[DESCRIPTION]
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[TEXT]
FORM 10-Q
[x] Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ended March 31, 1994
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File Number 1-6227
Lee Enterprises, Incorporated
A Delaware Corporation I.D. #42-0823980
215 N. Main Street, Davenport, Iowa 52801
Phone: (319) 383-2100
Indicate by a check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes [X] No
[ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date.
Class Outstanding at March 31, 1994
Common Stock, $2.00 par value 16,235,715
Class "B" Common Stock, $2.00 par value 6,867,862
[DESCRIPTION]
PART I. FINANCIAL INFORMATION
Item 1.
LEE ENTERPRISES, INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Data)
Three Months Six Months
Ended March 31, Ended March 31,
1994 1993 1994 1993
(Unaudited)
Operating revenue:
Newspaper:
Advertising $ 30,194 $ 28,315 $ 65,202 $ 62,060
Circulation 16,406 15,521 32,848 31,090
Other 10,031 7,858 19,361 16,197
Broadcasting 20,893 18,064 43,827 40,544
Media products and services 15,440 13,594 31,072 27,374
Equity in net income of
associated companies 1,959 1,557 4,700 3,991
$ 94,923 $ 84,909 $197,010 $181,256
Operating expenses:
Compensation costs $ 34,506 $ 30,950 $ 68,609 $ 62,865
Newsprint and ink 4,859 4,840 10,715 10,553
Depreciation 2,649 2,761 5,332 5,453
Amortization of intangibles 3,173 3,424 6,333 6,876
Other 30,282 27,992 61,528 57,766
$ 75,469 $ 69,967 $152,517 $143,513
Operating income $ 19,454 $ 14,942 $ 44,493 $ 37,743
Financial (income) expense,
net:
Financial (income) $ (540) $ (472) $ (1,249) $ (1,073)
Financial expense 3,363 3,881 7,095 7,952
$ 2,823 $ 3,409 $ 5,846 $ 6,879
Income before taxes
on income $ 16,631 $ 11,533 $ 38,647 $ 30,864
Income taxes 7,067 5,032 15,766 12,860
Net income $ 9,564 $ 6,501 $ 22,881 $ 18,004
Weighted average number of
shares 23,461 23,491 23,461 23,508
Earnings per share $ .41 $ .28 $ .98 $ .77
Dividends per share $ .21 $ .20 $ .42 $ .40
/TABLE
LEE ENTERPRISES, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
March 31, September 30,
1994 1993
(Unaudited)
ASSETS
Cash and cash equivalents $ 19,856 $ 17,072
Temporary investments 41,595 45,500
Accounts receivable, net 43,488 45,421
Inventories 9,140 11,177
Film rights and other 12,017 15,952
Total current assets $126,096 $135,122
Investments, associated companies 20,818 20,305
Property and equipment, net 78,647 75,356
Intangibles and other assets 247,437 251,534
$472,998 $482,317
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 97,213 $ 91,708
Long-term debt, less current maturities 100,215 127,466
Deferred items 39,758 39,661
Stockholders' equity 235,812 223,482
$472,998 $482,317
/TABLE
LEE ENTERPRISES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
1994 1993
(Unaudited)
Six Months Ended March 31:
CASH PROVIDED BY OPERATIONS
Net income $ 22,881 $ 18,004
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation and amortization 11,665 12,329
Distributions in excess of
earnings of associated companies 1,624 1,597
Other balance sheet changes 5,806 (4,554)
Net cash provided by operations $ 41,976 $ 27,376
CASH (REQUIRED FOR) INVESTING ACTIVITIES
Acquisitions $ (2,370) $ (444)
Purchase of temporary investments (67,579) (20,200)
Proceeds from maturities of temporary
investments 71,484 24,700
Purchase of property and equipment (8,600) (5,646)
Net cash (required for) investing
activities $ (7,065) $ (1,590)
CASH (REQUIRED FOR) FINANCING ACTIVITIES
Purchase of common stock $ (1,933) $ (3,853)
Cash dividends paid (4,836) (4,637)
Payment of debt (25,667) (10,852)
Other, primarily stock options exercised 309 3,029
Net cash (required for) financing
activities $(32,127) $(16,313)
Net increase in cash and cash
equivalents $ 2,784 $ 9,473
Cash and cash equivalents:
Beginning 17,072 23,271
Ending $ 19,856 $ 32,744
/TABLE
[DESCRIPTION]
LEE ENTERPRISES, INCORPORATED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL INFORMATION
NOTE 1. BASIS OF PRESENTATION
The information furnished reflects all adjustments, consisting of
normal recurring accruals, which are, in the opinion of
management, necessary to a fair presentation of the financial
position as of March 31, 1994 and the results of operations for
the three- and six-month periods ended March 31, 1994 and 1993 and
cash flows for the six-month periods ended March 31, 1994 and
1993.
NOTE 2. INVESTMENT IN ASSOCIATED COMPANIES
Condensed operating results of unconsolidated associated companies
are as follows:
Three Months Ended Six Months Ended
March 31, March 31,
1994 1993 1994 1993
(In Thousands)
(Unaudited)
Revenues $ 22,877 $ 20,907 $ 48,741 $ 44,912
Operating expenses,
except depreciation
and amortization 16,462 15,588 33,169 31,448
Depreciation and
amortization 432 442 924 926
Operating income 5,983 4,877 14,648 12,538
Financial income 440 419 885 773
Income before income
taxes 6,423 5,251 15,533 13,311
Income taxes 2,526 2,138 6,132 5,323
Net income 3,897 3,113 9,401 7,988
a. Madison Newspaper, Inc. (50% owned)
b. Journal-Star Printing Co. (49.75% owned)
c. Quality Information Systems (50% owned)
d. Consumer Target Marketing (50% owned)
LEE ENTERPRISES, INCORPORATED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL INFORMATION
NOTE 3. INVENTORIES
Inventories consist of the following:
March 31, September 30,
1994 1993
(In Thousands)
(Unaudited)
Newsprint $ 858 $ 2,904
Media products and services:
Raw material 4,443 4,737
Finished goods 3,839 3,536
$ 9,140 $ 11,177
NOTE 4. CASH FLOWS INFORMATION
The components of other balance sheet changes are:
Six Months Ended
March 31,
1994 1993
(In Thousands)
(Unaudited)
(Increase) decrease in receivables $ (204) $ 4,143
Decrease in inventories, film
rights and other 2,728 1,121
Increase (decrease) in accounts
payable, accrued expenses and
unearned income 2,287 (11,629)
Increase in income taxes payable 1,557 1,453
Other, primarily deferred items (562) 358
$ 5,806 $ (4,554)
NOTE 5. CHANGE IN ACCOUNTING PRINCIPLES
During the quarter ended September 30, 1993, the Company adopted
FASB Statement No. 109, Accounting for Income Taxes. As permitted
by Statement No. 109, the Company has elected to apply
retroactively the provisions of the Statement by restating the
financial statements for the 1993 interim periods. In connection
with the restatement the Company recorded additional goodwill and
deferred tax liabilities related to acquired identified
intangibles. The change did not have a material effect on net
income.
[DESCRIPTION]
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Operating results:
Three Months Ended Six Months Ended
March 31, March 31,
1994 1993 1994 1993
(Dollar Amounts in Thousands Except For
Per Share Data)
Revenue $ 94,923 $ 84,909 $197,010 $181,256
Percent change 11.8% 8.7%
Operating expenses 75,469 69,967 152,517 143,513
Percent change 7.9% 6.3%
Operating income 19,454 14,942 44,493 37,743
Percent change 30.2% 17.9%
Net income 9,564 6,501 22,881 18,004
Percent change 47.1% 27.1%
Earnings per share $ .41 $ .28 $ .98 $ .77
Percent change 46.4% 27.3%
Operations by line of business are as follows:
Three Months Ended Six Months Ended
March 31, March 31,
1994 1993 1994 1993
(In Thousands)
Revenue:
Newspapers $ 58,532 $ 53,360 $122,000 $113,464
Broadcasting 20,893 18,064 43,827 40,544
Media products and
services 15,498 13,485 31,183 27,248
$ 94,923 $ 84,909 $197,010 $181,256
Operating income:
Newspapers $ 16,364 $ 13,748 $ 36,268 $ 32,227
Broadcasting 4,626 2,272 10,432 8,574
Media products and
services 3,005 1,237 5,837 2,657
Corporate and other (4,541) (2,315) (8,044) (5,715)
$ 19,454 $ 14,942 $ 44,493 $ 37,743
Depreciation and
amortization:
Newspapers $ 2,663 $ 2,943 $ 5,322 $ 5,906
Broadcasting 1,924 1,975 3,772 3,837
Media products and
services 1,117 1,170 2,329 2,366
Corporate 118 97 242 220
$ 5,822 $ 6,185 $ 11,665 $ 12,329
Capital expenditures:
Newspaper $ 3,010 $ 760 $ 6,115 $ 1,175
Broadcasting 1,393 841 2,237 1,030
Media products and
services 68 64 134 292
Corporate 114 (437) 114 3,149
$ 4,585 $ 1,228 $ 8,600 $ 5,646
There were no significant non-recurring items during the quarter or six-
month period ended March 31, 1994.
QUARTER ENDED MARCH 31, 1994
Newspapers:
Wholly-owned daily newspaper advertising revenue increased $1,879,000,
6.6%. Advertising revenue from local merchants increased $715,000, 4.3%.
Local "run-of-press" advertising increased $589,000 on higher average
rates and a .9% increase in advertising inches attributable to Easter
occuring near the end of the second quarter of 1994 as opposed to the
third quarter of 1993. Local preprint units were flat while revenue
increased $126,000, 2.5%. Classified advertising revenue increased
$974,000, 12.5% as a result of a 6.1% increase in units in the automotive,
real estate and recruitment segments and higher average rates.
Circulation revenue increased $885,000, 5.7% as a result of higher rates
which offset a .4% decrease in volume. Other revenue at daily newspapers
increased $1,343,000, 28.6% primarily as a result of increases in
editorial fees, commercial printing, target marketing and other products
delivered separately from the newspaper.
Revenues from weekly newspapers, shoppers and specialty publications
increased $830,000, 26.2%. Revenue from properties acquired since the
beginning of the first quarter of the last fiscal year accounted for 42.0%
of the increase.
Compensation expense increased $1,409,000, 7.4% due to a 5.2% increase in
average compensation and a 2.2% increase in the number of hours worked
which includes the effect of shoppers and speciality publications acquired
since the first quarter of fiscal 1993. Newsprint and ink costs increased
$23,000, .4% as lower unit costs offset a $200,000 increase in newsprint
used by newspapers and a $140,000 increase in newsprint used for
commercial printing. Other cash costs increased $1,414,000, 11.1% which
includes the effect of acquisitions, commercial printing costs and the
development costs of new products.
Broadcasting:
Exclusive of the effects of the acquisition of KZIA-TV, Las Cruces, New
Mexico, revenue for the quarter increased $2,692,000, 14.9% primarily due
to the broadcast of the Winter Olympics on our five CBS affiliates.
Compensation costs increased $550,000, 7.1% principally resulting from a
4.9% increase in the number of hours worked. Portland, Omaha and
Huntington all expanded news programming which required additional
staffing and other related costs. Film amortization for the quarter
declined $224,000 primarily due to lower programming costs. Other cash
costs increased $92,000, 2.1% for the quarter.
Media Products and Services:
Revenue and operating income increased $2,013,000 and $1,768,000,
respectively, which came in large part from operations of NAPP Systems
Inc. NAPP's revenues increased 13.8% due primarily to higher plate orders
from customers in Europe, Asia and other international markets. This
cyclical increase will not affect the basic structural change in NAPP's
letterpress business where substantially all customers are expected to
convert to offset or flexographic printing within the next fifteen to
twenty years.
Corporate and other:
Costs for the quarter increased $2,226,000. Compensation and related
costs increased $1,825,000. Approximately $1,100,000 of the increase
related to performance based long-term incentive and other compensation
accruals. Medical costs included an increase of approximately $300,000
related to large claims incurred during the quarter.
Equity in Net Income of Associated Companies:
Equity in net income of associated companies increased $402,000 due in
part to a $235,000 increase in the net income of associated newspaper
companies and the balance due to income earned by 50%-owned strategic
alliances, Quality Information Systems and Consumer Target Marketing.
Financial Expenses and Income Taxes:
Interest expense was reduced due to payments on long-term debt.
Income taxes were 42.5% of pretax income for the quarter ended March 31,
1994 and 43.6% of pretax income in the quarter ended March 31, 1993.
Income taxes for the quarter ended March 31, 1994 were increased by
$300,000 (for a 2.0% increase in the effective tax rate) due to proposed
adjustments related to a current income tax examination. Contingencies
related to the amortization of intangibles for income tax purposes
increased 1993 income taxes by $300,000 (for a 2.6% increase in the
effective tax rate).
SIX MONTHS ENDED MARCH 31, 1994
Newspapers:
Wholly-owned daily newspaper advertising revenue increased $3,142,000,
5.1%. Advertising revenue from local merchants increased $243,000, 1.1%
in the first quarter and $715,000, 4.3% in the second quarter. Local
"run-of-press" advertising declined $9,000 in the first quarter and
increased $589,000 in the second quarter. Higher average rates were
realized in both periods but did not offset the 3.8% decline in
advertising inches in the first quarter. Volume increased .9% in the
second quarter partly due to pre-Easter Promotional Activity. Local
preprint units were flat while revenue increased $252,000, 3.9% in the
first quarter and $126,000, 2.5% in the second quarter. Classified
advertising revenue increased $904,000, 11.3% in the first quarter and
$974,000, 12.5% in the second quarter as a result of a 9.3% first quarter
and 6.1% second quarter increase in units in the automotive, real estate
and recruitment segments, more advertising by individual customers, and
higher average rates. Circulation revenue increased $873,000, 5.6% in the
first quarter and $885,000, 5.7% in the second quarter as a result of
higher rates which offset slight decreases in volume. Other revenue at
daily newspapers increased $361,000 in the first quarter and $1,343,000 in
the second quarter primarily as a result of increases in commercial
printing, target marketing and other non-traditional products.
Revenues from weekly newspapers, shoppers and specialty publications
increased $1,460,000, 22.5%. Revenue from properties acquired since the
beginning of the first quarter of the last fiscal year accounted for 40.2%
of the increase.
Compensation expense increased $2,813,000, 7.3% due to a 5.0% increase in
average compensation and a 2.3% increase in the number of hours worked
which includes the effect of shoppers and specialty publications acquired
since the end of fiscal 1992. Newsprint and ink costs increased $162,000,
1.5% as lower unit costs only partially offset a $400,000 increase in
newsprint used by newspapers and a $140,000 increase in newsprint used for
commercial printing. Other cash costs increased $2,103,000, 8.0% which
includes the effect of acquisitions, commercial printing costs and the
development costs of new products.
Broadcasting:
Exclusive of the effects of the acquisition of KZIA-TV, Las Cruces, New
Mexico, revenue for the six months increased $3,000,000, 7.4% as increases
in local and national advertising including the effect of broadcasting the
Winter Olympics on our five CBS affiliates more than offset the loss of
$2,300,000 in political advertising received during last year's national
political campaign. Compensation costs increased $1,240,000, 8.1% due
primarily to an increase in average compensation and a 3.3% increase in
the number of hours worked. Portland, Omaha and Huntington all expanded
news programming which required additional staffing and other related
costs. Film amortization declined $471,000 primarily due to lower
programming costs. Other cash costs increased $392,000, 4.4% for the six
month period.
Media Products and Services:
Revenue and operating income increased $3,935,000 and $3,180,000,
respectively, which came in large part from operations of NAPP Systems
Inc. NAPP's revenues increased 13.7% due primarily to higher plate orders
from North American customers who are experiencing economic recovery
compared to a year ago and increases in sales to international customers,
due in part to the new distribution arrangements with former customers of
BASF. This cyclical increase will not affect the basic structural change
in NAPP's letterpress business where substantially all customers are
expected to convert to offset or flexographic printing within the next
fifteen to twenty years.
Equity in Net Income of Associated Companies:
Equity in net income of associated companies increased $709,000 due in
part to a $472,000 increase in the net income of associated newspaper
companies, with the balance due to income earned by 50%-owned strategic
alliances, Quality Information Systems and Consumer Target Marketing.
Financial Expense and Income Taxes:
Interest expense was reduced due to payments on long-term debt.
Income taxes were 40.8% of pretax income for the six months ended
March 31, 1994 and 41.7% of pretax income in the six months ended
March 31, 1993. Contingencies related to the amortization of intangibles
for income tax purposes increased 1993 income taxes by $609,000 (for a
2.0% increase in the effective tax rate).
Liquidity and capital resources:
Cash provided by operations, which is the Company's primary source of
liquidity, generated $41,976,000 for the six months ended March 31, 1994.
Cash provided by operations for the six months ended March 31, 1993 was
reduced by $7,749,000 due to the distribution of account balances of the
Company's Deferred Compensation Unit Plan. Available cash balances and
cash flow from operations provide adequate liquidity. Covenants related
to the Company's credit agreements are not considered restrictive to
operations and anticipated stockholder dividends.
LEE ENTERPRISES, INCORPORATED
PART II. OTHER INFORMATION
[DESCRIPTION]
Item 4. Submission of matters a vote of security holders
(a) The annual meeting of the Company was held on January 28,
1994.
(b) J.P. Guerin, Charles E. Rickershauser and Mark Vittert were
reelected directors for a three-year term expiring at the 1997
annual meeting. Harry A. Fischer, Jr. was reelected as a
director for a one-year term expiring at the 1995 annual
meeting. Directors whose terms of office continued after the
meeting include: Rance E. Crain, Richard D. Gottlieb, Phyllis
Sewell, Andrew E. Newman, Ronald L. Rickman, Lloyd G.
Schermer, and Richard W. Sonnenfeldt.
(c) No other matters were voted upon at the meeting. Votes were
cast for nominees for director as follows:
For Against
J.P. Guerin 71,515,102 1,490,547
Charles E. Rickershauser 71,515,111 1,490,538
Mark Vittert 71,314,120 1,691,529
Harry A. Fischer 71,281,932 1,723,717
Votes withheld abstentions and broker non-votes were not
significant.
(d) Not applicable.
[DESCRIPTION]
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 11 - Computation of Earnings Per Share
(b) There were no reports on Form 8-K filed during the quarter for
which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LEE ENTERPRISES, INCORPORATED
DATE May 9, 1994 /s/ G. C. Wahlig
G. C. Wahlig, Chief Accounting
Officer
[DESCRIPTION]
LEE ENTERPRISES, INCORPORATED
PART I. EXHIBIT 11
Computation of Earnings Per Common Share
(In Thousands Except Per Share Amounts)
Three Months Ended Six Months Ended
March 31, March 31,
1994 1993 1994 1993
(Unaudited)
Net income applicable to
common shares $ 9,564 $ 6,501 $ 22,881 $ 18,004
Shares:
Weighted average common
shares outstanding 23,103 23,189 23,104 23,172
Dilutive effect of
certain stock options 358 302 357 336
Average common shares
outstanding as adjusted 23,461 23,491 23,461 23,508
Earnings per common share $ .41 $ .28 $ .98 $ .77
