-----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, IHf4Vxx/yBuao5nrWxh/quFjpHUoOy6o+qWTsUzWN1/Sh7LC/SwJRWpxH+K2LsJE AztuRFzHS8Uu9Uxs5SbSJQ== 0000743530-98-000054.txt : 19980813 0000743530-98-000054.hdr.sgml : 19980813 ACCESSION NUMBER: 0000743530-98-000054 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980812 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: SEC FILE NUMBER: 001-06227 FILM NUMBER: 98683307 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, 1998 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, 1998 - --------------------------------------- ---------------------------- Common Stock, $2.00 par value 32,730,378 Class "B" Common Stock, $2.00 par value 11,819,962 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, -------------------- --------------------- 1998 1997 1998 1997 - ----------------------------------------------------------------------------------------------------------- Operating revenue: Publishing: Daily newspaper: Advertising ....................................... $ 50,770 $ 45,991 $145,999 $134,319 Circulation ....................................... 20,439 20,199 61,457 60,219 Other ............................................... 27,245 13,890 77,641 42,084 Broadcasting ........................................... 34,549 30,675 96,751 92,095 Equity in net income of associated companies ........... 2,090 1,938 5,849 5,431 -------------------- -------------------- 135,093 112,693 387,697 334,148 -------------------- -------------------- Operating expenses: Compensation costs ..................................... 48,898 40,807 143,740 122,596 Newsprint and ink ...................................... 10,637 7,938 30,773 22,838 Depreciation ........................................... 4,963 4,366 14,283 12,321 Amortization of intangibles ............................ 4,533 2,703 13,462 8,108 Other .................................................. 33,605 27,943 99,136 87,937 -------------------- -------------------- 102,636 83,757 301,394 253,800 -------------------- -------------------- Operating income ............................ 32,457 28,936 86,303 80,348 -------------------- -------------------- Financial (income) expense, net: Financial (income) ..................................... (673) (1,145) (2,391) (3,143) Financial expense ...................................... 3,742 1,346 11,792 5,115 -------------------- -------------------- 3,069 201 9,401 1,972 -------------------- -------------------- Income from continuing operations before taxes on income ...................... 29,388 28,735 76,902 78,376 Income taxes .............................................. 11,297 10,976 29,616 30,269 -------------------- -------------------- Income from continuing operations ........... 18,091 17,759 47,286 48,107 Income from discontinued operations net of income tax effect ............................... - - 485 - - 1,485 -------------------- -------------------- Net income .................................. $ 18,091 $ 18,244 $ 47,286 $ 49,592 ==================== ==================== Average outstanding shares: Basic .................................................. 44,642 46,301 44,982 46,546 ==================== ==================== Diluted ................................................ 45,398 47,156 45,735 47,422 ==================== ==================== Earnings per share: Basic: Income from continuing operations ................... $ 0.41 $ 0.38 $ 1.05 $ 1.03 Income from discontinuing operations ................ - - 0.01 - - 0.03 -------------------- -------------------- Net income .................................. $ 0.41 $ 0.39 $ 1.05 $ 1.06 ==================== ==================== Diluted: Income from continuing operations ................... $ 0.40 $ 0.38 $ 1.03 $ 1.01 Income from discontinuing operations ................ - - 0.01 - - 0.03 -------------------- -------------------- Net income .................................. $ 0.40 $ 0.39 $ 1.03 $ 1.04 ==================== ==================== Dividends per share ....................................... $ 0.14 $ 0.13 $ 0.42 $ 0.39 ==================== ====================
LEE ENTERPRISES, INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands) June 30, September 30, ASSETS 1998 1997 - -------------------------------------------------------------------------------- (Unaudited) Cash and cash equivalents ......................... $ 33,245 $ 14,163 Accounts receivable, net .......................... 63,909 58,397 Newsprint inventory ............................... 1,346 3,716 Program rights and other .......................... 12,715 17,691 --------------------- Total current assets ................ 111,215 93,967 Investments ....................................... 26,063 24,691 Property and equipment, net ....................... 124,704 120,026 Intangibles and other assets ...................... 402,152 412,279 --------------------- $664,134 $650,963 ===================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities ............................... $105,290 $248,908 Long-term debt, less current maturities ........... 185,620 26,174 Deferred items .................................... 56,689 56,491 Stockholders' equity .............................. 316,535 319,390 -------------------- $664,134 $650,963 ==================== LEE ENTERPRISES, INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) Nine Months Ended June 30: 1998 1997 - -------------------------------------------------------------------------------- (Unaudited) Cash Provided by Operations: Net income ......................................... $ 47,286 $ 49,592 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization .................... 27,745 21,706 Distributions in excess of earnings of associated companies ..................................... 640 1,140 Adjustment of estimated loss on disposition of discontinued operations ....................... - - (1,985) Other balance sheet changes ...................... 5,994 6,835 ------------------- Net cash provided by operations ............ 81,665 77,288 ------------------- Cash Provided by (Required for) Investing Activities: Acquisitions ....................................... (3,037) (1,200) Purchase of property and equipment ................. (18,723) (11,229) Net proceeds from sale of subsidiary ............... - - 54,795 Other .............................................. (575) (884) ------------------- Net cash provided by (required for) investing activities ....................... (22,335) 41,482 ------------------- Cash (Required for) Financing Activities: Purchase of common stock ........................... (45,228) (25,902) Cash dividends paid ................................ (12,702) (12,149) Principal payments on long-term debt ............... (25,000) (35,000) Principal payments on short-term notes payable, net (145,000) - - Proceeds from long-term borrowings ................. 185,000 - - Other .............................................. 2,682 5,120 ------------------- Net cash (required for) financing activities (40,248) (67,931) ------------------- Net increase in cash and cash equivalents .. 19,082 50,839 Cash and cash equivalents: Beginning ............................................. 14,163 19,267 ------------------- Ending ................................................ $ 33,245 $ 70,106 =================== 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, 1998 and the results of operations for the three- and nine-month periods ended June 30, 1998 and 1997 and cash flows for the nine-month periods ended June 30, 1998 and 1997. Note 2. Investment in Associated Companies Condensed operating results of unconsolidated associated companies are as follows: Three Months Nine Months Ended June 30, Ended June 30, -------------------- -------------------- 1998 1997 1998 1997 ---------------------------------------------- Revenues ........................................... $21,430 $19,963 $63,457 $58,769 Operating expenses, except depreciation and amortization ................... 14,018 13,235 42,690 39,893 Income before depreciation and amortization, interest, and taxes ............... 7,412 6,728 20,767 18,876 Depreciation and amortization ...................... 720 502 2,150 1,506 Operating income ................................... 6,692 6,226 18,617 17,370 Financial income ................................... 338 293 961 847 Income before income taxes ......................... 7,030 6,519 19,578 18,217 Income taxes ....................................... 2,832 2,642 7,875 7,352 Net income ......................................... 4,198 3,877 11,703 10,865 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, ------------------- 1998 1997 ------------------- (In Thousands) (Unaudited) (Increase) in receivables ............................. $(6,943) $(5,658) Decrease in inventories, film rights and other ........ 2,024 3,063 Increase in accounts payable, accrued expenses and unearned income ................................ 7,771 5,222 Increase in income taxes payable ...................... 3,431 1,599 Other, primarily deferred items ....................... (289) 2,609 ------------------- $ 5,994 $ 6,835 =================== Note 4. Change in Accounting Principles In 1997, the Financial Accounting Standards Board (FASB) issued Statement No. 128, "Earnings Per Share". Statement No. 128 replaced the previously reported primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants, and convertible securities. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. All earnings per share amounts for all periods have been presented, and where necessary, restated to conform to Statement No. 128 requirements. The American Institute of Certified Public Accountants issued Statement of Position (SOP) 98-1 "Accounting for the Costs of Computer Software Developed for Internal Use". In accordance with SOP 98-1, the Company has capitalized the costs of certain software developed for internal use. Note 5. Earnings Per Share The following table sets forth the computation of basic and diluted earnings per share (in thousands except per share amounts): Three Months Ended Nine Months Ended June 30, June 30, ------------------- ------------------- 1998 1997 1998 1997 ------------------- ------------------- Numerator income applicable to common shares: Income from continuing operations .................... $18,091 $17,759 $47,286 $48,107 Income from discontinuing operations ................. - - 485 - - 1,485 ------------------- ------------------- Net income ................................ $18,091 $18,244 $47,286 $49,592 =================== =================== Denominator: Basic-weighted average common shares outstanding ................................ 44,642 46,301 44,982 46,546 Dilutive effect of employee stock options ........................................... 756 855 753 876 ------------------- ------------------- Dulited outstanding shares ........................... 45,398 47,156 45,735 47,422 =================== =================== Basic earnings per share: Income from continuing operations .................... $ 0.41 $ 0.38 $ 1.05 $ 1.03 Income from discontinuing operations ................. - - 0.01 - - 0.03 ------------------- ------------------- Net income ................................ $ 0.41 $ 0.39 $ 1.05 $ 1.06 =================== =================== Diluted earnings per share: Income from continuing operations .................... $ 0.40 $ 0.38 $ 1.03 $ 1.01 Income from discontinuing operations ................. - - 0.01 - - 0.03 ------------------- ------------------- Net income ................................ $ 0.40 $ 0.39 $ 1.03 $ 1.04 =================== ===================
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Operating results (dollars in thousands, except per share data): Three Months Nine Months Ended June 30, Ended June 30, ------------------------------ ------------------------------ 1998 1997 1997 1998 1997 1997 ------------------------------ ------------------------------ (Pro Forma) (Pro Forma) Revenue .......................................................... $135,093 $112,693 $126,788 $387,697 $334,148 $373,875 Percent change ................................................ 19.9% 16.0% Percent change, pro forma ..................................... 6.6 3.7 Income before depreciation and amortization, interest and taxes (EBITDA) ...................................................... 41,953 36,005 40,216 114,048 100,777 112,195 Percent change ................................................ 16.5% 13.2% Percent change, pro forma ..................................... 4.3 1.7 Operating income ................................................. 32,457 28,936 30,950 86,303 80,348 85,211 Percent change ................................................ 12.2% 7.4% Percent change, pro forma ..................................... 4.9 1.3 Income from continuing operations .................................................... 18,091 17,759 17,067 47,286 48,107 45,432 Percent change ................................................ 1.9% (1.7)% Percent change, pro forma ..................................... 6.0 4.1 Net income ....................................................... 18,091 18,244 17,552 47,286 49,592 46,917 Percent change ................................................ (0.8)% (4.6)% Percent change, pro forma ..................................... 3.1 0.8 Earnings per share: Basic: Income from continuing operations ............................................... $ 0.41 $ 0.38 $ 0.37 $ 1.05 $ 1.03 $ 0.98 Percent change ........................................... 7.9% 1.9% Percent change, pro forma ............................................. 10.8 7.1 Net income ................................................. 0.41 0.39 0.38 1.05 1.06 1.01 Percent change ........................................... 5.1% (0.9)% Percent change, pro forma ............................................. 7.9 4.0 Diluted: Income from continuing operations ............................................... $ 0.40 0.38 0.36 1.03 1.01 0.96 Percent change ........................................... 5.3% 2.0% Percent change, pro forma ............................................. 11.1 7.3 Net income ................................................. 0.40 0.39 0.37 1.03 1.04 0.99 Percent change ........................................... 2.6% (1.0)% Percent change, pro forma ............................................. 8.1 4.0
Operations by line of business are as follows (dollars in thousands, except per share date): Three Months Nine Months Ended June 30, Ended June 30, ------------------------------ ------------------------------ 1998 1997 1997 1998 1997 1997 ------------------------------ ------------------------------ (Pro Forma) Revenue: Publishing ........................ $100,544 $ 82,018 $ 96,113 $290,946 $242,053 $281,780 Broadcasting ...................... 34,549 30,675 30,675 96,751 92,095 92,095 ------------------------------ ------------------------------ $135,093 $112,693 $126,788 $387,697 $334,148 $373,875 ============================== ============================== Income before depreciation and amortization, interest and taxes (EBITDA): Publishing ........................ $ 33,533 $ 30,321 $ 34,532 $ 95,371 $ 84,456 $ 95,874 Broadcasting ...................... 11,845 9,113 9,113 28,662 26,901 26,901 Corporate ......................... (3,425) (3,429) (3,429) (9,985) (10,580) (10,580) ------------------------------ ------------------------------ $ 41,953 $ 36,005 $ 40,216 $114,048 $100,777 $112,195 ============================== ============================== Operating income: Publishing ........................ $ 27,195 $ 26,423 $ 28,437 $ 76,915 $ 73,147 $ 78,010 Broadcasting ...................... 8,931 6,097 6,097 20,190 18,231 18,231 Corporate ......................... (3,669) (3,584) (3,584) (10,802) (11,030) (11,030) ------------------------------ ------------------------------ $ 32,457 $ 28,936 $ 30,950 $ 86,303 $ 80,348 $ 85,211 ============================== ============================== Capital expenditures: Publishing ........................ $ 4,376 $ 1,424 $ 12,703 $ 5,132 Broadcasting ...................... 1,276 1,426 4,481 5,259 Corporate ......................... 553 652 1,539 838 ------------------- ------------------- $ 6,205 $ 3,502 $ 18,723 $ 11,229 =================== ===================
QUARTER ENDED JUNE 30, 1998 PUBLISHING The following daily newspaper revenue information is presented on a pro forma basis to include The Pacific Northwest Group as if the acquisition had occurred October 1, 1996. Pro forma wholly-owned daily newspaper advertising revenue increased $2,883,000, 6.0%. Advertising revenue from local merchants increased $1,227,000, 4.7%. Local "run-of-press" advertising increased $799,000, 4.4%, as a result of a 2.5% increase in advertising inches. Local preprint revenue increased $428,000, 5.2%. Classified advertising revenue increased $1,358,000, 8.0%, as a result of higher averages rates and a 2.4% increase in advertising inches. The employment category was the biggest contributor to the increase. Circulation revenue decreased $(268,000), (1.3%), as a result of a (.4%) decrease in volume. Other revenue consists of revenue from weekly newspapers, classified and specialty publications, commercial printing, products delivered outside the newspaper (which include activities such as target marketing and special event production) and editorial service contracts with Madison Newspapers, Inc. Other revenue by category and by property is as follows: 1998 1997 ---------------- (In Thousands) Weekly newspapers, classified and specialty publications: Properties owned for entire period .................................................... $ 6,149 $ 5,703 Acquired since March 31, 1997 ......................................................... 12,064 95 Commercial printing: Properties owned for entire period .................................................... 3,645 3,502 Acquired since March 31, 1997 ......................................................... 256 - - Products delivered outside the newspaper: Properties owned for entire period .................................................... 3,042 2,603 Acquired since March 31, 1997 ......................................................... 4 - - Editorial service contracts .............................................................. 2,085 1,987 ---------------- $27,245 $13,890 ================
The following table sets forth the percentage of revenue of certain items in the publishing segment. 1998 1997 --------------- Revenue .................................................... 100.0% 100.0% --------------- Compensation costs ......................................... 34.0 32.2 Newsprint and ink .......................................... 10.6 9.8 Other operating expenses ................................... 22.0 21.0 --------------- 66.6 63.0 --------------- Income before depreciation, amortization, interest and taxes ................................................ 33.4 37.0 Depreciation and amortization .............................. 6.3 4.8 --------------- Operating margin wholly-owned properties ................... 27.1% 32.2% =============== Exclusive of the effects of acquisitions, costs other than depreciation and amortization increased $5,006,000, 9.7%. Compensation expense increased $2,390,000, 9.1%, due to increases in average compensation rate and incentive compensation including payments related to circulation sales programs. Newsprint and ink costs increased $802,000, 10.0%. Approximately 1/2 of the increase was due to higher prices for newsprint and 1/2 to higher consumption related to advertising volume increases and circulation promotion programs. Other operating costs exclusive of depreciation and amortization increased $1,814,000, 10.5%, due to circulation incentive programs and marketing costs. BROADCASTING Revenue for the quarter increased $3,874,000, 12.6%. Local, regional, and national advertising increased $1,931,000, 7.4%, primarily due to improvement in rates. Political advertising increased $2,044,000, due to spring primary elections, and production revenue and revenues from other services were flat. The following table sets forth the percentage of revenue of certain items in the broadcasting segment. 1998 1997 --------------- Revenue .................................................... 100.0% 100.0% --------------- Compensation costs ......................................... 37.2 41.9 Programming costs .......................................... 6.1 6.0 Other operating expenses ................................... 22.4 22.4 --------------- 65.7 70.3 --------------- Income before depreciation, amortization, interest and taxes ................................................ 34.3 29.7 Depreciation and amortization .............................. 8.4 9.8 --------------- Operating margin ........................................... 25.9% 19.9% =============== Compensation costs were flat. Programming costs for the quarter increased $264,000, 14.3%, primarily due to accelerated amortization on new programming. Other operating expenses, exclusive of depreciation and amortization, increased $851,000, 12.4%, due to increased costs for promotion and bad debt expense associated with two customer bankruptcies. CORPORATE COSTS Corporate costs increased by $85,000, 2.4%. Reductions in new systems training and installation costs of $409,000 from 1997 levels offset other cost increases. FINANCIAL EXPENSE AND INCOME TAXES Interest expense increased due to borrowings to finance The Pacific Northwest Group acquisition. Income taxes were 38.4% and 38.2% of pretax income for the quarters ended June 30, 1998 and 1997, respectively. NINE MONTHS ENDED JUNE 30, 1998 PUBLISHING The following daily newspaper revenue information is presented on a pro forma basis to include The Pacific Northwest Group as if the acquisition had occurred October 1, 1996. Pro forma wholly-owned daily newspaper advertising revenue increased $6,274,000, 4.5%. Advertising revenue from local merchants increased $989,000, 1.2%. Local "run-of-press" advertising decreased $(382,000), (.7%), as a result of a (2.1%) decrease in advertising inches. Local preprint revenue increased $1,371,000, 5.5%. Classified advertising revenue increased $4,862,000, 10.8%, as a result of higher averages rates and a 3.9% increase in advertising inches. The employment category was the biggest contributor to the increase. Circulation revenue decreased $(269,000), (.4%) as a result of higher rates which offset a (1.1%) decrease in volume. Other revenue consists of revenue from weekly newspapers, classified and specialty publications, commercial printing, products delivered outside the newspaper (which include activities such as target marketing and special event production) and editorial service contracts with Madison Newspapers, Inc. Other revenue by category and by property is as follows: 1998 1997 ------------------ (In Thousands) Weekly newspapers, classified and specialty publications: Properties owned for entire period ..................... $ 18,334 $ 17,325 Acquired since September 30, 1996 ...................... 33,184 95 Commercial printing: Properties owned for entire period ..................... 10,381 10,884 Acquired since September 30, 1996 ...................... 700 - - Products delivered outside the newspaper: Properties owned for entire period ..................... 8,442 7,496 Acquired since September 30, 1996 ...................... 13 - - Editorial service contracts ............................... 6,587 6,284 ------------------ $ 77,641 $ 42,084 ================== The following table sets forth the percentage of revenue of certain items in the publishing segment. 1998 1997 --------------- Revenue .................................................... 100.0% 100.0% --------------- Compensation costs ......................................... 34.3 33.0 Newsprint and ink .......................................... 10.6 9.5 Other operating expenses ................................... 22.3 22.6 --------------- 67.2 65.1 --------------- Income before depreciation, amortization, interest and taxes ................................................ 32.8 34.9 Depreciation and amortization .............................. 6.3 4.7 --------------- Operating margin wholly-owned properties ................... 26.5% 30.2% =============== Exclusive of the effects of acquisitions, costs other than depreciation and amortization increased $8,791,000, 5.6%. Compensation expense increased $4,794,000, 6.0%, due primarily to increase in the average compensation rate and incentive compensation. Newsprint and ink costs increased $2,792,000, 12.2%, due primarily to higher prices for newsprint. Other operating costs exclusive of depreciation and amortization increased $1,205,000, 2.2%. BROADCASTING Revenue increased $4,656,000, 5.1% as local, regional, and national advertising increased $7,219,000, 9.8%, primarily due to Winter Olympics advertising in the second quarter and improved rates realized in the third quarter. Production revenue and revenues from other services increased $434,000, 5.9%. Political advertising decreased $(2,767,000), (48.4%), principally in the first fiscal quarter. The following table sets forth the percentage of revenue of certain items in the broadcasting segment. 1998 1997 --------------- Revenue .................................................... 100.0% 100.0% --------------- Compensation costs ......................................... 40.0 41.0 Programming costs .......................................... 6.6 6.2 Other operating expenses ................................... 23.8 23.6 --------------- 70.4 70.8 --------------- Income before depreciation, amortization, interest and taxes ................................................ 29.6 29.2 Depreciation and amortization .............................. 8.8 9.4 --------------- Operating margin ........................................... 20.8% 19.8% =============== Compensation costs increased $897,000, 2.4%, due to increases in average compensation. Programming costs for the period increased $706,000, 12.4%, primarily due to accelerated amortization on new programming. Other operating expenses, exclusive of depreciation and amortization, increased $1,292,000, 6.0%, as previously discussed. CORPORATE COSTS Corporate costs decreased by $(228.000), (2.1%). The decrease occurred in the second quarter primarily as a result of the capitalization of company software developed for internal use which was previously expensed as incurred. FINANCIAL EXPENSE AND INCOME TAXES Interest expense increased due to borrowings to finance The Pacific Northwest Group acquisition. Income taxes were 38.5% and 38.6% of pretax income for the nine months ended June 30, 1998 and 1997, respectively. LIQUIDITY AND CAPITAL RESOURCES Cash provided by operations, which is the Company's primary source of liquidity, generated $81,665,000 for the nine month period ended June 30, 1998. On March 31, 1998 the Company received $185,000,000 of proceeds from new long-term borrowings. At that date, the Company had $140,000,000 borrowed under a $200,000,000 unsecured revolving loan agreement. The borrowings under the revolving loan agreement were repaid in full and the revolving loan credit facility was reduced to $50,000,000. Available cash balances and cash flow from operations provide adequate liquidity. Covenants related to the Company's credit agreements 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 additional factors that potentially could materially affect the Company's financial results, is included in the Company's annual report on Form 10-K. LEE ENTERPRISES, INCORPORATED PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: None (b) The following report on Form 8-K was filed during the three months ended June 30, 1998. Dated of report: May 7, 1998 Item 5. The Board of Directors declared a dividend of one preferred share purchase right for each outstanding share of common stock. 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 G.C. Wahlig DATE August 12, 1998 -------------------------------------- ---------------------------- G. C. Wahlig, Chief Accounting Officer EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30, 1998 10-Q FOR LEE ENTERPRISES, INCORPORATED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS SEP-30-1998 JUN-30-1998 33,245 13,081 63,909 4,400 1,346 111,215 290,975 166,271 664,134 105,290 185,620 0 0 89,100 227,435 664,134 381,848 387,697 0 0 301,394 0 11,792 76,902 29,616 47,286 0 0 0 47,286 1.05 1.03
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