FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended September 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission File Number 1-6227
LEE ENTERPRISES, INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 42-0823980
- ------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
215 N. Main Street, Davenport, Iowa 52801
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (319) 383-2100
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange On
Title of Each Class Which Registered
- --------------------------------------------------------------------------------
Common Stock - $2.00 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
- --------------------
Class B Common Stock $2.00 par value
Indicate by 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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
State the aggregate market value of voting stock held by nonaffiliates of the
registrant as of December 2, 1996. Common Stock and Class B Common Stock, $2.00
par value: $1,802,000.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of December 2, 1996. Common Stock, $2.00 par value, 34,555,576
shares; and Class B Common Stock, $2.00 par value, 12,455,186 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Lee Enterprises, Incorporated Definitive Proxy Statement dated
December 27, 1996 are incorporated by reference in Part III of this Form 10-K.
<PAGE>
PART I
Item 1. Business
Item 1(a) Recent business developments. On November 4, 1996 the Company signed a
letter of intent to sell its graphic arts products subsidiary, NAPP Systems
Inc., for approximately $55,000,000. For additional information related to the
disposition, see Note 2 of the Notes to Financial Statements under Item 8,
herein.
Item 1(b) Financial information about industry segments. See Note 11 to the
Notes to Financial Statements under Item 8, herein.
Item 1(c) Narrative description of business.
NEWSPAPERS
The Company and its subsidiaries publish the following daily newspapers:
- - The Wisconsin State Journal - Madison, Wisconsin
- - The Lincoln Journal-Star - Lincoln, Nebraska
- - Quad-City Times - Davenport, Iowa
- - Billings Gazette - Billings, Montana
- - Herald and Review - Decatur, Illinois
- - The Journal Times - Racine, Wisconsin
- - LaCrosse Tribune - LaCrosse, Wisconsin
- - Rapid City Journal - Rapid City, South Dakota
- - Missoulian - Missoula, Montana
- - Bismarck Tribune - Bismarck, North Dakota
- - Southern Illinoisan - Carbondale, Illinois
- - Globe-Gazette - Mason City, Iowa
- - Ottumwa Courier - Ottumwa, Iowa
- - The Montana Standard - Butte, Montana
- - Independent Record - Helena, Montana
- - Gazette Times - Corvallis, Oregon
- - Winona Daily News - Winona, Minnesota
- - Muscatine Journal - Muscatine, Iowa
- - Star Courier - Kewanee, Illinois
One daily and Sunday newspaper, The Wisconsin State Journal, and one daily
newspaper, The Capital Times, are published in Madison, Wisconsin, both of which
are owned by Madison Newspapers, Inc. The Company owns 50% of the outstanding
capital stock of Madison Newspapers, Inc. The Company has a contract to furnish
the editorial and news content for The Wisconsin State Journal, which is a
morning newspaper published seven days each week. The Capital Times Company, of
which the Company owns 17% of the nonvoting common stock, owns the other 50% of
the outstanding capital stock of Madison Newspapers, Inc., and has a similar
contract to furnish the editorial and news content for The Capital Times, which
is an afternoon newspaper published daily, except Sunday. Both newspapers are
produced in the printing plant of Madison Newspapers, Inc., which maintains
common advertising, circulation, delivery and business departments for the two
newspapers. The Company is compensated for supplying the editorial and news
content. In the newspaper field and rating services The Wisconsin State Journal
is classified as one of the Lee Group of newspapers.
The Company also publishes 39 weekly newspapers and special industry
publications.
The basic raw material of newspapers is newsprint. The Company and its
subsidiaries purchase newsprint from U.S. and Canadian producers. The Company
believes it will continue to receive a supply of newsprint adequate to its
needs. Price increases for newsprint are probable in the future.
Newspaper revenue has traditionally been highest in the quarter ended December
31 and, likewise, has been lowest in the quarter ended March 31.
The Company's newspapers compete with newspapers having national or regional
circulation, magazines, radio, television, other advertising media such as
billboards, specialty publications and direct mail, as well as other information
content providers such as on-line services. In addition, many of the Company's
daily and Sunday newspapers compete with other newspapers in nearby cities and
towns.
<PAGE>
BROADCASTING
The Company and its subsidiaries own and operate the following television
stations:
Nielsen DMA
Station Market Ranking
- --------------------------------------------------------------------------------
ABC Affiliate, KGUN-TV - Tucson, Arizona 78
CBS Affiliates:
KOIN-TV - Portland, Oregon 24
KRQE-TV - Albuquerque, New Mexico 48 (1)
KGMB-TV - Honolulu, Hawaii 69 (2)
KMTV - Omaha, Nebraska 75
NBC Affiliates:
WSAZ-TV - Huntington-Charleston, West Virginia 56
KSNW-TV - Wichita, Kansas 65 (3)
KSNT-TV - Topeka, Kansas 141
UPN Affiliate, KZIA-TV - El Paso, Texas 99
UPN/WB Affiliate, KASY-TV - Albuquerque, New Mexico
(operating under local marketing agreement) 48
(1) Combined DMA rank. KRQE-TV also operates satellite stations KBIM-TV,
Roswell, New Mexico and KREZ-TV, Durango, Colorado.
(2) KGMB-TV also operates satellite stations KGMD-TV, Hilo, Hawaii and KGMV-TV,
Maui, Hawaii.
(3) KSNW-TV also operates satellite stations KSNG-TV, Garden City, Kansas;
KSNC-TV, Great Bend, Kansas; and KSNK-TV, Oberlin, Kansas/McCook, Nebraska
Broadcasting revenue has traditionally been highest in the quarter ended
December 31 and, likewise, has been lowest in the quarter ended March 31.
The Company's television stations are in competition with other over-the-air
broadcast, direct broadcast satellite ("DBS") and cable television, radio
companies, other advertising media such as newspapers, magazines and billboards,
as well as other information content providers such as on-line services.
Competition in the television broadcasting industry occurs primarily in
individual market areas. Generally, a television station in one market does not
compete with other stations in other market areas, nor does a group of stations,
such as those owned by the Company, compete with any other group of stations as
such. DBS and cable television systems in the Company's broadcasting markets
operate on a subscriber payment basis and compete by importing out-of-market
television signals or by originating programming to the extent permitted or
required by present or future rules of the Federal Communications Commission
("FCC").
The Company's television broadcasting operations are subject to the jurisdiction
of the FCC under the Communications Act of 1934, as amended (the "Act"). The Act
empowers the FCC, among other things, to issue, revoke or modify broadcasting
licenses, to assign frequency bands, to determine the location of stations, to
regulate the apparatus used by stations, to establish areas to be served, to
adopt regulations necessary to carry out the provisions of the Act and to impose
penalties for violation of such regulations. Television licenses are granted for
a maximum period of five years and, upon application, may be renewed for
additional five-year terms. The FCC is required to hold a hearing on a renewal
application if a substantial and material question of fact is raised with
respect to the renewal application, or if for any reason the FCC is unable to
find that the grant of the renewal application would serve the public interest,
convenience and necessity. Renewal of the Company's television licenses has
never been denied and all such licenses are now in full force and effect.
<PAGE>
OTHER MATTERS
Compliance with present statutory and regulatory requirements respecting
environmental quality will not necessitate significant capital outlays, or
materially affect the earning power of the business of the Company, or cause
material changes in the Company's business, whether present or intended.
In September 1996, the Company, its subsidiaries and associated companies had
approximately 5,300 employees, including approximately 1,700 part-time
employees.
Item 2. Properties
The Company's executive offices are located in facilities leased at 215 North
Main Street, Davenport, Iowa.
All of the newspaper printing plants (except Madison) are owned by the Company.
All newspaper printing plants (including Madison) are well maintained, are in
good condition, and are suitable for the present office and publishing
operations of the newspapers. All newspaper plants are adequately equipped with
typesetting, printing and other equipment required in the publication of
newspapers.
All offices, studios, and transmitter buildings of the broadcasting divisions
are owned or subject to long-term lease by the Company. All of the television
properties are adequately equipped for present operations, and are in good
condition and repair. Network television programs are received via satellite.
Item 3. Legal Proceedings
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
<PAGE>
Executive Officers of the Company
The following table shows the names and ages of all executive officers of the
Company, the period of service for each with the Company, the period during
which each has held his present office and the office held by each.
<TABLE>
Period of Service Period In
Name Age With Company Present Office Present Office
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Richard D. Gottlieb 54 33 years 5 years President and Chief
Executive Officer
Larry L. Bloom 47 3-1/2 years 3-1/2 years Vice-President and
Treasurer
Ronald L. Rickman 58 37 years 13 years Vice-President
Gary N. Schmedding 58 24 years 8 years Vice-President
Greg R. Veon 44 20 years 1 year Vice-President
Charles D. Waterman, III 50 7 years 7 years Secretary
George C. Wahlig 49 7 years 4 years Principal Accounting
Officer
John VanStrydonck 43 15 years 5 years Chairman and CEO,
NAPP Systems Inc.
</TABLE>
Larry L. Bloom was elected Vice-President of Finance, Treasurer and Chief
Financial Officer in June 1993 and for more than five years prior thereto he was
in financial management positions with the New York Daily News, most recently
serving as senior vice-president and chief financial officer.
Greg R. Veon was elected a Vice-President of the Company in November 1995; from
1992 through November 1995 he was Vice-President and General Manager of KOIN-TV,
Portland, Oregon; for more than 2 years prior thereto he was publisher of the
Herald & Review, Decatur, Illinois.
Charles D. Waterman, III was elected Secretary of the Company in November 1989.
He is presently, and for more than the past five years has been, a partner in
the law firm of Lane & Waterman, Davenport, Iowa, general counsel of the
Company.
George C. Wahlig was elected Principal Accounting Officer of the Company in
November 1992; from May 1990 to November 1992 he was Director of Finance.
John VanStrydonck was elected President and Chief Executive Officer of NAPP
Systems Inc. in July of 1991 and Chairman and CEO in September 1994. For more
than two years prior thereto he was publisher of the Globe-Gazette in Mason
City, Iowa.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters
COMMON STOCK PRICES AND DIVIDENDS
Lee Common Stock is listed on the New York Stock Exchange. The table below shows
the high and low prices of Lee Common Stock for each quarter during the past
three years, the closing price at the end of each quarter and the dividends paid
per share.
Quarter
----------------------------------------------------------
4th 3rd 2nd 1st
----------------------------------------------------------
STOCK PRICES
1996:
High ...... $ 23-5/8 $ 24-3/8 $ 22-3/4 $ 23
Low ....... 19-3/4 20-1/2 20 19-11/16
Closing ... 22-7/8 23-5/8 21-1/8 23
1995:
High ...... 21-11/16 19-5/16 18-3/8 17-3/8
Low ....... 18-1/8 17-7/16 16-13/16 15-7/8
Closing ... 21-11/16 19-1/16 17-3/4 17-1/4
1994:
High ...... 17-3/4 17-3/4 19-1/16 17-1/2
Low ....... 16 15-7/8 16-7/8 15-1/2
Closing ... 17-1/4 16 17-9/16 17-1/2
DIVIDENDS PAID
1996 $ 0.12 $ 0.12 $ 0.12 $ 0.12
1995 0.11 0.11 0.11 0.11
1994 0.105 0.105 0.105 0.105
For a description of the relative rights of Common Stock and Class B Common
Stock, see Note 7 of the Notes to Financial Statements under Item 8 herein.
At September 30, 1996, the Company had 4,313 holders of Common Stock and 2,590
holders of Class B Common Stock.
<PAGE>
Item 6. Selected Financial Data
FIVE YEAR FINANCIAL PERFORMANCE
<TABLE>
Year Ended September 30: 1996 1995 1994 1993 1992
----------------------------------------------------
(In Thousands Except Per Share Data)
<S> <C> <C> <C> <C> <C>
OPERATIONS
Operating revenue ...................... $427,369 $383,740 $341,241 $314,600 $ 301,374
====================================================
Income from continuing
operations .......................... $ 53,670 $ 52,232 $ 45,137 $ 36,923 $ 31,747
Discontinued operations ................ 7,725 6,227 5,717 4,313 6,745
Loss on disposition of
discontinued operations ............. (15,948) - - - - - - - -
----------------------------------------------------
Net income .................. $ 45,447 $ 58,459 $ 50,854 $ 41,236 $ 38,492
====================================================
PER SHARE AMOUNTS
Weighted average
shares .............................. 47,991 46,962 46,850 46,920 46,682
====================================================
Income from continuing
operations .......................... $ 1.12 $ 1.11 $ 0.97 $ 0.79 $ 0.68
Discontinued operations ................ 0.16 0.13 0.12 0.09 0.14
Loss on disposition of
discontinued operations ............. (0.33) - - - - - - - -
----------------------------------------------------
Net income .................. $ 0.95 $ 1.24 $ 1.09 $ 0.88 $ 0.82
====================================================
Dividends .............................. $ 0.48 $ 0.44 $ 0.42 $ 0.40 $.38-1/2
OTHER DATA
Total assets ........................... $527,416 $559,929 $474,701 $482,317 $ 504,985
Debt, including
current maturities .................. 95,503 123,489 130,532 160,214 173,537
Stockholders' equity ................... 324,954 311,042 241,930 223,482 203,812
</TABLE>
<PAGE>
Item 7. Management Discussion and Analysis of Financial Condition
and Results of Operations
This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Actual results could differ materially from those projected in the
forward-looking statements. The Company has attempted to identify
forward-looking statements by placing an asterisk immediately following the
sentence or phrase that contains the forward-looking statement.
Operating results are summarized below:
1996 1995 1994
----------------------------
(In Thousands)
Operating revenue ....................... $427,369 $383,740 $341,241
Percent change ....................... 11.4% 12.5% 8.5%
Operating income ........................ 94,741 91,405 84,287
Percent change ....................... 3.6% 8.4% 16.5%
Income from continuing operations ....... 53,670 52,232 45,137
Percent change ....................... 2.8% 15.7% 22.2%
Earnings per share, continuing operations 1.12 1.11 0.97
Percent change ....................... 0.9% 14.4% 22.8%
A weak advertising environment early in the fiscal year, the cyclical effects of
political advertising on our broadcast segment, and high newsprint prices which
did not moderate until the second half of the fiscal year, impacted the level of
growth in operating income in 1996.
On November 4, 1996 the Company entered into atentative agreement to sell NAPP
Systems Inc. for approximately $55,000,000. The operations of NAPP and the
related $15,948,000 loss from disposition are included in the Company's
consolidated financial statements as discontinued operations.
The fiscal 1995 comparisons are affected by two significant acquisitions. On
March 31, 1995 Lee acquired the 50.25% interest in Journal-Star Printing Co.
(JSPC) not previously owned, making JSPC a wholly-owned subsidiary. On August
28, 1995, Lee acquired the stock of SJL of Kansas Corp. (SJL) which operates NBC
network-affiliated television stations KSNW-TV and KSNT-TV in Wichita and
Topeka, Kansas and three satellite stations that comprise a network covering all
of western Kansas and parts of southwest Nebraska. The following unaudited
proforma operating results are as if the 1995 acquisitions had occurred on
October 1, 1993.
1996 1995 1994
----------------------------
(Proforma in Thousands)
Operating revenue ....................... $427,369 $412,600 $383,608
Percent change ....................... 3.6% 7.6%
Operating income ........................ 94,741 96,302 91,028
Percent change ....................... (1.6)% 5.8%
Income from continuing operations ....... 53,670 52,004 46,931
Percent change ....................... 3.2% 10.8%
Earnings per share, continuing operations 1.12 1.07 0.93
Percent change ....................... 4.7% 15.1%
<PAGE>
NEWSPAPERS
1996 1995 1994
----------------------------
(In Thousands)
Operating revenue ....................... $302,564 $274,877 $241,079
Percent change ....................... 10.1% 14.0% 7.9%
Operating income:
Wholly-owned properties .............. 75,687 68,366 65,881
Percent change .................... 10.7% 3.8% 12.7%
Equity in net income ................. 7,008 8,277 10,162
Percent change .................... (15.3) (18.5)% 6.4%
Operating margin, wholly-owned properties 25.0% 24.9% 27.3%
The newspaper segment includes daily and weekly newspapers and specialty
publications. Operating revenue consists of the following:
1996 1995 1994
----------------------------------
(In Thousands)
Daily newspapers:
Advertising ............... $169,151 $153,325 $134,322
Percent change ......... 10.3% 14.1% 5.9%
Circulation ............... 79,814 72,863 66,302
Percent change ......... 9.5% 9.9% 4.8%
Other ........................ 53,599 48,689 40,455
Percent change ............ 10.1% 20.4% 21.8%
Exclusive of the JSPC acquisition, advertising revenue increased 1.8% and 5.1%,
circulation revenue increased 4.9% and 3.8%, and other revenue increased by 9.3%
and 15.1%, in 1996 and 1995, respectively.
The following newspaper advertising lineage, circulation volume statistics, and
related revenue results are presented on a proforma basis for newspapers
wholly-owned at the end of fiscal 1996.
Changes in advertising units for classified and local advertising, which account
for more than 70% of newspaper advertising revenue, are as follows:
ADVERTISING LINEAGE, IN THOUSANDS OF INCHES (PROFORMA):
1996 1995 1994
----------------------------------------
Classified ..................... 3,650 3,674 3,586
Percent change .............. (0.7)% 2.5% 8.2%
Local .......................... 5,312 5,422 5,481
Percent change .............. (2.0)% (1.1)% (0.9)%
Classified advertising revenue increased approximately 6.6% in 1996, 9.1% in
1995 and 13.3% in 1994. The average rate realized increased 7.3% in 1996, 6.5%
in 1995 and 4.7% in 1994. In 1996 automobile advertising decreased until late in
the fiscal year. In 1995 growth was led by increases in employment, private
party and, in the first part of the year, automotive advertising.
Local "run-of-press" advertising represents advertising by merchants in the
local community which is printed in the newspaper, rather than "preprints",
which are printed separately by the Company or others and inserted into the
newspaper. Revenue increased 3.2%, 2.2%, and 3.3% in 1996, 1995, and 1994,
respectively, on higher average rates despite decreases in advertising inches.
Total revenue realized from local and national merchants is increasing despite
the shift from run-of-press advertising to preprints which have lower-priced,
higher-volume distribution rates.* Preprint revenue was flat in 1996 due to
cutbacks by advertisers during the 1995 holiday season, increased $1,839,000
(5.4%) in 1995, and $1,774,000 (5.5%) in 1994 primarily as a result of increases
in volume.
In 1996, 1995, and 1994 circulation revenue increased 3.7%, 3.8%, and 4.8%,
respectively, as a result of higher rates which offset 2.3%, .9%, and .6%
decreases in volume. Approximately one half of the volume decrease in 1996
results from a decrease in circulation following the merger of two newspapers in
Lincoln, Nebraska.
Other revenue consists of revenue from products delivered outside the newspaper
(which include activities such as target marketing and special event
production), specialty publications, commercial printing and editorial service
contracts with Madison Newspapers, Inc. and, through March 31, 1995, with
Journal-Star Printing Co.
<PAGE>
Other revenue by category and by property is as follows:
1996 1995 1994
----------------------------
(In Thousands)
Products delivered outside the newspaper:
Properties owned for entire period ...... $ 6,896 $ 6,389 $ 4,514
Acquired since September 30, 1993 ....... 1,022 229 - -
Specialty publications:
Properties owned for entire period ...... 15,873 15,732 15,233
Acquired since September 30, 1993 ....... 6,362 5,333 2,151
Commercial printing:
Properties owned for entire period ...... 14,199 11,799 10,178
Acquired since September 30, 1993 ....... 1,680 781 - -
Editorial service contracts ................ 7,567 8,426 8,379
----------------------------
$53,599 $48,689 $40,455
============================
The following table sets forth the percentage of revenue of certain items in the
newspaper segment.
1996 1995 1994
------------------------
Revenue ........................................... 100.0% 100.0% 100.0%
------------------------
Compensation costs ................................ 33.8 34.4 34.9
Newsprint and ink ................................. 12.7 11.6 9.0
Other operating expenses .......................... 23.6 24.5 24.4
------------------------
70.1 70.5 68.3
------------------------
Income before depreciation, amortization, interest
and taxes ...................................... 29.9 29.5 31.7
Depreciation and amortization ..................... 4.9 4.6 4.4
------------------------
Operating margin wholly-owned properties .......... 25.0% 24.9% 27.3%
========================
Exclusive of the effects of the 1995 acquisitions, in 1996 costs other than
depreciation and amortization increased 3%. Newsprint and ink costs increased
9.4% due to price increases for newsprint. High prices during the first two
quarters of the fiscal year stabilized during the third quarter and were lower
in the fourth quarter of 1996 than the fourth quarter of 1995. Newsprint
consumption was flat in 1996 as compared to 1995, as higher consumption for
commercial printing was offset by conservation efforts by the newspapers.
Compensation costs increased 4% due primarily to salary increases. Other
operating costs did not increase significantly.
Exclusive of the effects of acquisitions, in 1995 costs other than depreciation
and amortization increased 8.2%. Newsprint and ink costs increased 32.1% as
price increases offset the 1.4% reduction in newsprint usage. Compensation costs
increased 5.2% primarily as a result of salary increases. Other operating
expenses increased by 4.9% due to normal inflationary increases.
Exclusive of the effects of the specialty publication acquisitions, in 1994
costs other than depreciation and amortization increased 5.7%. Compensation
costs increased 6.9% primarily due to a 1.8% increase in hours worked and salary
increases. Total hours worked increased primarily due to the non-traditional
revenue activities. Newsprint and ink costs decreased 1.1%. Increased newsprint
rebates offset a 4% increase in newsprint usage by newspapers and a 11% increase
in commercial printing volume. Other operating expenses increased 7.1% primarily
due to non-traditional services and normal inflationary increases.
<PAGE>
BROADCASTING
1996 1995 1994
------------------------------
(Dollars in Thousands)
Operating revenue ............. $117,797 $100,586 $ 90,000
Percent change ............. 17.1% 11.8% 10.7%
Operating income .............. 22,953 26,934 21,494
Percent change ............. (14.8)% 25.3% 28.6%
Operating margin .............. 19.5% 26.8% 23.9%
In 1996, exclusive of the SJL acquisition, operating revenue decreased .6%.
Local/regional/national revenue decreased $2,600,000, due to softness in
automotive and retail spot buying. Political advertising increased $1,000,000.
Production revenue increased $760,000, primarily due to a new mobile production
facility at MIRA Productions in Portland, Oregon.
Exclusive of the effects of the SJL acquisition, operating revenue and operating
income increased 10.1% and 26.7%, respectively in 1995. Local/regional/national
revenue increased $4,600,000, political advertising increased $1,700,000, and
network compensation increased $1,900,000.
The full year of operations from the acquisition of KZIA-TV, then operating in
Las Cruces, New Mexico, increased operating revenue in 1994 by $400,000.
Exclusive of the effects of this acquisition, local/regional/national revenue
increased $9,000,000. Included in these increases are the effects of the Winter
Olympics on our four CBS affiliates and their satellite stations.
The following table sets forth the percentage of revenue of certain items in the
broadcasting segment.
1996 1995 1994
------------------------
Revenue .......................................... 100.0% 100.0% 100.0%
------------------------
Compensation costs ............................... 39.5 37.1 38.9
Programming costs ................................ 7.9 6.2 7.4
Other operating expenses ......................... 22.6 21.8 21.4
------------------------
70.0 65.1 67.7
------------------------
Income before depreciation, amortization, interest
and taxes ...................................... 30.0 34.9 32.3
Depreciation and amortization .................... 10.5 8.1 8.4
------------------------
Operating margin wholly-owned properties ......... 19.5% 26.8% 23.9%
========================
Exclusive of the effects of the SJL acquisition, operating income decreased by
$6,500,000 or 23.8% in 1996. Compensation costs increased by 5.1% primarily due
to a 6.9% increase in hours worked, mainly due to expanded operations at our New
Mexico locations. Programming costs increased by $2,000,000 (31.8%) as a result
of the addition of highly rated syndicated programming and the write-down of
certain programming to net realizable value. Other operating costs increased
4.2% due to higher expenditures for repairs and maintenance and sales and
audience promotion.
Exclusive of the effects of the SJL acquisition, operating income increased by
$5,700,000 in 1995. Compensation costs increased 4.6% primarily due to increased
hours worked. Programming costs decreased by $530,000 (8.0%) as a result of a
shift from more expensive syndicated programming to locally originated news
programming. Other operating expense increased 10.3% due to costs related to the
higher business activity levels and sales and audience promotion.
Operating income increased in 1994 by $4,800,000. Compensation costs increased
$3,200,000 or 10.1%, due to an increase in incentive compensation related to
increases in advertising revenue and an increase of 5.1% in the number of hours
worked (including the effects of the acquisition of KZIA-TV). Portland, Omaha
and Huntington all expanded news programming which required additional staffing
and other related costs. Program costs declined $1,000,000 primarily due to the
trend discussed above. Other operating expenses increased $1,800,000 or 10.4%,
due to costs related to the higher business activity levels.
<PAGE>
CORPORATE COSTS
Corporate costs in 1996 decreased by $1,300,000, (10.4%) primarily due to
decreased levels of incentive compensation and lower medical plan costs
resulting from a 1995 plan redesign. Corporate costs decreased in 1995 by
$1,100,000, (8.1%) primarily due to the discontinuance of performance unit
awards under the Company's 1990 Long-Term Incentive Plan. In 1994 costs related
to the performance unit awards, unfavorable medical plan experience and
increased incentive compensation increased corporate costs by $1,600,000,
(13.3%).
Corporate costs in 1997 are expected to increase by approximately $3,000,000 as
a result of increased marketing costs and the enhancement of computer
software.* Incentive compensation varies based upon operating results.*
INTEREST EXPENSE
Interest expense decreased by approximately $2,300,000 in 1996 and $1,700,000 in
1995 and 1994. The most significant element of the decrease was a lower debt
level which reduced interest expense by approximately $2,400,000, $2,000,000 and
$1,700,000, respectively. In 1995 a $500,000 increase in interest on deferred
compensation was offset by an increase in financial income earned on the
invested funds.
INCOME TAXES
Income taxes were 38.8% of pretax income in 1996, 37.2% in 1995, and 39.0% in
1994. In 1995 the effective tax rate was decreased by .9% as a result of the
elimination of the deferred income taxes related to the undistributed income of
the 49.75% interest in JSPC. The effective tax rate for 1997 is expected to be
approximately 39%.*
DISCONTINUED OPERATIONS
On November 4, 1996 the Company signed a letter of intent to sell its graphic
arts products subsidiary, NAPP Systems Inc., for approximately $55,000,000. For
additional information related to the disposition, see Note 2 of the Notes to
Financial Statements under Item 8, herein.
LIQUIDITY, CAPITAL RESOURCES AND COMMITMENTS
Cash provided by operations is the Company's primary source of liquidity,
generating $87,543,000 in 1996. The major sources and uses of cash in 1996 were
as follows:
(In
Thousands)
Sources of cash:
Operations ................................................... $87,543
All other .................................................... 566
-------
88,109
-------
Uses of cash:
Purchase of property and equipment ........................... 18,796
Cash dividends paid .......................................... 22,603
Purchase of Lee Enterprises, Incorporated stock .............. 11,917
Payment of debt .............................................. 26,209
-------
79,525
-------
Increase in cash .................................. $ 8,584
=======
The Company has financed significant acquisitions by long-term borrowings. The
long-term borrowings may not be prepaid without a substantial prepayment
penalty.
Capital expenditures for new and improved facilities and equipment are expected
to be about $18,500,000 in 1997.* The Company anticipates that funds
necessary for capital expenditures and other requirements will be
available from internally generated funds.*
<PAGE>
DIVIDENDS AND COMMON STOCK PRICES
The current quarterly cash dividend is 13 cents per share, an annual rate of 52
cents.
During the fiscal year ended September 30, 1996, the Company paid dividends of
$22,603,000 or 42.1% of year's earnings from continuing operations. The Company
will continue to review its dividend policy to assure that it remains consistent
with its capital demands. Covenants under long-term obligations are not
considered restrictive to payment of dividends.* Lee common stock is listed on
the New York Stock Exchange. The table under Item 5 herein shows the high and
low prices of Lee common stock for each quarter during the past three years. It
also shows the closing price at the end of each quarter and the dividends paid
in the quarter.
INFLATION
The net effect of inflation on operations has not been material in the last few
years because of efforts by the Company to lessen the effect of rising costs
through a strategy of improving productivity, controlling costs and, where
competitive conditions permit, increasing selling prices.
EMERGING ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board issued Statement No.
123 "Accounting for Stock-Based Compensation" (Statement No. 123). Statement No.
123 establishes a fair value based method of accounting for stock options and
other equity instruments. Statement No. 123 permits the continued use of the
current intrinsic value method prescribed in Accounting Principle Board Opinion
25, "Accounting for Stock Issued to Employees" (APB 25), but requires employers
to disclose proforma fair value information in the notes to the financial
statements. The Company plans to continue to measure compensation cost using APB
25; therefore, the adoption of Statement No. 123 will not have any impact on the
Company's financial condition or results of operations. This statement is
effective for the Company's year ending September 30, 1997.
QUARTERLY RESULTS
The Company's largest source of newspaper revenue, local run-of-press
advertising, is seasonal and tends to fluctuate with retail sales in markets
served. Historically, local run-of-press advertising is higher in the first and
third quarters. Newspaper classified advertising revenue (which includes real
estate and automobile ads) and broadcasting revenue are lowest in January and
February, which are included in our second fiscal quarter.
Quarterly results of operations are summarized under Item 8 herein.
<PAGE>
Item 8. Financial Statements and Supplementary Data
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
<TABLE>
September 30,
--------------------------------------
1996 1995 1994
--------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ........................................... $ 19,267 $ 10,683 $ 18,784
Temporary investments ............................................... - - 200 38,859
Trade receivables, less allowance for doubtful
accounts 1996 $4,000; 1995 $4,100; 1994
$4,100 ........................................................... 48,773 57,146 46,170
Receivables from associated companies ............................... 1,438 1,438 2,169
Inventories ......................................................... 3,668 18,355 13,147
Program rights and other ............................................ 17,183 16,687 16,578
Net assets of discontinued operations ............................... 56,379 - - - -
--------------------------------------
Total current assets ..................................... 146,708 104,509 135,707
--------------------------------------
Investments:
Associated companies ................................................ 11,488 10,754 21,969
Other ............................................................... 10,668 8,946 7,437
--------------------------------------
22,156 19,700 29,406
--------------------------------------
Property and Equipment:
Land and improvements ............................................... 10,140 12,053 11,392
Buildings and improvements .......................................... 57,995 64,768 56,675
Equipment ........................................................... 173,752 176,642 152,547
--------------------------------------
241,887 253,463 220,614
Less accumulated depreciation ....................................... 137,182 145,267 138,450
--------------------------------------
104,705 108,196 82,164
--------------------------------------
Intangibles and Other Assets:
Intangibles ......................................................... 246,061 321,014 225,633
Other ............................................................... 7,786 6,510 1,791
--------------------------------------
253,847 327,524 227,424
--------------------------------------
$527,416 $559,929 $474,701
======================================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
September 30,
---------------------------------
1996 1995 1994
---------------------------------
(Dollars In Thousands)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable and current maturities of long-term
debt .................................................. $ 43,213 $ 47,978 $ 31,891
Accounts payable ......................................... 15,369 24,155 17,336
Compensation and other accruals .......................... 20,419 28,431 26,523
Income taxes payable ..................................... 4,738 2,656 12,971
Unearned income .......................................... 14,038 13,307 11,009
--------------------------------
Total current liabilities ..................... 97,777 116,527 99,730
--------------------------------
Long-Term Debt, net of current maturities ................... 52,290 75,511 98,641
--------------------------------
Deferred Items:
Retirement and compensation .............................. 11,611 11,632 13,021
Income taxes ............................................. 40,784 45,217 21,379
--------------------------------
52,395 56,849 34,400
--------------------------------
Stockholders' Equity:
Capital stock:
Serial convertible preferred, no par value;
authorized 500,000 shares; issued none
Common, $2 par value; authorized
60,000,000 shares; issued and outstanding
1996 34,289,000 shares .............................. 68,578 68,396 32,130
Class B, common, $2 par value; authorized
30,000,000 shares; issued and outstanding
1996 12,733,000 shares 25,466 26,336 13,390
Additional paid-in capital ............................... 20,189 17,404 6,497
Unearned compensation .................................... (637) (533) (665)
Retained earnings ........................................ 211,358 199,439 190,578
--------------------------------
324,954 311,042 241,930
--------------------------------
$527,416 $559,929 $474,701
================================
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
Year Ended September 30,
--------------------------------
1996 1995 1994
--------------------------------
(In Thousands Except Per Share Data)
<S> <C> <C> <C>
Operating revenue:
Newspaper:
Advertising .................................. $169,151 $153,325 $134,322
Circulation .................................. 79,814 72,863 66,302
Other ........................................ 53,599 48,689 40,455
Broadcasting .................................... 117,797 100,586 90,000
Equity in net income of associated companies .... 7,008 8,277 10,162
--------------------------------
427,369 383,740 341,241
--------------------------------
Operating expenses:
Compensation costs .............................. 153,076 137,368 126,023
Newsprint and ink ............................... 38,535 31,936 21,744
Depreciation .................................... 16,236 11,965 10,066
Amortization of intangibles ..................... 11,563 9,501 8,838
Other ........................................... 113,218 101,565 90,283
--------------------------------
332,628 292,335 256,954
--------------------------------
Operating income ..................... 94,741 91,405 84,287
--------------------------------
Financial (income) expense:
Interest expense ................................ 9,648 11,902 13,576
Financial (income) .............................. (2,609) (3,704) (2,984)
--------------------------------
7,039 8,198 10,592
--------------------------------
Income from continuing operations
before taxes on income ............... 87,702 83,207 73,695
Income taxes ....................................... 34,032 30,975 28,558
--------------------------------
Income from continuing operations .... 53,670 52,232 45,137
--------------------------------
Discontinued operations:
Income from discontinued operations net of
income tax effect ............................ 7,725 6,227 5,717
(Loss) on disposition of discontinued operations,
net of income tax effect ..................... (15,948) - - - -
--------------------------------
(8,223) 6,227 5,717
--------------------------------
Net income ........................... $ 45,447 $ 58,459 $ 50,854
================================
Weighted average number of shares .................. 47,991 46,962 46,850
================================
Earnings per share:
Income from continuing operations ............... $ 1.12 $ 1.11 $ 0.97
Income (loss) from discontinued operations ...... (0.17) 0.13 0.12
--------------------------------
Net income ........................... $ 0.95 $ 1.24 $ 1.09
================================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
Year Ended September 30,
------------------------------------------------------------------------
Amount Shares
---------------------------------- ------------------------------------
1996 1995 1994 1996 1995 1994
---------------------------------- ------------------------------------
(In Thousands Except Per Share Data)
<S> <C> <C> <C> <C> <C> <C>
Common Stock:
Balance, beginning ................... $ 68,396 $ 32,130 $ 31,826 34,198 32,130 31,826
Conversion from Class B
Common stock .................... 862 252 988 431 252 988
Stock split ....................... - - 34,198 - - - - - - - -
Shares issued ..................... 404 3,508 462 202 3,508 462
Shares reacquired ................. (1,084) (1,692) (1,146) (542) (1,692) (1,146)
------------------------------------------------------------------------
Balance, ending ...................... $ 68,578 $ 68,396 $ 32,130 34,289 34,198 32,130
========================================================================
Class B Common Stock:
Balance, beginning ................... $ 26,336 $ 13,390 $ 14,374 13,168 13,390 14,374
Conversion to common
stock ........................... (862) (252) (988) (431) (252) (988)
Stock split ....................... - - 13,168 - - - - - - - -
Shares issued ..................... - - 38 14 - - 38 14
Shares reacquired ................. (8) (8) (10) (4) (8) (10)
------------------------------------------------------------------------
Balance, ending ...................... $ 25,466 $ 26,336 $ 13,390 12,733 13,168 13,390
========================================================================
Additional Paid-In Capital:
Balance, beginning ................... $ 17,404 $ 6,497 $ 3,469
Shares issued ..................... 2,785 58,273 3,028
Common stock split ................ - - (47,366) - -
---------------------------------
Balance, ending ...................... $ 20,189 $ 17,404 $ 6,497
=================================
Unearned Compensation:
Balance, beginning ................... $ (533) $ (665) $ (901)
Restricted shares issued .......... (637) (496) (474)
Restricted shares canceled ........ 4 24 22
Amortization ...................... 529 604 688
---------------------------------
Balance, ending ...................... $ (637) $ (533) $ (665)
=================================
Retained Earnings:
Balance, beginning ................... $199,439 $190,578 $174,714
Net income ........................ 45,447 58,459 50,854
Cash dividends per share
1996 $.48; 1995 $.44;
1994 $.42 ....................... (22,603) (20,295) (19,367)
Shares reacquired ................. (10,925) (29,303) (15,623)
---------------------------------
Balance, ending ...................... $211,358 $199,439 $190,578
=================================
Stockholders' Equity .................... $324,954 $311,042 $241,930 47,022 47,366 45,520
========================================================================
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
Year ended September 30,
-------------------------------
1996 1995 1994
-------------------------------
(In Thousands)
<S> <C> <C> <C>
Cash Provided by Operating Activities:
Net income ........................................ $45,447 $ 58,459 $ 50,854
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization .................. 32,159 25,974 23,496
Loss on disposition of discontinued operations . 14,563
Distributions in excess of (less than) earnings
of associated companies ...................... (734) 206 (1,696)
Change in assets and liabilities, net of effects
from business acquisitions:
(Increase) in receivables .................... (1,347) (4,849) (2,631)
(Increase) decrease in inventories, program
rights and other ......................... 768 (4,717) (4,013)
Increase (decrease) in accounts payable,
accrued expenses and unearned income ..... (9,446) 6,619 5,038
Increase (decrease) in income taxes payable .. 2,067 (10,469) 2,163
Other, primarily deferred items .............. 4,066 1,348 4,564
--------------------------------
Net cash provided by operating
activities ............................. 87,543 72,571 77,775
--------------------------------
Cash (Required For) Investing Activities:
Acquisitions ...................................... - - (41,609) (4,132)
Purchase of property and equipment ................ (18,796) (17,435) (17,611)
Purchase of temporary investments ................. (200) (200) (117,732)
Proceeds from maturities of temporary investments . 400 38,859 124,373
Other ............................................. (2,089) (1,509) (787)
--------------------------------
Net cash (required for) investing
activities ............................. (20,685) (21,894) (15,889)
--------------------------------
Cash (Required For) Financing Activities:
Purchase of common stock .......................... (11,917) (30,925) (16,498)
Cash dividends paid ............................... (22,603) (20,295) (19,367)
Proceeds from long-term borrowings ................ - - 20,000 - -
Proceeds from short-term notes payable, net ....... - - 15,000 - -
Principal payments on long-term borrowings ........ (26,209) (45,069) (26,667)
Other ............................................. 2,455 2,511 2,358
--------------------------------
Net cash (required for) financing
activities ............................. (58,274) (58,778) (60,174)
--------------------------------
Net increase (decrease) in cash and cash
equivalents ............................ 8,584 (8,101) 1,712
Cash and cash equivalents:
Beginning ......................................... 10,683 18,784 17,072
--------------------------------
Ending ............................................ $ 19,267 $ 10,683 $ 18,784
================================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS:
The Company has two principal businesses: newspaper publishing and broadcasting.
As of September 30, 1996, operating divisions and associated companies publish
19 daily newspapers and operate nine full service network affiliated television
stations and seven satellite television stations.
Significant Accounting Policies:
Accounting estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount 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.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. All significant
intercompany items have been eliminated.
TEMPORARY INVESTMENTS: Temporary investments are carried at cost which
approximates fair value.
INVENTORIES: Newsprint inventories are priced at the lower of cost or market
with cost being determined primarily by the last-in, first-out method. Newsprint
inventories as of September 30, 1996, 1995 and 1994 were less than replacement
cost by $5,087,000, $4,896,000 and $2,985,000, respectively.
PROGRAM RIGHTS: Cost of program rights is stated at the lower of cost or
estimated net realizable value. The total cost of the rights is recorded as an
asset and a liability when the program becomes available for broadcast. Cost of
program rights is charged to operations primarily on accelerated bases related
to the usage of the program. The current portion of program rights represents
those rights that will be amortized in the succeeding year.
INVESTMENTS: Investments in the common stock or joint venture capital of
associated companies are reported at cost plus the Company's share of
undistributed earnings since acquisition, less amortization of intangibles.
Long-term loans to associated companies are included in investments in
associated companies.
Other investments primarily consist of various securities held in trust under a
deferred compensation arrangement. These investments are classified as trading
securities and carried at fair value with gains and losses reported in the
consolidated statements of income.
PROPERTY AND EQUIPMENT: Property and equipment is carried at cost. Equipment,
except for newspaper presses and broadcast towers, is depreciated primarily by
declining-balance methods. The straight-line method is used for all other
assets. The estimated useful lives in years are as follows:
Years
--------------
Buildings and improvements 5-25
Newspaper:
Presses 15-20
Other major equipment 3-11
Broadcasting:
Towers 15-20
Other major equipment 3-10
<PAGE>
The Company capitalizes interest as part of the cost of constructing major
facilities.
INTANGIBLES: Intangibles include covenants not-to-compete, consulting
agreements, customer lists, broadcast licenses and agreements, newspaper
subscriber lists, and the excess costs over fair value of net assets of
businesses acquired.
The excess costs over fair value of net tangible assets include $21,510,000
incurred prior to October 31, 1970, which is not being amortized. Excess costs
related to specialty publications are being amortized over a 10 to 15 year
period. Intangibles, representing non-compete covenants, consulting agreements,
customer lists, broadcast licenses and agreements and newspaper subscriber lists
are being amortized over a period of 3 to 40 years. The remaining costs are
being amortized over a period of 40 years. All intangibles are amortized by the
straight-line method.
The Company reviews its intangibles and other long-lived assets annually to
determine potential impairment. In performing the review, the Company estimates
the future cash flows expected to result from the use of the asset and its
eventual disposition. If the sum of the expected future cash flows (undiscounted
and without interest charges) is less than the carrying amount of the asset, an
impairment is recognized.
ADVERTISING COSTS: Advertising costs, which are not material, are expensed as
incurred.
INCOME TAXES: Deferred taxes are provided on a liability method whereby deferred
tax assets are recognized for deductible temporary differences and loss
carryforwards and deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the reported
amounts of assets and liabilities and their tax bases. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment.
EARNINGS PER SHARE: Earnings per share are calculated using the weighted average
number of common stock, Class B common stock and common stock equivalent shares
outstanding resulting from employee stock option and purchase plans.
CASH AND CASH EQUIVALENTS: For the purpose of reporting cash flows, the Company
considers all highly liquid debt instruments purchased with an original maturity
of three months or less at date of acquisition to be cash equivalents.
RESTRICTED STOCK: The Company amortizes as compensation cost the value of
restricted stock, issued under a long-term incentive plan, by the straight-line
method over the three year restriction period.
NOTE 2. Discontinued Operations
On November 4, 1996 the Company signed a letter of intent to sell its graphic
arts products subsidiary, NAPP Systems Inc. for approximately $55,000,000. It is
anticipated that the closing will occur by January 17, 1997. The results for
NAPP Systems Inc.'s operations have been classified as discontinued operations
for all periods presented in the consolidated statements of income. The assets
and liabilities of discontinued operations have been classified in the
consolidated balance sheet as "net assets of discontinued operations" as of
September 30, 1996.
Upon the signing of the letter of intent, the Company recorded an after tax
charge of $15,948,000 which includes estimated earnings and dividends through
the anticipated closing date.
Summary operating results of discontinued operations are as follows:
1996 1995 1994
-----------------------------
(In Thousands)
Sales ....................................... $65,552 $59,448 $61,310
Costs and expenses .......................... 51,040 47,421 50,120
-----------------------------
Income before income taxes .................. 14,512 12,027 11,190
Provision for income taxes .................. 6,787 5,800 5,473
-----------------------------
Income, net of tax ............ 7,725 6,227 5,717
-----------------------------
(Loss) on disposition before income taxes ... (14,563) - - - -
Provision for income taxes .................. 1,385 - - - -
-----------------------------
(Loss) on disposition ......... (15,948) - - - -
-----------------------------
Income (loss) from discontinued
operations .................... $(8,223) $ 6,227 $ 5,717
=============================
<PAGE>
Net assets of discontinued operations as of September 30, 1996 are as follows:
Accounts receivable, net ........................... $9720
Inventories ........................................ 12,606
Other .............................................. 206
Property and equipment, net ........................ 4,996
Intangibles, net ................................... 52,777
-------
Total ................................ 80,305
-------
Accrued loss on disposal ........................... 14,563
Deferred income taxes .............................. 1,104
Other liabilities .................................. 6,683
Long-term debt ..................................... 1,427
Deferred compensation .............................. 149
-------
23,926
-------
Net assets of discontinued
operations ........................... $56,379
=======
Note 3. ACQUISITIONS
On March 31, 1995, the Company issued 3,293,000 shares of common stock, in
exchange for 50.25% of the outstanding shares of Journal-Star Printing Co., a
subsidiary which prior to the acquisition was 49.75% owned by the Company. The
total acquisition cost over the fair value of the net assets acquired was
$41,586,000.
The acquisition has been accounted for as a purchase. The results of operations
of 100% of the Journal-Star Printing Co. since the date of acquisition are
included in the consolidated financial statements. Equity in net income was
recorded for the Company's 49.75% interest in income through March 31, 1995.
On August 28, 1995, the Company acquired, for cash, 100% of the outstanding
stock of SJL of Kansas Corp., the owner of two television stations in Wichita
and Topeka, Kansas. The total acquisition cost was $51,100,000. The excess of
the total acquisition cost, over the fair value of the net assets acquired, was
$19,790,000.
The acquisition has been accounted for as a purchase, and results of operations
of SJL of Kansas Corp. since the date of acquisition are included in the
consolidated financial statements.
Unaudited pro forma consolidated results of operations for the years ended
September 30, 1995 and 1994, as though 100% of the Journal-Star Printing Co. and
SJL of Kansas Corp. had been acquired as of October 1, 1993, follows:
Year Ended September 30
-----------------------
1995 1994
-----------------------
(In Thousands Except Per
Share Data)
Operating revenue ............................ $412,600 $383,608
Income from continuing operations ............ 52,004 46,931
Earnings per share, continuing operations .... 1.07 0.93
The above amounts reflect adjustments for amortization of intangibles,
additional depreciation on revalued purchased assets and imputed interest on
borrowed funds.
The Company also acquired four specialty publications and a satellite television
station in 1995 and two specialty publications in 1994.
<PAGE>
The purchase price of business acquisitions was allocated as follows:
<TABLE>
Year Ended
September 30,
-------------------
1995 1994
-------------------
(In Thousands)
<S> <C> <C>
Noncash working capital acquired .......................................... $ 1,723 $ 161
Property and equipment .................................................... 21,484 436
Intangibles ............................................................... 108,890 3,535
Other long-term assets .................................................... 6,370 - -
Debt assumed .............................................................. (1,871) - -
Issuance of note payable .................................................. (2,315) - -
Deferred items ............................................................ (22,682) - -
Common stock issued ....................................................... (58,250) - -
-------------------
Total cash purchase price ................................... 53,349 4,132
Less equity interest in cash balance at date of
acquisition ............................................................ (11,740) - -
-------------------
$ 41,609 $ 4,132
===================
</TABLE>
Note 4. INVESTMENTS IN ASSOCIATED COMPANIES
The Company has a 50% ownership interest in Madison Newspapers, Inc., a
newspaper publishing company operating in Madison, Wisconsin, Quality
Information Systems, a direct marketing venture, and INN Partnership, LC, a
venture providing internet assistance to newspapers. The Company had, until
March 31, 1995 (see Note 3), an effective 50% ownership interest in Journal-Star
Printing Co., a newspaper publishing company in Lincoln, Nebraska.
Summarized financial information of the associated companies is as follows:
<TABLE>
Combined Associates 1996 1995 1994
-------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C>
ASSETS
Current assets .......................................... $ 23,470 $ 22,873 $ 35,895
Investments and other assets ............................ 3,912 3,865 13,757
Property and equipment, net ............................. 6,741 6,359 13,835
------------------------------
$ 34,123 $ 33,097 $ 63,487
==============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities ..................................... $ 11,778 $ 12,180 $ 17,839
Long-term debt .......................................... 515 590 615
Deferred items .......................................... - - - - 2,414
Stockholders' equity .................................... 21,830 20,327 42,619
------------------------------
$ 34,123 $ 33,097 $ 63,487
==============================
Revenue ................................................. $ 73,016 $ 85,421 $ 98,011
Income before depreciation, amortization, interest,
and income taxes ..................................... 23,663 27,159 33,454
Operating income ........................................ 21,962 25,104 31,629
Net income .............................................. 14,016 16,076 20,353
</TABLE>
<PAGE>
Receivables from associated companies consist of dividends. Certain information
relating to Company investments in these associated companies is as follows:
1996 1995 1994
--------------------------------
(In Thousands)
Share of:
Stockholders' equity ............ $ 10,915 $ 10,164 $ 21,265
Undistributed earnings .......... 10,574 9,946 19,508
Note 5. DEBT
The Company has long-term obligations, net of current maturities, as follows:
<TABLE>
September 30,
----------------------------
1996 1995 1994
----------------------------
<S> <C> <C> <C>
Insurance companies notes payable:
Senior notes ......................................... $ - - $ - - $20,000
Senior notes, effective rate of 9.92%,
$25,000,000 due January 1998 and 1999 ............. 50,000 50,000 75,000
Bank term loan .......................................... - - 20,000 - -
Program contracts, noninterest bearing, due
through 2000 ......................................... 2,290 2,763 2,040
Other ................................................... - - 2,748 1,601
---------------------------
$52,290 $ 75,511 $98,641
===========================
</TABLE>
At September 30, 1996 the Company had $15,000,000 of borrowings under an
unsecured line-of-credit agreement with a bank which terminates in July 1998.
Interest rates float at rates specified in the agreement.
Aggregate maturities during the next four years are $43,213,000, $26,939,000,
$25,337,000, and $14,000. Covenants under these agreements are not considered
restrictive to normal operations or anticipated stockholder dividends.
Note 6. RETIREMENT AND COMPENSATION PLANS
Substantially all the Company's employees are covered by a qualified defined
contribution retirement plan. The Company has other retirement and compensation
plans for executives and others. Retirement and compensation plan costs,
including interest on deferred compensation costs, charged to operations were
$11,200,000 in 1996, $9,200,000 in 1995, and $10,200,000 in 1994.
Note 7. COMMON STOCK AND CLASS B COMMON STOCK
Class B Common Stock has ten votes per share on all matters and generally votes
as a class with Common Stock (which has one vote per share). The transfer of
Class B Common Stock is restricted; however, Class B Common Stock is at all
times convertible into shares of Common Stock on a share-for-share basis. Common
Stock and Class B Common Stock have identical rights with respect to cash
dividends and upon liquidation.
<PAGE>
Note 8. STOCK OPTIONS, RESTRICTED STOCK AND STOCK PURCHASE PLANS
Stock option and restricted stock plans:
The Company has reserved 6,893,000 shares of common stock for issuance to key
employees under incentive and nonstatutory stock option plans and a restricted
stock plan approved by stockholders. Options have been granted at a price equal
to the fair market value on the date of grant, and are exercisable in cumulative
installments over a ten-year period. Other pertinent information related to the
stock option plans is as follows:
Number of Shares
--------------------------------
1996 1995 1994
--------------------------------
(In Thousands)
Under option, beginning of year ......... 2,220 2,406 2,556
Granted .............................. 241 192 198
Terminated and canceled .............. (3) (10) (34)
Exercised ............................ (179) (368) (314)
-------------------------------
Under option, end of year ............... 2,279 2,220 2,406
===============================
Options exercisable, end of year ........ 1,861 1,778 1,856
===============================
Average Price
--------------------------------
1996 1995 1994
--------------------------------
Granted during the year $19.96 $16.66 $16.03
Exercised during the year 12.64 11.45 12.37
Under option, end of year 14.52 13.79 13.20
Restricted stock is subject to an agreement requiring forfeiture by the employee
in the event of termination of employment within three years of the grant date
for reasons other than normal retirement, death or disability. As of September
30, 1996, 130,000 shares of restricted stock were outstanding.
At September 30, 1996, 4,614,000 shares were available for granting of stock
options or issuance of restricted stock.
Stock purchase plan:
The Company has 1,494,000 additional shares of common stock available for
issuance pursuant to a non-officer employee stock purchase plan. April 30, 1997
is the exercise date for the current offering. The purchase price is the lower
of 85% of the fair market value at the date of the grant or the exercise date
which is one year from the date of the grant.
In 1996, 1995 and 1994 employees purchased 124,000, 109,000, and 120,000 shares,
respectively, at a per share price of $15.26 in 1996, $14.90 in 1995 and $12.49
in 1994.
<PAGE>
Note 9. INCOME TAX MATTERS
Components of income tax expense consist of the following:
Year Ended September 30,
-------------------------
1996 1995 1994
-------------------------
(In Thousands)
Paid or payable on currently taxable income:
Federal .......................................... $32,965 $29,031 $27,846
State ............................................ 6,541 5,948 5,535
Net increase due to deferred income taxes ........... 2,698 1,796 650
-------------------------
$42,204 $ 36,775 $ 34,031
=========================
The total tax provision has been allocated to the following financial statement
items:
Year Ended September 30,
-------------------------
1996 1995 1994
-------------------------
(In Thousands)
Income from continuing operations ................. $34,032 $30,975 $28,558
Discontinued operations:
Income from discontinued operations ............ 6,787 5,800 5,473
Disposition of discontinued operations ......... 1,385 - - - -
-------------------------
$42,204 $36,775 $34,031
=========================
Income tax expense for the years ended September 30, 1996, 1995, and 1994 is
different than the amount computed by applying the U.S. federal income tax rate
to income before income taxes. The reasons for these differences are as follows:
% of Pre-Tax Income
-----------------------
1996 1995 1994
-----------------------
Computed "expected" income tax expense .............. 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit ...... 4.4 4.4 4.2
Net income of associated companies taxed at dividend
rates ............................................ (2.5) (3.1) (4.3)
Goodwill amortization ............................... 2.0 1.7 1.8
Other ............................................... (0.1) (0.8) 2.1
-----------------------
38.8% 37.2% 38.8%
=======================
Foreign taxes are not material.
<PAGE>
Net deferred tax liabilities consist of the following components as of September
30, 1996, 1995 and 1994:
<TABLE>
1996 1995 1994
-------------------------
(In Thousands)
<S> <C> <C> <C>
Deferred tax liabilities:
Property and equipment ............................... $ 9,054 $ 8,607 $ 3,429
Equity in undistributed earnings of affiliates ....... 897 883 1,676
Deferred gain on sale of broadcast properties ........ 3,308 3,308 3,308
Identifiable intangible assets ....................... 32,409 36,179 19,686
Other ................................................ 2,657 2,303 - -
-------------------------
48,325 51,280 28,099
-------------------------
Deferred tax assets:
Accrued compensation ................................. 7,290 7,501 7,525
Receivable allowance ................................. 1,774 1,550 1,746
Loss carryforwards acquired .......................... 9,147 10,544 784
Capital loss carryforward ............................ 5,752
Other ................................................ 2,155 2,654 3,084
-------------------------
26,118 22,249 13,139
Less, valuation allowance ............................ 12,652 10,263 - -
-------------------------
13,466 11,986 13,139
-------------------------
$34,859 $39,294 $14,960
=========================
</TABLE>
The components giving rise to the net deferred tax liabilities described above
have been included in the accompanying balance sheets as of September 30, 1996,
1995, and 1994 as follows:
1996 1995 1994
-----------------------------
(In Thousands)
Current assets .................................. $ 5,925 $ 5,923 $ 6,419
Noncurrent liabilities .......................... (40,784) (45,217) (21,379)
----------------------------
$(34,859) $(39,294) $(14,960)
============================
The Company provided a valuation allowance of $5,752,000 during 1996, due to
limitations imposed by the tax laws on the Company's ability to realize the
benefit of the capital loss carryforward related to the disposal of NAPP Systems
Inc. In addition, as a result of the operations of SJL of Kansas Corp. (SJL)
management has determined that the valuation allowance related to the acquired
operating loss carryforward should be reduced to $6,900,000 from the original
reserve of $10,263,000 with a corresponding $3,363,000 reduction to goodwill. As
of September 30, 1996 the SJL net operating loss carryforward was approximately
$23,000,000 and will expire in varying amounts from 1999 to 2010. During 1994,
as a result of changes in the operations of New Mexico Broadcasting Company,
Inc. management has determined that it is more likely than not that the
Company's remaining net operating losses will be utilized and, accordingly,
reduced the valuation allowance that it had previously established by $1,703,000
with a corresponding reduction in goodwill. The Company changed its estimate of
the tax basis of acquired intangibles and reduced goodwill by $5,877,000 during
the year ended September 30, 1994.
<PAGE>
Note 10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value.
The carrying amounts of cash and cash equivalents, temporary investments,
receivables, and accounts payable approximate fair value because of the short
maturity of those instruments. The carrying value of other investments is as
follows: $6,386,000 of debt and equity securities in a deferred compensation
trust are carried at fair value based upon quoted market prices and $4,282,000
of equity securities, consisting primarily of the Company's 17% ownership of the
nonvoting common stock of The Capital Times Company, are carried at cost, as the
fair value is not readily determinable.
The fair value of the Company's debt is estimated based on the quoted market
prices for the same or similar issues or on the current rates offered to the
Company for debt of the same remaining maturities. The estimated fair values of
the Company's debt instruments are as follows:
Carrying
Amount Fair Value
------------------------
(In Thousands)
September 30:
1996 $ 95,503 $ 97,672
1995 123,489 127,723
1994 130,532 134,130
Note 11. LINE OF BUSINESS INFORMATION
<TABLE>
Year Ended September 30,
-------------------------------
1996 1995 1994
-------------------------------
(In Thousands)
<S> <C> <C> <C>
Revenue:
Newspapers:
Wholly-owned properties .......................... $302,564 $274,877 $241,079
Equity in net income of associated companies ..... 7,008 8,277 10,162
Broadcasting ........................................ 117,797 100,586 90,000
-------------------------------
Total revenue ............................ $ 427,369 $383,740 $341,241
===============================
Operating income:
Newspapers .......................................... $ 82,695 $ 76,643 $ 76,043
Broadcasting ........................................ 22,953 26,934 21,494
Corporate and other ................................. (10,907) (12,172) (13,250)
-------------------------------
Total operating income ................... $ 94,741 $ 91,405 $ 84,287
===============================
Identifiable assets:
Newspapers .......................................... $226,097 $229,765 $174,695
Broadcasting ........................................ 198,441 211,652 139,401
Graphic arts ........................................ - - 87,880 88,225
Corporate ........................................... 46,499 30,632 72,380
Discontinued operations ............................. 56,379 - - - -
-------------------------------
Total identifiable assets ................ $527,416 $559,929 $474,701
===============================
</TABLE>
<PAGE>
Year Ended September 30,
-----------------------------
1996 1995 1994
-----------------------------
(In Thousands)
Depreciation:
Newspapers ................................. $ 8,063 $ 7,041 $ 5,645
Broadcasting ............................... 7,309 4,388 3,917
Corporate .................................. 864 536 504
----------------------------
Total depreciation .............. $ 16,236 $ 11,965 $ 10,066
============================
Amortization of intangibles:
Newspapers ................................. $ 6,505 $ 5,746 $ 5,177
Broadcasting ............................... 5,058 3,755 3,661
----------------------------
Total amortization of intangibles $ 11,563 $ 9,501 $ 8,838
============================
Capital expenditures:
Newspapers ................................. $ 11,018 $ 9,875 $ 12,993
Broadcasting ............................... 6,948 7,141 4,298
Graphic arts (discontinued operations) ..... 290 63 170
Corporate .................................. 540 356 150
----------------------------
Total capital expenditures ...... $ 18,796 $ 17,435 $ 17,611
============================
Note 12. OTHER INFORMATION
Balance sheet information:
Inventories consist of the following:
September 30,
-------------------------
1996 1995 1994
-------------------------
(In Thousands)
Newsprint .......................................... $ 3,668 $ 3,634 $ 2,343
Graphic arts products:
Raw material .................................... - - 7,554 5,684
Finished goods .................................. - - 7,167 5,120
-------------------------
$ 3,668 $18,355 $13,147
=========================
Program rights and other consist of the following:
September 30,
-------------------------
1996 1995 1994
-------------------------
(In Thousands)
Program rights ..................................... $ 6,577 $ 6,793 $ 6,278
Deferred income taxes .............................. 5,925 5,923 6,419
Other .............................................. 4,681 3,971 3,881
------------------------
$17,183 $16,687 $16,578
=========================
<PAGE>
Intangibles consist of the following:
September 30,
----------------------------
1996 1995 1994
----------------------------
(In Thousands)
Goodwill ......................................... $194,746 $268,945 $206,525
Less, accumulated amortization ................... 50,240 64,185 56,631
----------------------------
144,506 204,760 149,894
----------------------------
Covenants and consulting agreements .............. 25,739 25,739 25,315
Less, accumulated amortization ................... 18,859 15,811 13,543
----------------------------
6,880 9,928 11,772
----------------------------
Customer lists, broadcasting licenses and
agreements and newspaper subscriber lists ..... 116,472 124,472 79,432
Less, accumulated amortization ................... 21,797 18,146 15,465
----------------------------
94,675 106,326 63,967
----------------------------
$246,061 $321,014 $225,633
============================
Compensation and other accruals consist of the following:
September 30,
-------------------------
1996 1995 1994
-------------------------
(In Thousands)
Compensation ....................................... $ 8,156 $10,355 $ 9,684
Deferred compensation, current portion ............. 96 1,394 1,567
Vacation pay ....................................... 3,946 4,824 3,892
Retirement and stock purchase plans ................ 2,930 2,941 2,769
Interest ........................................... 1,429 1,834 2,365
Other .............................................. 3,862 7,083 6,246
-------------------------
$20,419 $28,431 $26,523
=========================
<PAGE>
Cash flows information:
Year Ended September 30,
-------------------------
1996 1995 1994
-------------------------
(In Thousands)
Cash payments for:
Interest ........................................ $10,052 $12,433 $14,042
=========================
Income taxes .................................... $41,021 $45,294 $31,218
=========================
Program rights were acquired by issuing
long-term contracts as follows .................. $ 7,700 $ 6,000 $ 3,600
=========================
Issuance of restricted common stock, net ........... $ 590 $ 334 $ 452
=========================
Change in tax contingency estimates:
Reduction in goodwill ........................... $ 3,363 $ - - $ 7,580
=========================
Reduction in:
Deferred income taxes ........................ $ 3,363 $ - - $ 5,801
Income taxes payable ......................... - - - - 1,779
-------------------------
$ 3,363 $ - - $ 7,580
=========================
Change in purchase accounting estimates:
Reduction in identified intangibles ............. $ 8,000 $ - - $ - -
Additional long-term debt ....................... 16 - - - -
-------------------------
$ 8,016 $ - - $ - -
=========================
Reduction in deferred income taxes .............. $ 2,666 $ - - $ - -
Increase in goodwill ............................ 4,085 - - - -
Increase in other long-term assets .............. 1,265 - - - -
-------------------------
$ 8,016 $ - - $ - -
=========================
<PAGE>
SUPPLEMENTARY DATA
QUARTERLY RESULTS (UNAUDITED)
<TABLE>
4th 3rd 2nd 1st
-----------------------------------
(In Thousands Except Per Share Data)
<S> <C> <C> <C> <C>
1996 Quarter:
Operating revenue .......................................... $107,129 $109,499 $ 99,960 $110,781
===================================
Income from continuing operations .......................... $ 14,513 $ 15,381 $ 9,084 $ 14,692
Income (loss) from discontinued
operations .............................................. (12,856) 1,664 1,721 1,248
-----------------------------------
Net income ...................................... $ 1,657 $ 17,045 $ 10,805 $ 15,940
===================================
Earnings per common and common equivalent share:
Income from continuing operations ....................... $ 0.30 $ 0.32 $ 0.19 $ 0.30
Income (loss) from discontinued
operations ............................................ 0.27) 0.03 0.04 0.03
-----------------------------------
Net income ...................................... $ 0.03 $ 0.35 $ 0.23 $ 0.33
===================================
1995 Quarter:
Operating revenue .......................................... $ 99,150 $101,313 $ 84,849 $ 98,428
===================================
Income from continuing operations .......................... $ 11,925 $ 14,315 $ 9,941 $ 16,051
Income from discontinued operations ........................ 2,157 2,120 1,175 775
-----------------------------------
Net income ...................................... $ 14,082 $ 16,435 $ 11,116 $ 16,826
===================================
Earnings per common and common equivalent share:
Income from continuing operations ....................... $ 0.25 $ 0.30 $ 0.22 $ 0.35
Income from discontinued operations ..................... 0.04 0.04 0.03 0.02
-----------------------------------
Net income ...................................... $ 0.29 $ 0.34 $ 0.25 $ 0.37
===================================
1994 Quarter:
Operating revenue .......................................... $ 87,558 $ 87,624 $ 79,531 $ 86,528
===================================
Income from continuing operations .......................... $ 12,800 $ 12,394 $ 8,044 $ 11,899
Income from discontinued operations ........................ 806 1,973 1,520 1,418
-----------------------------------
Net income ...................................... $ 13,606 $ 14,367 $ 9,564 $ 13,317
===================================
Earnings per common and common equivalent share:
Income from continuing operations ....................... $ 0.27 $ 0.27 $ 0.17 $ 0.25
Income from discontinued operations ..................... 0.02 0.04 0.03 0.03
-----------------------------------
Net income ...................................... $ 0.29 $ 0.31 $ 0.20 $ 0.28
===================================
</TABLE>
<PAGE>
Item 9. Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure
Not applicable.
PART III
The information called for by Part III of this Form 10-K is omitted in
accordance with General Instruction G because the Company will file with the
Commission a definitive proxy statement pursuant to Regulation 14A not later
than 120 days after the close of the Company's fiscal year ended September 30,
1996.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K
Page Number
(a) 1. Financial Statements
Independent Auditor's Report and Consent
Financial Statements
Consolidated balance sheets as of September 30,
1996, 1995 and 1994
Consolidated statements of income years ended
September 30, 1996, 1995 and 1994
Consolidated statements of stockholders' equity
years ended September 30, 1996, 1995 and 1994
Consolidated statements of cash flows years
ended September 30, 1996, 1995 and 1994
Notes to consolidated financial statements
(a) 2. Financial statements schedule
Schedule
XII - Valuation and qualifying accounts years ended
September 30, 1996, 1995 and 1994
All other schedules have been omitted as not required, not
applicable, not deemed material or because the information is
included in the Notes to Financial Statements.
(a) 3. Exhibits (listed by numbers corresponding to the
Exhibit Table of Item 601 in Regulation S-K).
11 Computation of earnings per share years ended
September 30, 1996, 1995 and 1994
21 Subsidiaries
24 Power of Attorney
27 Financial Data Schedule
(b) No reports on Form 8-K were filed for the three months ended September 30,
1996:
* * * * *
For the purposes of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1991) under the Securities Act of 1933, the
undersigned registrant hereby undertakes as follows, which undertaking
shall be incorporated by reference into registrant's Registration
Statements on Form S-8 Nos. 2-56652 (filed June 17, 1976), 2-58393
(filed March 11, 1977), 2-77121 (filed April 22, 1982), 33-19725 (filed
January 20, 1988), 33-46708 (filed March 31, 1992), 333-6435 and
333-6433 (filed June 20, 1996).
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act of 1933, and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling person
of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
AND CONSENT
To the Stockholders
Lee Enterprises, Incorporated
and Subsidiaries
Davenport, Iowa
We have audited the accompanying consolidated balance sheets of Lee Enterprises,
Incorporated and subsidiaries as of September 30, 1996, 1995 and 1994 and the
related consolidated statements of income, stockholders' equity, and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Lee Enterprises,
Incorporated and subsidiaries as of September 30, 1996, 1995 and 1994 and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
In our opinion, schedules included in this Annual Report on Form 10-K for the
year ended September 30, 1996, present fairly the information set forth therein,
in conformity with generally accepted accounting principles.
We consent to the incorporation by reference in the Registration Statements on
Form S-8 No. 2-56652, No. 2-77121, No. 2-58393, No. 33-19725, No. 33-46708
No. 333-6435 and No. 333-6433 and in the related Prospectuses of our
report dated November 4, 1996 with respect to the financial
statements of Lee Enterprises, Incorporated, incorporated by reference
and the schedule included in this Annual Report on Form 10-K for the year
ended September 30, 1996 and to the reference to us under the heading "Experts"
in such Prospectuses.
/s/ McGladrey & Pullen, LLP
Davenport, Iowa
November 4, 1996
<PAGE>
LEE ENTERPRISES, INCORPORATED
AND WHOLLY-OWNED SUBSIDIARIES
SCHEDULE XII - VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
<TABLE>
Column A Column B Column C Column D Column E
(1)
Balance
At Additions Charged Deduction Balance
Beginning Charged To Other From At Close
Description Of Period To Income Accounts Reserves Of Period
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts:
For the year ended
September 30, 1996 .................... $4,100 $2,560 $ (375)(3) $2,285 $4,000
For the year ended
September 30, 1995 .................... 4,100 1,525 408 1,933 4,100
For the year ended
September 30, 1994 .................... 3,400 2,200 - - 1,500 4,100
<FN>
(1) Represents accounts written off as uncollectible, net of recoveries which
are immaterial.
(2) Balance upon consolidation of Journal-Star Printing Company's 49.75%
previously owned and acquisition of 50.25% interest and acquisition of SJL
of Kansas, Corp.
(3) Balance upon disposal of NAPP Systems Inc.
</FN>
</TABLE>
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this annual report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date December 27, 1996 LEE ENTERPRISES, INCORPORATED
/s/ Richard D. Gottlieb /s/ Larry L. Bloom
- ------------------------------- -----------------------------
Richard D. Gottlieb, President Larry L. Bloom,
Chief Executive Officer, and Vice-President of Finance,
Director Treasurer and Chief Financial
Officer
/s/ G. C. Wahlig
------------------------------
G. C. Wahlig,
Principal Accounting Officer
We, the undersigned directors of Lee Enterprises, Incorporated, hereby severally
constitute Richard D. Gottlieb and Larry L. Bloom, and each of them, our true
and lawful attorneys with full power to them, and each of them, to sign for us
and in our names, in the capacities indicated below, the Annual Report on Form
10-K of Lee Enterprises, Incorporated for the fiscal year ended September 30,
1996 to be filed herewith and any amendments to said Annual Report, and
generally do all such things in our name and behalf in our capacities as
directors to enable Lee Enterprises, Incorporated to comply with the provisions
of the Securities Exchange Act of 1934 as amended, and all requirements of the
Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorneys, or either of them, to
said Annual Report on Form 10-K and any and all amendments thereto.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated:
Signature Title Date
/s/ Lloyd G. Schermer Chairman of the
Lloyd G. Schermer Board of Directors November 13, 1996
/s/ J. P. Guerin
J. P. Guerin Director November 13, 1996
/s/ Phyllis Sewell
Phyllis Sewell Director November 13, 1996
/s/ Mark Vittert
Mark Vittert Director November 13, 1996
/s/ Ronald L. Rickman
Ronald L. Rickman Director November 13, 1996
/s/ Richard W. Sonnenfeldt
Richard W. Sonnenfeldt Director November 13, 1996
/s/ Rance E. Crain
Rance E. Crain Director November 13, 1996
/s/ Charles E. Rickershauser, Jr.
Charles E. Rickershauser, Jr. Director November 13, 1996
/s/ Andrew E. Newman
Andrew E. Newman Director November 13, 1996
LEE ENTERPRISES, INCORPORATED
AND WHOLLY-OWNED SUBSIDIARIES
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
Year Ended September 30,
----------------------------
1996 1995 1994
----------------------------
Amounts in Thousands, Except
Per Share Data
Number of shares of common stock outstanding
at beginning of the period ................ 47,367 45,520 46,254
Weighted average number of shares of common
stock issued (reacquired) during the period (267) 700 (56)
Weighted average number of common stock
equivalents ............................... 891 742 652
Weighted average number of shares of common
stock outstanding during each period ...... 47,991 46,962 46,850
Income from continuing operations ............ $53,670 $52,232 $45,137
Income (loss) from discontinued operations ... (8,223) 6,227 5,717
----------------------------
Net income ..................... $45,447 $58,459 $50,854
============================
Earnings per share of common stock:
Income from continuing operations ......... $ 1.12 $ 1.11 $ 0.97
income (loss) from discontinued operations (0.17) 0.13 0.12
----------------------------
Net income ..................... $ 0.95 $ 1.24 $ 1.09
============================
LEE ENTERPRISES, INCORPORATED
AND WHOLLY-OWNED SUBSIDIARIES
EXHIBIT 21 - WHOLLY-OWNED SUBSIDIARIES
AND ASSOCIATED COMPANIES
Percentage of
Voting Securities
State of Incorporation Owned
- --------------------------------------------------------------------------------
Lee Enterprises, Incorporated Delaware Parent
Lee Technical Systems, Inc. Iowa 100%
Lee Consolidated Holdings Co. South Dakota 100%
KOIN-TV, Inc. Delaware 100%
NAPP Systems Inc. Iowa 100%
New Mexico Broadcasting Company, Inc. New Mexico 100%
Accudata, Inc. Iowa 100%
Target Marketing Systems, Inc. Iowa 100%
Journal-Star Printing Co. Nebraska 100%
Madison Newspapers, Inc. Wisconsin 50%
SJL of Kansas Corp. Kansas 100%
INN Partnership LC Iowa 50%
EXHIBIT 24
POWER OF ATTORNEY
We, the undersigned directors of Lee Enterprises, Incorporated, hereby severally
constitute Richard D. Gottlieb and Larry L. Bloom, and each of them, our true
and lawful attorneys with full power to them, and each of them, to sign for us
and in our names, the capacities indicated below, the Annual Report on Form 10-K
of Lee Enterprises, Incorporated for the fiscal year ended September 30, 1996 to
be filed herewith and any amendments to said Annual Report, and generally do all
such things in our name and behalf in our capacities as directors to enable Lee
Enterprises, Incorporated to comply with the provisions of the Securities
Exchange Act of 1934 as amended, and all requirements of the Securities and
Exchange Commission, hereby ratifying and confirming our signatures as they may
be signed by our said attorneys, or either of them, to said Annual Report on
Form 10-K and any and all amendments thereto.
Date
/s/ Rance E. Crain
Rance E. Crain, Director November 13, 1996
/s/ J. P. Guerin
J. P. Guerin, Director November 13, 1996
/s/ Andrew E. Newman
Andrew E. Newman, Director November 13, 1996
/s/ Charles E. Rickershauser, Jr.
Charles E. Rickershauser, Jr., Director November 13, 1996
/s/ Ronald L. Rickman
Ronald L. Rickman November 13, 1996
/s/ Lloyd G. Schermer
Lloyd G. Schermer, Chairman of the Board
and Director November 13, 1996
/s/ Phyllis Sewell
Phyllis Sewell, Director November 13, 1996
/s/ Richard W. Sonnenfeldt
Richard W. Sonnenfeldt November 13, 1996
/s/ Mark Vittert
Mark Vittert, Director November 13, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 30, 1996 FORM 10-K FOR LEE ENTERPRISES, INCORPORATED AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 19,267
<SECURITIES> 0
<RECEIVABLES> 52,773
<ALLOWANCES> 4,000
<INVENTORY> 3,668
<CURRENT-ASSETS> 146,708
<PP&E> 241,887
<DEPRECIATION> 137,182
<TOTAL-ASSETS> 527,416
<CURRENT-LIABILITIES> 97,777
<BONDS> 52,290
0
0
<COMMON> 94,044
<OTHER-SE> 230,910
<TOTAL-LIABILITY-AND-EQUITY> 527,416
<SALES> 420,361
<TOTAL-REVENUES> 427,369
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 332,628
<LOSS-PROVISION> 2,560
<INTEREST-EXPENSE> 9,648
<INCOME-PRETAX> 87,702
<INCOME-TAX> 34,032
<INCOME-CONTINUING> 53,670
<DISCONTINUED> (8,223)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,447
<EPS-PRIMARY> .95
<EPS-DILUTED> .95
</TABLE>
