UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 30, 2002
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
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(Exact name of Registrant as specified in its charter)
Delaware 42-0823980
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(State of Incorporation) (I.R.S. Employer Identification No.)
215 N. Main Street, Davenport, Iowa 52801
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(Address of principal executive offices)
(563) 383-2100
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Registrant's telephone number, including area code
Name of Each Exchange
Title of Each Class On Which Registered
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Securities registered pursuant to
Section 12(b) of the Act:
Common Stock - $2.00 par value New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Class B Common Stock - $2.00 par value
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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 November 29, 2002. Common Stock and Class B Common Stock, $2.00
par value, $1,493,437,000.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of November 29, 2002. Common Stock, $2.00 par value, 34,741,422
shares and Class B Common Stock, $2.00 par value, 9,672,943 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Lee Enterprises, Incorporated Definitive Proxy Statement dated
December 27, 2002 are incorporated by reference in Part III of this Form 10-K.
TABLE OF CONTENTS PAGE
Forward Looking Statements
Business
Properties
Legal Proceedings
Submission of Matters to a Vote of Security Holders
Market for Registrant's Common Equity and Related Stockholder Matters
Selected Financial Data
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
Directors and Executive Officers of the Registrant
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management
Certain Relationships and Related Transactions
Controls and Procedures
Exhibits, Financial Statement Schedules and Reports on Form 8-K
Signatures
Certification of Chief Executive Officer
Certification of Chief Financial Officer
Exhibit Index
Consolidated Financial Statements
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "Safe Harbor"
for forward-looking statements. This report contains information that may be
deemed forward-looking and that is based largely on the Company's current
expectations and is subject to certain risks, trends and uncertainties that
could cause actual results to differ materially from those anticipated. Among
such risks, trends and other uncertainties are changes in advertising demand,
newsprint prices, interest rates, labor costs, legislative and regulatory
rulings and other results of operations or financial conditions, difficulties in
integration of acquired businesses or maintaining employee and customer
relationships and increased capital and other costs. The words "may," "will,"
"would," "could," "believes," "expects," "anticipates," "intends," "plans,"
"projects," "considers" and similar expressions generally identify
forward-looking statements. Readers are cautioned not to place undue reliance on
such forward-looking statements, which are made as of the date of this report.
The Company does not undertake to publicly update or revise its forward-looking
statements.
PART I
ITEM 1. BUSINESS
The Company directly, and through its ownership of associated companies,
publishes 44 daily newspapers in 18 states and more than 175 other weekly,
classified and specialty publications, along with associated online services.
The Company was founded in 1890, incorporated in 1950, and listed on the New
York Stock Exchange in 1978. Before 2001, the Company also operated a number of
network-affiliated and satellite television stations.
In April 2002, the Company acquired ownership of 15 daily newspapers and a joint
interest in the Sioux City, Iowa daily newspaper by purchasing Howard
Publications, Inc. (Howard). This acquisition was consistent with the strategy
the Company announced in 2000 to buy daily newspapers with circulation of 30,000
to 125,000. These acquisitions increased the Company's circulation by more than
75 percent, to 1.1 million daily and 1.2 million on Sunday, and increased its
revenue by nearly 50 percent. In July 2002, the Company acquired the remaining
50 percent of the Sioux City newspaper.
The Company owns 50% of the capital stock of Madison Newspapers, Inc. (MNI) and
17% of the nonvoting common stock of The Capital Times Company. The Capital
Times Company owns the remaining 50% of the capital stock of MNI. The Company
has a contract to furnish the editorial and news content for the Wisconsin State
Journal, which is published by MNI, and periodically provides other services to
MNI. The Wisconsin State Journal is classified as one of the Lee group of
newspapers in the newspaper field and in the rating services. Results of MNI are
accounted for using the equity method.
Advertising
Approximately two-thirds of the Company's revenue is derived from advertising.
The Company's strategies are to increase its share of local advertising through
increased sales pressure in its existing markets and, over time, to increase
circulation through internal expansion into contiguous markets, as well as make
selective acquisitions. Acquisition efforts are focused on newspapers with
circulation from 30,000 to 125,000, as noted above, and other publications that
expand the Company's operating revenue.
Many of the Company's businesses operate in geographic groups of publications,
or "clusters," which provide operational efficiencies and extend sales
penetration. Operational efficiencies are obtained through consolidation of
sales forces, back office operations such as finance or human resources,
management or production of the publications. Sales penetration can occur if the
sales effort is successful in cross-selling advertising into multiple
publications. The table under the caption "Circulation" in Item 1 identifies
those groups of newspapers operating in clusters.
The Company's newspapers, and classified and specialty publications compete with
newspapers having national or regional circulation, magazines, radio,
television, other advertising media such as billboards, other classified and
specialty publications, direct mail, as well as other information content
providers such as online services. In addition, several of the Company's daily
and Sunday newspapers compete with other local newspapers in nearby cities and
towns. The Company estimates that it captures more than one-half of the total
advertising dollars spent in its markets on print, broadcast and online.
The number of competitors in any given market varies, and cannot be estimated
with any degree of certainty. However, all of the forms of competition noted
above exist to some degree in most of the Company's markets, the principal ones
of which are listed in the table under the caption "Circulation" in Item 1. The
Company's competitors use pricing, frequency and other methods to compete for
advertising business.
Classified publications are weekly advertising publications available in racks
or delivered free, by carriers or third-class mail, to all households in a
particular geographic area. Classified publications offer advertisers a
cost-effective local advertising system and are particularly effective in larger
markets with high media fragmentation in which metropolitan newspapers generally
have low penetration.
The following broadly define major categories of advertising revenue:
Retail advertising is revenue earned from sales of display advertising
space, or for preprinted advertising inserted in the publication, to local
accounts.
National advertising is revenue earned from display advertising space, or
for preprinted advertising inserted in the publication, to national
accounts, if there is no local retailer representing the account in the
market.
Classified advertising, which includes automotive, real estate, employment
and other categories, is revenue earned from sales of advertising space in
the classified section of the publication.
The Company's many geographic markets have significant differences in their
advertising rate structures, some of which are highly complex. A single
operation often has scores of rate alternatives.
Late in 2000, the newspaper industry began to experience declining advertising
revenue demand for the first time in several years. The advertising environment
has been adversely impacted by the state of the slowing overall economy. The
Company's enterprises are located in mid-size and smaller markets. These markets
have been more stable than major metropolitan markets during the current
downturn in advertising spending.
Circulation
After advertising, circulation is the Company's largest source of revenue. The
Company estimates that its products are sold to approximately one-half, and read
by approximately three-fourths, of adults in its markets. For the six months
ended September 2002, daily circulation of newspapers owned in both 2002 and
2001, as measured by the Audit Bureau of Circulations (ABC), increased 1.0% and
Sunday circulation was flat, the third consecutive six-month period of
improvement for the Company. Growth in circulation can, over time, also
positively impact advertising revenue. The Company's strategies to improve
readership and circulation include continuous improvement of content and
promotional efforts. Content can include focus on local news, other content,
layout, reduction of factual errors or in other ways. Promotional efforts
include advertising, contests and other efforts to increase awareness of the
products. Customer service can also influence circulation. Initiatives vary from
property to property and are determined principally by the publishers at the
local level in collaboration with senior management.
Circulation competition exists in all markets, even from unpaid products, but is
most significant in markets with competing daily newspapers. These markets tend
to be those markets near major metropolitan areas, where the size of the
population is sufficient to support more than one daily newspaper.
The Company and its affiliate MNI publish the following daily newspapers:
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Paid Circulation
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Newspaper City State Daily Sunday
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North County Times (5) Oceanside California 92,490 (1) 93,337 (1)
and Escondido
Madison Newspapers (4)
Wisconsin State Journal Madison Wisconsin 89,569 (1) 154,427 (1) (3)
The Capital Times Madison Wisconsin 20,389 (1) - (3)
Daily Citizen Beaver Dam Wisconsin 10,593 (1) -
Portage Daily Register Portage Wisconsin 4,850 (1) -
Baraboo News Republic Baraboo Wisconsin 3,975 (1) -
The Times (5) Munster Indiana 84,176 (1) 91,673 (1)
Lincoln Group
Lincoln Journal Star Lincoln Nebraska 74,586 (1) 83,387 (1)
Columbus Telegram Columbus Nebraska 9,471 (1) 10,373 (1)
Fremont Tribune Fremont Nebraska 8,299 (1) -
Beatrice Daily Sun Beatrice Nebraska 7,983 (1) -
Quad-Cities Group
Quad-City Times Davenport Iowa 51,385 (1) 71,239 (1)
Muscatine Journal Muscatine Iowa 7,998 (1) -
Billings Gazette Billings Montana 47,019 (1) 52,684 (1)
Waterloo-Cedar Falls Courier (5) Waterloo Iowa 44,688 (1) 52,182 (1)
Sioux City Journal (5) Sioux City Iowa 41,577 (1) 42,243 (1)
Central Illinois Group
Herald & Review Decatur Illinois 34,831 (1) 41,249 (1)
Journal Gazette (5) Mattoon Illinois 11,201 (1) -
Times-Courier (5) Charleston Illinois 6,904 (1) -
The Post-Star (5) Glens Falls New York 34,202 (1) 37,650 (1)
River Valley Group
La Crosse Tribune La Crosse Wisconsin 31,903 (1) 40,879 (1)
Winona Daily News Winona Minnesota 11,545 (1) 12,258 (1)
Casper Star-Tribune (5) Casper Wyoming 30,646 (1) 33,369 (1)
Missoula Group
Missoulian Missoula Montana 30,066 (1) 34,998 (1)
Ravalli Republic Hamilton Montana 4,468 (2) -
Rapid City Journal Rapid City South Dakota 29,820 (1) 34,242 (1)
The Journal Times Racine Wisconsin 29,217 (1) 31,336 (1)
The Southern Illinoisan Carbondale Illinois 28,267 (1) 36,381 (1)
The Bismarck Tribune Bismarck North Dakota 27,531 (1) 31,120 (1)
The Times-News (5) Twin Falls Idaho 22,656 (1) 23,103 (1)
The Daily News (5) Longview Washington 22,350 (1) 21,704 (1)
Globe Gazette Mason City Iowa 19,005 (1) 23,005 (1)
Mid-Valley News Group
Democrat-Herald Albany Oregon 17,989 (1) 31,401 (1) (3)
Corvallis Gazette-Times Corvallis Oregon 11,949 (1) - (3)
The Times and Democrat (5) Orangeburg South Carolina 17,970 (1) 18,375 (1)
The Sentinel (5) Carlisle Pennsylvania 14,739 (1) 14,918 (1)
The Montana Standard Butte Montana 14,383 (1) 14,412 (1)
The Journal-Standard (5) Freeport Illinois 13,693 (1) 14,003 (1)
The Leader (5) Corning New York 13,385 (1) 13,146 (1)
Independent Record Helena Montana 13,713 (1) 14,610 (1)
The Citizen (5) Auburn New York 13,084 (1) 14,752 (1)
The Ledger Independent (5) Maysville Kentucky 8,491 (2) -
The Chippewa Herald Chippewa Falls Wisconsin 6,987 (2) 7,063 (1)
Shawano Leader (4) Shawano Wisconsin 5,639 (1) 6,085 (1)
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1,125,682 1,201,604
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<FN>
(1) Source: ABC: Six months ended September 2002.
(2) Source: Company statistics.
(3) Combined edition.
(4) Owned by MNI, which is 50% owned by the Company.
(5) Acquired in 2002.
</FN>
Commercial Printing
The Company offers commercial printing services through the following entities:
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City State
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William Street Press Decatur Illinois
Hawkeye Printing Davenport Iowa
Trico Communications Davenport Iowa
Platen Press Butte Montana
Farcountry Press Helena Montana
Broadwater Printing Townsend Montana
Journal Star Commercial Printing Lincoln Nebraska
Little Nickel Quik Print Lynwood Washington
Spokane Print and Mail Spokane Washington
Triangle Press Chippewa Falls Wisconsin
Wingra Printing (1) Madison Wisconsin
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<FN>
(1) Owned by MNI, which is 50% owned by the Company.
</FN>
Certain of the Company's newspapers also directly provide commercial printing
services.
Online Services
The Company's online activities are comprised of websites supporting each of its
daily newspapers and certain of its other publications. The Company also owns
81% of an Internet service company which provides web infrastructure for more
than 650 small daily and weekly newspapers, and shoppers. Internet activities of
the newspapers and majority owned businesses are reported and managed as a part
of the Company's publishing operations. In addition, the Company has a minority
investment in, or loans to, two Internet service companies, which provide
integrated online classified solutions for the newspaper industry, or integrate
online editorial content with transactional and promotional opportunities.
Online businesses of the Company have experienced rapid growth over the last
several years, which is expected to continue.
Newsprint
The basic raw material of newspapers, and classified and specialty publications,
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 for its needs. Newsprint prices are volatile and fluctuate
based upon factors that include both the foreign and domestic production
capacity and consumption. The price fluctuations can have a significant effect
on the results of operations. For the quantitative impacts of these
fluctuations, see "Quantitative And Qualitative Disclosures About Market Risk"
under Item 7A, included herein.
Executive Team
The following table lists executive team members of the Company as of November
29, 2002:
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Named
Service To Present
Name Age With The Company Office Present Office
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Mary E. Junck 55 June 1999 January 2002 Chairman, President and Chief
Executive Officer
Nancy L. Green 61 December 2000 September 2002 Vice President - Circulation
Michael R. Gulledge 42 October 1982 February 2002 Group Publisher
Daniel K. Hayes 57 September 1969 April 1998 Director of Communications
James W. Hopson 56 July 2000 July 2000 Vice President - Publishing
Brian E. Kardell 39 January 1991 January 2001 Vice President - Information
Systems and Chief
Information Officer
Vytenis P. Kuraitis 54 August 1994 January 1997 Vice President - Human
Resources
Linda Ritchie Lindus 54 April 2000 February 2002 Group Publisher
Kevin E. Mowbray 40 September 1986 July 2002 Vice President - Sales &
Marketing
Michael E. Phelps 56 February 2000 June 2002 Vice President - Publishing
Gregory P. Schermer 48 February 1989 November 1997 Vice President - Interactive
Media and Corporate Counsel
Carl G. Schmidt 46 May 2001 May 2001 Vice President, Chief
Financial Officer and Treasurer
David B. Stoeffler 43 June 1981 December 2001 Vice President - News
John VanStrydonck 49 March 1981 June 2000 Vice President - Publishing
Greg R. Veon 50 April 1976 November 1999 Vice President - Publishing
- --------------------------------------------------------------------------------------------------------------------
Mary E. Junck was elected Chairman, President and Chief Executive Officer in
January 2002. From January 2001 to January 2002 she served as President and
Chief Executive Officer. From January 2000 to January 2001 she served as
President and Chief Operating Officer. From May 1999 to January 2000 she served
as Executive Vice President and Chief Operating Officer. From May 1996 to April
1999 she was Executive Vice President of The Times Mirror Company and President
of Eastern Newspapers. She was named Publisher and Chief Executive Officer of
The Baltimore Sun in 1993.
Nancy L. Green was appointed Vice President - Circulation in September 2002.
From December 2000 to September 2002, she served as Director of Circulation
Sales, Distribution and Marketing. For more than five years prior to December
2000, she served as a vice president in the University System of Georgia.
Michael R. Gulledge was appointed Group Publisher in February 2002 and named
Publisher of the Billings Gazette in October 2000. From November 1996 to October
2000, he served as General Manager and Publisher of the Herald & Review.
Daniel K. Hayes was appointed Director of Communications in April 1998. From
March 1986 to April 1998, he served as Editor of the Quad-City Times.
James W. Hopson was elected Vice President - Publishing and named Publisher of
the Wisconsin State Journal in July 2000. He was elected Chairman of MNI in
January 2002. For more than the past five years prior to July 2000, he served as
Chief Executive Officer of Thomson Newspapers Central Ohio Strategic Marketing
Group.
Brian E. Kardell was appointed Vice President - Information Systems and Chief
Information Officer in January 2001. From 1997 to 2001, Mr. Kardell was Chief
Information Officer. Prior to 2001, he served as Director of Information
Services.
Vytenis P. Kuraitis was elected Vice President - Human Resources in January
1997. From August 1994 through January 1997 he served as Director of Human
Resources.
Linda Ritchie Lindus was appointed Group Publisher in February 2002, and was
named Publisher of the Herald & Review in July 2002. From April 2000 to February
2002, she served as Publisher of The Southern Illinoisan. From 1999 to April
2000 she served as Publisher of The Spectrum and Chief Executive Officer of the
Utah Strategic Marketing Group of Thomson Newspapers. From 1997 to 1999 she
served as Director of Advertising and New Initiatives at The Spectrum.
Kevin E. Mowbray was elected Vice President - Sales & Marketing in July 2002.
For the past two years he was Publisher of the The Bismarck Tribune. From 1998
to 2000 he served as General Manager of the Missoulian. From 1995 to 1998 he
served as Advertising Manager of the Lincoln Journal Star.
Michael E. Phelps was elected Vice President - Publishing and named Publisher of
the Quad City Times in June 2002. He served as Vice President - Sales and
Marketing from February 2000 to June 2002. For more than the past five years
prior to February 2000, he was managing principal of Phelps, Cutler &
Associates, newspaper management consultants.
Gregory P. Schermer was elected Vice President - Interactive Media in November
1997. He has served as Corporate Counsel of the Company since 1989.
Carl G. Schmidt was elected Vice President, Chief Financial Officer and
Treasurer in May 2001. For more than the past five years prior to May 2001, he
served as Senior Vice President and Chief Financial Officer of Johnson Outdoors
Inc.
David B. Stoeffler was appointed Vice President - News in December 2001. From
1997 to December 2001, Mr. Stoeffler was Editor of the Lincoln Journal Star.
From 1995 to 1997, he served as Editor of the La Crosse Tribune.
John VanStrydonck was elected Vice President - Publishing in June 2000 and named
Publisher of the Missoulian in October 2002. From September 1994 to June 2000 he
was Publisher of the Rapid City Journal and served as Chairman and Chief
Operating Officer of NAPP Systems from September 1994 until its sale by Lee in
January 1997.
Greg R. Veon was elected Vice President - Publishing in November 1999. From
November 1995 through November 1999 he served as Vice President - Marketing.
Employees
At September 30, 2002, the Company had approximately 6,700 employees, including
approximately 1,300 part-time employees, exclusive of MNI. The Company considers
its relationship with its employees to be good.
Approximately 90 employees in three locations are members of collective
bargaining units.
Other Matters
In the opinion of management, compliance with present statutory and regulatory
requirements respecting environmental quality will not necessitate significant
capital outlays, materially affect the earning power of the business of the
Company, or cause material changes in the Company's business, whether present or
intended.
ITEM 2. PROPERTIES
The Company's executive offices are located in leased facilities at 215 North
Main Street, Davenport, Iowa. The lease expires in December 2003 and comparable
space is available if it is not renewed.
All of the Company's printing facilities (except Madison, Wisconsin, which is
owned by MNI, and a leased plant in Spokane, Washington) are owned. All
facilities are well maintained, in good condition, suitable for existing office
and publishing operations and adequately equipped. None of the Company's
facilities are individually significant to its business.
The Baraboo News Republic, Corvallis Gazette-Times, Muscatine Journal, Ravalli
Republic, Times Courier and Winona Daily News, as well as many of the Company's
more than 175 other publications, are printed at other Lee facilities to enhance
operating efficiency. The Company's newspapers and other publications have
formal or informal arrangements for backup of printing in the event of a
disruption in production capability.
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS
Common Stock of the Company is listed on the New York Stock Exchange. Class B
Common Stock is not traded on an exchange but is readily convertible to Common
Stock. Class B Common Stock was issued to stockholders of record of the Company
in 1986 pursuant to a 100% stock dividend and is converted at sale, or at the
option of the holder, into Common Stock. The table below shows the high and low
prices of Common Stock for each quarter during the past three years, the closing
price at the end of each quarter and the dividends per share.
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Quarter
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1st 2nd 3rd 4th
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STOCK PRICES
2002
High $37.60 $37.23 $40.09 $35.87
Low 29.88 33.36 34.86 28.90
Closing 36.37 36.90 35.00 32.86
2001
High $30.69 $32.55 $34.98 $34.40
Low 24.81 26.94 29.25 29.40
Closing 29.81 30.45 33.00 31.67
2000
High $32.25 $31.56 $26.19 $28.94
Low 27.25 19.69 20.50 23.25
Closing 31.94 26.13 23.31 28.88
DIVIDENDS
2002 $0.17 $0.17 $0.17 $0.17
2001 0.17 0.17 0.17 0.17
2000 0.16 0.16 0.16 0.16
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Common Stock and Class B Common Stock have identical rights with respect to cash
dividends and upon liquidation. For a more complete description of the relative
rights of Common Stock and Class B Common Stock, see Note 8 of the Notes to
Consolidated Financial Statements, included herein.
At September 30, 2002, the Company had 2,830 holders of Common Stock and 1,868
holders of Class B Common Stock.
On November 14, 2002, the Board of Directors declared a dividend in the amount
of $0.17 per share on the issued and outstanding Common Stock and Class B Common
Stock of the Company, be paid on January 2, 2003, to stockholders of record on
December 2, 2002.
ITEM 6. SELECTED FINANCIAL DATA
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Year Ended September 30
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(Thousands, Except Per Common Share Data) 2002 2001 2000 1999 1998
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(2) (3)
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OPERATING RESULTS
Operating revenue $525,896 $426,966 $416,089 $400,709 $379,737
EBITDA (1) 147,830 110,332 122,057 115,528 105,355
Depreciation and amortization 35,050 31,357 28,571 26,990 25,625
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Operating income, before equity 112,780 78,975 93,486 88,538 79,730
in net income of associated
companies
Equity in net income of associated
companies 9,057 7,651 9,377 9,238 8,367
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Operating income 121,837 86,626 102,863 97,776 88,097
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Financial income 6,007 28,548 3,259 1,920 1,896
Financial expense (15,777) (11,963) (12,643) (12,863) (14,611)
Income from continuing operations 81,029 59,829 70,117 57,069 47,795
Discontinued operations 946 254,399 13,546 10,904 14,438
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Net income $ 81,975 $314,228 $83,663 $67,973 $62,233
----------------------------------------------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE
Basic:
Continuing operations $ 1.84 $ 1.37 $ 1.59 $ 1.29 $ 1.07
Discontinued operations 0.02 5.81 0.31 0.25 0.32
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Net income $ 1.86 $ 7.18 $ 1.90 $ 1.54 $ 1.39
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Diluted:
Continuing operations $ 1.83 $ 1.36 $ 1.58 $ 1.27 $ 1.05
Discontinued operations 0.02 5.77 0.31 0.25 0.32
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Net income $ 1.85 $ 7.13 $ 1.89 $ 1.52 $ 1.37
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Weighted average common shares
outstanding:
Basic 44,087 43,784 44,005 44,273 44,829
Diluted 44,351 44,089 44,360 44,861 45,557
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Dividends per common share $ 0.68 $ 0.68 $ 0.64 $ 0.60 $ 0.56
----------------------------------------------------------------------------------------------------------------------
BALANCE SHEET INFORMATION
Total assets $1,463,830 $1,000,397 $762,236 $679,513 $660,585
Debt, including current maturities 409,300 173,400 214,173 192,000 209,991
Stockholders' equity 741,256 681,944 395,167 354,329 319,579
----------------------------------------------------------------------------------------------------------------------
<FN>
(1) EBITDA (earnings before interest, taxes, depreciation and amortization) is
not a financial performance measurement under United States generally
accepted accounting principles (GAAP), and should not be considered in
isolation or as a substitute for GAAP performance measurements. EBITDA is
also not reflected in the Consolidated Statements of Cash Flows, but is a
common and meaningful alternative performance measurement. The computation
of EBITDA also excludes other non-operating items, primarily gains and
losses on sales of businesses, losses related to other ventures and equity
in net income of associated companies. EBITDA presented may not be
comparable to similarly titled measures of other companies.
(2) Includes six months of operations from the Howard acquisition, which was
consummated in April 2002.
(3) Includes gain on the sale of the Company's broadcast properties, as
reported in discontinued operations.
</FN>
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Year Ended September 30
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2002 2001 2000 1999 1998
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OTHER INFORMATION
EBITDA as a percent of revenue 28.1% 25.8% 29.3% 28.8% 27.7%
Operating income as a percent of
revenue 23.2 20.3 24.7 24.4 23.2
Income from continuing operations
as a percent of revenue 15.4 14.0 16.9 14.2 12.6
Dividends as a percent of income
from continuing operations 37.2 49.8 40.3 46.7 52.8
-------------------------------------------------------------------------------------------------------------------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion includes comments and analysis relating to the
Company's results of operations and financial condition as of, and for the three
years ended, September 2002. This discussion should be read in conjunction with
the Consolidated Financial Statements and related Notes thereto.
CONTINUING OPERATIONS
Operating results, as reported in the Consolidated Financial Statements, are
summarized below:
- -------------------------------------------------------------------------------------------------------------
Year Ended September 30 Percent Change
- -------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------ ------------------------------------
2002 2001
vs vs
(Thousands, Except Per Common Share Data) 2002 2001 2000 2001 2000
- -------------------------------------------------------------------------------------------------------------
Operating revenue $525,896 $426,966 $416,089 23.2% 2.6%
Income before interest, taxes
depreciation and amortization
(EBITDA) 147,830 110,332 122,057 34.0 (9.6)
Operating income 121,837 86,626 102,863 40.6 (15.8)
Non-operating (income) expense,
net 10,778 (6,418) (7,748) NM (17.2)
Income from continuing operations 81,029 59,829 70,117 35.4 (14.7)
Earnings per common share:
Basic $ 1.84 $ 1.37 $ 1.59 34.3% (13.8)%
Diluted 1.83 1.36 1.58 34.6 (13.9)
- -------------------------------------------------------------------------------------------------------------
2002 vs. 2001
Revenue
Revenue, as reported in the Consolidated Financial Statements, consists of the following:
- --------------------------------------------------------------------------------------------------------------------
Year Ended September 30
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
(Thousands) 2002 2001 Percent
Change
- --------------------------------------------------------------------------------------------------------------------
Advertising revenue:
Retail $212,356 $166,524 27.5%
National 12,355 10,335 19.5
Classified:
Employment 30,857 28,134 9.7
Automotive 29,324 20,939 40.0
Real estate 21,624 15,967 35.4
All other 47,811 38,053 25.6
- --------------------------------------------------------------------------------------------------------------------
Total classified 129,616 103,093 25.7
- --------------------------------------------------------------------------------------------------------------------
Total advertising 354,327 279,952 26.6
- --------------------------------------------------------------------------------------------------------------------
Circulation 105,711 81,441 29.8
Other:
Commercial printing 22,266 25,233 (11.8)
Online 7,363 5,640 30.5
Niche publications and other 36,229 34,700 4.4
- --------------------------------------------------------------------------------------------------------------------
65,858 65,573 0.4
- --------------------------------------------------------------------------------------------------------------------
Total operating revenue $525,896 $426,966 23.2%
- --------------------------------------------------------------------------------------------------------------------
All categories of revenue were substantially impacted by the acquisition of
Howard, which the Company purchased in April 2002. In total, acquisitions
accounted for $113,594,000 of revenue in 2002. Businesses sold in 2002, but
still included in continuing operations, accounted for $4,060,000 of revenue in
the current year and $11,754,000 of revenue in 2001.
2002 had one fewer Sunday than the prior year. Sundays generate substantially
more advertising and circulation revenue than any other day of the week.
Revenue - Same Property
The following discussion of revenue is presented on an operating basis, which
includes 100% of the revenue of MNI, which is owned 50% by the Company and
accounted for in the Consolidated Financial Statements using the equity method.
It is exclusive of acquisitions and divestitures. The Company believes such
comparisons provide the most meaningful information for an understanding of
changes in its revenue.
In 2002, total advertising revenue decreased $6,674,000, or 2.0%. Retail revenue
in the Company's markets was not as adversely impacted by the slowing economy as
major metropolitan markets, and increased $1,248,000, or 0.6%, in 2002.
Increased emphasis on rate discipline and new accounts helped offset declines in
advertising volume. Retail rates, excluding preprint insertions, increased 2.1%
in 2002. Rate discipline means adhering to standard rates rather than
negotiating specific rates for individual customer situations.
Classified advertising revenue decreased approximately $7,653,000, or 5.9%, in
2002. Higher margin employment advertising at the daily newspapers accounted for
more than 100% of the decrease and declined 22.4% for the year. Unit declines in
employment classified advertising compare favorably to national survey amounts.
The automotive category increased by 0.9% due to promotional financing, real
estate increased 3.4% due to lower interest rates, and other classified
advertising increased 1.4%. Classified rates declined 9.3%, primarily due to
declines in employment-related advertising.
Advertising lineage, as reported on a same property operating basis for daily
newspapers only, consists of the following:
- ---------------------------------------------------------------------------------------------------------------
Year Ended September 30
- ---------------------------------------------------------------------------------------------------------------
(Thousands of Inches) 2002 2001 Percent Change
- ---------------------------------------------------------------------------------------------------------------
Retail 7,155 7,240 (1.2)%
National 371 396 (6.3)
Classified 6,602 6,513 1.4
- ---------------------------------------------------------------------------------------------------------------
14,128 14,149 (0.1)%
- ---------------------------------------------------------------------------------------------------------------
Circulation revenue decreased $253,000, or 0.2%, in 2002 primarily due to the
loss of a Sunday. The Company's average daily newspaper circulation units
increased 1.0% and Sunday circulation was flat for the six months ended
September 2002. For the six months ended March 2002, daily circulation increased
1.8% and Sunday circulation increased 0.4%. The Company is focused on growing
circulation units and revenue through a number of initiatives.
Commercial printing revenue declined $3,560,000, or 11.0%, in 2002 due, in part,
to economic conditions and the loss of certain key customers. Online revenue
increased $1,377,000, or 22.3%, in 2002 due to growth in advertising revenue and
cross selling with the Company's newspapers.
Operating Expenses
The following table sets forth the percentage of revenue of the Company's
operating expenses as reported in the Consolidated Financial Statements:
- ------------------------------------------------------------------------------------------------------------
Year Ended September 30
- ------------------------------------------------------------------------------------------------------------
2002 2001
- ------------------------------------------------------------------------------------------------------------
Compensation 39.3% 39.2%
Newsprint and ink 8.3 9.8
Other operating expenses 24.3 25.2
- ------------------------------------------------------------------------------------------------------------
71.9 74.2
- ------------------------------------------------------------------------------------------------------------
EBITDA 28.1 25.8
Depreciation and amortization 6.7 7.3
- ------------------------------------------------------------------------------------------------------------
Operating margin, before equity in net income of 21.4% 18.5%
associated companies
- ------------------------------------------------------------------------------------------------------------
Costs other than depreciation and amortization increased $61,432,000, or 19.4%,
in 2002. All categories of expenses were impacted by the acquisition of Howard,
which the Company purchased in April 2002. In total, acquisitions accounted for
$79,848,000 of operating costs, excluding depreciation and amortization, in the
current year. Businesses sold in 2002, but still included in continuing
operations, accounted for $3,362,000 of operating expenses other than
depreciation and amortization in the current year and $10,401,000 of such
expenses in 2001. Compensation expense increased $39,277,000, or 23.5%, in 2002
as workforce reductions, delayed salary increases and both one-time and
permanent changes in benefit programs in existing businesses were more than
offset by costs of acquired businesses. Newsprint and ink costs increased
$1,718,000, or 4.1%, in 2002 as volume increases related to acquired businesses
more than offset price decreases and same property volume declines. Newsprint
prices began rising late in 2002 and may negatively impact 2003 results. Other
operating costs, exclusive of depreciation and amortization, increased
$20,437,000, or 19.0%, in 2002 as costs of acquired businesses more than offset
cost savings on a same property basis.
In 2002, the Company adopted the provisions of FASB Statement 142. As a result,
goodwill and indefinite useful life intangible assets acquired in a purchase
business combination are no longer being amortized, but are tested for
impairment at least annually. Amortization expense related to goodwill was
$7,815,000 in 2001. The increase in depreciation and amortization expense in
2002 is primarily due to the acquisition of Howard, offset by the elimination of
goodwill amortization.
EBITDA improved 34.0% to $147,830,000 in 2002 from $110,332,000 in 2001. EBITDA
margin improved to 28.1% from 25.8% in the prior year. The Company's efforts at
controlling expenses and lower newsprint prices all contributed to the
improvement, offset to some extent by lower margins of acquired businesses.
Operating margin, before equity in net income of associated companies, increased
to 21.4% in 2002 from 18.5% for the same reasons, but was further impacted by a
higher level of amortization from acquisitions, offset by the goodwill
accounting change.
Non-operating Income and Expense
Financial income decreased $22,541,000 to $6,007,000 in 2002. The Company's
invested balances decreased $433,000,000 due to the April 2002 acquisition of
Howard. Balances were further reduced in 2002 by final income tax payments
related to the sale of broadcast properties in October 2000. Reinvestment rates
have also declined from the prior year.
In 2001, other non-operating expense consists primarily of realized and
unrealized losses on the sale of several small publications and the write down
of certain non-operating assets.
Overall Results
Income taxes were 27.0% and 35.7% of pretax income from continuing operations in
2002 and 2001, respectively. The favorable resolution of tax issues reduced
income tax expense by approximately $10,100,000 in 2002. The effective rate
would have been 36.1% without this event.
As a result of all of the above, earnings from continuing operations totaled
$81,029,000 in 2002, compared to $59,829,000 in 2001. Earnings per diluted
common share increased to $1.83 in 2002 from $1.36 in 2001.
The following table reconciles reported per share results to results adjusted
for significant items that affect the comparability of the respective years:
- ------------------------------------------------------------------------------------------------------------
Year Ended September 30
- ------------------------------------------------------------------------------------------------------------
2002 2001
- ------------------------------------------------------------------------------------------------------------
Diluted earnings per share from continuing operations, as reported $ 1.83 $ 1.36
Favorable resolution of tax issues (0.23) -
Higher interest rates and higher invested balances in prior year,
exclusive of the effect of funds used for acquisitions - (0.18)
New accounting rules for amortization of intangible assets
adopted in October 2001 - 0.14
Losses on sales of businesses and other items - 0.14
- ------------------------------------------------------------------------------------------------------------
Diluted earnings per share from continuing operations, as adjusted $ 1.60 $ 1.46
- ------------------------------------------------------------------------------------------------------------
2001 VS 2000
Revenue
Revenue, as reported in the Consolidated Financial Statements, consists of the
following:
- --------------------------------------------------------------------------------
Year Ended September 30
- --------------------------------------------------------------------------------
(Thousands) 2001 2000 Percent
Change
- --------------------------------------------------------------------------------
Advertising:
Retail $166,524 $ 157,865 5.5%
National 10,335 9,312 11.0
Classified:
Employment 28,134 31,163 (9.7)
Automotive 20,939 21,973 (4.7)
Real estate 15,967 15,496 3.0
All other 38,053 36,797 3.4
- --------------------------------------------------------------------------------
Total classified 103,093 105,429 (2.2)
- --------------------------------------------------------------------------------
Total advertising 279,952 272,606 2.7
- --------------------------------------------------------------------------------
Circulation 81,441 79,792 2.1
Other:
Commercial printing 25,233 24,976 1.0
Online 5,640 3,252 73.4
Niche publications and other 34,700 35,463 (2.2)
- --------------------------------------------------------------------------------
65,573 63,691 3.0
- --------------------------------------------------------------------------------
Total operating revenue $426,966 $416,089 2.6%
- --------------------------------------------------------------------------------
In total, acquisitions accounted for $27,172,000 of revenue in 2001 and
$11,526,000 in 2000. Businesses sold in 2001, but still included in continuing
operations, accounted for $3,725,000 of revenue in 2001 and $7,688,000 of
revenue in 2000.
2001 included one more Sunday than the prior year. Sundays generate
substantially more advertising and circulation revenue than any other day of the
week.
Revenue - Same Property
The following discussion of revenue is presented on an operating basis, which
includes 100% of the revenue of MNI, which is owned 50% by the Company and
accounted for in the Consolidated Financial Statements using the equity method.
It is exclusive of acquisitions and divestitures. The Company believes such
comparisons provide the most meaningful information for an understanding of
changes in its revenue.
In 2001, total advertising revenue decreased $4,613,000, or 1.4%. Retail revenue
in the Company's markets was not as adversely impacted by the slowing economy as
major metropolitan markets and increased $1,267,000 or 0.7%, in 2001. Retail
rates, excluding preprint insertions, increased 3.0%.
Classified advertising revenue decreased approximately $6,007,000, or 4.6%, in
2001. Higher margin employment revenue declined $5,740,000, or 12.5%, along with
automotive which was down $1,798,000, or 6.2%. Real estate and all other
classified revenue increased. Classified rates declined 3.3%.
Advertising lineage, as reported on a same property operating basis for daily
newspapers only, consists of the following:
- --------------------------------------------------------------------------------
Year Ended September 30
- --------------------------------------------------------------------------------
(Thousands of Inches) 2001 2000 Percent Change
- --------------------------------------------------------------------------------
Retail 6,092 6,437 (5.3)%
National 370 368 0.5
Classified 5,971 6,162 (3.1)
- --------------------------------------------------------------------------------
12,433 12,667 (1.8)%
- --------------------------------------------------------------------------------
Circulation revenue decreased $1,002,000, or 1.0%, in 2001. Average daily
newspaper circulation units increased 0.9% and Sunday circulation declined 0.2%
for the six months ended September 2001.
Commercial printing decreased $902,000, or 3.7%. Online revenue increased
$1,227,000, or 34.6%, due to growth in advertising revenue. Niche publications
and other revenue decreased $656,000, or 1.6%, in 2001.
Operating Expenses
The following table sets forth the percentage of revenue of the Company's
operating expenses as reported in the Consolidated Financial Statements:
- --------------------------------------------------------------------------------
Year Ended September 30
- --------------------------------------------------------------------------------
2001 2000
- --------------------------------------------------------------------------------
Compensation 39.2% 37.4%
Newsprint and ink 9.8 9.1
Other operating expenses 25.2 24.2
- --------------------------------------------------------------------------------
74.2 70.7
- --------------------------------------------------------------------------------
EBITDA 25.8 29.3
Depreciation and amortization 7.3 6.9
- --------------------------------------------------------------------------------
Operating margin, before equity in net income
of associated companies 18.5% 22.4%
- --------------------------------------------------------------------------------
All categories of costs were impacted by the full year effect of acquisitions
consummated in 2000. Costs other than depreciation and amortization increased
$22,602,000, or 7.7%, in 2001. Compensation expense increased $11,623,000, or
7.5%, due to normal increases in rates in addition to the impact of
acquisitions. Newsprint and ink costs increased $4,190,000, or 11.1%. Other
operating costs, exclusive of depreciation and amortization, increased
$6,789,000, or 6.7%, in 2001.
Non-operating Income and Expenses
Financial income increased $25,289,000 to $28,548,000 in 2001. The Company's
invested balances increased substantially due to the October 2000 sale of
broadcast properties. In 2001 and 2000, other non-operating income and expense
consisted primarily of realized gains and realized and unrealized losses on the
sale or exchange of several small publishing operations. In 2001, the Company
also recognized a write down of certain non-operating assets.
Overall Results
Income taxes were 35.7% and 36.6% of pretax income from continuing operations in
2001 and 2000, respectively.
As a result of all of the above, earnings from continuing operations totaled
$59,829,000 in 2001 compared to $70,117,000 in 2000. Earnings per diluted common
share decreased to $1.36 in 2001, from $1.58.
DISCONTINUED OPERATIONS
In March 2000, the Board of Directors of the Company made a determination to
sell its broadcast properties. In May 2000 the Company entered into an agreement
to sell substantially all of its broadcasting operations, consisting of eight
network-affiliated and seven satellite television stations, to Emmis
Communications Corporation and consummated the transaction in October 2000. The
net proceeds of approximately $565,000,000 resulted in an after-tax gain for
financial reporting purposes of approximately $250,800,000 in 2001. Results for
the broadcast properties have been classified as discontinued operations for all
periods presented.
In July 2001, the Company completed the sale of its last broadcasting property.
Net proceeds of the sale totaled approximately $7,600,000. The after-tax gain of
approximately $4,000,000 on the sale is reflected in discontinued operations in
2001.
A $4,000,000 reduction of income tax expense has been recorded in results from
discontinued operations in 2002, from changes in estimates related to state
taxes on the sale of broadcasting operations.
In July 2002, the Company acquired the remaining fifty percent interest in SCN.
The Company's Flathead group of weekly newspapers in Montana was transferred as
partial consideration for the purchase. The Company recognized an after-tax loss
of $2,688,000 on the transfer of the Flathead newspapers, which is recorded in
discontinued operations in 2002.
In October 2002, the Company completed the sale of its Ashland, Oregon, daily
newspaper. The transaction resulted in an after-tax loss on sale of $300,000,
which is recorded in discontinued operations in 2002. Results are recorded in
discontinued operations for all periods presented in accordance with the
provisions of FASB Statement 144, Accounting for the Impairment or Disposal of
Long-Lived Assets.
Revenue of discontinued operations in 2002, 2001 and 2000 was $5,668,000,
$7,184,000 and $128,904,000, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities of continuing operations was $115,301,000
in 2002, $106,735,000 in 2001, and $102,685,000 in 2000. Increased income from
continuing operations, offset by increases in working capital, accounted for the
change between 2002 and 2001. Decreased income from continuing operations,
offset by decreases in working capital and losses on sales of businesses,
accounted for the change between 2001 and 2000.
Cash required for investing activities totaled $547,474,000 in 2002,
$223,304,000 in 2001, and $87,297,000 in 2000. Acquisitions accounted for
substantially all of the usage in 2002 and 2000. Investment purchases related to
the sale of broadcast operations and cash flow from operations were responsible
for the primary usage of funds in 2001. The investment portfolio was largely
liquidated in 2002 to fund acquisitions.
The Company anticipates that funds necessary for capital expenditures, which are
expected to total approximately $19,000,000 in 2003, and other requirements will
be available from internally generated funds, availability under its existing
credit agreement and, if necessary, by accessing the capital markets.
Cash provided by financing activities totaled $217,163,000 in 2002, and required
$78,026,000 in 2001 and $13,599,000 in 2000.
The Company entered into a five-year, $350,000,000 credit agreement in March
2002. The primary purposes of the agreement are to fund the acquisition of
Howard, and to provide liquidity for other corporate purposes. $279,000,000 was
borrowed under this agreement in 2002 to consummate the acquisitions of Howard
and SCN.
Under the terms of the Company's 1998 Note Purchase Agreement (1998 Agreement),
the Company was required to repay the outstanding balance of $161,800,000 in
October 2002 unless the Company reinvested the net proceeds of the sale of its
broadcast operations or obtained a waiver or amendment of that provision of the
1998 Agreement. The acquisition of Howard satisfied the conditions of the
Company's 1998 Agreement with regard to reinvestment of the net proceeds of the
sale of broadcast operations. If repayment had been required, a substantial
prepayment penalty would have also been required, based upon interest rates in
effect at that time.
Debt agreements provide for restrictions as to indebtedness, liens, sales,
mergers, acquisitions and investments and require the Company to maintain
leverage and interest coverage ratios. Covenants under these agreements are not
considered restrictive to normal operations or historical amounts of stockholder
dividends. At September 30, 2002, the Company was in compliance with these
covenants. Aggregate maturities during the five years ending September 2007 are
$14,600,000, $36,600,000, $11,600,000, $12,400,000 and $256,900,000,
respectively.
Cash required for discontinued operations totaled $42,778,000 in 2002, primarily
for income tax payments related to the gain on sale of broadcast operations.
Cash provided by discontinued operations totaling $437,337,000 in 2001 primarily
reflects net proceeds from the sale of such operations.
SEASONALITY
The Company's largest source of publishing revenue, retail advertising, is
seasonal and tends to fluctuate with retail sales in markets served.
Historically, retail advertising is higher in the first and third fiscal
quarters. Newspaper classified advertising revenue is lowest in the second
fiscal quarter.
Quarterly results of operations are summarized in Note 18 to the Consolidated
Financial Statements, included herein.
INFLATION
The Company has not been significantly impacted by inflationary pressures over
the last several years. The Company anticipates that changing costs of
newsprint, its basic raw material, may impact future operating costs. Price
increases (or decreases) for the Company's products are implemented when deemed
appropriate by management. The Company continuously evaluates price increases,
productivity improvements and cost reductions to mitigate the impact of
inflation.
CRITICAL ACCOUNTING POLICIES
The Company's discussion and analysis of its financial condition and results of
operations are based upon the Company's Consolidated Financial Statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these financial statements
requires the Company to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an on-going basis, the Company evaluates
its estimates, including those related to bad debts, investments, intangible
assets, remaining useful lives of long-lived assets and income taxes. The
Company bases its estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or
conditions.
See Note 1 to the Consolidated Financial Statements, included herein, for a
description of the Company's accounting policies used in the preparation of its
Consolidated Financial Statements.
CONTRACTUAL OBLIGATIONS
In 2002, the Company entered into a four-year contract for the annual purchase
of 45,000 metric tonnes of newsprint, at market prices, from a single supplier.
The commitment represents approximately one-third of the Company's annual
volume, inclusive of MNI. The commitment is reduced to the extent it exceeds 75%
of the Company's annual usage. The Company has other newsprint commitments, both
formal and informal, for lesser amounts, with other suppliers.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk stemming from changes in interest rates
and commodity prices. Changes in these factors could cause fluctuations in
earnings and cash flows. In the normal course of business, exposure to certain
of these market risks is managed as described below.
Interest Rates
Interest rate risk in the Company's investment portfolio is managed by investing
only in securities with a maturity at date of acquisition of 180 days or less.
Only high-quality investments are considered. In April 2002, the Company
liquidated substantially all of its investment portfolio in conjunction with the
acquisition of Howard.
The Company's debt structure and interest rate risk are managed through the use
of fixed and floating rate debt. The Company's primary exposure is to the London
Interbank Offered Rate (LIBOR). A one percent increase in LIBOR would decrease
income from continuing operations before income taxes approximately $2,445,000,
based on floating rate debt outstanding at September 30, 2002.
Commodities
Certain materials used by the Company are exposed to commodity price changes.
The Company manages this risk through instruments such as purchase orders and
non-cancelable supply contracts. The Company is also involved in continuing
programs to mitigate the impact of cost increases through identification of
sourcing and operating efficiencies. Primary commodity price exposures are
newsprint and, to a lesser extent, ink.
A $10 per metric tonne newsprint price increase would result in a reduction in
income from continuing operations before income taxes of approximately
$1,115,000, excluding MNI, based on anticipated consumption in 2003.
Sensitivity to Changes in Value
The estimate that follows is intended to measure the maximum potential impact on
fair value of fixed rate debt of the Company in one year from adverse changes in
market interest rates under normal market conditions. The calculations are not
intended to represent actual losses in fair value that the Company expects to
incur. The estimates do not consider favorable changes in market rates. The
position included in the calculations is fixed rate debt, which totals
$161,800,000 at September 30, 2002.
The estimated maximum potential one-year loss in fair value from a 100 basis
point movement in interest rates on market risk sensitive instruments
outstanding at September 30, 2002 is approximately $7,200,000. There is no
impact on operating results from such changes in interest rates.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information with respect to this Item is included herein under the caption
"Consolidated Financial Statements".
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
The Company dismissed McGladrey & Pullen, LLP (McGladrey) as its independent
accountant, effective June 30, 2002. In connection with the audits of the fiscal
years ended September 30, 2001 and 2000, and during the interim period prior to
the dismissal, there were no disagreements with McGladrey on any matter of
accounting principle or practice, financial statement disclosure, or auditing
scope or procedure. The Audit Committee of the Company appointed Deloitte &
Touche LLP (Deloitte) as its new independent accountant, effective July 1, 2002,
after evaluating several firms, including McGladrey. The Company previously
reported this change in accountants in a Current Report on Form 8-K dated July
2, 2002.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to this Item, except for certain information included
under the caption "Officers" in Part I of this Form 10-K, is included in the
Company's Proxy Statement dated December 27, 2002, which is incorporated herein
by reference, under the captions "Proposal 1 - Election of Directors" and
"Section 16(a) Beneficial Ownership Reporting Compliance".
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to this Item is included in the Company's Proxy
Statement dated December 27, 2002, which is incorporated herein by reference,
under the captions "Proposal 1 - Election of Directors," "Compensation of
Directors" and "Executive Compensation"; provided, however, that the subsection
entitled "Executive Compensation - Report of the Executive Compensation
Committee of the Board of Directors on Executive Compensation" shall not be
deemed to be incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Certain information with respect to this Item is included in the Company's Proxy
Statement dated December 27, 2002, which is incorporated herein by reference,
under the caption "Voting Securities and Principal Holders Thereof".
Information as of September 30, 2002 with respect to equity compensation plans
is as follows:
- ---------------------------------------------------------------------------------------------------------------------
Number of
Number of securities to Weighted average securities
be issued upon exercise exercise price of remaining
of outstanding options, outstanding options, available for
Plan Category warrants and rights warrants and rights future issuance
- --------------------------------------------------------------------------------------------------------------------
Equity compensation plans
approved by stockholders (1)(2) 1,048,809 $ 29.04 3,038,235
- --------------------------------------------------------------------------------------------------------------------
<FN>
(1) 1990 Long-Term Incentive Plan.
(2) Excludes purchase rights accruing under the Company's Employees' Stock
Purchase Plan (Purchase Plan), which has a stockholder approved reserve of
925,000 shares. Under the Purchase Plan, each eligible employee may
purchase up to 5% of base compensation not to exceed $25,000 on the last
business day of April each year at a purchase price per share equal to 85%
of the lower of the average of the high and low market price on either the
first or last business day of the plan year.
</FN>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Vertis, Inc. (Vertis) provides the Company, in the normal course of business,
with an Internet subscription service that allows access to advertising
prototypes. Fees paid to Vertis totaled $76,000 in 2002. Director Herbert W.
Moloney III is Chief Operating Officer, North America, of Vertis.
ITEM 14. CONTROLS AND PROCEDURES
In order to ensure that the information that must be disclosed in filings with
the Securities and Exchange Commission is recorded, processed, summarized and
reported in a timely manner, the Company has disclosure controls and procedures
in place. The Chief Executive Officer, Mary E. Junck, and Chief Financial
Officer, Carl G. Schmidt, have reviewed and evaluated disclosure controls and
procedures as of September 30, 2002, and have concluded that such controls and
procedures are appropriate and that no changes are required.
There have been no significant changes in internal controls, or in other factors
that could affect internal controls, since September 30, 2002.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The following documents are filed as part of this Annual Report on Form 10-K:
Financial Statements
Consolidated Balance Sheets - September 30, 2002 and 2001
Consolidated Statements of Income - Years ended September 30, 2002,
2001 and 2000
Consolidated Statements of Stockholders' Equity - Years ended September 30,
2002, 2001 and 2000
Consolidated Statements of Cash Flows - Years ended September 30, 2002,
2001 and 2000
Notes to Consolidated Financial Statements
Independent Auditors' Reports
Report of Management
Financial Statement Schedules
All schedules have been omitted as not required, not applicable, not deemed
material or because the information is included in the Notes to Consolidated
Financial Statements.
Exhibits
See Exhibit Index.
Reports on Form 8-K
On July 2, 2002, the Company filed a Current Report on Form 8-K reporting
"Changes in Registrant's Certifying Accountant" pursuant to Item 9 reporting
that the Company has dismissed McGladrey as its independent accountant,
effective June 30, 2002, and appointed Deloitte as its new independent
accountant, effective July 1, 2002. The Form 8-K further stated that during the
fiscal years ended September 30, 2001 and 2000, and during the interim period
prior to the dismissal, there were no disagreements with McGladrey on any matter
of accounting principle or practice, financial statement disclosure, or auditing
scope or procedure.
SIGNATURES
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 on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized on the
27th day of December 2002.
LEE ENTERPRISES, INCORPORATED
/s/ Mary E. Junck /s/ Carl G. Schmidt
- ------------------------------------- ----------------------------------
Mary E. Junck Carl G. Schmidt
Chairman, President and Chief Vice President, Chief Financial Officer
Executive Officer and Treasurer
(Principal Financial and Accounting
Officer)
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 their respective capacities on the 14th day of November, 2002.
Signature
/s/ Rance E. Crain Director
- -------------------------------------
Rance E. Crain
/s/ Mary E. Junck Chairman, President and Chief Executive
- ------------------------------------- Officer and Director
Mary E. Junck
/s/ William E. Mayer Director
- -------------------------------------
William E. Mayer
/s/ Herbert W. Moloney III Director
- -------------------------------------
Herbert W. Moloney III
/s/ Andrew E. Newman Director
- -------------------------------------
Andrew E. Newman
/s/ Gordon D. Prichett Director
- -------------------------------------
Gordon D. Prichett
/s/ Gregory P. Schermer Vice President - Interactive Media
- ------------------------------------- and Corporate Counsel and Director
Gregory P. Schermer
/s/ Mark Vittert Director
- -------------------------------------
Mark Vittert
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Mary E. Junck, certify that:
1. I have reviewed this Annual Report on Form 10-K (Annual Report) of Lee
Enterprises, Incorporated (Registrant);
2. Based on my knowledge, this Annual Report does not contain any untrue
statement of a material fact or omit to state material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this Annual Report;
3. Based on my knowledge, the Consolidated Financial Statements, and other
financial information included in this Annual Report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in this
Annual Report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this Annual Report
is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this Annual Report (Evaluation Date); and
c) presented in this Annual Report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The Registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the Registrant's auditors and the Audit
Committee of the Registrant's Board of Directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrant's ability to
record, process, summarize and report financial data and have
identified for the Registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal
controls; and
6. The Registrant's other certifying officer and I have indicated in this
Annual Report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: December 27, 2002 /s/ Mary E. Junck
------------------------------
Mary E. Junck
Chairman, President and Chief Executive Officer
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Carl G. Schmidt, certify that:
1. I have reviewed this Annual Report on Form 10-K (Annual Report) of Lee
Enterprises, Incorporated (Registrant);
2. Based on my knowledge, this Annual Report does not contain any untrue
statement of a material fact or omit to state material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this Annual Report;
3. Based on my knowledge, the Consolidated Financial Statements, and other
financial information included in this Annual Report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in this
Annual Report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this Annual Report
is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this Annual Report (Evaluation Date); and
c) presented in this Annual Report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The Registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the Registrant's auditors and the Audit
Committee of the Registrant's Board of Directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Registrant's ability to
record, process, summarize and report financial data and have
identified for the Registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal
controls; and
6. The Registrant's other certifying officer and I have indicated in this
Annual Report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: December 27, 2002 /s/ Carl G. Schmidt
------------------------------
Carl G. Schmidt
Vice President, Chief Financial Officer and Treasurer
EXHIBIT INDEX
Exhibits marked with an asterisk (*) are incorporated by reference to documents
previously filed by the Company with the Securities and Exchange Commission, as
indicated. Exhibits marked with a plus (+) are management contracts or
compensatory plan contracts or arrangements filed pursuant to Item
601(b)(10)(iii)(A) of Regulation S-K. All other documents listed are filed with
this Annual Report on Form 10-K.
- --------------------------------------------------------------------------------
Number Description
- --------------------------------------------------------------------------------
2.1* Acquisition Agreement by and among Lee Enterprises, Incorporated,
Howard Publications, Inc., Howard Energy Co., Inc. and the
stockholders of Howard Publications, Inc. named therein dated February
11, 2002 and First Amendment thereto dated March 29, 2002 (Exhibit 2.1
to Current Report on Form 8-K dated April 1, 2002)
2.2* Escrow Agreement by and among Lee Enterprises, Incorporated, and HPI
Indemnifying Stockholders listed on Schedule I attached thereto, and
Wells Fargo Iowa, N.A. as Escrow Agent dated as of April 1, 2002
(Exhibit 2.2 to Current Report on Form 8-K dated April 1, 2002)
3.1 Restated Certificate of Incorporation of Lee Enterprises, Incorporated
as of November 14, 2002
3.2* Lee Enterprises, Incorporated Amended and Restated By-Laws as of
January 23, 2002 (Exhibit 3 to Form 10-Q for Quarter Ended March 31,
2002)
4* Rights Agreement, dated as of May 7, 1998, between Lee Enterprises,
Incorporated and The First Chicago Trust Company of New York, which
includes the form of Certificate of Designation of the Preferred Stock
as Exhibit A, the form of Right Certificate as Exhibit B and the
Summary of Rights as Exhibit C (Exhibit 1 to Current Report on Form
8-K dated May 7, 1998)
10.+* Lee Enterprises, Incorporated 1990 Long-Term Incentive Plan
effective as of October 1, 1999, as amended, restated and extended on
January 26, 1999 (Exhibit A to Schedule 14A Definitive Proxy Statement
for 1998)
10.1a+ Forms of related Incentive Stock Option Agreement, Non-Qualified
Stock Option Agreement and Restricted Stock Option Agreement related
to Lee Enterprises, Incorporated 1990 Long-Term Incentive Plan
effective as of October 1, 1999, as amended, restated and extended on
January 26, 1999
10.2+* Lee Enterprises, Incorporated Amended and Restated 1977 Employees'
Stock Purchase Plan as amended February 1, 1996 (Exhibit B to Schedule
14A Definitive Proxy Statement for 1996)
10.3+* Lee Enterprises, Incorporated 1996 Stock Plan for Non-Employee
Directors, effective February 1, 1996 (Exhibit C to Schedule 14A
Definitive Proxy Statement for 1996)
10.4+ Lee Enterprises, Incorporated Supplementary Benefits Plan
10.5+* Form of Employment Agreement for Lee Enterprises, Incorporated
Executive Officers Group (Exhibit 10 to Annual Report on Form 10-K for
the Fiscal Year Ended September 30, 1998)
10.6+* Form of Indemnification Agreement for Lee Enterprises, Incorporated
Directors and Executive Officers Group (Exhibit 10 to Annual Report on
Form 10-K for the Fiscal Year Ended September 30,1998)
16* Former Independent Accountant's Letter (Exhibit 16 to Current Report
on Form 8-K dated July 2, 2002)
- --------------------------------------------------------------------------------
Number Description
- --------------------------------------------------------------------------------
21 Subsidiaries and associated companies
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of McGladrey & Pullen, LLP
24 Power of Attorney
99.* Note Purchase Agreement by and among Lee Enterprises, Incorporated and
the Purchasers named therein dated as of March 15, 1998 (Exhibit 99 to
Current Report on Form 8-K dated March 31, 1998).
99.1a* First Amendment to the Note Purchase Agreement, dated as of August
30, 2001, by and among Lee Enterprises, Incorporated and the
Purchasers named therein dated as of March 15, 1998 (Exhibit 99.1 to
Current Report on Form 8-K dated September 5, 2001)
99.2* Credit Agreement among Lee Enterprises, Incorporated, Bank of
America, N.A., as Administrative Agent and other lenders party thereto
dated as of March 28, 2002 (Exhibit 99 to Current Report on Form 8-K
dated April 1, 2002)
99.3* Statement under Oath of Chief Executive Officer (Exhibit 99.1 to Form
10-Q for Quarter Ended June 30, 2002)
99.4* Statement under Oath of Chief Financial Officer (Exhibit 99.2 to Form
10-Q for Quarter Ended June 30, 2002)
99.5 Sarbanes-Oxley Act Section 906 Certification
CONSOLIDATED FINANCIAL STATEMENTS PAGE
Consolidated Statements of Income
Consolidated Balance Sheets
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditors' Reports
Report of Management
CONSOLIDATED STATEMENTS OF INCOME
- ---------------------------------------------------------------------------------------------------------------------
Year Ended September 30
- ---------------------------------------------------------------------------------------------------------------------
(Thousands, Except Per Common Share Data) 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------
Operating revenue:
Advertising $354,327 $279,954 $272,606
Circulation 105,711 81,441 79,792
Other 65,858 65,571 63,691
- ---------------------------------------------------------------------------------------------------------------------
525,896 426,966 416,089
- ---------------------------------------------------------------------------------------------------------------------
Operating expenses:
Compensation 206,454 167,177 155,554
Newsprint and ink 43,727 42,009 37,819
Depreciation 18,127 15,992 14,207
Amortization of intangible assets 16,923 15,365 14,364
Other 127,885 107,448 100,659
- ---------------------------------------------------------------------------------------------------------------------
413,116 347,991 322,603
- ---------------------------------------------------------------------------------------------------------------------
Operating income, before equity in net income of 112,780 78,975 93,486
associated companies
Equity in net income of associated companies 9,057 7,651 9,377
- ---------------------------------------------------------------------------------------------------------------------
Operating income 121,837 86,626 102,863
- ---------------------------------------------------------------------------------------------------------------------
Non-operating income (expense), net:
Financial income 6,007 28,548 3,259
Financial expense (15,777) (11,963) (12,643)
Gain (loss) on sales of businesses (339) (6,233) 18,439
Other, net (669) (3,934) (1,307)
- ---------------------------------------------------------------------------------------------------------------------
(10,778) 6,418 7,748
- ---------------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes 111,059 93,044 110,611
Income tax expense 30,030 33,215 40,494
- ---------------------------------------------------------------------------------------------------------------------
Income from continuing operations 81,029 59,829 70,117
- ---------------------------------------------------------------------------------------------------------------------
Discontinued operations:
Income (loss) from discontinued operations, net of
income tax effect (176) (373) 4,496
Gain on dispositions, net of income tax effect 1,122 254,772 9,050
- ---------------------------------------------------------------------------------------------------------------------
946 254,399 13,546
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 81,975 $314,228 $ 83,663
- ---------------------------------------------------------------------------------------------------------------------
Earnings per common share:
Basic:
Continuing operations $ 1.84 $ 1.37 $ 1.59
Discontinued operations 0.02 5.81 0.31
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 1.86 $ 7.18 $ 1.90
- ---------------------------------------------------------------------------------------------------------------------
Diluted:
Continuing operations $ 1.83 $ 1.36 $ 1.58
Discontinued operations 0.02 5.77 0.31
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 1.85 $ 7.13 $ 1.89
- ---------------------------------------------------------------------------------------------------------------------
The accompanying Notes are an integral part of the Consolidated Financial
Statements.
CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------------------------------------
September 30
- ------------------------------------------------------------------------------------------------------------
(Thousands, Except Per Share Data) 2002 2001
- ------------------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 14,381 $ 272,169
Temporary cash investments - 211,221
Accounts receivable, less allowance for doubtful accounts:
2002 $6,035; 2001 $4,328 57,313 40,644
Receivable from associated companies 1,500 1,500
Inventories 10,166 3,889
Deferred income taxes 7,812 5,488
Other 2,986 1,900
Assets of discontinued operations 9,869 11,329
- ------------------------------------------------------------------------------------------------------------
104,027 548,140
- ------------------------------------------------------------------------------------------------------------
Investments:
Associated companies 20,278 18,940
Other 7,460 13,771
- ------------------------------------------------------------------------------------------------------------
27,738 32,711
- ------------------------------------------------------------------------------------------------------------
Property and equipment:
Land and improvements 21,095 10,356
Buildings and improvements 96,442 61,925
Equipment 231,752 176,944
- ------------------------------------------------------------------------------------------------------------
349,289 249,225
Less accumulated depreciation 144,992 132,736
- ------------------------------------------------------------------------------------------------------------
204,297 116,489
- ------------------------------------------------------------------------------------------------------------
Goodwill 609,792 225,147
Other intangible assets 513,109 77,552
Other 4,867 358
- ------------------------------------------------------------------------------------------------------------
$1,463,830 $1,000,397
- ------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
September 30
- -----------------------------------------------------------------------------------------------------------------
2002 2001
- -----------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities of long-term debt $ 14,600 $ 11,600
Accounts payable 21,015 10,782
Compensation and other accrued liabilities 32,591 27,048
Income taxes payable 5,103 57,281
Dividends payable 7,533 -
Liabilities of discontinued operations 157 479
Unearned revenue 27,750 17,949
- -----------------------------------------------------------------------------------------------------------------
108,749 125,139
- -----------------------------------------------------------------------------------------------------------------
Long-term debt, net of current maturities 394,700 161,800
Deferred items:
Retirement and compensation 7,655 13,178
Income taxes 210,475 18,336
Other 995 -
- -----------------------------------------------------------------------------------------------------------------
722,574 318,453
- -----------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Serial convertible preferred stock, no par value;
authorized 500 shares; none issued - -
Common Stock, $2 par value; authorized 69,242 67,318
60,000 shares; issued and outstanding:
2002 34,621 shares;
2001 33,659 shares
Class B Common Stock, $2 par value; authorized 19,380 20,758
30,000 shares; issued and outstanding:
2002 9,690 shares;
2001 10,379 shares
Additional paid-in capital 55,797 48,164
Unearned compensation (1,845) (1,130)
Retained earnings 598,682 546,834
- -----------------------------------------------------------------------------------------------------------------
741,256 681,944
- -----------------------------------------------------------------------------------------------------------------
$1,463,830 $1,000,397
- -----------------------------------------------------------------------------------------------------------------
The accompanying Notes are an integral part of the Consolidated Financial
Statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended September 30
- ----------------------------------------------------------------------------------------------------------------------------
Amount Shares
- ---------------------------------------------------------------------------------------- ----------------------------------
(Thousands, Except Per Common Share Data) 2002 2001 2000 2002 2001 2000
- ---------------------------------------------------------------------------------------- ----------------------------------
Common Stock: $ 67,318 $ 66,140 $ 66,142 33,659 33,070 33,071
Balance, beginning of year
Conversion from Class B
Common Stock 1,378 694 770 689 347 385
Shares issued 580 1,194 478 290 597 239
Shares reacquired (34) (710) (1,250) (17) (355) (625)
- ---------------------------------------------------------------------------------------- -----------------------------------
Balance, end of year 69,242 67,318 66,140 34,621 33,659 33,070
- ---------------------------------------------------------------------------------------- -----------------------------------
Class B Common Stock:
Balance, beginning of year 20,758 21,480 22,376 10,379 10,740 11,188
Conversion to Common
Stock (1,378) (694) (770) (689) (347) (385)
Shares reacquired - (28) (126) - (14) (63)
- ---------------------------------------------------------------------------------------- -----------------------------------
Balance, end of year 19,380 20,758 21,480 9,690 10,379 10,740
- ---------------------------------------------------------------------------------------- -----------------------------------
Additional paid-in capital:
Balance, beginning of year 48,164 37,330 32,641
Shares issued 7,633 10,834 4,689
- ----------------------------------------------------------------------------------------
Balance, end of year 55,797 48,164 37,330
- ----------------------------------------------------------------------------------------
Unearned compensation:
Balance, beginning of year (1,130) (1,227) (961)
Restricted shares issued (2,067) (1,136) (1,364)
Restricted shares canceled 92 251 283
Amortization 1,260 982 815
- ----------------------------------------------------------------------------------------
Balance, end of year (1,845) (1,130) (1,227)
- ----------------------------------------------------------------------------------------
Retained earnings:
Balance, beginning of year 546,834 271,444 234,131
Net income 81,975 314,228 83,663
Cash dividends per
common share: (30,075) (29,797) (28,288)
2002 $0.68;
2001 $0.68;
2000 $0.64
Shares reacquired (52) (9,041) (18,062)
- ----------------------------------------------------------------------------------------
Balance, end of year 598,682 546,834 271,444
- ---------------------------------------------------------------------------------------- -----------------------------------
Total stockholders' equity $ 741,256 $ 681,944 $ 395,167 44,311 44,038 43,810
- ---------------------------------------------------------------------------------------- -----------------------------------
The accompanying Notes are an integral part of the Consolidated Financial
Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------------------------------------------------
Year Ended September 30
- ------------------------------------------------------------------------------------------------------------------------
(Thousands) 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------------------
Cash provided by operating activities:
Net income $ 81,975 $ 314,228 $ 83,663
Less: discontinued operations (946) (254,399) (13,546)
- ------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 81,029 59,829 70,117
Adjustments to reconcile income from continuing
operations to net cash provided by operating
activities of continuing operations:
Depreciation and amortization 35,050 31,357 28,571
Losses (gains) on sales, or expected sales, of businesses 339 6,233 (18,439)
Distributions less than earnings of associated companies (1,338) (552) (2,891)
Change in assets and liabilities, net of effects from
business acquisitions:
Decrease (increase) in receivables 2,722 (636) 2,250
Decrease (increase) in inventories and other (6,562) 47 3,657
Increase (decrease) in accounts payable,
accrued expenses and unearned revenue (98) (5,507) 7,940
Increase (decrease) in income taxes payable (9,702) 6,449 2,421
Other 13,861 9,515 9,059
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 115,301 106,735 102,685
- ------------------------------------------------------------------------------------------------------------------------
Cash required for investing activities:
Sales (purchases) of temporary cash investments, net 211,221 (211,221) -
Purchases of property and equipment (13,522) (9,904) (25,392)
Acquisitions, net (753,089) (4,518) (71,609)
Proceeds from sales of businesses 7,509 5,341 8,775
Other 407 (3,002) 929
- ------------------------------------------------------------------------------------------------------------------------
Net cash required for investing activities (547,474) (223,304) (87,297)
- ------------------------------------------------------------------------------------------------------------------------
Cash required for financing activities:
Proceeds from (payments on) notes payable, net 3,000 (37,937) 30,500
Payments on long-term debt (46,100) (11,600) -
Purchases of common stock (341) (10,050) (20,021)
Proceeds from long-term debt 279,000 - -
Financing costs (2,442) - -
Cash dividends paid (22,542) (29,797) (28,288)
Other, primarily issuance of common stock 6,588 11,358 4,210
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by (required for) financing activities 217,163 (78,026) (13,599)
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by (required for) discontinued operations (42,778) 437,337 17,102
- ------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (257,788) 242,742 18,891
Cash and cash equivalents:
Beginning of year 272,169 29,427 10,536
- ------------------------------------------------------------------------------------------------------------------------
End of year $ 14,381 $ 272,169 $ 29,427
- ------------------------------------------------------------------------------------------------------------------------
The accompanying Notes are an integral part of the Consolidated Financial
Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company directly, and through its ownership of associated companies,
publishes 44 daily newspapers in 18 states and more than 175 other weekly,
classified and specialty publications, along with associated online services.
The Company currently operates in a single business segment.
1 SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company has revised its previous presentation of equity in earnings of
associated companies to exclude those amounts from operating revenue. Certain
other amounts as previously reported have also been reclassified to conform with
the current year presentation.
References to 2002, 2001 and 2000 mean the years ended September 30, 2002, 2001
and 2000, respectively.
Accounting Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities, revenue 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, or majority-owned, subsidiaries. All significant intercompany
transactions have been eliminated.
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.
Investments
All temporary cash investments, consisting of municipal and corporate debt
securities, are classified as held to maturity, as the Company has the ability
and the positive intent to do so. Such securities are stated at amortized cost,
adjusted for amortization of premium and accretion of discount.
Investments in the common stock of associated companies are accounted for using
the equity method and are reported at cost plus the Company's share of
undistributed earnings since acquisition, less amortization of intangible
assets.
Other investments primarily consist of marketable securities held in trust under
a deferred compensation arrangement and investments for which no established
market exists. Marketable securities are classified as trading securities and
carried at fair value with gains and losses reported in the Consolidated
Statements of Income. Non-marketable securities are carried at cost.
Accounts Receivable
The Company evaluates its allowance for doubtful accounts receivable based on
the customer's historical credit experience, payment trends, and other economic
factors, to the extent available.
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 at
September 30, 2002 and 2001 were less than replacement cost by $1,877,000 and
$2,954,000, respectively.
Other inventories consisting of ink, plates and film are priced at the lower of
cost or market, with cost being determined by the first-in, first-out method.
Property and Equipment
Property and equipment are carried at cost. Equipment, except for printing
presses and mailroom equipment, is depreciated primarily by declining-balance
methods. The straight-line method is used for all other assets. The estimated
useful lives are as follows:
- --------------------------------------------------------------------------------
Years
- --------------------------------------------------------------------------------
Buildings and improvements 5 - 49
Printing presses and mailroom equipment 4 - 28
Other 3 - 11
- --------------------------------------------------------------------------------
The Company capitalizes interest as a component of the cost of constructing
major facilities.
Goodwill and Intangible Assets
Intangible assets include covenants not to compete, consulting agreements,
customer lists, newspaper subscriber lists, mastheads and other. Intangible
assets subject to amortization are being amortized as follows:
- --------------------------------------------------------------------------------
Years
- --------------------------------------------------------------------------------
Non-compete and consulting agreements 3 - 15
Customer lists 3 - 23
Newspaper subscriber lists 12 - 33
Other 10
- --------------------------------------------------------------------------------
In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
141, Business Combinations, and Statement 142, Goodwill and Other Intangible
Assets. Statement 141 requires that the purchase method of accounting be used
for all business combinations initiated or completed after June 2001. Statement
141 also specifies criteria intangible assets acquired in a purchase method
business combination must meet to be recognized and reported apart from
goodwill. Statement 142 requires that goodwill and intangible assets with
indefinite useful lives, such as mastheads, no longer be amortized, but instead
tested for impairment at least annually. Statement 142 also requires that
intangible assets with definite useful lives be amortized over their respective
estimated useful lives to their estimated residual values, and reviewed for
impairment in accordance with Statement 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of.
In August 2001, the FASB issued Statement 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which supersedes Statement 121, discussed above,
but retains the fundamental provisions of Statement 121 with regard to
recognition and measurement of impairment of long-lived assets.
The Company was required to adopt the provisions of Statement 141 immediately,
except with regard to business combinations initiated prior to July 2001, and
Statements 142 and 144 effective no later than 2003. Furthermore, intangible
assets determined to have an indefinite useful life and goodwill that are
acquired in a purchase business combination completed after June 2001 may not be
amortized. The Company elected to adopt Statements 142 and 144 effective in
2002.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Statement 141 requires, upon adoption of Statement 142, that the Company
evaluate its existing intangible assets and goodwill that were acquired in a
prior purchase business combination, and make any necessary reclassifications in
order to conform with the new criteria for recognition apart from goodwill. Upon
adoption of Statement 142, the Company reassessed the useful lives and residual
values of all intangible assets acquired in purchase business combinations.
There were no significant reclassifications or impairment losses identified as a
result of adoption. In addition, the Company is required to periodically test
the intangible assets identified as having an indefinite useful life and
goodwill for impairment in accordance with the provisions of Statement 142.
The impact of adoption of these statements is as follows:
- -------------------------------------------------------------------------------------------------------------------
Year Ended September 30
- -------------------------------------------------------------------------------------------------------------------
(Thousands) 2002 2001 2000
Income from continuing operations, as reported $ 81,029 $ 59,829 $ 70,117
Goodwill amortization, net of income tax benefit - 5,861 5,863
Goodwill amortization of associated companies - 236 102
- -------------------------------------------------------------------------------------------------------------------
Income from continuing operations, as adjusted 81,029 65,926 76,082
Discontinued operations 946 254,399 13,546
- -------------------------------------------------------------------------------------------------------------------
Net income, as adjusted $ 81,975 $320,325 $ 89,628
- -------------------------------------------------------------------------------------------------------------------
The earnings per common share impact related to the adoption of these statements
is as follows:
- -------------------------------------------------------------------------------------------------------------------
Year Ended September 30
- -------------------------------------------------------------------------------------------------------------------
2002 2001 2000
- -------------------------------------------------------------------------------------------------------------------
Basic:
Income from continuing operations, as reported $ 1.84 $ 1.37 $ 1.59
Goodwill amortization - 0.14 0.14
- -------------------------------------------------------------------------------------------------------------------
Income from continuing operations, as adjusted 1.84 1.51 1.73
Discontinued operations 0.02 5.81 0.31
- -------------------------------------------------------------------------------------------------------------------
Net income, as adjusted $ 1.86 $ 7.32 $ 2.04
- -------------------------------------------------------------------------------------------------------------------
Diluted:
Income from continuing operations, as reported $ 1.83 $ 1.36 $ 1.58
Goodwill amortization - 0.14 0.13
- -------------------------------------------------------------------------------------------------------------------
Income from continuing operations, as adjusted 1.83 1.50 1.71
Discontinued operations 0.02 5.77 0.31
- -------------------------------------------------------------------------------------------------------------------
Net income, as adjusted $ 1.85 $ 7.27 $ 2.02
- -------------------------------------------------------------------------------------------------------------------
Revenue Recognition
Advertising and circulation revenue is recognized based on date of publication.
Unearned revenue arises in the ordinary course of business from advance
subscription payments for newspapers. Other revenue is recognized in the period
in which it is earned.
Advertising Costs
Advertising costs, which are not material, are expensed as incurred.
Income Taxes
Deferred income taxes are provided using the liability method, whereby deferred
income tax assets are recognized for deductible temporary differences and loss
carryforwards and deferred income tax liabilities are recognized for taxable
temporary differences. Temporary differences are the difference between the
reported amounts of assets and liabilities and their tax basis. Deferred income
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
income tax assets will not be realized. Deferred income tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.
Stock Compensation
The Company has three stock-based compensation plans. As permitted under
generally accepted accounting principles, grants under those plans are accounted
for following APB Opinion 25 and related interpretations. Accordingly, no
compensation cost has been recognized for grants under the stock option or stock
purchase plans.
The Company amortizes as compensation expense the value of restricted stock,
issued under a long-term incentive plan, by the straight-line method over the
restriction period, which is generally three years.
Effective in 2003, stock compensation will be accounted for as an expense in the
Consolidated Statements of Income, according to the fair value method provisions
of FASB Statement 123, Accounting for Stock-Based Compensation. The Company
plans to restate prior year results for all awards granted, modified or settled
in 1996 and thereafter, subject to the final issuance of the exposure draft
amending FASB Statement 123. The Company estimates, based on historical stock
compensation activity, that adoption of the fair value method provisions of
Statement 123 will reduce 2003 results approximately $0.05 to $0.07 per diluted
common share. See Note 9.
Uninsured Risks
The Company is self-insured for health care costs of its employees, subject to
stop loss insurance, which limits exposure to large claims. The Company accrues
its estimated health care costs in the period in which such costs are incurred,
including an estimate of incurred but not reported claims. Other insurance
carries deductible losses of varying amounts.
Discontinued Operations
In accordance with the provisions of FASB Statement 144, the operations and
related losses on properties sold, or identified as held for sale in 2002, have
been presented as discontinued operations in the Consolidated Statements of
Income for all periods presented. Gains are recognized when realized.
2 ACQUISITIONS AND DIVESTITURES
In April 2002, the Company acquired the stock of Howard Publications, Inc.
(Howard), a privately owned company comprised of 15 daily newspapers, 50% of the
stock of Sioux City Newspapers, Inc. (SCN), and related specialty publications.
The transaction was valued at approximately $696,800,000 after taking into
account $50,000,000 of cash on the Howard balance sheet retained by the Company,
and other adjustments. Certain non-publishing businesses of Howard were not
included in the transaction.
The Company paid the purchase price and expenses related to the transaction from
$433,000,000 of available funds, including proceeds from the sale of its
broadcast properties, and revolving loans under the terms of a five year,
$350,000,000 credit agreement.
The representations and warranties of Howard stockholders are secured for
varying amounts pursuant to an escrow agreement between the Company and the
indemnifying Howard stockholders.
In July 2002, the Company acquired the remaining 50% interest in SCN from a
privately owned company. The transaction was valued at approximately $57,000,000
and was funded in part with approximately $42,000,000 in cash and temporary cash
investments. The remainder of the purchase price was funded by the Company's
credit agreement. $3,000,000 of the purchase price is payable in November 2002.
The Company's Flathead group of weekly newspapers in Montana was transferred as
partial consideration for the purchase.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma consolidated income information for 2002 and 2001, set
forth below, presents results of operations as if the acquisitions of Howard and
SCN had occurred at the beginning of each year and are not necessarily
indicative of future results or actual results that would have been achieved had
the acquisitions occurred as of the beginning of the respective years. Pro forma
amounts for 2001, as previously reported on Form 8-K, have been adjusted to give
effect to businesses reclassified to discontinued operations and additional
purchase price adjustments. Pro forma results for 2001 do not reflect the full
year impact of various newspapers and specialty publications purchased in 2001
because the impact is not significant.
- ------------------------------------------------------------------------------------------------------------------
Year Ended
September 30
- ------------------------------------------------------------------------------------------------------------------
(Thousands, Except Per Common Share Data) (Unaudited) 2002 2001
- ------------------------------------------------------------------------------------------------------------------
Total revenue $645,756 $655,560
Income from continuing operations 81,900 44,810
Earnings per common share:
Basic $ 1.86 $ 1.02
Diluted 1.85 1.02
- ------------------------------------------------------------------------------------------------------------------
The purchase price allocation for Howard, including SCN and direct costs of
acquisitions, subject to final purchase price adjustments, is as follows:
- ------------------------------------------------------------------------------------------------------------------
(Thousands)
- ------------------------------------------------------------------------------------------------------------------
Current assets $ 23,610
Property and equipment 93,941
Goodwill 395,223
Other intangible assets 453,703
- ------------------------------------------------------------------------------------------------------------------
Total assets acquired 966,477
Current liabilities 27,237
Long-term liabilities 185,394
- ------------------------------------------------------------------------------------------------------------------
$ 753,846
- ------------------------------------------------------------------------------------------------------------------
Acquired intangible assets consist of the following:
- ------------------------------------------------------------------------------------------------------------------
Weighted Average
Amortization Period
(Thousands) (Years)
- ------------------------------------------------------------------------------------------------------------------
Amortizable intangible assets:
Customer lists $361,074 23
Newspaper subscriber lists 60,607 24
Noncompete agreements 6,000 3
- ------------------------------------------------------------------------------------------------------------------
$427,681 23
- ------------------------------------------------------------------------------------------------------------------
Unamortizable intangible assets:
Mastheads $ 26,022 -
- ------------------------------------------------------------------------------------------------------------------
The Company acquired six weekly newspapers or specialty publications and
increased its ownership in an Internet venture in 2001; and acquired three daily
newspapers, and several weekly newspapers and classified or specialty
publications in 2000. In 2000, the Company also acquired a daily newspaper and
specialty publications and received $9,300,000 of cash in exchange for all the
assets and liabilities of two of its daily newspapers and the related specialty
and classified publications. In connection with this transaction, the Company
recognized a gain on sale of $18,439,000, which is recorded as non-operating
income in 2000.
All acquisitions were accounted for as purchases and, accordingly, the results
of operations since the respective dates of acquisition are included in the
Consolidated Financial Statements.
The Company sold several weekly and specialty publications in 2002, 2001 and
2000. These transactions were initiated prior to the adoption of FASB Statement
144 and, accordingly, results to the respective dates of sale and the gain or
loss on sale are included in continuing operations. Proceeds from sales of
properties or exchanges consist of the following:
- --------------------------------------------------------------------------------------------------------------------
Year Ended September 30
- --------------------------------------------------------------------------------------------------------------------
(Thousands) 2002 2001 2000
- --------------------------------------------------------------------------------------------------------------------
Noncash working capital $ 492 $ 519 $ 111
Property and equipment 327 1,319 764
Intangible assets 7,029 4,961 721
- --------------------------------------------------------------------------------------------------------------------
7,848 6,799 1,596
Gain (loss) recognized on sales, or expected sales,
of businesses (339) (1,458) 18,439
- --------------------------------------------------------------------------------------------------------------------
7,509 5,341 20,035
Less fair value of assets exchanged - - 11,260
- --------------------------------------------------------------------------------------------------------------------
$ 7,509 $ 5,341 $ 8,775
- --------------------------------------------------------------------------------------------------------------------
In 2001 the Company recorded an expected loss of $4,775,000 related to
businesses identified for sale. The properties were sold in 2002 and an
additional loss of approximately $339,000 was recognized. These amounts are
classified as non-operating expense in the Consolidated Statements of Income.
3 DISCONTINUED OPERATIONS
In March 2000, the Board of Directors of the Company made a determination to
sell its broadcast properties. In May 2000 the Company entered into an agreement
to sell substantially all of its broadcasting operations, consisting of eight
network-affiliated and seven satellite television stations, to Emmis
Communications Corporation and consummated the transaction in October 2000. The
net proceeds of approximately $565,000,000 resulted in an after-tax gain for
financial reporting purposes of approximately $250,800,000 in 2001. Results for
the broadcast properties have been classified as discontinued operations for all
periods presented.
In July 2001, the Company completed the sale of its last broadcasting property.
Net proceeds of the sale totaled approximately $7,600,000. The after-tax gain of
approximately $4,000,000 on the sale is reflected in discontinued operations in
2001.
The Company's Flathead group of weekly newspapers in Montana was transferred as
partial consideration for the purchase of the remaining 50% of SCN. The Company
recognized an after-tax loss of $2,688,000 on the transfer of the Flathead
newspapers, which is recorded in discontinued operations in 2002.
In October 2002, the Company completed the sale of its Ashland, Oregon, daily
newspaper. The transaction resulted in an after-tax loss on sale of $300,000,
which is recorded in discontinued operations in 2002. Results for Flathead and
Ashland are recorded in discontinued operations for all periods presented in
accordance with the provisions of FASB Statement 144.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income from discontinued operations consists of the following:
- --------------------------------------------------------------------------------------------------------------------
Year Ended September 30
- --------------------------------------------------------------------------------------------------------------------
(Thousands) 2002 2001 2000
- --------------------------------------------------------------------------------------------------------------------
Operating revenue $ 5,668 $ 7,184 $ 128,904
Income from, or gain (loss) on sale of,
discontinued operations (5,271) 402,086 23,224
Income tax expense (benefit) (6,217) 147,687 9,678
- --------------------------------------------------------------------------------------------------------------------
$ 946 $ 254,399 $ 13,546
- --------------------------------------------------------------------------------------------------------------------
Income tax benefit related to discontinued operations differs from the amounts
computed by applying the U.S. federal income tax rate in 2002 as follows:
- --------------------------------------------------------------------------------------------------------------------
Year Ended
September 30, 2002
- --------------------------------------------------------------------------------------------------------------------
Computed "expected" income tax benefit (35.0)%
State income taxes, net of federal tax benefit (3.8)
Resolution of tax issues (75.9)
Other (3.2)
- --------------------------------------------------------------------------------------------------------------------
(117.9)%
- --------------------------------------------------------------------------------------------------------------------
A $4,000,000 reduction of income tax expense has been recorded in results from
discontinued operations in 2002, from changes in estimates related to state
taxes on the sale of broadcasting operations. The difference from the U.S.
federal income tax rate in 2001 and 2000 was primarily attributable to state
income taxes.
The components of assets and liabilities of discontinued operations at September
30, 2002 and 2001 are not significant.
4 INVESTMENTS IN ASSOCIATED COMPANIES
The Company has a 50% ownership interest in Madison Newspapers, Inc. (MNI), a
company that publishes daily and Sunday newspapers, and other publications in
Madison, Wisconsin, other daily newspapers and various other publications in
Wisconsin; and also holds interests in Internet service ventures.
Summarized financial information of MNI is as follows:
- ------------------------------------------------------------------------------------------------------------
September 30
- ------------------------------------------------------------------------------------------------------------
(Thousands) 2002 2001
- ------------------------------------------------------------------------------------------------------------
ASSETS
Current assets $ 24,284 $ 21,805
Investments and other assets 49,608 32,175
Property and equipment, net 13,972 14,810
- ------------------------------------------------------------------------------------------------------------
$ 87,864 $ 68,790
- ------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities, excluding debt $ 14,673 $ 14,911
Debt, including current maturities 32,344 16,000
Other 291 -
Stockholders' equity 40,556 37,879
- ------------------------------------------------------------------------------------------------------------
$ 87,864 $ 68,790
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
Year Ended September 30
- ------------------------------------------------------------------------------------------------------------
(Thousands) 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------
Revenue $ 106,527 $ 105,880 $ 97,279
Operating expenses, excluding depreciation
and amortization 74,175 76,337 64,769
Operating income 27,703 24,824 29,781
Net income 16,927 15,302 18,791
- ------------------------------------------------------------------------------------------------------------
Accounts receivable from associated companies consist of dividends due from MNI.
Fees for editorial, marketing and information technology services provided to
MNI by the Company are included in other revenue and totaled $8,962,000,
$9,300,000 and $9,320,000 in 2002, 2001 and 2000, respectively.
Certain other information relating to the Company's investment in MNI is as
follows:
- ------------------------------------------------------------------------------------------------------------
September 30
- ------------------------------------------------------------------------------------------------------------
(Thousands) 2002 2001
- ------------------------------------------------------------------------------------------------------------
Company's share of:
Stockholders' equity $ 20,278 $ 18,940
Undistributed earnings 20,028 18,690
- ------------------------------------------------------------------------------------------------------------
In April 2002, a subsidiary of MNI acquired certain of the assets of Citizen
Newspapers, LLC, which owned the Beaver Dam Daily Citizen and various other
publications published in Wisconsin. The purchase price was approximately
$18,440,000.
5 INTANGIBLE ASSETS AND GOODWILL
Identified intangible assets related to continuing operations consist of the
following:
- -------------------------------------------------------------------------------------------------------------------
September 30
- -------------------------------------------------------------------------------------------------------------------
(Thousands) 2002 2001
- -------------------------------------------------------------------------------------------------------------------
Unamortizable intangible assets:
Mastheads $ 26,022 $ -
Amortizable intangible assets:
Noncompete covenants and consulting agreements 28,406 22,475
Less accumulated amortization 21,967 21,380
- -------------------------------------------------------------------------------------------------------------------
6,439 1,095
- -------------------------------------------------------------------------------------------------------------------
Customer and newspaper subscriber lists 525,224 106,195
Less accumulated amortization 44,576 29,738
- -------------------------------------------------------------------------------------------------------------------
480,648 76,457
- -------------------------------------------------------------------------------------------------------------------
$ 513,109 $ 77,552
- -------------------------------------------------------------------------------------------------------------------
Annual pretax amortization of intangible assets related to continuing operations
for the five years ending September 2007 is estimated to be $27,623,000,
$27,610,000, $24,736,000, $23,216,000 and $23,213,000, respectively.
Changes in the carrying amount of goodwill are as follows:
- ------------------------------------------------------------------------------------------------------------------
Year Ended
September 30
- -------------------------------------------------------------------------------------------------------------------
(Thousands) 2002 2001
- -------------------------------------------------------------------------------------------------------------------
Goodwill, beginning of year $ 225,147 $ 236,722
Goodwill related to acquisitions 395,223 3,126
Goodwill related to sales of businesses (10,578) (6,886)
Amortization - (7,815)
- -------------------------------------------------------------------------------------------------------------------
Goodwill, end of year $ 609,792 $ 225,147
- -------------------------------------------------------------------------------------------------------------------
6 DEBT
In conjunction with the acquisition of Howard, the Company entered into a
five-year, $350,000,000 credit agreement dated as of March 28, 2002 among the
Company, Bank of America, N.A. (BofA), as administrative agent, and the other
lenders party thereto. The previously existing revolving credit agreement was
simultaneously cancelled. The initial interest rate of the revolving loans is,
at the option of the Company, LIBOR plus 1.25% or a base rate equal to the
greater of the federal funds rate plus 0.5% or the BofA prime rate. The weighted
average interest rate on floating rate debt is 3.07% at September 30, 2002.
Debt consists of the following:
- ------------------------------------------------------------------------------------------------------------
September 30
- ------------------------------------------------------------------------------------------------------------
(Thousands) 2002 2001
- ------------------------------------------------------------------------------------------------------------
2002 credit agreement $ 244,500 $ -
1998 Note Purchase Agreement, 6.14% to 6.64%
due in varying amounts to 2013 161,800 173,400
Other, due 2003 3,000 -
- ------------------------------------------------------------------------------------------------------------
409,300 173,400
Less current maturities 14,600 11,600
- ------------------------------------------------------------------------------------------------------------
$ 394,700 $ 161,800
- ------------------------------------------------------------------------------------------------------------
Aggregate maturities during the five years ending September 2007 are
$14,600,000, $36,600,000, $11,600,000, $12,400,000 and $256,900,000,
respectively.
Under the terms of the Company's 1998 Note Purchase Agreement (1998 Agreement),
the Company was required to repay the outstanding balance of $161,800,000 in
October 2002 unless the Company reinvested the net proceeds of the sale of its
broadcast operations or obtained a waiver or amendment of that provision of the
1998 Agreement. The acquisition of Howard satisfied the conditions of the
Company's 1998 Agreement with regard to reinvestment of the net proceeds of the
sale of broadcast operations. If repayment had been required, a substantial
prepayment penalty would have also been required, based upon interest rates in
effect at that time.
Debt agreements provide for restrictions as to indebtedness, liens, sales,
mergers, acquisitions and investments and require the Company to maintain
leverage and interest coverage ratios. Covenants under these agreements are not
considered restrictive to normal operations or historical amounts of stockholder
dividends. At September 30, 2002, the Company was in compliance with these
covenants.
7 RETIREMENT PLANS
Substantially all the Company's employees are eligible to participate in a
qualified defined contribution retirement plan. The Company also has other
retirement and compensation plans for executives and others. Retirement and
compensation plan costs, including interest on deferred compensation costs,
charged to continuing operations are $11,076,000 in 2002, $9,800,000 in 2001 and
$10,200,000 in 2000.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8 COMMON STOCK, CLASS B COMMON STOCK, AND PREFERRED SHARE PURCHASE RIGHTS
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. 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. All outstanding Class B Common Stock converts to Common
Stock when the shares of Class B Common Stock outstanding total less than
5,600,000 shares.
In 1998, the Board of Directors adopted a Shareholder Rights Plan (Plan). Under
the Plan, the Board declared a dividend of one Preferred Share Purchase Right
(Right) for each outstanding share of Common Stock and Class B Common Stock
(collectively Common Shares) of the Company. Rights are attached to and
automatically trade with the Company's Common Shares.
Rights become exercisable only in the event that any person or group of
affiliated persons becomes a holder of 20% or more of the Company's outstanding
Common Shares, or commences a tender or exchange offer which, if consummated,
would result in that person or group of affiliated persons owning at least 20%
of the Company's outstanding Common Shares. Once the Rights become exercisable,
they entitle all other stockholders to purchase, by payment of a $150 exercise
price, one one-thousandth of a share of Series A Participating Preferred Stock,
subject to adjustment, with a value of twice the exercise price. In addition, at
any time after a 20% position is acquired and prior to the acquisition of a 50%
position, the Board of Directors may require, in whole or in part, each
outstanding Right (other than Rights held by the acquiring person or group of
affiliated persons) to be exchanged for one share of Common Stock or one
one-thousandth of a share of Series A Preferred Stock. The Rights may be
redeemed at a price of $0.001 per Right at any time prior to their expiration in
May 2008.
9 STOCK OWNERSHIP PLANS
The Company has three stock-based compensation plans. As permitted under
generally accepted accounting principles, grants under those plans are accounted
for following APB Opinion 25 and related interpretations. Accordingly, no
compensation cost has been recognized for grants under the stock option or stock
purchase plans.
Had compensation costs for all of the stock-based compensation plans been
determined based on the grant date fair values of awards (the method described
in FASB Statement 123), reported net income and earnings per common share would
have been reduced to the pro forma amounts shown below:
- ----------------------------------------------------------------------------------------------------------------
(Thousands, Except Per Common Share Data) 2002 2001 2000
- ----------------------------------------------------------------------------------------------------------------
Net income:
As reported $ 81,975 $ 314,228 $ 83,663
Pro forma 79,855 312,470 82,035
Earnings per common share:
Basic:
As reported $ 1.86 $ 7.18 $ 1.90
Pro forma 1.81 7.14 1.86
Diluted:
As reported 1.85 7.13 1.89
Pro forma 1.80 7.09 1.85
- ----------------------------------------------------------------------------------------------------------------
Stock Options and Restricted Stock
The Company has reserved 4,087,000 shares of Common Stock for issuance to key
employees under an incentive and nonstatutory stock option and 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. The fair value of each grant is estimated
at the grant date using the Black-Scholes option-pricing model with the
following weighted-average assumptions for grants: dividend rates of 2.0% to
2.8%; price volatility of 18.5% to 29.8%; risk-free interest rates based upon
the life of the option ranging from 2.2% to 6.7%; and expected lives based upon
the life of the option ranging from 0.7 to 8 years.
A summary of stock option activity is as follows:
- -----------------------------------------------------------------------------------------------------------------
Number of Shares
- -----------------------------------------------------------------------------------------------------------------
(Thousands) 2002 2001 2000
- -----------------------------------------------------------------------------------------------------------------
Under option, beginning of year 967 1,178 1,258
Granted 300 355 282
Exercised (174) (547) (336)
Terminated and canceled (44) (19) (26)
- -----------------------------------------------------------------------------------------------------------------
Under option, end of year 1,049 967 1,178
- -----------------------------------------------------------------------------------------------------------------
Exercisable, end of year 530 467 767
- -----------------------------------------------------------------------------------------------------------------
Weighted average prices of options are as follows:
- -----------------------------------------------------------------------------------------------------------------
2002 2001 2000
- -----------------------------------------------------------------------------------------------------------------
Granted $ 35.58 $ 27.24 $ 29.11
Exercised 25.77 18.83 14.15
Under option, end of year 29.04 26.44 22.72
Fair value of options granted 9.74 6.97 7.75
- -----------------------------------------------------------------------------------------------------------------
A summary of options outstanding at September 30, 2002 is as follows:
- -----------------------------------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
- -------------------------------------------------------------------- ----------------------------------------
Weighted-
Average Weighted- Weighted-
Range of Remaining Average Average
Exercise Number Contractual Life Exercise Number Exercise
Prices Outstanding (In Years) Price Exercisable Price
- -------------------------------------------------------------------- ----------------------------------------
$15 to 20 69,000 1.7 $ 17.71 69,000 $ 17.71
20 to 25 52,000 3.7 21.66 49,000 21.60
25 to 30 563,000 5.4 27.35 360,000 27.65
30 to 34 72,000 5.1 31.89 52,000 32.10
35 to 40 293,000 9.1 35.58 - -
- -------------------------------------------------------------------- ----------------------------------------
Total 1,049,000 6.1 $ 29.04 530,000 $ 26.23
- -------------------------------------------------------------------- ----------------------------------------
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. In 2002, 2001 and
2000, the Company granted 58,000, 44,000 and 46,000 shares, respectively, of
restricted stock to employees. At September 30, 2002, 114,000 shares of
restricted stock were outstanding.
At September 30, 2002, 3,038,000 shares were available for granting of stock
options or issuance of restricted stock.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stock Purchase Plan
The Company has 925,000 shares of Common Stock available for issuance pursuant
to an employee stock purchase plan. April 30, 2003 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 grant or the exercise date, which is one year from the date
of grant. The weighted-average fair values of purchase rights granted in 2002,
2001 and 2000, computed using the Black-Scholes option-pricing model, were
$9.23, $6.93 and $5.32, respectively.
In 2002, 2001 and 2000 employees purchased 63,000, 85,000 and 124,000 shares,
respectively, at a price of $26.44 in 2002, $19.20 in 2001 and $19.31 in 2000.
10 INCOME TAXES
Income tax expense consists of the following:
- -----------------------------------------------------------------------------------------------------------------
Year Ended September 30
- -----------------------------------------------------------------------------------------------------------------
(Thousands) 2002 2001 2000
- -----------------------------------------------------------------------------------------------------------------
Current:
Federal $ 13,115 $ 181,412 $ 36,036
State 5,832 28,936 6,612
Deferred 4,866 (29,446) 7,524
- -----------------------------------------------------------------------------------------------------------------
$ 23,813 $ 180,902 $ 50,172
- -----------------------------------------------------------------------------------------------------------------
Continuing operations $ 30,030 $ 33,215 $ 40,494
Discontinued operations (6,217) 147,687 9,678
- -----------------------------------------------------------------------------------------------------------------
$ 23,813 $ 180,902 $ 50,172
- -----------------------------------------------------------------------------------------------------------------
Income tax expense related to continuing operations differs from the amounts
computed by applying the U.S. federal income tax rate to income before income
taxes. The reasons for these differences are as follows:
- -----------------------------------------------------------------------------------------------------------------
Year Ended September 30
- -----------------------------------------------------------------------------------------------------------------
2002 2001 2000
- -----------------------------------------------------------------------------------------------------------------
Computed "expected" income tax expense 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit 3.8 4.0 4.0
State income tax credits - (2.4) -
Net income of associated companies taxed
at dividend rates (2.4) (2.2) (2.3)
Goodwill amortization - 1.2 1.0
Resolution of tax issues (9.1) - -
Other (0.3) 0.1 (1.1)
- -----------------------------------------------------------------------------------------------------------------
27.0% 35.7% 36.6%
- -----------------------------------------------------------------------------------------------------------------
The favorable resolution of tax issues reduced income tax expense in 2002 by
approximately $10,100,000. The Company has favorably resolved one element of a
federal tax claim related to the deductibility of losses on the 1997 sale of a
business. Due to the uncertainty of a favorable resolution at the time of sale,
the amount claimed was reserved in the Consolidated Financial Statements. The
reversal has been recorded in results from continuing operations as a reduction
of income tax expense in 2002.
Substantial deferred income tax liabilities were recorded in 2002 as a result of
acquisitions. Net deferred income tax liabilities consist of the following
components:
- -----------------------------------------------------------------------------------------------------------------
September 30
- -----------------------------------------------------------------------------------------------------------------
(Thousands) 2002 2001
- -----------------------------------------------------------------------------------------------------------------
Deferred income tax liabilities:
Property and equipment $ 20,543 $ 10,374
Equity in undistributed earnings of affiliates 1,594 1,238
Identifiable intangible assets 191,952 13,093
Other 160 185
- -----------------------------------------------------------------------------------------------------------------
214,249 24,890
- -----------------------------------------------------------------------------------------------------------------
Deferred income tax assets:
Accrued compensation 3,888 6,644
Allowance for doubtful accounts 3,407 2,707
Other 4,291 2,691
- -----------------------------------------------------------------------------------------------------------------
11,586 12,042
- -----------------------------------------------------------------------------------------------------------------
Net deferred income tax liabilities $202,663 $ 12,848
- -----------------------------------------------------------------------------------------------------------------
Net deferred income tax liabilities have been classified in the accompanying
Consolidated Balance Sheets as follows:
- -----------------------------------------------------------------------------------------------------------------
September 30
- -----------------------------------------------------------------------------------------------------------------
(Thousands) 2002 2001
- -----------------------------------------------------------------------------------------------------------------
Current assets $ 7,812 $ 5,488
Non-current liabilities (210,475) (18,336)
- -----------------------------------------------------------------------------------------------------------------
$(202,663) $ (12,848)
- -----------------------------------------------------------------------------------------------------------------
A $4,000,000 reduction of income tax expense from changes in estimates related
to state taxes on the sale of broadcasting operations in 2000 and thereafter has
been recorded in results from discontinued operations in 2002.
11 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 cash investments,
accounts receivable, and accounts payable approximate fair value because of the
short maturity of those instruments. The carrying value of other investments,
consisting of debt and equity securities in a deferred compensation trust, is
carried at fair value based upon quoted market prices. Equity securities
totaling $3,927,000, 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 floating rate debt
approximates the carrying amount.
The fair value of the Company's fixed rate 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 fixed rate debt are as follows:
- --------------------------------------------------------------------------------
(Thousands) Carrying Fair Value
Amount
- --------------------------------------------------------------------------------
September 30:
2002 $161,800 $175,200
2001 173,400 178,100
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12 EARNINGS PER COMMON SHARE
The following table sets forth the computation of basic and diluted earnings per
common share:
- -----------------------------------------------------------------------------------------------------------------
Year Ended September 30
- -----------------------------------------------------------------------------------------------------------------
(Thousands, Except Per Common Share Data) 2002 2001 2000
- -----------------------------------------------------------------------------------------------------------------
Income applicable to common stock:
Continuing operations $ 81,029 $ 59,829 $ 70,117
Discontinued operations 946 254,399 13,546
- -----------------------------------------------------------------------------------------------------------------
Net income $ 81,975 $ 314,228 $ 83,663
- -----------------------------------------------------------------------------------------------------------------
Weighted average common shares outstanding 44,204 43,873 44,099
Less non-vested restricted stock 117 89 94
- -----------------------------------------------------------------------------------------------------------------
Basic average common shares outstanding 44,087 43,784 44,005
Dilutive stock options and restricted stock 264 305 355
- -----------------------------------------------------------------------------------------------------------------
Diluted average common shares 44,351 44,089 44,360
- -----------------------------------------------------------------------------------------------------------------
Earnings per common share:
Basic:
Continuing operations $ 1.84 $ 1.37 $ 1.59
Discontinued operations 0.02 5.81 0.31
- -----------------------------------------------------------------------------------------------------------------
Net income $ 1.86 $ 7.18 $ 1.90
- -----------------------------------------------------------------------------------------------------------------
Diluted:
Continuing operations $ 1.83 $ 1.36 $ 1.58
Discontinued operations 0.02 5.77 0.31
- -----------------------------------------------------------------------------------------------------------------
Net income $ 1.85 $ 7.13 $ 1.89
- -----------------------------------------------------------------------------------------------------------------
13 OTHER INFORMATION
Compensation and other accrued liabilities related to continuing operations
consist of the following:
- -----------------------------------------------------------------------------------------------------------------
September 30
- -----------------------------------------------------------------------------------------------------------------
(Thousands) 2002 2001
- -----------------------------------------------------------------------------------------------------------------
Compensation $ 17,552 $ 13,525
Retirement and stock purchase plans 7,849 4,615
Interest 1,075 5,537
Other 6,115 3,371
- -----------------------------------------------------------------------------------------------------------------
$ 32,591 $ 27,048
- -----------------------------------------------------------------------------------------------------------------
Cash flow information is as follows:
- -----------------------------------------------------------------------------------------------------------------
Year Ended September 30
- -----------------------------------------------------------------------------------------------------------------
(Thousands) 2002 2001 2000
- -----------------------------------------------------------------------------------------------------------------
Cash payments for:
Interest, net of capitalized interest of
$1,389 in 2000 $ 18,881 $ 13,025 $ 5,783
Income taxes 65,485 165,028 42,345
Program rights acquired by issuing long-term contracts - - 7,794
Capital expenditures related to discontinued operations 150 68 7,360
- -----------------------------------------------------------------------------------------------------------------
14 VALUATION AND QUALIFYING ACCOUNTS
Valuation and qualifying account information related to continuing operations is
as follows:
- ------------------------------------------------------------------------------------------------------------------
Balance, Additions Reserves of
Beginning Charged to Businesses Deductions Balance, End
(Thousands) of Year Income Acquired or Sold from Reserves of Year
- ------------------------------------------------------------------------------------------------------------------
ALLOWANCE FOR
DOUBTFUL ACCOUNTS
Year ended September 30:
2002 $ 4,328 $ 2,728 $ 2,396 $ 3,417 $ 6,035
2001 3,244 4,160 - 3,076 4,328
2000 3,257 3,153 - 3,166 3,244
ALLOWANCE FOR
LOSSES ON LOANS
Year ended September 30:
2002 $ 2,522 $ 188 $ - $ - $ 2,710
2001 - 2,522 - - 2,522
- ------------------------------------------------------------------------------------------------------------------
15 RELATED PARTY TRANSACTIONS
In 2002, the Company accrued a $1,000,000 contribution to Lee Foundation, the
directors of which are officers of the Company. Lee Foundation supports capital
and other projects of not for profit organizations in the communities in which
newspapers and other publications of the Company are located.
16 COMMITMENTS
In 2002, the Company entered into a four-year contract for the annual purchase
of 45,000 metric tonnes of newsprint, at market prices, from a single supplier.
The commitment represents approximately one-third of the Company's annual
volume, inclusive of MNI. The commitment is reduced to the extent it exceeds 75%
of the Company's annual usage. The Company has other newsprint commitments, both
formal and informal, for lesser amounts, with other suppliers.
17 Impact of Recently Issued Accounting Standards
In July 2002, the FASB issued Statement 146, Accounting for Costs Associated
with Exit or Disposal Activities. Statement 146 requires companies to recognize
liabilities and costs associated with exit or disposal activities initiated
after December 2002 when they are incurred, rather than when management commits
to a plan to exit an activity. Statement 146 will affect only the timing of the
recognition of future restructuring costs and is not expected to have a material
effect on the Company's Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18 QUARTERLY FINANCIAL DATA (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------
Quarter
- ----------------------------------------------------------------------------------------------------------------------
(Thousands, Except Per Common Share Data) 1st 2nd 3rd 4th
- ----------------------------------------------------------------------------------------------------------------------
2002 (1) (1) (1)
Operating revenue $ 107,360 $ 96,507 $ 159,547 $ 162,482
Income from continuing operations 18,037 13,226 30,756 19,010
Income (loss) from discontinued operations (37) (102) 1,332 (247)
Net income 18,000 13,124 32,088 18,763
- ----------------------------------------------------------------------------------------------------------------------
Earnings per common share:
Basic:
Income from continuing operations $ 0.41 $ 0.30 $ 0.70 $ 0.43
Income from discontinued operations - - 0.03 (0.01)
- ----------------------------------------------------------------------------------------------------------------------
Net income $ 0.41 $ 0.30 $ 0.73 $ 0.42
- ---------------------------------------------------------------------------------------------------------------------
Diluted:
Income from continuing operations $ 0.41 $ 0.30 $ 0.69 $ 0.43
Income from discontinued operations - - 0.03 (0.01)
- ----------------------------------------------------------------------------------------------------------------------
Net income $ 0.41 $ 0.30 $ 0.72 $ 0.42
- ----------------------------------------------------------------------------------------------------------------------
2001 (1) (1) (1) (1)
Operating revenue $ 114,429 $ 99,226 $ 107,684 $ 105,627
Income from continuing operations 21,052 13,282 15,797 9,698
Income (loss) from discontinued operations 250,850 (226) (95) 3,870
Net income 271,902 13,056 15,702 13,568
- ----------------------------------------------------------------------------------------------------------------------
Earnings per common share:
Basic:
Income from continuing operations $ 0.48 $ 0.30 $ 0.36 $ 0.23
Income from discontinued operations 5.75 - - 0.06
- ----------------------------------------------------------------------------------------------------------------------
Net income $ 6.23 $ 0.30 $ 0.36 $ 0.29
- ----------------------------------------------------------------------------------------------------------------------
Diluted:
Income from continuing operations $ 0.48 $ 0.30 $ 0.36 $ 0.22
Income from discontinued operations 5.71 - - 0.06
- ----------------------------------------------------------------------------------------------------------------------
Net income $ 6.19 $ 0.30 $ 0.36 $ 0.28
- ----------------------------------------------------------------------------------------------------------------------
<FN>
(1) In the third and fourth quarters of 2002 the Company reclassified the
results of its Flathead group of weekly newspapers and Ashland, Oregon
daily newspaper, respectively, to discontinued operations. See Note 3.
</FN>
Deloitte
& Touche
INDEPENDENT AUDITORS' REPORT
To the Stockholders
Lee Enterprises, Incorporated
and subsidiaries
Davenport, Iowa
We have audited the accompanying consolidated balance sheet of Lee Enterprises,
Incorporated and subsidiaries as of September 30, 2002, and the related
consolidated statements of income, stockholders' equity, and cash flows for the
year 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 audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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 audit provides a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Lee Enterprises, Incorporated and
subsidiaries at September 30, 2002 and the results of their operations and their
cash flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.
As discussed in Note 1 to the consolidated financial statements, in 2002 the
Company changed its method of accounting for goodwill and other intangible
assets to conform to Statement of Financial Accounting Standards No. 142.
/s/ Deloitte & Touche, LLP
- ---------------------------
Davenport, Iowa
November 7, 2002
McGladrey & Pullen
Certified Public Accountants
INDEPENDENT AUDITOR'S REPORT
To the Stockholders
Lee Enterprises, Incorporated
and subsidiaries
Davenport, Iowa
We have audited the accompanying consolidated balance sheet of Lee Enterprises,
Incorporated and subsidiaries as of September 30, 2001 and the related
consolidated statements of income, stockholders' equity, and cash flows for the
years ended September 30, 2001 and 2000. 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 auditing standards generally accepted
in the United States of America. 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, 2001 and the results of their
operations and their cash flows for the years ended September 30, 2001 and 2000
in conformity with accounting principles generally accepted in the United States
of America.
/s/ McGladrey & Pullen, LLP
- ------------------------------
Davenport, Iowa
November 9, 2001
Lee Enterprises
REPORT OF MANAGEMENT
The management of Lee Enterprises, Incorporated is responsible for the
preparation and integrity of all financial statements and other information
contained in this Annual Report on Form 10-K. We rely on a system of internal
financial and disclosure controls to meet the responsibility of providing
accurate financial statements. These controls provide reasonable assurance that
assets are safeguarded, that transactions are executed in accordance with
management's authorization and that the financial statements are prepared in
accordance with accounting principles generally accepted in the United States of
America.
The financial statements for each of the years covered in this Annual Report on
Form 10-K have been audited by independent auditors, who have provided an
independent assessment as to the fairness of the financial statements, after
obtaining an understanding of the Company's systems and procedures and
performing such other audit tests as deemed necessary.
The Audit Committee of the Board of Directors, which is composed solely of
directors who are not officers of the Company, meets with management and the
independent auditors to review the results of their work and to satisfy itself
that their respective responsibilities are being properly discharged. The
independent auditors have full and free access to the Audit Committee and have
regular discussions with the Committee regarding appropriate auditing and
financial reporting matters.
/s/ Mary E. Junck
- ------------------------------------------------------
Mary E. Junck
Chairman, President and Chief Executive Officer
/s/ Carl G. Schmidt
- ------------------------------------------------------
Carl G. Schmidt
Vice President, Chief Financial Officer and Treasurer
December 27, 2002
EXHIBIT 3.1
RESTATED CERTIFICATE OF
INCORPORATION
OF
LEE ENTERPRISES, INCORPORATED
(as of November 14, 2002)
Lee Enterprises, Incorporated, a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, whose
original certificate of incorporation of the Corporation was filed in the office
of the Secretary of State on September 22, 1950, adopts the following Restated
Certificate of Incorporation:
FIRST: The name of the Corporation (hereinafter referred to as the
"Corporation") is and shall be:
LEE ENTERPRISES, INCORPORATED
SECOND: The registered office of the Corporation in the State of Delaware
is and shall be located at 229 South State Street, in the City of Dover, County
of Kent. The name and address of its registered agent is Corporation Service
Company, 2711 Centerville Road, Suite 400, Wilmington, DE 19808.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 90,500,000, consisting of 500,000
shares of Serial Convertible Preferred Stock, without par value, 60,000,000
shares of Common Stock, par value $2.00 per share ("Common Stock"), and
30,000,000 shares of Class B Common Stock, par value $2.00 per share ("Class B
Common Stock").
The following is a statement of the designations, preferences and rights,
and the qualifications, limitations and restrictions thereof, in respect of the
Common Stock and the Class B Common Stock and the Serial Convertible Preferred
Stock, except such thereof as the Board of Directors is herein expressly
authorized to fix.
COMMON STOCK AND CLASS B COMMON STOCK
(A) The powers, preferences and rights of the Common Stock and Class B
Common Stock, and the qualifications, limitations or restrictions thereof, shall
be in all respects identical, except as otherwise required by law or expressly
provided in this Restated Certificate of Incorporation.
(B) At each annual or special meeting of stockholders, each holder of
Common Stock shall be entitled to one (1) vote in person or by proxy for each
share of Common Stock standing in his name on the stock transfer records of the
Corporation and each holder of Class B Common Stock shall be entitled to ten
(10) votes in person or by proxy for each share of Class R Common Stock standing
in his name on the stock transfer records of the Corporation. Except as set
forth below, all actions submitted to a vote of stockholders shall be voted on
by the holders of Common Stock and Class B Common Stock voting together as a
single class. The holders of Common Stock and Class B Common Stock shall vote
separately as classes with respect to amendments to this Restated Certificate of
Incorporation that alter or change the powers, preferences or special rights of
their respective classes of stock so as to affect them adversely, and with
respect to such other matters as may require class votes under the General
Corporation Law of the State of Delaware. The holders of all outstanding shares
of capital stock of the Corporation entitled to vote shall vote together as a
single class upon any proposal to authorize additional shares of Common Stock or
Class B Common Stock, or upon any proposal to issue authorized but unissued
shares of Class B Common Stock other than (i) pursuant to stock dividends, stock
splits or (ii) issuances pursuant to the 1977 Employee Stock Purchase Plan for
1985-86 and the 1975 and 1982 Stock Option Plans respecting outstanding stock
options for which shares of Class B Common Stock have been duly reserved for
issuance on the record date for the initial distribution of shares of Class B
Common Stock (the "Record Date").
(C) If and when dividends on the Common Stock and Class B Common Stock are
declared payable from time to time by the Board of Directors from funds legally
available therefor, whether payable in cash, in property or in shares of stock
of the Corporation, the holders of Common Stock and the holders of Class B
Common Stock shall be entitled to share equally, share for share, in such
dividends, except that, if dividends are declared than are payable in shares of
Common Stock or Class B Common Stock, dividends shall be declared that are
payable at the same rate on both classes of stock and the dividends payable in
shares of Common Stock shall be payable to holders of that class of stock and
the dividends payable in shares of Class B Common Stock shall be payable to
holders of that class of stock. If the Corporation shall in any manner subdivide
or combine the outstanding shares of Common Stock or Class B Common Stock, the
outstanding shares of the other such class of stock shall be proportionally
subdivided or combined in the same manner and on the same basis as the
outstanding shares of Common Stock or Class B Common Stock, as the case may be,
have been subdivided or combined.
(D) (1) The holder of each outstanding share of Class B Common Stock shall
have the right at any time, or from time to time, at such holder's option to
convert such share into one fully paid and non-assessable share of Common Stock,
on and subject to the terms and conditions hereinafter set forth.
(2) In order to exercise his conversion privilege, the holder of any shares
of Class B Common Stock to be converted shall present and surrender the
certificate representing such shares during usual business hours at any office
or agency of the Corporation maintained for the transfer of Class B Common Stock
and shall deliver a written notice of the election of the holder to convert the
shares represented by such certificate or any portion thereof specified in such
notice. Such notice shall also state the name or names (with address) in which
the certificate or certificates for shares of Common Stock which shall be
issuable on such conversion shall be issued. If so required by the Corporation,
any certificate for shares surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the holder of such shares or his duly authorized representative. Each
conversion of shares of Class B Common Stock shall be deemed to have been
effected on the date (the "conversion date") on which the certificate or
certificates representing such shares shall have been surrendered and such
notice and any required instruments of transfer shall have been received as
aforesaid, and the person or persons in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable on such conversion
shall be deemed to have become immediately prior to the close of business on the
conversion date the holder or holders of record of the shares of Common Stock
represented thereby.
(3) As promptly as practicable after the presentation and surrender for
conversion, as herein provided, of any certificate for shares of Class B Common
Stock, the Corporation shall issue and deliver at such office or agency, to or
upon the written order of the holder thereof, certificates for the number of
shares of Common Stock issuable upon such conversion. In case any certificate
for shares of Class B Common Stock shall be surrendered for conversion of a part
only of the shares represented thereby, the Corporation shall deliver at such
office or agency, to or upon the written order of the holder thereof, a
certificate or certificates for the number of shares of Class B Common Stock
represented by such surrendered certificate, which are not being converted. The
issuance of certificates for shares of Common Stock issuable upon the conversion
of shares of Class B Common Stock shall be made without charge to the converting
holder for any tax imposed on the Corporation in respect of the issue thereof.
The Corporation shall not, however, be required to pay any tax which may be
payable with respect to any transfer involved in the issue and delivery of any
certificate in a name other than that of the holder of the shares being
converted, and the Corporation shall not be required to issue or deliver any
such certificate unless and until the person requesting the issue thereof shall
have paid to the Corporation the amount of such tax or has established to the
satisfaction of the Corporation that such tax has been paid.
(4) Upon any conversion of shares of Class B Common Stock into shares of
Common Stock pursuant hereto, no adjustment with respect to dividends shall be
made; only those dividends shall be payable on the shares so converted as may be
declared and may be payable to holders of record of shares of Class B Common
Stock on a date prior to the conversion date with respect to the shares so
converted; and only those dividends shall be payable on shares of Common Stock
issued upon such conversion as may be declared and may be payable to holders of
record of shares of Common Stock on or after such conversion date.
(5) In case of any consolidation or merger of the Corporation as a result
of which the holders of Common Stock shall be entitled to receive stock, other
securities or other property with respect to or in exchange for Common Stock or
in case of any sale or conveyance of all or substantially all of the property or
business of the Corporation as an entirety, a holder of a share of Class B
Common Stock shall have the right thereafter, so long as the conversion right
hereunder shall exist, to convert such share into the kind and amount of shares
of stock and other securities and properties receivable upon such consolidation,
merger, sale or conveyance by a holder of one share of Common Stock and shall
have no other conversion rights with regard to such share. The provisions of
this subparagraph (5) shall similarly apply to successive consolidations,
mergers, sales or conveyances.
(6) All shares of Class B Common Stock which shall have been surrendered
for conversion as herein provided shall no longer be deemed to be outstanding,
and all rights with respect to such shares, including the rights, if any, to
receive notices and to vote, shall thereupon cease and terminate, except only
the right of the holders thereof, subject to the provisions of subparagraph (3)
of this subdivision (D), to receive shares of Common Stock in exchange therefor.
(7) Such number of shares of Common Stock as may from time to time be
required for such purpose shall be reserved for issuance upon conversion of
outstanding shares of Class B Common Stock.
(E) (1) No person holding shares of Class B Common Stock (hereinafter
called a "Class B Holder") may transfer, and the Corporation shall not register
the transfer of, such shares of Class B Common Stock, whether by sale,
assignment, gift, bequest, appointment or otherwise, except to a Permitted
Transferee of such Class B Holder, which term shall have the following meanings:
(a) In the case of a Class B Holder who is a natural person and the
holder of record and beneficial owner of the shares of Class B Common Stock
subject to said proposed transfer, "Permitted Transferee" means (A) the
spouse of such Class B Holder, (B) a lineal descendant of a great
grandparent of such Class B Holder or a spouse of any such lineal
descendant, (C) the trustee of a trust (including a voting trust) for the
benefit of one or more Class B Holders, other lineal descendants of a great
grandparent of such Class B Holder, the spouse of such Class B Holder, the
spouses of such other lineal descendants and an organization contributions
to which are deductible for federal income, estate or gift tax purposes
(hereinafter called a "Charitable Organization"), and for the benefit of no
other person, provided that such trust may grant a general or special power
of appointment to the spouse of such Class B Holder, any lineal descendant
of such Class B Holder or the spouse of any such lineal descendant, and may
permit trust assets to be used to pay taxes, legacies and other obligations
of the trust or the estate of such Class B Holder payable by reason of the
death of such Class B Holder and provided that such trust prohibits
transfer of shares of Class B Common Stock to persons other than Permitted
Transferees, as defined in clause (b) below, (D) a Charitable Organization
established by such Class B Holder, such Class B Holder's spouse, a lineal
descendant of a great grandparent of such Class B Holder, a spouse of any
such lineal descendant, the Corporation or employees or former employees of
the Corporation, and (E) a corporation all the outstanding capital stock of
which is owned by, or a partnership all the partners of which are, one or
more of such Class B Holders, other lineal descendants of a great
grandparent of such Class B Holder or a spouse of any such lineal
descendant, and the spouse of such Class B Holder, provided that if any
share of capital stock of such a corporation (or of any survivor of a
merger or consolidation of such a corporation), or any partnership interest
in such a partnership, is acquired by any person who is not within such
class of persons, all shares of Class B Common Stock then held by such
corporation or partnership, as the case may be, shall be deemed without
further act to be converted into shares of Common Stock, and stock
certificates formerly representing such shares of Class B Common Stock
shall thereupon and thereafter be deemed to represent the like number of
shares of Common Stock.
(b) In the case of a Class B Holder holding the shares of Class B
Common Stock subject to said proposed transfer as trustee pursuant to a
trust other than a trust described in clause (c) below, "Permitted
Transferee" means (A) the person who established such trust and (B) a
Permitted Transferee of such person determined pursuant to clause (a)
above.
(c) In the case of a Class B Holder holding the shares of Class B
Common Stock subject to said proposed transfer as trustee pursuant to a
trust which was irrevocable on the Record Date, for determining the persons
to whom the Class B Common Stock is first issuable by the Corporation
"Permitted Transferee" means any person to whom or for whose benefit
principal may be distributed either during or at the end of the term of
such trust whether by power of appointment or otherwise or any "Permitted
Transferee" of such person determined pursuant to clause (a), (b), (d), (e)
or (f) hereof, as the case may be.
(d) In the case of a Class B Holder who is the record (but not
beneficial) owner of the shares of Class B Common Stock subject to said
proposed transfer as nominee for the person who was the beneficial owner
thereof on the Record Date, "Permitted Transferee" means such beneficial
owner and a Permitted Transferee of such beneficial owner determined
pursuant to clause (a), (b), (c), (e) or (f) hereof, as the case may be.
(e) In the case of a Class B Holder which is a partnership and the
holder of record and beneficial owner of the shares of Class B Common Stock
subject to said proposed transfer, "Permitted Transferee" means any partner
of such partnership or any "Permitted Transferee" of such partner
determined pursuant to clause (a), (b), (c), (d) or (f) hereof, as the case
may be.
(f) In the case of a Class B Holder which is a corporation (other than
a Charitable Organization described in subclause (D) of clause (a) above)
and the holder of record and beneficial owner of the shares of Class B
Common Stock subject to said proposed transfer, "Permitted Transferee"
means any stockholder of such corporation receiving shares of Class B
Common Stock through a dividend or through a distribution made upon
liquidation of such corporation and the survivor of a merger or
consolidation of such corporation or any "Permitted Transferee" of such
stockholder determined pursuant to clause (a), (b), (c), (d) or (e) hereof,
as the case may be.
(g) In the case of a Class B Holder which is the estate of a deceased
Class B Holder, or which is the estate of a bankrupt or insolvent Class B
Holder, and provided such deceased, bankrupt or insolvent Class B Holder,
as the case may be, was the record and beneficial owner of the shares of
Class B Common Stock subject to said proposed transfer, "Permitted
Transferee" means a Permitted Transferee of such deceased, bankrupt or
insolvent Class B Holder as determined pursuant to clauses (a), (e), or (f)
above, as the case may be.
(2) Notwithstanding anything to the contrary set forth herein, any Class B
Holder may pledge such Holder's shares of Class B Common Stock to a pledges
pursuant to a bona fide pledge of such shares as collateral security for
indebtedness due to the pledges, provided that such shares shall not be
transferred to or registered in the name of the pledgee and shall remain subject
to the provisions of this subdivision (E). In the event of foreclosure or other
similar action by the pledges, such pledged shares of Class B Common Stock may
only be transferred to a Permitted Transferee of the pledgor or converted into
shares of Common Stock, as the pledges may elect.
(3) For purposes of this subdivision (E):
(a) The relationship of any person that is derived by or through
legal adoption shall be considered a natural one.
(b) Each joint owner of shares of Class B Common Stock shall be
considered a "Class B Holder" of such shares.
(c) A minor for whom shares of Class B Common Stock are held
pursuant to a Uniform Gifts to Minors Act or similar law
shall be considered a Class B Holder of such shares.
(d) Unless otherwise specified, the term "person" means both
natural persons and legal entities.
(4) Any purported transfer of shares of Class B Common Stock not permitted
hereunder shall result in the conversion of the transferee's shares of Class B
Common Stock into shares of Common Stock, effective on the date of such
purported transfer. The Corporation may, as a condition to the transfer or the
registration of transfer of shares of Class B Common Stock to a purported
Permitted Transferee, require the furnishing of such affidavits or other proof
as it deems necessary to establish that such transferee is a Permitted
Transferee.
(F) (1) Shares of Class B Common Stock shall be registered in the name(s)
of the beneficial owner(s) thereof (as hereafter defined) and not in "street" or
"nominee" names; provided, however, certificates representing shares of Class B
Common Stock issued as a stock dividend on the Corporation's then outstanding
Common Stock may be registered in the same name and manner as the certificates
representing the shares of Common Stock with respect to which the shares of
Class B Common Stock were issued. For the purposes of this subdivision (F), the
term "beneficial owner(s)" of any shares of Class B Common Stock shall mean the
person or persons who possess the power to dispose, or to direct the
disposition, of such shares.
(2) The Corporation shall note on the certificates representing the shares
of Class B Common Stock that there are restrictions on transfer and registration
of transfer imposed by subdivision (E) and this subdivision (F).
(G) Except as otherwise provided in subdivisions (B) and (C) above and
except for shares of Class B Common Stock duly reserved for issuance as of the
record date for the distribution of shares of Class B Common Stock, the
Corporation shall not issue additional shares of Class B Common Stock after the
date shares of Class B Common Stock are first issued by the Corporation. All
shares of Class B Common Stock surrendered for conversion shall resume the
status of authorized but unissued shares of Class B Common Stock.
(H) If at any time following the initial issuance of shares of Class B
Common Stock the number of outstanding shares of Class B Common Stock as
reflected on the stock transfer books of the Company is less than 2,800,000 (as
adjusted for any stock splits, combinations or stock dividends effected after
the record date for the initial distribution of shares of Class B Common Stock),
then the outstanding shares of Class B Common Stock shall be deemed without
further act to be converted into shares of Common Stock, and stock certificates
formerly representing outstanding shares of Class B Common Stock shall thereupon
and thereafter be deemed to represent a like number of shares of Common Stock,
and any outstanding right to receive Class B Common Stock shall automatically
become the right to receive a like number of shares of Common Stock.
(I) The Common Stock and Class B Common Stock are subject to all the
powers, rights, privileges, preferences and priorities of the Serial Convertible
Preferred Stock as may be stated herein and as shall be stated and expressed in
any resolution or resolutions adopted by the Board of Directors pursuant to
authority expressly granted to and vested in it by the provisions of this
Article FOURTH.
PREFERRED STOCK
(A) The Board of Directors is hereby empowered to cause the shares of
Serial Convertible Preferred Stock to be issued in one or more series from time
to time. Each series shall be designated by the Board of Directors so as to
distinguish the shares thereof from the shares of all other series. All shares
of the Serial Convertible Preferred Stock of all series shall be of equal rank
and all shares of any particular series shall be identical except as to the date
or dates from which dividends thereon shall be cumulative as provided in
subdivision (B) hereof. The shares of Serial Convertible Preferred Stock of
different series, subject to any applicable provision of law, may vary as to the
following designations, preferences and relative, participating, optional or
other special rights and qualifications, limitations or restrictions thereof,
which the Board of Directors is expressly authorized to fix, in the case of each
such series, at any time prior to the issuance of the shares thereof: (1) the
annual dividend rate for the particular series and the date from which dividends
on all shares of such series issued prior to the record date for the first
dividend for such series shall be cumulative; (2) the redemption price or prices
for the particular series; (3) the terms and amount of any sinking fund provided
for the purchase or redemption of shares of the particular series; and (4) the
conversion (which shall be into Common Stock and not into Class B Common Stock),
participating or other special rights, and the qualifications, limitations or
restrictions thereof, if any, of the particular series.
(B) The holders of each series of the Serial Convertible Preferred Stock at
the time outstanding shall be entitled to receive, but only when and as declared
by the Board of Directors, out of funds legally available for the payment of
dividends, dividends at the annual rate for the particular series fixed therefor
as herein provided, payable quarterly on the 1st day of January, April, July and
October in each year, to stockholders of record on the respective dates, not
exceeding 50 days preceding such dividend payment dates, fixed for the purpose
by the Board of Directors in advance of the payment of the respective dividends.
No dividend shall be declared on any series of the Serial Convertible Preferred
Stock in respect of any quarter-yearly dividend period unless there shall
likewise be declared on all shares of all series of the Serial Convertible
Preferred Stock at the time outstanding, like proportionate dividends, ratably,
in proportion to the annual dividend rates fixed therefor in respect of the same
quarter-yearly dividend period, to the extent that such shares are entitled to
receive such dividend for such quarter-yearly dividend period. The dividends on
shares of all series of the Serial Convertible Preferred Stock shall be
cumulative. In the case of all shares of each particular series, the dividends
on shares of such series shall be cumulative: (1) if issued prior to the record
date for the first dividend on the shares of such series, then from the date for
the particular series fixed therefor by the Board of Directors at any time prior
to the issuance of shares of the particular series; (2) if issued during the
period commencing on a record date for a dividend and terminating at the close
of the payment date for such dividend, then from such dividend payment date; and
(3) otherwise from the quarter-yearly dividend payment date next preceding the
date of issue of such shares, so that unless dividends on all outstanding shares
of each series of the Serial Convertible Preferred Stock, at the annual dividend
rate and from the dates for accumulation thereof fixed as herein provided shall
have been paid or declared and set aside for payment for all past quarter-yearly
dividend periods, but without interest on cumulative dividends, no dividends
shall be paid or declared and no other distribution shall be made on the Common
Stock or Class B Common Stock and no Common Stock or Class B Common Stock shall
be purchased or otherwise acquired for value by the Corporation. The holders of
the Serial Convertible Preferred Stock of any series shall not be entitled to
receive any dividends thereon other than the dividends referred to in this
subdivision (B).
(C) The Corporation, by action of its Board of Directors, may redeem the
whole or any part of any series of the Serial Convertible Preferred Stock, at
any time or from time to time, by paying in cash the redemption price of the
shares of the particular series fixed therefor as herein provided, together with
a sum in the case of each share of each series so to be redeemed, computed at
the annual dividend rate for the series of which the particular share is a part
from the date from which dividends on such share became cumulative to the date
fixed for such redemption, less the aggregate of the dividends theretofore or on
such redemption date paid thereon. At least 30 days' and not more than 90 days'
notice of every such redemption shall be mailed to the holders of record of the
shares of the Serial Convertible Preferred Stock so to be redeemed, at their
respective addresses as the same shall appear on the books of the Corporation;
but no failure to mail such notice nor any defect therein or in the mailing
thereof shall affect the validity of the proceedings for the redemption of any
shares of the Serial Convertible Preferred Stock so to be redeemed. In case of
the redemption of a part only of any series of the Serial Convertible Preferred
Stock at the time outstanding, the Corporation shall select by lot or in such
other manner as the Board of Directors may determine, the shares so to be
redeemed. The Board of Directors shall have full power and authority, subject to
the limitations and provisions herein contained, to prescribe the manner in
which and the terms and conditions upon which the shares of the Serial
Convertible Preferred Stock shall be redeemed from time to time. If such notice
of redemption shall have been duly given, and if on or before the redemption
date specified in such notice all funds necessary for such redemption shall have
been set aside by the Corporation, separate and apart from its other funds, in
trust for the account of the holders of the shares to be redeemed, so as to be
and continue to be available therefor, then, notwithstanding that any
certificate for such shares so called for redemption shall not have been
surrendered for cancellation, from and after the date fixed for redemption, the
shares represented thereby shall no longer be deemed outstanding, the right to
receive dividends thereon shall cease to accrue and all rights with respect to
such shares so called for redemption shall forthwith on such redemption date
cease and terminate, except only the right of the holders thereof to receive,
out of the funds so set aside in trust, the amount payable upon redemption
thereof, without interest; provided, however, that the Corporation may at any
time prior to the redemption date specified in such notice, deposit in trust,
for the account of the holders of the shares to be redeemed, funds necessary for
such redemption with a bank or trust company in good standing, organized under
the laws of the State of Iowa or the State of Illinois or of the United States
of America, doing business in the City of Davenport, Iowa, or the City of
Chicago, Illinois, having capital, surplus and undivided profits aggregating at
least $500,000, designated in such notice of redemption, and, upon such deposit
in trust, all shares with respect to which such deposit shall have been made
shall no longer be deemed to be outstanding, and all rights with respect to such
shares shall forthwith cease and terminate, except only the right of the holders
thereof to receive, out of the funds so deposited in trust, from and after the
date of such deposit, the amount payable upon the redemption thereof, without
interest. Nothing herein contained shall limit any legal right of the
Corporation to purchase or otherwise acquire any shares of the Serial
Convertible Preferred Stock.
(D) Before any amount shall be paid to or any assets distributed among the
holders of Common Stock or Class B Common Stock upon any liquidation,
dissolution or winding up of the Corporation, and after paying or providing for
the payment of all creditors of the Corporation, the holders of each series of
Serial Convertible Preferred Stock at the time outstanding shall be entitled to
be paid in cash the amount for the particular series fixed therefor as herein
provided, together with a sum in the case of each such share of each series,
computed at the annual dividend rate for the series of which the particular
share is apart, from the date from which dividends on such share became
cumulative to the date fixed for the payment of such distributive amount, less
the aggregate of the dividends theretofore or on such date paid thereon; but no
payments on account of such distributive amounts shall be made to the holders of
any series of the Serial Convertible Preferred Stock unless there shall likewise
be paid at the same time to the holders of each other series of the Serial
Convertible Preferred Stock at the time outstanding like proportionate
distributive amounts, ratably, in proportion to the full distributive amounts to
which they are respectively entitled as herein provided. The holders of Serial
Convertible Preferred Stock of any series shall not be entitled to receive any
amounts with respect thereto upon any liquidation, dissolution or winding up of
the Corporation other than the amounts referred to in this subdivision (D).
Neither the consolidation or merger of the Corporation with any other
corporation or corporations, nor the sale or transfer by the Corporation of all
or any part of its assets, shall be deemed to be a liquidation, dissolution or
winding up of the Corporation.
(E) Whenever the full dividends on all series of the Serial Convertible
Preferred Stock at the time outstanding for all past quarter-yearly dividend
periods shall have been paid or declared and set apart for payment, then such
dividends (payable in cash or Common Stock or Class B Common Stock, as the case
may be), as may be determined by the Board of Directors, may be declared and
paid on the Common Stock and Class B Common Stock but only out of funds legally
available for the payment of dividends.
(F) In the event of any liquidation, dissolution or winding up of the
Corporation, all assets and funds of the Corporation remaining after paying or
providing for the payment of all creditors of the Corporation and after paying
or providing for the payment to the holders of shares of all series of the
Serial Convertible Preferred Stock of the preferential amount specified in
subdivision (D) hereof to which they are respectively entitled, shall be divided
among and paid to the holders of the Common Stock and Class B Common Stock
according to their respective rights and interests.
(G) (1) So long as any shares of the Serial Convertible Preferred Stock of
any series are outstanding, the Corporation shall not, without the consent
(given in writing or by vote at a meeting called for that purpose) of the
holders of at least two-thirds of the total number of shares of the Serial
Convertible Preferred Stock of all series then outstanding:
(a) Create or authorize any class of stock ranking prior to the
Serial Convertible Preferred Stock, or create or authorize any
obligation or security convertible into shares of stock of any
such class; or
(b) Amend, alter, change or repeal any of the express terms of the
Serial Convertible Preferred Stock or of any series of the Serial
Convertible Preferred Stock then outstanding in a manner
prejudicial to the holders thereof; provided, however, that if
any such amendment, alteration, change or repeal would be
prejudicial to the holders of one or more, but not all, of the
series of the Serial Convertible Preferred Stock at the time
outstanding, only such consent of the holders of two-thirds of
the total number of shares of all series so affected shall be
required; or
(c) Issue any shares of any series of the Serial Convertible
Preferred Stock unless the net earnings of the Corporation
(calculated in accordance with the accounting principles followed
by the Corporation during the period for which such net earnings
are calculated) available for the payment of dividends on the
Serial Convertible Preferred Stock for any twelve consecutive
calendar months within the fifteen calendar months immediately
preceding the calendar month within which such additional shares
of stock shall be issued, shall have been at least two times the
dividend requirements for a twelve months' period upon the entire
amount of the Serial Convertible Preferred Stock to be
outstanding immediately after such issue (including the shares
proposed to be issued but not including any shares proposed to be
redeemed or otherwise retired in connection with such issue).
(2) So long as any shares of the Serial Convertible Preferred Stock of any
series are outstanding, the Corporation shall not, without the consent (given in
writing or by vote at a meeting called for that purpose) of the holders of a
majority of the total number of shares of the Serial Convertible Preferred Stock
of all series then outstanding increase the total authorized amount of the
Serial Convertible Preferred Stock of all series.
(3) Provided that the consent of the holders of the Serial Convertible
Preferred Stock (or of any series thereof) required by the provisions of
subparagraphs (1) and (2) of this subdivision (G), if any such consent be so
required, shall have been obtained, the Corporation may create or authorize any
class of stock ranking prior to or on a parity with or subordinate to the Serial
Convertible Preferred Stock or may increase the total authorized amount of the
Serial Convertible Preferred Stock or of any other class of stock of the
Corporation or may amend, alter, change or repeal any of the rights, privileges,
terms and conditions of the Serial Convertible Preferred Stock or of any series
of the Serial Convertible Preferred Stock then outstanding upon the vote, given
at a meeting called for that purpose, of the holders of a majority of the total
number of shares of stock of the Corporation then outstanding and entitled to
vote thereon.
(H) Each share of Serial Convertible Preferred Stock of any series may, at
the option of the holder thereof, be converted into Common Stock at any time
prior to the close of business on the 10th day preceding the date fixed for
redemption thereof into the number of shares of Common Stock designated by the
Board of Directors at the time of authorization of such series, subject to the
following terms and conditions:
(1) No adjustment of dividends will be made upon the exercise of the
conversion privilege.
(2) In case the Corporation shall at any time or from time to time
subdivide the outstanding shares of Common Stock into a greater number of shares
or pay a dividend thereon in Common Stock, or combine the outstanding shares of
Common Stock into a smaller number of shares, then with respect to each such
subdivision or Common Stock dividend the number of shares of Common Stock
deliverable upon the conversion of each share of Serial Convertible Preferred
Stock shall be increased proportionately and with respect to each such
combination shall be decreased proportionately.
(3) In case the Corporation shall offer to the holders of Common Stock any
right to subscribe for stock or other securities of the Corporation, the holders
of each series of Serial Convertible Preferred Stock outstanding as of the date
the record is taken of the holders of Common Stock entitled to receive such
rights, shall be entitled to subscribe for and purchase at the same price at
which such stock or securities are offered to the holders of Common Stock, and
upon the same terms, the number of shares of such stock or the amount of such
securities for which they would have been entitled to subscribe if they had been
holders of record of the number of shares of Common Stock into which their
Serial Convertible Preferred Stock was convertible on such record date.
(4) If during any fiscal year the Board of Directors shall declare cash
dividends on the Common Stock in excess of the amount of dividends declared
during such year on any series of the Serial Convertible Preferred Stock, then
the Corporation shall give notice of the amount of such excess dividend to all
holders of such series of Serial Convertible Preferred Stock at least 20 days
prior to the record date for determination of shareholders entitled to such
dividend. Such notice shall be given by mailing a copy thereof to each holder of
record of such series of Serial Convertible Preferred Stock at his address last
appearing on the books of the Corporation and shall be deemed to have been given
when mailed.
(5) So long as any of the Serial Convertible Preferred Stock remains
outstanding, no reorganization of the Corporation and no consolidation of the
Corporation and no consolidation or merger thereof with or into any other
corporation or corporations and no conveyance of all or substantially all of its
properties and business, as an entity, to any other corporation, shall be made,
unless as part of such reorganization, consolidation, merger or conveyance,
arrangements shall be made whereby the holders of each series of Serial
Convertible Preferred Stock then outstanding shall thereafter be entitled to
convert such Serial Convertible Preferred Stock into any stock or securities
given in exchange for Common Stock of the Corporation on such reorganization, or
in connection with such consolidation, merger or conveyance, in such amounts as
would at the time have been given in exchange for the Common Stock then issuable
upon conversion of such Serial Convertible Preferred Stock.
(6) Whenever any shares of Serial Convertible Preferred Stock shall be
redeemed or converted into Common Stock, such shares shall be restored to the
status of unissued shares of Serial Convertible Preferred Stock and the number
of authorized shares of Serial Convertible Preferred Stock shall not be reduced
as a result thereof.
(I) Subject to the provisions of Subdivision (J) hereof, every holder of
the Serial Convertible Preferred Stock and every holder of the Common Stock
shall have one vote, and every holder of Class B Common Stock shall have ten
votes, for each share of stock held by him for the election of directors and
upon all other matters.
(J) (1) No more than twenty per cent (20%) of the outstanding shares of
stock of the Corporation shall at any time be owned or controlled, directly or
indirectly, by or for the account of all aliens as a group (including the
representatives, associates and affiliates thereof).
(2) No more than twenty per cent (20%) of the outstanding shares of stock
of the Corporation entitled to vote on any matter submitted to stockholders
(including the election of directors) shall be voted, directly or indirectly, by
or for the account of all aliens as a group (including the representatives,
associates and affiliates thereof).
(3) No alien (including the representatives, associates and affiliates
thereof) shall be eligible to serve as a director of the Corporation.
For the purposes of this Subdivision (J):
(a) The term "alien" includes:
(i) all persons not citizens of the United States of
America, without regard to residence;
(ii) All corporations organized under laws other than those
of the United States of America or the several States;
and/or
(iii) all foreign governments.
(b) The term "representative" means any person acting at the
request or direction of, or in anticipation of benefit
(economic or otherwise) from, the person specified, either
directly or through one or more intermediaries.
(c) The term "affiliate" includes any person who directly or
indirectly through one or more intermediaries, controls, or
is controlled by, or is under common control with, the
person specified.
(d) The term "associate" includes: (i) any person of which the
person specified is an officer or partner or is, directly or
indirectly, the beneficial owner of 10 per cent or more of
any class or equity securities; (ii) any trust or other
estate in which the specified person has a substantial
beneficial interest or as to which the person specified
serves as trustee or in a similar capacity, or (iii) any
relative or spouse of the person specified or any relative
of such spouse, who has the same home as the person
specified or who is a director or officer of the person
specified or any corporation which controls or is controlled
by the person specified.
(e) The term "control" means the possession directly or
indirectly, of the power to direct or cause the direction of
management, actions, decisions or policies of a person,
whether through the ownership of voting securities, by
contract or otherwise.
(f) The term "person" includes all individuals and legal
entities (including corporations, partnerships, trusts and
estates).
The By-laws of the Corporation shall establish rules, regulations and
procedures to assure compliance with and enforcement of this Subdivision (J).
Each of the foregoing provisions (1, 2 and 3) is separate and severable. In
the event of the unenforceability of any one or more of said provisions, all of
the remaining provisions shall continue in full force and effect.
FIFTH: For the management of the business and for the conduct of the
affairs of the Corporation, and in further definition, limitation and regulation
of the powers of the Corporation and of its directors and stockholders, it is
further provided:
(A) The election of directors need not be by ballot.
(B) The Board of Directors is expressly authorized and empowered to make,
alter, amend and repeal By-Laws, subject to the power of the stockholders to
alter or repeal the By-Laws made by the Board of Directors.
(C) Any officer elected or appointed by the stockholders or by the Board of
Directors may be removed at any time in such manner as shall be provided in the
By-Laws of the Corporation.
(D) No person who is or was at any time a Director of the Corporation shall
have any personal liability to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a Director; provided, however, that
unless and except to the extent otherwise permitted from time to time by
applicable law, the provisions of this Subdivision shall not eliminate or limit
the liability of a Director (i) for any breach of the Director's duty of loyalty
to the Corporation or its stockholders, (ii) for acts or omissions by the
Director which are not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, (iv) for any transaction from which the Director derived an
improper personal benefit, or (v) for any act or omission occurring prior to the
date this Subdivision becomes effective.
(E) Notwithstanding the provisions of Section 228 of the Delaware General
Corporation Law, no corporate action without a meeting of stockholders shall be
taken by less than unanimous written consent of the stockholders of the
Corporation.
(F) Special meetings of the stockholders may be called by the Board of
Directors or the Chairman of the Board.
SIXTH: The number of Directors of the Corporation shall be such as from
time to time shall be fixed by, or in the manner provided in, the By-Laws, but
in no event less than three. The Directors shall be divided into three classes
as nearly equal in number as possible, with the term of office of one class
expiring each year. Each class of Directors shall be elected for a three year
term. During the intervals between annual meetings of stockholders, any vacancy
occurring in the Board of Directors caused by resignation, removal, death or
incapacity, and any newly created directorships resulting from an increase in
the number of Directors, shall be filled by a majority vote of the Directors
then in office whether or not a quorum. Each Director chosen to fill a vacancy
shall hold office for the unexpired term in respect of which such vacancy
occurred. Each Director chosen to fill a newly created directorship shall hold
office until the next election of the class for which such Director shall have
been chosen. When the number of Directors is changed, any newly created
directorships or any decrease in directorships shall be so apportioned among the
classes as to make all classes as nearly equal in number as possible. Each
Director shall serve until a successor shall have been duly elected and
qualified, except in the event of resignation, removal, death or other
incapacity. A Director may be removed from office at any time, but only for
cause, by the affirmative vote of the holders of a majority of the outstanding
shares of stock entitled to vote for the election of Directors at a meeting of
the stockholders called for that purpose.
SEVENTH: Any proposal that the Corporation (1) enter into a merger or
consolidation with any person, or (2) sell, lease, transfer, exchange, mortgage,
pledge or otherwise dispose of all or a substantial portion of its assets or
business to any person, or (3) issue voting securities of the corporation in
exchange or payment for the securities or assets of any person, or (4) be
liquidated or dissolved, and any proposal, (5) that the stockholders increase or
decrease the number of Directors of the corporation, however effectuated, shall
require for approval the affirmative vote of the holders of not less than
seventy-five per cent (75%) of the outstanding shares entitled to vote thereon.
Provided, however, that the foregoing shall not apply to any such proposal which
has been approved by the affirmative vote of not less than two-thirds of the
Directors of the Corporation nor to any merger, consolidation or sale of assets
or business or the issuance of voting securities between this corporation and
another corporation fifty per cent (50%) or more of the voting stock of which is
owned by this Corporation. For the purposes of this Article, the term "person"
includes all individuals and other legal entities, including corporations,
partnerships, trusts and estates.
EIGHTH: The provisions set forth in Subdivision (J) of Article FOURTH and
in Articles SIXTH and SEVENTH of this Certificate of Incorporation and this
Article EIGHTH shall not be repealed or amended in any respect unless such
repeal or amendment is approved by the affirmative vote of the holders of not
less than seventy-five per cent (75%) of the outstanding shares of stock of the
corporation entitled to vote thereon.
NINTH: (A) The Board of Directors of the Corporation, when evaluating any
offer of another party to (a) make a tender or exchange offer for any equity
security of the Corporation, (b) merge or consolidate the Corporation with
another corporation, or (c) purchase or otherwise acquire all or substantially
all of the properties and assets of the Corporation, shall, in connection with
the exercise of its judgment in determining what is in the best interests of the
Corporation and its stockholders, give due consideration to all relevant
factors, including without limitation the social and economic effects on the
employees, customers, suppliers and other constituents of the Corporation and
its subsidiaries and on the communities in which the Corporation and its
subsidiaries operate or are located.
(B) This Article shall not be repealed or amended in any respect unless
such repeal or amendment is approved by the affirmative vote of the holders of
not less than seventy-five per cent (75%) of the outstanding shares of stock of
the Corporation entitled to vote thereon.
TENTH: This Restated Certificate of Incorporation; (1) sets forth the
provisions of the original Certificate of Incorporation of the Corporation as
heretofore amended; (2) was duly adopted by the Board of Directors in accordance
with the provisions of Section 245 of the General Corporation Law of the State
of Delaware; and (3) it only restates and integrates and does not further amend
the provisions of the Corporation's Certificate of Incorporation as heretofore
amended or supplemented, and that there is no discrepancy between those
provisions and the Restated Certificate of Incorporation.
IN WITNESS WHEREOF, Lee Enterprises, Incorporated has caused its corporate
seal to be hereunto affixed and this Certificate to be signed by Mary E. Junck,
its Chairman, President and Chief Executive Officer, and C. D. Waterman III, its
Secretary, this 14th day of November, 2002.
LEE ENTERPRISES, INCORPORATED
By /s/Mary E. Junck
Mary E. Junck, Chairman, President and
Chief Executive Officer
ATTEST:
By /s/C. D. Waterman III
C. D. Waterman III, Secretary
STATE OF IOWA )
) SS:
COUNTY OF SCOTT )
BE IT REMEMBERED, that on this 14th day of November, 2002, personally came
before me MARY E. JUNCK and C. D. WATERMAN III, Chairman, President and Chief
Executive Officer and Secretary, respectively, of Lee Enterprises, Incorporated,
a corporation of the State of Delaware, party to the foregoing instrument, known
to me personally to be such, and acknowledged the said instrument to be their
own act and deed and the act and deed of said Corporation; that the signatures
of the Chairman, President and Chief Executive Officer and Secretary of said
Corporation to said instrument are in the handwriting of said Chairman,
President and Chief Executive Officer and Secretary of said Corporation, that
the seal affixed is the common or corporate seal of said Corporation, and that
the facts stated therein are true.
GIVEN under my hand and seal of office the day and year aforesaid.
/s/Debra S. Collins
-----------------------------
My Commission Expires October 1, 2005
Commission Number 144929
EXHIBIT 10.1a
Dear
I am pleased to inform you that you have been granted an Incentive Stock Option
Award of __________ shares of Lee Enterprises, Incorporated Common Stock, $2.00
par value. You are receiving this award under the Company's 1990 Long-Term
Incentive Plan (amended, restated and extended effective October 1, 1999), as
presently written or later amended (the "Plan"), as outlined below.
SUMMARY OF AWARD
Granted To:
SSN
Grant Date:
Incentive Stock Option Award:
Option Price Per Share: $ Total Cost to Exercise: $
Expiration Date:
Vesting Schedule: or 30% of the shares on ____________
or 30% of the shares on ____________
or 40% of the shares on ____________
LEE ENTERPRISES, INCORPORATED
By
-------------------------------------------------------
By clicking on the "I agree" box at the top of this electronic mail message, I
acknowledge receipt of this Restricted Stock Award as of the Grant Date above,
which has been issued to me under the terms and conditions of the Plan and as
stated in this letter agreement. I further acknowledge I can obtain the
Prospectus, including the Plan at http://10.1.18/reference.html. I agree to all
of the terms and conditions of this letter agreement and the Plan.
If an "I Agree" box does not appear at the top of this signature,
your consent may be acknowledged by inserting your name & date
below and returning the agreement via e-mail to the sender
Signature: __________________________________________ Date: ______________
Note: If there are any discrepancies in the name or address shown
above, or if you are unable to access the Prospectus, please
notify Connie Sehmann at (563) 383-2174.
SUMMARY OF ADDITIONAL TERMS OF AWARD
1. Incentive Stock Option Award.
(a) To the extent that this option is not exercised by you when it
becomes initially exercisable, it will not expire but will be carried
forward and will be exercisable at any time thereafter. However, this
option will not be exercisable after the expiration of ten (10) years from
the Grant Date and then this letter agreement will automatically terminate.
Also, this option is subject to and must comply with such limitations as
may be prescribed by Section 422(d) of the Internal Revenue Code of 1986,
as from time to time amended, and any implementing regulations.
(b) This option may be exercised in whole or from time to time in
part, provided that no partial exercise may be for less than ten (10) full
shares of the Company's Common Stock or its equivalent. You must give
written notice of election to exercise this option in whole or in part to
the Company. When you have exercised this option in full before ten (10)
years from the Grant Date, then this letter agreement will automatically
terminate. If the option is being exercised by any person other than you,
the notice must be accompanied by proof, satisfactory to the Company, of
the right of such person to exercise the option. Such notice must state the
number of shares with respect to which the option is being exercised and
must be accompanied with a check or draft payable to the Company for the
amount of the purchase price. Upon receipt of the purchase price, the
Company will instruct its transfer agent to countersign and deliver to you,
or such other person exercising the option, a certificate for the number of
shares purchased.
(c) This option may not be transferable and may not be encumbered or
disposed of in whole or in part during your lifetime. During your lifetime
this option may be exercised only by you. Upon your death any rights to the
extent exercisable on the date of death may be exercised by your estate or
by a person who acquires the right to exercise this option by bequest or
inheritance or by reason of your death, provided that such exercise occurs
within the remaining effective term of the option.
(d) On termination of your employment by reason of retirement under a
retirement plan of the Company or any of its subsidiaries, you may at any
time within a period of three (3) months after such termination exercise
this option to the extent it was exercisable by you on the date of
termination. As used in this option, "employment" means employment by the
Company or any subsidiary of the Company as defined in Section 424(f) of
the Internal Revenue Code, as from time to time amended, and any
implementing regulations.
(e) On termination of your employment by reason of permanent and total
disability, as defined in Section 22(e)(3) of the Internal Revenue Code, as
from time to time amended, and any implementing regulations, you may at any
time within a period of twelve (12) months after such termination exercise
this option to the extent it was exercisable by you on the date of
termination.
(f) On termination of your employment for any reason other than death,
permanent and total disability or retirement, all rights to purchase shares
under this option will automatically terminate on the thirtieth (30th) day
after such cessation of employment.
(g) This Incentive Stock Option Award includes the right to acquire an
Accelerated Ownership Non-Qualified Stock Option ("AO"). If you pay all or
part of the purchase price of the option with shares of the Company's
Common Stock held by you for at least one (1) year, then upon exercise of
the option you will be granted the additional option to purchase, at the
price per share equal to the Fair Market Value at the date of that later
grant, the number of shares of the Company's Common Stock equal to the
number of whole shares of the Company's Common Stock used by you in payment
of the purchase price and the number of whole shares of the Company's
Common Stock, if any, withheld by the Company as payment for applicable
withholding taxes. An AO may be exercised no earlier than one (1) year
after its grant and no later than the date of expiration of this letter
agreement.
(h) This option is subject to the requirement that, at any time the
Board of Directors determines, in its discretion, that the listing,
registration or qualification of the shares subject to this option on any
securities exchange or under any state or federal law, or the consent or
approval of any government regulatory body, is necessary or desirable as a
condition of, or in connection with, the granting of this option or the
issue or purchase of shares under this letter agreement, this option may
not be exercised in whole or in part unless such listing, registration,
qualification, consent or approval has been effected or obtained free of
any conditions not acceptable to the Board of Directors.
(i) If you are granted a leave of absence, the Company's Executive
Compensation Committee (the "Committee") may agree to continue this option
while you remain an employee of the Company or a subsidiary of the Company
as it may deem equitable, except that in no event will the option be
exercised after the expiration of ten (10) years from the Grant Date. Any
provision for continuation of the exercise of an AO may not extend beyond
the date of expiration of this letter agreement.
(j) The Plan is incorporated in this letter agreement by reference and
is made a part of this letter agreement as if fully set forth in this
letter agreement. The Plan will control if there is a any conflict between
the Plan and this letter agreement. Also, the Plan will control on such
matters as are not contained in this letter agreement. Defined terms which
are not given specific meaning in this letter agreement will have the
meanings used in the Plan.
(k) Any dispute or disagreement which will arise under, as a result
of, or in any way relate to the interpretation or construction of this
letter agreement will be determined by the Committee. Any such
determination made under this letter agreement will be final, binding and
conclusive for all purposes.
2. Change in Present Stock. If any change in the outstanding shares of the
Company's Common Stock by reason of any stock dividend or split,
recapitalization, merger, consolidation, spin-off, combination or exchange of
shares or other corporate change, or any distributions to common shareholders
other than cash dividends occurs, the Committee will make such substitution or
adjustment, if any, as it deems to be equitable (a) to accomplish fairly the
purposes of the Plan, and (b) to preserve the intended benefits of the Plan to
the Participants and the Company, as to the number or kind of shares of the
Company's Common Stock or other securities issued or reserved for issuance under
the Plan.
3. Change in Control. In spite of any other provision of the Plan to the
contrary, if a Change of Control, as defined in the Plan occurs, the
restrictions and deferral limitations applicable to the Restricted Stock will
lapse. The Restricted Stock will then become free of all restrictions and will
be fully vested and transferable to the full extent of the original grant.
4. Effect Upon Employment. Nothing contained in this letter agreement will
restrict the right of the Company to terminate your employment at any time with
or without cause.
5. Notices. Each notice relating to this letter agreement will be in
writing and delivered in person or by registered or certified mail, and if given
to the Company, at its office, 215 N. Main Street, 400 Putnam Building,
Davenport, Iowa, 52801, attention of the Vice President-Human Resources. Notices
given to you or other person or persons then entitled to exercise this award
will be given at your last address given to the Company. Either party may change
the address to which such notices are to be given by notice in writing to the
other in accordance with the terms of this letter agreement.
6. Governing Law. This letter agreement is governed by the laws of the
State of Delaware.
7. Successors in Interest. This letter agreement will inure to the benefit
of and be binding on each successor and assign of the Company and your heirs,
legatees and legal representatives.
EXHIBIT 10.1a
Dear
I am pleased to inform you that you have been granted an Non-Qualified Stock
Option Award of ________ shares of Lee Enterprises, Incorporated Common Stock,
$2.00 par value. You are receiving this award under the 1990 Long-Term Incentive
Plan of the Company (amended, restated and extended effective October 1, 1999),
as presently written or later amended (the "Plan"), as outlined below.
Granted To:
SSN
Grant Date:
Non Qualified Stock Option Award:
Option Price Per Share: $ Total Cost to Exercise: $
Expiration Date:
Vesting Schedule: or 30% of the shares on ____________
or 30% of the shares on ____________
or 40% of the shares on ____________
LEE ENTERPRISES, INCORPORATED
By
----------------------------------------------------
By clicking on the "I agree" box at the top of this electronic mail message, I
acknowledge receipt of this Restricted Stock Award as of the Grant Date above,
which has been issued to me under the terms and conditions of the Plan and as
stated in this letter agreement. I further acknowledge I can obtain the
Prospectus, including the Plan at http://10.1.18/reference.html. I agree to all
of the terms and conditions of this letter agreement and the Plan.
If an "I Agree" box does not appear at the top of this signature,
your consent may be acknowledged by inserting your name & date
below and returning the agreement via e-mail to the sender Note:
Signature: ___________________________________ Date: ___________________
If there are any discrepancies in the name or address shown
above, or if you are unable to access the Prospectus, please
notify Connie Sehmann at (563) 383-2174.
SUMMARY OF ADDITIONAL TERMS OF AWARD
1. Non-Qualified Stock Option Award.
(a) To the extent that this option is not exercised by you when it
becomes initially exercisable, it will not expire but will be carried
forward and will be exercisable at any time thereafter. However, this
option will not be exercisable after the expiration of ten (10) years from
the Grant Date and then this letter agreement will automatically terminate.
Also, this option is subject to and must comply with such limitations as
may be prescribed by Section 422(d) of the Internal Revenue Code of 1986,
as from time to time amended, and any implementing regulations.
(b) This option may be exercised in whole or from time to time in
part, provided that no partial exercise may be for less than ten (10) full
shares of the Company's Common Stock or its equivalent. You must give
written notice of election to exercise this option in whole or in part to
the Company. When you have exercised this option in full before ten (10)
years from the Grant Date, then this letter agreement will automatically
terminate. If the option is being exercised by any person other than you,
the notice must be accompanied by proof, satisfactory to the Company, of
the right of such person to exercise the option. Such notice must state the
number of shares with respect to which the option is being exercised and
must be accompanied with a check or draft payable to the Company for the
amount of the purchase price. Upon receipt of the purchase price, the
Company will instruct its transfer agent to countersign and deliver to you,
or such other person exercising the option, a certificate for the number of
shares purchased.
(c) This option may not be transferable and may not be encumbered or
disposed of in whole or in part during your lifetime. During your lifetime
this option may be exercised only by you. Upon your death any rights to the
extent exercisable on the date of death may be exercised by your estate or
by a person who acquires the right to exercise this option by bequest or
inheritance or by reason of your death, provided that such exercise occurs
within the remaining effective term of the option.
(d) On termination of your employment by reason of retirement under a
retirement plan of the Company or any of its subsidiaries, you may at any
time within a period of three (3) months after such termination exercise
this option to the extent it was exercisable by you on the date of
termination. As used in this option, "employment" means employment by the
Company or any subsidiary of the Company as defined in Section 424(f) of
the Internal Revenue Code, as from time to time amended, and any
implementing regulations.
(e) On termination of your employment by reason of permanent and total
disability, as defined in Section 22(e)(3) of the Internal Revenue Code, as
from time to time amended, and any implementing regulations, you may at any
time within a period of twelve (12) months after such termination exercise
this option to the extent it was exercisable by you on the date of
termination.
(f) On termination of your employment for any reason other than death,
permanent and total disability or retirement, all rights to purchase shares
under this option will automatically terminate on the thirtieth (30th) day
after such cessation of employment.
(g) This Non-Qualified Stock Option Award includes the right to
acquire an Accelerated Ownership Non-Qualified Stock Option ("AO"). If you
pay all or part of the purchase price of the option with shares of the
Company's Common Stock held by you for at least one (1) year, then upon
exercise of the option you will be granted the additional option to
purchase, at the price per share equal to the Fair Market Value at the date
of that later grant, the number of shares of the Company's Common Stock
equal to the number of whole shares of the Company's Common Stock used by
you in payment of the purchase price and the number of whole shares of the
Company's Common Stock, if any, withheld by the Company as payment for
applicable withholding taxes. An AO may be exercised no earlier than one
(1) year after its grant and no later than the date of expiration of this
letter agreement.
(h) This option is subject to the requirement that, at any time the
Board of Directors determines, in its discretion, that the listing,
registration or qualification of the shares subject to this option on any
securities exchange or under any state or federal law, or the consent or
approval of any government regulatory body, is necessary or desirable as a
condition of, or in connection with, the granting of this option or the
issue or purchase of shares under this letter agreement, this option may
not be exercised in whole or in part unless such listing, registration,
qualification, consent or approval has been effected or obtained free of
any conditions not acceptable to the Board of Directors.
(i) If you are granted a leave of absence, the Company's Executive
Compensation Committee (the "Committee") may agree to continue this option
while you remain an employee of the Company or a subsidiary of the Company
as it may deem equitable, except that in no event will the option be
exercised after the expiration of ten (10) years from the Grant Date. Any
provision for continuation of the exercise of an AO may not extend beyond
the date of expiration of this letter agreement.
(j) The Plan is incorporated in this letter agreement by reference and
is made a part of this letter agreement as if fully set forth in this
letter agreement. The Plan will control if there is a any conflict between
the Plan and this letter agreement. Also, the Plan will control on such
matters as are not contained in this letter agreement. Defined terms which
are not given specific meaning in this letter agreement will have the
meanings used in the Plan.
(k) Any dispute or disagreement which will arise under, as a result
of, or in any way relate to the interpretation or construction of this
letter agreement will be determined by the Committee. Any such
determination made under this letter agreement will be final, binding and
conclusive for all purposes.
2. Change in Present Stock. If any change in the outstanding shares of the
Company's Common Stock by reason of any stock dividend or split,
recapitalization, merger, consolidation, spin-off, combination or exchange of
shares or other corporate change, or any distributions to common shareholders
other than cash dividends occurs, the Committee will make such substitution or
adjustment, if any, as it deems to be equitable (a) to accomplish fairly the
purposes of the Plan, and (b) to preserve the intended benefits of the Plan to
the Participants and the Company, as to the number or kind of shares of the
Company's Common Stock or other securities issued or reserved for issuance under
the Plan.
3. Change in Control. In spite of any other provision of the Plan to the
contrary, if a Change of Control, as defined in the Plan occurs, the
restrictions and deferral limitations applicable to the Restricted Stock will
lapse. The Restricted Stock will then become free of all restrictions and will
be fully vested and transferable to the full extent of the original grant.
4. Effect Upon Employment. Nothing contained in this letter agreement will
restrict the right of the Company to terminate your employment at any time with
or without cause.
5. Notices. Each notice relating to this letter agreement will be in
writing and delivered in person or by registered or certified mail, and if given
to the Company, at its office, 215 N. Main Street, 400 Putnam Building,
Davenport, Iowa, 52801, attention of the Vice President-Human Resources. Notices
given to you or other person or persons then entitled to exercise this award
will be given at your last address given to the Company. Either party may change
the address to which such notices are to be given by notice in writing to the
other in accordance with the terms of this letter agreement.
6. Governing Law. This letter agreement is governed by the laws of the
State of Delaware.
7. Successors in Interest. This letter agreement will inure to the benefit
of and be binding on each successor and assign of the Company and your heirs,
legatees and legal representatives.
EXHIBIT 10.1a
Dear
I am pleased to inform you that you have been granted an Accelerated Ownership
Non-Qualified Stock Option Award ("AO Option") of ________ shares of Lee
Enterprises, Incorporated Common Stock, $2.00 par value. You are receiving this
award under the 1990 Long-Term Incentive Plan of the Company (amended, restated
and extended effective October 1, 1999), as presently written or later amended
(the "Plan"), as outlined below.
Granted To:
SSN
Grant Date:
Non Qualified Stock Option Award:
Option Price Per Share: $ Total Cost to Exercise: $
Expiration Date:
Vesting Schedule: Full Vesting 1 year after Grant Date
LEE ENTERPRISES, INCORPORATED
- ------------------------------------------------------
By clicking on the "I agree" box at the top of this electronic mail message, I
acknowledge receipt of this Restricted Stock Award as of the Grant Date above,
which has been issued to me under the terms and conditions of the Plan and as
stated in this letter agreement. I further acknowledge I can obtain the
Prospectus, including the Plan at http://10.1.18/reference.html. I agree to all
of the terms and conditions of this letter agreement and the Plan.
If an "I Agree" box does not appear at the top of this signature, your
consent may be acknowledged by inserting your name & date below and
returning the agreement via e-mail to the sender
Signature:_____________________________________ Date: __________________
Note: If there are any discrepancies in the name or address shown
above, or if you are unable to access the Prospectus, please notify
Connie Sehmann at (563) 383-2174.
SUMMARY OF ADDITIONAL TERMS OF AWARD
1. Accelerated Ownership Non-Qualified Stock Option Award.
(a) This AO may be exercised no earlier than one (1) year after the
above Grant Date. To the extent that this option is not exercised by you
when it becomes initially exercisable, it will not expire but will be
carried forward and will be exercisable at any time thereafter. However,
this option will not be exercisable after the expiration of ten (10) years
from the Grant Date of the Incentive Stock Option Award or Non-Qualified
Stock Option Award whose exercise gave rise to this grant (the "Original
Stock Option Award"). At such time this letter agreement will automatically
terminate. Also, this option is subject to and must comply with such
limitations as may be prescribed by Section 422(d) of the Internal Revenue
Code of 1986, as from time to time amended, and any implementing
regulations.
(b) This option may be exercised in whole or from time to time in
part, provided that no partial exercise may be for less than ten (10) full
shares of the Company's Common Stock or its equivalent. You must give
written notice of election to exercise this option in whole or in part to
the Company. Your exercise this option in full before ten (10) years from
the Grant Date of the Original Stock Option Award will result in the
automatic termination of this letter agreement. If the option is being
exercised by any person other than you, the notice must be accompanied by
proof, satisfactory to the Company, of the right of such person to exercise
the option. Such notice must state the number of shares with respect to
which the option is being exercised and must be accompanied with a check or
draft payable to the Company for the amount of the purchase price. Upon
receipt of the purchase price, the Company will instruct its transfer agent
to countersign and deliver to you, or such other person exercising the
option, a certificate for the number of shares purchased.
(c) This option may not be transferable and may not be encumbered or
disposed of in whole or in part during your lifetime. During your lifetime
this option may be exercised only by you. Upon your death any rights to the
extent exercisable on the date of death may be exercised by your estate or
by a person who acquires the right to exercise this option by bequest or
inheritance or by reason of your death, provided that such exercise occurs
within the remaining effective term of the option.
(d) On termination of your employment by reason of retirement under a
retirement plan of the Company or any of its subsidiaries, you may at any
time within a period of three (3) months after such termination exercise
this option to the extent it was exercisable by you on the date of
termination. As used in this option, "employment" means employment by the
Company or any subsidiary of the Company as defined in Section 424(f) of
the Internal Revenue Code, as from time to time amended, and any
implementing regulations.
(e) On termination of your employment by reason of permanent and total
disability, as defined in Section 22(e)(3) of the Internal Revenue Code, as
from time to time amended, and any implementing regulations, you may at any
time within a period of twelve (12) months after such termination exercise
this option to the extent it was exercisable by you on the date of
termination.
(f) On termination of your employment for any reason other than death,
permanent and total disability or retirement, all rights to purchase shares
under this option will automatically terminate on the thirtieth (30th) day
after such cessation of employment.
(g) This option is subject to the requirement that, at any time the
Board of Directors determines, in its discretion, that the listing,
registration or qualification of the shares subject to this option on any
securities exchange or under any state or federal law, or the consent or
approval of any government regulatory body, is necessary or desirable as a
condition of, or in connection with, the granting of this option or the
issue or purchase of shares under this letter agreement, this option may
not be exercised in whole or in part unless such listing, registration,
qualification, consent or approval has been effected or obtained free of
any conditions not acceptable to the Board of Directors.
(h) If you are granted a leave of absence, the Company's Executive
Compensation Committee (the "Committee") may agree to continue this option
while you remain an employee of the Company or a subsidiary of the Company
as it may deem equitable, except that in no event will the option be
exercised after the expiration of ten (10) years from the Grant Date of the
Original Stock Option Award. Any provision for continuation of the exercise
of an AO may not extend beyond the date of expiration of this letter
agreement.
(i) The Plan is incorporated in this letter agreement by reference and
is made a part of this letter agreement as if fully set forth in this
letter agreement. The Plan will control if there is a any conflict between
the Plan and this letter agreement. Also, the Plan will control on such
matters as are not contained in this letter agreement. Defined terms which
are not given specific meaning in this letter agreement will have the
meanings used in the Plan.
(j) Any dispute or disagreement which will arise under, as a result
of, or in any way relate to the interpretation or construction of this
letter agreement will be determined by the Committee. Any such
determination made under this letter agreement will be final, binding and
conclusive for all purposes.
2. Change in Present Stock. If any change in the outstanding shares of the
Company's Common Stock by reason of any stock dividend or split,
recapitalization, merger, consolidation, spin-off, combination or exchange of
shares or other corporate change, or any distributions to common shareholders
other than cash dividends occurs, the Committee will make such substitution or
adjustment, if any, as it deems to be equitable (a) to accomplish fairly the
purposes of the Plan, and (b) to preserve the intended benefits of the Plan to
the Participants and the Company, as to the number or kind of shares of the
Company's Common Stock or other securities issued or reserved for issuance under
the Plan.
3. Change in Control. In spite of any other provision of the Plan to the
contrary, if a Change of Control, as defined in the Plan occurs, the
restrictions and deferral limitations applicable to the Restricted Stock will
lapse. The Restricted Stock will then become free of all restrictions and will
be fully vested and transferable to the full extent of the original grant.
4. Effect Upon Employment. Nothing contained in this letter agreement will
restrict the right of the Company to terminate your employment at any time with
or without cause.
5. Notices. Each notice relating to this letter agreement will be in
writing and delivered in person or by registered or certified mail, and if given
to the Company, at its office, 215 N. Main Street, 400 Putnam Building,
Davenport, Iowa, 52801, attention of the Vice President-Human Resources. Notices
given to you or other person or persons then entitled to exercise this award
will be given at your last address given to the Company. Either party may change
the address to which such notices are to be given by notice in writing to the
other in accordance with the terms of this letter agreement.
6. Governing Law. This letter agreement is governed by the laws of the
State of Delaware.
7. Successors in Interest. This letter agreement will inure to the benefit
of and be binding on each successor and assign of the Company and your heirs,
legatees and legal representatives.
EXHIBIT 10.1a
Dear
I am pleased to inform you that you have been granted a Restricted Stock Award
of __________ shares of Lee Enterprises, Incorporated Common Stock, $2.00 par
value. You are receiving this award under the Company's 1990 Long-Term Incentive
Plan (amended, restated and extended effective October 1, 1999), as presently
written or later amended (the "Plan"), as outlined below.
SUMMARY OF AWARD
Granted To:
SSN
Grant Date:
Restricted Stock Award:
Restricted Stock Price Per Share:
Vesting Schedule: Restricted Stock does not vest until _______
LEE ENTERPRISES, INCORPORATED
By
-------------------------------------------------------
By clicking on the "I agree" box at the top of this electronic mail message, I
acknowledge receipt of this Restricted Stock Award as of the Grant Date above,
which has been issued to me under the terms and conditions of the Plan and as
stated in this letter agreement. I further acknowledge I can obtain the
Prospectus, including the Plan at http://10.1.18/reference.html. I agree to all
of the terms and conditions of this letter agreement and the Plan.
If an "I Agree" box does not appear at the top of this signature,
your consent may be acknowledged by inserting your name & date
below and returning the agreement via e-mail to the sender
Signature:_____________________________________ Date: __________________
Note: If there are any discrepancies in the name or address shown
above, or if you are unable to access the Prospectus, please
notify Connie Sehmann at (563) 383-2174.
SUMMARY OF ADDITIONAL TERMS OF AWARD
1. Restricted Stock Award.
(a) You own the Restricted Stock as of the date of this letter
agreement, subject to the provisions for your forfeiture described in
subparagraph (b) below.
(b) Upon termination of your employment for any reason other than
death, permanent and total disability or normal retirement (as defined in
the Plan) before to November 13, 2005, all of your rights to the Restricted
Stock will be forfeited to the Company, unless otherwise determined by the
Company's Executive Compensation Committee (the "Committee"). The
determination as to waiver of the forfeiture of all or any part of the
Restricted Stock Award will be made at the sole, complete and absolute
discretion of the Committee. Its determination will be final and binding on
you and the Company. No action by the Committee will constitute a waiver of
the Committee's discretion to act at any time under the terms of this
letter agreement regarding the matters reserved to its discretion, unless
such waiver is unequivocally expressed in writing by the Committee
addressed to you and the Company.
(c) This letter agreement will not be transferable and may not be
encumbered or disposed of in whole or in part during your lifetime. During
your lifetime and the term of this letter agreement, your rights under this
letter agreement may be exercised solely by you. Upon your death any
rights, to the extent exercisable or vested on the date of your death, may
be exercised by your estate or by a person who acquires the right to
ownership of your Restricted Stock by bequest, inheritance or otherwise by
reason of your death. Evidence satisfactory to the Committee of your death
and the proper legal standing of your successor in interest must be
provided.
(d) During the term of this letter agreement, you will be entitled to
all distributions related to the Restricted Stock. However, any
distributions related to the Restricted Stock represented by additional
shares of the Company, whether by reason of stock dividend, split-up or
other recapitalization of the Company, will be retained and held by the
Company for the term of this letter agreement as provided in this letter
agreement.
(e) During the term of this letter agreement, the certificates
evidencing ownership of the Restricted Stock will be retained by the
Company, as security for your performance of all obligations under this
letter agreement. By execution of this letter agreement, you are appointing
the Company's chief financial officer as your duly authorized agent and
attorney-in-fact for and on your behalf and subject to the terms of this
letter agreement to hold and retain your Restricted Stock certificates
related to the Restricted Stock granted by this letter agreement or later
distributed by the Company during the term of this letter agreement related
to the original Restricted Stock. Further, you appoint him or her to
execute and deliver to the Company any and all such share certificates you
forfeit under the terms of this letter agreement or as otherwise required
by the Plan.
(f) Unless forfeited as described in subparagraph (b) above, your
Restricted Stock certificates evidencing ownership of the Restricted Stock
will be delivered to you unconditionally and without requirement for
payment by you, on November 13, 2005. This letter agreement will terminate
upon distribution of the Restricted Stock.
(g) This grant is subject to the requirement that, if at any time the
Company's Board of Directors determines, in its discretion, that the
listing, registration or qualification of the Restricted Stock on any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as
a condition of, or in connection with, the granting of this Restricted
Stock Award or the issuance or acquisition of your Restricted Stock, the
grant will not be effective in whole or in part unless such listing,
registration, qualification, consent or approval has been effected or
obtained free of any conditions not acceptable to the Company's Board of
Directors.
(h) The Plan is incorporated in this letter agreement by reference and
is made a part of this letter agreement as if fully set forth in this
letter agreement. The Plan will control if there is a conflict between the
Plan and this letter agreement. Also, the Plan will control on such matters
as are not contained in this letter agreement. Defined terms which are not
given specific meaning in this letter agreement will have the meanings used
in the Plan.
(i) Any dispute or disagreement which arises under, as a result of, or
in any way related to the interpretation or construction of this letter
agreement will be determined by the Committee. Any such determination made
under this letter agreement will be final, binding and conclusive for all
purposes.
2. Change in Present Stock. If any change in the outstanding shares of the
Company's Common Stock by reason of any stock dividend or split,
recapitalization, merger, consolidation, spin-off, combination or exchange of
shares or other corporate change, or any distributions to common shareholders
other than cash dividends occurs, the Committee will make such substitution or
adjustment, if any, as it deems to be equitable (a) to accomplish fairly the
purposes of the Plan, and (b) to preserve the intended benefits of the Plan to
the Participants and the Company, as to the number or kind of shares of the
Company's Common Stock or other securities issued or reserved for issuance under
the Plan.
3. Change in Control. In spite of any other provision of the Plan to the
contrary, if a Change of Control, as defined in the Plan occurs, the
restrictions and deferral limitations applicable to the Restricted Stock will
lapse. The Restricted Stock will then become free of all restrictions and will
be fully vested and transferable to the full extent of the original grant.
4. Effect Upon Employment. Nothing contained in this letter agreement will
restrict the right of the Company to terminate your employment at any time with
or without cause.
5. Notices. Each notice relating to this letter agreement must be in
writing and delivered in person or by registered or certified mail, and if given
to the Company, at its office, 215 N. Main Street, 400 Putnam Building,
Davenport, Iowa, 52801, attention of the Vice President-Human Resources. Notices
given to you or other person or persons then entitled to exercise this award
will be given at your last address given to the Company. Either party may change
the address to which such notices are to be given by notice in writing to the
other in accordance with the terms of this letter agreement.
6. Governing Law. This letter agreement is governed by the laws of the
State of Delaware.
7. Successors in Interest. This letter agreement will inure to the benefit
of and be binding upon each successor and assign of the Company and your heirs,
legatees and legal representatives.
EXHIBIT 10.4
LEE ENTERPRISES, INCORPORATED
SUPPLEMENTARY BENEFIT PLAN
(as amended and restated April 26, 1990)
1. Establishment. Name and Purpose. Lee Enterprises, Incorporated (the
"Company") established the Lee Enterprises, Incorporated Supplementary Benefit
Plan (the "Supplementary Plan"), effective July 1, 1980. The Plan was originally
established following the termination of the Income Security Plan to provide
increased retirement benefits for certain executive employees of the Company
whose retirement benefits under the Income Security Plan were adversely affected
due to its termination. The Plan has been amended since inception to make
provision for additional limitations to contributions imposed on the Retirement
Account Plan because of amendments to the Internal Revenue Code. The purposes of
the Supplementary Plan are as follows:
(a) Sections 415, 401 and 402 of the Internal Revenue Code impose
differing limitations upon benefits and contributions payable under Defined
Benefit Plans, Defined Contribution Plans, and Plans which provide both
defined benefits and defined contributions. Prior to adoption of the
Retirement Account Plan, Executive Payroll Employees of the Company were
subject to the limitations with respect to both defined benefits and
defined contributions; upon adoption of the Retirement Plan, such employees
became subject to the more stringent limitations applicable to defined
contribution plans alone. One of the purposes of the Supplementary Plan is
to enable benefits to be provided without regard to any statutory
limitations; the Retirement Account Plan will provide the
statutorily-permitted benefits and the Supplementary Plan will increase
such benefits to the full amount which would be provided if there were no
statutory limitations.
(b) The compensation of an executive who is awarded deferred
compensation units under the Lee Enterprises, Incorporated Deferred
Compensation Unit Plan is, for purposes of calculating both pension
benefits and Retirement Account contributions, reduced by the award value
of the deferred units. Under the pension plan, retirement benefits were in
part measured by the average compensation level of the last five years
before retirement. This enabled executives to acquire deferred units during
the bulk of their employment years and, by not receiving such units during
the last five employment years to maximize their pensions. Under the
Retirement Account Plan, however, every deferred unit award reduces the
Company contributions, and the executive is not able to offset such reduced
contributions by foregoing deferred units in the last five employment
years. The Supplementary Plan is designed to make up for the penalty
against the executive who is awarded deferred units.
(c) Executives who had received deferred units during the five years
that preceded the adoption of the Retirement Account Plan and the freezing
of the pension plan on July 1, 1980, were prevented from maximizing their
pension benefits before the freeze by declining deferred unit awards. The
Supplementary Plan is designed to make up for this inequity.
(d) For plan years after 1986 Internal Revenue Code Section 401(m)
limits the amount of after tax contributions which an executive may be
permitted to contribute to the Retirement Account Plan. The Supplementary
Plan permits participants to defer five percent (5%) of their compensation
into the Plan to compensate for the fact that Executive Payroll employees
are prohibited from making Special Contributions to the Retirement Account
Plan.
2. Eligibility for Participation. Any employee who is an Executive Payroll
Employee of the Company at the time of his or her employment termination,
retirement or death.
3. Supplementary Plan Benefit. The amount of benefit payable under this
Supplementary Plan shall be the value of the following at the time of death,
termination of employment, or retirement, as the case may be:
(a) The difference between (1) the amount of Company and related
employee contributions under the Retirement Account Plan which would be
authorized in the absence of Sections 401, 402 and 415 of the Internal
Revenue Code, and (2) the amount permitted under Sections 401, 402 and 415.
(b) The amount of current compensation deferred into the Supplementary
Plan at the election of the participant up to five percent (5%) which must
be in excess of an election to contribute five percent (5%) as Regular
Contributions to the Retirement Account Plan.
(c) 6.2% / 12.4% or 11.9% (as applicable under the Retirement Account
Plan) of any compensation which is deferred on or after July 1, 1980.
(d) Gains and losses on a participant's account under the
Supplementary Plan shall be determined by applying the rate of return
earned by the trust established under the Trust Agreement for Lee
Enterprises, Incorporated Supplementary Benefit Plan dated April 17, 1989
to the participant's account balance.
(e) Each participant in Supplementary Plan shall be fully vested
(100%) in the employer and employee contributions to the plan.
-2-
In determining benefits payable under the Supplementary Plan, each
employee's account shall be adjusted at the end of each calendar quarter of each
year for gains and losses.
4. Time and Method of Payment. The Supplementary shall be administered by
the Executive Compensation Committee of the Company. Amounts payable shall be
paid in two installments with the first payment being made on the first day of
the sixth month after the date on which the employee's employment with the
Company is terminated, and the second payment on the first day of the thirteenth
month after the termination date. The payments shall be substantially equal but
shall be subject to the liquidity of the trust established under the Trust
Agreement for Lee Enterprises, Incorporated Supplementary Benefit Plan dated
April 17, 1989.
5. Amendment or Termination. The Company may amend or terminate this
Supplementary Plan at any time; except, without the consent of any Participant
or his Spouse or Beneficiary, no such amendment or termination shall reduce or
diminish any such person's right to receive any benefit accrued hereunder prior
to the date of such amendment or termination.
IN WITNESS WHEREOF, this Amended Supplementary Benefit Plan has been duly
executed as of the 26th day of April 1990.
LEE ENTERPRISES, INCORPORATED
By /s/ Richard D. Gottlieb
---------------------------------------
ATTEST: Richard D. Gottlieb, President
By /s/ C. D. Waterman, III
-------------------------------------
C. D. Waterman, III, Secretary
-3-
EXHIBIT 21
LEE ENTERPRISES, INCORPORATED
AND SUBSIDIARIES
SUBSIDIARIES AND ASSOCIATED COMPANIES
- -----------------------------------------------------------------------------------------------------------------------
Percentage of
Voting Securities
State of Organization Owned
- -----------------------------------------------------------------------------------------------------------------------
Lee Enterprises, Incorporated Delaware Parent
Lee Publications, Inc. Delaware 100%
Accudata, Inc. Iowa 100%
INN Partners, L.C. d/b/a International Newspaper Network Iowa 81%
Lee Procurement Solutions Co. Iowa 100%
Sioux City Newspapers, Inc. Iowa 100%
Target Marketing Systems, Inc. Iowa 100%
Journal-Star Printing Co. Nebraska 100%
K. Falls Basin Publishing, Inc. Oregon 100%
Lee Consolidated Holdings Co. South Dakota 100%
LINT Co. South Dakota 100%
Madison Newspapers, Inc. Wisconsin 50%
- -----------------------------------------------------------------------------------------------------------------------
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statements No.
33-46708, No. 333-6433 and No. 333-6435 of Lee Enterprises, Incorporated on Form
S-8 of our report dated November 7, 2002 relating to our audit of the
consolidated financial statements of the Company for the year ended September
30, 2002, appearing in this Annual Report on Form 10-K of Lee Enterprises,
Incorporated for the year ended September 30, 2002.
/s/Deloitte & Touche LLP
- ------------------------------
Davenport, Iowa
December 27, 2002
EXHIBIT 23.2
INDEPENDENT AUDITOR'S CONSENT
To the Stockholders
Lee Enterprises, Incorporated
and Subsidiaries
Davenport, Iowa
We consent to the incorporation by reference in the Registration Statements on
Form S-8 No. 33-46708, No. 333-6435 and No. 333-6433 and in the related
Prospectuses of our report dated November 9, 2001 with respect to the financial
statements of Lee Enterprises, Incorporated, incorporated by reference included
in this Annual Report on Form 10-K for the year ended September 30, 2002 and to
the reference to us under the heading "Experts" in such Prospectuses.
s/s McGladrey & Pullen, LLP
--------------------------------
Davenport, Iowa
December 20, 2002
EXHIBIT 24
POWER OF ATTORNEY
We, the undersigned directors of Lee Enterprises, Incorporated, hereby severally
constitute Mary E. Junck and Carl G. Schmidt, 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, 2002 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.
Signature Date
/s/ Rance E. Crain
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Rance E. Crain, Director November 14, 2002
/s/ Mary E. Junck
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Mary E. Junck, Director November 14, 2002
/s/ William E. Mayer
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William E. Mayer, Director November 14, 2002
/s/ Herbert W. Moloney III
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Herbert W. Moloney III, Director November 14, 2002
/s/ Andrew E. Newman
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Andrew E. Newman, Director November 14, 2002
/s/ Gordon D. Prichett
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Gordon D. Prichett, Director November 14, 2002
/s/ Gregory P. Schermer
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Gregory P. Schermer, Director November 14, 2002
/s/ Mark Vittert
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Mark Vittert, Director November 14, 2002
EXHIBIT 99.5
The following statement is being made to the Securities and Exchange Commission
solely for purposes of Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.
1349), which carries with it certain criminal penalties in the event of a
knowing or willful misrepresentation.
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Re: Lee Enterprises, Incorporated
Ladies and Gentlemen:
In accordance with the requirements of Section 906 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. 1349), each of the undersigned hereby
certifies that:
(i) this Annual Report on Form 10-K for the fiscal period ended
September 30, 2002, fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d));
and
(ii) the information contained in this Annual Report fairly presents,
in all material respects, the financial condition and results of operations
of Lee Enterprises, Incorporated for the periods presented in the Annual
Report.
Dated as of this 27th day of December, 2002.
/s/ Mary E. Junck /s/ Carl G. Schmidt
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Mary E. Junck Carl G. Schmidt
Chairman, President and Vice President, Chief Financial Officer
Chief Executive Officer and Treasurer