SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM 8-K
__________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: March 12, 1997
CENTRAL NEWSPAPERS, INC.
(Exact name of registrant as specified in its charter)
INDIANA
(State or other jurisdiction of incorporation)
1-10333 35-0220660
(Commission File Number) (IRS Employer Identification No.)
135 North Pennsylvania Street, Suite 1200
Indianapolis, Indiana 46204
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (317) 231-9200
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Item 4. Changes in Registrant's Certifying Accountant
Upon the recommendation of the Audit Committee of the Board of Directors,
the Board of Directors of Central Newspapers, Inc. (the "Company") is
recommending to shareholders the appointment of Price Waterhouse LLP to examine
the financial statements of the Company for the fiscal year ending December 28,
1997. If approved, Price Waterhouse LLP will replace Geo. S. Olive & Co. LLC,
which has acted as the independent public accountant for the Company for its two
most recent fiscal years.
The Audit Committee of the Board of Directors solicited bids for audit,
tax and related services from several independent accounting firms, including
Price Waterhouse LLP and Geo. S. Olive & Co. LLC. Based upon these bids, the
Audit Committee recommended the appointment of Price Waterhouse LLP. The Board
of Directors approved the recommendations of the Audit Committee at its meeting
held on March 11, 1997.
During the last two fiscal years, the audit reports issued by Geo. S. Olive
& Co. LLC with respect to the Company's financial statements did not contain an
adverse opinion or disclaimer of opinion, and were not qualified as to
uncertainty, audit scope or accounting principles. During the last two fiscal
years (and in any subsequent interim period), there have been no disagreements
between the Company and Geo. S. Olive & Co. LLC on any matter of accounting
principles or practices, financial statement disclosure or auditing scope
or procedure, which disagreements, if not resolved to the satisfaction of Geo.
S. Olive & Co. LLC, would have caused it to make a reference to the subject
matter of the disagreement in connection with its audit report.
During 1996, the Company consulted with Price Waterhouse LLP to confirm the
conclusions reached by Geo. S. Olive & Co., LLC with respect to the accounting
treatment to be afforded the purchase of a minority shareholder's interest.
Attached hereto as Exhibit 99.1 is Price Waterhouse LLP's report expressing its
views. These views expressed by Price Waterhouse LLP were in agreement with
those of Geo. S. Olive & Co., LLC.
Pursuant to Item 304 of Regulation S-K, the Company has provided a copy of
this Current Report on Form 8-K to Geo. S. Olive & Co. LLC for review. Attached
hereto as Exhibit 16.1 is a letter from Geo. S. Olive & Co. LLC addressed to the
Securities and Exchange Commission indicating that it agrees with the statements
made by the Company herein.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CENTRAL NEWSPAPERS, INC.
By:/s/ Thomas K. MacGillivray
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Thomas K. MacGillivray, Treasurer
and Chief Financial Officer
Date: March 12, 1997
Exhibit 16.1
Securities and Exchange Commission
Washington, D.C. 20549
We were previously the principal accountants for Central Newspapers, Inc. (the
Company) and, under the date of February 3, 1997, we reported on the
consolidated financial statements of the Company as of and for the three fiscal
years in the period ended December 29, 1996. On March 11, 1997, our appointment
as principal accountants was terminated. We have read the Company's statements
included under Item 4 of its Form 8-K dated March 12, 1997, and we agree with
such statements, except that we are not in a position to agree or disagree with
the Company's statement that the change was recommended by the Audit
Committee and approved by the Board of Directors.
/s/ Geo. S. Olive & Co., LLC
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Indianapolis, Indiana
March 12, 1997
Exhibit 99.1
September 11, 1996
Mr. Thomas MacGillivray
Central Newspapers, Inc.
135 North Pennsylvania Street, Suite 1200
Indianapolis, Indiana 46204
Dear Mr. MacGillivray:
You have engaged us to report on the appropriate application of generally
accepted accounting principles to the specific transaction (the transaction)
described below. This report is being issued to Central Newspapers, Inc.
(Central) for assistance in evaluating certain accounting principles applicable
for the transaction. Our engagement has been conducted in accordance with
standards established by the American Institute of Certified Public Accountants.
Description of the Transaction
We have included only those terms and conditions which we believe are necessary
in understanding the transaction or relevant to providing our opinion on the
appropriate accounting treatment. You have advised us that the key elements
of the transaction are as follows:
Central currently owns slightly in excess of 90% of the common stock of
Indianapolis Newspapers, Inc. (INI) which is split into two classes (Class A and
Class B shares) with idential characteristics. (Central owns approximately 60%
of INI's 5,772 Class A shares and all of its 13,468 Class B shares.) During the
last several years, Central has attempted to acquire the minority interest in
INI as evidenced by separate cash transactions in September 1994 and June 1995
involving 3,591 Class A shares and 50 Class A shares, respectively. Both of
these transactions were treated as purchase transactions with Central's basis in
the share acquisitions pushed down to the INI financial statements.
Now that Central owns more than 90% of INI's common stock, it has the legal
right to force out the remaining minority shareholders and gain 100% control of
INI. In order to effect this force out, Central will incorporate a new
wholly-owned shell company which will merge with and into INI with INI being the
surviving corporation. INI will then give its minority shareholders the option
of choosing $10,579 in cash for each Class A share or an equivalent number of
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shares of newly created INI preferred stock with the following terms: $10,000
par value per share, quarterly dividends of $175 per share (annual rate of 7%);
cumulative dividends; nonvoting; callable at par by INI after five years; and
redeemable at the holder's option at any time. After the transaction, INI's
Class A common stock (i.e., the shares owned by Central as well as the shares
obtained from the minority shareholders pursuant to this transaction) will be
canceled.
Accounting Treatment
You have asked us to address the appropriate accounting treatment for the
transaction at the INI level as well as in Central's consolidated financial
statements. The primary authoritative accounting pronouncements which should be
considered in addressing this issue are Accounting Principles Board Opinion No.
16, Business Combinations (APB 16), Accounting Interpretations of APB Opinion
No. 16, #26, Acquisition of Minority Interest (AIN-APB 16, #26), and Statement
of Financial Accounting Standards No. 109, Accounting for Income Taxes
(SFAS 109). Furthermore, the Securities and Exchange Commission staff (SEC
staff) have considered the accounting for certain aspects of the transaction in
Staff Accounting Bulletin Topic 5J - Push Down Basis of Accounting Required in
Certain Limited Circumstances (SAB 5J) and Rule 5-02, Caption 28(a) of
Regulation S-X - Preferred Stocks Subject to Mandatory Redemption Requirements
or Whose Redemption is Outside the Control of the Issuer (S-X Rule 5-02.28(a))
In substance, the transaction is the acquisition of a minority interest by
Central for either cash or preferred shares of INI. Accordingly, the
transaction should be accounted for as a step-acquisition following the purchase
accounting guidance contained in paragraphs 66-69 of APB 16 and AIN-APB 16, #26.
Additionally, the transaction should be recorded at the INI level following the
push-down accounting guidance contained in the SEC staff's interpretative
response to Question 1 of SAB 5J in a manner consistent with the Central's
purchases of INI common stock in 1994 and 1995.
Under paragraph 67 of APB 16, the cost of the acquisition would be the total
of a) cash paid for the Class A shares repurchased by INI, b) the fair value
of INI preferred stock issued in exchange for the Class A shares and c) other
direct costs of the acquisition. The cost of the acquisition should then be
allocated to the assets acquired and liabilities assumed as required by
paragraph 68 of APB 16. As a corresponding change in basis is not anticipated
for income tax purposes, deferred income taxes should be provided for any
resulting book/tax basis differences in accordance with paragraph 30 of SFAS
109. The difference between the cost of the acquisition and the amounts
allocated to tangible and intangible assets acquired net of liabilities assumed
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as well as the related deferred income taxes should be recorded as goodwill and
amortized over the related estimated useful life. The portion of INI's
stockholders' equity accounts relating to the Class A shares acquired should
be relieved at their historical amounts. Finally, as the preferred stock
represents a mandatorily redeemable security due to the holder's redemption
rights, it should be classified outside of INI's stockholder's equity pursuant
to S-X Rule 5-02.28(a) and using a caption similar to "Mandatorily Redeemable
Preferred Shares of Subsidiary" in Central's consolidated financial statements.
Our comments with respect to the transaction have not addressed federal or state
tax matters. Interested parties should consult their advisors on such
matters. Additionally, we can give no assurance that the SEC staff would agree
with the views expressed in this report.
The ultimate responsibility for the appropriate application of generally
accepted accounting principles on actual transactions rests with the preparers
of financial statements, who should consult with their continuing independent
accountants. Our judgment on the appropriate application of generally accepted
accounting principles for the proposed transaction is based solely on the facts
provided to us as described above; should these facts and circumstances differ,
our comments may change. We assume no responsibility for events and
circumstances occurring after the date of this letter.
Yours very truly,
/s/Price Waterhouse LLP
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Price Waterhouse LLP
