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, 1995
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, 1995
Common Stock, $2.00 par value 34,363,227
Class "B" Common Stock, $2.00 par value 13,034,885
PART I. FINANCIAL INFORMATION
Item 1.
LEE ENTERPRISES, INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Data)
1995 1994
(Unaudited)
Three Months Ended December 31:
Operating revenue:
Newspaper:
Advertising $ 45,201 $ 37,721
Circulation 20,184 17,076
Other 13,126 11,461
Broadcasting 30,341 29,347
Graphic arts 15,882 14,703
Equity in net income of
associated companies 1,921 2,780
$126,655 $113,088
Operating expenses:
Compensation costs $ 41,638 $ 36,254
Newsprint and ink 10,215 6,776
Depreciation 3,947 2,845
Amortization of intangibles 3,773 3,021
Other 38,519 33,932
$ 98,092 $ 82,828
Operating income $ 28,563 $ 30,260
Financial (income) expense,
net:
Financial (income) $ (527) $ (811)
Financial expense 2,555 3,256
$ 2,028 $ 2,445
Income before taxes
on income $ 26,535 $ 27,815
Income taxes 10,595 10,989
Net income $ 15,940 $ 16,826
Weighted average number of
shares 48,297 45,816
Earnings per share $ .33 $ .37
Dividends per share $ .12 $ .11
LEE ENTERPRISES, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31, September 30,
1995 1995
(Unaudited)
ASSETS
Cash and cash equivalents $ 29,907 $ 10,683
Temporary investments 200 200
Accounts receivable, net 65,297 58,584
Inventories 16,848 18,355
Program rights and other 15,340 16,687
Total current assets $127,592 $104,509
Investments 20,116 19,700
Property and equipment, net 108,761 108,196
Intangibles and other assets 322,957 327,524
$579,426 $559,929
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $126,253 $116,527
Long-term debt, less current maturities 75,109 75,511
Deferred items 57,358 56,849
Stockholders' equity 320,706 311,042
$579,426 $559,929
LEE ENTERPRISES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
1995 1994
(Unaudited)
Three Months Ended December 31:
CASH PROVIDED BY OPERATIONS
Net income $ 15,940 $ 16,826
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation and amortization 7,720 5,866
Distributions in excess of current
earnings of associated companies 1,953 2,026
Other balance sheet changes (395) 4,927
Net cash provided by operations $ 25,218 $ 29,645
CASH PROVIDED BY (REQUIRED FOR) INVESTING
ACTIVITIES
Acquisitions $ - - $ (1,350)
Purchase of temporary investments (200) - -
Proceeds from maturities of temporary
investments 200 8,386
Purchase of property and equipment (4,346) (3,081)
Other (931) (815)
Net cash provided by (required for)
investing activities $ (5,277) $ 3,140
CASH (REQUIRED FOR) FINANCING ACTIVITIES
Purchase of common stock $ (868) $(13,901)
Other 151 106
Net cash (required for) financing
activities $ (717) $(13,795)
Net increase in cash and cash
equivalents $ 19,224 $ 18,990
Cash and cash equivalents:
Beginning 10,683 18,784
Ending $ 29,907 $ 37,774
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, 1995 and the results of operations and
cash flows for the three-month periods ended December 31, 1995 and
1994.
NOTE 2. COMMON STOCK SPLIT
On November 9, 1995, the Board of Directors declared a two-for-one
stock split on the Company's common stock and Class B common stock
effected in the form of a stock dividend payable December 8, 1995,
to holders of record on November 20, 1995. All share and per
share data is stated to reflect the split.
NOTE 3. INVESTMENT IN ASSOCIATED COMPANIES
Condensed operating results of unconsolidated associated companies
are as follows:
Three Months Ended
December 31,
1995 1994
(In Thousands)
(Unaudited)
Revenues $ 19,291 $ 26,891
Operating expenses, except
depreciation and amortization 12,727 17,459
Depreciation and amortization 460 611
Operating income 6,104 8,821
Financial income 308 495
Income before income taxes 6,412 9,316
Income taxes 2,569 3,748
Net income 3,843 5,568
a. Madison Newspapers, Inc. (50% owned)
b. Journal-Star Printing Co. (49.75% owned until March 31, 1995)
c. Quality Information Systems (50% owned)
NOTE 4. INVENTORIES
Inventories consist of the following:
December 31, September 30,
1995 1995
(In Thousands)
(Unaudited)
Newsprint $ 2,786 $ 3,634
Media products and services:
Raw material 6,881 7,554
Finished goods 7,181 7,167
$ 16,848 $ 18,355
LEE ENTERPRISES, INCORPORATED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL INFORMATION
NOTE 5. CASH FLOWS INFORMATION
The components of other balance sheet changes are:
Three Months Ended
December 31,
1995 1994
(In Thousands)
(Unaudited)
(Increase) in receivables $ (8,151) $ (7,032)
Decrease in inventories, film
rights and other 1,969 2,107
Increase (decrease) in accounts
payable, accrued expenses and
unearned income (4,209) 1,047
Increase in income taxes payable 9,265 8,734
Other 731 71
$ (395) $ 4,927
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Operating results:
Three Months Ended
December 31,
1995 1994
(Dollar Amounts in
Thousands Except For
Per Share Data)
Revenue $126,655 $113,088
Percent change 12.0%
Income before depreciation and
amortization, interest and taxes
(EBITDA) 36,283 36,126
Percent change .4%
Operating income 28,563 30,260
Percent change (5.6%)
Net income 15,940 16,826
Percent change (5.3%)
Earnings per share $ .33 $ .37
Percent change (10.8%)
As if acquisition of Journal-Star Printing Co. and SJL of Kansas Corp. had
occurred on October 1, 1994.
Proforma:
Revenue $126,655 $124,961
Percent change 1.4%
Income before depreciation and
amortization, interest and taxes
(EBITDA) 36,283 39,892
Percent change (9.0%)
Operating income 28,563 32,536
Percent change 12.2%
Net income 15,940 17,425
Percent change (8.5%)
Earnings per share $ .33 $ .35
Percent change (5.7%)
Operations by line of business are as follows:
Three Months Ended
December 31,
1995 1994
(In Thousands)
Revenue:
Newspapers $ 80,425 $ 69,051
Broadcasting 30,341 29,347
Graphic arts 15,889 14,690
$126,655 $113,088
Income before depreciation and
amortization, interest and taxes
(EBITDA):
Newspapers $ 26,143 $ 23,527
Broadcasting 9,878 13,491
Graphic arts 3,617 2,845
Corporate (3,355) (3,737)
$ 36,283 $ 36,126
Operating income:
Newspapers $ 22,593 $ 20,793
Broadcasting 6,951 11,618
Graphic arts 2,508 1,712
Corporate and other (3,489) (3,863)
$ 28,563 $ 30,260
Capital expenditures:
Newspaper $ 2,013 $ 1,367
Broadcasting 2,061 1,673
Graphic arts 227 41
Corporate 45 - -
$ 4,346 $ 3,081
There were no significant non-recurring items during the quarter.
The advertising environment was sluggish in the first quarter of the
fiscal year and is expected to remain sluggish at least through the second
quarter.
Newspapers:
On a proforma basis for newspapers owned at the end of fiscal 1995,
wholly-owned daily newspaper advertising revenue increased $1,322,000,
3.0%. Advertising revenue from local merchants increased $661,000,
2.4%. Local "run-of-press" advertising decreased $142,000, (.7%) as a
result of higher average rates which partially offset a 6.1% decrease in
advertising inches. Local preprint revenue increased $803,000, 9.6%.
Classified advertising revenue increased $568,000, 4.8% as a 3.0%
decrease in units primarily related to weakness in the automotive
segment was offset by higher average rates. Circulation revenue
increased $1,065,000, 5.6% as a result of higher rates which offset a
2.0% decrease in volume. Other revenue at daily newspapers increased
$1,569,000, 24.6% primarily as a result of increases in commercial
printing and other non-traditional products and services.
On a proforma basis for newspapers owned at the end of fiscal 1995,
wholly-owned daily newspaper compensation expense increased $778,000,
3.4% due primarily to increases in average compensation. Newsprint and
ink costs increased $2,258,000, 28.8%. Higher unit costs were offset in
part by a 2.3% decrease in consumption. Other operating expenses
exclusive of depreciation and amortization decreased $214,000, (1.3%).
Revenues from weekly newspapers, shoppers and specialty publications
increased $382,000, 8.0%. Revenue from properties acquired since the
beginning of the first quarter of the last fiscal year were not
significant.
Broadcasting:
Exclusive of the effects of the acquisition of SJL of Kansas Corp.
revenue for the quarter decreased $3,371,000, (11.5%), as political
advertising decreased $2,905,000, local/regional advertising increased
$595,000, (4.3%) and national advertising decreased $50,000, (.6%).
Compensation costs increased $351,000, 4.9% due primarily to a 9.8%
increase in the number of hours worked which was offset, in part, by a
decrease in the average hourly rates. Programming costs for the quarter
increased $411,000, 23.6% primarily due to higher program acquisition
costs. Other operating expenses exclusive of depreciation and
amortization increased $336,000, 6.5% for the quarter.
Graphic Arts:
Graphic arts revenue increased $1,179,000, 8.0%, as decreased unit
volume from NAPP's letterpress plate business was offset by higher
selling prices, growth in the flexographic printing plate business and
revenue from the distribution of flexographic commercial printing plates
which commenced in September 1995. 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 increased $796,000, 46.5% due to the increased sales volume and a
reduction in spending on new product initiatives.
Equity in Net Income of Associated Companies:
Equity in net income of associated companies decreased $859,000. The
prior year included $808,000 of equity in net income of Journal-Star
Printing Co.
Financial Expense and Income Taxes:
Interest expense was reduced due to payments on long-term debt offset,
in part, by $15,000,000 of short-term borrowings to finance the
acquisition of SJL of Kansas Corp.
Income taxes were 39.9% and 39.5% of pre-tax income for the quarters
ended December 31, 1995 and 1994, respectively. The increase in the
effective income tax rate was due to an increase in nondeductible
intangible asset amortizations.
Liquidity and Capital Resources:
Cash provided by operations, which is the Company's primary source of
liquidity, generated $25,218,000 for the quarter. Available cash
balances, cash flow from operations and bank lines-of-credit provide
adequate liquidity. Covenants related to the Company's credit
agreements are not considered restrictive to operations and anticipated
stockholder dividends.
LEE ENTERPRISES, INCORPORATED
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit "A" - Computation of Earnings Per Share
(b) The following report on Form 8-K was filed during the three
months ended December 31, 1995.
Date of report: December 5, 1995
Item: 5 - Announce the declaration of the two-for-one stock
split
Financial statements filed: none
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 2/08/96 /s/G. C. Wahlig
G. C. Wahlig, Chief Accounting
Officer
PART I. EXHIBIT "A"
COMPUTATION OF EARNINGS PER COMMON SHARE
(In Thousands Except Per Share Data)
Three Months Ended
December 31,
1995 1994
(Unaudited)
Net income applicable to common shares $ 15,940 $ 16,826
Shares:
Weighted average common shares outstanding 47,378 45,218
Dilutive effect of certain stock options 919 598
Average common shares outstanding as adjusted 48,297 45,816
Earnings per common share $ .33 $ .37
5
1,000
3-MOS
SEP-30-1996
DEC-31-1995
29,907
200
69,597
4,300
16,848
127,592
257,481
148,720
579,426
126,253
75,109
0
0
94,796
225,910
579,426
126,655
126,655
0
08,092
0
0
2,555
26,535
10,595
15,940
0
0
0
15,940
.33
.33
