-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CIAJ6HAdl1CURwLqiEbmOlzXUcotv55bz7Dwk4Tx7YqV6XlDNN9nawLXvzJpwmWh /PiVvV+eF5jc+/cyyGO3MA== 0000743530-97-000070.txt : 19970814 0000743530-97-000070.hdr.sgml : 19970814 ACCESSION NUMBER: 0000743530-97-000070 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEE ENTERPRISES INC CENTRAL INDEX KEY: 0000058361 STANDARD INDUSTRIAL CLASSIFICATION: NEWSPAPERS: PUBLISHING OR PUBLISHING & PRINTING [2711] IRS NUMBER: 420823980 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06227 FILM NUMBER: 97659559 BUSINESS ADDRESS: STREET 1: 400 PUTNAM BLDG STREET 2: 215 N MAIN ST CITY: DAVENPORT STATE: IA ZIP: 52801 BUSINESS PHONE: 3193832100 MAIL ADDRESS: STREET 1: 400 PUTNAM BUILDING STREET 2: 215 N. MAIN STREET CITY: DAVENPORT STATE: IA ZIP: 52801 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [ X ] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended June 30, 1997 OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number 1-6227 Lee Enterprises, Incorporated A Delaware Corporation I.D. #42-0823980 215 N. Main Street Davenport, Iowa 52801 Phone: (319) 383-2100 Indicate by a 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Class Outstanding at June 30, 1997 - --------------------------------------- ----------------------------- Common Stock, $2.00 par value 34,153,683 Class "B" Common Stock, $2.00 par value 12,247,268 PART I. FINANCIAL INFORMATION Item 1. LEE ENTERPRISES, INCORPORATED CONSOLIDATED STATEMENTS OF INCOME (In Thousands Except Per Share Data) Three Months Nine Months Ended June 30, Ended June 30, -------------------------------------------- 1997 1996 1997 1996 - --------------------------------------------------------------------------------------- Operating revenue: Newspaper: Advertising ...................... $ 45,991 $ 43,362 $134,319 $126,180 Circulation ...................... 20,199 19,967 60,219 59,918 Other ............................ 13,890 13,835 42,084 41,095 Broadcasting ........................ 30,675 30,671 92,095 88,200 Equity in net income of associated companies ........................ 1,938 1,664 5,431 4,847 -------------------------------------------- 112,693 109,499 334,148 320,240 -------------------------------------------- Operating expenses: Compensation costs .................. 40,807 38,396 122,596 115,494 Newsprint and ink ................... 7,938 9,539 22,838 29,777 Depreciation ........................ 4,366 4,120 12,321 11,727 Amortization of intangibles ......... 2,703 2,864 8,108 8,691 Other ............................... 27,943 27,647 87,937 84,617 -------------------------------------------- 83,757 82,566 253,800 250,306 -------------------------------------------- Operating income ......... 28,936 26,933 80,348 69,934 -------------------------------------------- Financial (income) expense, net: Financial (income) .................. (1,145) (663) (3,143) (1,751) Financial expense ................... 1,346 2,347 5,115 7,335 -------------------------------------------- 201 1,684 1,972 5,584 -------------------------------------------- Income from continuing operations before taxes on income ................... 28,735 25,249 78,376 64,350 Income taxes ........................... 10,976 9,868 30,269 25,193 -------------------------------------------- Income from continuing operations ............... 17,759 15,381 48,107 39,157 Income from discontinued operations net of income tax effect ............ 485 1,664 1,485 4,633 -------------------------------------------- Net income ............... $ 18,244 $ 17,045 $ 49,592 $ 43,790 ============================================ Weighted average number of shares ...... 47,231 47,938 47,488 48,021 ============================================ Earnings per share: Income from continuing operations ... 0.38 0.32 1.01 0.81 Income from discontinued operations . 0.01 0.04 0.03 0.10 -------------------------------------------- Net income ............... $ 0.39 $ 0.36 $ 1.04 $ 0.91 ============================================ Dividends per share .................... $ 0.13 $ 0.12 $ 0.39 $ 0.36 ============================================
LEE ENTERPRISES, INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands) June 30, September 30, ASSETS 1997 1996 - ------------------------------------------------------------------------------- (Unaudited) Cash and cash equivalents ...................... $ 70,106 $ 19,267 Accounts receivable, net ....................... 54,526 50,211 Newsprint inventory ............................ 2,021 3,668 Program rights and other ....................... 12,080 17,183 Net assets of discontinued operations .......... -- 56,379 ------------------------- Total current assets ............. 138,733 146,708 Investments .................................... 23,338 22,156 Property and equipment, net .................... 104,378 104,705 Intangibles and other assets ................... 247,209 253,847 ------------------------- $513,658 $527,416 ========================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities ............................ $ 97,439 $ 97,777 Long-term debt, less current maturities ........ 27,021 52,290 Deferred items ................................. 53,265 52,395 Stockholders' equity ........................... 335,933 324,954 ------------------------ $513,658 $527,416 ======================== LEE ENTERPRISES, INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) Nine Months Ended June 30: 1997 1996 - ------------------------------------------------------------------------------- (Unaudited) Cash Provided by Operations: Net income ......................................... $ 49,592 $ 43,790 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization .................... 21,706 23,695 Distributions in excess of earnings of associated companies ..................................... 1,140 1,166 Adjustment of estimated loss on disposition of discontinued operations ....................... (1,985) Other balance sheet changes ...................... 6,835 (7,228) ------------------- Net cash provided by operations ............ 77,288 61,423 ------------------- Cash Provided by (Required for) Investing Activities: Acquisitions ....................................... (1,200) (367) Purchase of property and equipment ................. (11,229) (13,866) Purchase of temporary investments .................. -- (200) Proceeds from maturities of temporary investments .. -- 400 Net proceeds from sale of subsidiary ............... 54,795 -- Other .............................................. (884) (1,320) ------------------- Net cash provided by (required for) investing activities ....................... 41,482 (15,353) ------------------- Cash (Required for) Financing Activities: Purchase of common stock ........................... (25,902) (11,654) Cash dividends paid ................................ (12,149) (11,316) Payment of debt .................................... (35,000) (25,076) Proceeds from long-term borrowings ................. -- 15,000 Other .............................................. 5,120 2,284 ------------------- Net cash (required for) financing activities (67,931) (30,762) ------------------- Net increase in cash and cash equivalents .. 50,839 15,308 Cash and cash equivalents: Beginning ............................................. 19,267 10,683 ------------------- Ending ................................................ $ 70,106 $ 25,991 =================== LEE ENTERPRISES, INCORPORATED NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL INFORMATION - -------------------------------------------------------------------------------- Note 1. Basis of Presentation The information furnished reflects all adjustments, consisting of normal recurring accruals, which are, in the opinion of management, necessary to a fair presentation of the financial position as of June 30, 1997 and the results of operations for the three and nine month periods ended June 30, 1997 and 1996 and cash flows for the nine month periods needed June 30, 1997 and 1996. Note 2. Investment in Associated Companies Condensed operating results of unconsolidated associated companies are as follows: Nine Months Three Months Ended June 30, Ended June 30, ---------------------------------- 1997 1996 1997 1996 ---------------------------------- Revenues ....................... $19,963 $18,226 $58,769 $54,576 Operating expenses, except depreciation and amortization 13,235 12,506 39,893 37,871 Depreciation and amortization .. 502 433 1,506 1,363 Operating income ............... 6,226 5,287 17,370 15,342 Financial income ............... 293 286 847 876 Income before income taxes ..... 6,519 5,573 18,217 16,218 Income taxes ................... 2,642 2,249 7,352 6,522 Net income ..................... 3,877 3,324 10,865 9,696 a. Madison Newspaper, Inc. (50% owned) b. Quality Information Systems (50% owned) c. Inn Partnership, LC (an effective 50% owned) Note 3. Cash Flows Information The components of other balance sheet changes are: Nine Months Ended June 30, ---------------- 1997 1996 ---------------- (In Thousands) (Unaudited) (Increase) in receivables ................................... $(5,658) $(9,175) Decrease in inventories, film rights and other .............. 3,063 2,098 Increase (decrease) in accounts payable, accrued expenses and unearned income ...................................... 5,222 (5,987) Increase in income taxes payable ............................ 1,599 4,622 Other, primarily deferred items ............................. 2,609 1,214 ---------------- $ 6,835 $(7,228) ================ Note 4. Pending Accounting Changes In February 1997, the Financial Accounting Standards Board (FASB) issued Statement No. 128, "Earnings Per Share." This Statement simplifies the computation of earnings per share and makes the computation more consistent with those of International Accounting Standards. The Statement is effective for periods ending after December 15, 1997. The Company does not expect the adoption of this new standard to significantly impact previously reported earnings per share or earnings per share trends. In June 1997, the FASB issued Statement No. 130 "Reporting Comprehensive Income" and Statement No. 131 "Disclosures About Segments of an Enterprise and Related Information." Statement No. 130 establishes standards for reporting comprehensive income in financial statements. Statement No. 131 expands certain reporting and disclosure requirements for segments from current standards. The Statements are effective for fiscal years beginning after December 15, 1997 and the Company does not expect the adoption of these new standards to result in material changes to previously reported amounts or disclosures. Note 5. Subsequent Events On July 25, 1997 Lee Enterprises, Incorporated entered into a definitive agreement to acquire the Pacific Northwest Publishing Group from ABC, Inc., a wholly-owned subsidiary of The Walt Disney Company ("Seller"). The Pacific Northwest Publishing Group publishes daily and weekly newspapers, shoppers and specialty publications. The shopper and specialty publication group covers eight markets in the states of Washington, Oregon, Nevada, and Utah. They are grouped into three geographic regions with total circulation of 980,000 and estimated readership of over 2.2 million. The newspaper group publishes eight Oregon newspapers geographically clustered in the Willamette Valley. The two daily and six weekly newspapers have an aggregate paid circulation of approximately 67,000. The transaction, which is subject to requisite regulatory approval discussed below and other customary contingencies for a transaction of this nature, is expected to close before September 30, 1997. The purchase price is approximately $185 million. The acquisition will be affected by registrant's acquisition of all of the outstanding shares of common stock of Southern Utah Media, Inc., a Delaware corporation, Nevada Media Inc., a Delaware corporation, and Oregon News Media Inc., a Delaware corporation, from Seller. The transaction is subject to the approval of the Federal Trade Commission and the United States Department of Justice pursuant to the requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Three Months Nine Months Ended June 30, Ended June 30, ------------------- ------------------ 1997 1996 1997 1996 ---------------------------------------- (Dollar Amounts in Thousands Except for Per Share Data) Operating revenue .................. $112,693 $109,499 $334,148 $320,240 Percent change .................. 2.9% 4.3% Income before depreciation and amortization, interest and taxes (EBITDA) ........................ 36,005 33,917 100,777 90,352 Percent change .................. 6.1% 11.5% Operating income ................... 28,936 26,933 80,348 69,934 Percent change .................. 7.4% 14.9% Income from continuing operations .. 17,759 15,381 48,107 39,157 Percent change .................. 15.5% 22.9% Net income ......................... 18,244 17,045 49,592 43,790 Percent change .................. 7.0% 13.2% Earnings per share: Income from continuing operations $ 0.38 $ 0.32 $ 1.01 $ 0.81 Percent change ................ 18.8% 24.7% Net income ...................... 0.39 0.36 1.04 0.91 Percent change ................ 8.3% 14.3% Operations by line of business are as follows: Three Months Nine Months Ended June 30, Ended June 30, -------------------------------------------- 1997 1996 1997 1996 - --------------------------------------------------------------------------------------- (In Thousands) Operating revenue: Newspapers .......................... $ 82,018 $ 78,828 $242,053 $232,040 Broadcasting ........................ 30,675 30,671 92,095 88,200 -------------------------------------------- $112,693 $109,499 $334,148 $320,240 ============================================ Income before depreciation and amortization, interest and taxes (EBITDA): Newspapers .......................... $ 30,321 $ 25,690 $ 84,456 $ 71,465 Broadcasting ........................ 9,113 10,425 26,901 27,017 Corporate ........................... (3,429) (2,198) (10,580) (8,130) -------------------------------------------- $ 36,005 $ 33,917 $100,777 $ 90,352 ============================================ Operating income: Newspapers .......................... $ 26,423 $ 21,936 $ 73,147 $ 60,580 Broadcasting ........................ 6,097 7,342 18,231 17,907 Corporate ........................... (3,584) (2,345) (11,030) (8,553) -------------------------------------------- $ 28,936 $ 26,933 $ 80,348 $ 69,934 ============================================ Capital expenditures: Newspapers .......................... $ 1,424 $ 3,269 $ 5,132 $ 8,302 Broadcasting ........................ 1,426 1,428 5,259 4,951 Graphic arts ........................ -- 24 -- 251 Corporate ........................... 652 186 838 362 -------------------------------------------- $ 3,502 $ 4,907 $ 11,229 $ 13,866 ============================================
QUARTER ENDED JUNE 30, 1997 Newspapers: Wholly-owned daily newspaper advertising revenue increased $2,629,000, 6.1%. Advertising revenue from local merchants increased $561,000, 2.3%. Local "run-of-press" advertising decreased $28,000, (.2%). Advertising inches decreased (4.5%). Local preprint revenue increased $589,000, 8.0%. Classified advertising revenue increased $1,711,000, 11.8% as a result of higher average rates and a 7.2% increase in advertising volume. Employment and real estate advertising led the increase. Circulation revenue increased $232,000, 1.2% as a result of higher rates which offset a 1.9% decrease in volume. Other revenue at daily newspapers decreased $316,000, (3.8%). Wholly-owned daily newspaper compensation expense increased $417,000, 1.8% due primarily to increases in average compensation. Newsprint and ink costs decreased $1,581,000, (16.8%) due to lower newsprint prices. Other operating expenses exclusive of depreciation and amortization decreased $390,000, (2.6%). Revenues from weekly newspapers, shoppers and specialty publications increased $371,000, 6.9% (5.8% exclusive of acquisitions). Operating income increased $140,000. Broadcasting: Revenue for the quarter remained even as political advertising decreased $1,159,000, (81.9%), local/regional/national advertising increased $430,000, 1.7% and production revenue increased $321,000, 22.4%. Compensation costs increased $1,344,000, 11.7% due to a 4.1% increase in the number of hours worked and an increase in the average hourly rate. Programming costs decreased $330,000, (15.2%) primarily due to decreased amortization from programs amortized on an accelerated basis. Other operating expenses exclusive of depreciation and amortization increased $302,000, 4.6% for the quarter. Corporate: Corporate costs increased $1,239,000 as a result of increased marketing costs and the enhancement of computer software. Financial Expense and Income Taxes: The increase in interest income reflects the investment of the proceeds from the sale of NAPP Systems Inc. on January 17, 1997. Interest expense was reduced due to payments on long-term debt along with payments of short-term borrowings used to finance the acquisition of SJL of Kansas Corp. Income taxes were 38.2% and 39.1% of pre-tax income for the quarters ended June 30, 1997 and 1996, respectively. NINE MONTHS ENDED JUNE 30, 1997 Newspaper: Wholly-owned daily newspaper advertising revenue increased $8,139,000, 6.5%. Advertising revenue from local merchants increased $3,401,000, 4.6%. Local "run-of-press" advertising increased $2,249,000, 4.3%, as a result of higher average rates. Local preprint revenue increased $1,152,000, 5.1%. Classified advertising revenue increased $3,827,000, 9.7%, as a result of higher average rates and a 4.6% increase in advertising inches. The employment category was the biggest contributor to the increase. Circulation revenue increased $302,000, .5%, as a result of higher rates which offset a 2.2% decrease in volume. Other revenue at daily newspapers increased $205,000, .8%, primarily as a result of increases in commercial printing and other non-traditional products and services. Wholly-owned daily newspaper compensation expense increased $2,527,000, 3.6%, due primarily to increases in average compensation. Newsprint and ink costs decreased $6,923,000, (23.5%), due to lower newsprint prices. Other operating expense exclusive of depreciation and amortization increased $1,049,000, 2.3%. Revenues from weekly newspapers, shoppers and specialty publications increased $784,000, 4.7%. Operating income increased $271,000. Broadcasting: Revenue for the period increased $3,895,000, 4.4%, as political advertising increased $2,347,000, 69.7%, and local/regional/national advertising increased $217,000, .3%. Production revenue increased $566,000, 13.4%, primarily due to increased corporate/studio business at MIRA Creative Group in Portland, Oregon. Compensation costs increased $3,223,000, 9.3%, due to a 3.7% increase in the number of hours worked and an increase in the average hourly rates. Programming costs for the period decreased $1,150,000, (16.8%), primarily due to decreased amortization from programs amortized on an accelerated basis. Other operating expenses exclusive of depreciation and amortization increased $1,938,000, 9.8%, primarily due to increased audience promotion for the November ratings period and outside services. Corporate Costs: Corporate costs increased by $2,477,000, 29.0%, as a result of increased marketing costs, the enhancement of computer software, and relocation costs. Financial Expense and Income Taxes: The increase in interest income reflects the investment of the proceeds from the sale of NAPP Systems Inc. on January 17, 1997. Interest expense was reduced due to payments of long-term debt, along with payment of short-term borrowings used to finance the acquisition of SJL of Kansas Corp. Income taxes were 38.6% and 39.1% of pre-tax income for the nine months ended June 30, 1997 and 1996, respectively. Discontinued Operations: On January 17, 1997, the Company closed on the sale of its graphic arts products subsidiary, NAPP Systems Inc. for approximately $56,500,000. Liquidity and Capital Resources: Cash provided by operations, which is the Company's primary source of liquidity, generated $77,288,000 for the nine month period ended June 30, 1997. Available cash balances and cash flow from operations provide adequate liquidity. Covenants related to the Company's credit agreement are not considered restrictive to operations and anticipated stockholder dividends. Safe Harbor Statement: This report contains forward-looking statements and includes assumptions concerning the Company's operations, future results and prospects. These forward-looking statements are based on current expectations and are subject to risks and uncertainties. In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Company provides the following cautionary statements identifying important economic, political, and technological factors which, among others, could cause the actual results or events to differ materially from those set forth or implied by the forward-looking statements or assumptions. Such factors include the following: (i) changes in the current and future business environment, including interest rates and capital and consumer spending; (ii) prices for newsprint products; (iii) the availability of quality broadcast programming at competitive prices; (iv) the quality and ratings of network over-the-air broadcast programs; and (v) legislative or regulatory initiatives affecting the cost of delivery of over-the-air broadcast programs to the Company's customers. Further information concerning the Company and its businesses, including factors that potentially could materially affect the Company's financial results, is included in the Company's annual report on Form 10-K. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit 11 - Computation of Earnings Per Share (b) There were no reports on Form 8-K required to be filed during the quarter for which this report is filed. 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 thereunto duly authorized. LEE ENTERPRISES, INCORPORATED DATE: August 13, 1997 /s/ G.C. Wahlig - ----------------------- ------------------------------------- G.C. Wahlig, Chief Accounting Officer EX-11 2 LEE ENTERPRISES, INCORPORATED PART I. EXHIBIT 11 Computation of Earnings Per Common Share (In Thousands Except Per Share Amounts) Three Months Nine Months Ended June 30, Ended June 30, ---------------- ---------------- 1997 1996 1997 1996 - ------------------------------------------------------------------------------------ Income applicable to common shares: Income from continuing operations ........... $17,759 $15,381 $48,107 $39,157 Income from discontinued operations ......... 485 1,664 1,485 4,633 --------------------------------- Net income ....................... $18,244 $17,045 $49,592 $43,790 ================================== Shares: Weighted average common shares outstanding .............................. 46,401 46,974 46,646 47,126 Dilutive effect of certain stock operations ............................... 830 964 842 895 ---------------------------------- Average common shares outstanding, as adjusted ...................... 47,231 47,938 47,488 48,021 ================================== Earnings per share of common stock: Income from continuing operations ........... $ 0.38 $ 0.32 $ 1.01 $ 0.81 Income from discontinued operations ......... 0.01 0.04 0.03 0.10 ---------------------------------- Net income ....................... $ 0.39 $ 0.36 $ 1.04 $ 0.91 ==================================
EX-27 3
5 THIS SCHEDULE CONTAINS SUMARY FINANCIAL INFROMATION EXTRACTED FROM THE JUNE 30, 1997 FORM 10Q OF LEE ENTERPRISES, INCORPORATED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1,000 9-MOS SEP-30-1997 JUN-30-1997 70,106 0 58,658 4,132 2,021 138,733 252,000 147,622 513,658 97,439 27,021 0 0 92,802 243,131 513,658 328,717 334,148 0 0 253,800 0 5,115 78,376 30,269 48,107 1,485 0 0 49,592 1.04 1.04
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