[DESCRIPTION]
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, 1994
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, 1994
Common Stock, $2.00 par value 16,436,634
Class "B" Common Stock, $2.00 par value 6,739,276
<PAGE>
[DESCRIPTION]
PART I. FINANCIAL INFORMATION
Item 1.
LEE ENTERPRISES, INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended June 30, Ended June 30,
1994 1993 1994 1993
(Unaudited)
<S> <C> <C> <C> <C>
Operating revenue:
Newspaper:
Advertising $ 35,027 $ 32,759 $100,229 $ 94,819
Circulation 16,585 15,901 49,433 46,991
Other 10,233 8,701 29,594 24,898
Broadcasting 23,179 20,947 67,006 61,491
Media products and services 15,439 16,036 46,511 43,410
Equity in net income of
associated companies 2,559 2,699 7,259 6,690
$103,022 $ 97,043 $300,032 $278,299
Operating expenses:
Compensation costs $ 34,657 $ 32,918 $103,266 $ 95,783
Newsprint and ink 6,113 5,860 16,828 16,413
Depreciation 2,692 2,808 8,024 8,261
Amortization of intangibles 3,130 3,384 9,463 10,260
Other 30,147 29,546 91,675 87,312
$ 76,739 $ 74,516 $229,256 $218,029
Operating income $ 26,283 $ 22,527 $ 70,776 $ 60,270
Financial (income) expense,
net:
Financial (income) $ (760) $ (570) $ (2,009) $ (1,643)
Financial expense 3,219 3,834 10,314 11,786
$ 2,459 $ 3,264 $ 8,305 $ 10,143
Income before taxes
on income $ 23,824 $ 19,263 $ 62,471 $ 50,127
Income taxes 9,457 7,414 25,223 20,274
Net income $ 14,367 $ 11,849 $ 37,248 $ 29,853
Weighted average number of
shares 23,413 23,442 23,445 23,486
Earnings per share $ .61 $ .51 $ 1.59 $ 1.27
Dividends per share .21 .20 .63 .60
</TABLE>
<PAGE>
LEE ENTERPRISES, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
June 30, September 30,
1994 1993
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 27,071 $ 17,072
Temporary investments 46,775 45,500
Accounts receivable, net 48,162 45,421
Inventories 10,165 11,177
Film rights and other 13,114 15,952
Total current assets $145,287 $135,122
Investments, associated companies 21,657 20,305
Property and equipment, net 79,624 75,356
Intangibles and other assets 245,268 251,534
$491,836 $482,317
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $106,980 $ 91,708
Long-term debt, less current maturities 97,649 127,466
Deferred items 39,999 39,661
Stockholders' equity 247,208 223,482
$491,836 $482,317
</TABLE>
<PAGE>
LEE ENTERPRISES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
1994 1993
(Unaudited)
<S> <C> <C>
Nine Months Ended June 30:
CASH PROVIDED BY OPERATIONS
Net income $ 37,248 $ 29,853
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation and amortization 17,487 18,521
Distributions in excess of
earnings of associated companies 785 913
Other balance sheet changes 8,671 (3,938)
Net cash provided by operations $ 64,191 $ 45,349
CASH (REQUIRED FOR) INVESTING ACTIVITIES
Acquisitions $ (4,083) $ (444)
Purchase of temporary investments (102,003) (53,500)
Proceeds from maturities of temporary
investments 100,728 36,700
Purchase of property and equipment (11,953) (7,826)
Net cash (required for) investing
activities $(17,311) $(25,070)
CASH (REQUIRED FOR) FINANCING ACTIVITIES
Purchase of common stock $ (2,118) $ (5,888)
Cash dividends paid (9,688) (9,275)
Payment of debt (27,267) (10,862)
Other, primarily stock options exercised 2,192 4,232
Net cash (required for) financing
activities $(36,881) $(21,793)
Net increase (decrease) in cash and
cash equivalents $ 9,999 $ (1,514)
Cash and cash equivalents:
Beginning 17,072 23,271
Ending $ 27,071 $ 21,757
</TABLE>
<PAGE>
[DESCRIPTION]
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, 1994 and the results of operations for the
three- and nine-month periods ended June 30, 1994 and 1993 and
cash flows for the nine-month periods ended June 30, 1994 and
1993.
NOTE 2. INVESTMENT IN ASSOCIATED COMPANIES
Condensed operating results of unconsolidated associated companies
are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1994 1993 1994 1993
(In Thousands)
(Unaudited)
<S> <C> <C> <C> <C>
Revenues $ 24,759 $ 23,903 $ 73,500 $ 68,815
Operating expenses,
except depreciation
and amortization 16,236 15,237 49,405 46,686
Depreciation and
amortization 428 409 1,352 1,335
Operating income 8,095 8,257 22,743 20,794
Financial income 438 420 1,323 1,193
Income before income
taxes 8,533 8,677 24,066 21,987
Income taxes 3,406 3,273 9,538 8,596
Net income 5,127 5,404 14,528 13,391
</TABLE>
a. Madison Newspaper, Inc. (50% owned)
b. Journal-Star Printing Co. (49.75% owned)
c. Quality Information Systems (50% owned)
d. Consumer Target Marketing (50% owned)
<PAGE>
LEE ENTERPRISES, INCORPORATED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL INFORMATION
NOTE 3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, September 30,
1994 1993
(In Thousands)
(Unaudited)
<S> <C> <C>
Newsprint $ 498 $ 2,904
Media products and services:
Raw material 4,478 4,737
Finished goods 5,189 3,536
$ 10,165 $ 11,177
</TABLE>
NOTE 4. CASH FLOWS INFORMATION
The components of other balance sheet changes are:
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
1994 1993
(In Thousands)
(Unaudited)
<S> <C> <C>
(Increase) decrease in receivables $ (4,623) $ 1,251
Decrease in inventories, film
rights and other (406) (334)
Increase (decrease) in accounts
payable, accrued expenses and
unearned income 9,098 (6,597)
Increase in income taxes payable 4,661 1,394
Other, primarily deferred items (59) 348
$ 8,671 $ (3,938)
</TABLE>
NOTE 5. CHANGE IN ACCOUNTING PRINCIPLES
During the quarter ended September 30, 1993, the Company adopted
FASB Statement No. 109, Accounting for Income Taxes. As permitted
by Statement No. 109, the Company has elected to apply
retroactively the provisions of the Statement by restating the
financial statements for the 1993 interim periods. In connection
with the restatement the Company recorded additional goodwill and
deferred tax liabilities related to acquired identified
intangibles. The change did not have a material effect on net
income.
<PAGE>
[DESCRIPTION]
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Operating results:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1994 1993 1994 1993
(Dollar Amounts in Thousands Except For
Per Share Data)
<S> <C> <C> <C> <C>
Revenue $103,022 $ 97,043 $300,032 $278,299
Percent change 6.2% 7.8%
Operating expenses 76,739 74,516 229,256 218,029
Percent change 3.0% 5.1%
Operating income 26,283 22,527 70,776 60,270
Percent change 16.7% 17.4%
Net income 14,367 11,849 37,248 29,853
Percent change 21.3% 24.8%
Earnings per share $ .61 $ .51 $ 1.59 $ 1.27
Percent change 19.6% 25.2%
</TABLE>
Operations by line of business are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1994 1993 1994 1993
(In Thousands)
<S> <C> <C> <C> <C>
Revenue:
Newspapers $ 64,398 $ 59,879 $186,398 $173,343
Broadcasting 23,179 20,947 67,006 61,491
Media products and
services 15,445 16,217 46,628 43,465
$103,022 $ 97,043 $300,032 $278,299
Operating income:
Newspapers $ 19,672 $ 18,421 $ 55,940 $ 50,648
Broadcasting 6,207 4,412 16,639 12,986
Media products and
services 3,694 2,125 9,531 4,782
Corporate and other (3,290) (2,431) (11,334) (8,146)
$ 26,283 $ 22,527 $ 70,776 $ 60,270
<PAGE>
Three Months Ended Nine Months Ended
June 30, June 30,
1994 1993 1994 1993
(In Thousands)
<S> <C> <C> <C> <C>
Depreciation and
amortization:
Newspapers $ 2,787 $ 3,091 $ 8,109 $ 8,997
Broadcasting 1,786 1,914 5,558 5,751
Media products and
services 1,117 1,036 3,446 3,402
Corporate 132 151 374 371
$ 5,822 $ 6,192 $ 17,487 $ 18,521
Capital expenditures:
Newspaper $ 2,554 $ 250 $ 8,669 $ 1,425
Broadcasting 746 1,632 2,983 2,662
Media products and
services 33 22 167 314
Corporate 20 276 134 3,425
$ 3,353 $ 2,180 $ 11,953 $ 7,826
</TABLE>
There were no significant non-recurring items during the quarter or nine-
month period ended June 30, 1994.
QUARTER ENDED JUNE 30, 1994
Newspapers:
Wholly-owned daily newspaper advertising revenue increased $2,268,000,
6.9%. Advertising revenue from local merchants increased $885,000, 4.6%.
Local "run-of-press" advertising increased $547,000 on higher average
rates despite a 1.1% decrease in advertising inches. Local preprint units
were up 3.3% and revenue increased $338,000, 5.6%. Classified advertising
revenue increased $1,387,000, 14.9%, as a result of a 10.8% increase in
units primarily in the automotive and recruitment segments and higher
average rates. Circulation revenue increased $684,000, 4.3%, as a result
of higher rates which offset a 1.1% decrease in volume. Other revenue at
daily newspapers increased $618,000, 12.1%, primarily as a result of
increases in editorial fees, commercial printing, target marketing and
other products delivered separately from the newspaper.
Revenues from weekly newspapers, shoppers and specialty publications
increased $914,000, 25.4%. Revenue from properties acquired since the
beginning of the first quarter of the last fiscal year accounted for 63.2%
of the increase.
Compensation expense increased $1,743,000, 9.0%, due to a 5.6% increase in
average compensation and a 3.4% increase in the number of hours worked
which includes the effect of shoppers and specialty publications acquired
since the first quarter of fiscal 1993. Newsprint and ink costs increased
$253,000, 4.3%, primarily as a result of a $150,000 increase in newsprint
used by newspapers and a $95,000 increase in newsprint used for commercial
printing. Other cash costs increased $1,461,000, 11.0%, which includes
the effect of acquisitions, commercial printing costs and the development
costs of new products.
<PAGE>
Broadcasting:
Exclusive of the effects of the acquisition of KZIA-TV Las Cruces, New
Mexico, revenue for the quarter increased $2,167,000, 10.4%, primarily due
to growth in the Albuquerque, Tucson and Portland markets. The New Mexico
Primary accounted for more than one half of the approximately $1,000,000
increase in political advertising revenue this quarter. Compensation
costs increased $730,000, 9.3%, principally resulting from a 5.4% increase
in the number of hours worked. Portland, Omaha and Huntington all
expanded news programming which required additional staffing and other
related costs. Film amortization for the quarter declined $260,000
primarily due to lower programming costs. Other cash costs were
essentially flat.
Media Products and Services:
Revenue decreased $772,000 and operating income increased $1,569,000,
respectively, which came in large part from operations of NAPP Systems
Inc. NAPP's revenues decreased 3.4% due primarily to the 1993 one-time
sale of letterpress printing plate inventories to NAPP's new European
distributor.
Equity in Net Income of Associated Companies:
Equity in net income of associated companies decreased $140,000 as a
$35,000 increase in the net income of associated newspaper companies only
partially offset a decrease in income earned by 50%-owned strategic
alliances, Quality Information Systems and Consumer Target Marketing.
Financial Expenses and Income Taxes:
Interest expense was reduced due to payments on long-term debt.
Income taxes were 39.7% of pretax income for the quarter ended June 30,
1994 and 38.5% of pretax income in the quarter ended June 30, 1993.
Contingencies related to the amortization of intangibles for income tax
purposes increased 1993 income taxes by $300,000 (for a 1.5% increase in
the effective tax rate) but were offset by results of an income tax audit
concluded during the quarter.
<PAGE>
NINE MONTHS ENDED JUNE 30, 1994
Newspapers:
Wholly-owned daily newspaper advertising revenue increased $5,410,000,
5.7%. Advertising revenue from local merchants increased $243,000, 1.1%,
in the first quarter, $715,000, 4.3%, in the second quarter and $885,000,
4.6%, in the third quarter. Local "run-of-press" advertising declined
$9,000 in the first quarter and increased $589,000 and $547,000 in the
second and third quarters, respectively. Higher average rates were
realized in all periods but did not offset the 3.8% decline in advertising
inches in the first quarter. Volume increased .9% in the second quarter
partly due to pre-Easter promotional activity. Volume declined 1.1% in
the third quarter. Local preprint units were flat while revenue increased
$252,000, 3.9%, in the first quarter and $126,000, 2.5%, in the second
quarter. Preprint units increased 3.3% in the third quarter and revenue
increased 5.6%. Classified advertising revenue increased $904,000, 11.3%,
in the first quarter, $974,000, 12.5%, in the second quarter and
$1,387,000, 14.9%, in the third quarter as a result of 9.3% first quarter,
6.1% second quarter and 10.8% third quarter increases in units in the
automotive, real estate and recruitment segments, more advertising by
individual customers, and higher average rates. Circulation revenue
increased $873,000, 5.6%, in the first quarter, $885,000, 5.7%, in the
second quarter, and $684,000, 4.3%, in the third quarter as a result of
higher rates which offset slight decreases in volume. Other revenue at
daily newspapers increased $361,000 in the first quarter, $1,343,000 in
the second quarter, and $618,000 in the third quarter primarily as a
result of increases in commercial printing, target marketing and other
non-traditional products.
Revenues from weekly newspapers, shoppers and specialty publications
increased $2,374,000, 23.5%. Revenue from properties acquired since the
beginning of the first quarter of the last fiscal year accounted for 49.1%
of the increase.
Compensation expense increased $4,555,000, 7.9%, due to a 5.6% increase in
average compensation and a 2.3% increase in the number of hours worked
which includes the effect of shoppers and specialty publications acquired
since the end of fiscal 1993. Newsprint and ink costs increased $415,000,
2.5%, as lower unit costs only partially offset a $550,000 increase in
newsprint used by newspapers and a $235,000 increase in newsprint used for
commercial printing. Other cash costs increased $3,566,000, 9.0%, which
includes the effect of acquisitions, commercial printing costs and the
development costs of new products.
Broadcasting:
Exclusive of the effects of the acquisition of KZIA-TV, Las Cruces, New
Mexico, revenue for the nine months increased $5,166,000, 8.4%, as
increases in local and national advertising including the effect of
broadcasting the Winter Olympics on our five CBS affiliates more than
offset the loss of $2,300,000 in political advertising received during
last year's national political campaign. Compensation costs increased
$1,976,000, 8.5%, due primarily to an increase in average compensation and
a 3.5% increase in the number of hours worked. Portland, Omaha and
Huntington all expanded news programming which required additional
staffing and other related costs. Film amortization declined $768,000
primarily due to lower programming costs. Other cash costs increased
$398,000, 3.0%, for the nine month period.
<PAGE>
Media Products and Services:
Revenue and operating income increased $3,163,000 and $4,749,000,
respectively, which came in large part from operations of NAPP Systems
Inc. NAPP's revenues increased 7.4% due primarily to higher plate orders
from North American customers who are experiencing economic recovery
compared to a year ago and increases in sales to international customers,
which include new distribution arrangements with former customers of BASF.
The distribution agreement also affected the third quarter comparisons as
previously discussed. This cyclical increase will not affect the basic
structural change in NAPP's letterpress business where substantially all
customers are expected to convert to offset or flexographic printing
within the next fifteen to twenty years.
Corporate and other:
Year-to-date costs increased $3,188,000. In the second quarter costs
increased $2,226,000 of which $1,825,000 related to compensation.
Approximately $1,100,000 of the increase related to performance-based
long-term incentive and other compensation.
Equity in Net Income of Associated Companies:
Equity in net income of associated companies increased $569,000 due in
part to a $507,000 increase in the net income of associated newspaper
companies, with the balance attributable to income earned by 50%-owned
strategic alliances, Quality Information Systems and Consumer Target
Marketing.
Financial Expense and Income Taxes:
Interest expense was reduced due to payments on long-term debt.
Income taxes were 40.4% of pretax income for the nine months ended
June 30, 1994 and June 30, 1993. Contingencies related to the
amortization of intangibles for income tax purposes increased 1993 income
taxes by $905,000 (for a 1.8% increase in the effective tax rate) but the
increase was partially offset by results of an income tax audit concluded
during the third quarter.
Liquidity and capital resources:
Cash provided by operations, which is the Company's primary source of
liquidity, generated $64,191,000 for the nine months ended June 30, 1994.
Cash provided by operations for the nine months ended June 30, 1993 was
reduced by $7,749,000 due to the distribution of account balances of the
Company's Deferred Compensation Unit Plan. 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.
<PAGE>
LEE ENTERPRISES, INCORPORATED
PART II. OTHER INFORMATION
[DESCRIPTION]
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 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
\s\ G. C. Wahlig, Chief Accounting
Officer
<PAGE>
[DESCRIPTION]
LEE ENTERPRISES, INCORPORATED
PART I. EXHIBIT 11
Computation of Earnings Per Common Share
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1994 1993 1994 1993
(Unaudited)
<S> <C> <C> <C> <C>
Net income applicable to
common shares $ 14,367 $ 11,849 $ 37,248 $ 29,853
Shares:
Weighted average common
shares outstanding 23,129 23,199 23,112 23,181
Dilutive effect of
certain stock options 284 243 333 305
Average common shares
outstanding as adjusted 23,413 23,442 23,445 23,486
Earnings per common share $ .61 $ .51 $ 1.59 $ 1.27
</TABLE>
