UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[ X ] Amended Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ended December 31, 1997
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, 1997
- --------------------------------------- --------------------------------
Common Stock, $2.00 par value 33,114,472
Class "B" Common Stock, $2.00 par value 12,017,227
PART I. FINANCIAL INFORMATION
Item 1.
LEE ENTERPRISES, INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
1997 1996
- -------------------------------------------------------------------------
Three Months Ended December 31: .................. (Unaudited)
Operating revenue:
Publishing:
Daily newspapers:
Advertising ........................... $ 52,005 $ 48,293
Circulation ........................... 20,791 20,194
Other .................................... 25,059 13,888
Broadcasting ............................... 31,255 35,381
Equity in net income of associated companies 2,149 1,912
--------------------
131,259 119,668
--------------------
Operating expenses:
Compensation costs ......................... 47,668 41,323
Newsprint and ink .......................... 10,562 7,964
Depreciation ............................... 4,620 3,981
Amortization of intangibles ................ 4,456 2,703
Other ...................................... 33,855 31,285
--------------------
101,161 87,256
--------------------
Operating income ................... 30,098 32,412
--------------------
Financial (income) expense, net
Financial (income) ......................... (530) (544)
Financial expense .......................... 3,706 1,742
--------------------
3,176 1,198
--------------------
Income before taxes on income ...... 26,922 31,214
Income taxes .................................. 10,338 12,106
--------------------
Net income ......................... $ 16,584 $ 19,108
====================
Average outstanding shares:
Basic ...................................... 45,316 46,869
====================
Diluted .................................... 46,025 47,755
====================
Earnings per share:
Basic ...................................... $ 0.37 $ 0.41
====================
Diluted .................................... $ 0.36 $ 0.40
====================
Dividends per share ........................... $ 0.14 $ 0.13
====================
LEE ENTERPRISES, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31, September 30,
ASSETS 1997 1997
- --------------------------------------------------------------------------------
(Unaudited)
Cash and cash equivalents ............................ $ 23,147 $ 14,163
Accounts receivable, net ............................. 64,496 58,397
Newsprint inventory .................................. 2,011 3,716
Program rights and other ............................. 15,357 17,691
-------------------
Total current assets ................... 105,011 93,967
Investments .......................................... 24,260 24,691
Property and equipment, net .......................... 119,854 120,026
Intangibles and other assets ......................... 407,820 412,279
-------------------
$656,945 $650,963
===================
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
Current liabilities .................................. $256,397 $248,908
Long-term debt, less current maturities .............. 25,800 26,174
Deferred items ....................................... 56,371 56,491
Stockholders' equity ................................. 318,377 319,390
-------------------
$656,945 $650,963
===================
LEE ENTERPRISES, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Three Months Ended December 31: 1997 1996
- ------------------------------------------------------------------------------------
(Unaudited)
Cash Provided by Operations:
Net income ................................................. $ 16,584 $ 19,108
Adjustments to reconcile net income to net cash provided by
operations:
Depreciation and amortization ........................... 9,076 7,743
Distributions in excess of current earnings of associated
companies ............................................. 1,813 1,844
Other balance sheet changes ............................. 3,282 11,109
-------------------
Net cash provided by operations ................. 30,755 39,804
-------------------
Cash (Required for) Investing Activities:
Purchase of property and equipment ......................... (4,347) (4,302)
Other ...................................................... (95) (437)
-------------------
Net cash (required for) investing activities .... (4,442) (4,739)
-------------------
Cash (Required for) Financing Activities:
Purchase of Lee Common Stock ............................... (22,482) (9,115)
Proceeds (payments) on short-term notes payable, net ....... 5,000 (15,000)
Other ...................................................... 153 373
-------------------
Net cash (required for) financing activities .... (17,329) (23,742)
-------------------
Net increase in cash and cash equivalents ....... 8,984 11,323
Cash and cash equivalents:
Beginning .................................................. 14,163 19,267
-------------------
Ending ..................................................... $ 23,147 $ 30,590
===================
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, 1997 and the results
of operations and cash flows for the three-month periods ended December 31, 1997
and 1996.
Note 2. Investment in Associated Companies
Condensed operating results of Madison Newspapers, Inc. (50% owned) and other
unconsolidated associated companies are as follows:
Three Months Ended
December 31,
---------------------
1997 1996
---------------------
(In Thousands)
(Unaudited)
Revenues ............................................. $ 21,785 $ 19,777
Operating expenses, except depreciation and
amortization ....................................... 14,245 13,190
Income before depreciation and amortization, interest,
and taxes .......................................... 7,540 6,587
Depreciation and amortization ........................ 712 501
Operating income ..................................... 6,828 6,086
Financial income ..................................... 333 317
Income before income taxes ........................... 7,161 6,403
Income taxes ......................................... 2,885 2,578
Net income ........................................... 4,276 3,825
Note 3. Cash Flows Information
The components of other balance sheet changes are:
Three Months Ended
December 31,
-------------------
1997 1996
-------------------
(In Thousands)
(Unaudited)
(Increase) in receivables .............................. $ (7,536) $ (8,663)
Decrease in inventories, film rights and other ......... 2,452 4,355
Increase (decrease) in accounts payable, accrued
expenses and unearned income ........................ (855) 5,161
Increase in income taxes payable ....................... 9,311 11,085
Other .................................................. (90) (829)
------------------
$ 3,282 $ 11,109
==================
Note 4. Change in Accounting Principles
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128 "Earnings per Share". Statement No. 128 replaced
the previously reported primary and fully diluted earnings per share with basic
and diluted earnings per share. Unlike primary earnings per share, basic
earnings per share excludes any dilutive effects of options, warrants, and
convertible securities. Diluted earnings per share is vary similar to the
previously reported fully diluted earnings per share. All earnings per share
amounts for all periods have been presented, and where necessary, restated to
conform to Statement No. 128 requirements.
Note 5. Subsequent Event
The Company has established the terms of a private placement of $185,000,000 of
long-term debt. The proceeds will be used to repay the notes associated with the
Pacific Northwest Publishing Group acquisition and for general corporate
purposes. It is anticipated the funds will be received on or before March 31,
1998. The debt will have an average maturity of nine years and a weighted
average interest rate of 6.37%. Covenants under the loan agreement are not
expected to be restrictive to operations or stockholder dividends.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Operating results:
Three Months Ended December 31,
---------------------------------
1997 1996 1996
---------------------------------
(Dollar Amounts In (Pro Forma)
Thousands, Except
Per Share Data)
Revenue .................................... $131,259 $119,668 $133,081
Percent change .......................... 9.7%
Percent change - pro forma .............. (1.4)%
Income before depreciation and amortization,
interest and taxes (EBITDA) ............. $ 39,174 $ 39,096 $ 43,251
Percent change .......................... 0.2%
Percent change - pro forma .............. (9.4)%
Operating income ........................... $ 30,098 $ 32,412 $ 34,474
Percent change .......................... (7.1)%
Percent change - pro forma .............. (12.7)%
Net income ................................. $ 16,584 $ 19,108 $ 18,503
Percent change .......................... (13.2)%
Percent change - pro forma .............. (10.4)%
Earnings per share:
Basic ................................... $ 0.37 $ 0.41 $ 0.40
Percent change ....................... (9.8)%
Percent change - pro forma ........... (7.5)%
Diluted ................................. 0.36 0.40 0.39
Percent change ....................... (10.0)%
Percent change - pro forma ........... (7.7)%
Operations by line of business are as follows:
Three Months Ended December 31,
---------------------------------
1997 1996 1996
---------------------------------
(In Thousands) (Pro Forma)
Revenue:
Publishing .............................. $100,004 $ 84,287 $ 97,700
Broadcasting ............................ 31,255 35,381 35,381
--------------------------------
$131,259 $119,668 $133,081
================================
Income before depreciation and amortization,
interest, and taxes (EBITDA):
Publishing ............................... $ 34,706 $ 30,119 $ 34,274
Broadcasting ............................. 8,423 12,925 12,925
Corporate ................................ (3,955) (3,948) (3,948)
--------------------------------
$ 39,174 $ 39,096 $ 43,251
================================
Operating income:
Publishing ............................... $ 28,610 $ 26,387 $ 28,449
Broadcasting ............................. 5,680 10,122 10,122
Corporate and other ...................... (4,192) (4,097) (4,097)
--------------------------------
$ 30,098 $ 32,412 $ 34,474
================================
Capital expenditures:
Publishing ............................... $ 2,631 $ 1,567
Broadcasting ............................. 1,450 2,528
Corporate ................................ 266 207
--------------------
$ 4,347 $ 4,302
====================
There were no significant non-recurring items during the quarter.
PUBLISHING
The following daily newspaper revenue information is presented on a pro forma
basis to include The Pacific Northwest Group as if the acquisitions had occurred
October 1, 1996.
Pro forma wholly-owned daily newspaper advertising revenue increased $1,856,000,
3.7%. Advertising revenue from local merchants decreased $(119,000), (.4%).
Local "run-of-press" advertising decreased $(710,000), (3.3%), as a result of a
(5.2%) decrease in advertising inches. Local preprint revenue increased
$591,000, 6.1%. Classified advertising revenue increased $1,857,000, 13.1%, as a
result of higher averages rates and a 5.3% increase in advertising inches. The
employment category was the biggest contributor to the increase. Circulation
revenue increased $99,000, .5%, as a result of higher rates which offset a 1.7%
decrease in volume.
Other revenue consists of revenue from weekly newspapers, classified and
specialty publications, commercial printing, products delivered outside the
newspaper (which include activities such as target marketing and special event
production) and editorial service contracts with Madison Newspapers, Inc.
Other revenue by category and by property is as follows:
1997 1996
-------------------
(In Thousands)
Weekly newspapers, classified and specialty publications:
Properties owned for entire period .................... $ 5,815 $ 5,462
Acquired since September 30, 1996 ..................... 10,727 --
Commercial printing:
Properties owned for entire period .................... 3,579 3,998
Acquired since September 30, 1996 ..................... 241 --
Products delivered outside the newspaper:
Properties owned for entire period .................... 2,574 2,382
Acquired since September 30, 1996 ..................... 4 --
Editorial service contracts .............................. 2,119 2,046
-------------------
$ 25,059 $ 13,888
===================
The following table sets forth the percentage of revenue of certain items in the
publishing segment.
1997 1996
---------------
Revenue .................................................... 100.0% 100.0%
---------------
Compensation costs ......................................... 33.0 32.0
Newsprint and ink .......................................... 10.6 9.5
Other operating expenses ................................... 21.7 22.8
---------------
65.3 64.3
---------------
Income before depreciation, amortization, interest and taxes . 34.7 35.7
Depreciation and amortization ................................ 6.1 4.4
---------------
Operating margin wholly-owned properties ..................... 28.6% 31.3%
===============
Exclusive of the effects of acquisitions, costs other than depreciation and
amortization increased $1,739,000, 3.2%. Compensation expense increased
$1,175,000, 4.4%, due primarily to increase in average compensation. Newsprint
and ink costs increased $914,000, 11.5%, due to higher prices for newsprint.
Other operating costs exclusive of depreciation and amortization decreased
$(350,000), (1.9%). BROADCASTING
Revenue for the quarter decreased $(4,126,000), (11.7%), as political
advertising decreased $(4,849,000), (90.4%), and local/regional/national
advertising increased $763,000, 2.9%. Production revenue and revenues from other
services decreased $(89,000), (3.7%). Advertising revenue growth may be
favorably affected in the second quarter due to the Winter Olympics on CBS, and
then later in the year due to primary elections.
The following table sets forth the percentage of revenue of certain items in the
broadcasting segment.
1997 1996
---------------
Revenue ................................................... 100.0% 100.0%
---------------
Compensation costs ........................................ 40.8 35.5
Programming costs ......................................... 7.1 5.7
Other operating expenses .................................. 25.2 22.3
---------------
73.1 63.5
---------------
Income before depreciation, amortization, interest and taxes . 26.9 36.5
Depreciation and amortization ............................. 8.7 7.9
---------------
Operating margin wholly-owned properties .................. 18.2% 28.6%
===============
Compensation costs increased $171,000, 1.4% due to increases in average
compensation. Programming costs for the quarter increased $219,000, 10.9%,
primarily due to accelerated amortization on new programming. Other operating
expenses, exclusive of depreciation and amortization, decreased $(14,000), (.2%)
due to cost controls.
CORPORATE COSTS
Corporate costs increased by $99,000, 2.4%, as a result of increased marketing
costs and the enhancement of computer software, offset in part by reduced
relocation expenses.
FINANCIAL EXPENSE AND INCOME TAXES
Interest expense increased due to short-term borrowings to finance The Pacific
Northwest Group acquisition.
Income taxes were 38.4% and 38.8% of pre-tax income for the quarters ended
December 31, 1997 and 1996, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations, which is the Company's primary source of liquidity,
generated $30,755,000 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:
11. Computation of Earnings Per Share
27. Financial Data Schedule
(b) Report on Form 8-K
The Company filed a report on Form 8-K/A dated November 21,
1997 pursuant to Item 7 thereof. The report included the
audited 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
and unaudited financial statements as of June 29, 1997 and June
28, 1996 and for the nine month periods then ended.
Date of Report: November 21, 1997
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 Date: February 13, 1998
- -------------------------------------
G.C. Wahlig, Chief Accounting Officer