UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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LEE ENTERPRISES, INCORPORATED
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LEE ENTERPRISES, INCORPORATED
201 N. Harrison Street, Suite 600
Davenport, Iowa 52801-1924
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD March 21, 2012
TO OUR STOCKHOLDERS:
The Annual Meeting of Stockholders (the "Annual Meeting") of Lee Enterprises, Incorporated, a Delaware corporation (the "Company"), will be held on the 4th floor of the Company's offices, 201 N. Harrison Street, Davenport, Iowa, 52801-1924, on March 21, 2012, at 9:00 a.m. CST, for the following purposes:
(1) | To elect four directors for terms of three years; |
(2) | To ratify the selection of KPMG LLP as the Company's independent registered public accounting firm; |
(3) | To grant the Board of Directors the discretionary authority to effect a reverse stock split; and |
(4) | To transact such other business as may properly come before the Annual Meeting or any adjournment thereof. |
The Board of Directors has fixed January 23, 2012 as the record date for the determination of stockholders entitled to notice of, and to vote at the Annual Meeting.
We are furnishing our proxy materials to you under Securities and Exchange Commission rules that allow public companies to deliver proxy materials to their stockholders using the Internet. On or about February 6, 2012, you were provided with a Notice of Internet Availability of Proxy Materials (“Notice”) and provided access to our proxy materials over the Internet.
We encourage you to attend the Annual Meeting. However, it is important that your shares be represented whether or not you plan to attend. Even if you plan to attend the Annual Meeting, please vote, as instructed in the Proxy Statement as promptly as possible to ensure that your vote is recorded. Alternatively, you may follow the procedures outlined in the Notice to request a paper proxy card to submit your vote by mail. If you attend the meeting and your shares are registered in your name, you may withdraw your proxy at that time and vote your shares in person.
 | |
C. D. Waterman III, Secretary | |
Davenport, Iowa
February 6, 2012
TABLE OF CONTENTS | PAGE |
Proposal 3 - To Grant the Board of Directors the Discretionary Authority to Effect a Reverse Stock Split | |
LEE ENTERPRISES, INCORPORATED
2012 ANNUAL MEETING OF STOCKHOLDERS
PROXY STATEMENT
References to “we”, “our”, “us” and the like, except under "Executive Compensation", refer to Lee Enterprises, Incorporated (the "Company"). References to "2012", "2011", "2010" and the like refer to the fiscal year ending, or ended, the last Sunday in September.
This Proxy Statement is being furnished in connection with the solicitation of proxies by the Board of Directors of the Company to be voted at the Annual Meeting of Stockholders (the “Annual Meeting”) to be held on the 4th floor of our offices, 201 N. Harrison Street, Davenport, Iowa, 52801-1924, on March 21, 2012, at 9:00 a.m. CST, for the purposes set forth in the Notice of Annual Meeting of Stockholders.
In accordance with rules adopted by the Securities and Exchange Commission (“SEC”), we have provided Internet access to this Proxy Statement and our Annual Report on Form 10-K for the year ended September 25, 2011. Accordingly, a Notice of Internet Availability of Proxy Materials (the “Notice”) has been sent to our stockholders of record and beneficial owners. All stockholders will have the ability to access the proxy materials on the website referred to in the Notice or request that a printed set of the proxy materials be sent to them by following the instructions in the Notice. If you requested printed versions of these materials by mail, these materials also include the proxy card for the Annual Meeting.
Also, the Notice provides you with instructions to inform us how to send our future proxy materials to you electronically by email, or in printed form by mail. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email, or in printed form by mail, will remain in effect until you terminate it.
PROXIES
Your vote is very important. If you are a stockholder of record, you may vote your Common Stock in person at the Annual Meeting. We will give you a ballot when you arrive. If you do not wish to vote in person or if you will not be attending the Annual Meeting, you may vote by proxy. You may vote by proxy over the Internet (at www.eproxy.com/lee), by telephone (1-800-560-1965) or through the mail. If you received these proxy materials by mail, you may vote by signing and dating the proxy card(s) and returning the card(s) in the prepaid envelope or you may also vote by Internet or telephone (as indicated above). If you received these proxy materials via e-mail, the e-mail message transmitting the link to these materials contains instructions on how to vote your shares of Common Stock and your control number. Instructions on how to vote by Internet are also contained in the Notice.
You may revoke the proxy before the Annual Meeting, whether delivered by Internet, telephone or through the mail, by using, respectively, the Internet voting procedures, the telephone voting procedures or by mailing a signed instrument revoking the proxy to: C. D. Waterman III, Corporate Secretary, Lee Enterprises, Incorporated, at the address shown on the cover of this Proxy Statement. To be effective, a mailed revocation must be received by the Secretary on or before March 20, 2012. A stockholder may also attend the Annual Meeting in person, withdraw the proxy and vote in person.
If a broker, bank or other nominee holds your Common Stock, you will receive instructions from them that you must follow in order to have your shares voted. Shares held by a broker, bank or other nominee cannot be voted in person at the Annual Meeting.
FORMER HOLDERS OF CLASS B COMMON STOCK
In 2011, all shares of Class B Common Stock were converted into an equal number of shares of Common Stock, in accordance with sunset provisions for Class B Common Stock established in 1986. If you still hold shares of Class B Common Stock, contact Wells Fargo Shareowner Services at 1-877-536-3552 to have the shares converted to Common Stock.
VOTING PROCEDURES
Stockholders of record at the close of business on January 23, 2012 will be entitled to vote at the Annual Meeting or any adjournment thereof. As of December 30, 2011, there were 44,957,601 shares of Common Stock outstanding. Each share of Common Stock is entitled to one vote at the Annual Meeting. The holders of Common Stock will vote as a single class on all matters to be considered at the Annual Meeting.
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The presence, in person or by proxy, of a majority of the voting power of our Common Stock issued and outstanding and entitled to vote is necessary to constitute a quorum at the Annual Meeting. The affirmative vote of the holders of a plurality of the voting power of Common Stock represented in person or by proxy at the Annual Meeting is required to elect directors under Proposal 1, and the affirmative vote of the holders of a majority of the voting power of Common Stock represented at the Annual Meeting, voting as a single class, is required to act on Proposal 2 and Proposal 3, as more fully set forth in this Proxy Statement, and on any other matter properly brought before the meeting.
Abstentions from voting on Proposal 2 and Proposal 3 will be included for purposes of determining whether the requisite number of affirmative votes is received on any matters other than the election of directors submitted to the stockholders for vote and, accordingly, will have the same effect as a vote AGAINST such matters. If a broker indicates on the proxy that it does not have discretionary authority as to certain shares to vote on a particular matter, those shares will be considered as present and entitled to vote, but will have no effect on the vote with respect to that matter.
In voting by proxy with regard to the election of directors, stockholders may vote in favor of all nominees, withhold their votes as to all nominees, or withhold their votes as to specific nominees. Stockholders should specify their choices by using the Internet or telephone voting procedures, or on the proxy card, if printed copies of the proxy materials are requested by mail. All properly executed proxies delivered to us and not subsequently revoked will be voted at the Annual Meeting in accordance with the directions given. For any stockholder of record, if no specific instructions are provided the shares represented by the proxy will be voted FOR the election of all directors in Proposal 1 and FOR the approval of Proposal 2 and Proposal 3, as more fully set forth in this Proxy Statement. If any other matters properly come before the Annual Meeting, the persons named as proxies will vote upon such matters according to their judgment.
New York Stock Exchange ("NYSE") rules forbid its member-brokers to vote shares held by them in elections for directors, and on any matters relating to executive compensation. Accordingly, YOUR BROKER MAY NOT VOTE on Proposal 1 in its discretion, though your shares will be counted for purposes of determining whether a quorum is present. NYSE member-brokers are allowed to vote shares held by them for their customers only on matters the NYSE determines are routine, unless the brokers have received voting instructions from their customers. The NYSE does not consider the proposal to approve such other business as may properly come before the Annual Meeting or any adjournment a routine matter, so YOUR BROKER MAY NOT VOTE on this proposal in its discretion, though your shares will be counted for purposes of determining whether a quorum is present. Your broker, therefore, will need to return a proxy card without voting on these matters if you do not give voting instructions with respect to these matters. This is referred to as a “broker non-vote”.
We encourage you to provide voting instructions to the broker, bank or other nominee that holds your shares by carefully following the instructions provided in the Notice from such entity.
PROPOSAL 1 - ELECTION OF DIRECTORS
Four directors are to be elected to hold office for three-year terms expiring at the annual meeting in 2015.
Proxies will be voted for the election of the nominees unless the stockholder giving the proxy withholds such authority. If, as a result of circumstances not now known, any of such nominees shall be unable to serve as a director, proxies will be voted for the election of such other person as the Board of Directors may select. Information about the nominees and directors continuing in office, including business experience for at least the last five years, is set forth below. Also included is a description of the specific experience, qualifications, attributes and skills of each nominee and director continuing in office that led the Board of Directors to conclude that each is well qualified to serve as a member of our Board of Directors.
Nominees for Election as Directors with Terms Expiring in 2015
Each of the individuals named below is a nominee of the Nominating and Corporate Governance Committee of the Board of Directors and nominated by the full Board of Directors for election as a director at the Annual Meeting. Except for Mr. Schermer, each nominee is independent, as defined in the listing standards of the NYSE. The current terms of directors Magid, Mayer, Schermer and Vittert expire March 21, 2012.
Brent Magid, 46, Director since 2010
Mr. Magid is President and Chief Executive Officer of Frank N. Magid Associates, Inc., a research-based strategy consulting company with expertise in a wide range of media. From 2007 to 2009, Mr. Magid served as a director of
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Quattro Wireless, a mobile advertising company. Mr. Magid provides the Board of Directors with experience and insight into key marketing and advertising trends and related media industry strategies.
Mr. Magid is a member of the Nominating and Corporate Governance Committee.
William E. Mayer, 71, Director since 1998
Mr. Mayer is a founding partner of Park Avenue Equity Partners, L.P., New York, NY, a private equity firm. He is also a director of BlackRock Kelso Capital Corporation, a closed-end management investment company, DynaVox, Inc. and a trustee of the Columbia Mutual Funds. Since 1976, Mr. Mayer has served on the boards of directors of 16 public companies, and as chairman of the board of the University of Maryland, College Park, and The Aspen Institute. Mr. Mayer also served as a professor and dean of the College of Business and Management at the University of Maryland from 1992 to 1996. Mr. Mayer provides the Board of Directors with business leadership experience, an understanding of the strategic, operational and financial issues confronting public companies, and experience with respect to corporate governance matters.
Mr. Mayer is Chairman of the Executive Compensation Committee and a member of the Executive Committee and the Nominating and Corporate Governance Committee. Mr. Mayer has been designated as our Lead Director by the independent directors to preside over executive sessions of non-management directors.
Gregory P. Schermer, 57, Director since 1999
Mr. Schermer is Vice President-Interactive Media of the Company. From 1989 to July 2006, Mr. Schermer also served as Corporate Counsel of the Company. Mr. Schermer leads the development of our digital media strategies and platforms and represents the Company in several industry digital media initiatives, including The Newspaper Consortium (the "Consortium"), a group of 30 companies that represent nearly 800 local newspapers helping local advertisers to reach digital audiences. Mr. Schermer serves as a member of the Consortium's executive committee. Mr. Schermer provides the Board of Directors with insight and operational perspective on the Company's digital media strategies.
Mark B. Vittert, 63, Director since 1986
Mr. Vittert has been a private investor for more than 20 years. Over the past 40 years, Mr. Vittert has been involved as a founder, developer of, or investor in several companies involved in market research and youth marketing, publishing, sporting goods and the food and beverage industries. Mr. Vittert was a founder of Business Journals Publishing Corp., with publications in major metropolitan markets including Indianapolis, St. Louis, Pittsburgh, Philadelphia, Baltimore and Cincinnati. Since the sale of the business, he continues to be an investor in several publications. Mr. Vittert has also served on the boards of directors of several public companies, and provides the Board of Directors with insight and experience in corporate governance, risk management and the publishing industry.
Mr. Vittert is Chairman of the Nominating and Corporate Governance Committee and a member of the Executive Compensation Committee.
* * * *
The affirmative vote of the holders of a plurality of the voting power of our Common Stock, represented in person or proxy at the Annual Meeting, is required to elect directors.
Recommendation of the Board of Directors
The Board of Directors recommends a vote FOR Proposal 1 for the election of each of the nominees listed herein.
INCUMBENT DIRECTORS WITH TERMS EXPIRING IN 2013
Mary E. Junck, 64, Director since 1999
Ms. Junck was elected Chairman, President and Chief Executive Officer of the Company in 2002. She is also a director of TNI Partners, which is owned 50% by the Company. Ms. Junck is a director and vice-chairman of the board of directors of the Associated Press and a director of The Newspaper Association of America. Ms. Junck leads our senior
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executive team and provides the Board of Directors with in-depth knowledge of the Company and the publishing industry, in which she has worked in executive and senior management positions for more than 30 years. Ms. Junck provides a valuable and unique perspective in Board deliberations about the Company's business, competitive landscape, strategic relationships and opportunities, senior leadership and operational and financial performance.
Ms. Junck is Chairman of the Executive Committee.
Andrew E. Newman, 67, Director since 1991
Mr. Newman is Chairman of Hackett Security, Inc., a security systems company with operations in several states; a private investor, and a trustee of Washington University, St. Louis. Mr. Newman has been a founder, principal and/or chief executive officer of several retail and restaurant companies and a group of business publications. Mr. Newman's business, executive and financial experience provide the Board of Directors with strong oversight of its financial and disclosure responsibilities, procedures and controls, and qualify him to serve as Chairman of our Audit Committee and as its designated financial expert.
Mr. Newman is Chairman of the Audit Committee and a member of the Executive Compensation Committee.
Gordon D. Prichett, 70, Director since 1998
Dr. Prichett is Professor of Mathematics, Finance and Computer Applications at Babson College, Babson Park, MA. From 1987 to 1992, Dr. Prichett served as Vice President and Dean of Faculty of the school and from 1994 until 2006 as Chairman of the Division of Mathematics, Sciences and Information Systems. He is a founder and investment committee member of Cairnwood Cooperative, Boston, MA, a private investment group. Dr. Prichett is also chairman of the Board of Trustees of the Pan-Mass Challenge, the largest single athletic fundraising event in the world. Dr. Prichett brings to the Board of Directors strong financial and analytical skills, as well as experience in organizational leadership, risk management and strategy development.
Dr. Prichett is a member of the Audit Committee and the Executive Committee.
INCUMBENT DIRECTORS WITH TERMS EXPIRING IN 2014
Richard R. Cole, 69, Director since 2006
Dr. Cole is the John Thomas Kerr Jr. Distinguished Professor at the School of Journalism and Mass Communication, University of North Carolina at Chapel Hill. From 1979 to 2005, Dr. Cole served as dean of the school and brings to the Board of Directors over 40 years experience in the profession of journalism and journalism-mass communication education.
Dr. Cole is a member of the Nominating and Corporate Governance Committee.
Nancy S. Donovan, 60, Director since 2003
Ms. Donovan is a founding partner of Circle Financial Group, LLC, New York, NY, a wealth advisory and private equity firm, and the founding partner of Oakmont Partners, LLC, Lake Forest, IL, a private equity firm. From 1989 to 2001, Ms. Donovan was President and Chief Operating Officer of Morgan Stanley Credit Corporation, Riverwoods, IL. Prior to 1989, Ms Donovan was instrumental in the development of the Discover Card, and led all marketing and merchant sales. Ms. Donovan provides the Board of Directors with experience in corporate finance, capital markets, risk analysis and strategic investment.
Ms. Donovan is a member of the Audit Committee.
Leonard J. Elmore, 59, Director since 2008
Mr. Elmore is an attorney. Mr. Elmore has been the Chief Executive Officer of iHoops, the official youth basketball initiative of the NCAA and the NBA, since May 2010 and served as a board member of iHoops from its inception in April 2009. Prior to joining iHoops, Mr. Elmore was a partner with the law firm of Dreier LLP from September 2008 until December 2008, and senior counsel with the law firm of Dewey & LeBoeuf from 2004 to 2008. Mr. Elmore is also a basketball analyst for ESPN and CBS Sports. Mr. Elmore serves as a trustee of the University of Maryland, and a
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commissioner on the John S. and James L. Knight Foundation's Knight Commission on Intercollegiate Athletics. Mr. Elmore also serves as a member of the board of directors and chairman of the nominating and corporate governance committee of 1-800-FLOWERS.COM, Inc. Mr. Elmore brings to the Board of Directors his skills and experience in diverse roles as a lawyer, broadcaster and executive and in public sector board service.
Mr. Elmore is a member of the Audit Committee.
Herbert W. Moloney III, 60, Director since 2001
From December 2006 through July 2011, Mr. Moloney was President and Chief Operating Officer of Western Colorprint, Inc. (“Western Colorprint”), a privately-held company that provides advertising supplements and commercial printing services to the publishing industry. From April 2005 to November 2006, Mr. Moloney was President and Publisher of the Washington Examiner. From 2000 to March 2005 Mr. Moloney was the Chief Operating Officer, North America, and an Executive Vice President of Vertis, Inc., a premium provider of targeted advertising and marketing solutions to leading retail and consumer services companies. Mr. Moloney provides the Board of Directors over 30 years of executive and management experience in the publishing and television industries.
Mr. Moloney is a member of the Audit Committee and the Executive Compensation Committee.
PROPOSAL 2 - RATIFICATION OF SELECTION OF KPMG LLP AS THE
COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee ("Audit Committee") has selected KPMG LLP (“KPMG”) to serve as the independent registered public accounting firm to audit our financial statements for 2012. KPMG also served as our independent registered public accounting firm in 2011. Our Amended and Restated By-laws ("By-laws") do not require that the stockholders ratify the appointment of KPMG as our independent registered public accounting firm. The Board of Directors is requesting the stockholders to ratify this appointment as a means of soliciting stockholders' opinions and as a matter of good corporate practice.
Representatives of KPMG are expected to be present at the Annual Meeting. The KPMG representatives will have an opportunity to make a statement, if they desire to do so, and will be available to respond to appropriate questions from stockholders.
The affirmative vote of a majority of the voting power of all of our Common Stock present in person or by proxy, voting as a single class, a quorum being present, will be required to ratify the selection of KPMG. If the stockholders do not ratify the appointment, the Audit Committee will consider any information submitted by the stockholders in determining whether to retain KPMG as our independent registered public accounting firm for 2012. Even if the appointment is ratified, the Audit Committee, in its discretion, may change the appointment at any time during the year if it determines that a change would be in the best interests of the Company and its stockholders.
Recommendation of the Board of Directors
The Board of Directors recommends that stockholders vote FOR Proposal 2 to ratify the appointment of KPMG LLP as the Company's Independent Registered Public Accounting Firm.
PROPOSAL 3 - TO GRANT THE BOARD OF DIRECTORS
THE DISCRETIONARY AUTHORITY TO EFFECT
A REVERSE STOCK SPLIT
We are seeking stockholder approval to grant the Board of Directors discretionary authority to amend our Amended and Restated Certificate of Incorporation, as of January 30, 2012 (“Restated Certificate of Incorporation”) to effect a reverse stock split of the issued and outstanding shares of our Common Stock, par value $0.01 per share, such split to combine a whole number of outstanding shares of our Common Stock in a range of not less than two and not more than five shares, into one share of Common Stock, at any time prior to June 30, 2012.
Our Board of Directors unanimously approved, and recommended seeking stockholder approval of this proposal, on November 17, 2011.
Even if the stockholders approve the reverse stock split, we reserve the right not to effect the reverse stock split if the
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Board of Directors does not deem it to be in the best interests of our stockholders. The Board of Directors believes that granting this discretion provides the Board with maximum flexibility to act in the best interests of our stockholders. If this proposal is approved by the stockholders, the Board of Directors will have the authority, in its sole discretion, without any further action necessary by the stockholders, to effect a reverse stock split.
The Board's decision as to whether and when to effect the reverse stock split will be based on a number of factors, including prevailing market conditions, existing and expected trading prices for our Common Stock, actual or forecasted results of operations and the likely effect of such results on the market price of our Common Stock.
In 1998, the Board of Directors adopted a Stockholder Rights Plan (“Plan”). Under the Plan, the Board of Directors declared a dividend of one Preferred Share Purchase Right (“Right”) for each outstanding share of Common Stock and Class B Common Stock (collectively, “Common Shares”) of the Company. Rights are attached to, and automatically trade with, the Company's Common Shares.
In 2008, the Board of Directors approved an amendment to the Plan. The amendment increased the beneficial ownership threshold to 25% from 20% for stockholders purchasing Common Stock for passive investment only and decreased the threshold to 15% for all other investors. In addition, the amendment extended the expiration date of the Plan to May 31, 2018 from May 31, 2008.
Rights become exercisable only in the event that any person or group of affiliated persons other than a passive investor becomes a holder of 15% or more of the Company's outstanding Common Stock, or commences a tender or exchange offer which, if consummated, would result in that person or group of affiliated persons owning at least 15% of the Company's outstanding Common Stock. Once the Rights become exercisable, they entitle all other stockholders to purchase, by payment of a $150 exercise price, one one-thousandth of a share of Series A Participating Preferred Stock, subject to adjustment, with a value of twice the exercise price. In addition, at any time after a 15% position is acquired and prior to the acquisition of a 50% position, the Board of Directors may require, in whole or in part, each outstanding Right (other than Rights held by the acquiring person or group of affiliated persons) to be exchanged for one share of Common Stock or one one-thousandth of a share of Series A Preferred Stock. The Rights may be redeemed at a price of $0.001 per Right at any time prior to their expiration.
The total number of shares of all classes of our stock which we have authority to issue is 150,500,000, consisting of 500,000 shares of Serial Convertible Preferred Stock, without par value, 120,000,000 shares of Common Stock and 30,000,000 shares of Class B Common Stock. The aggregate number of issued and outstanding shares of Common Stock at the close of business on December 30, 2011 was 44,957,601. We do not have any shares of Class B Common Stock or Serial Convertible Preferred Stock outstanding.
In addition, the stockholders have previously authorized us to reserve for issuance (i) 1,400,000 shares of Common Stock under the Amended and Restated 1977 Employee Stock Purchase Plan (“ESPP") (of which 270,104 shares remain unissued); (ii) 135,000 shares of Common Stock under the 2005 Supplemental Employee Stock Purchase Plan, amended November 16, 2005 (“SPP") (of which 8,717 shares remain unissued); (iii) 6,250,000 shares of Common Stock under the Long-Term Incentive Plan ("LTIP") (of which 3,272,625 shares remain unissued); and (iv) 450,000 shares of Common Stock under the Non-Employee Directors Stock Plan (of which 182,455 shares remain unissued). The Company has an unused balance of Common Stock of 71,308,498 shares as of December 30, 2011, which will be reduced to 64,564,858 shares January 30, 2012 upon consummation of our refinancing.
Following a reverse stock split, the number of outstanding shares of Common Stock will be significantly reduced. A reverse stock split will also affect our outstanding stock options issued under the LTIP, as well as shares of Common Stock issued under the ESPP, SPP and Non-Employee Directors Stock Plan. Under these plans, the number of shares of Common Stock deliverable upon exercise or grant must be appropriately adjusted and appropriate adjustments must be made to the purchase price per share to reflect the reverse stock split.
An amendment to our Restated Certificate of Incorporation to effect a reverse stock split would not change the number of authorized shares of Common Stock, Class B Common Stock or Serial Convertible Preferred Stock, the par value of Common Stock and Class B Common Stock or the relative voting power of our stockholders. Accordingly, the number of authorized, but unissued shares will materially increase and will be available for reissuance by the Company. Also, a reverse stock split, if effected, would affect all of our holders of Common Stock uniformly.
The reverse stock split is not being proposed in response to any effort of which we are aware to accumulate our shares of Common Stock or obtain control of the Company, nor is it part of a plan by management to recommend a series of
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similar actions to our Board of Directors or our stockholders.
There are certain risks associated with a reverse stock split, and we cannot accurately predict or assure that the reverse stock split will produce or maintain the desired results (for more information on the risks see the section below entitled “Certain Risks Associated with a Reverse Stock Split”). However, our Board of Directors believes that the benefits to the Company and our stockholders outweigh the risks and recommends that you vote in favor of granting the Board the discretionary authority to effect a reverse stock split.
Reasons for the Reverse Stock Split
The primary purpose for effecting the reverse stock split, should the Board of Directors choose to effect one, would be to increase the per share price of our Common Stock. The Board of Directors believes that, should the appropriate circumstances arise, effecting the reverse stock split would, among other things, help us to:
• | Improve the perception of our Common Stock as an investment security; and |
• | Appeal to a broader range of investors to generate greater investor interest in the Company. |
Improve the Perception of Our Common Stock as an Investment Security - Our Common Stock is listed on the NYSE (LEE). As of July 1, 2011, our Common Stock traded at an average 30-day closing market price of less than $1 per share. Our equity market capitalization is also less than the $50,000,000 minimum requirement of the NYSE. Under the NYSE listing standards, if our Common Stock fails to maintain an adequate per share price and total market capitalization, our Common Stock could be removed from the NYSE and traded in the over-the-counter market. In a letter dated July 8, 2011 the NYSE notified the Company that it does not meet the NYSE continued listing standard due to its failure to maintain an adequate share price. Our price cure period will extend through the Annual Meeting date in order to receive shareholder approval to implement a reverse stock split, if necessary, as permitted under NYSE rules. In addition, Lee continues to operate under a planned cure period with respect to its minimum market capitalization that provides for a maximum cure date no later than February 2013, with continuing assessment by the NYSE throughout. An increase in the average closing price to $1 per share would return Lee to compliance with all quantitative listing requirements, absent a reverse stock split.
We believe that the overall economic environment in which we and other publishing companies are currently operating has been a significant contributing factor in the decline in the price of our Common Stock. We also believe uncertainty surrounding the refinancing of our debt, which has now been resolved, was a significant contributing factor. Our Board of Directors unanimously approved the discretionary authority to effect a reverse stock split as one potential means of increasing the share price of our Common Stock to improve the perception of our Common Stock as a viable investment security. Lower-priced stocks have a perception in the investment community as being risky and speculative, which may negatively impact not only the price of our Common Stock, but also our market liquidity. As a publishing company we believe that we may be particularly sensitive to this type of negative public perception and, if this proposal is approved, our Board of Directors would have the ability to increase our per share price if it determines that it is undermining our current or future prospects.
Appeal to a Broader Range of Investors to Generate Greater Investor Interest in the Company - An increase in our stock price may make our Common Stock more attractive to investors. Brokerage firms may be reluctant to recommend lower-priced securities to their clients, particularly lower-priced securities of publishing companies. Many institutional investors have policies prohibiting them from holding lower-priced stocks in their portfolios, which reduces the number of potential purchasers of our Common Stock. Investment funds may also be reluctant to invest in lower-priced stocks. Investors may also be dissuaded from purchasing lower-priced stocks because the brokerage commissions, as a percentage of the total transaction, tend to be higher for such stocks. Moreover, the analysts at many brokerage firms do not monitor the trading activity or otherwise provide coverage of lower-priced stocks. Giving the Board of Directors the ability to effect a reverse stock split and thereby increase the price of our Common Stock would give the Board the ability to address these issues if it is deemed necessary.
Certain Risks Associated with a Reverse Stock Split
Even if a reverse stock split is effected, some or all of the expected benefits discussed above may not be realized or maintained. The market price of our Common Stock will continue to be based, in part, on our performance and other factors unrelated to the number of shares outstanding.
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The current economic environment in which we operate, the substantial debt we carry and other risks which affect our ability to operate as a going concern, along with otherwise volatile equity market conditions, could limit our ability to raise new equity capital in the future.
Principal Effects of a Reverse Stock Split
If our stockholders approve this proposal and the Board of Directors elects to effect a reverse stock split, our issued and outstanding shares of Common Stock would decrease in accordance with the exchange ratio determined by the Board. The reverse stock split would be effected simultaneously for all of our Common Stock, and the exchange ratio would be the same for all shares of Common Stock. The reverse stock split would affect all of our stockholders uniformly and would not affect any stockholder's percentage ownership interests in the Company. The reverse stock split would not affect the relative voting or other rights that accompany the shares of our Common Stock. Common Stock issued pursuant to the reverse stock split would remain fully paid and non-assessable. The reverse stock split would not affect our securities law reporting and disclosure obligations, and we would continue to be subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We have no current plans to take the Company private. Accordingly, a reverse stock split is not related to a strategy to do so.
In addition to the change in the number of shares of Common Stock outstanding, the reverse stock split would have the following effects:
Increase the Per Share Price of our Common Stock - By effectively condensing a number of pre-split shares into one share of Common Stock, the per share price of a post-split share is generally greater than the per share price of a pre-split share. The amount of the initial increase in per share price and the duration of such increase, however, is uncertain. If appropriate circumstances exist, the Board of Directors may utilize the reverse stock split as part of its plan to address the required minimum per share price of the Common Stock under the NYSE listing standards noted above.
Increase in the Number of Shares of Common Stock Available for Future Issuance - By reducing the number of shares outstanding without a corresponding reduction in the number of shares of authorized but unissued Common Stock, a reverse stock split would increase the number of authorized but unissued shares.
The following table shows the number of shares that would be (a) issued and outstanding, (b) authorized and reserved for issuance upon the exercise of outstanding stock options and (c) authorized but unreserved for issuance, upon the implementation of a reverse stock split of one-for-two or one-for-five based on our capitalization at December 30, 2011, as adjusted on a pro forma basis for the issuance, as of January 30, 2012, of 6,743,640 shares of Common Stock to holders of the Company's Second Lien Term Loan.
Common Stock as of December 30, 2011, As Adjusted | ||||||||
Shares Issued and Outstanding | Shares Authorized and Reserved for Issuance | Shares Authorized but Unreserved | Total Authorized | |||||
Pre-split | 51,701,241 | 3,733,901 | 64,564,858 | 120,000,000 | ||||
If 1-for-2 Stock Split Enacted | 25,850,621 | 1,866,951 | 92,282,428 | 120,000,000 | ||||
If 1-for-5 Stock Split Enacted | 10,340,248 | 746,780 | 108,912,972 | 120,000,000 | ||||
Although a reverse stock split would not have any dilutive effect on our stockholders, the reverse stock split would reduce the proportion of shares owned by our stockholders relative to the number of shares authorized for issuance, giving our Board of Directors an effective increase in the authorized shares available for issuance, in its discretion. Our Board of Directors from time to time may deem it to be in the best interests of the Company and our stockholders to enter into transactions and other ventures that may include the issuance of shares of our Common Stock. However, our Board of Directors has no current plans to use the additional authorized shares available for issuance as a result of the reverse stock split for such purposes. Many stock issuances not involving equity compensation do not require stockholder approval, and our Board of Directors generally seeks approval of our stockholders in connection with a proposed issuance only if required at that time.
Require Adjustment to Currently Outstanding Securities and Debt Obligations Exercisable or Convertible into Shares of our Common Stock - A reverse stock split would effect a reduction in the number of shares of Common Stock issuable upon the exercise or conversion of our outstanding stock options and Serial Convertible Preferred Stock in proportion
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to the reverse stock split ratio. Additionally, the exercise price of outstanding options would increase, likewise in proportion to the reverse stock split ratio.
Require Adjustment to the Number of Shares of Common Stock Available for Future Issuance Under our LTIP, ESPP, SPP and Non-Employee Director Stock Plans - In connection with any reverse split our Board of Directors would also make a corresponding reduction in the number of shares available for future issuance under the foregoing plans so as to avoid the effect of increasing the number of authorized but unissued shares available for future issuance under such plans.
In addition, a reverse stock split may result in some stockholders owning “odd lots” of less than 100 shares of Common Stock, which may be more difficult to sell and may cause those holders to incur greater brokerage commissions and other costs upon sale.
Procedure for Effecting Reverse Stock Split and Exchange of Stock Certificates
If this Proposal is approved by our stockholders, our Board of Directors, in its sole discretion, will determine whether such an action is in the best interests of the Company and our stockholders, taking into consideration the factors discussed above. If our Board of Directors believes that a reverse stock split is in our best interests and the best interest of our stockholders, our Board will then determine the ratio of the reverse stock split to be implemented.
We would then file a certificate of amendment to our Restated Certificate of Incorporation with the Secretary of the State of Delaware at such time as our Board of Directors had determined as the appropriate effective time for the reverse stock split. Upon the filing of the certificate of amendment, and without any further action on the part of the Company or our stockholders, the issued and outstanding shares of Common Stock held by stockholders of record as of the effective date of the reverse stock split would be converted into a lesser number of shares of Common Stock calculated in accordance with a reverse stock split ratio of not less than one-for-two or not more than one-for-five, as selected by our Board of Directors and set forth in the certificate of amendment.
For example, if a stockholder presently holds 100 shares of our Common Stock, he or she would hold 50 shares of Common Stock following a one-for-two reverse stock split, or 20 shares of Common Stock following a one-for-five reverse stock split. Beginning on the effective date of the split, each certificate representing pre-split shares would be deemed for all corporate purposes to evidence ownership of post-split shares.
As soon as practicable after the effective date of the reverse stock split, stockholders would be notified that the reverse stock split had been effected.
Effect on Beneficial Holders (i.e., Stockholders Who Hold in “Street Name”)
Upon the reverse stock split, we intend to treat Common Stock held by stockholders in “street name,” through a bank, broker or other nominee, in the same manner as stockholders whose shares are registered in their own names. Banks, brokers or other nominees will be instructed to effect the reverse stock split for their customers holding Common Stock in “street name.” However, these banks, brokers or other nominees may have different procedures than registered stockholders for processing the reverse stock split. If you hold shares of Common Stock with a bank, broker or other nominee and have any questions in this regard, you are encouraged to contact your bank, broker or other nominee.
Effect on Registered “Book-Entry” Holders (i.e., Stockholders That are Registered on the Transfer Agent's Books and Records but do not Hold Certificates)
Some of our registered holders of Common Stock may hold some or all of their shares electronically in book-entry form with our transfer agent, Wells Fargo Bank N.A. These stockholders do not have stock certificates evidencing their ownership of Common Stock. They are, however, provided with a statement reflecting the number of shares registered in their accounts. If a stockholder holds registered shares in book-entry form with our transfer agent, no action needs to be taken to receive post-reverse stock split shares or fractional shares, if applicable. If a stockholder is entitled to post-reverse stock split shares, a transaction statement will automatically be sent to the stockholder's address of record indicating the number of shares (including fractional shares) of Common Stock held following the reverse stock split.
Effect on Certificated Shares
Upon the reverse stock split our transfer agent will act as our exchange agent and assist holders of Common Stock
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in implementing the exchange of their certificates.
Commencing on the effective date of a reverse stock split, stockholders holding shares in certificated form will be sent a transmittal letter by our transfer agent. The letter of transmittal will contain instructions on how a stockholder should surrender his or her certificates representing Common Stock (“Old Certificates”) to the transfer agent in exchange for certificates representing the appropriate number of whole post-reverse stock split Common Stock, as applicable (“New Certificates”). No New Certificates will be issued to a stockholder until that stockholder has surrendered all Old Certificates, together with a properly completed and executed letter of transmittal, to the transfer agent. No stockholder will be required to pay a transfer or other fee to exchange his Old Certificates. The letter of transmittal will contain instructions on how you may obtain New Certificates if your Old Certificates have been lost. If you have lost your certificates, you will have to pay any surety premium and the service fee required by our transfer agent.
Until surrendered, we will deem outstanding Old Certificates held by stockholders to be canceled and only to represent the number of whole shares to which these stockholders are entitled.
Any Old Certificates submitted for exchange, whether because of a sale, transfer or other disposition of shares, will automatically be exchanged for New Certificates.
Stockholders should not destroy any stock certificates and should not submit any certificates until requested to do so by the transfer agent. Shortly after the reverse stock split the transfer agent will provide registered stockholders with instructions and a letter of transmittal for converting Old Certificates into New Certificates. Stockholders are encouraged to promptly surrender Old Certificates to the transfer agent (acting as exchange agent in connection with the reverse stock split) in order to avoid having shares become subject to escheat laws.
Fractional Shares
Fractional shares will be issued in connection with the reverse stock split. Stockholders who hold a number of shares of Common Stock that could not be evenly divided by the reverse stock split ratio selected by the Board of Directors would receive any fractional shares that they would otherwise be entitled to.
Accounting Matters
The par value of our Common Stock would remain unchanged at $0.01 per share, if a reverse stock split is effected.
The Company's stockholders' equity in its consolidated balance sheet would not change in total. However, the Company's stated capital (i.e., $0.01 par value times the number of shares issued and outstanding), would be proportionately reduced based on the reduction in shares of Common Stock outstanding. Additional paid in capital would be increased by an equal amount, which would result in no overall change to the balance of stockholders' equity.
Additionally, net income or loss per share for all periods would increase proportionately as a result of a reverse stock split since there would be a lower number of shares outstanding. We do not anticipate that any other material accounting consequences would arise as a result of a reverse stock split.
A reduction in stated capital will, under Delaware law, create a corresponding increase in paid-in surplus (i.e., the excess of net assets over stated capital), and the Company may make distributions, such as the payment of dividends, up to the amount of its surplus provided that the distribution does not cause it to become insolvent.
Potential Anti-Takeover Effect
Even though a potential reverse stock split would result in an increased proportion of unissued authorized shares to issued shares, which could, under certain circumstances, have an anti-takeover effect (for example, by permitting issuances that would dilute the stock ownership of a person seeking to effect a change in the composition of the Board of Directors or contemplating a tender offer or other transaction for the combination of us with another company), the reverse stock split proposal is not being proposed in response to any effort of which we are aware to accumulate shares of our Common Stock or obtain control of us, nor is it part of a plan by management to recommend a series of similar amendments to our Board and our stockholders.
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No Appraisal Rights
Our stockholders are not entitled to appraisal rights with respect to a reverse stock split, and we will not independently provide stockholders with any such right.
Federal Income Tax Consequences of a Reverse Stock Split
The following is a summary of certain material federal income tax consequences of a reverse stock split. It does not purport to be a complete discussion of all of the possible federal income tax consequences of a reverse stock split and is included for general information only and is not intended as tax advice to any person or entity. Further, it does not address any state, local or foreign income or other tax consequences. Also, it does not address the tax consequences to holders in light of their individual circumstances or to the holders that are subject to special tax rules, such as banks, insurance companies, regulated investment companies, personal holding companies, foreign entities, nonresident alien individuals, partnerships, limited liability companies and other tax-transparent entities, broker-dealers, holders subject to the alternative minimum tax provisions of the Internal Revenue Code (the “Code”), holders who hold their stock as part of a hedge, wash sale, appreciated financial position, straddle, conversion transaction, synthetic security or other risk reduction transaction or integrated investment, holders who have acquired their stock upon exercise of employee stock options or otherwise as compensation and tax-exempt entities. The discussion is based on the provisions of the United States federal income tax law as of the date hereof, which is subject to change retroactively as well as prospectively. This summary also assumes that the pre-split shares were, and the post-split shares will be, held as a “capital asset,” as defined in the Code (generally, property held for investment). The tax treatment of a stockholder may vary depending upon the particular facts and circumstances of such stockholder. Our view regarding the tax consequences of a reverse stock split is not binding on the Internal Revenue Service or the courts. Each stockholder is urged to consult with such stockholder's own tax advisor with respect to the tax consequences of a reverse stock split.
No gain or loss for federal income tax purposes should be recognized by a stockholder upon such stockholder's exchange of pre-split shares for post-split shares pursuant to the reverse stock split. The aggregate tax basis of the post-split shares received in the reverse stock split, including any fraction of a post-split share deemed to have been received, will be the same as the stockholder's aggregate tax basis in the pre-split shares that are exchanged. The stockholder's holding period for the post-split shares will include the period during which the stockholder held the pre-split shares surrendered in the reverse stock split.
The Company itself would not realize any taxable gain or loss as a result of a reverse stock split.
Interests of Directors and Executive Officers
Our directors and executive officers have no substantial interests, directly or indirectly, in the matters set forth in this proposal except to the extent of their ownership of shares of our Common Stock.
Reservation of Right to Abandon Reverse Stock Split
We reserve the right to abandon a reverse stock split without further action by our stockholders at any time before the effectiveness of the filing with the Secretary of the State of Delaware of the certificate of amendment to our Restated Certificate of Incorporation, even if the authority to effect a reverse stock split has been approved by our stockholders at the Annual Meeting. By voting in favor of a reverse stock split, you are expressly also authorizing the Board of Directors to delay, not to proceed with, and abandon, a reverse stock split if it should so decide, in its sole discretion, that such action is in the best interests of the stockholders.
Vote Required
The affirmative vote of the holders of a majority of the voting power of Common Stock represented at the Annual Meeting, voting as a single class, is required for approval of the certificate of amendment to effect a reverse stock split. Accordingly, abstentions and broker “non-votes” will have the effect of a vote AGAINST the proposal.
* * * *
We recommend a vote FOR the proposal to grant the Board of Directors the discretionary authority to effect a reverse stock split.
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DIRECTORS' MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
General
Our Board of Directors met fifteen times in 2011. No incumbent director attended fewer than 75% of the aggregate of (1) the total number of meetings of the Board of Directors and (2) the total number of meetings held by all committees of the Board on which he or she served in 2011. All of the incumbent directors attended our February 23, 2011 Annual Meeting of Stockholders. All directors are expected to attend each meeting of our Board of Directors and the committees on which they serve and are also expected to attend our annual meetings of stockholders.
Our Board of Directors has four committees. With the exception of the Executive Committee, each is composed of at least three independent directors and operates under a written charter, which are all available on our website www.lee.net by clicking on “Governance”.
Board Leadership Structure
As stated in our Corporate Governance Guidelines, our Board of Directors has no formal policy with respect to the separation of the offices of Chairman and Chief Executive Officer. Our Board of Directors believes that having a combined Chairman and Chief Executive Officer position (the "CEO"), together with an independent Lead Director, currently provides the best Board leadership structure for the Company. This structure, together with our other corporate governance practices, provides strong independent oversight of management, while ensuring clear strategic alignment throughout the Company. Our Lead Director is a non-employee director who is elected by the independent members of the Board of Directors. William E. Mayer, a director since 1998, currently serves as our Lead Director.
The role of Mr. Mayer, as Lead Director, includes the following duties:
• | Preside at all meetings of the Board when the Chairman is not present; |
• | Call meetings of the non-management directors, as needed; |
• | Develop the agendas for meetings of the non-management directors; |
• | Preside at executive sessions of the non-management directors; |
• | Confer regularly with the CEO; |
• | Serve as a liaison between the CEO and the non-management directors; |
• | In consultation with the CEO, review and approve Board meeting schedules and agendas; and |
• | Meet with stockholders as appropriate. |
Risk Oversight
Oversight of risk management is a responsibility of the Board of Directors and is an integral part of the Board's oversight of our business. The primary responsibility for the identification, assessment and management of the various risks resides with management. The Board of Directors has delegated to the Audit Committee primary responsibility for evaluating our overall risk management profile and ensuring that management has established and adequately reviewed processes for identifying and preparing the Company to manage risks.
Director Independence
Our Board of Directors has examined the relationship between each of our non-employee directors and the Company and has determined that directors Cole, Donovan, Elmore, Magid, Mayer, Moloney, Newman, Prichett and Vittert qualify as “independent” directors in accordance with the published listing requirements of the NYSE and, in the case of the Audit Committee, the rules of the SEC. In assessing the independence of directors named in this Proxy Statement, our Audit Committee and Board of Directors considered the fact that Mr. Moloney served as an officer of Western Colorprint, with which we conduct business. He became President and Chief Operating Officer in December 2006 and served in that capacity until July 2011. Western Colorprint provided us, in the normal course of business, with commercial printing services for which we paid Western Colorprint $618,000 in 2011. We believe that the terms of 2011 business with Western Colorprint were comparable to terms that would have been reached by unrelated parties in an arms-length transaction. Our Audit Committee and the Board of Directors have reviewed the relationship between the Company and Western Colorprint and have concluded that the relationship was not material to either party, and that Mr. Moloney did not have a material interest in, nor any direct involvement with, the transactions and as such and no material relationship with us. Based on its review, the Board of Directors has determined that Mr. Moloney is also an independent director of the Company under the rules of the NYSE and the SEC. Western Colorprint ceased business
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operations in 2011. See “Certain Relationships and Related Transactions” below. Directors Junck and Schermer do not qualify as independent directors because they are employees of the Company.
Audit Committee
The Audit Committee met eight times in 2011. The members of the Audit Committee are directors Newman, who chairs the Audit Committee, Donovan, Elmore, Moloney and Prichett. The Audit Committee has the responsibilities set forth in its charter, including, without limitation: (1) the quality and integrity of our financial statements; (2) our compliance with legal and regulatory requirements, including the review of related persons reports and disclosures of transactions involving the Company and any director, nominee for director, officer, owner of more than 5% of our Common Stock or immediate family member of any of the above; (3) our overall risk management profile; (4) the independent registered public accounting firm's qualifications and independence; (5) the performance of our internal audit function and that of our independent registered public accounting firm; and (6) preparation of the annual Audit Committee Report to be included in our Proxy Statement.
Executive Compensation Committee
The ECC met four times in 2011. The members of the ECC are directors Mayer, who chairs the ECC, Moloney, Newman and Vittert. Its functions are to: (1) administer our Retirement Account Plan, Non-Qualified Plan, LTIP, the ESPP and SPP; (2) establish salaries, bonus formulae and bonuses, and participation in other benefit plans or programs for executive officers; (3) review employment terminations involving payment to any officer or other key executive in excess of $200,000; (4) approve employment contracts for executives extending beyond one year; and (5) approve the position description, performance standards and goals for cash bonus and restricted stock awards for our CEO under our 2005 Incentive Compensation Program and to measure her related performance. In addition, the ECC recommends to the Board of Directors significant employee benefit programs and bonus or other benefit plans affecting executives other than NEOs. The ECC is responsible for evaluating risks posed by our compensation policies.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee (“NCGC”) met twice in 2011. The members of the NCGC are directors Vittert, who chairs the NCGC, Cole and Mayer. Its functions are to consider and recommend to the Board of Directors all nominees for possible election and re-election to the Board, and to consider all matters relating to the size, composition and governance of the Board and the general subject matter, size and composition of Board committees.
The NCGC regularly reviews the composition of the Board of Directors, anticipated openings and whether the addition of directors with particular experiences, skills or other characteristics would make the Board more effective. The NCGC has not established any specific minimum criteria or qualifications that a nominee must possess. Rather, the NCGC seeks directors who possess integrity and other character traits, broad experience, expertise in their field, capacity to understand our business, a willingness to devote adequate time to duties of the Board of Directors and the ability to make independent judgments using their diversity of experience. The NCGC also considers if a potential nominee will otherwise qualify for membership on the Board of Directors and if the potential nominee will satisfy the independence requirements of the NYSE and the SEC. In determining whether to recommend a director for re-election, the NCGC also considers the director's past attendance at meetings and participation in and contributions to the Board of Directors. The NCGC considers diversity in the nominating process, but has no specific policy related to diversity.
Consideration of a nominee for the Board of Directors typically involves a series of internal discussions, review of a nominee's background and experience and interviews of the nominee. In general, nominees are suggested by members of the Board of Directors or our executives. The NCGC then meets to consider and approve the final nominees, and either makes its recommendation to the Board of Directors to fill a vacancy, add an additional member or recommend a slate of nominees to the Board of Directors for nomination and election to the Board. Director nominees recommended by the NCGC for election at an annual meeting are subject to approval by the full Board of Directors.
The NCGC will consider nominees recommended by stockholders. The NCGC evaluates nominees proposed by stockholders using the same criteria as other nominees. A written nomination should be mailed or delivered to Mark B. Vittert, Chairman, NCGC, in care of the Company, at the address shown on the cover of this Proxy Statement. The nomination should include the stockholder's name, address and the class and number of shares of our Common Stock owned. It should also include the name, age, business and residence addresses of the individual being nominated, the nominee's principal occupation or employment and the class and number of shares of our Common Stock if any,
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owned by the nominee, together with a statement indicating the nominee's willingness to serve, if elected. To assist in the evaluation of nominees recommended by the stockholders, the NCGC may require the nominees to provide any additional information about themselves as the NCGC may determine appropriate or desirable, including information required to be disclosed in our Proxy Statement under the Exchange Act. To be considered by the NCGC for the slate recommended in the Proxy Statement for the 2013 annual meeting, stockholders must submit the required information to Mr. Vittert by October 8, 2012.
Executive Committee
The Executive Committee did not meet in 2011. The members of the Executive Committee are directors Junck, who chairs the Executive Committee, Mayer and Prichett. The Executive Committee may exercise the authority of the Board of Directors between its meetings, except to the extent that the Board of Directors has delegated authority to another committee or to other persons, and except as limited by applicable law.
CORPORATE GOVERNANCE
We maintain corporate governance information on our website, which includes key information about our corporate governance initiatives, including our Corporate Governance Guidelines, Code of Business Conduct and Ethics and charters for the independent committees of the Board of Directors. The corporate governance information can be found at www.lee.net by clicking on “Governance”.
We also post on our website our 2011 Annual Report on Form 10-K, as filed with the SEC. The Annual Report on Form 10-K can be found at www.lee.net by clicking on “Financial”. We will also furnish, upon written request and without charge, a printed copy of the 2011 Annual Report on Form 10-K to each person whose proxy is solicited and to each person representing that, as of the record date of the Annual Meeting, he or she was a beneficial owner of shares entitled to be voted at the meeting. Such written request should be directed to the Company at the address shown on the cover of this Proxy Statement.
Our policies and practices reflect corporate governance initiatives that are in compliance with the listing requirements of the NYSE and the corporate governance requirements of the Sarbanes-Oxley Act of 2002, specifically:
• | The Board of Directors has adopted clear corporate governance policies; |
• | A majority of the Board of Directors is independent of the Company and its management; |
• | The non-management directors meet regularly without management present; |
• | All members of the Audit Committee, ECC and NCGC are independent; |
• | The non-management directors have designated an independent Lead Director to chair their meetings and consult with our CEO regarding matters considered by the non-management directors; |
• | The charters of the Board committees clearly establish their respective roles and responsibilities; |
• | We have a Code of Business Conduct and Ethics that is monitored by the Audit Committee and is annually affirmed by our directors and executive officers; |
• | Our Code of Business Conduct and Ethics applies to our principal executive officer and all members of our finance staff, including the principal financial and accounting officer; |
• | We have a hotline available to all employees and the Audit Committee has procedures in place for the anonymous submission of employee complaints on accounting, internal controls, auditing or other matters; and |
• | Our internal audit function maintains critical oversight over the key areas of our business and financial processes and controls, and reports directly to the Audit Committee. |
Interested parties may communicate with the Board of Directors, the non-management directors as a group, or the Lead Director by writing to William E. Mayer, Lead Director, in care of the Company, at the address shown on the cover
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of this Proxy Statement.
COMPENSATION OF NON-EMPLOYEE DIRECTORS
We desire to compensate our directors in a manner that is comparable to compensation levels at companies in our peer group (see “Peer Group Information” below) and provides stock ownership. Our Human Resources Department provides the ECC with information from our peer group's proxies on annual retainers and compensation for board and committee meetings. The ECC reviews the information and makes a recommendation to the full Board of Directors for its approval.
In 2011, we paid all non-employee directors a $40,000 annual retainer. Our Lead Director received an additional annual retainer of $10,000. The chairmen of the Audit Committee and ECC each received a $10,000 annual retainer for serving as such and the Chairman of the NCGC received an annual retainer of $5,000. Non-employee directors received $2,000 for each Board or committee meeting attended and $1,000 for each Board or committee telephonic meeting. Non-employee directors are also reimbursed for reasonable and customary business expenses incurred on our behalf.
Under the Amended and Restated 1996 Stock Plan for Non-Employee Directors (“Stock Plan”), in 2011, non-employee directors received an annual grant of 10,000 shares (which is subject to a cap on the fair market value of shares awarded equal to the annual cash retainer). The Stock Plan is intended to encourage non-employee directors to increase their ownership of shares of our Common Stock and thereby align their interests more closely with the interests of our other stockholders. In addition, an objective of the Stock Plan has been to assist us in attracting and retaining non-employee directors of outstanding ability and in providing compensation opportunities which are competitive with those of other major corporations, as well as enabling such directors to participate in our long-term growth and financial success. Non-employee directors are required to hold their annual stock grant for a minimum of ten years, unless a director retires, resigns or dies while holding the position of director prior to satisfying this requirement.
Directors engaged to provide consultative services are normally compensated at the rate of $1,500 per diem. No non-employee director provided such compensated consultative services in 2011.
The following table summarizes 2011 non-employee director compensation:
(Dollars) | Fees Earned or Paid in Cash | Value of Stock Awards | All Other Compensation | Total | ||||||
(1) | (2) | (3) | ||||||||
Richard R. Cole | 61,000 | 11,200 | 5,000 | 77,200 | ||||||
Nancy S. Donovan | 64,000 | 11,200 | 5,000 | 80,200 | ||||||
Leonard J. Elmore | 63,000 | 11,200 | 5,000 | 79,200 | ||||||
Brent Magid | 57,000 | 11,200 | 2,000 | 70,200 | ||||||
William E. Mayer | 84,000 | 11,200 | 1,000 | 96,200 | ||||||
Herbert W. Moloney III | 76,000 | 11,200 | 2,800 | 90,000 | ||||||
Andrew E. Newman | 85,000 | 11,200 | 5,000 | 101,200 | ||||||
Gordon D. Prichett | 62,000 | 11,200 | 5,000 | 78,200 | ||||||
Mark B. Vittert | 67,000 | 11,200 | 5,000 | 83,200 | ||||||
(1) | Includes all non-employee directors who served in 2011. |
(2) | All stock awards are fully vested on the grant date, subject to the holding period. Stock awards are granted at a price equal to the fair market value on the date of the grant. |
(3) | The Lee Foundation, an affiliate of the Company, matches on a dollar-for-dollar basis up to $5,000 annually, charitable contributions made by non-employee directors to qualifying organizations. Such matching contributions are not considered income to the director. |
The Board of Directors has authorized non-employee directors, prior to the beginning of any calendar year, to elect to defer receipt of all or any part of the cash compensation a director might earn during such year under our Outside Directors Deferral Plan (Amended and Restated as of January 1, 2008). Amounts so deferred will be paid to the director upon his or her separation from service, death or disability, adjusted for any investment gains (or losses) thereon. Alternatively, directors may elect to have deferred compensation credited to a “rabbi trust” established by us with an independent trustee, which administers the investment of amounts so credited for the benefit and at the direction of the trust beneficiaries until their accounts are distributed under the deferred compensation plan. Amounts so credited
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for the benefit of non-employee directors are invested in investment alternatives selected by the director.
None of our employees receive any compensation for serving as a director.
EQUITY COMPENSATION PLAN INFORMATION
Information as of September 25, 2011 with respect to equity compensation plans is as follows:
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted Average Exercise Price of Outstanding Options, Warrants and Rights (Dollars) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | |||
(1) | (2) (3) | |||||
Equity compensation plans approved by stockholders | 1,812,341 | 5.07 | 5,500,992 | |||
(1) | LTIP. |
(2) | Includes the number of securities remaining available for future issuance under the LTIP, Stock Plan, ESPP and SPP. |
(3) | Under the LTIP, those securities that are not issued upon the exercise of stock options may, in the discretion of the ECC, be issued as restricted Common Stock. Such amounts are excluded from the total presented as the amount cannot be determined. |
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth information as of December 30, 2011, except as set forth below, as to each person known by us to own beneficially more than five (5) percent of our Common Stock.
Beneficial Owners | Common Stock | Percent of Class | ||
Cedar Rock Capital Limited (1) 110 Wigmore Street London W1U 3RW United Kingdom | 3,587,257 | 7.8 | ||
Dimensional Fund Advisors LP (2) Building One, 6300 Bee Cave Road Austin, TX 78746 | 3,006,465 | 6.6 | ||
Schermer Management Corporation (3) General Partner Schermer Investment Partnership, L.P. c/o Reed Smith LLP 10 S. Wacker Drive, 40th Floor Chicago, IL 60606-7507 | 1,163,966 | 2.5 | ||
(1) | The information is based solely on a report on Form 13G, filed February 14, 2011 by Cedar Rock Capital Limited (“Cedar Rock”) with the SEC. Cedar Rock reported shared voting authority with respect to all of the reported shares. |
(2) | The information is based solely on a report on Form 13F, dated September 30, 2011, filed by Dimensional Fund Advisors LP, wtih the SEC. Dimensional Fund Advisors LP reported sole voting authority with respect to 2,940,538 of the reported shares. |
(3) | Schermer Investment Partnership, L.P. (“SIP”) was established for family investment planning. It owns 1,163,966 shares of Common Stock. SIP's limited partners are as follows: (i) Gregory P. Schermer, who holds 41.50 of the limited partnership units of SIP; (ii) separate trusts for the benefit of each of Gregory P. Schermer's four children, each of which holds 2 limited partnership units of SIP (and for which Gregory P. Schermer is the trustee); (iii) Grant E. Schermer, who holds 49.50 limited partnership units of SIP; and (iv) Schermer Management Corporation, a Colorado corporation ("SMC"), which holds 1 limited partnership unit. SMC is the sole general partner of SIP charged with management of the business of SIP, including voting and investment authority with regard to the Common Stock held by SIP. SMC has four equal stockholders: Gregory P. Schermer and Grant E. Schermer and trusts for the benefit of Lloyd G. Schermer and Betty A. Schermer. The Board of Directors of SMC consists of Lloyd G. Schermer, Betty A. Schermer, Gregory P. Schermer and Grant E. Schermer (collectively, the “SMC Directors”). No SMC Director may act individually with regard to voting or investment of the shares of Common Stock held by SIP. Such actions require the majority vote of three SMC directors. By virtue of these actions with regard to the shares held by SIP, Lloyd G. Schermer, Betty A. Schermer, Gregory P. Schermer and Grant E. Schermer may be deemed to be members of a “group” under Section 13(d) of the Act. If deemed such a group, Gregory P. Schermer, Lloyd G. Schermer, Betty A. Schermer and Grant E. Schermer, individually or through trusts, may each be deemed to be the beneficial owner of these 1,163,966 shares of Common Stock. Separately: (a) Lloyd G. Schermer is the beneficial owner of the following shares of Common Stock: (i) 20,000 shares of Common Stock owned by a trust as to which Mr. Schermer possesses sole voting and investment authority; (ii) 110,020 shares of Common Stock held by a trust and 320,700 shares of Common Stock held by a charitable foundation as to which Mr. Schermer shares voting and investment authority; and (iii) 69,308 shares of Common Stock owned by a trust as to which Betty A. Schermer possesses sole voting and investment authority. Mr. Schermer disclaims beneficial ownership of all the shares of Common Stock listed in (a)(ii) and (a)(iii) above and all shares of Common Stock beneficially owned by Betty A. Schermer, Gregory P. Schermer and Grant E. Schermer; (b) Betty A. Schermer is the beneficial owner of the following shares of Common Stock: (i) 69,308 shares of Common Stock owned by a trust as to which Mrs. Schermer possesses sole voting and investment authority; (ii) 320,700 shares of Common Stock held by a charitable foundation as to which Mrs. Schermer shares voting and investment authority; and (iii) 20,000 shares of Common Stock owned by a trust as to which Lloyd G. Schermer possesses sole voting and investment authority. Mrs. Schermer disclaims beneficial ownership of all the shares of Common Stock listed in (b)(ii) and (b)(iii) above and all shares of Common Stock beneficially owned by Lloyd G. Schermer, Gregory P. Schermer and Grant E. Schermer; (c) Gregory P. Schermer is the beneficial owner of the following shares of Common Stock: (i) 546,688 shares of Common Stock as to which Mr. Schermer possesses sole voting and investment authority; and (ii) 8,541 shares of Common Stock held a by trust for the benefit of Mr. Schermer's son and 4,541 shares of Common Stock held by a trust for the benefit of a daughter and 541 shares of Common Stock held by separate trusts for the benefit of two other minor daughters as to which Mr. Schermer shares voting and investment authority. Mr. Schermer disclaims beneficial ownership of all the shares of Common Stock listed in (c)(ii) and all shares of Common Stock beneficially owned by Lloyd G. Schermer, Betty A. Schermer and Grant E. Schermer; and (d) Grant E. Schermer is the beneficial owner of 518,449 shares of Common Stock as to which he possesses sole voting and investment authority. Mr. Schermer disclaims beneficial ownership of all shares of Common Stock owned by Lloyd G. Schermer, Betty A. Schermer and Gregory P. Schermer. In the aggregate, this group would beneficially own 2,763,295 shares or 6.0% of the outstanding shares of Common Stock. |
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The following table sets forth information as to our Common Stock beneficially owned as of December 30, 2011 by each director and nominee, each of the NEOs listed in the Summary Compensation Table, and by all directors and executive officers as a group:
Name of Beneficial Owner | Common Stock | Percent of Class | ||
Richard R. Cole | 26,000 | * | ||
Nancy S. Donovan | 57,603 | * | ||
Leonard J. Elmore | 25,693 | * | ||
Mary E. Junck (1) | 479,673 | 1.1 | ||
Vytenis P. Kuraitis (1) | 42,718 | * | ||
Brent Magid | 20,200 | * | ||
William E. Mayer | 141,979 | * | ||
Kevin D. Mowbray (1) | 48,678 | * | ||
Herbert W. Moloney III | 43,000 | * | ||
Andrew E. Newman | 36,000 | * | ||
Gordon D. Prichett | 41,600 | * | ||
Gregory P. Schermer (1) (2) | 564,632 | 1.2 | ||
Carl G. Schmidt (1) | 89,533 | * | ||
Greg R. Veon (1) (2) | 110,096 | * | ||
Mark B. Vittert | 36,000 | * | ||
All executive officers and directors as a group (16 persons) (1) | 1,811,098 | 4.0 | ||
* | Less than one percent of the class. |
(1) | The table includes the following shares of Common Stock subject to acquisition within 60 days by the exercise of outstanding stock options: Ms. Junck - 49,500; Mr. Kuraitis - 8,940; Mr. Mowbray - 16,740; Mr. Schermer - 3,780; Mr. Schmidt - 20,070; Mr. Veon - 6,030; and all executive officers and directors as a group - 116,100. All such options have exercise prices in excess of the market price at December 30, 2011. |
(2) | The following directors and named executive officers disclaim beneficial ownership of the following shares, included above: Mr. Schermer - 8,541 shares of Common Stock held by a trust for the benefit of his son, 4,541 shares of Common Stock held by a trust for the benefit of a daughter and 541 shares of Common Stock held by separate trusts for the benefit of two other minor daughters as to which Mr. Schermer shares voting and investments authority; and Mr. Veon - 400 shares of Common Stock held by his sons. See also (3) to "Voting Securities and Principal Holders Thereof" above. |
EXECUTIVE COMPENSATION
References to “we,” “our” or “us” under "Executive Compensation" refer to the ECC.
Overview
Due to continuing difficult economic conditions affecting the Company, the publishing industry and the overall economy, in 2011, we maintained the substantially reduced compensation levels established for the NEOs in 2009. Salaries were frozen at the 2008 level. In addition, NEOs were required to take one week off without pay, which reduced 2011 salaries paid by 1.9% from the 2008 level. Annual cash incentive payments were also suspended.
Compensation Discussion and Analysis
The discussion and analysis that follow provide an overview of the Company's regular executive compensation program that existed in years prior to 2009 and to which we expect to return when business conditions sufficiently improve. Specifics elements of the changes implemented in 2009 and continued in 2010 and 2011 are also noted below.
Elements of Compensation
Our compensation program reinforces the key drivers of success in the Company's business. Our financial emphasis is on revenue and operating cash flow. We believe these two measures are key measures of long and short term success in our industry. We also approve annual individualized objectives for each executive except the CEO. We
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believe that successful execution of key individual objectives helps drive overall corporate goals. Compensation for the NEOs has historically included the following:
• | Salaries; |
• | Annual cash incentives which are based, to a large extent, on annual performance of the Company or the operations the individual manages; |
• | Long-term incentives in the form of restricted Common Stock or stock options that vest three years after grant; and |
• | Benefits, including health, life and disability insurance, a 401(K) plan and a supplemental deferred compensation plan. |
A significant amount of NEO compensation is at risk, based on performance criteria. In addition, stock options, when granted by us, are inherently performance based because an option only has value if the stock price rises after the option is granted.
The Named Executive Officers
SEC regulations require us to include the Company's CEO, Ms. Mary E. Junck, its chief financial officer, Mr. Carl G. Schmidt, and its three other most highly compensated executive officers as NEOs.
Objectives of our Compensation Program
We intend for the Company to be an employer of choice, both in its industry and in the communities it serves. In order to achieve this status, our strategies are to have compensation programs in place that will:
• | Reward executives for their contribution; |
• | Create an ownership mentality in the executives; |
• | Focus the executives on building long-term value; |
• | Permit us to recruit the talent we need; |
• | Pay the executives at comparable levels with organizations with which the Company competes for talent; and |
• | Encourage top performers to remain with the Company. |
Our core compensation philosophy is to pay executive officers competitive levels of compensation that best reflect their individual responsibilities and contributions to the Company, while providing incentives to achieve its business and financial objectives. While comparisons to compensation levels at companies in the peer group (discussed below) are helpful in assessing the overall competitiveness of our compensation program, we believe that our executive compensation program also must be internally consistent and equitable in order for the Company to achieve the compensation objectives outlined above.
In implementing this philosophy, we have analyzed the relationship between the CEO's total compensation and the total compensation of the other executive officers of the Company. For this purpose, total compensation includes not only base salary and bonus, but also the grant date fair value of equity awards (as well as accumulated realized and unrealized equity gains), all perquisites and payment amounts upon a change of control. The Company's Human Resources Department accumulates the internal pay equity information under our direction.
When making compensation decisions, we also look at the compensation of the CEO and the other NEOs relative to the compensation paid to similarly-situated executives at companies that we consider to be peers. This is often referred to as benchmarking. We believe, however, that a benchmark should be one point of reference for measurement, but not the sole determinative factor for executive compensation. The purpose of the comparison is not to supplant the analysis of internal pay equity, wealth accumulation and the individual performance of the executive officers that we
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consider when making compensation decisions. Further, given the limitations associated with comparative pay information for setting individual executive compensation, including the difficulty of assessing and comparing wealth accumulation through equity gains and post-employment amounts, we may elect to not use the comparative compensation information at all in the course of making compensation decisions.
Peer Group Information
We use market data for context and a frame of reference for decision making, but it is not the sole source of information from which compensation is determined. We target the median of the market to establish the total compensation opportunity. We determine the market for the NEO positions to be comparable publicly traded publishing companies.
We review the composition of the peer group annually to ensure that companies are relevant for comparative purposes. We factor in the relative size of these companies since size of the company generally correlates with compensation paid. We believe that the current group of companies is representative of the sector in which the Company operates, and the group was chosen because of each of the companies' relative leadership position in the publishing sector, their relative size as measured by market capitalization and the relative complexity of the business and the CEO's role and responsibilities. These companies currently are:
• | A.H. Belo Corporation; |
• | Gannett Co., Inc.; |
• | Journal Communications, Inc.; |
• | The McClatchy Company; |
• | Media General, Inc.; |
• | The New York Times Company; |
• | The E.W. Scripps Company; and |
• | The Washington Post Company. |
The Company's Human Resources Department provides us with compensation data obtained from the proxy statements of each of these companies. We also utilize compensation data from Equilar, Inc., Watson Wyatt Worldwide, Inc. and the Inland Press Association.
We use consultants on specific issues and rotate those consulting assignments among nationally prominent executive compensation firms.
How We Determine the Amount of Compensation
The Company's By-Laws provide that the Board of Directors has the sole authority to determine the compensation of all officers of the Company who are elected or appointed by the Board. The Board has, by adoption of our charter, delegated that authority to us. In addition, the LTIP approved by stockholders gives us the sole authority to establish equity awards for executive officers.
The CEO, working primarily with the Company's Vice President - Human Resources, recommends all elements of compensation for all executive officers other than the CEO and we determine it. We determine CEO compensation without management input, other than the analysis of CEO compensation obtained from the peer publishing companies' proxy statements and other information obtained by the Human Resources Department from independent sources.
When making compensation decisions, we analyze compensation summaries prepared for each of the NEOs. These summaries are prepared by the Human Resources Department. Each of these summaries presents the dollar amount of each component of the NEO's compensation, including current cash compensation (base salary and bonus), equity awards, retirement benefits and any other compensation. Accordingly, these summaries reflect the annual compensation for the NEOs (both target and actual). Potential payments upon termination of employment involving a change of control and long-term incentives accumulated by the NEOs are also reviewed.
In our most recent review we determined that annual compensation amounts for the CEO and the other NEOs remained consistent with our expectations.
Say-on-Pay Proposals
In 2011, our stockholders recommended, in a non-binding vote, that stockholder advisory votes on the Company's
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compensation of its executive officers be held every three years. 80.3% of votes cast were voted in favor of a three year frequency for such votes.
In 2011, the stockholders also recommended, on an advisory basis, the approval of the compensation philosophy, policies and procedures employed by the ECC, as described herein. 93.7% of votes cast were voted in favor of the proposal.
We also considered the results of the most recent say-on-pay vote in determining 2011 compensation. The next scheduled advisory vote related to such executive compensation matters is expected to be in 2014.
Salary
We compare NEO salaries to those paid to executives at the peer companies noted above and to other national survey data. Actual salaries are influenced by what other companies pay their executives, but are primarily determined by the executive officer's responsibilities, experience and demonstrated performance. If comparable data is not available, we use internal compensation equity to evaluate the executive officer's responsibilities.
In order to implement our philosophy for the executive officers, our goal is to pay between 90-110% of competitive levels of base salary and annual incentives.
For 2011, we continued the freeze, first implemented in 2009, on NEO salaries at the 2008 level, due to continuing difficult economic conditions affecting the Company, the publishing industry and the overall economy. Actual salaries paid to each of the NEOs other than the CEO were reduced 1.9% from the 2008 level due to unpaid time off taken by each of the NEOs in 2011. In addition, Ms. Junck voluntarily reduced her base salary by 4.8% or $40,865, to $809,135, for 2011.
Annual Cash Incentive Plan for Named Executive Officers Other Than the CEO
Annual cash incentives are designed to support our objective of delivering positive annual operating results. In order to achieve competitive annual incentive targets, our goal is to set bonus targets at levels where we can expect the executive to receive a competitive incentive payment six out of ten years - in two out of ten years they would exceed competitive levels, and in two out of ten years, they would receive less than competitive levels.
The incentive plan for NEOs other than the CEO historically consists of two elements:
• | 70-100% of the total target bonus is based on financial performance as measured by a combination of (1) revenue and/or adjusted operating cash flow (as defined below) and (2) revenue and/or adjusted operating cash flow for enterprises for which the NEO is responsible, both relative to our current year operating plan (“Budget”); and |
• | 0-30% of the total target bonus is based on key result areas (“KRAs”). KRAs are specific individual performance goals that are established for each management person prior to the start of the fiscal year. |
Based on performance, the participant is eligible to earn from 0% up to 250% of the financial bonus target and from 0% up to 150% of the KRA bonus target.
For 2011, we continued the suspension of all annual cash incentives first implemented in 2009, due to continuing difficult economic conditions affecting the Company, the publishing industry and the overall economy.
Financial Performance
Revenue is defined as total operating revenue, adjusted to exclude revenue of acquisitions and divestitures consummated in the period(s) being compared.
Adjusted Operating Cash Flow (“Adjusted OCF”) is defined as total operating income, adjusted to exclude depreciation, amortization, unusual costs (and cost reductions) and results of acquisitions and divestitures consummated in the period(s) being compared.
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Historically, a decline in both revenue and Adjusted OCF from the Budget of more than 3% would result in no payment of an annual cash incentive. Achievement of both the revenue and Adjusted OCF amounts in the Budget would result in payment of 100% of the target. Payment is capped at 250% of the target for exceeding the revenue in the Budget by 5% and exceeding Adjusted OCF in the Budget by 2.5%. Results are interpolated between the minimum and maximum.
Key Result Areas
Historically, all NEOs other than the CEO develop individualized goals for the year. Such goals may be related to revenue improvement, cost control, personnel development, news content or other aspects of our business.
For NEOs who have operating responsibilities, KRAs also incorporate other key goals, such as:
• | Digital - audience growth; |
• | Circulation - maintain or grow circulation units; or |
• | Cash costs - operate at or below Budget levels. |
Discretionary Bonuses
From time to time, we also develop special incentive programs and approve the CEO's determination of discretionary bonuses to the NEOs (other than the CEO) based on specific performance. No discretionary bonuses were paid to the NEOs in 2011.
Annual Cash Incentive Plan for the CEO
The annual incentive program for the CEO is historically based solely on the achievement of Adjusted OCF in the Budget. Budgets are approved annually by the Board of Directors. We have limited the CEO's performance measure to Adjusted OCF in order to focus on improvements in cash flow and the related debt reduction to enhance shareholder value.
Historically, a decline in Adjusted OCF from the Budget of a specified amount would result in no payment of an annual cash incentive. Achievement of the Adjusted OCF in the Budget would result in payment of 100% of the target. Payment is capped at 200% of the target for exceeding the Adjusted OCF in the Budget by a specified amount. Results are interpolated between the minimum and maximum.
For 2011, we continued the suspension of annual cash incentives for the CEO first implemented in 2009, due to continuing difficult economic conditions affecting the Company, the publishing industry and the overall economy.
1990 Long-Term Incentive Plan
The LTIP authorizes us to grant a mixture of restricted Common Stock, non-qualified stock options and incentive stock options. Annual grant targets as a percentage of base salary for the NEOs other than the CEO historically range from 10% to 100%. The LTIP is designed to promote ownership of the Company's Common Stock as a component of our overall compensation program, as noted above.
Actual grants for NEOs other than the CEO are recommended based on performance as evaluated by the CEO and approved by the ECC. The CEO's recommendation for each NEO is based on her evaluation of how the NEO contributed to the financial performance of the Company for the year just completed and her assessment of continued performance in future years. CEO grants are determined by the process described below. Historically, we grant two thirds of the dollar value of long-term incentives in restricted Common Stock and one third of the dollar value in stock options. The restricted Common Stock grants vest 100% after a three-year period. There is no partial vesting. The executive must remain an employee for three years after the grant date for the award to vest.
Options, when granted, have a term of ten years and vest over a three-year period. After both the first and second years, 30% is vested. After the third year, the remaining 40% is vested. Ten years from the grant date, the ability to exercise any unexercised options expires. Generally, when options are granted, 75-100% are non-qualified and 0-25% are incentive stock options, subject to Internal Revenue Code limits.
Upon exercise of stock options by the option holders by delivery of previously owned Common Stock, replacement, or
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“reload,” options in the amount of the shares delivered is awarded at fair market value on the date of exercise of non-qualified stock options. Such options have a term equal to the remaining term of the options exercised and are exercisable after one year.
1990 Long-Term Incentive Plan for the CEO
Grants of restricted Common Stock to the CEO are historically made under the Company's Annual Incentive Compensation Program approved by the stockholders at the Company's 2005 Annual Meeting. Each year, we historically establish a target award of restricted Common Stock, the receipt of which is subject to adjustment based on the CEO's achievement of the performance measures we determine at the time of the grant. The performance measure we establish is Adjusted OCF in relation to prior year Adjusted OCF. We determine the dollar value of the target award by considering the CEO's total compensation in relation to her peers, after taking into account her base salary and incentive bonus opportunity, together with our assessment of the Company's operating performance in relation to peer companies.
Historically, a decline in Adjusted OCF from the comparable prior year amount of more than a specified amount would have resulted in no restricted Common Stock granted. A decrease in Adjusted OCF of a specified amount from the comparable prior year amount would result in a grant of 100% of the target. Grants are capped at 120% of the target for exceeding the comparable prior year amount of Adjusted OCF by a specified amount.
We reserve the right to modify grants based on our evaluation of the CEO's performance, and to modify the performance measures from year to year. Restricted Common Stock vests three years after the date of the grant of the target award.
The CEO is also eligible to receive non-qualified and incentive stock options, as described above under "1990 Long-Term Incentive Plan".
Valuation of Equity Awards
The accounting value of equity awards is expensed ratably over the vesting period of the equity award. There were no equity grants to NEOs in 2009 or 2010. The accounting value of 2008 and 2011 equity grants to NEOs is summarized below:
(Dollars) | Total Accounting Value of 2011 Grants | Accounting Charge Recorded in 2011 for 2011 Grants | Accounting Charge Recorded in 2011 for 2008 Grants | Accounting Charge to be Recorded in 2012-2014 for 2011 Grants | ||||
Mary E. Junck | 307,339 | 96,137 | 3,509 | 211,202 | ||||
Carl G. Schmidt | 124,613 | 38,981 | 31,264 | 85,632 | ||||
Greg R. Veon | 37,439 | 11,712 | 21,705 | 25,727 | ||||
Kevin D. Mowbray | 103,937 | 32,512 | 20,155 | 71,425 | ||||
Vytenis P. Kuraitis | 55,508 | 17,364 | 12,729 | 38,144 | ||||
Primary Benefits
Benefits are part of a competitive compensation package to attract and retain employees - including executives. The NEOs participate in the same benefit plans as the Company's salaried employees, many of which require the employees to share in the cost of such programs. NEOs may elect not to participate in the Company's insurance programs. Benefits include:
• | Health insurance, including prescription drug coverage; |
• | Dental insurance; |
• | Vision insurance; |
• | Life insurance coverage in the event of the employee's death; |
• | Accidental death and dismemberment insurance; |
• | Short-term disability insurance; |
• | Long-term disability insurance for a disability lasting longer than five months; |
• | Retirement Account Plan; and |
• | Non-Qualified Plan. |
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Retirement Plans
Under the Retirement Account Plan and Non-Qualified Plan, beginning in January 2011, the Company resumed matching, upon eligibility, of 40% of employee contributions up to 5% of employee compensation. These retirement plans are defined contribution plans. Company and employee contributions are invested according to investments selected by the employee, and the total amount is paid following retirement or termination of employment. Company contributions fully vest after six years of service for the Retirement Account Plan. Employee contributions to the Non-Qualified Plan are vested immediately. Amounts contributed by the Company credited in 2011 and 2009 under the Retirement Account Plan and Non-Qualified Plan to the accounts of the NEOs are listed in the Summary Compensation Table under “All Other Compensation.” No Company contributions were made in 2010. The Non-Qualified Plan is intended to promote retention by providing employees with an opportunity to save in a tax-efficient manner.
Other Benefits
The only additional benefits the NEOs are eligible to receive are explained below. No NEO received benefits detailed below with a value of $10,000 or more in 2011.
Annual Physical Examination
Each NEO is eligible to receive a comprehensive medical evaluation annually. This program benefits the Company by assuring its most senior executives are medically fit for their responsibilities.
Connectivity
NEOs are reimbursed for the cost of a home computer and/or internet access at their primary residence. NEOs also may use mobile or other digital devices provided by the Company. This program benefits the Company by providing the executive access to its systems, digital products and communications during non-business hours.
Club Dues
NEO's are reimbursed for the annual dues of one social membership to a club of the executive's choice. This program benefits the Company by providing a place for the NEO to entertain and hold meetings with customers, prospective customers, community leaders and employees.
Transportation
NEOs who also serve as publishers receive an annual automobile allowance of $5,100.
Other
NEOs are reimbursed for reasonable and customary business expenses incurred on the Company's behalf. The Lee Foundation, an affiliate of the Company, also matches, on a dollar-for-dollar basis up to $5,000 annually, charitable contributions made by NEOs to qualifying organizations. Such reimbursements and matching contributions are not considered income to the NEO and are excluded from the Summary Compensation Table below.
We only allow use of aircraft chartered by the Company for trips related to the Company's business.
We do not provide tax reimbursements to employees, except for reimbursement of certain relocation costs, or upon termination of employment in connection with a change in control of the Company.
Risk Management and Executive Compensation
We do not believe our executive compensation practices are likely to have a material adverse effect on the Company. We believe our compensation policies and practices do not encourage excessive risk taking.
* * * *
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Executive Compensation Committee Report
We have reviewed and discussed the Compensation Discussion and Analysis included in this Proxy Statement with management. Based on this review and discussion, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company's Proxy Statement relating to the Annual Meeting and in the Company's Annual Report on Form 10-K for the year ended September 25, 2011.
The Executive Compensation Committee
William E. Mayer, Chairman
Herbert W. Moloney III
Andrew E. Newman
Mark B. Vittert
Summary Compensation Table
The following table summarizes the 2011, 2010 and 2009 compensation of the NEOs:
(Dollars) | Year | Salary | Stock Awards | Option Awards | Non-Equity Incentive Plan Compensation | All Other Compensation | Total | ||||||
(1) | (2) | (2) | (3) | (4) | |||||||||
Mary E. Junck | 2011 | 809,135 | — | 329,654 | — | 11,933 | 1,150,722 | ||||||
Chairman, President and Chief Executive Officer | 2010 | 833,654 | — | — | — | — | 833,654 | ||||||
2009 | 833,654 | — | — | — | 48,800 | 882,454 | |||||||
Carl G. Schmidt | 2011 | 472,731 | — | 133,660 | — | 7,045 | 613,436 | ||||||
Vice President, Chief Financial Officer and Treasurer | 2010 | 472,731 | — | — | — | — | 472,731 | ||||||
2009 | 472,731 | — | — | 100,000 | 40,100 | 612,831 | |||||||
Greg R. Veon | 2011 | 354,058 | — | 40,158 | — | 5,276 | 399,492 | ||||||
Vice President - Publishing | 2010 | 354,058 | — | — | — | — | 354,058 | ||||||
2009 | 354,058 | — | — | — | 27,279 | 381,337 | |||||||
Kevin D. Mowbray | 2011 | 328,558 | — | 111,483 | — | 4,896 | 444,937 | ||||||
Vice President - Publishing | 2010 | 328,558 | — | — | — | — | 328,558 | ||||||
2009 | 328,558 | — | — | — | 24,770 | 353,328 | |||||||
Vytenis P. Kuraitis | 2011 | 262,846 | — | 59,537 | — | 3,917 | 326,300 | ||||||
Vice President - Human Resources | 2010 | 262,846 | — | — | — | — | 262,846 | ||||||
2009 | 262,846 | — | — | — | 20,567 | 283,413 | |||||||
(1) | The NEOs include the principal executive officer, principal financial officer and the three other most highly compensated executive officers who were serving as executive officers at September 25, 2011. |
(2) | Stock and option awards are granted at a price equal to the fair market value on the date of the grant. Information with respect to stock options granted to the NEOs in 2011 is reflected in “Outstanding Equity Awards at September 25, 2011” below. All such options have exercise prices in excess of the market price at December 30, 2011. |
(3) | Discretionary amounts paid under the annual cash incentive plan. |
(4) | Includes direct and matching contributions made to the Company's Retirement Account Plan and Non-Qualified Plan and dividends on restricted Common Stock in 2009. |
The Compensation Disclosure and Analysis above more fully describes our executive compensation program and the decisions made by the ECC. Specifically, our executive compensation program substantially reduced the compensation to the NEOs in 2011, 2010 and 2009, including a freeze on salaries at the 2008 level, mandatory unpaid vacation time, elimination of grants under the LTIP in 2010 and 2009, suspension of substantially all other cash compensation, including performance-based annual cash incentives in 2009, 2010 and 2011 and contributions to the Retirement
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Account Plan and Non-Qualified Plan in 2010.
Grants of Plan-Based Awards
The following table summarizes information related to grants of equity compensation to our NEOs in 2011 under the 1990 Long-Term Incentive Plan. The Company's non-equity compensation does not have provisions for future payouts.
Name | 2011 Grant Date | All Other Stock Awards: Number of Shares of Stock | All Other Option Awards: Numbers of Securities Underlying Options | Per Share Exercise Price of Option Awards | 2011 Grant Date Fair Value of Stock and Option Awards | ||||
(1) | (2) | ||||||||
Mary E. Junck | 9/28/2010 | — | 165,000 | 2.57 | 329,654 | ||||
Carl G. Schmidt | 9/28/2010 | — | 66,900 | 2.57 | 133,660 | ||||
Greg R. Veon | 9/28/2010 | — | 20,100 | 2.57 | 40,158 | ||||
Kevin D. Mowbray | 9/28/2010 | — | 55,800 | 2.57 | 111,483 | ||||
Vytenis P. Kuraitis | 9/28/2010 | — | 29,800 | 2.57 | 59,537 | ||||
(1) | Under the 1990 Long-Term Incentive Plan, we are authorized, in our discretion, to grant stock options and restricted stock awards in such proportions and upon such terms and conditions as we may determine. All options are for Common Stock and have an exercise price equal to the closing market price of the stock on the grant date. The provisions of the 1990 Long-Term Incentive Plan allow an optionee exercising an option to satisfy the withholding tax obligations by electing to have the Company withhold shares of stock otherwise issuable under the option with a fair market value equal to such obligations. We also permit an optionee exercising an option to satisfy the exercise price by delivering previously awarded restricted Common Stock or previously owned Common Stock. The limitations accompanying any restricted Common Stock delivered at the exercise of an option remain in effect and apply to the corresponding number of shares issued upon the stock option exercise until they lapse according to their original terms. Restricted Common Stock is subject to an agreement requiring forfeiture by the employee in the event of termination of employment, generally within three years of the grant date for reasons other than normal retirement, death or disability. Dividends are paid on shares of restricted Common Stock in the same amount and at the same time as dividends are paid to all other owners of Common Stock, except that shares of Restricted Common Stock held by the CEO are not eligible for dividends until after the specific performance goal measurement period has expired. |
(2) | The grant date fair value is a hypothetical fair value ($1.99 for September 28, 2010 grants) determined under the Black-Scholes Option Pricing Model using certain specified assumptions. The assumptions used in calculating the values were as follows: |
Factor | Grant of September 28, 2010 | |
Dividend yield | — | |
Volatility | 111.20 | % |
Risk-free interest rate | 1.01 | % |
Expected life (Years) | 4.7 | |
The Company's stock options are not transferable, are subject to a risk of forfeiture, and the actual value of the stock options that the NEO may realize, if any, will depend on the excess of the market price on the date of exercise over the exercise price.
Upon exercise of stock options by the option holders by delivery of previously owned Common Stock, replacement, or “reload,” options are awarded at fair market value on the date of exercise of non-qualified stock options. Such options have a term equal to the remaining term of the options exercised and are exercisable after one year.
In 2011, we granted non-qualified stock options to the NEOs and other key executives. The grants to the NEOs were reported in timely filings with the SEC. There were no grants to the NEOs in 2009 and 2010.
In 2008, we canceled outstanding stock options for the NEOs and certain other key employees who voluntarily tendered such options to the Company for cancellation and termination without consideration or promise of consideration for their shares.
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Outstanding Equity Awards at September 25, 2011
No restricted Common Stock awards are outstanding at September 25, 2011. The following table summarizes outstanding equity awards to the NEOs as of September 25, 2011:
Option Awards | |||||||
Number of Securities Underlying Unexercised Options | |||||||
(Dollars, Except Share Data) | Exercisable | Unexercisable | Exercise Price | Expiration Date | |||
(1 | ) | ||||||
Mary E. Junck | — | 165,000 | 2.57 | 9/28/2020 | |||
Carl G. Schmidt | — | 66,900 | 2.57 | 9/28/2020 | |||
Greg R. Veon | — | 20,100 | 2.57 | 9/28/2020 | |||
Kevin D. Mowbray | — | 55,800 | 2.57 | 9/28/2020 | |||
Vytenis P. Kuraitis | — | 29,800 | 2.57 | 9/28/2020 | |||
(1) | Original options, which have a term of ten years, vest over a three year period. The first year, 30% is vested. The second year, an additional 30% is vested. And the third year, the remaining 40% is vested. Reload options vest one year from the date of the grant and have a term equal to the remaining term of the options exercised. |
Option Exercises and Stock Vested
The following table summarizes information related to vesting of restricted Common Stock of the NEOs in 2011. No NEO exercised option awards in 2011.
Restricted Common Stock Awards | ||||
(Dollars, Except Share Data) | Number of Shares Acquired on Vesting | Value Realized on Vesting | ||
(1) | ||||
Mary E. Junck | 3,579 | 8,733 | ||
Carl G. Schmidt | 31,887 | 77,804 | ||
Greg R. Veon | 22,137 | 54,014 | ||
Kevin D. Mowbray | 20,556 | 50,157 | ||
Vytenis P. Kuraitis | 12,983 | 31,679 | ||
(1) | Based on the fair market value of Company Common Stock on the December 20, 2010 vesting date of $2.44. |
Non-Qualified Deferred Compensation
The following table summarizes information related to 2011 activity in the Non-Qualified Plan for the NEOs.
(Dollars) | NEO Contributions | Company Contributions | Aggregate Earnings (Losses) | Distributions | Aggregate Balance at September 25, 2011 | |||||
(1) | (2) | (3) | ||||||||
Mary E. Junck | 68,663 | 7,033 | (5,801 | ) | — | 212,798 | ||||
Carl G. Schmidt | 11,387 | 2,145 | (1,929 | ) | — | 38,227 | ||||
Greg R. Veon | 8,993 | 376 | 15 | — | 22,321 | |||||
Kevin D. Mowbray | 4,178 | — | 1 | — | 8,357 | |||||
Vytenis P. Kuraitis | 6,768 | — | (1,066 | ) | — | 6,678 | ||||
(1) | Amounts included in total compensation in the Summary Compensation Table under “Salary” and/or “Non-Equity Incentive Plan Compensation.” |
(2) | Earnings (losses) are based on the performance of investments selected by the NEO. |
(3) | Amounts include compensation to the NEO in the form of Company contributions prior to 2011. |
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For those NEO's continuing to participate in the Non-Qualified Plan in 2011 and thereafter, withdrawals are permitted following termination of employment. Employee contributions are limited to 45% of salary and bonus compensation. See “Primary Benefits” above for additional information with regard to the Non-Qualified Plan.
Change of Control, Employment and Other Agreements
In 2008, we approved a new form of employment agreement between the Company and each of the NEOs which entitles these executives to severance and other benefits upon termination without cause or for good reason that becomes effective only upon a change of control. A change of control is defined to include certain mergers and acquisitions, liquidation or dissolution of the Company, changes in the membership of the Company's Board of Directors and acquisition of 15% of the outstanding stock of the Company for the purpose of changing the control of the Company.
Absent a change of control, the agreements do not require the Company to retain the executives or to pay them any specified level of compensation or benefits, and they remain employees at will.
The agreements extend for three years from the date of signature. The agreements renew annually for a new three-year period unless the Company gives notice of non-renewal at least 60 days before the anniversary date.
The agreements are subject to the following triggers:
• | The agreements become effective and the protective features vest upon a change of control or if an executive's employment is terminated in anticipation of such event. |
• | The agreements provide that each executive is to remain an employee for a three-year period following a change of control of the Company unless the executive resigns for good reason. |
Under the agreements, a change of control or related termination triggers the following compensation and benefits for the executives:
Employment Period Benefits
During the three-year employment period, the executives are entitled to:
• | An annual base salary, payable monthly in an amount at least equal to their highest monthly base salary during the year prior to the change of control; |
• | An annual bonus, payable in a lump sum within 75 days following each fiscal year in an amount at least equal to their highest annual bonus in the three years prior to the change of control; |
• | Continued participation in the Company's incentive, savings, retirement and welfare benefit plans; and |
• | Payment of expenses and fringe benefits (including, without limitation, office and support staff, tax and financial planning services, applicable club dues and use of an auto and related expenses) to the extent paid or provided to such executive prior to the change of control or other peer executives of the Company. |
Benefits Upon Termination
If the executive's employment is terminated during the three-year employment period other than for cause, death or disability, or the executive terminates employment for good reason, the executive will be entitled to the following benefits:
• | All accrued and unpaid annual base salary and annual bonus for the prior fiscal year payable in a lump sum within 30 days of termination; |
• | A severance payment equal to three times the sum of the executive's annual base salary, and highest recent annual bonus payable in a lump sum within 30 days of termination; |
• | A payment equal to three times the Company's average annual contributions on behalf of the executive under all defined contribution plans maintained by the Company during the three-year period immediately preceding the termination, payable in a lump sum within 30 days of termination; |
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• | Any legal fees and expenses incurred by the executive in asserting legal rights in connection with the agreement; and |
• | Continued welfare benefits for three years and outplacement services for two years. |
Under the agreements, termination for cause means termination of the executive's employment due to the (1) willful and continued failure of the executive to perform substantially the executive's duties with the Company or one of its affiliates, or (2) the willful engaging by the executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company.
Good reason means actions taken by the Company that result in a material negative change in the employment relationship, including a detrimental change in responsibilities, a reduction in salary or benefits or a relocation of office.
Excise Tax Gross-Up
To reduce the impact of any excise tax imposed on the executive related to the change of control, the agreements also require the Company to pay the executive in a lump sum (subject to certain limits and safe harbor/reduction provisions):
• | A “gross-up” payment with respect to the excise tax; and |
• | Any penalties and interest incurred by the executive related to the excise tax. |
At September 25, 2011, this provision is not applicable, based on the current compensation of the NEOs.
Other Provisions
For a period of one year after the agreements become effective, the executives are restricted from:
• | Disclosing the confidential information of the Company and its affiliates; |
• | Competing against the Company and its affiliates; |
• | Soliciting the customers of the Company and its affiliates; and |
• | Soliciting the employees of the Company and its affiliates for employment and hiring them, unless the employee is responding to employment advertising of a general nature or unless approved by the President of the Company in advance. |
There is no requirement in the agreements that the executives execute a release of claims in favor of the Company and its affiliates.
Acquirer's Obligations
The agreements mandate that the Company require an acquirer to assume and satisfy the Company's obligations under the agreements.
Equity Awards
The Company's LTIP provides, if a change of control occurs, for early vesting and exercise and issuance or payment as permitted of the following awards to executives (subject to certain limits):
• | Awards of restricted Common Stock; |
• | Stock options and stock grants; or |
• | Amounts payable instead of such issuance in a lump-sum payment within 30 days of surrender of such stock options to the Company. |
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Potential Payments Upon Termination or Change of Control
The following summarizes information as of September 25, 2011 related to potential payments upon a change in control to the NEOs. Amounts in the table do not reflect income tax benefits that would be realized by the Company.
(Dollars) | Estimated Net Present Value of Change in Control Severance and Benefits | |
Mary E. Junck | 2,671,300 | |
Carl G. Schmidt | 1,862,800 | |
Greg R. Veon | 1,185,500 | |
Kevin D. Mowbray | 1,107,800 | |
Vytenis P. Kuraitis | 902,100 | |
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code limits the deductibility of executive compensation paid by publicly held companies to certain of their executive officers to $1,000,000 per year, but contains an exception for performance-based compensation. While our general policy is to structure our compensation programs to preserve the deductibility of most compensation paid to the Company's executive officers, we periodically authorize payments that may not be deductible if we believe such payments are in the best interests of both the Company and its stockholders.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Herbert W. Moloney III, a director of the Company and a member of the ECC, was President and Chief Operating Officer of Western Colorprint, which provided us, in the normal course of business, with commercial printing services. This relationship is explained below in “Certain Relationships and Related Transactions”.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have adopted procedures that apply to any transaction or series of transactions in which the Company or a subsidiary is a participant involving an amount in excess of $120,000, and a related person has a direct or indirect material interest. Under SEC rules, a related person is a director, nominee for director, executive officer, owner of more than 5% of our Common Stock or immediate family member of any of the above. On an annual basis, each director, nominee for director, officers and certain 5% or greater stockholders are required to complete a Director and Officer Questionnaire that requires disclosure of any transactions with us in which a related person has a direct or indirect material interest. Our general counsel is primarily responsible for the development and implementation of procedures and controls to obtain information from these related persons. The charter of our Audit Committee provides that the Audit Committee is responsible for review, approval or ratification of related-person transactions. Though we have no written policy, it is the practice of our Audit Committee to approve such transactions only if it deems them to be in the best interests of the Company. When considering a transaction, the Audit Committee will review all relevant factors including our rationale for entering into a related-person transaction, alternatives to the transaction, whether the transaction is on terms at least as fair to the Company as would be the case were the transaction entered into with a third party, and potential for an actual or apparent conflict of interest. The Audit Committee reports its findings to the Board of Directors.
In 2011, there was one series of related-person transactions under relevant rules. Herbert W. Moloney III, a director of the Company, became President and Chief Operating Officer of Western Colorprint in December 2006 and served in that capacity until July 2011. Western Colorprint provided us, in the normal course of business, with commercial printing services for which we paid Western Colorprint $618,000 in 2011. We believe that the terms of our 2011 business with Western Colorprint were comparable to terms that would have been reached by unrelated persons in an arms-length transaction. Our Audit Committee and the Board of Directors have reviewed the relationship between us and Western Colorprint and have ratified these transactions, concluding that the relationship was not material to either party, and that Mr. Moloney did not have a material interest in, nor any direct involvement with, the transactions and as such had no material relationship with the Company. Western Colorprint ceased business operations in 2011.
We have entered into indemnification agreements with each of our directors and executive officers. These agreements require us to indemnify such individuals, to the fullest extent permitted by Delaware law, for certain liabilities to which
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they may become subject as a result of their affiliation with the Company.
REPORT OF THE AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS REGARDING ANNUAL FINANCIAL STATEMENTS
The Audit Committee is comprised of five directors who are not officers or employees of the Company. All members are independent under rules of the NYSE and the SEC. The Board of Directors has established a written charter for the Audit Committee.
The Audit Committee held eight meetings in 2011. The meetings were designed to facilitate and encourage private communication between the Audit Committee, management, our internal auditors and our independent registered public accounting firm.
During these meetings, the Audit Committee reviewed and discussed the annual audited and quarterly unaudited financial statements with management and the independent registered public accounting firm, and the effectiveness of our internal control over financial reporting. The Audit Committee believes that management maintains an effective system of internal control over financial reporting. Based on its review and discussions, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in our Annual Report on Form 10-K for filing with the SEC for the year ended September 25, 2011.
The discussions with the independent registered public accounting firm also included the matters required by the Public Company Accounting Oversight Board (“PCAOB”) in Rule 3200T regarding “Communications with Audit Committees.” The Audit Committee received from the independent registered public accounting firm written disclosures and the letter required by PCAOB Rule 3600T regarding “Independence Discussions with Audit Committees.” This information was discussed with the independent registered public accounting firm. The Audit Committee considered whether the non-audit services provided by the independent registered public accounting firm to us are compatible with maintaining auditor independence.
The Audit Committee
Andrew E. Newman, Chairman
Nancy S. Donovan
Leonard J. Elmore
Herbert W. Moloney III
Gordon D. Prichett
Each member of the Audit Committee meets the current financial literacy requirements of the NYSE. Our Board of Directors has determined that Mr. Newman meets the requirements of an audit committee financial expert, as defined by the SEC, and all Audit Committee members meet the NYSE's definition of an independent director.
RELATIONSHIP WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
KPMG has served as our independent registered public accounting firm since 2008. Representatives of KPMG are expected to be present at the Annual Meeting and will be afforded the opportunity to make a statement, if they desire to do so, and will be available to respond to appropriate questions.
For 2011 and 2010, KPMG performed the following professional services and received, or will receive, fees in the amounts indicated.
(Dollars) | 2011 | 2010 | ||
Audit fees | 1,140,000 | 951,400 | ||
Audit-related fees | 116,000 | 21,000 | ||
1,256,000 | 972,000 | |||
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Services Provided by KPMG
All services rendered by KPMG are permissible under applicable laws and regulations. The Audit Committee reviewed and pre-approved all services listed in the above table in accordance with our Policy Regarding the Approval of Audit and Non-Audit Services by Independent Public Accountants (“Policy”). Under the Policy, Audit Committee pre-approval includes audit services, audit-related services, tax services, other services and services exceeding the pre-approved cost range. In some instances, pre-approval is provided by the full Audit Committee for up to a year with any such pre-approval relating to a particular defined assignment or scope of work and subject to a specific defined budget. In other instances, the Audit Committee may delegate pre-approval authority of additional services to one or more designated members with any such pre-approval reported to the Audit Committee at its next scheduled meeting. Any pre-approved service requires the submission of an engagement letter or other detailed back-up information. Pursuant to rules of the SEC, the fees paid to KPMG for services are disclosed in the table above under the categories described below.
Audit Fees - Fees for professional services for the audit of our Consolidated Financial Statements, review of financial statements included in our quarterly Form 10-Q filings, attestation reporting on the effectiveness of our internal control over financial reporting, and services that are normally provided in connection with statutory and regulatory filings or engagements.
Audit-Related Fees - Fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements. This includes due diligence related to mergers and acquisitions, preparation of comfort letters related to financing or other transactions, attestations that are not required by statute or regulation, and consulting related to financial accounting or reporting standards.
Tax Fees - Fees for professional services with respect to tax compliance and advice and planning. This includes preparation of original and amended tax returns for the Company and its consolidated subsidiaries, refund claims, payment planning, tax audit assistance and tax work stemming from audit-related matters. We also engage the services of other accounting firms and law firms for such services. Fees paid to such firms are not reflected in the table above except to the extent KPMG is engaged directly by such firms to perform services on behalf of the Company.
All Other Fees - Fees for other permissible work that does not meet the above category descriptions.
These services are actively monitored both as to spending level and work content by the Audit Committee to maintain the appropriate objectivity and independence in our independent registered public accounting firm's core work, which is the audit of our Consolidated Financial Statements.
The Audit Committee has designated KPMG as its independent registered public accounting firm for purposes of auditing our Consolidated Financial Statements for the year ending September 30, 2012.
* * * *
The Executive Compensation Committee Report and Report of the Audit Committee set forth above shall not be deemed to be incorporated by reference into any filing made by us under the Securities Act of 1933 (“Securities Act”) or the Exchange Act, notwithstanding any general statement contained in any such filing incorporating this Proxy Statement by reference, except to the extent we incorporate such reports by specific reference. In addition, these Reports shall not be deemed to be filed under either the Securities Act or the Exchange Act.
STOCKHOLDER PROPOSALS FOR 2013 ANNUAL MEETING
Proposals of stockholders in accordance with SEC rules to be presented at the 2013 annual meeting must be received by us, at the address shown on the cover of this Proxy Statement, sent by registered, certified or express mail, to be considered for inclusion in our Proxy Statement and form of proxy relating to that meeting by October 8, 2012.
Stockholders who want to bring business before the 2013 annual meeting, other than through a stockholder proposal in accordance with SEC rules, must notify the Secretary of the Company in writing and provide the information required by the provision of our By-Laws dealing with stockholder proposals. The notice must be delivered to or mailed and received at the address of the Company shown on the cover of this Proxy Statement by October 8, 2012. The requirements for such notice are set forth in our By-Laws, which were filed as an exhibit to our Current Report on Form
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8-K filed on or about January 31, 2012. That document is located on our website www.lee.net. Click on “Financial” and “Lee SEC filings”.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our executive officers and directors to file initial reports of ownership and reports of changes in that ownership with the SEC. Specific due dates for these reports have been established and we are required to disclose in our Proxy Statement any failure to file by these dates in 2011.
Based solely on review of the copies of such reports furnished to us and written representations that no other reports were required, we believe that all filing requirements applicable to our executive officers and directors were satisfied, except that in connection with the Company's automatic conversion of its former Class B Common Stock to Common Stock, a report of the conversion for each of SIP, SMC, Betty A. Schermer and Messrs. Lloyd G. Schermer, Grant E. Schermer, Gregory P. Schermer, Greg R. Veon and C.D. Waterman III, was filed late due to the untimely notice to the Company from its transfer agent of the event of conversion.
OTHER MATTERS
The cost of the solicitation of proxies will be borne by us. In addition to solicitation by mail, some of our officers and regular employees may, without extra remuneration, solicit proxies personally or by telephone, electronic transmission or facsimile. We may also request brokerage houses, nominees, custodians and fiduciaries to forward proxy materials to the beneficial owners of stock held of record and will reimburse such persons for their expenses. We have retained Morrow & Co., LLC to aid in the solicitation of proxies, for which we will pay an amount that it has estimated will not exceed $25,000 plus expenses.
 | |
MARY E. JUNCK | |
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| Shareowner Services™ P.O. Box 64945 St. Paul, MN 55164-0945 | ||
COMPANY # | |||
Vote by Internet, Telephone or Mail 24 Hours a Day, 7 Days a Week | ||||
Your phone or Internet vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card. | ||||
 | INTERNET - www.eproxy.com/lee | |||
Use the Internet to vote your proxy until 12:00 p.m. (CST) on March 20, 2012. | ||||
 | PHONE - 1-800-560-1965 | |||
Use a touch-tone telephone to vote your proxy until 12:00 p.m. (CST) on March 20, 2012. | ||||
 | MAIL - Mark, sign and date your proxy card and return it in the postage-paid envelope provided. | |||
If you vote your proxy by Internet or by Telephone, you do NOT need to mail back your Proxy Card. | ||||
TO VOTE BY MAIL AS THE BOARD OF DIRECTORS RECOMMENDS ON ALL ITEMS BELOW,
SIMPLY SIGN, DATE, AND RETURN THIS PROXY CARD.
ò | Please detach here | ò |
The Board of Directors Recommends a Vote FOR Items 1, 2 and 3. | ||
1. | To elect four directors | 01 | Brent Magid | 03 | Gregory P. Schermer | o | Vote FOR all nominees | o | Vote WITHHELD | |||||
for terms of three years: | 02 | William E. Mayer | 04 | Mark B. Vittert | (except as marked) | from all nominees | ||||||||
(Instructions: To withhold authority to vote for any indicated nominee, write the number(s) of the nominee(s) in the box provided to the right.) | ||
2. | To ratify the selection of KPMG LLP as the Company's independent registered public accounting firm | o For o Against o Abstain | ||
3. | To grant the Board of Directors the discretionary authority to effect a reverse stock split | o For o Against o Abstain | ||
4. | To transact such other business as may properly come before the Annual Meeting or any adjournment thereof. | |||
THIS PROXY when properly executed will be voted as directed or, if no direction is given, will be voted as the Board recommends. | ||||
Address Change? Mark Box o | Indicate changes below: | Date | ||||
Signature(s) in Box PLEASE SIGN exactly as your name(s) appear(s) on the Proxy. If held in joint tenancy, all persons must sign. Trustees, administrators, etc., should include title and authority. Corpo-rations should provide full name of corporation and title of authorized officer signing the proxy. | ||||||
LEE ENTERPRISES, INCORPORATED
ANNUAL MEETING OF STOCKHOLDERS
March 21, 2012
9:00 a.m. (CST)
Lee Enterprises Corporate Offices
201 N. Harrison St.
Fourth Floor
Davenport, IA 52801
201 N. Harrison St., Suite 600 Davenport, IA 52801 | proxy | ||
This proxy is solicited by the Board of Directors for use at the Annual Meeting on March 21, 2012.
The shares of stock you hold in your account will be voted as you specify on the reverse side.
If no choice is specified, the proxy will be voted “FOR” Items 1, 2 and 3.
By signing the proxy, you revoke all prior proxies and appoint Mary E. Junck and William E. Mayer, and each of
them, with full power of substitution, to vote your shares on the matters shown on the reverse side and any other
matters that may come before the Annual Meeting and all adjournments.
See reverse for voting instructions.