall be subject to
all terms and conditions set forth in Section 5 and shall also be
subject to the following additional terms and conditions:
(a) The number of shares of Common Stock subject to an
Option granted under this Section 8 in any calendar year
shall not exceed:
(i) in the case of the chief executive
officer of the Corporation, one hundred thousand
(100,000) shares; and
(ii) in the case of each of the four highest
paid officers of the Corporation and its Subsidiaries,
other than the chief executive officer of the
Corporation, fifty thousand (50,000) shares.
Any Awards made under this Section 8 shall be subject to all
terms and conditions set forth in Section 6 and shall also be
subject to the following additional terms and conditions:
(b) An Award made under this Section 8 shall provide
that shares of Common Stock subject thereto shall become
freely transferable (and any other restrictions applicable
thereto shall lapse) only upon the satisfaction of
objective, quantified performance standards based on the
Corporation's (or a Subidiary's) net operating income before
taxes and extraordinary charges against income. The
Incentive Compensation Subcommittee shall be solely
responsible for setting actual performance targets in
accordance with the performance standards set forth in the
preceding sentence and for determining whether such targets
have been attained.
(c) The number of shares of Common Stock subject to an
Award made under this Section 8 in any calendar year shall
not exceed:
(i) in the case of the chief executive
officer of the Corporation, twenty thousand (20,000)
shares; and
(ii) in the case of each of the four highest
paid officers of the Corporation and its Subsidiaries,
other than the chief executive officer of the
Corporation, ten thousand (10,000) shares.
9. Incentive Stock Options and Non-Qualified Stock
Options. Options granted under the Plan may be incentive stock
options under Sec. 422A of the Code or non-qualified stock options.
All Options granted hereunder shall be clearly identified as
either incentive stock options or non-qualified stock options. In
no event shall the exercise of an incentive stock option affect
the right to exercise any non-qualified stock option, nor shall
the exercise of any non-qualified stock option affect the right
to exercise any incentive stock option. Nothing in this Plan
shall be construed to prohibit the grant of incentive stock
options and non-qualified stock options to the same person;
provided, however, that incentive stock options and non-qualified
stock options shall not be granted in a manner whereby the
exercise of a non-qualified stock option or incentive stock
option affects the exercisability of the other. Notwithstanding
the foregoing, Director Options shall in all events be non-
qualified stock options.
10. Adjustment of Shares. In the event of any change after
the effective date of the Plan in the outstanding stock of the
Corporation by reason of any reorganization, recapitalization,
stock split, stock dividend, combination of shares, exchange of
shares, merger or consolidation, liquidation, or any other change
in the nature of the shares of stock of the Corporation, the
Committee (or, in the case of shares to be reserved for issuance
pursuant to Director Options, the Inside Directors) shall
determine what changes, if any, are appropriate in the number and
kind of shares reserved under the Plan and in the option price
under and/or the number and kind of shares covered by outstanding
Options, Director Options or Awards granted under the Plan. Any
determination of the Committee (or the Inside Directors)
hereunder shall be conclusive.
11. Tax Withholding. Whenever the Corporation proposes or
is required to issue or transfer shares of Common Stock under the
Plan or whenever a Recipient first becomes subject to federal
income tax on an Award of shares, the Corporation shall have the
right to require the Optionee (or Recipient) or his or her legal
representative to remit to the Corporation an amount sufficient
to satisfy any federal, state and/or local withholding tax
requirements prior to the delivery of any certificate or
certificates for such shares, and whenever under the Plan
payments are to be made in cash, such payments shall be net of an
amount sufficient to satisfy any federal, state and/or local
withholding tax requirements.
12. Amendment. The Board of Directors of the Corporation
may amend the Plan from time to time and, with the consent of the
affected Optionee, Outside Director or Recipient, the terms and
provisions of his or her Option, Director Option or Award, except
that, without the approval of the Corporation's shareholders:
(a) the number of shares of Common Stock which may be
reserved for issuance under the Plan may not be increased
except as provided in Section 10 hereof;
(b) the option price under any Option (or Director
Option) may not be reduced to less than the fair market
value, as determined by the Committee (or the Inside
Directors) consistent with the requirements of Sec. 422A of the
Code, of the Common Stock on the date such Option or
Director Option is granted except as provided in Section 10
hereof;
(c) the period during which an Option or Director
Option may be exercised may not be extended beyond ten (10)
years from the date on which such Option or Director Option
was granted;
(d) the class of employees or directors to whom
Awards, Options or Director Options may be granted under the
Plan shall not be modified materially; and
(e) the benefits accruing to Recipients, Optionees or
Outside Directors under the Plan shall not be increased
materially within the meaning of Reg. 16b-3(a)(2)(ii)(A)
promulgated under the 1934 Act.
No amendment of the Plan, however, may, without the consent
of the affected Optionee, Outside Director or Recipient, make any
changes in any outstanding Options, Director Options or Awards
theretofore granted under the Plan which would adversely affect
the rights of such Optionee, Outside Director or Recipient.
Furthermore, Section 7 of the Plan may not be amended more than
once in any six (6) month period other than to comply with the
requirements of the Code.
13. Termination. The Board of Directors of the Corporation
may terminate the Plan at any time and no Options, Director
Options or Awards shall be granted thereafter. Such termination,
however, shall not affect the validity of any Option, Director
Option or Award theretofore granted under the Plan. In any event,
no Option, Director Option or Award may be granted after the
conclusion of a ten (10) year period commencing on the date the
Plan was originally adopted or, if earlier, the date the Plan is
approved by the Corporation's shareholders.
14. Successors. The Plan shall be binding upon the
successors and assigns of the Corporation.
15. Governing Law. The terms of any Options, Director
Options or Awards granted hereunder and the rights and
obligations hereunder of the Corporation, the Optionees, Outside
Directors and Recipients and their successors in interest shall,
except to the extent governed by federal law, be governed by
Indiana law.
16. Government and Other Regulations. The obligations of
the Corporation to issue or transfer and deliver shares under
Options, Director Options and Awards granted under the Plan shall
be subject to compliance with all applicable laws, governmental
rules and regulations, and administrative action.
17. Effective Date. The Plan as amended shall become
effective when it shall have been approved by the Corporation's
shareholders and the Corporation's Board of Directors.
Adopted July 14, 1989
Amended May 16, 1991
Amended September 22, 1992
Amended March 17, 1993
Amended March 21, 1995
<PAGE>10
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
The Company's management is responsible for the preparation and content of
the consolidated financial statements and other financial information in
this annual report. The financial statements have been prepared in
conformity with generally accepted accounting principles and include some
amounts that must be based on management's estimates and judgments.
The Company's management maintains an accounting system and related
internal controls designed to provide reasonable assurance that there is
proper authorization and accounting for all transactions, that financial
records are reliable for preparing financial statements and that assets
are safeguarded against loss or unauthorized use. The system is supported
by written policies and guidelines and the selection and training of
qualified personnel.
Geo. S. Olive & Co. LLC, independent auditors, have been appointed by the
Board of Directors, with the ratification of the shareholders, to conduct
an independent audit and to express an opinion as to the fairness of the
presentation of the consolidated financial statements of Central
Newspapers, Inc. The Geo. S. Olive & Co. LLC report appears on page 14.
The Audit Committee of the Board of Directors is composed of three
directors. The Audit Committee meets periodically with management and the
independent auditors to discuss accounting, financial reporting, auditing
and internal control matters. The Audit Committee reviews the Company's
financial reports and accounting practices to ascertain they are
appropriate in the circumstances. The independent auditors have direct
and private access to the Audit Committee.
/s/Louis A. Weil III /s/Thomas K. MacGillivray
- ------------------------ -------------------------
Louis A. Weil III Thomas K. MacGillivray
President and Chief Executive Officer Treasurer and
Chief Financial Officer
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Central Newspapers, Inc. (the "Company") is primarily engaged in the
publishing and distribution of newspapers. Principally, revenues are
derived from advertising and newspaper sales in the Phoenix, Arizona and
Indianapolis, Indiana metropolitan areas. The Company has a 13.5%
interest in Ponderay Newsprint Company ("Ponderay"), a partnership formed
to own and operate a newsprint mill in Washington. The fiscal year ended
December 31, 1995 included 53 weeks. The 1994 and 1993 fiscal years each
include 52 weeks. The following analysis should be read in conjunction
with the consolidated financial statements and the accompanying notes to
the consolidated financial statements.
In May 1995 the Phoenix and Indianapolis newspapers announced morning and
evening newsroom staff consolidations. These consolidations were
completed in the fourth quarter of 1995. The changes are designed to
create more resources for expanded coverage of urban and suburban issues
along with continued expansion of new forms of information distributions.
Operating costs for 1995 were not significantly impacted due to these
combinations, but as a result, evening newspaper circulation has declined.
During July 1994, the Company offered to buy the 5,533 shares of Class A
common stock of Indianapolis Newspapers, Inc. ("INI") not already owned
for $10,000 net in cash per share. On September 12, 1994, the Company
purchased 3,591 shares of the Class A common stock of INI. The stock
purchase resulted in the Company increasing its ownership of INI to 89.9%
and permits INI to be considered part of the consolidated group for
federal income tax purposes. In June, 1995, the Company purchased an
additional 50 shares of Class A common stock of INI which increased its
ownership of INI to 90.2%. The purchase of the minority interest did not
have a significant effect on the reported earnings per share for 1994 and
1995.
<PAGE>11
At the beginning of 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115 "Accounting for Certain Investments in
Debt and Equity Securities." The adoption of SFAS No. 115 resulted in the
Company carrying its investments in debt and equity securities at fair
value. Net unrealized gains and losses on available-for-sale securities
are recorded as a component of shareholders' equity. Unrealized gains and
losses on trading securities are reflected in earnings.
1995 Compared to 1994
Operating revenue increased $60.2 million, or 11.6%, to $579.9 million in
1995. The gain resulted from a $51.2 million, or 13.0%, increase in
advertising revenue and a $7.7 million, or 6.3%, increase in circulation
revenue. Phoenix and Indianapolis combined full run advertising linage
was up 10.7% from 1994.
Advertising revenue at Phoenix increased 14.5%. The revenue increase
reflects a gain of 12.5% in full run linage, a decrease of 3.1% in part
run linage and an increase in advertising rates at the beginning of 1995.
At Indianapolis, advertising revenue was up 8.5% from the prior year. The
revenue increase reflects a gain of 8.1% in full run linage, a decrease of
22.9% in part run linage and advertising rate increases effective January
1, 1995.
Circulation revenue increased 8.6% at Phoenix, reflecting a decrease of
1.0% in the average Sunday circulation and a .7% gain in combined daily
circulation. The single copy price of the Sunday newspaper was raised by
$.50, or 33.3%, to $2.00 in March 1995.
Circulation revenue increased 1.6% at Indianapolis, reflecting an increase
in the daily home delivered price of $.30 to $1.80, or 20%, in March 1995,
offset by a loss of 4.8% in combined daily circulation and a loss of 1.3%
in Sunday circulation.
During the past three years, circulation rates have been increased from
time to time. Generally, a rate increase will cause a temporary decline
in circulation; however, the evening newspapers are experiencing an
ongoing decline in their average annual circulation.
Operating expenses increased $50.0 million, or 11.3%, to $494.0 million.
Compensation and fringe benefit costs increased 2.3% during 1995 due
primarily to the effects of an additional week in 1995. Newsprint expense
was up $33.7 million, or 45.8%, as average newsprint costs were up 43.3%
and consumption increased 2.5%. Other operating, distribution and general
expenses increased $13.0 million, or 10.9%, from the prior year.
Contributing to this increase were the additional costs related to
production and delivery of zoned advertising products, increased
promotional expenses and higher property taxes. General expenses for 1994
reflected the receipt of a $1.0 million property tax refund. Depreciation
expense increased $1.8 million, or 6.9%, due principally to the phase in
of a new computer system in Phoenix. Work force reduction costs of $3.3
million for 1995 and $7.1 million for 1994 are associated with the
voluntary early retirement programs in Indianapolis and Phoenix,
respectively. These programs were undertaken due to economic conditions,
increasing costs and changes in technology.
Operating income increased $10.2 million, or 13.4%, to $85.9 million for
the year. Excluding the effects of work force reduction costs, operating
income for 1995 increased $6.4 million, or 7.8% to $89.2 million. Other
income increased $3.5 million, or 58.4%, which reflects higher rates of
return on investments and the full year effect of a new cash management
policy implemented during July 1994. Other expense of $1.3 million
increased $314,000.
Income before income taxes increased $13.4 million, or 16.5%, to $94.0
million. The effective income tax rate for 1995 was 40.5% compared to
40.7% for 1994.
The Company's equity in Ponderay, net of tax benefits, resulted in a loss
of $590,000 for 1995 compared to a loss of $3.6 million during 1994 and
reflects the improved operations of Ponderay principally due to the
effects of newsprint price increases.
Net income for 1995 was $54.0 million compared to $41.3 million during
1994. Earnings per share were $2.03 for 1995, an increase of 31.0% from
the $1.55 reported last year. Excluding the effects of work force
reduction costs of $3.3 million during 1995 and $7.1 million during 1994,
earnings per share would have been $2.11 and $1.71, respectively.
<PAGE>12
1994 Compared to 1993
During August 1993, Indianapolis Newspapers, Inc. began a program called
Indianapolis Market Penetration and Custom Targeting ("IMPACT"). This
program utilizes total market coverage, zoned run of press advertising and
preprint programs which provide advertisers flexibility in their needs for
high penetration and the ability to reach their target markets. The
utilization of this program significantly increased the volume of part run
advertising.
Operating revenue increased $53.1 million, or 11.4%, to $519.7 million in
1994. The gain resulted from a $48.9 million, or 14.1%, increase in
advertising revenue and a $3.8 million, or 3.2%, increase in circulation
revenue. Phoenix and Indianapolis combined full run advertising linage
was up 11.8% from 1993.
Advertising revenue at Phoenix increased 14.0%. The revenue increase
reflects a gain of 12.7% in full run linage, an increase of 5.2% in part
run linage and an increase in advertising rates at the beginning of 1994.
At Indianapolis, advertising revenue was up 15.2% from 1993. The revenue
increase reflects a gain of 10.5% in full run linage, a gain of 100.4% in
part run linage and advertising rate increases effective January 1, 1994.
The significant gain in Indianapolis part run linage reflects a full year
of the IMPACT program.
Circulation revenue increased 4.3% at Phoenix, reflecting a gain of 2.5%
in the average Sunday circulation and a 1.8% gain in combined daily
circulation. The single copy price of the morning newspaper was raised by
$.15, or 42.9%, to $.50 in January 1993.
Circulation revenue increased .9% at Indianapolis, reflecting a loss of
2.2% in combined daily circulation and a loss of 1.7% in Sunday
circulation which was offset by the Sunday delivered price increase of
$.25, or 20%, to $1.50 in May 1993.
During the past three years, circulation rates have been increased from
time to time. Generally, a rate increase will cause a temporary decline
in circulation; however, the evening newspapers are experiencing an
ongoing decline in their average annual circulation.
Operating expenses increased $43.0 million, or 10.7%, to $444.0 million.
Compensation and fringe benefit costs increased 9.2% during 1994 due to
the higher volume of production in Phoenix, the full year of operation of
the IMPACT program in Indianapolis and changes in the retirement plans.
Newsprint expense was up $8.0 million, or 12.2%, as average newsprint
prices were up 3.9% and consumption increased 8.2%. Other operating,
distribution and general expenses increased $10.4 million, or 9.5%, from
the prior year. Contributing to this increase were the additional costs
related to the full year of expenses associated with the IMPACT program,
increased equipment repair costs and higher circulation and distribution
costs. Depreciation expense increased $.8 million, or 3.2%. Work force
reduction costs of $7.1 million for 1994 and $1.5 million for 1993 are
associated with the voluntary early retirement programs in Indianapolis
and Phoenix. These programs were undertaken due to economic conditions,
increasing costs and changes in technology.
Operating income increased $10.1 million, or 15.4%, to $75.7 million for
the year. Other income increased $2.4 million, or 65.6%, which reflects
larger amounts available for investment compared to the prior year and
higher rates of return on investments. Other expense of $1.0 million
decreased $171,000.
Income before income taxes increased $12.7 million, or 18.6%, to $80.7
million. The effective income tax rate for 1994 was 40.7% compared to
41.1% for 1993.
The Company's equity in Ponderay, net of tax benefits, resulted in a loss
of $3.6 million for 1994 compared to a loss of $4.3 million during 1993.
Net income for 1994 was $41.3 million compared to $32.1 million during
1993. Earnings per share were $1.55 for 1994, an increase of 28.1% from
the $1.21 reported in 1993. Excluding the work force reduction costs of
$7.1 million during 1994 and $1.5 million in 1993, earnings per share
would have been $1.71 and $1.24, respectively.
<PAGE>13
Investment In Affiliate
The Company owns a 13.5% interest in Ponderay Newsprint Company
("Ponderay"), a general partnership formed to own and operate a newsprint
mill. The Company's investment in Ponderay is accounted for using the
equity method, which reflects the Company's share of Ponderay's net income
or loss, tax credits and related income tax expense or benefits.
Ponderay's operating results include interest expense on long-term debt.
While Ponderay's operating results will be affected by movements in
newsprint prices, it is currently anticipated that due to recent and
planned future newsprint price increases, Ponderay may report operating
income in 1996 which will favorably affect the Company's net income. In
the event of a downturn in newsprint prices, Ponderay may again experience
future operating losses. The Company does not anticipate making
additional cash investments to Ponderay during 1996. See Note 11 of Notes
to Consolidated Financial Statements.
Capital Resources and Liquidity
Cash provided by operations is the Company's primary source of liquidity.
In the past three years, net cash provided from operations in conjunction
with cash investments has been sufficient to fund all capital
expenditures. Operating activities generated $62.3 million and $41.9
million of cash during 1995 and 1994, respectively, which includes $17.6
million in 1995 and $45.7 million in 1994 of net purchases of trading
securities that are classified as operating activities under SFAS No. 115.
In 1993 and prior, the purchases of and proceeds from marketable
securities were considered to be investing activities. The Company had
working capital of $137.8 million at December 31, 1995 and $132.9 million
at December 25, 1994.
Total capital expenditures in 1995 were $58.7 million, up from $23.3
million for 1994. It is estimated capital expenditures for 1996 will be
approximately $40.0 million which includes the anticipated final
expenditures on the Phoenix office building, client-server computer
system, editorial system and the Phoenix distribution facilities discussed
in Note 16 of Notes to Consolidated Financial Statements.
The Company invested $2.5 million in Ponderay during 1995 and $5.6 million
during 1994. See Note 11 of Notes to Consolidated Financial Statements
for guarantees of certain debt related to Ponderay. The Company does not
anticipate Ponderay cash investments during 1996.
Beginning with the third quarter of 1995, the dividend rate was increased
to $.17 for Class A common stock and $.017 for Class B common stock. Cash
dividend payments of $16.4 million and $15.2 million were made in 1995 and
1994.
The Company purchased 3,591 shares of Class A common stock of Indianapolis
Newspapers, Inc. in September 1994 at a total cost of $36.2 million which
increased its ownership of Indianapolis Newspapers, Inc. to 89.9%. The
Company purchased additional shares in 1995 in the amount of $500,000
which increased ownership to 90.2%.
In January 1996, the Company announced that it reached an agreement to
acquire the common stock of McCormick & Company, Inc., the publisher of
the Alexandria Louisiana Daily Town Talk and parent of McCormick Graphics,
Inc. The purchase price of this acquisition is $62.0 million. The
Company anticipates using a portion of its existing investments in
marketable securities to finance this acquisition.
The Company has significant cash balances and a consistent ability to
generate cash flow from operations. The Company foresees no difficulty in
maintaining its present financial condition and liquidity. Funding of the
above acquisition, current and future capital programs and investments in
partnerships is considered adequate for the foreseeable future.
Inflation
The impact of inflation on the Company's operations has become less
significant with lower inflation rates in recent years. Generally, the
Company has been able to offset the inflationary effects of operating
expenses by increasing advertising and circulation rates. During 1993,
newsprint prices declined due to an oversupply in the newsprint industry.
During 1994 and 1995, the Company experienced an overall increase in the
average cost of newsprint of 3.9% and 43.3%. The Company's newsprint
suppliers have announced an additional price increase that is expected to
become effective during the second quarter of 1996.
<PAGE>14
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Shareholders
Central Newspapers, Inc.
We have audited the accompanying consolidated statement of financial
position of Central Newspapers, Inc. and Subsidiaries as of December 31,
1995 and December 25, 1994 and the related consolidated statements of
income, shareholders' equity and cash flows for each of the three fiscal
years in the period ended December 31, 1995. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform 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, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Central Newspapers, Inc. and Subsidiaries as of December 31,
1995 and December 25, 1994 and the consolidated results of their
operations and their cash flows for each of the three fiscal years in the
period ended December 31, 1995, in conformity with generally accepted
accounting principles.
As discussed in Note 2, the Company adopted, effective at the beginning of
1994, SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities."
/s/ Geo. S. Olive & Co. LLC
- ---------------------------
Geo. S. Olive & Co. LLC
Indianapolis, Indiana
February 7, 1996
<PAGE>15
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except share per data)
FOR THE YEAR ENDED: Dec. 31 Dec. 25 Dec. 26
1995 1994 1993
Operating revenues:
Advertising $446,693 $395,450 $346,566
Circulation 129,537 121,823 118,032
Other 3,671 2,429 1,969
------- ------- -------
579,901 519,702 466,567
------- ------- -------
Operating expenses:
Operating costs 265,072 222,074 200,200
Distribution and general 197,123 188,195 173,444
Depreciation 28,487 26,639 25,810
Work force reduction cost 3,328 7,064 1,491
------- ------- -------
494,010 443,972 400,945
------- ------- -------
Operating income 85,891 75,730 65,622
Other income--net 8,154 4,965 2,417
------- ------- -------
Income before income taxes 94,045 80,695 68,039
Provision for income taxes 38,048 32,847 27,948
------- ------- -------
Income before minority interest and
equity in Affiliate 55,997 47,848 40,091
Minority interest in subsidiary (1,409) (2,977) (3,683)
Equity in Affiliate, net of tax benefits (590) (3,550) (4,280)
------- ------- -------
Net income $ 53,998 $ 41,321 $ 32,128
======= ======= =======
Net income per common share $ 2.03 $ 1.55 $ 1.21
======= ======= =======
Average common shares outstanding 26,651 26,621 26,571
======= ======= =======
See accompanying notes to consolidated financial statements.
<PAGE>16
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(In thousands, except share data)
Dec. 31 Dec.25
1995 1994
ASSETS
Current assets:
Cash and cash equivalents $ 26,142 $ 22,105
Marketable securities 103,390 107,413
Accounts receivable (net of allowances of
$1,067 and $1,071) 62,355 54,625
Inventories 10,125 9,142
Deferred income tax benefits 6,773 7,636
Other current assets 4,233 2,418
------- -------
Total current assets 213,018 203,339
------- -------
Property, plant and equipment:
Land 16,943 14,665
Buildings and improvements 110,265 99,985
Leasehold improvements 4,177 4,075
Machinery and equipment 322,799 302,333
Construction in progress 33,567 9,934
------- -------
487,751 430,992
Less accumulated depreciation 206,946 181,675
------- -------
280,805 249,317
------- -------
Other assets:
Land held for development 1,607 4,148
Goodwill and other intangibles 29,009 29,112
Investment in Affiliate 5,843 3,989
Other 16,922 10,539
------- -------
53,381 47,788
------- -------
TOTAL ASSETS $547,204 $500,444
======= =======
See accompanying notes to consolidated financial statements.
<PAGE> 17
Dec. 31 Dec. 25
1995 1994
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 19,122 $ 17,134
Accrued compensation 17,172 16,423
Dividends payable 5,027 4,205
Accrued expenses and other liabilities 14,567 18,240
Federal and state income taxes 1,941
Deferred revenue 17,371 14,430
------- -------
Total current liabilities 75,200 70,432
------- -------
Deferred income taxes 23,009 22,216
------- -------
Long-term debt 2,678 2,678
------- -------
Postretirement benefit obligation 79,327 77,802
------- -------
Minority interest in subsidiary 8,249 7,554
------- -------
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--23,520,611 and 23,483,000 shares 18,967 18,182
Class B common stock--without par value:
Authorized--50,000,000 shares
Issued--31,553,000 shares 63 63
Retained earnings 338,436 300,968
Net unrealized gain on
available-for-sale securities 1,275 549
------- -------
358,741 319,762
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $547,204 $500,444
======= =======
<PAGE>18
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In thousands)
Net
Unrealized
Gain on
Class A Class B Available-
Common Common Retained for-Sale
Stock Stock Earnings Securities
-------- -------- -------- ----------
Balance at December 28, 1992 $16,340 $65 $253,592
Net income (52 weeks) 32,128
Dividends declared:
Class A common stock (10,757)
Class B common stock (1,470)
Exercise of stock options 795
Common stock conversion 2 (2)
-------- -------- -------- ----------
Balance at December 26, 1993 17,137 63 273,493
Adoption of SFAS No. 115, net of
deferred income taxes and
minority interest $649
Net income (52 weeks) 41,321
Dividends declared:
Class A common stock (12,204)
Class B common stock (1,642)
Exercise of stock options 1,045
Change in net unrealized gain on
available-for-sale securities (100)
--------- ------- -------- ----------
Balance at December 25, 1994 18,182 63 300,968 549
Net income (53 weeks) 53,998
Dividends declared:
Class A common stock (14,573)
Class B common stock ( 1,957)
Exercise of stock options 785
Change in net unrealized gain on
available-for-sale securities 726
-------- ------- -------- ----------
Balance at December 31, 1995 $18,967 $63 $338,436 $1,275
======== ======= ======== ==========
See accompanying notes to consolidated financial statements.
<PAGE>19
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
FOR THE YEAR ENDED: Dec. 31 Dec. 25 Dec. 26
1995 1994 1993
Operating activities:
Net income $ 53,998 $ 41,321 $32,128
Items which did not use (provide) cash:
Depreciation and amortization 29,281 27,284 26,305
Postretirement and pension benefits 2,072 7,815 2,741
(Gain) loss on disposition of assets 357 (171) (56)
Unrealized gain on trading securities (1,009) (105)
Minority interest in earnings of
subsidiary 1,409 2,977 3,683
Equity in Affiliate 540 3,550 4,280
Deferred income taxes 1,791 (92) 4,979
Other (32) (37)
Change in assets and liabilities:
Net purchases of trading securities (17,630) (45,682)
Accounts receivable (7,730) (8,276) (4,602)
Inventories (983) 974 (126)
Other current assets (1,429) 428 539
Accounts payable 1,056 3,564 (712)
Accrued compensation 749 1,257 (310)
Accrued expenses and other liabilities (4,869) 3,586 398
Federal and state income taxes 1,739 1,340 3,591
Deferred revenue 2,941 2,159 931
------ ------ ------
Net cash provided by operating
activities 62,283 41,897 73,732
------ ------ ------
Investing activities:
Purchases of property, plant and equipment (58,676) (23,256) (16,049)
Proceeds from disposition of assets 2,452 622 258
Purchases of available-for-sale securities (76,726)(234,011) (161,331)
Proceeds from available-for-sale securities 99,051 274,800 132,087
Investment in Affiliate (2,484) (5,603) (3,834)
Purchase of minority interest in subsidiary (500) (36,205)
Purchase of intangibles and other (5,580) (3,877) (6,678)
------ ------ -------
Net cash used by investing activities (42,463) (27,530) (55,547)
------ ------ -------
Financing activities:
Cash dividends paid (15,724) (13,308) (11,956)
Dividends paid to minority interest (678) (1,937) (1,991)
Proceeds from exercise of stock options 619 840 684
------ ------ ------
Net cash used by financing activities (15,783) (14,405) (13,263)
------ ------ ------
Increase (decrease) in cash and
cash equivalents 4,037 (38) 4,922
Cash and cash equivalents,
beginning of year 22,105 22,143 17,221
------ ------ ------
Cash and cash equivalents, end of year $ 26,142 $ 22,105 $ 22,143
====== ====== ======
Supplemental cash flow information:
Income taxes paid during the year $ 34,492 $31,920 $19,377
Interest paid during the year 215 208 221
See accompanying notes to consolidated financial statements.
<PAGE>20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1--NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations - Central Newspapers, Inc. and its subsidiaries (the
"Company") are primarily engaged in the publishing and distribution of
newspapers. Revenues are principally derived from advertising and
newspaper sales, in the Phoenix, Arizona and Indianapolis, Indiana
metropolitan areas. The Company also has a 13.5% interest in Ponderay
Newsprint Company ("Affiliate"), a partnership formed to own and operate a
newsprint mill in Washington.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make 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 and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Principles of Consolidation - The consolidated financial statements
include the accounts of the Company, all wholly-owned and majority-owned
subsidiaries. Investments in companies in which the Company exercises
significant influence and partnerships are accounted for using the equity
method. All significant intercompany accounts and transactions have been
eliminated.
Fiscal Year - The Company's fiscal year ends on the last Sunday of the
calendar year. The fiscal years 1995, 1994 and 1993 included fifty-three,
fifty-two and fifty-two weeks, respectively.
Revenue Recognition - Advertising revenue is recognized when the
advertisement appears in the newspaper. Deferred subscription revenue,
which primarily represents amounts received from customers in advance of
newspaper delivery, is included in revenue over the subscription term.
Cash Equivalents - The Company considers highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.
Concentrations of Credit Risk - Financial instruments which potentially
subject the Company to concentrations of credit risk consist primarily of
cash equivalents, trade accounts receivable and investments in marketable
securities. The Company places its temporary cash with financial
institutions and limits the amount of credit exposure to any one financial
institution. Accounts receivable are with customers located primarily in
the immediate geographical area of each city of publication. The Company
reviews a customer's credit history before extending credit and
establishes an allowance for doubtful accounts based on factors
surrounding the credit risk of specific customers, historic trends and
other information. The Company, by policy, limits the type and amount of
its investments in marketable securities.
Inventories - Newsprint is valued at the lower of cost or market on the
last-in, first-out (LIFO) method. Other inventories are valued at the
lower of cost or market using the first-in, first-out (FIFO) and moving
average methods.
Property, Plant and Equipment - Property, plant and equipment are carried
at cost. Depreciation is computed using primarily the straight-line
method based on the estimated useful lives of the assets. The principal
estimated useful lives range from three to fifteen years for machinery and
equipment and ten to twenty-five years for buildings and leasehold
improvements.
Goodwill and Other Intangibles - Goodwill acquired before 1970 is not
being amortized. Goodwill and other intangibles acquired after 1970 are
being amortized on a straight-line basis over periods from fifteen to
forty years. Amortization amounted to $794,000 for 1995, $639,000 for
1994 and $495,000 for 1993. Accumulated amortization was $2,237,000 and
$1,443,000 at the end of 1995 and 1994, respectively.
Investment in Affiliate - The Company uses the equity method of accounting
for its 13.5% partnership interest in Ponderay Newsprint Company.
Income Taxes - The Company provides for the determination of deferred tax
liabilities and assets at the end of each period based on the difference
between financial statement and tax basis of assets and liabilities using
presently enacted tax rates. The Company files a consolidated federal
income tax return with its wholly-owned subsidiaries. Effective September
12, 1994, Indianapolis Newspapers, Inc. ("INI") became a majority-owned
subsidiary for income tax reporting purposes and subsequently, will be
included in the Company's consolidated income tax returns. In prior
periods, INI filed separate consolidated income tax returns with its
majority-owned subsidiary.
Net Income Per Common Share - The net income per common share is computed
based on the weighted average number of common shares outstanding in each
year. The Class B common stock is included in the computation as if
converted to Class A common stock at a ratio of ten shares of Class B
common stock to one share of Class A common stock. The weighted average
common shares outstanding were 26,651,007, 26,621,133 and 26,570,973 for
1995, 1994 and 1993. Outstanding stock options are common stock
equivalents but are excluded from net income per common share computations
as their effect is not significant.
Accounting Changes - At the beginning of the 1994 fiscal year, the Company
adopted SFAS No. 115 "Accounting for Certain Investments in Debt and
Equity Securities." During 1993, the Company adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits." The Company has not
elected early adoption of SFAS No. 123 "Accounting for Stock Based
Compensation" or SFAS No. 121 "Accounting for the Impairment of Long-Lived
Assets to be Disposed of." Both pronouncements become effective with the
Company's first quarter of fiscal 1996. SFAS No. 121 is not expected to
have a material effect on the Company's financial statements. The future
effects of the adoption of SFAS No. 123 have not yet been determined.
<PAGE>21
2--MARKETABLE SECURITIES
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 as 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 available-for-sale
equity securities are classified as noncurrent assets.
(In thousands)
The following is a summary of securities at December 31, 1995:
Gross Gross
Amortized Unrealized Unrealized Fair
Available-for-Sale Securities Cost Gains Losses Value
Debt securities of the
U.S. Treasury & agencies $ 35,408 $ 158 $ (5) $35,561
Equity securities 153 2,624 2,777
Corporate debt securities 2,783 2 2,785
------ ------ ------ ------
38,344 2,784 (5) 41,123
------ ------ ------ ------
Trading Securities
Debt securities of the
U.S. Treasury and agencies 19,860 243 (3) 20,100
Corporate debt securities 14,025 286 14,311
Mortgage-backed securities 19,517 479 (1) 19,995
Preferred stock 10,515 136 (64) 10,587
Other 118 (67) 51
------ ------ ------ ------
64,035 1,144 (135) 65,044
------ ------ ------ ------
$102,379 $3,928 $(140) $106,167
======= ====== ====== =======
(In Thousands)
The following is a summary of securities at December 25, 1994:
Gross Gross
Amortized Unrealized Unrealized Fair
Available-for-Sale Securities Cost Gains Losses Value
Debt securities of the
U.S. Treasury $ 60,724 $ 7 $(171) $60,560
Equity securities 142 1,563 1,705
Corporate debt securities 485 (2) 483
------- ------- ---- -------
61,351 1,570 (173) 62,748
------- ------- ---- -------
Trading Securities
Debt securities of the
U.S. Treasury and agencies 13,927 (118) 13,809
Corporate debt securities 12,089 6 (15) 12,080
Mortgage-backed securities 20,249 279 (47) 20,481
------- ------ ---- -------
46,265 285 (180) 46,370
------- ------ ---- -------
$107,616 $1,855 $(353) $109,118
======== ====== ===== ========
Included in the Company's earnings for 1995 and 1994 were changes in net
unrealized holding gains of $1,009,000 and $105,000, respectively, from
trading investments.
Proceeds from the sale of available-for-sale investments totaled
approximately $99,051,000 and $274,800,000 in 1995 and 1994. Gross
realized gains and losses for 1995 and 1994 on available-for-sale
investments were insignificant. All available-for-sale debt securities
had a contractual maturity of one year or less in both 1995 and 1994. The
fair value of equity securities in the amounts of $2,777,000 in 1995 and
$1,705,000 in 1994 have been classified with other noncurrent assets.
Gross realized gains and losses on marketable securities in 1993 were
insignificant.
<PAGE> 22
3--PURCHASE OF MINORITY INTEREST AND GOODWILL
During July 1994, the Company made a tender offer for the 5,533 shares of
Class A common stock of Indianapolis Newspapers, Inc. not already owned
for $10,000 net in cash per share. On September 12, 1994, the Company
purchased 3,591 shares of INI which increased the Company's ownership to
89.9% from 71.2%. The total acquisition cost of $36,200,000, including
consulting fees, was accounted for using the purchase method of
accounting. The fair value of assets acquired was $22,800,000, including
$19,700,000 of goodwill. The transaction resulted in a reduction of the
minority interest of $13,400,000. In June 1995, the Company purchased an
additional 50 shares of INI for $10,000 net in cash per share which
increased the Company's ownership to 90.2%. The effects of these
purchases were insignificant to earnings for 1995 and 1994.
4--EMPLOYEE BENEFIT PLANS
The Company has defined benefit plans to provide pension benefits to all
employees who have met the eligibility requirements. Benefits are based
primarily on length of service, wages earned, age and the amount of
optional employee contributions. The Company's policy is to fund at least
the minimum amount required by ERISA. Assets of the plans consist
primarily of stocks, bonds and short-term investments.
The funded status for the Company's defined benefit plans at year end:
(In thousands) 1995 1994
Actuarial present value of plan benefits:
Vested $180,545 $142,998
Nonvested 10,236 8,165
-------- --------
Accumulated benefit obligation 190,781 151,163
Effect of future salary increases 11,999 7,771
-------- --------
Projected benefit obligation 202,780 158,934
Plan assets at fair value 207,401 168,634
-------- --------
Plan assets in excess of projected benefit obligation 4,621 9,700
Unrecognized SFAS No. 87 transition asset (7,548) (8,831)
Unrecognized prior service cost 3,680 4,123
Unrecognized net (gain) loss 716 (3,557)
-------- --------
Prepaid pension cost $ 1,469 $ 1,435
======== ========
Assumptions used in determining funded status at the end of 1995 were a 9%
rate of return, 7% discount rate and a 4% rate of compensation increase.
The assumptions for determining funded status at the end of 1994 were a 9%
rate of return, 8.75% discount rate and a 5% rate of compensation
increase.
Pension expense (income), excluding the special retirement benefits
discussed in Note 7, included the following components:
(In thousands) 1995 1994 1993
Service cost--benefits earned during the year $ 4,904 $ 5,959 $ 3,231
Interest cost on projected benefit obligation 14,116 12,851 12,492
Return on assets:
Actual (48,898) 84 (17,927)
Deferred gain (loss) 33,542 (14,551) 3,028
Amortization of:
Transition asset (1,283) (1,286) (1,286)
Prior service cost 444 443 403
Gain (10) (10) (7)
-------- ------- -------
Pension expense (income) $ 2,815 $ 3,490 $ (66)
======== ======= =======
Significant assumptions used in determining pension expense (income):
1995 1994 1993
Expected long-term rate of return 9.0% 8.5% 9.0%
Discount rate 8.75 7.25 8.25
Rate of increase in future compensation levels 5.0 4.0 5.0
<PAGE> 23
Effective January 1, 1994, the pension plans were amended to eliminate the
voluntary employee contributions, provide future benefits based on the
participants' years of service and average compensation at retirement,
enhance pension benefits of participants who begin receiving benefits
before age 65 and increase benefits to all eligible retirees. The
amendments have been approved by the Internal Revenue Service and were
accounted for as of January 1, 1994.
The Company has a wage deferral plan qualified under Section 401(k) of the
Internal Revenue Code that covers all eligible employees. Company
contributions to this plan were $4,397,000, $4,414,000 and $1,743,000 for
1995, 1994 and 1993. The plan was amended effective January 1, 1994 to
increase the allowable amount of participants' contributions and to change
the basis of Company contributions.
5--POSTRETIREMENT BENEFIT OBLIGATION
The Company sponsors postretirement medical and life insurance plans which
are available to most of its employees. In order to be eligible for these
plans, employees must retire from the Company and have been covered under
an active plan. The level of benefits provided depends on the year of
retirement and years of service. The plans are contributory with periodic
adjustments in the amount of contributions by retirees. The Company's
policy is to fund these benefits as claims and premiums are paid.
The status of the postretirement benefit obligation at year end:
(In thousands) 1995 1994
Accumulated postretirement benefit obligation:
Retirees $52,077 $36,880
Fully eligible active plan participants 13,556 14,534
Other active plan participants 19,452 14,030
------- -------
Total accumulated postretirement benefit obligation 85,085 65,444
Unrecognized prior service cost 4,884 6,811
Unrecognized net gain (loss) (7,544) 8,721
------- -------
Accrued postretirement benefit obligation $82,425 $80,976
======= =======
1995 1994 1993
The net postretirement benefit cost included
the following components:
Service cost--benefits earned
during the year $1,941 $2,646 $2,451
Interest cost on accumulated
benefit obligation 5,387 5,765 5,851
Amortization of unrecognized
prior service cost (1,927) (1,934) (1,898)
Amortization of loss (gain) (241) 6
------ ------ ------
Postretirement benefit expense $5,160 $6,483 $6,404
====== ====== ======
The accumulated postretirement benefit obligation was determined using a
discount rate of 7% and a health care cost trend rate of 9% in 1995
decreasing to 5% in the year 2000 and thereafter. Discount rates used for
1994 and 1993 were 8.75% and 7.75%. The effect of a 1% increase each year
in the health care cost trend rate used, would result in an increase of
approximately $7,368,000 in the accumulated postretirement benefit
obligation at the end of 1995 and $799,000 in the aggregate service and
interest components of the 1995 expense.
6--POSTEMPLOYMENT BENEFITS
The Company has certain postemployment benefit plans covering most of its
employees. The benefit plans provide severance, disability, supplemental
health care, life insurance and other welfare benefits. The Company
adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits"
in 1993. SFAS No. 112 prescribes accounting methods for employers who
provide certain benefits to former or inactive employees after employment
but before retirement.
<PAGE> 24
7--WORK FORCE REDUCTION
The Company has reduced its work force in response to economic conditions,
increasing costs and changes in technology. Early retirement incentive
programs contributed to staff reductions. Employees were offered
early retirement benefits through a non-qualified supplemental retirement
plan and those terminated due to job eliminations received severance
payments. Work force reduction costs include retirement benefits,
severance payments and professional support.
8--OTHER INCOME--NET
(In thousands) 1995 1994 1993
Income items:
Interest $ 7,213 $5,457 $3,083
Unrealized gain on trading securities 1,009 105
Gain on disposition of assets 171
Dividends 572 62 57
Other 708 204 482
------- ------ ------
9,502 5,999 3,622
------- ------ ------
Expense items:
Interest 238 204 221
Loss on disposition of assets 357 102
Other 753 830 882
------- ------ ------
1,348 1,034 1,205
------- ------ ------
Other income--net $ 8,154 $4,965 $2,417
======= ====== ======
9--INCOME TAXES
The provision for income taxes, exclusive of tax benefits from equity in
Affiliate, consisted of:
(In thousands) 1995 1994 1993
State:
Currently payable $ 7,347 $ 6,376 $ 4,192
Deferred 354 54 1,381
------- ------- -------
7,701 6,430 5,573
------- ------- -------
Federal:
Currently payable 28,910 26,077 17,376
Deferred 1,437 340 4,999
------- ------- -------
30,347 26,417 22,375
------- ------- -------
Provision for income taxes $38,048 $32,847 $27,948
======= ======= =======
Components of net deferred income tax liability:
(No valuation allowance required)
(In thousands) 1995 1994 1993
Depreciation $53,520 $52,982 $47,160
Pension 562 549 1,864
Other 1,731 641
------- ------- -------
Gross deferred tax liability 55,813 54,172 49,024
------- ------- -------
Postretirement benefits (33,124) (32,020) (31,015)
Vacation (3,857) (3,830) (3,740)
Other (2,596) (3,742) (4,126)
------- ------- -------
Gross deferred tax asset (39,577) (39,592) (38,881)
------- ------- -------
Net deferred income tax liability $16,236 $14,580 $10,143
======= ======= =======
<PAGE>25
Reconciliation of the U.S. federal statutory tax rate to the effective tax
rate:
(In thousands) 1995 1994 1993
-------------- -------------- --------------
Federal statutory tax rate $32,916 35.0% $28,243 35.0% $23,814 35.0%
State taxes net of federal
tax effect 5,006 5.3 4,181 5.2 3,622 5.3
Dividend benefit
eliminations (58) (.1) 101 .1 335 .5
Other 184 .3 322 .4 177 .3
------- ----- ------- ----- ------- -----
Provision for income taxes $38,048 40.5% $32,847 40.7% $27,948 41.1%
======= ===== ======= ===== ======= =====
10--INVENTORIES
Newsprint inventory amounted to $7,559,000 and $5,962,000 at the end of
1995 and 1994. The current value exceeded LIFO value by $8,517,000 and
$3,779,000, respectively. Other inventories, consisting primarily of
newspaper production supplies, amounted to $2,566,000 and $3,180,000 at
the end of 1995 and 1994.
11--INVESTMENT IN AFFILIATE
The Company, through its subsidiaries, has a 13.5% partnership interest in
Ponderay Newsprint Company, which was formed to own and operate a
newsprint mill in Washington. Under the terms of a loan agreement, the
Company has guaranteed partnership debt in the amount $16,875,000. At the
end of 1995 and 1994, $36,400,000 and $33,916,000 had been invested in
Ponderay. The Company has committed to purchase for use in Phoenix the
lesser of 13.5% of annual newsprint production or 34,900 metric tons on a
"take if tendered" basis until the debt is repaid. Newsprint purchased
from Ponderay amounted to $19,601,000 during 1995 and $14,937,000 during
1994.
Summarized financial data for Affiliate:
(In thousands) 1995 1994 1993
Results of operations:
Net sales $151,690 $100,233 $94,375
Net loss 4,666 40,509 45,713
Financial position:
Current assets $ 27,881 $ 19,484 $19,633
Property and equipment, at cost--net 278,224 291,033 304,315
Other assets 3,457 1,654 5,690
-------- -------- --------
$309,562 $312,171 $329,638
======== ======== ========
Current liabilities $ 37,252 $ 34,010 $33,771
Long-term debt ($125 million
guaranteed by partners) 229,048 248,633 267,330
Partners' capital 43,262 29,528 28,537
-------- -------- --------
$309,562 $312,171 $329,638
======== ======== ========
Summary of the Company's investment in Affiliate:
(In thousands) 1995 1994 1993
Investment, beginning of year $ 3,989 $ 3,855 $ 5,315
Equity in partnership loss (630) (5,469) (6,171)
Additional investments 2,484 5,603 4,711
------- ------- -------
Investment, end of year $ 5,843 $ 3,989 $ 3,855
======= ======= =======
Equity in Affiliate:
Equity in partnership loss $ (630) $(5,469) $(6,171)
Current income tax benefit (606) 1,325 4,356
Deferred tax benefit (expense) 696 594 (2,465)
Other (50)
------- ------- -------
Equity in Affiliate, net of tax benefits $ (590) $(3,550) $(4,280)
======= ======= =======
<PAGE> 26
12--LONG-TERM DEBT
The trust indenture relating to the fifty-year 4 1/2% debentures due
December 1, 1998 contains various requirements and restrictions as to the
financial activities of INI and its subsidiary. There are certain
restrictions on capital expenditures and dividend payments by INI.
Interest paid amounted to $121,000 for 1995, 1994 and 1993.
13--RENTAL EXPENSE AND LEASE COMMITMENTS
Rental expense for 1995, 1994 and 1993 amounted to $4,429,000, $3,843,000
and $4,190,000. Future obligations for minimum annual rentals under
noncancelable long-term leases are not considered to be significant.
14--CAPITAL STOCK AND STOCK COMPENSATION PLAN
Class A common stock is entitled to 1/10 of a vote per share. At December
31, 1995, the Company has reserved 2,803,100 shares that are available for
issuance under its Stock Compensation Plan, 500,000 shares for issuance
under its 401(k) plan and 3,155,300 shares for issuance upon conversion of
Class B common stock. The Class B common stock has one vote per share
while its dividend and liquidation distributions are 1/10 of the amount of
Class A common stock. Class B common stock may be converted into Class A
common stock at a ratio of ten shares of Class B common stock for one
share of Class A common stock. The Eugene C. Pulliam Trust ("Trust") owns
Class B common stock which provides the Trust the majority voting control
of the Company.
Dividend declared per share: 1995 1994 1993
Class A common stock $.62 $.52 $.46
Class B common stock .062 .052 .046
The Stock Compensation Plan provides for the granting of stock options to
certain officers, key employees and members of the Board of Directors.
The plan also provides for issuance of Class A shares under restricted
stock grants to the five most highly compensated employees. The options
are granted at prices determined by the Stock Option Committee of the
Board of Directors but not less than fair market value on date of grant.
Options granted may be incentive or non-qualified options with a term of
ten years. Options granted before December 27, 1992 are currently
exercisable. Options granted in 1993 and 1995 become exercisable three
years from date of grant. There have been no restricted stock grants
issued under this plan.
Stock Option Plan Summary:
Reserved
Shares Shares Price
Outstanding, December 28, 1992 2,144,500 674,000 $16.625 - 23.000
Granted 300,500 23.875
Exercised (39,500) (39,500) 16.625 - 18.000
Cancelled (11,500) 23.000
--------- ------- ---------------
Outstanding, December 26, 1993 2,105,000 923,500 16.625 - 23.875
Exercised (49,050) (49,050) 16.625 - 18.000
Cancelled (6,000) 23.875
--------- ------- ---------------
Outstanding, December 25, 1994 2,055,950 868,450 16.625 - 23.875
Additional reserved shares 800,000
Granted 543,000 25.750 - 30.625
Exercised (52,850) (52,850) 16.625 - 25.750
Cancelled (7,500) 23.000 - 23.875
--------- --------- ----------------
Outstanding, December 31, 1995 2,803,100 1,351,100 $16.625 - 30.625
--------- --------- ----------------
Exercisable at December 31, 1995 529,600 $16.625 - 23.000
========= ================
<PAGE> 27
15--FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts receivable,
other current assets, accounts payable and accrued expenses approximate
fair value because of the short maturity of those instruments. Long-term
debt has a carrying value of $2,678,000 and a fair value of $2,628,000.
Fair value was determined based on current rates offered for similar debt.
The Company has guaranteed $16,875,000 of the total $243,085,000 debt of
Ponderay. The fair value approximates the guaranteed amount.
16--COMMITMENTS AND CONTINGENCIES
See Note 11 for commitments related to Affiliate.
In 1995, the Internal Revenue Service ("IRS") finalized its adjustments
involving investment tax credit issues related to Ponderay. The total
adjustments for the years 1987 through 1989 of approximately $119,000 have
been recorded in the 1995 financial statements. The IRS has completed its
examination of the Company's federal income tax returns through 1993.
There are various libel and other legal actions that have arisen in the
normal course of business and are now pending against the Company. It is
the opinion of management that final disposition of such litigation will
not have any material adverse effect on the Company's financial position
or results of operations.
The Board of Directors has approved a total of $28,000,000 for the
construction and purchase of distribution centers, computer networking
equipment, editorial systems and a client-server computer system in
Phoenix. Completion of the distribution centers, networking equipment and
editorial systems are anticipated in 1996. Conversion to the new computer
system is scheduled for completion by 1997. During 1993, the Board of
Directors approved the construction of a new downtown Phoenix office
building. Total costs of the building and related expenditures are
expected to be $32,000,000 with completion anticipated in 1996. Formal
commitments totaling $31,610,000 have been entered into as of December 31,
1995 relating to these projects. Expenditures as of December 31, 1995
related to these commitments approximate $26,425,000.
The Board of Directors has also approved $4,500,000 for a new facility at
Topics Newspapers, Inc., $5,300,000 for the purchase of a currently leased
building at Indianapolis and $10,000,000 for investments in partnership
business ventures. Expenditures on these projects as of December 31, 1995
approximate $5,973,000.
17--SUBSEQUENT EVENT
On January 10, 1996, the Company announced that it reached an agreement to
acquire the common stock of McCormick & Company, Inc., the publisher of
the Alexandria Louisiana Daily Town Talk (40,400 daily and 41,300 Sunday
circulation newspapers) and parent of McCormick Graphics Co., Inc. The
purchase price is approximately $62,000,000. The acquisition is expected
to close in March 1996.
<PAGE> 30
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The Company's business is to a certain extent seasonal, with peak revenue and
profits generally occurring in the second and fourth quarters of each year.
Operating results for the last three years:
(In thousands, except share data) 1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total
1995 (53 weeks)
Operating revenues $136,882 $142,472 $135,504 $165,043 $579,901
Operating expenses 116,790 121,349 118,336 137,535 494,010
-------- -------- -------- -------- --------
Operating income 20,092 21,123 17,168 27,508 85,891
Other income--net 2,255 2,455 1,820 1,624 8,154
Provision for income taxes (9,123) (9,731) (7,649) (11,545) (38,048)
Minority interest (304) (325) (284) (496) (1,409)
Equity in Affiliate--net (537) (111) 79 (21) (590)
-------- -------- -------- -------- --------
Net income $ 12,383 $ 13,411 $ 11,134 $ 17,070 $ 53,998
======== ======== ======== ======== ========
Net income per common share $.46 $.51 $.42 $.64 $2.03
==== ==== ==== ==== =====
1994 (52 weeks)
Operating revenues $123,528 $129,262 $124,850 $142,062 $519,702
Operating expenses 104,384 106,626 108,078 124,884 443,972
-------- -------- -------- -------- --------
Operating income 19,144 22,636 16,772 17,178 75,730
Other income--net 1,088 1,192 1,303 1,382 4,965
Provision for income taxes (8,257) (9,771) (7,347) (7,472) (32,847)
Minority interest (757) (1,150) (668) (402) (2,977)
Equity in Affiliate--net (1,014) (930) (753) (853) (3,550)
-------- -------- -------- -------- --------
Net income $ 10,204 $ 11,977 $ 9,307 $ 9,833 $ 41,321
======== ======== ======== ======== ========
Net income per common share $.38 $.45 $.35 $.37 $1.55
==== ==== ==== ==== =====
1993 (52 weeks)
Operating revenues $111,318 $116,943 $110,238 $128,068 $466,567
Operating expenses 99,495 98,873 97,469 105,108 400,945
-------- -------- -------- -------- --------
Operating income 11,823 18,070 12,769 22,960 65,622
Other income--net 502 615 811 489 2,417
Provision for income taxes (4,949) (7,553) (5,754) (9,692) (27,948)
Minority interest (405) (1,038) (758) (1,482) (3,683)
Equity in Affiliate--net (1,148) (997) (1,153) (982) (4,280)
-------- -------- -------- -------- --------
Net income $ 5,823 $ 9,097 $ 5,915 $ 11,293 $ 32,128
======== ======== ======== ======== ========
Net income per common share $.22 $.34 $.22 $.43 $1.21
==== ==== ==== ==== =====
<PAGE> 28
TEN-YEAR FINANCIAL HIGHLIGHTS
(In thousands, except share data)
Fiscal Years Ended: Dec. 31 Dec. 25 Dec. 26 Dec. 27 Dec. 29
1995 1994 1993 1992 1991
53 Weeks 52 Weeks 52 Weeks 52 Weeks 52 Weeks
Consolidated Statement of Income
Operating revenues:
Advertising $446,693 $395,450 $346,566 $319,872 $316,950
Circulation 129,537 121,823 118,032 112,180 102,459
Other 3,671 2,429 1,969 1,548 942
-------- -------- -------- -------- --------
579,901 519,702 466,567 433,600 420,351
-------- -------- -------- -------- --------
Operating expenses:
Operating costs 265,072 222,074 200,200 187,611 197,584
Distribution and general 197,123 188,195 173,444 169,105 154,410
Depreciation 28,487 26,639 25,810 21,649 17,334
Work force reduction cost 3,328 7,064 1,491 3,572 3,281
-------- -------- -------- -------- --------
494,010 443,972 400,945 381,937 372,609
-------- -------- -------- -------- --------
Operating income 85,891 75,730 65,622 51,663 47,742
Other income--net 8,154 4,965 2,417 1,111 3,735
-------- -------- -------- -------- --------
Income before income taxes 94,045 80,695 68,039 52,774 51,477
Provision for income taxes 38,048 32,847 27,948 21,491 20,792
-------- -------- -------- -------- --------
Income before minority
interest and equity
in Affiliate 55,997 47,848 40,091 31,283 30,685
Minority interest in
subsidiary (1,409) (2,977) (3,683) (3,105) (1,729)
Equity in Affiliate, net
of tax benefits (590) (3,550) (4,280) (4,820) (3,053)
-------- -------- -------- -------- --------
Income before cumulative
effect of accounting change 53,998 41,321 32,128 23,358 25,903
Cumulative effect of accounting
change (34,212)
-------- -------- -------- -------- --------
Net income (loss) $ 53,998 $ 41,321 $ 32,128 $(10,854) $ 25,903
-------- -------- -------- -------- --------
Class A Share Data
Income before cumulative
effect of accounting change $2.03 $1.55 $1.21 $.88 $.98
Cumulative effect of accounting
change (1.29)
---- ---- ---- ---- ----
Net income (loss) 2.03 1.55 1.21 (.41) .98
==== ==== ==== ==== ====
Dividends declared .62 .52 .46 .42 .40
Other Financial Data
Total assets $547,204 $500,444 $464,688 $432,872 $403,627
Working capital 137,818 132,907 127,999 90,488 70,217
Long-term debt 2,678 2,678 2,678 2,678 2,678
Shareholders' equity 358,741 319,762 290,693 269,997 290,982
This data was compiled from the consolidated financial statements of Central
Newspapers, Inc. and Subsidiaries. The consolidated financial statements and
related notes and discussions for the year ended December 31, 1995 should be
read in order to obtain a better understanding of this data.
<PAGE> 29
Dec. 30 Dec. 31 Dec. 25 Dec. 27 Dec. 28
1990 1989 1988 1987 1986
52 Weeks 53 Weeks 52 Weeks 52 Weeks 52 Weeks
Consolidated Statement of Income
Operating revenues:
Advertising $335,795 $346,924 $337,854 $329,067 $319,237
Circulation 94,689 88,160 78,575 72,434 68,806
Other 1,175 1,144 1,179 1,197 1,084
-------- -------- -------- -------- --------
431,659 436,228 417,608 402,698 389,127
-------- -------- -------- -------- --------
Operating expenses:
Operating costs 209,191 213,377 216,788 208,633 193,521
Distribution and general 151,719 148,015 133,842 129,782 120,969
Depreciation 15,902 14,908 13,970 12,190 10,952
Work force reduction cost 2,082 7,586
-------- -------- -------- -------- --------
378,894 376,300 372,186 350,605 325,442
-------- -------- -------- -------- --------
Operating income 52,765 59,928 45,422 52,093 63,685
Other income--net 8,963 8,389 5,918 5,134 5,071
-------- -------- -------- -------- --------
Income before income taxes 61,728 68,317 51,340 57,227 68,756
Provision for income taxes 25,813 27,748 18,911 24,071 33,339
-------- -------- -------- -------- --------
Income before minority
interest and equity
in Affiliate 35,915 40,569 32,429 33,156 35,417
Minority interest in
subsidiary (3,117) (3,411) (3,916) (3,754) (3,496)
Equity in Affiliate, net
of tax benefits (4,515) 1,309 743 8
-------- -------- -------- -------- --------
Income before cumulative
effect of accounting change 28,283 38,467 29,256 29,410 31,921
Cumulative effect of accounting
change 3,388
-------- -------- -------- -------- --------
Net income (loss) $ 28,283 $ 38,467 $ 29,256 $ 32,798 $ 31,921
======== ======== ======== ======== ========
Class A Share Data
Income before cumulative
effect of an accounting change $1.07 $1.45 $1.10 $1.10 $1.19
Cumulative effect of accounting
change .13
----- ----- ----- ----- -----
Net income (loss) 1.07 1.45 1.10 1.23 1.19
===== ===== ===== ===== =====
Dividends declared .40 .325 .325 .325 .325
Other Financial Data
Total assets $383,758 $356,103 $321,809 $300,966 $270,815
Working capital 122,710 134,755 116,192 106,705 101,566
Long-term debt 2,678 2,678 2,678 2,678 2,678
Shareholders' equity 275,623 257,938 230,316 213,579 189,312
<PAGE> 31
SHAREHOLDER INFORMATION
Since an initial public offering on September 21, 1989, shares of Class A
common stock have traded on the New York Stock Exchange under the symbol
"ECP." No established trading market currently exists for the Company's
Class B common stock. Shares of Class B common stock are convertible into
Class A common stock at a ratio of ten B shares for one A share. At
December 31, 1995, there were approximately 360 shareholders of record of
Class A common stock and 24 shareholders of record of Class B common stock.
Dividends
Dividends declared per share:
1995 Class A Class B
1st Quarter $.14 $.014
2nd Quarter .14 .014
3rd Quarter .17 .017
4th Quarter .17 .017
---- -----
$.62 $.062
==== =====
1994 Class A Class B
1st Quarter $.12 $.012
2nd Quarter .12 .012
3rd Quarter .14 .014
4th Quarter .14 .014
---- -----
$.52 $.052
==== =====
Shares Outstanding
The net income per common share is computed based on the weighted average
number of common shares outstanding in each year. The Class B common stock is
included in the computation as if converted to Class A common stock at a ratio
of ten shares of Class B common stock to one share of Class A common stock.
The weighted common shares outstanding were: 1995 26,651,007
1994 26,621,133
1993 26,570,973
Form 10-K
The Central Newspapers, Inc. annual report on Form 10-K filed with the
Securities and Exchange Commission is available at no charge upon written
request to Chief Financial Officer, Central Newspapers, Inc., 135 North
Pennsylvania Street, Suite 1200, Indianapolis, Indiana 46204.
Stock Prices
Calendar Quarter 1st 2nd 3rd 4th
1995 High $28 $28 7/8 $30 5/8 $32 5/8
Low 24 1/8 25 3/8 26 5/8 29 1/4
1994 High $29 $30 $28 5/8 $28 5/8
Low 26 3/4 24 5/8 26 24 3/4
Annual Meeting
The Annual Meeting of Shareholders will be held at the INI Pulliam Production
Centre, 8278 Georgetown Road, Indianapolis, Indiana, on April 17, 1996, at
10:00 a.m. local time.
Transfer Agent and Registrar:
Norwest Bank Minnesota, N.A.
Stock Transfer
161 North Concord Exchange
Post Office Box 738
South St. Paul, Minnesota 55075-0738
Board of Directors
Kent E. Agness
Partner
Barnes & Thornburg
Malcolm W. Applegate
President and General Manager
Indianapolis Newspapers, Inc.
William A. Franke
Chairman and Chief Executive Officer
America West Airlines, Inc.
President
Franke & Company, Inc.
Eugene S. Pulliam
Executive Vice President
Central Newspapers, Inc.
President
Phoenix Newspapers, Inc.
Publisher
The Indianapolis Star
The Indianapolis News
Dan Quayle
Chairman
BTC, Inc.
James C. Quayle
President
Huntington Newspapers, Inc.
Frank E. Russell
Chairman of the Board and Assistant Secretary
Central Newspapers, Inc.
Louis A. Weil III
President and Chief Executive Officer
Central Newspapers, Inc.
<PAGE>
Corporate Officers and
Executive Management
Frank E. Russell
Chairman of the Board and
Assistant Secretary
Central Newspapers, Inc.
Louis A. Weil III
President and Chief Executive Officer
Central Newspapers, Inc.
Eugene S. Pulliam
Executive Vice President
Central Newspapers, Inc.
President
Phoenix Newspapers, Inc.
Publisher
The Indianapolis Star
The Indianapolis News
Thomas K. MacGillivray
Treasurer and Chief Financial Officer
Central Newspapers, Inc.
John F. Oppedahl
Publisher and Chief Executive Officer
Phoenix Newspapers, Inc.
Malcolm W. Applegate
President and General Manager
Indianapolis Newspapers, Inc.
CONSENT OF GEO. S. OLIVE & CO. LLC
We consent to the incorporation by reference into this Annual Report on Form
10-K of our report dated February 7, 1996 with respect to the consolidated
financial statements of Central Newspapers, Inc. for the year ended December 31,
1995, included in the Central Newspapers, Inc. Annual Report to Shareholders and
to the incorporation of such report by reference into (a) the Registration
Statements on Form S-8 (File Numbers 33-37566, 33-40776 and 33-61397) and
related Prospectus pertaining to the Central Newspapers, Inc. Stock
Compensation Plan (formerly Central Newspapers, Inc. Stock Option Plan) and (b)
the Registration Statement on Form S-8 (File Number 33-33026) and related
Prospectus pertaining to the Central Newspapers, Inc. Savings Plus Plan.
/s/ Geo. S. Olive & Co. LLC
- ----------------------------------
GEO. S. OLIVE & CO. LLC
Indianapolis, Indiana
March 22, 1996
<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 December 31, 1995 and the consolidated statements of income, shareholders'
equity and cash flows for the fiscal year ended December 31, 1995 and is
qualified in its entirety by reference to such statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 26142
<SECURITIES> 103390
<RECEIVABLES> 62355
<ALLOWANCES> 1067
<INVENTORY> 10125
<CURRENT-ASSETS> 213018
<PP&E> 487751
<DEPRECIATION> 206946
<TOTAL-ASSETS> 547204
<CURRENT-LIABILITIES> 75200
<BONDS> 2678
<COMMON> 19030
0
0
<OTHER-SE> 339711
<TOTAL-LIABILITY-AND-EQUITY> 547204
<SALES> 579901
<TOTAL-REVENUES> 579901
<CGS> 0
<TOTAL-COSTS> 494010
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 238
<INCOME-PRETAX> 94045
<INCOME-TAX> 38048
<INCOME-CONTINUING> 53998
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53998
<EPS-PRIMARY> 2.03
<EPS-DILUTED> 0
</TABLE>
