UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ended December 31, 1994
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File Number 1-6227
Lee Enterprises, Incorporated
A Delaware Corporation I.D. #42-0823980
215 N. Main Street, Davenport, Iowa 52801
Phone: (319) 383-2100
Indicate by a check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes [X] No
[ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date.
Class Outstanding at December 31, 1994
Common Stock, $2.00 par value 15,721,055
Class "B" Common Stock, $2.00 par value 6,663,220
PART I. FINANCIAL INFORMATION
Item 1.
LEE ENTERPRISES, INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Data)
1994 1993
(Unaudited)
Three Months Ended December 31:
Operating revenue:
Newspaper:
Advertising $ 37,721 $ 35,008
Circulation 17,076 16,442
Other 11,461 9,330
Broadcasting 29,347 22,934
Media products and services 14,703 15,632
Equity in net income of associated companies 2,780 2,741
$113,088 $102,087
Operating expenses:
Compensation costs $ 36,254 $ 34,103
Newsprint and ink 6,776 5,856
Depreciation 2,845 2,683
Amortization of intangibles 3,021 3,160
Other 33,932 31,246
$ 82,828 $ 77,048
Operating income $ 30,260 $ 25,039
Financial (income) expense, net:
Financial (income) $ (811) $ (709)
Financial expense 3,256 3,732
$ 2,445 $ 3,023
Income before taxes on income $ 27,815 $ 22,016
Income taxes 10,989 8,699
Net income $ 16,826 $ 13,317
Weighted average number of shares 22,908 23,462
Earnings per share $ .73 $ .57
Dividends per share $ .22 $ .21
LEE ENTERPRISES, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31, September 30,
1994 1994
(Unaudited)
ASSETS
Cash and cash equivalents $ 37,774 $ 18,784
Temporary investments 30,473 38,859
Accounts receivable, net 53,202 48,339
Inventories 11,250 13,147
Film rights and other 14,753 16,578
Total current assets $147,452 $135,707
Investments, associated companies 22,112 21,969
Property and equipment, net 82,482 82,164
Intangibles and other assets 234,711 234,861
$486,757 $474,701
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $112,217 $ 99,730
Long-term debt, less current maturities 100,015 98,641
Deferred items 33,733 34,400
Stockholders' equity 240,792 241,930
$486,757 $474,701
LEE ENTERPRISES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
1994 1993
(Unaudited)
Three Months Ended December 31:
CASH PROVIDED BY OPERATIONS
Net income $ 16,826 $ 13,317
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation and amortization 5,866 5,843
Distributions in excess of current
earnings of associated companies 2,026 1,734
Other balance sheet changes 4,927 7,382
Net cash provided by operations $ 29,645 $ 28,276
CASH PROVIDED BY (REQUIRED FOR) INVESTING
ACTIVITIES
Acquisitions $ (1,350) $ (2,370)
Purchase of temporary investments - - (38,500)
Proceeds from maturities of temporary
investments 8,386 21,900
Purchase of property and equipment (3,081) (4,015)
Net cash provided by (required for)
investing activities $ 3,955 $(22,985)
CASH (REQUIRED FOR) FINANCING ACTIVITIES
Purchase of common stock $(13,901) $ (805)
Payment of debt - - (9)
Other (709) (59)
Net cash (required for) financing
activities $(14,610) $ (873)
Net increase in cash and cash
equivalents $ 18,990 $ 4,418
Cash and cash equivalents:
Beginning 18,784 17,072
Ending $ 37,774 $ 21,490
LEE ENTERPRISES, INCORPORATED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL INFORMATION
NOTE 1. BASIS OF PRESENTATION
The information furnished reflects all adjustments, consisting of
normal recurring accruals, which are, in the opinion of
management, necessary to a fair presentation of the financial
position as of December 31, 1994 and the results of operations and
cash flows for the three-month periods ended December 31, 1994 and
1993.
NOTE 2. INVESTMENT IN ASSOCIATED COMPANIES
Condensed operating results of unconsolidated associated companies
are as follows:
Three Months Ended
December 31,
1994 1993
(In Thousands)
(Unaudited)
Revenues $ 26,891 $ 25,864
Operating expenses, except
depreciation and amortization 17,459 16,707
Depreciation and amortization 611 492
Operating income 8,821 8,665
Financial income 495 445
Income before income taxes 9,316 9,110
Income taxes 3,748 3,606
Net income 5,568 5,504
a. Madison Newspaper, Inc. (50% owned)
b. Journal-Star Printing Co. (49.75% owned)
c. Quality Information Systems (50% owned)
NOTE 3. INVENTORIES
Inventories consist of the following:
December 31, September 30,
1994 1994
(In Thousands)
(Unaudited)
Newsprint $ 776 $ 2,343
Media products and services:
Raw material 6,298 5,684
Finished goods 4,176 5,120
$ 11,250 $ 13,147
LEE ENTERPRISES, INCORPORATED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL INFORMATION
NOTE 4. CASH FLOWS INFORMATION
The components of other balance sheet changes are:
Three Months Ended
December 31,
1994 1993
(In Thousands)
(Unaudited)
(Increase) in receivables $ (7,032) $ (3,133)
Decrease in inventories, film
rights and other 2,107 2,300
Increase in accounts payable,
accrued expenses and
unearned income 1,047 833
Increase in income taxes payable 8,734 8,132
Other, primarily deferred items 71 (750)
$ 4,927 $ 7,382
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Operating results:
Three Months Ended
December 31,
1994 1993
(Dollar Amounts in
Thousands Except For
Per Share Data)
Revenue $113,088 $102,087
Percent change 10.8%
Operating expenses 82,828 77,048
Percent change 7.5%
Operating income 30,260 25,039
Percent change 20.9%
Net income 16,826 13,317
Percent change 26.3%
Earnings per share $ .73 $ .57
Percent change 28.1%
Operations by line of business are as follows:
Three Months Ended
December 31,
1994 1993
(In Thousands)
Revenue:
Newspapers $ 69,051 $ 63,468
Broadcasting 29,347 22,934
Media products and services 14,690 15,685
$113,088 $102,087
Operating income:
Newspapers $ 20,793 $ 19,904
Broadcasting 11,618 5,806
Media products and services 1,712 2,832
Corporate and other (3,863) (3,503)
$ 30,260 $ 25,039
Depreciation and amortization:
Newspapers $ 2,734 $ 2,659
Broadcasting 1,873 1,848
Media products and services 1,133 1,212
Corporate 126 124
$ 5,866 $ 5,843
Capital expenditures:
Newspaper $ 1,367 $ 3,105
Broadcasting 1,673 844
Media products and services 41 66
$ 3,081 $ 4,015
There were no significant non-recurring items during the quarter.
Newspapers:
Wholly-owned daily newspaper advertising revenue increased $2,846,000,
8.1%. Advertising revenue from local merchants increased $1,788,000,
8.1%. Local "run-of-press" advertising increased $1,156,000 as a result
of higher average rates and a 3.6% increase in advertising inches. Local
preprint units were up 8.8% while revenue increased $632,000, 9.4%.
Classified advertising revenue increased $1,173,000, 13.2% as a result of
a 5.0% increase in units in the recruitment and private party segments
which offset weakness in the automotive and real estate segments and
higher average rates. Circulation revenue increased $634,000, 3.9% as a
result of higher rates which offset a .7% decrease in volume. Other
revenue at daily newspapers increased $1,225,000, 38.2% primarily as a
result of increases in commercial printing, target marketing and other
non-traditional products and services.
Wholly-owned daily newspaper compensation expense increased $1,144,000,
6.0% due primarily to increases in average compensation. Newsprint and
ink costs increased $909,000, 15.8%. Higher unit costs represented 80% of
the increase with the balance attributable to an increase in newsprint
used by newspapers due to advertising and commercial printing volume
increases. Other cash costs increased $1,900,000, 15.5% which includes
the costs of new non-traditional products and services.
Revenues from weekly newspapers, shoppers and specialty publications
increased $847,000, 21.4%. Revenue from properties acquired since the
beginning of the first quarter of the last fiscal year accounted for
substantially all of the increase.
Broadcasting:
Revenue for the quarter increased $6,413,000, 28.0% as political
advertising increased $3,837,000, local/regional advertising increased
$845,000, 6.5% and national advertising increased $1,244,000, 16.2%.
Compensation costs increased $449,000, 5.3% due primarily to an increase
in average compensation and a 2.7% increase in the number of hours worked.
Programming costs for the quarter declined $212,000 primarily due to lower
program acquisition costs. Other cash costs increased $336,000, 6.8% for
the quarter.
Media Products and Services:
Media products and services revenue decreased $995,000, 6.3% as decreased
unit volume from NAPP's letterpress plate business was only partially
offset by higher selling prices and growth in the flexographic printing
plate business. Letterpress customers reduced inventory levels and
several customers completed conversion to offset or flexographic printing.
Revenue from the letterpress business is expected to decrease each year as
conversions continue. Operating income decreased $1,120,000, 39.6% due to
a lower level and some continuing new product initiatives.
Equity in Net Income of Associated Companies:
Equity in net income of associated companies decreased $39,000. An
increase in the net income of associated newspaper companies of $105,000
was offset by a reduction in income earned by 50%-owned strategic
alliances.
Financial Expense and Income Taxes:
Interest expense was reduced due to payments on long-term debt.
Income taxes were 39.5% of pretax income for the quarters ended
December 31, 1994 and 1993.
Liquidity and Capital Resources:
Cash provided by operations, which is the Company's primary source of
liquidity, generated $29,645,000 for the quarter. Available cash balances
and cash flow from operations provide adequate liquidity. Covenants
related to the Company's credit agreements are not considered restrictive
to operations and anticipated stockholder dividends.
PART II. OTHER INFORMATION
Item 5. Other Materially Important Events
A letter of intent was executed on February 6, 1995 for the
acquisition by Lee Enterprises, Incorporated of 50.25% (3,015 shares) of the
common stock of Journal-Star Printing Co., a Nebraska corporation, from
Journal Limited Partnership, a Nebraska limited partnership. Journal-Star
Printing Co. publishes the Lincoln Star, the Lincoln Journal, the Saturday
Journal-Star, and the Sunday Journal and Star; owns all of the outstanding
stock of Plattsmouth Journal Company, publisher of the Plattsmouth
(Nebraska) Journal; and is engaged in the delivery of related printing and
publishing products and services, all in Lincoln, Nebraska.
The acquisition will be accomplished by merger of Journal-Star Printing Co.
into a subsidiary of Lee to be formed. In exchange for the shares of
Journal-Star Printing Co. owned by Journal Limited Partnership, Lee will
issue shares of its Common Stock having an approximate value of $58.3
million. Journal-Star will also make certain nonmaterial payments to
Journal Limited Partnership in exchange for the assignment or cancellation
of certain outstanding contracts.
The transaction is subject to approval of the Federal Trade Commission and
the United States Department of Justice pursuant to the requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. Subject
to such approval, the parties contemplate closing of the transaction on
March 31, 1995.
The transaction does not require the approval of Lee's stockholders. Common
shares issued by Lee are presently authorized but unissued shares of the
Company and will be "restricted shares" in the hands of Journal Limited
Partnership until registration under the Securities Act of 1933 is
requested.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit "A" - Computation of Earnings Per Share
(b) There were no reports on Form 8-K during the quarter for which
this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
LEE ENTERPRISES, INCORPORATED
DATE
G.C. Wahlig, Chief Accounting Officer
LEE ENTERPRISES, INCORPORATED
PART I. EXHIBIT "A"
Computation of Earnings Per Common Share
(In Thousands Except Per Share Amounts)
Three Months Ended
December 31,
1994 1993
(Unaudited)
Net income applicable to common shares $ 16,826 $ 13,317
Shares:
Weighted average common shares outstanding 22,609 23,103
Dilutive effect of certain stock options 299 359
Average common shares outstanding as adjusted 22,908 23,462
Earnings per common share $ .73 $ .57
5
1000
3-MOS
SEP-30-1995
DEC-31-1994
68,247
0
53,202
4,600
11,250
147,452
223,603
141,121
486,757
112,217
100,015
44,769
0
0
196,023
486,757
110,308
113,088
0
0
82,828
0
3,256
27,815
10,989
16,826
0
0
0
16,826
.73
.73
