UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ended December 31, 1996
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File Number 1-6227
Lee Enterprises, Incorporated
A Delaware Corporation I.D. #42-0823980
215 N. Main Street
Davenport, Iowa 52801
Phone: (319) 383-2100
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Class Outstanding At December 31, 1996
Common Stock, $2.00 par value 34,280,223
Class "B" Common Stock, $2.00 par value 12,410,236
PART I. FINANCIAL INFORMATION
Item 1.
LEE ENTERPRISES, INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
1996 1995
- --------------------------------------------------------------------------------
Three Months Ended December 31: (Unaudited)
Operating revenue:
Newspaper:
Advertising ................................. $48,293 $45,201
Circulation ................................. 20,194 20,184
Other ....................................... 13,888 13,134
Broadcasting .................................. 35,381 30,341
Equity in net income of associated companies .. 1,912 1,921
-----------------
119,668 110,781
-----------------
Operating expenses:
Compensation costs ............................... 41,323 38,614
Newsprint and ink ................................ 7,964 10,215
Depreciation ..................................... 3,981 3,773
Amortization of intangibles ...................... 2,703 2,838
Other ............................................ 31,285 29,278
------------------
87,256 84,718
------------------
Operating income ..................... 32,412 26,063
------------------
Financial (income) expense, net
Financial (income) .............................. (544) (527)
Financial expense ............................... 1,742 2,555
------------------
1,198 2,028
------------------
Income from continuing operations
before taxes on income ................ 31,214 24,035
Income taxes ........................................ 12,106 9,343
------------------
Income from continuing operations ..... 19,108 14,692
Income from discontinued operations, net of income
tax effect ....................................... - - 1,248
------------------
Net income ............................ $19,108 $15,940
------------------
Weighted average number of shares ................... 47,820 48,297
==================
Earnings per share:
Income from continuing operations ................ $ 0.40 $ 0.30
Income from discontinued operations .............. - - 0.03
------------------
$ 0.40 $ 0.33
------------------
Dividends per share ................................. $ 0.13 $ 0.12
==================
LEE ENTERPRISES, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31, September 30,
ASSETS 1996 1996
- --------------------------------------------------------------------------------
(Unaudited)
Cash and cash equivalents .................... $ 30,590 $ 19,267
Accounts receivable, net ..................... 57,235 50,211
Newsprint inventory .......................... 1,441 3,668
Program rights and other ..................... 14,695 17,183
Net assets of discontinued operations ........ 55,496 56,379
---------------------------
Total current assets ........... 159,457 146,708
Investments .................................. 22,187 22,156
Property and equipment, net .................. 105,026 104,705
Intangibles and other assets ................. 251,243 253,847
---------------------------
$537,913 $527,416
===========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities ........................ $103,387 $ 97,777
Long-term debt, less current maturities .... 52,103 52,290
Deferred items ............................. 53,067 52,395
Stockholders' equity ....................... 329,356 324,954
---------------------------
$537,913 $527,416
===========================
LEE ENTERPRISES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Three Months Ended December 31: 1996 1995
- --------------------------------------------------------------------------------
(Unaudited)
Cash Provided by Operations:
Net income ............................................ $19,108 $15,940
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization ...................... 7,743 7,720
Distributions in excess of current earnings of
associated companies ............................. 1,844 1,953
Other balance sheet changes ........................ 11,109 (395)
------------------
Net cash provided by operations ............ 39,804 25,218
------------------
Cash (Required for) Investing Activities:
Purchase of temporary investments ..................... - - (200)
Proceeds from maturities of temporary investments ..... - - 200
Purchase of property and equipment .................... (4,302) (4,346)
Other ................................................. (437) (931)
------------------
Net cash (required for) investing activities (4,739) (5,277)
------------------
Cash (Required for) Financing Activities:
Purchase of Lee Common Stock .......................... (9,115) (868)
Payments on short-term notes payable .................. (15,000) - -
Other ................................................. 373 151
------------------
Net cash (required for) financing activities (23,742) (717)
------------------
Net increase in cash and cash equivalents .. 11,323 19,224
Cash and cash equivalents:
Beginning ............................................. 19,267 10,683
-----------------
Ending ................................................ $30,590 $29,907
=================
LEE ENTERPRISES, INCORPORATED
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
Note 1. Basis of Presentation
The information furnished reflects all adjustments, consisting of normal
recurring accruals, which are, in the opinion of management, necessary to a fair
presentation of the financial position as of December 31, 1996 and the results
of operations and cash flows for the three-month periods ended December 31, 1996
and 1995.
Note 2. Investment in Associated Companies
Condensed operating results of unconsolidated associated companies are as
follows:
Three Months Ended
December 31,
----------------
1996 1995
----------------
(In Thousands)
(Unaudited)
Revenues ............................................... $19,777 $19,291
Operating expenses, except depreciation and amortization 13,190 12,727
Depreciation and amortization .......................... 501 460
Operating income ....................................... 6,086 6,104
Financial income ....................................... 317 308
Income before income taxes ............................. 6,403 6,412
Income taxes ........................................... 2,578 2,569
Net income ............................................. 3,825 3,843
a. Madison Newspapers, Inc. (50% owned)
b. Quality Information Systems (50% owned)
c. INN Partnership, LC (an effective 50% owned)
Note 3. Cash Flows Information
The components of other balance sheet changes are:
Three Months Ended
December 31,
------------------
1996 1995
------------------
(In Thousands)
(Unaudited)
(Increase) in receivables ................................ $(8,663) $(8,151)
Decrease in inventories, film rights and other ........... 4,355 1,969
Increase (decrease) in accounts payable, accrued expenses
and unearned income ................................... 5,161 (4,209)
Increase in income taxes payable ......................... 11,085 9,265
Other .................................................... (829) 731
-----------------
$11,109 $ (395)
=================
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Operating results:
Three Months Ended
December 31,
-------------------
1996 1995
-------------------
(Dollar Amounts in
Thousands, Except
Per Share Data)
Revenue ................................................. $119,668 $110,781
Percent change ....................................... 8.0%
Income before depreciation and amortization, interest and
taxes (EBITDA) ....................................... 39,096 32,674
Percent change ....................................... 19.7%
Operating income ........................................ 32,412 26,063
Percent change ....................................... 24.4%
Income from continuing operations ....................... 19,108 14,692
Percent change ....................................... 30.1%
Net income .............................................. 19,108 15,940
Percent change ....................................... 19.9%
Earnings per share:
Income from continuing operations .................... 0.40 0.30
Percent change .................................... 33.3%
Net income ........................................... 0.40 0.33
Percent change .................................... 21.2%
Operations by line of business are as follows:
Three Months Ended
December 31,
---------------------
1996 1995
---------------------
(In Thousands)
Revenue:
Newspapers .......................................... $ 84,287 $ 80,440
Broadcasting ........................................ 35,381 30,341
------------------
$119,668 $110,781
==================
Income before depreciation and amortization, interest,
and taxes (EBITDA):
Newspapers .......................................... $ 30,119 $ 26,151
Broadcasting ........................................ 12,925 9,878
Corporate ........................................... (3,948) (3,355)
------------------
$ 39,096 $ 32,674
==================
Operating income:
Newspapers .......................................... $ 26,387 $ 22,601
Broadcasting ........................................ 10,122 6,951
Corporate and other ................................. (4,097) (3,489)
------------------
$ 32,412 $ 26,063
==================
Capital expenditures:
Newspaper ........................................... $ 1,567 $ 2,013
Broadcasting ........................................ 2,528 2,061
Graphic arts ........................................ - - 227
Corporate ........................................... 207 45
------------------
$ 4,302 $ 4,346
==================
There were no significant non-recurring items during the quarter.
NEWSPAPERS
Wholly-owned daily newspaper advertising revenue increased $3,092,000, 6.8%.
Advertising revenue from local merchants increased $1,907,000, 6.7%. Local
"run-of-press" advertising increased $1,756,000, 9.1%, as a result of higher
average rates and a 4.0% increase in advertising inches. The period between
Thanksgiving and Christmas was shorter than normal and merchants increased their
advertising to stimulate sales. Local preprint revenue increased $151,000, 1.7%.
Classified advertising revenue increased $1,005,000, 8.0%, as a result of higher
averages rates and a 4.3% increase in advertising inches. The employment
category was the biggest contributor to the increase. Circulation revenue
increased $10,000, 0.1%, as a result of higher rates which offset a 2.4%
decrease in volume. Other revenue at daily newspapers increased $495,000, 6.0%,
primarily as a result of increases in commercial printing and other
non-traditional products and services.
Wholly-owned daily newspaper compensation expense increased $1,231,000, 5.2%,
due primarily to increases in average compensation. Newsprint and ink costs
decreased $2,251,000, (22.0%), due to lower newsprint prices. Newsprint prices
remain below prior year levels; however, newsprint suppliers have announced
their intention to increase prices in the second quarter of the fiscal year.
Based on present market conditions, we anticipate prices to remain below prior
year levels for the balance of the fiscal year but price increases are probable
in the future. Other operating expenses exclusive of depreciation and
amortization increased $702,000, 4.4%.
Revenues from weekly newspapers, shoppers, and specialty publications increased
$259,000, 5.0%. Operating income decreased $52,000, (26.0%), due to higher than
anticipated costs of specialty publications.
BROADCASTING
Revenue for the quarter increased $5,040,000, 16.6%, as political advertising
increased $4,273,000, 391.5%, and local/regional/national advertising increased
$340,000, 1.3%. Production revenue increased $390,000, 34.5%, primarily due to
increased corporate/studio business at MIRA Creative Group in Portland, Oregon.
Advertising revenue growth may be adversely affected in the balance of the
fiscal year due to limited political advertising which category amounted to
approximately $5,000,000 in the last nine months of fiscal 1996. We are also
affected, but less significantly, by the loss of Olympic advertising as NBC
affiliate revenue accounts for only 30% of our broadcast revenue.
Compensation costs increased $1,197,000, 10.5%, due to a 4.4% increase in the
number of hours worked and an increase in the average hourly rates. Programming
costs for the quarter decreased $476,000, (19.1%), primarily due to decreased
amortization from programs amortized on an accelerated basis. Other operating
expenses exclusive of depreciation and amortization increased $1,270,000, 19.2%,
primarily due to increased audience promotion for the November ratings period,
and outside services.
CORPORATE COSTS
Corporate costs increased by $608,000, 17.4%, as a result of increased marketing
costs, the enhancement of computer software, and relocation costs.
FINANCIAL EXPENSE AND INCOME TAXES
Interest expense was reduced due to payments on long-term debt, along with
payment of short-term borrowings used to finance the acquisition of SJL of
Kansas Corp.
Income taxes were 38.8% and 38.9% of pre-tax income for the quarters ended
December 31, 1996 and 1995, respectively.
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. The
closing occurred on January 17, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations, which is the Company's primary source of liquidity,
generated $39,804,000 for the quarter. Available cash balances, cash flow from
operations and bank lines of credit provide adequate liquidity. Covenants
related to the Company's credit agreements are not considered restrictive to
operations and anticipated stockholder dividends.
SAFE HARBOR STATEMENT
This report contains forward-looking statements and includes assumptions
concerning the Company's operations, future results and prospects. These
forward-looking statements are based on current expectations and are subject to
risks and uncertainties. In connection with the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, the Company provides the
following cautionary statements identifying important economic, political, and
technological factors which, among others, could cause the actual results or
events to differ materially from those set forth or implied by the
forward-looking statements or assumptions.
Such factors include the following: (i) changes in the current and future
business environment, including interest rates and capital and consumer
spending; (ii) prices for newsprint products; (iii) the availability of quality
broadcast programming at competitive prices; (iv) the quality and ratings of
network over-the-air broadcast programs; and (v) legislative or regulatory
initiatives affecting the cost of delivery of over-the-air broadcast programs to
the Company's customers. Further information concerning the Company and its
businesses, including factors that potentially could materially affect the
Company's financial results, is included in the Company's annual report on Form
10-K.
LEE ENTERPRISES, INCORPORATED
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit "A" - Computation of Earnings Per Share
(b) The following report on Form 8-K was filed during the three
months ended December 31, 1996.
Date of Report: November 4, 1996
Item 5: Announce that a letter of intent was executed for the
disposition by Lee Enterprises, Incorporated of its graphic
arts products subsidiary, NAPP Systems Inc. to Polyfibron
Technologies, Inc.
Financial statements filed: None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LEE ENTERPRISES, INCORPORATED
/s/ G.C. Wahlig January 30, 1997
- ------------------------------------- ------------------------------
G.C. Wahlig, Chief Accounting Officer Date
PART I. EXHIBIT "A"
COMPUTATION OF EARNINGS PER COMMON SHARE
(In Thousands, Except Per Share Data)
Three Months Ended
December 31,
------------------
1996 1995
------------------
(Unaudited)
Income applicable to common shares:
Income from continuing operations ................ $19,108 $14,692
Income from discontinued operations .............. - - 1,248
------------------
Net income ............................ $19,108 $15,940
==================
Shares:
Weighted average common shares outstanding ....... $46,967 $47,378
Dilutive effect of certain stock options ......... 853 919
------------------
Average common shares outstanding as adjusted .... $47,820 $48,297
==================
Earnings per common share:
Income from continuing operations ................ $ 0.40 $ 0.30
Income from discontinued operations .............. 0.03
------------------
Net income ............................ $ 0.40 $ 0.33
==================
5
1,000
3-MOS
SEP-30-1997
DEC-31-1996
30,590
0
58,752
4,398
1,441
159,457
246,110
141,084
537,913
103,387
52,103
0
0
93,381
235,975
537,913
117,756
119,668
0
0
87,256
0
1,742
31,214
12,106
19,108
0
0
0
19,108
.40
.40
