United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR
--- 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 30, 1997
--- TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____to_____
Commission File Number: 1-10333
CENTRAL NEWSPAPERS, INC.
(Exact name of registrant as specified in its charter)
Indiana 35-0220660
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
135 North Pennsylvania Street, Suite 1200, Indianapolis, Indiana 46204
(Address of principal executive office)
(317) 231-9200
(Registrant's telephone number)
Indicate by check mark whether the registrant has (1) filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES x NO
--- ---
The number of shares of each class of common stock outstanding as of April 30,
1997:
CLASS A COMMON STOCK 23,199,111
CLASS B COMMON STOCK 31,553,000
<PAGE> 2
Central Newspapers, Inc.
Index to Form 10-Q
Part I -- FINANCIAL INFORMATION Page
Item 1 -- Financial Statements:
Consolidated Statement of Financial Position 3-4
Consolidated Statement of Income 5
Consolidated Statement of Shareholders' Equity 6
Consolidated Statement of Cash Flows 7
Notes to Consolidated Financial Statements 8-9
Item 2 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-13
Part II -- OTHER INFORMATION 14-17
<PAGE> 3
PART I
Item 1. Financial Statements
CENTRAL NEWSPAPERS, INC.
Consolidated Statement of Financial Position
March 30, Dec. 29,
ASSETS 1997 1996
(In thousands) (Unaudited)
-------- --------
CURRENT ASSETS:
Cash and cash equivalents $59,447 $36,149
Marketable securities 11,952 25,612
Accounts receivable (net of allowances of
$2,546 and $792) 77,347 90,023
Inventories 8,697 8,912
Deferred income tax benefits 7,512 7,263
Other current assets 5,446 3,503
-------- --------
Total current assets 170,401 171,462
-------- --------
PROPERTY, PLANT AND EQUIPMENT:
Land 18,604 18,225
Buildings and improvements 121,855 121,785
Leasehold improvements 4,256 4,255
Machinery and equipment 372,699 367,173
Construction in progress 2,840 1,414
-------- --------
520,254 512,852
Less accumulated depreciation 224,593 215,872
-------- --------
295,661 296,980
-------- --------
OTHER ASSETS:
Land held for development 3,105 3,118
Goodwill and other intangibles 115,110 75,449
Investment in Affiliate 8,428 8,867
Other 30,009 31,096
-------- --------
156,652 118,530
-------- --------
TOTAL ASSETS $622,714 $586,972
======== ========
See accompanying notes to consolidated financial statements.
<PAGE> 4
CENTRAL NEWSPAPERS, INC.
Consolidated Statement of Financial Position
March 30, Dec. 29,
LIABILITIES AND SHAREHOLDERS' EQUITY 1997 1996
(In thousands, except share data) (Unaudited)
-------- --------
CURRENT LIABILITIES:
Accounts payable $15,224 $19,079
Accrued compensation 16,755 17,052
Dividends payable 5,338 5,180
Accrued expenses and other liabilities 17,220 13,914
Federal and state income taxes 14,459 5,880
Deferred revenue 22,727 18,034
-------- --------
Total current liabilities 91,723 79,139
-------- --------
DEFERRED INCOME TAXES 28,189 26,602
-------- --------
LONG-TERM DEBT 2,678 2,678
-------- --------
POSTRETIREMENT BENEFIT OBLIGATION 82,394 81,759
-------- --------
MINORITY INTEREST IN SUBSIDIARY 836 9,244
-------- --------
REDEEMABLE PREFERRED STOCK ISSUED BY SUBSIDIARY 18,920
-------- --------
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--23,197,911 and 23,237,711 shares 25,763 24,259
Class B common stock--without par value:
Authorized--50,000,000 shares
Issued--31,553,000 shares 63 63
Retained earnings 372,070 363,365
Unamortized value of restricted stock (1,800) (1,627)
Unrealized gain on available-for-sale securities 1,878 1,490
-------- --------
397,974 387,550
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $622,714 $586,972
======== ========
See accompanying notes to consolidated financial statements.
<PAGE> 5
CENTRAL NEWSPAPERS, INC.
Consolidated Statement of Income
(Unaudited)
(In thousands, except per share data)
Thirteen Weeks Ended
March 30, March 31,
1997 1996
-------- --------
OPERATING REVENUES:
Advertising $128,996 $112,504
Circulation 35,554 34,270
Other 6,418 1,122
-------- --------
170,968 147,896
-------- --------
OPERATING EXPENSES:
Compensation 59,599 56,817
Newsprint and ink 24,320 32,348
Other operating costs 39,295 32,499
Depreciation and amortization 10,705 8,459
Building impairment cost 3,034
Work force reduction cost 6,041 440
-------- --------
139,960 133,597
-------- --------
OPERATING INCOME 31,008 14,299
OTHER INCOME (principally investment income) 1,266 1,857
OTHER EXPENSES (174) (264)
-------- --------
INCOME BEFORE INCOME TAXES 32,100 15,892
PROVISION FOR INCOME TAXES 13,534 6,592
-------- --------
INCOME BEFORE MINORITY INTEREST AND
EQUITY IN AFFILIATE 18,566 9,300
MINORITY INTEREST IN SUBSIDIARIES (543) (182)
EQUITY IN AFFILIATE, NET OF TAX (285) 691
-------- --------
NET INCOME $17,738 $9,809
======== ========
NET INCOME PER COMMON SHARE $.67 $.37
==== ====
DIVIDENDS DECLARED PER CLASS A COMMON SHARE $.19 $.17
AVERAGE COMMON SHARES
OUTSTANDING (combined Class A and
equivalent Class B shares) 26,394 26,700
See accompanying notes to consolidated financial statements.
<PAGE> 6
<TABLE>
CENTRAL NEWSPAPERS, INC.
Consolidated Statement of Shareholders' Equity
(Unaudited)
<CAPTION>
(In thousands, except share data) Unrealized
Unamortized Gain on
Common Stock Common Stock Value of Available-
Class A Class B Retained Restricted for-Sale
Shares Amount Shares Amount Earnings Stock Securities
---------- -------- ---------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1996 23,520,611 $18,967 31,553,000 $63 $338,436 $1,275
Net income (13 weeks) 9,809
Dividends declared:
Class A common stock (4,006)
Class B common stock (536)
Exercise of stock options 93,500 1,132
Change in unrealized gain on
available-for-sale securities (70)
---------- ------- ---------- -------- ------- ---------- ----------
BALANCE AT MARCH 31, 1996 23,614,111 20,099 31,553,000 63 343,703 1,205
Net income (39 weeks) 51,725
Dividends declared:
Class A common stock (12,850)
Class B common stock (1,736)
Exercise of stock options 61,200 2,796
Repurchase of Class A common stock (490,100) (539) (17,477)
Issuance of restricted stock grants 52,500 1,903 ($1,903)
Amortization of restricted stock
grants 276
Change in unrealized gain on
available-for-sale securities 285
---------- ------- ---------- -------- ------- ---------- ---------
BALANCE AT DECEMBER 29, 1996 23,237,711 24,259 31,553,000 63 363,365 (1,627) 1,490
Net income (13 weeks) 17,738
Dividends declared:
Class A common stock (4,407)
Class B common stock (599)
Exercise of stock options 42,700 1,224
Repurchase of Class A common stock (90,500) (91) (4,027)
Issuance of restricted stock grants 8,000 371 (371)
Amortization of restricted stock
grants 198
Change in unrealized gain on
available-for-sale securities 388
---------- ------- ---------- -------- -------- ---------- ---------
BALANCE AT MARCH 30, 1997 23,197,911 $25,763 31,553,000 $63 $372,070 ($1,800) $1,878
========== ======= ========== ======== ======== ========== =========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 7
CENTRAL NEWSPAPERS, INC.
Consolidated Statement of Cash Flows
(Unaudited)
(In thousands) 13 Weeks 13 Weeks
Ended Ended
March 30, March 31,
1997 1996
-------- --------
OPERATING ACTIVITIES:
Net income $17,738 $9,809
Items which did not use (provide) cash:
Depreciation and amortization 10,705 8,463
Postretirement and pension benefits 1,728 1,687
Loss (gain) on disposition of assets (65) 2,960
Minority interest in earnings of subsidiaries 543 181
Equity in Affiliate 285 (715)
Deferred income taxes 420 490
Amortization of restricted stock awards 198
Net proceeds from trading securities 2,048 41,392
Net change in other current assets and liabilities 27,515 9,246
-------- --------
Net cash provided by operating activities 61,115 73,513
-------- --------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment-net (6,665) (12,310)
Purchases of available-for-sale securities (5,798)
Proceeds from available-for-sale securities 11,437 19,884
Acquisition of subsidiaries (33,219) (60,509)
Other (36) (581)
-------- --------
Net cash used by investing activities (28,483) (59,314)
-------- --------
FINANCING ACTIVITIES:
Cash dividends paid (5,015) (4,535)
Dividends paid to minority interest (165) (492)
Proceeds from exercise of stock options 763 891
Principal repayments on long-term debt (800)
Repurchase of Class A common stock (4,117)
-------- --------
Net cash used by financing activities (9,334) (4,136)
-------- --------
INCREASE IN CASH AND CASH EQUIVALENTS 23,298 10,063
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 36,149 26,142
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $59,447 $36,205
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Issuance by subsidiary of redeemable preferred
stock in exchange for Class A common stock
of subsidiary $18,920
Income taxes paid during the period 4,065 $1,745
Interest paid during the period 25 168
See accompanying notes to consolidated financial statements.
<PAGE> 8
CENTRAL NEWSPAPERS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
1. 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 an 80%
interest in the Westech group of companies which are predominately in the jobs
fair business and a 13.5% interest in Ponderay Newsprint Company ("Affiliate"),
a partnership formed to own and operate a newsprint mill in the State of
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.
2. The accompanying unaudited consolidated financial statements do not include
all of the information and disclosures which are normally included in Form 10-K
and annual report to shareholders. These financial statements should be read in
conjunction with the Company's audited consolidated financial statements and
related notes for the year ended December 29, 1996. The accompanying
consolidated financial statements have been prepared in accordance with the
instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. The consolidated statement of financial position at December 29, 1996 has
been derived from audited financial statements. In the opinion of the Company's
management, the unaudited consolidated financial statements reflect all
adjustments which are necessary to present fairly the Company's financial
position, results of operations and cash flows for the interim periods
presented. All adjustments are of a normal recurring nature. Such statements
are not necessarily indicative of the results to be expected for the full
year.
3. The Company's fiscal year ends on the last Sunday of the calendar year. The
years ending December 28, 1997 and December 29, 1996 each comprise 52 weeks.
4. Net income per common share is computed based on the weighted average number
of common shares outstanding. The Class B common shareholders have the right to
convert their shares into shares of Class A common stock at the ratio of ten
shares of Class B common stock for one share of Class A common stock. The Class
B common stock is included in the computation as if converted into Class A
common stock.
5. During 1997 and 1996, the Company reduced its work force in response to
circulation distribution changes, technological changes and the closure of the
Phoenix afternoon newspaper. Certain employees were offered retirement benefits
through a non-qualified supplemental retirement plan. Year-to-date 1997 work
force reduction costs were $6,041,000.
6. On March 19, 1996 the Board of Directors authorized the repurchase of up to
1,000,000 shares of the Company's Class A common stock. The shares may be
purchased over three years on the open market or in privately
negotiated transactions. As of March 30, 1997 the Company had repurchased
580,600 shares of Class A common stock.
7. In February 1997 the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share." This statement establishes new standards for
reporting earnings per share. This standard is effective for interim and annual
periods ending after December 15, 1997. It is not expected to have a material
impact on the Company's earnings per share.
<PAGE> 9
8. On January 3, 1997, the Company acquired the remaining 9.8% of Indianapolis
Newspapers, Inc. ("INI") common stock that it did not already own. This
transaction, which was recorded using purchase accounting, was accomplished by
issuing the current minority shareholders an aggregate of 1,892 shares of
newly created, non-voting, INI preferred stock, with an aggregate stated value
of $18,920,000, in exchange for the shares of INI common stock owned by them.
The preferred stock provides for aggregate annual dividends of $1,324,000 on a
cumulative basis, is callable in five years by INI, and is redeemable at any
time by the shareholders of INI at the stated value plus accrued but unpaid
dividends. This transaction is not expected to have a material effect on future
earnings.
9. In February 1997, the Company acquired for $34.8 million, 80% of the
Santa Clara, California based Westech group of companies. The transaction was
accounted for using purchase accounting. The group, which had 1996 sales of
approximately $20 million, includes Westech ExpoCorp., which organizes job fairs
for the high tech industry, High Technology Careers, which publishes High
Technology Careers Magazine and Virtual Job Fair, an internet-based resume
posting and research service and JobsAmerica, which organizes job fairs for
service industry positions. The transaction generated approximately $32.4
million of goodwill which is being amortized on a straight line basis over 15
years.
10. Certain amounts in the financial statements have been reclassified to
conform with the 1997 presentation.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
GENERAL
The principal line of business of the Company is newspaper publishing. Revenues
are derived primarily from advertising and newspaper sales in the Phoenix,
Arizona and Indianapolis, Indiana metropolitan areas. The Company also has an
80% interest in the Westech group of companies which are predominantly in the
jobs fair business and a 13.5% interest in Ponderay, a partnership formed to
own and operate a newsprint mill in the State of Washington. The analysis of
the first quarter of 1997 compared with the first quarter of 1996 should be
read in conjunction with the fiscal 1996 consolidated financial statements
and the accompanying notes to the consolidated financial statements.
The Company's business tends to be seasonal, with peak revenues and profits
generally occurring in the second and fourth quarters of each year.
RECENT EVENTS
On April 14, 1997, the Company entered into definitive agreements with the
beneficiaries of the Enid Goodrich estate to purchase an aggregate of
1,177,367 shares of Class A common stock at $49.50 per share. The aggregate
$58.3 million transactions are expected to be consummated no later than May 31,
1997.
In February 1997, the Company acquired 80% of Westech. Based in Santa Clara,
California, Westech consists of Westech ExpoCorp., which organizes job fairs for
the high tech industry; High Technology Careers, which publishes High Technology
Careers Magazine and Virtual Job Fair (http://www.vjf.com), an internet-based
resume posting and research service; and JobsAmerica, which organizes job fairs
for service industry positions. Westech had approximately $20 million of
revenues in 1996.
<PAGE> 10
Effective January 18, 1997, the Company ceased publication of its afternoon
newspaper, The Phoenix Gazette, and realigned the news gathering structure of
its morning newspaper, The Arizona Republic. These changes resulted in the
Company recording a one-time pre-tax charge to earnings of approximately $4.8
million in the first quarter of 1997 and are expected to result in a reduction
in operating expenses of approximately $5.0 million in 1997 and ongoing
operating expense savings in future years of approximately $6.4 million.
Approximately 85 positions were eliminated as a result of these actions.
On January 3, 1997, the Company acquired the remaining 9.8% of Indianapolis
Newspapers, Inc. ("INI") common stock that it did not already own. This
transaction, which was recorded using purchase accounting, was accomplished
by issuing the current minority shareholders an aggregate of 1,892 shares of
newly created, non-voting, INI preferred stock, with an aggregate stated
value of $18,920,000, in exchange for the shares of INI common stock owned by
them. The preferred stock provides for aggregate annual dividends of
$1,324,000 on a cumulative basis, is callable in five years by INI, and is
redeemable at any time by the shareholders of INI at the stated value plus
accrued but unpaid dividends. This transaction is not expected to have a
material effect on future earnings.
On March 12, 1996, the Company purchased 100% of the outstanding common stock of
McCormick & Company, Inc. ("McCormick"), which owns the Alexandria Daily Town
Talk newspaper of Louisiana and McCormick Graphics, Inc., a commercial printing
subsidiary. The purchase price was approximately $62.0 million in cash. Since
a significant portion of the purchase price was allocated to intangible assets,
the amortization of which is not deductible for tax purposes, the Company's net
income may be negatively impacted for approximately three years from the date of
acquisition. Thereafter,the acquisition is expected to contribute positively
to net income. However, the Company's EBITDA has been positively impacted
since the acquisition.
FIRST QUARTER OF 1997 COMPARED WITH THE FIRST QUARTER OF 1996
QUARTERLY RESULTS OF OPERATIONS
The first quarter of 1997 resulted in record revenues and profits for the
Company. First quarter earnings per share were $.67, an 81.1% increase over the
$.37 earned in the first quarter of 1996. Both quarters included the effects of
work force reduction and/or asset impairment costs ("special charges") which
negatively impacted earnings. Excluding the special charges, earnings per share
would have been $.81 in the first quarter of 1997 and $.44 in the first quarter
of 1996, an increase of 84.1%. Operating income for the first quarter of 1997
was $31.0 million for an increase of 116.9% from the $14.3 million earned in the
first quarter of 1996. Approximately $9.6 million of the operating income
increase was due to substantially lower newsprint prices in the 1997 first
quarter when compared with 1996. The first quarter of 1997 includes two
additional months of year-over-year McCormick activity, initial operating income
from Westech and work force reduction charges primarily related to The
Phoenix Gazette closure. The 1996 first quarter included charges related to
asset impairments and work force reductions. Excluding these items in both
periods, 1997 first quarter operating income would have been $34.7 million
compared to $17.8 million in the 1996 first quarter for an increase of 95.0%.
EBITDA (operating income before depreciation, amortization and special
charges) for the comparable periods was $47.8 million in the 1997 period and
$26.2 million in the 1996 period, an increase of 82.0%. Net income for the
1997 first quarter was $17.7 million, an 80.8% increase from the $9.8 million
net income for the first quarter of 1996. Excluding the special charges for
both periods, net income would have been $21.2 million and $11.8 million,
respectively.
<PAGE> 11
OPERATING REVENUES
The Company's quarterly operating revenues rose to $171.0 million in 1997 from
$147.9 million in 1996, an increase of 15.6%. These comparisons include the
1997 revenues from the February 1997 Westech acquisition and the March 1996
McCormick acquisition (the "Acquisitions"). Excluding the effects of the
Acquisitions, operating revenues increased 9.3% compared to the first quarter of
1996. Advertising and circulation revenues increased 14.7% and 3.7%,
respectively, in the first quarter of 1997. These gains were partially affected
by the Acquisitions, but the advertising increases were primarily due to strong
gains in the classified and national advertising groups in both major markets.
Areas of particular advertising strength included automotive and recruitment
advertising categories in Phoenix and all major advertising categories in
Indianapolis. Although The Phoenix Gazette closed in January, 1997, the impact
on advertising and circulation revenues was not significant since approximately
85% of the Phoenix afternoon subscribers were successfully transferred to The
Arizona Republic.
The following is a summary of major market linage and circulation statistics for
the period:
(In thousands, except circulation)
1st Quarter %
------------------
1997 1996 Change
Full Run Linage in six column inches: (1)
Retail 633.6 567.2 11.7
National 101.3 62.3 62.6
Classified 759.5 656.8 15.6
------- -------
Total 1,494.4 1,286.3 16.2
======= =======
Full Run Linage by Major Markets:
Phoenix (1) 686.9 652.4 5.3
Indianapolis 807.5 633.9 27.4
------- -------
1,494.4 1,286.3 16.2
------- -------
Net Advertising Revenue (1) $128,996 $112,504 14.7
Combined Average Daily Circulation:
Phoenix 487,050 492,413 (1.1)
Indianapolis 274,660 290,111 (5.3)
Sunday Circulation:
Phoenix 618,546 621,310 (.4)
Indianapolis 393,219 403,134 (2.5)
(1) For comparability, linage statistics for the 13 weeks ended March 31, 1996
and March 30, 1997 exclude linage of The Phoenix Gazette, which ceased
publication in January, 1997. Linage statistics for the thirteen weeks ended
March 31, 1996 including The Phoenix Gazette were 762 retail, 88 national and
889 classified. Total Phoenix market full run linage for the 1996 period
including The Phoenix Gazette, was 1,106. Advertising revenue was not
significantly affected by the closure of The Phoenix Gazette and has not
been restated.
OPERATING EXPENSES
Compensation costs, which include payroll and fringe benefits, increased 4.9% to
$59.6 million in the first quarter of 1997 compared with the first quarter of
1996. Excluding the acquisitions, compensation costs would have increased
0.3%. Period over period headcount (excluding Westech) decreased 2.7% due
primarily to the closure of The Phoenix Gazette and the impact of a
conversion from a carrier-based distribution arrangement to an agency-based
distribution work force in Indianapolis. Newsprint and ink expense was $24.3
million in the first quarter of 1997, a 24.8% decrease from the first quarter
of 1996. Excluding the acquisitions, newsprint and ink expense would have
decreased 26.8%. Sharply lower prices of newsprint of approximately 30% in the
first quarter of 1997 compared to the first quarter of 1996 have resulted in a
significant decrease in costs; however, the Company increased newsprint
consumption by 6.5% due to the acquisitions and increased
<PAGE> 12
advertising linage. Other operating costs increased 20.9% to $39.3 million in
the first quarter of 1997. Excluding the acquisitions, operating costs
increased 12.7%. Significant items contributing to the increase in operating
costs included higher property taxes in Phoenix and Indianapolis, charges
associated with the Phoenix client server computer system, and changes in
circulation distribution methods in Indianapolis.
Depreciation and amortization expense increased 26.6% to $10.7 million in the
first quarter of 1997 compared to the first quarter of 1996. Excluding the
effects of the acquisitions, depreciation and amortization expense would have
increased 13.7% as a result of the new office building and client server
computer system in Phoenix and distribution centers and inserting equipment
at both locations.
The Company recorded work force reduction costs of approximately $6.0 million in
the first quarter of 1997. Of this amount, approximately $4.8 million resulted
from the closure of The Phoenix Gazette where approximately 85 positions were
eliminated. The balance of the charge related to the costs of eliminating 18
positions in the conversion of distribution systems in Indianapolis.
NON-OPERATING ITEMS
Other non-operating income (primarily investment income) decreased 31.8% in the
first quarter of 1997 primarily due to a reduction in investable cash because of
the Westech and McCormick acquisitions. Income tax expense increased 105.3%
reflecting sharply higher taxable income. Equity in affiliate decreased $1.0
million due to a reduction in newsprint selling prices being realized by
Ponderay Newsprint Company.
LIQUIDITY AND CAPITAL RESOURCES FOR THE QUARTER ENDED MARCH 30, 1997
Net cash provided by operating activities is the Company's primary source of
liquidity. Net cash provided by operating activities, excluding the effects of
net purchases of trading securities for the first quarter of 1997 and 1996, was
$59.1 million and $32.1 million, respectively. Changes for both years were
primarily attributable to net income and working capital differences. The
principal uses of cash in the first quarter of 1997 were the acquisition of
Westech, payment of dividends, capital expenditures and the repurchase of Class
A common stock. At the end of the quarter, the Company's available cash and
investments totaled $71.4 million, up $9.6 million from the end of 1996.
Working capital for the same period decreased $13.6 million to $78.7 million.
Total capital expenditures in the first quarter of 1997 were $6.7 million
compared with $12.3 million in the first quarter of 1996. As of March 30, 1997,
there are no significant formal commitments related to future capital
expenditures.
The Company announced in March, 1996 that it has been authorized to repurchase
up to 1 million shares of Class A common stock on the open market or in
privately negotiated transactions over a three year time period. Through March
30, 1997 the Company had repurchased a total of 580,600 shares. For the
quarter ended March 30, 1997 the Company repurchased 90,500 shares in the
aggregate cost of $4.1 million.
On April 14, 1997, the Company announced that it had signed definitive
agreements to repurchase 1,177,367 shares of its Class A common stock (not
related to the March 1996 authorized repurchase) at $49.50 per share from the
beneficiaries of the estate of Enid Goodrich. The aggregate $58.3 million
transactions are expected to be consummated by May 31, 1997. The Company plans
to utilize existing cash and investments for part of the repurchase with the
balance being obtained from a $60 million uncommitted, unsecured short-term bank
line of credit that the Company is currently negotiating.
<PAGE> 13
Dividends of $.19 per share on the Class A common stock and $.019 on the Class
B common stock were declared during the quarter.
The Company has demonstrated a consistent ability to generate net cash flow from
operations. As a result, management believes that existing cash and investments,
available bank credit resources and net cash flows from operations will be
sufficient to fund existing capital and investment needs along with working
capital requirements for the foreseeable future.
OUTLOOK FOR THE REMAINDER OF 1997
The Company foresees continued growth in advertising revenues for the balance of
1997, but at a rate less than that experienced in the first quarter of 1997.
Despite the closure of The Phoenix Gazette in January, 1997, circulation revenue
is also expected to increase modestly compared to 1996 due to September, 1996
Indianapolis price increases and circulation growth. Non-newsprint operating
expenses are expected to increase at a comparable rate with revenue growth. The
cost of newsprint expense, the second largest expense category, is expected to
increase during the remainder of 1997; but total 1997 newsprint and ink expense
is expected to be less than comparable 1996 levels. If so, the Company expects
favorable financial performance in 1997 compared with 1996.
FORWARD LOOKING STATEMENTS
This document contains material that is forward-looking in nature. From time to
time, the Company may provide forward looking statements relating to such
matters as anticipated financial performance, business prospects and similar
matters. All forward-looking statements are based upon information available to
the Company at the time they are made and the Company assumes no obligation to
update any forward-looking statements. The Company notes that a variety of
factors could cause the Company's actual results to differ materially from the
expectations expressed in the forward-looking statements. The risks and
uncertainties that may affect the operations, performance and results of the
Company's business include, but are not limited to:
* economic weakness in the Company's geographic markets
* weakness in retail and/or classified advertising revenue due to factors
including retail consolidations, declines in the advertising budgets of
major customers, and increased competition from print and non-print
products
* declines in circulation due to changing reader preferences and/or new forms
of information dissemination
* fluctuations in the price of newsprint
* and increase in distribution and/or production costs over anticipated
levels
* the negative impact of issues related to labor agreements
<PAGE> 16
PART II
CENTRAL NEWSPAPERS, INC.
Item 1. Legal Proceedings -- None
Item 2. Changes in Securities -- None
Item 3. Default Upon Senior Securities -- None
Item 4. Submission of Matters to a Vote of Security Holders -- None
Item 5. Other Information -- None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits 1a and 1b -- Independent Accountant's Reports
b) Exhibit 2 -- Press release relating to an agreement to repurchase
1.18 million shares of Class A common stock from the beneficiaries of
the estate of Enid Goodrich.
c) The Company filed a report on Form 8-K on March 12, 1997 announcing
that the Board of Directors of the Company recommended to
shareholders the appointment of Price Waterhouse LLP to examine the
financial statements of the Company for the fiscal year ending
December 28, 1997. This recommendation was ratified by the
shareholders at the annual meeting held on April 24, 1997. 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.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
CENTRAL NEWSPAPERS, INC.
Dated: April 28, 1997 By:/s/ Louis A. Weil, III
----------------------
Louis A. Weil, III
President and Chief Executive
Officer
By: /s/ Thomas K. MacGillivray
--------------------------
Thomas K. MacGillivray
Vice President and Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contails summary financial information extracted from the
Company's unaudited financial statements as of and for the fiscal three month
period ended March 30, 1997 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-END> MAR-30-1997
<CASH> 59447
<SECURITIES> 11952
<RECEIVABLES> 79893
<ALLOWANCES> 2546
<INVENTORY> 8697
<CURRENT-ASSETS> 170401
<PP&E> 520254
<DEPRECIATION> 224593
<TOTAL-ASSETS> 622714
<CURRENT-LIABILITIES> 91723
<BONDS> 2678
18920
0
<COMMON> 25826
<OTHER-SE> 372148
<TOTAL-LIABILITY-AND-EQUITY> 622714
<SALES> 170968
<TOTAL-REVENUES> 170968
<CGS> 0
<TOTAL-COSTS> 139960
<OTHER-EXPENSES> 174
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25
<INCOME-PRETAX> 32100
<INCOME-TAX> 13534
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17738
<EPS-PRIMARY> .67
<EPS-DILUTED> 0
</TABLE>
INDEPENDENT ACCOUNTANT'S REPORT
To the Board of Directors and Shareholders of
Central Newspapers, Inc.
We have reviewed the accompanying consolidated statement of financial position
of Central Newspapers, Inc. as of March 30, 1997, and the consolidated
statements of income, shareholders' equity and cash flows for the three-month
period then ended. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements as of and for the three-month
period ended March 30, 1997 for them to be in conformity with generally accepted
accounting principles.
/s/Price Waterhouse LLP
- -----------------------
Price Waterhouse LLP
Indianapolis, Indiana
April 28, 1997
Exhibit 1b
INDEPENDENT ACCOUNTANT'S REPORT
To the Board of Directors
Central Newspapers, Inc.
We have reviewed the consolidated statement of financial position of Central
Newspapers, Inc. as of March 31, 1996 (not presented herein), and the
consolidated statements of income, shareholders' equity and cash flows for the
fiscal three-month period ended March 31, 1996. These financial statements are
the responsiblility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated statement of financial position as of December 29,
1996 and the related consolidated statements of income, shareholders' equity
and cash flows for the year then ended (not presented herein); and in our report
dated February 3, 1997, we expressed an unqualified opinion on those
consolidated financial statements.
/s/ Geo. S. Olive & Co., LLC
- -----------------------------
Geo. S. Olive & Co., LLC
Indianapolis, Indiana
April 28, 1997
Exhibit 2
CENTRAL NEWSPAPERS SIGNS AGREEMENT TO REPURCHASE 1.18 MILLION SHARES
INDIANAPOLIS, IN, April 14, 1997 - Central Newspapers, Inc. announced that it
has signed a definitive agreement to repurchase 1,177,367 of its Class A common
shares of $49.50 per share from the beneficiaries of the estate of Enid
Goodrich. The $58 million transaction is expected to close by May 31, 1997.
Central Newspapers currently has approximately 26.3 million combined Class A and
equivalent Class B shares outstanding.
Enid Goodrich, who died in 1996, was the wife of the late Pierre Goodrich, one
of the early investors in Central Newspapers.
Central Newspapers is a media company that publishes daily, Sunday and weekly
newspapers including The Arizona Republic, The Indianapolis Star, The
Indianapolis News, Muncie Star Press, as well as smaller community papers in
Indiana; The Alexandria Daily Town Talk in Louisiana, and High Technology
Careers Magazine. It also organizes job fairs for the high-tech and service
industries. Central Newspapers is the 10th largest publicly traded U.S.
newspaper company in terms of circulation.
