FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
         OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended September 30, 1996

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

Commission File Number 1-6227

                          LEE ENTERPRISES, INCORPORATED

             (Exact name of registrant as specified in its charter)

        Delaware                                           42-0823980
- ------------------------                    ------------------------------------
(State of Incorporation)                    (I.R.S. Employer Identification No.)

  215 N. Main Street, Davenport, Iowa                       52801
- ----------------------------------------                  ----------
(Address of Principal Executive Offices)                  (Zip Code)

Registrant's telephone number, including area code (319) 383-2100

Securities registered pursuant to Section 12(b) of the Act:

                                                        Name of Each Exchange On
          Title of Each Class                              Which Registered
- --------------------------------------------------------------------------------

Common Stock - $2.00 par value                          New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

  Title of Class
- --------------------

Class B Common Stock              $2.00 par value

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

State the aggregate  market value of voting stock held by  nonaffiliates  of the
registrant as of December 2, 1996.  Common Stock and Class B Common Stock, $2.00
par value: $1,802,000.

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of December 2, 1996. Common Stock, $2.00 par value,  34,555,576
shares; and Class B Common Stock, $2.00 par value, 12,455,186 shares.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Lee Enterprises,  Incorporated  Definitive Proxy Statement dated
December 27, 1996 are incorporated by reference in Part III of this Form 10-K.




                                     PART I

Item 1.  Business

Item 1(a) Recent business developments. On November 4, 1996 the Company signed a
letter of intent to sell its graphic  arts  products  subsidiary,  NAPP  Systems
Inc., for approximately  $55,000,000.  For additional information related to the
disposition,  see Note 2 of the  Notes to  Financial  Statements  under  Item 8,
herein.

Item 1(b)  Financial  information  about industry  segments.  See Note 11 to the
Notes to Financial Statements under Item 8, herein.

Item 1(c) Narrative description of business.

                                   NEWSPAPERS

The Company and its subsidiaries publish the following daily newspapers:

- -    The   Wisconsin   State   Journal  -  Madison,   Wisconsin  
- -    The  Lincoln Journal-Star - Lincoln,  Nebraska  
- -    Quad-City  Times - Davenport,  Iowa
- -    Billings  Gazette - Billings,  Montana  
- -    Herald  and  Review - Decatur, Illinois  
- -    The  Journal  Times - Racine,  Wisconsin  
- -    LaCrosse  Tribune - LaCrosse,  Wisconsin  
- -    Rapid  City  Journal - Rapid  City,  South  Dakota
- -    Missoulian - Missoula, Montana 
- -    Bismarck Tribune - Bismarck, North Dakota
- -    Southern Illinoisan - Carbondale,  Illinois  
- -    Globe-Gazette - Mason City, Iowa  
- -    Ottumwa  Courier -  Ottumwa,  Iowa 
- -    The  Montana  Standard - Butte, Montana 
- -    Independent Record - Helena,  Montana 
- -    Gazette Times - Corvallis, Oregon  
- -    Winona  Daily  News -  Winona,  Minnesota  
- -    Muscatine  Journal  -  Muscatine, Iowa 
- -    Star Courier - Kewanee, Illinois

One daily and Sunday  newspaper,  The  Wisconsin  State  Journal,  and one daily
newspaper, The Capital Times, are published in Madison, Wisconsin, both of which
are owned by Madison  Newspapers,  Inc. The Company owns 50% of the  outstanding
capital stock of Madison Newspapers,  Inc. The Company has a contract to furnish
the  editorial  and news content for The  Wisconsin  State  Journal,  which is a
morning newspaper  published seven days each week. The Capital Times Company, of
which the Company owns 17% of the nonvoting common stock,  owns the other 50% of
the  outstanding  capital stock of Madison  Newspapers,  Inc., and has a similar
contract to furnish the editorial and news content for The Capital Times,  which
is an afternoon  newspaper  published daily,  except Sunday. Both newspapers are
produced in the printing  plant of Madison  Newspapers,  Inc.,  which  maintains
common advertising,  circulation,  delivery and business departments for the two
newspapers.  The Company is  compensated  for  supplying  the editorial and news
content.  In the newspaper field and rating services The Wisconsin State Journal
is classified as one of the Lee Group of newspapers.

The  Company  also  publishes  39  weekly   newspapers   and  special   industry
publications.

The  basic  raw  material  of  newspapers  is  newsprint.  The  Company  and its
subsidiaries  purchase newsprint from U.S. and Canadian  producers.  The Company
believes  it will  continue  to receive a supply of  newsprint  adequate  to its
needs. Price increases for newsprint are probable in the future.

Newspaper revenue has  traditionally  been highest in the quarter ended December
31 and, likewise, has been lowest in the quarter ended March 31.

The Company's  newspapers  compete with  newspapers  having national or regional
circulation,  magazines,  radio,  television,  other  advertising  media such as
billboards, specialty publications and direct mail, as well as other information
content providers such as on-line services.  In addition,  many of the Company's
daily and Sunday  newspapers  compete with other newspapers in nearby cities and
towns.


                                  BROADCASTING

The  Company and its  subsidiaries  own and  operate  the  following  television
stations:

                                                               Nielsen DMA
             Station                                          Market Ranking
- --------------------------------------------------------------------------------

ABC Affiliate, KGUN-TV - Tucson, Arizona                             78
CBS Affiliates:
   KOIN-TV - Portland, Oregon                                        24
   KRQE-TV - Albuquerque, New Mexico                                 48 (1)
   KGMB-TV - Honolulu, Hawaii                                        69 (2)
   KMTV - Omaha, Nebraska                                            75
NBC Affiliates:
   WSAZ-TV - Huntington-Charleston, West Virginia                    56
   KSNW-TV - Wichita, Kansas                                         65 (3)
   KSNT-TV - Topeka, Kansas                                         141
UPN Affiliate, KZIA-TV - El Paso, Texas                              99
UPN/WB Affiliate, KASY-TV - Albuquerque, New Mexico
   (operating under local marketing agreement)                       48


(1)  Combined  DMA rank.  KRQE-TV  also  operates  satellite  stations  KBIM-TV,
     Roswell, New Mexico and KREZ-TV, Durango, Colorado.

(2)  KGMB-TV also operates satellite stations KGMD-TV, Hilo, Hawaii and KGMV-TV,
     Maui, Hawaii.

(3)  KSNW-TV also operates  satellite  stations  KSNG-TV,  Garden City,  Kansas;
     KSNC-TV, Great Bend, Kansas; and KSNK-TV, Oberlin, Kansas/McCook, Nebraska

Broadcasting  revenue  has  traditionally  been  highest  in the  quarter  ended
December 31 and, likewise, has been lowest in the quarter ended March 31.

The Company's  television  stations are in competition  with other  over-the-air
broadcast,  direct  broadcast  satellite  ("DBS")  and cable  television,  radio
companies, other advertising media such as newspapers, magazines and billboards,
as well as  other  information  content  providers  such  as  on-line  services.
Competition  in  the  television   broadcasting  industry  occurs  primarily  in
individual market areas.  Generally, a television station in one market does not
compete with other stations in other market areas, nor does a group of stations,
such as those owned by the Company,  compete with any other group of stations as
such. DBS and cable  television  systems in the Company's  broadcasting  markets
operate on a subscriber  payment  basis and compete by  importing  out-of-market
television  signals or by  originating  programming  to the extent  permitted or
required  by present or future  rules of the Federal  Communications  Commission
("FCC").

The Company's television broadcasting operations are subject to the jurisdiction
of the FCC under the Communications Act of 1934, as amended (the "Act"). The Act
empowers the FCC, among other things,  to issue,  revoke or modify  broadcasting
licenses,  to assign frequency bands, to determine the location of stations,  to
regulate the apparatus  used by stations,  to establish  areas to be served,  to
adopt regulations necessary to carry out the provisions of the Act and to impose
penalties for violation of such regulations. Television licenses are granted for
a maximum  period of five  years  and,  upon  application,  may be  renewed  for
additional  five-year  terms. The FCC is required to hold a hearing on a renewal
application  if a  substantial  and  material  question  of fact is raised  with
respect to the  renewal  application,  or if for any reason the FCC is unable to
find that the grant of the renewal  application would serve the public interest,
convenience  and  necessity.  Renewal of the Company's  television  licenses has
never been denied and all such licenses are now in full force and effect.






                                  OTHER MATTERS


Compliance  with  present  statutory  and  regulatory   requirements  respecting
environmental  quality will not  necessitate  significant  capital  outlays,  or
materially  affect the earning  power of the business of the  Company,  or cause
material changes in the Company's business, whether present or intended.

In September 1996, the Company,  its subsidiaries  and associated  companies had
approximately   5,300  employees,   including   approximately   1,700  part-time
employees.

Item 2.  Properties

The Company's  executive  offices are located in facilities  leased at 215 North
Main Street, Davenport, Iowa.

All of the newspaper  printing plants (except Madison) are owned by the Company.
All newspaper  printing plants (including  Madison) are well maintained,  are in
good  condition,  and  are  suitable  for  the  present  office  and  publishing
operations of the newspapers.  All newspaper plants are adequately equipped with
typesetting,  printing  and  other  equipment  required  in the  publication  of
newspapers.

All offices,  studios, and transmitter  buildings of the broadcasting  divisions
are owned or subject to long-term  lease by the Company.  All of the  television
properties  are  adequately  equipped  for present  operations,  and are in good
condition and repair. Network television programs are received via satellite.

Item 3.  Legal Proceedings

Not applicable.

Item 4.  Submission of Matters to a Vote of Security Holders

Not applicable.





Executive Officers of the Company

The following  table shows the names and ages of all  executive  officers of the
Company,  the period of service  for each with the  Company,  the period  during
which each has held his present office and the office held by each.



                                         Period of Service         Period In
            Name                Age        With Company         Present Office          Present Office
- ------------------------------------------------------------------------------------------------------
                                                                       

Richard D. Gottlieb              54          33 years               5 years        President and Chief
                                                                                   Executive Officer

Larry L. Bloom                   47         3-1/2 years           3-1/2 years      Vice-President and
                                                                                   Treasurer

Ronald L. Rickman                58          37 years              13 years        Vice-President

Gary N. Schmedding               58          24 years               8 years        Vice-President

Greg R. Veon                     44          20 years               1 year         Vice-President

Charles D. Waterman, III         50           7 years               7 years        Secretary

George C. Wahlig                 49           7 years               4 years        Principal Accounting
                                                                                   Officer

John VanStrydonck                43          15 years               5 years        Chairman and CEO,
                                                                                   NAPP Systems Inc.

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

                 EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE

                                                   Year Ended September 30,
                                                 ----------------------------
                                                   1996      1995      1994
                                                 ----------------------------
                                                 Amounts in Thousands, Except 
                                                       Per Share Data

Number of shares of common stock outstanding
   at beginning of the period ................    47,367     45,520    46,254
Weighted average number of shares of common
   stock issued (reacquired) during the period      (267)       700       (56)
Weighted average number of common stock
   equivalents ...............................       891        742       652
Weighted average number of shares of common
   stock outstanding during each period ......    47,991     46,962    46,850

Income from continuing operations ............   $53,670    $52,232   $45,137
Income (loss) from discontinued operations ...    (8,223)     6,227     5,717
                                                 ----------------------------
              Net income .....................   $45,447    $58,459   $50,854
                                                 ============================

Earnings per share of common stock:
   Income from continuing operations .........   $  1.12    $   1.11  $  0.97
   income (loss) from discontinued operations      (0.17)       0.13     0.12
                                                 ----------------------------
              Net income .....................   $  0.95    $   1.24  $  1.09
                                                 ============================






                          LEE ENTERPRISES, INCORPORATED
                          AND WHOLLY-OWNED SUBSIDIARIES

                     EXHIBIT 21 - WHOLLY-OWNED SUBSIDIARIES
                            AND ASSOCIATED COMPANIES


                                                                 Percentage of
                                                             Voting Securities
                                   State of Incorporation            Owned
- --------------------------------------------------------------------------------

Lee Enterprises, Incorporated            Delaware                         Parent
Lee Technical Systems, Inc.              Iowa                               100%
Lee Consolidated Holdings Co.            South Dakota                       100%
KOIN-TV, Inc.                            Delaware                           100%
NAPP Systems Inc.                        Iowa                               100%
New Mexico Broadcasting Company, Inc.    New Mexico                         100%
Accudata, Inc.                           Iowa                               100%
Target Marketing Systems, Inc.           Iowa                               100%
Journal-Star Printing Co.                Nebraska                           100%
Madison Newspapers, Inc.                 Wisconsin                           50%
SJL of Kansas Corp.                      Kansas                             100%
INN Partnership LC                       Iowa                                50%




                                   EXHIBIT 24

                               POWER OF ATTORNEY



We, the undersigned directors of Lee Enterprises, Incorporated, hereby severally
constitute  Richard D. Gottlieb and Larry L. Bloom,  and each of them,  our true
and lawful  attorneys  with full power to them, and each of them, to sign for us
and in our names, the capacities indicated below, the Annual Report on Form 10-K
of Lee Enterprises, Incorporated for the fiscal year ended September 30, 1996 to
be filed herewith and any amendments to said Annual Report, and generally do all
such things in our name and behalf in our  capacities as directors to enable Lee
Enterprises,  Incorporated  to  comply  with the  provisions  of the  Securities
Exchange Act of 1934 as amended,  and all  requirements  of the  Securities  and
Exchange Commission,  hereby ratifying and confirming our signatures as they may
be signed by our said  attorneys,  or either of them,  to said Annual  Report on
Form 10-K and any and all amendments thereto.

                                                          Date

/s/ Rance E. Crain
Rance E. Crain, Director                             November 13, 1996

/s/ J. P. Guerin
J. P. Guerin, Director                               November 13, 1996

/s/ Andrew E. Newman
Andrew E. Newman, Director                           November 13, 1996

/s/ Charles E. Rickershauser, Jr.
Charles E. Rickershauser, Jr., Director              November 13, 1996

/s/ Ronald L. Rickman
Ronald L. Rickman                                    November 13, 1996

/s/ Lloyd G. Schermer
Lloyd G. Schermer, Chairman of the Board
  and Director                                       November 13, 1996

/s/ Phyllis Sewell
Phyllis Sewell, Director                             November 13, 1996

/s/ Richard W. Sonnenfeldt
Richard W. Sonnenfeldt                               November 13, 1996

/s/ Mark Vittert
Mark Vittert, Director                               November 13, 1996


 

5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SEPTEMBER 30, 1996 FORM 10-K FOR LEE ENTERPRISES, INCORPORATED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1,000 YEAR SEP-30-1996 SEP-30-1996 19,267 0 52,773 4,000 3,668 146,708 241,887 137,182 527,416 97,777 52,290 0 0 94,044 230,910 527,416 420,361 427,369 0 0 332,628 2,560 9,648 87,702 34,032 53,670 (8,223) 0 0 45,447 .95 .95