SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
Amendment to Report
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: November 21, 1997
LEE ENTERPRISES, INCORPORATED
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-6227 42-0823980
- ---------------------------- ---------------------- -------------------
(State of Other Jurisdiction Commission File Number (I.R.S. Employer
of Incorporation 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
AMENDMENT NO. 1
The undersigned registration hereby amends the following items, financial
statements, exhibits or other portions of its September 8, 1997 current report
on Form 8-K as set forth in the pages attached hereto:
(List all such items, financial statements, exhibits or other portions amended)
ITEM 7 A AND B
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned hereunto duly authorized.
LEE ENTERPRISES, INCORPORATED
(Registrant)
By /s/ G. C. Wahlig
---------------------------------
G. C. Wahlig, Chief Accounting Officer
Date 11/12/97
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial statements of the business acquired:
Financial Statements and Independent Auditor's Report on the financial
statements of Pacific Northwest Publishing Group as of September 29,
1996 and for the four months ended January 28, 1996 and the eight
months ended September 29, 1996
Unaudited financial statements of Pacific Northwest Publishing Group as
of June 29, 1997 and for the 9 months then ended and for the five
months ended June 30, 1996 and the four months ended January 28, 1996
(b) Pro Forma Financial Information of Lee Enterprises, Incorporated and
subsidiaries
Unaudited Pro Forma consolidated balance sheets as of June 30, 1997
Unaudited Pro Forma consolidated statements of income for the fiscal
year ended September 29, 1996 and for the nine month period ended June
29, 1997
Notes to unaudited Pro Forma financial statements
(c) Exhibits:
(1) Stock Purchase Agreement by and between Lee Enterprises,
Incorporated and ABC, Inc. dated July 25, 1997
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Lee Enterprises, Incorporated
Davenport, Iowa
We have audited the accompanying combined balance sheet of The Pacific
Northwest Publishing Group, a division of ABC, Inc. as of September 29,
1996, and the related combined statements of income and division's equity
and cash flows for the four months ended January 28, 1996 and the eight
months ended September 29, 1996. These financial statements are the
responsibility of the Group'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 combined financial statements referred to above present
fairly, in all material respects, the combined financial position of The
Pacific Northwest Publishing Group as of September 29, 1996, and the
combined results of its operations and its cash flows for the four months
ended January 28, 1996 and eight months ended September 29, 1996 in
conformity with generally accepted accounting principles.
/s/ McGLADREY & PULLEN, LLP
Davenport, Iowa
August 29, 1997, except for Note 7 as to which
the date is September 8, 1997
THE PACIFIC NORTHWEST PUBLISHING GROUP
A DIVISION OF ABC, INC.
COMBINED STATEMENTS OF INCOME AND DIVISION'S EQUITY
Preacquisition Postacquisition
Eight Months Four Months
Ended Ended
September 29, January 28,
1996 1996
- --------------------------------------------------------------------------
Operating revenue:
Advertising ......................... $ 26,639,952 $ 11,386,199
Circulation ......................... 1,908,742 928,959
Other ............................... 5,469,565 3,011,533
------------ ------------
34,018,259 15,326,691
------------ ------------
Operating expenses:
Compensation costs .................. 12,052,033 5,646,068
Newspaper and ink ................... 5,849,270 2,952,307
Depreciation ........................ 887,567 437,172
Amortization ........................ 2,533,333 125,037
Other ............................... 6,326,751 2,940,559
------------ ------------
27,648,954 12,101,143
------------ ------------
Operating income ......... 6,369,305 3,225,548
Interest income ........................ 71,679 37,911
------------ ------------
Income before income taxes 6,440,984 3,263,459
Income taxes, current .................. 3,545,000 1,338,000
------------ ------------
Net income ............... 2,895,984 1,925,459
Division's equity at beginning of period 167,687,837 20,761,274
Transfers to parent, net ............ (6,511,957) (778,958)
------------ ------------
Division's equity at end of period ..... $164,071,864 $ 21,907,775
============ ============
See Notes to Combined Financial Statements.
THE PACIFIC NORTHWEST PUBLISHING GROUP
A DIVISION OF ABC, INC.
COMBINED BALANCE SHEET
Postacquisition
September 29,
ASSETS 1996
- --------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents ................................... $ 673,872
Trade receivables, less allowance for
doubtful accounts of $382,316 ............................ 4,518,628
Inventories ................................................. 560,952
Deferred income taxes ....................................... 400,000
Prepaid expenses and other .................................. 101,224
------------
Total current assets ............................. 6,254,676
------------
Investments .................................................... 10,080
------------
Property and Equipment:
Land and improvements ....................................... 2,396,548
Buildings and improvements .................................. 7,741,542
Equipment ................................................... 12,252,291
------------
22,390,381
Less accumulated depreciation ............................... 10,705,003
------------
11,685,378
------------
Intangibles, net of accumulated amortization of $2,533,333 ..... 149,466,667
------------
$167,416,801
============
LIABILITIES AND DIVISION'S EQUITY
- --------------------------------------------------------------------------------
Current Liabilities:
Accounts payable ............................................ $ 537,868
Compensation and other accruals ............................. 2,190,958
Unearned income ............................................. 616,111
------------
Total current liabilities ........................ 3,344,937
------------
Division's Equity .............................................. 164,071,864
------------
$167,416,801
============
See Notes to Combined Financial Statements.
THE PACIFIC NORTHWEST PUBLISHING GROUP
A DIVISION OF ABC, INC.
COMBINED STATEMENTS OF CASH FLOWS
Postacquisition Preacquisition
Eight Four
Months Months
Ended Ended
September 29, January 28,
1996 1996
- ------------------------------------------------------------------------------------------------------
Cash Provided by Operating Activities:
Net income ........................................................ $2,895,984 $1,925,459
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation ................................................... 887,567 437,172
Amortization ................................................... 2,533,333 125,037
Changes in assets and liabilities:
(Increase) decrease in receivables ........................... (426,597) 400,977
(Increase) decrease in inventories, prepaid expenses and other 447,522 (163,041)
Increase (decrease) in accounts payable, accrued expenses
and unearned income ....................................... 1,192,324 (1,395,681)
---------- ----------
Net cash provided by operating activities .............. 7,530,133 1,329,923
---------- ----------
Cash Required for Investing Activities, purchase of property
and equipment ..................................................... (793,263) (276,932)
---------- ----------
Cash Required For Financing Activities,
transfers to parent company ....................................... (6,511,957) (778,958)
---------- ----------
Net increase in cash and cash equivalents ............. 224,913 274,033
Cash and cash equivalents:
Beginning ............................................................ 448,959 174,926
---------- ----------
Ending ............................................................... $ 673,872 $ 448,959
---------- ----------
Supplemental Disclosures of Cash Flow Information, cash transfers
to parent for taxes ............................................... $3,545,000 $1,338,000
========== ==========
See Notes to Combined Financial Statements.
THE PACIFIC NORTHWEST PUBLISHING GROUP
A DIVISION OF ABC, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS:
The Pacific Northwest Publishing Group (the Group) is operated as a division of
ABC, Inc., which is owned by The Walt Disney Company (Disney) and is not a legal
entity. The Group publishes two daily newspapers, six weekly newspapers, and
sixteen specialty publications in Oregon, Washington, Utah, and Nevada. On June
30, 1997, ABC, Inc. transferred the assets and liabilities of the Group to
Oregon News Media, Inc., Southern Utah Media, Inc., and Nevada Media, Inc.
Basis of presentation:
For all periods presented, the accounts of the Group were included in the
publishing group of ABC, Inc. and were not presented on a combined basis as
those of a separate reporting entity. Accordingly, the accounts included in the
accompanying financial statements were carved out of the ABC, Inc. historical
accounting records. For all periods presented, the financial statements of the
Group include the accounts of the above newspapers and specialty publications.
On February 9, 1996, Disney completed its acquisition of ABC, Inc. (formerly
known as Capital Cities/ABC, Inc.) which owned the Group. The acquisition was
accounted for as a purchase and the total purchase price allocated to the Group
was approximately $168,000,000 based on the estimated fair value of the Group's
net assets. The excess of the purchase price over the Group's net tangible
assets, was approximately $152,000,000. This amount is being amortized on a
straight-line basis over forty years.
This change in ownership occurred as of an interim date. In the accompanying
statements of income and division's equity and cash flows the periods captioned
as "preacquisition" include those when the Group was owned by ABC, Inc., while
the period identified as "postacquisition" represents the Group after ABC, Inc.
was acquired by Disney.
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 combination: The combined financial statements include the
accounts of properties outlined above. All significant intercompany items have
been eliminated.
Cash and cash equivalents: For the purpose of reporting cash flows, the Group
considers all highly liquid debt instruments purchased with an original maturity
of three months or less at date of acquisition to be cash equivalents.
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 29, 1996 were less than replacement cost by $98,000.
Property and equipment: Property and equipment is carried at cost. Depreciation
is computed primarily by the straight-line method. The estimated useful lives in
years are as follows:
Year
-------------
Land improvements 10 - 25
Buildings and improvements 5 - 10
Equipment 5 - 10
Intangibles: Intangibles consist primarily of the excess costs over fair value
of net assets of businesses acquired. Intangibles are being amortized by the
straight-line method over forty years.
The Group reviews its intangibles and other long-lived assets annually to
determine potential impairment. In performing the review, the Group 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 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.
Fiscal year: The Group's fiscal year ends on the last Sunday of September each
year. The four months ended January 28, 1996 consisted of 17 weeks and the eight
months ended September 29, 1996 consisted of 35 weeks.
Note 2. Related Party Transactions
The combined financial statements include allocations from ABC, Inc. for the
costs of functions and services performed centrally. All allocations and
estimates were based on assumptions that ABC, Inc.'s management believed were
reasonable in the circumstances. These allocations and estimates are not
necessarily indicative of the expenses that would have resulted if the Group had
been operated as a separate entity. Included in other expenses for these
corporate overhead allocations are approximately $303,000 and $275,000 for the
eight months ended September 29, 1996 and four months ended January 28, 1996,
respectively.
Note 3. Discretionary Bonuses
The Group pays discretionary bonuses to its key employees. The amounts of these
bonuses charged to compensation expense were approximately $362,000 and $164,000
for the eight months ended September 29, 1996 and four months ended January 28,
1996, respectively.
The Group entered into employment contracts with key employees that require
certain future performance bonuses, along with bonuses if the employees remain
with the Group until the sale of the Group was completed.
Note 4. Profit-Sharing Plan
The Group has a profit-sharing plan for those employees who meet the eligibility
requirements set forth in the plan and are employed by publications that
participate in the plan. Substantially all of the Group's publications and
full-time employees are covered by the plan. The Group's contributions vest 10%
a year through four years of service and 20% a year thereafter until fully
vested after seven years. Effective January 1, 1996, the plan was merged into
the parent company's plan; however, the terms remained substantially the same.
The amounts of the contribution to the plan are at the discretion of the parent
Company's Board of Directors. The amounts charged to compensation expense for
the Group's contributions were approximately $630,000 and $197,000 for the eight
months ended September 29, 1996 and four months ended January 28, 1996,
respectively.
Note 5. Lease Commitments and Total Rental Expense
The Group leases buildings for the operations of certain locations under various
leases that expire from 1997 to 2001. The total aggregate minimum rental
commitment at September 29, 1996 under these leases is approximately $515,000
which is due as follows:
Year ending September:
1997 $ 155,000
1998 154,000
1999 126,000
2000 65,000
2001 15,000
---------------
$ 515,000
===============
The Group also leases other property and equipment on a month-to-month basis.
The total rental expense included in the combined income statements for the
eight months ended September 29, 1996 and four months ended January 28, 1996 was
approximately $217,000 and $108,000, respectively.
Note 6. Income Tax Matters
The Group is included in the consolidated federal and state income tax returns
of Disney for taxable years ended after February 9, 1996 and ABC, Inc. for
taxable years ended on or before February 9, 1996. Income tax expense in the
Group's statements of income has been computed based on a separate return basis.
The reconciliation of income tax computed at the U.S. federal statutory rate to
income tax expense is as follows:
% of Pre-Tax
Income
---------------------------
Eight Four Months
Months Ended Ended
September 29, January 28,
1996 1996
---------------------------
Computed "expected" income tax expense ............. 35.0% 35.0%
State income taxes, net of federal tax benefit ..... 4.5 4.5
Goodwill amortization .............................. 15.5 1.5
----- -----
55.0% 41.0%
===== =====
Net deferred tax assets consist of the following components as of September 29,
1996:
Accrued compensation .................................... $192,000
Receivable allowance .................................... 130,000
Accrued expenses ........................................ 78,000
--------
$400,000
========
Note 7. Subsequent Event
On July 25, 1997 Disney signed an agreement to sell the Group to Lee
Enterprises, Incorporated. The transaction closed on September 8, 1997.
THE PACIFIC NORTHWEST PUBLISHING GROUP
A DIVISION OF ABC, INC.
INTERIM COMBINED STATEMENTS OF INCOME AND
STOCKHOLDER'S EQUITY
(UNAUDITED)
Preacquisition Postacquisition
----------------------------- Months
Nine Months Five Months Ended
Ended Ended January 28,
June 29, 1997 June 30, 1996 1996
- ------------------------------------------------------------------------------------------
Operating revenue:
Advertising ............................ $30,132,975 $16,626,786 $11,386,199
Circulation ............................ 2,129,333 1,189,569 928,959
Other .................................. 5,950,704 3,609,415 3,011,533
------------ ------------ ------------
38,213,012 21,425,770 15,326,691
------------ ------------ ------------
Operating expenses:
Compensation costs ..................... 14,187,204 7,512,902 5,646,068
Newspaper and ink ...................... 5,464,481 3,933,970 2,952,307
Depreciation ........................... 1,108,378 565,798 437,172
Amortization ........................... 2,870,289 1,583,333 125,037
Other .................................. 7,005,230 3,865,389 2,940,559
------------ ------------ ------------
30,635,582 17,461,392 12,101,143
------------ ------------ ------------
Operating income ............ 7,577,430 3,964,378 3,225,548
Interest income ........................... 91,084 42,773 37,911
------------ ------------ ------------
Income before income taxes .. 7,668,514 4,007,151 3,263,459
Income taxes .............................. 4,163,000 2,208,000 1,338,000
------------ ------------ ------------
Net income .................. 3,505,514 1,799,151 1,925,459
Stockholder's equity at beginning of period 164,071,864 167,867,837 20,761,274
Transfers to parent, net ............... (3,514,846) (4,244,140) (778,958)
------------ ------------ ------------
Stockholder's equity at end of period ..... $164,062,532 $165,422,848 $ 21,907,775
============ ============ ============
See Notes to Interim Combined Financial Statements.
THE PACIFIC NORTHWEST PUBLISHING GROUP
A DIVISION OF ABC, INC.
INTERIM COMBINED BALANCE SHEET (UNAUDITED)
Postacquisition
June 29,
ASSETS 1997
- -------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents ......................................... $ 436,509
Trade receivables, less allowance for doubtful accounts of $329,512 5,008,352
Inventories ....................................................... 493,362
Deferred income taxes ............................................. 400,000
Prepaid expenses and other ........................................ 8,969
------------
Total current assets ................................... 6,347,192
------------
Investments .......................................................... 10,080
------------
Property and Equipment:
Land and improvements ............................................. 2,366,529
Buildings and improvements ........................................ 7,592,557
Equipment ......................................................... 14,053,975
------------
24,013,061
Less accumulated depreciation ..................................... 11,642,702
------------
12,370,359
------------
Intangibles, net of accumulated amortization of $5,383,333 ........... 148,114,378
------------
$166,842,009
============
LIABILITIES AND STOCKHOLDER'S EQUITY
- -------------------------------------------------------------------------------------
Current Liabilities:
Accounts payable .................................................. $ 260,741
Compensation and other accruals ................................... 1,856,277
Unearned income ................................................... 662,459
------------
Total current liabilities .............................. 2,779,477
------------
Stockholder's Equity ................................................. 164,062,532
------------
$166,842,009
============
See Notes to Interim Combined Financial Statements.
THE PACIFIC NORTHWEST PUBLISHING GROUP
A DIVISION OF ABC, INC.
INTERIM COMBINED STATEMENTS OF CASH FLOWS (UNAUDITED)
Postacquisition
---------------------------- Preacquisition
Nine Four
Months Ended Five Months Ended
June 29, Months Ended January 28,
1997 June 30, 1996 1996
- -------------------------------------------------------------------------------------------------------------
Cash Provided by Operating Activities:
Net income ................................................... $ 3,505,514 $ 1,799,151 $ 1,925,459
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation .............................................. 1,108,378 565,798 437,172
Amortization .............................................. 2,870,289 1,583,333 125,037
Changes in assets and liabilities:
(Increase) decrease in receivables ...................... (489,724) (575,710) 400,977
(Increase) decrease in inventory, prepared expenses and
other
and other ............................................ 159,845 362,502 (163,041)
Increase (decrease) in accounts payable, accrued expenses
expenses and unearned income ......................... (565,460) 1,019,867 (1,395,681)
----------- ----------- -----------
Net cash provided by operating activities ......... 6,588,842 4,754,941 1,329,923
----------- ----------- -----------
Cash Required For Investing Activities:
Purchase of property and equipment ........................... (1,761,359) (480,323) (276,932)
Acquisition .................................................. (1,550,000) - - - -
----------- ----------- -----------
Net cash required for investing activities ....... (3,311,359) (480,298) (276,907)
----------- ----------- -----------
Cash Required For Financing Activities,
transfers to parent company .................................. (3,514,846) (4,244,140) (778,958)
----------- ----------- -----------
Net increase (decrease) in
cash and cash equivalents ......................... (237,363) 30,503 274,058
Cash and cash equivalents:
Beginning ....................................................... 673,872 448,959 174,926
----------- ----------- -----------
Ending .......................................................... $ 436,509 $ 479,462 $ 448,984
=========== =========== ===========
See Notes to Interim Combined Financial Statements.
THE PACIFIC NORTHWEST PUBLISHING GROUP
A DIVISION OF ABC, INC.
NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
Note 1. Nature of Business and Basis of Presentation
Nature of business:
The Pacific Northwest Publishing Group (the Group) is operated as a division of
ABC, Inc., which is owned by The Walt Disney Company (Disney). The Group
publishes two daily newspapers, six weekly newspapers, and sixteen specialty
publications in Oregon, Washington, Utah, and Nevada. On June 30, 1997, ABC,
Inc. transferred the assets and liabilities of the Group to Oregon News Media,
Inc., Southern Utah Media, Inc., and Nevada Media, Inc.
Basis of presentation:
For all periods presented, the accounts of the Group were included in the
publishing group of ABC, Inc. and were not presented on a combined basis as
those of a separate reporting entity. Accordingly, the accounts included in the
accompanying financial statements were of the ABC, Inc. historical accounting
records. For all periods presented, the financial statements of the Group
include the accounts of the above newspapers and specialty publications.
The accompanying unaudited interim financial statements include costs allocated
by ABC, Inc. for certain functions and services they performed centrally. All
allocations and estimates were based on assumptions ABC, Inc.'s management
believed were reasonable in the circumstances. These allocations and estimates
are not necessarily indicative of the costs and expenses that would have
resulted if the Group had been operated as a separate entity.
The accompanying unaudited combined financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of managmeent, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the nine months ended June 30, 1997 are not
necessarily indicative of the results that may be expected for the full year.
On February 9, 1996, Disney completed its acquisition of ABC, Inc. (formerly
known as Capital Cities/ABC, Inc.) which owned the Group. The acquisition was
accounted for as a purchase and the total purchase price allocated to the Group
was approximately $168,000,000 based on the estimated fair value of the Group's
net assets. The excess of the purchase price over the Group's net tangible
assets, was approximately $152,000,000. This amount is amortized on a
straight-line basis over forty years.
This change in ownership occurred as of an interim date. In the accompanying
statements of income and division's equity and cash flows the periods captioned
as "preacquisition" include those when the Group was owned by ABC, Inc., while
the period identified as "postacquisition" represents the Group after it was
acquired by Disney.
Note 2. Subsequent Event
On July 25, 1997 Disney signed an agreement to sell the Group to Lee
Enterprises, Incorporated. The transaction closed on September 8, 1997.
LEE ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma consolidated financial statements presented on the
following pages are based on the historical financial statements of the Company
and reflect the pro forma effects of the acquisition of The Pacific Northwest
Publishing Group (the Group). The acquisition was accounted for under the
purchase method.
For purposes of the pro forma statements, the purchase price of the assets of
the Group has been allocated to the acquired net assets based on information
currently available with regard to the values of such net assets. Pro forma
adjustments have been made only for those assets and liabilities which, based
solely on preliminary estimates, may have fair values significantly different
from historical amounts. As such, final adjustments to recorded amounts may
differ significantly from the pro forma adjustments presented herein.
The unaudited pro forma consolidated statements of income for the year ended
September 30, 1996 and the nine months ended June 30, 1997 were prepared as if
the acquisition had occurred as of the beginning of the respective periods for
the purposes of the consolidated statements of income and as if such an
acquisition had occurred at the end of the period for purposes of the
consolidated balance sheet.
These pro forma financial statements are not necessarily indicative of the
results of operations that might have occurred had the acquisition taken place
at the beginning of the period, or to project the Company's results of
operations at any future date or for any future period. The pro forma statements
should be read in connection with the notes thereto.
LEE ENTERPRISES, INCORPORATED AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
June 30, 1997
(In Thousands)
The Pacific
Lee Northwest
Enterprises, Publishing Pro Forma Adjusted
Incorporated Group Adjustments Pro Forma
----------------------------------------------------
ASSETS
Current Assets:
Cash and cash equivalents ............ $ 70,106 $ 437 $(41,253) (a) $ 29,290
Trade receivables, net ............... 54,526 5,008 - - 59,534
Inventories .......................... 2,021 493 - - 2,514
Program rights and other ............. 12,080 409 - - 12,489
-------- -------- -------- --------
Total current assets ...... 138,733 6,347 (41,253) 103,827
-------- -------- -------- --------
Investments:
Associated companies ................. 11,786 - - - - 11,786
Other ................................ 11,552 10 - - 11,562
-------- -------- -------- --------
23,338 10 - - 23,348
-------- -------- -------- --------
Property and Equipment, net ............. 104,378 12,370 3,395 (b) 120,143
-------- -------- -------- --------
Intangibles and Other Assets:
Intangibles .......................... 238,796 148,115 18,795 (b) 405,706
Other ................................ 8,413 - - - - 8,413
-------- -------- -------- --------
247,209 148,115 18,795 414,119
-------- -------- -------- --------
$513,658 $166,842 $(19,063) $661,437
======== ======== ======== ========
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
The Pacific
Lee Northwest
Enterprises, Publishing Pro Forma Adjusted
Incorporated Group Adjustments Pro Forma
--------------------------------------------------
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Notes payable and current
maturities of long-term debt ...... $ 28,456 $ - - $ - - $ 28,456
Accounts payable ..................... 16,571 261 - - 16,832
Compensation and other accruals ...... 25,300 1,856 - - 27,156
Income taxes payable ................. 6,337 - - - - 6,337
Unearned income ...................... 14,742 662 - - 15,404
Dividends payable .................... 6,033 - - - - 6,033
-------- --------- -------- --------
Total current liabilities . 97,439 2,779 - - 100,218
-------- --------- -------- --------
Long-Term Debt, net of current maturities 27,021 - - 145,000 (a) 172,021
-------- --------- -------- --------
Deferred Items:
Retirement and compensation .......... 12,482 - - - - 12,482
Income taxes ......................... 40,783 - - - - 40,783
-------- --------- -------- --------
53,265 - - - - 53,265
-------- --------- -------- --------
Stockholders' Equity:
Capital stock:
Common ............................ 68,308 - - - - 68,308
Class B Common .................... 24,494 - - - - 24,494
Additional paid-in capital ........... 24,867 - - - - 24,867
Unearned compensation ................ (632) - - - - (632)
Division equity ...................... - - 164,063 (164,063) (c) - -
Retained earnings .................... 218,896 - - - - 218,896
-------- --------- -------- --------
335,933 164,063 (164,063) 335,933
-------- --------- -------- --------
$513,658 $ 166,842 $(19,063) $661,437
======== ========= ======== ========
LEE ENTERPRISES, INCORPORATED AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
Year Ended September 29, 1996
(In Thousands Except Per Share Data)
The Pacific
Lee Northwest
Enterprises, Publishing Pro Forma Adjusted
Incorporated Group Adjustments Pro Forma
-----------------------------------------------------
Operating revenue:
Newspaper:
Advertising ................... $169,151 $ 38,026 $ - - $207,177
Circulation ................... 79,814 2,838 - - 82,652
Other ......................... 53,599 8,481 - - 62,080
Broadcasting ..................... 117,797 - - - - 117,797
Equity in net income of associated
companies ..................... 7,008 - - - - 7,008
-------- -------- -------- --------
427,369 49,345 - - 476,714
-------- -------- -------- --------
Operating expenses:
Compensation costs ............... 153,076 17,698 - - 170,774
Newsprint and ink ................ 38,535 8,802 - - 47,337
Depreciation ..................... 16,236 1,325 5 (d) 17,566
Amortization of intangibles ..... 11,563 2,658 3,519 (e) 17,740
Other ............................ 113,218 9,267 - - 122,485
-------- -------- -------- --------
332,628 39,750 3,524 375,902
-------- -------- -------- --------
Operating income ...... 94,741 9,595 (3,524) 100,812
-------- -------- -------- --------
Financial (income) expense:
Interest expense ................. 9,648 - - 10,150 (f) 19,798
Financial (income) ............... (2,609) (109) 2,228 (f) (490)
-------- -------- -------- --------
7,039 (109) 12,378 19,308
-------- -------- -------- --------
Income from continuing
operations before taxes
on income ............. 87,702 9,704 (15,902) 81,504
Income taxes ........................ 34,032 4,883 (7,331) (g) 31,584
-------- -------- -------- --------
Income from continuing
operations ............ $ 53,670 $ 4,821 $ (8,571) $ 49,920
======== ======== ======== ========
Weighted average number of shares ... 47,991 47,991
======== ========
Earnings per share from continuing
operations ....................... $ 1.12 $ 1.04
======== ========
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
LEE ENTERPRISES, INCORPORATED AND
SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS
OF INCOME
Nine Months Ended June 29, 1997
(In Thousands Except Per Share Data)
The Pacific
Lee Northwest
Enterprises, Publishing Pro Forma Adjusted
Incorporated Group Adjustments Pro Forma
-----------------------------------------------------
Operating revenue:
Newspaper:
Advertising ................... $134,319 $ 30,133 $ - - $164,452
Circulation ................... 60,219 2,129 - - 62,348
Other ......................... 42,084 5,951 - - 48,035
Broadcasting ..................... 92,095 - - - - 92,095
Equity in net income of associated
companies ..................... 5,431 - - - - 5,431
-------- -------- -------- --------
334,148 38,213 - - 372,361
-------- -------- -------- --------
Operating expenses:
Compensation costs ............... 122,596 14,187 - - 136,783
Newsprint and ink ................ 22,838 5,465 - - 28,303
Depreciation ..................... 12,321 1,108 (110) (d) 13,319
Amortization of intangibles ..... 8,108 2,870 1,763 (e) 12,741
Other ............................ 87,937 7,005 - - 94,942
-------- -------- -------- --------
253,800 30,635 1,653 286,088
-------- -------- -------- --------
Operating income ...... 80,348 7,578 (1,653) 86,273
-------- -------- -------- --------
Financial (income) expense:
Interest expense ................. 5,115 - - 7,613 (f) 12,728
Financial (income) ............... (3,143) (91) 1,671 (f) (1,563)
-------- -------- -------- --------
1,972 (91) 9,284 11,165
-------- -------- -------- --------
Income from continuing
operations before taxes
on income ............. 78,376 7,669 (10,937) 75,108
Income taxes ........................ 30,269 4,163 (5,454) (g) 28,978
-------- -------- -------- --------
Income from continuing
operations ............ $ 48,107 $ 3,506 $ (5,483) $ 46,130
======== ======== ======== ========
Weighted average number of shares ... 47,488 47,488
======== ========
Earnings per share from continuing
operations ....................... $ 1.01 $ 0.97
======== ========
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
LEE ENTERPRISES, INCORPORATED
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(In Thousands)
- --------------------------------------------------------------------------------
(a) Reflect the financing plan and costs in connection therewith as follows:
Cash ................................................. $ 41,253
Term loan ............................................ 145,000
--------
$186,253
========
(b) The Acquisition will be accounted for as a purchase, applying the
provisions of Accounting Principles Board Opinion 16. The purchase price
will be allocated to acquired assets and liabilities based on their
relative fair values as of the closing date, determined using valuations
and other studies which are not yet complete. The purchase price and
preliminary allocation of such cost is as follows, assuming the Acquisition
occurred on June 29, 1997:
Purchase price ................................................... $186,253
Book value per historical financial statements ................... 164,063
--------
Excess of purchase price over net book value
of assets acquired ......................................... $ 22,190
========
Allocated to:
Property and equipment (1) .................................... $ 3,395
Intangible assets ............................................. 18,795
--------
$ 22,190
========
(1) The recorded value of acquired property and
equipment will be .......................................... $ 15,765
========
(c) The adjustment reflects the elimination of the historical divisional
equity, as the acquisition will be accounted for using the purchase method
of accounting.
Nine Month
Year Ended Period Ended
September 29, June 29,
1996 1997
--------------------------
(d) Adjust depreciation expense as follows:
Record depreciation based upon fair values
assigned to acquired assets ....................................... $ 1,330 $ 998
Less previously recorded depreciation ................................ (1,325) (1,108)
-------- -------
$ 5 $ (110)
======== =======
(e) Adjust amortization of intangibles as follows:
Record amortization of intangibles from a preliminary
allocation of purchase price ...................................... $ 6,177 $ 4,633
Previously recorded amortization ..................................... (2,658) (2,870)
-------- -------
$ 3,519 $ 1,763
======== =======
(f) Adjust financial (income) expense as follows:
Reduction of interest income as a result of
$41,253 of investments being used to fund
the acquisition at an average rate of 5.4% ........................ $ 2,228 $ 1,671
-------- --------
Increase in interest expense related to the
$145,000 of additional borrowings to fund
the acquisition at an average rate of 7% .......................... $ 10,150 $ 7,613
-------- --------
(g) Adjust income taxes as follows:
Pretax income of Group ............................................... $ 9,704 $ 7,669
Purchase accounting adjustment ....................................... (15,902) (10,937)
-------- --------
Adjusted taxable income ................................... $ (6,198) $ (3,268)
-------- --------
Tax effect of 39.5% .................................................. $ (2,448) $ (1,291)
Less previously reported tax expense ................................. (4,883) (4,163)
-------- --------
$ (7,331) $ (5,454)
======== ========