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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-6227
LEE ENTERPRISES, INCORPORATED
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 42-0823980
- ------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
215 N. Main Street, Davenport, Iowa 52801
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (319) 383-2100
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange On
Title of Each Class Which Registered
- -------------------------------- ------------------------
Common Stock - $2.00 par value New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
--------------------------------------
Class B Common Stock - $2.00 par value
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
State the aggregate market value of voting stock held by nonaffiliates of the
registrant as of December 1, 2000. Common Stock and Class B Common Stock, $2.00
par value, $1,197,960,000.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of December 1, 2000. Common Stock, $2.00 par value, 32,975,540
shares; and Class B Common Stock, $2.00 par value, 10,726,497 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Lee Enterprises, Incorporated Definitive Proxy Statement dated
December 27, 2000 are incorporated by reference in Part III of this Form 10-K.
PART I
Item 1. Business
This Annual Report on Form 10-K contains certain forward-looking statements that
are based largely on the Company's current expectations and are subject to
certain risks, trends, and uncertainties that could cause actual results to
differ materially from those anticipated. Among such risks, trends, and
uncertainties are changes in advertising demand, newsprint prices, interest
rates, regulatory rulings, other economic conditions, and the effect of
acquisitions, investments, and dispositions on the Company's results of
operations or financial condition. The words "believe," "expect," "anticipate,"
"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 as of the date of this
filing.
Item 1(a). Recent business developments. On October 1, 2000 the Company
consummated the sale of certain broadcasting properties for approximately
$565,000,000, net of selling expenses. For additional information related to the
disposition, see Note 2 of the Notes to Consolidated Financial Statements under
Item 8, herein.
Item 1(b). The Company operates as a single industry segment publishing
newspapers, classified and specialty publications, along with associated online
services.
Item 1(c) Narrative description of business.
The Company and its subsidiaries publish the following:
Daily Newspapers:
Circulation
-------------------------------
Newspaper City State Daily (M-F) Sunday
- --------------------------------------------------------------------------------------------------------
Southern Illinoisian Carbondale Illinois 25,667 35,431
Herald & Review Decatur Illinois 34,708 42,842
Quad City Times Davenport Iowa 50,237 72,154
Globe Gazette Mason City Iowa 19,451 23,520
Muscatine Journal Muscatine Iowa 8,121 -
Winona Daily News Winona Minnesota 11,910 12,733
Billings Gazette Billings Montana 47,390 52,895
The Montana Standard Butte Montana 14,388 14,730
Ravalli Republic Hamilton Montana 4,600 * -
Independent Record Helena Montana 13,123 13,933
Missoulian Missoula Montana 30,405 36,863
Beatrice Daily Sun Beatrice Nebraska 8,200 -
Columbus Telegram Columbus Nebraska 10,116 10,933
Fremont Tribune Fremont Nebraska 9,319 * -
Lincoln Journal Star Lincoln Nebraska 74,862 83,469
The Bismarck Tribune Bismarck North Dakota 27,311 30,380
Democrat-Herald Albany Oregon 18,669 32,758 **
Ashland Daily Tidings Ashland Oregon 5,086 -
Corvallis Gazette-Times Corvallis Oregon 12,322 - **
Rapid City Journal Rapid City South Dakota 29,963 34,004
Baraboo News Republic *** Baraboo Wisconsin 3,812 * -
Chippewa Herald Chippewa Falls Wisconsin 7,550 * -
LaCrosse Tribune LaCrosse Wisconsin 31,390 40,505
Wisconsin State Journal *** Madison Wisconsin 88,171 158,492
Portage Daily Register *** Portage Wisconsin 4,645 * -
The Journal Times Racine Wisconsin 29,636 31,091
Shawano Leader *** Shawano Wisconsin 5,981 * 6,292
-------------- --------------
Total paid daily and Sunday circulation 627,033 733,025
============== ==============
Source - Audit Bureau of Circulation (ABC): Average of 6 months ended March and September 2000.
* From publisher's statement.
** Combined edition with Democrat-Herald.
*** Published by Madison Newspapers, Inc., a 50%-owned affiliate.
The Company owns 50% of the capital stock of Madison Newspapers, Inc. 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 Madison Newspapers, Inc.
Madison Newspapers, Inc. owns the Wisconsin State Journal, a morning newspaper
published seven days each week, and The Capital Times, an afternoon paper
published Monday through Saturday each week. Both newspapers are produced in the
printing plant of Madison Newspapers, Inc., which maintains common advertising,
circulation, delivery, and business departments for the two newspapers.
Central Wisconsin Newspapers, Inc., a wholly-owned subsidiary of Madison
Newspapers, Inc., publishes three daily newspapers, seven weekly publications,
and two classified publications.
The Company has a contract to furnish the editorial and news content for the
Wisconsin State Journal. The Wisconsin State Journal is classified as one of the
Lee Group of newspapers in the newspaper field and in the rating services.
Weekly Newspapers:
Newspaper City State Day(s) Circulation
- ---------------------------------------------------------------------------------------------------------------
Bettendorf News Bettendorf Iowa Wednesday 7,800
Britt Tribune News Britt Iowa Tuesday 1,750
Forest City Summit Forest City Iowa Wednesday 3,200
Mitchell County Press-News Osage Iowa Wednesday 3,300
Bigfork Eagle Big Fork Montana Wednesday 1,600
Hungry Horse News Columbia Falls Montana Thursday 6,500
Clark Fork Valley Press Plains Montana Wednesday 1,500
Lake County Leader Polson Montana Thursday 5,600
Mineral County Independent Superior Montana Wednesday 11,000
Whitefish Pilot Whitefish Montana Thursday 4,000
David City Banner Press David City Nebraska Thursday 3,800
The Plattsmouth Journal Plattsmouth Nebraska Thursday 5,500
Schuyler Sun Schuyler Nebraska Thursday 2,950
Burt County Plaindealer Tekamah Nebraska Tuesday 2,000
Mandan News Mandan North Dakota Thursday 1,900
Cottage Grove Sentinel Cottage Grove Oregon Wednesday 4,500
Lebanon Express Lebanon Oregon Wednesday 3,500
Newport News-Times Newport Oregon Wednesday and Friday 10,000
The Springfield News Springfield Oregon Wednesday and Saturday 11,000
Business First * Madison Wisconsin Tuesday 10,000
Juneau County Star-Times * Mauston Wisconsin Wednesday and Saturday 2,900
Dunn County News Menomonie Wisconsin Wednesday and Sunday 4,400
Oregon News * Oregon Wisconsin Thursday 5,000
Reedsburg Times Press/Report * Reedsburg Wisconsin Thursday and Saturday 2,400
Sauk Prairie Eagle * Sauk City Wisconsin Thursday 2,400
Stoughton News * Stoughton Wisconsin Thursday 5,000
Sun Prairie News * Sun Prairie Wisconsin Thursday 9,000
Tomah Journal/Monitor Herald Tomah Wisconsin Monday and Thursday 5,150
Vernon County Broadcaster Viroqua Wisconsin Thursday 5,400
Coulee News West Salem Wisconsin Thursday 2,100
Westby Times Westby Wisconsin Thursday 1,600
Wisconsin Dells Events * Wisconsin Dells Wisconsin Wednesday and Saturday 1,800
---------------
Total paid weekly circulation 148,550
===============
Source: Company statistics
* Published by Madison Newspapers, Inc., a 50%-owned affiliate.
Classified Publications:
Publication City State Day(s) Circulation
- ------------------------------------------------------------------------------------------------------------------
Dandy Dime Tucson Arizona Friday 37,000
Nickel Want Ad Newspaper Redding California Thursday 19,000
Flipside Carbondale Illinois Thursday 11,000
Southern Hometown Shopper Carbondale Illinois Wednesday 35,100
Prairie Shopper Decatur Illinois Tuesday 44,200
The Extra Decatur Illinois Tuesday 22,000
Thrifty Nickel East Moline Illinois Thursday 11,700
Town & Country Advertiser Britt Iowa Tuesday 4,700
Gateway Times Clinton Iowa Saturday 10,000
Quad City Advertiser Davenport Iowa Wednesday 25,000
Summit Advertiser Forest City Iowa Wednesday 7,500
Winnebago/Hancock Shopper Forest City Iowa Monday 10,700
Globe Advertiser Mason City Iowa Tuesday 5,800
Mason City Shopper Mason City Iowa Tuesday 28,200
Sunday Express Muscatine Iowa Sunday 4,300
The Post Muscatine Iowa Tuesday 20,500
Town & Country Shopper Osage Iowa Wednesday 3,600
Neighbors Extra Winona Minnesota Saturday 9,700
Thrifty Nickel Billings Montana Thursday 30,000
Work for You Billings Montana Wednesday 10,000
Yellowstone Shopper Billings Montana Thursday 14,800
Mini Nickel Bozeman Montana Thursday 27,500
Western Montana Shopper Deer Lodge Montana Thursday 3,500
Consumers Press Great Falls Montana Thursday 34,000
Post Script Hamilton Montana Wednesday 16,000
The Adit Helena Montana Wednesday 23,500
West Shore News Lakeside Montana Wednesday 3,500
The Shopping News Missoula Montana Wednesday 15,500
Western Montana Messenger Missoula Montana Wednesday 33,000
The Advertiser Polson Montana Wednesday 28,000
Penny Press Beatrice Nebraska Tuesday 18,500
Plug Nickel Beatrice Nebraska Wednesday 8,500
Sunland Weekend Extra Beatrice Nebraska Saturday 15,000
Scout Shopper Columbus Nebraska Tuesday 13,500
Tribune Marketplace Fremont Nebraska Tuesday 21,000
Homefront Buyers Guide Fremont Nebraska Friday 19,500
Neighborhood Extra Lincoln Nebraska Saturday 62,000
Star Express Lincoln Nebraska Wednesday 30,000
Stuff for You Lincoln Nebraska Friday 5,000
Work for You Lincoln Nebraska Tuesday 7,500
Consumer Connection Plattsmouth Nebraska Tuesday 18,000
Nifty Nickel Las Vegas Nevada Friday 50,000
Penny Saver Albuquerque New Mexico Thursday 24,000
Quik Quarter/Thrifty Nickel Albuquerque New Mexico Thursday 36,000
Tribune Extra Bismarck North Dakota Wednesday 15,000
---------------
Circulation subtotal forward 892,800
Publication City State Day(s) Circulation
- ------------------------------------------------------------------------------------------------------------------
Circulation subtotal forwarded 892,800
Pennysaver Dickinson North Dakota Wednesday 13,800
The Finder Mandan North Dakota Wednesday 39,200
Minot Finder Minot North Dakota Wednesday 18,000
This Week Albany/Corvallis Oregon Wednesday 16,500
Ashland People Ashland Oregon Tuesday 6,000
Nickel Want Ad Newspaper Klamath Falls Oregon Thursday 19,000
Nickel Want Ad Newspaper Medford Oregon Thursday 27,500
This Week Newport Oregon Tuesday 10,000
Nickel Ads Portland Oregon Friday 173,000
Rapid City Advertiser Rapid City South Dakota Wednesday 28,000
Northern Hills Advertiser Spearfish South Dakota Wednesday 15,000
Pioneer Shopper St. George Utah Thursday 28,500
Little Nickel Lynnwood Washington Wednesday and Thursday 320,000
Nickel Saver Moses Lake Washington Thursday 21,500
Nickel Nik Spokane Washington Friday 37,000
Buyline Walla Walla Washington Thursday 20,000
Nickel Ads Wenatchee Washington Thursday 26,500
Chippewa County Advertiser Chippewa Falls Wisconsin Sunday 12,500
Your Family Shopper Chippewa Falls Wisconsin Saturday 31,800
Tradin' Post Buyer's Guide Eau Claire Wisconsin Monday 27,000
Foxxy Shopper LaCrosse Wisconsin Tuesday 34,000
Tribune Extra LaCrosse Wisconsin Wednesday 21,300
Work for You Extra ** Madison Wisconsin Sunday 40,000
Dunn County Reminder Menomonie Wisconsin Thursday 22,000
Dunn County Shopper Menomonie Wisconsin Sunday 16,000
Shopper Stopper ** Merrimac Wisconsin Tuesday 123,000
Pennysaver Racine Wisconsin Monday 55,000
Foxxy Shopper Sparta Wisconsin Tuesday 43,800
Tri-County Advertiser Tomah Wisconsin Tuesday 12,200
Economy Shopper West Salem Wisconsin Tuesday 18,900
---------------
Total non-paid weekly circulation 2,169,800
===============
Source: Company statistics
** Published by Madison Newspapers, Inc., a 50%-owned affiliate.
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. Classified publications are
particularly effective in larger markets with high media fragmentation in which
metropolitan newspapers generally have low penetration.
Specialty Publications:
City State
- --------------------------------------------------------------------------------
Cars & Trucks Tuscon Arizona
Welcome Home Carbondale Illinois
Wheels for You Decatur Illinois
Thrifty Nickel Wheel Deals East Moline Illinois
Classic Images Muscatine Iowa
Films of the Golden Age Muscatine Iowa
Autofinder Billings Montana
Western Business Billings Montana
Prairie Star Great Falls Montana
Montana Magazine Helena Montana
Autofinder Missoula Montana
Wheels for You Grand Island Nebraska
Real Estate Lincoln Nebraska
Rentals for You Lincoln Nebraska
Wheels for You Lincoln Nebraska
Midwest Messenger Tekamah Nebraska
Farm & Ranch Guide Bismarck North Dakota
The Family Times Corvallis Oregon
Goldmine Cottage Grove Oregon
Mighty Mailer Springfield Oregon
Tri-State Neighbor Sioux Falls South Dakota
Homes Moses Lake Washington
Driveline Spokane Washington
Home Buyer's Guide Spokane Washington
Nickel Nik's RV/Truck Wheel Deals Spokane Washington
Nickel Nik's Wheel Deals Spokane Washington
Homes Wenatchee Washington
Enterpriser LaCrosse Wisconsin
Wheels for You LaCrosse Wisconsin
Home Buyers Guide LaCrosse Wisconsin
Ad World ** Madison Wisconsin
AgriView ** Madison Wisconsin
Apartment Showcase ** Madison/Milwaukee Wisconsin
Nursing Matters ** Madison Wisconsin
Wisconsin Reminder ** Mauston Wisconsin
Cent Saver ** Portage Wisconsin
Penny Saver ** Shawano Wisconsin
** Published by Madison Newspapers, Inc., a 50%-owned affiliate.
Commercial Printing:
City State
- -----------------------------------------------------------------------------
William Street Press Decatur Illinois
Hawkeye Printing Davenport Iowa
Platen Press Deer Lodge Montana
Farcountry Press Helena Montana
Broadwater Printing Townsend Montana
Oak Creek Printing Lincoln Nebraska
Little Nickel Quik Print Lynwood Washington
Maple Street Press Spokane Washington
Online Services:
The Company's internet activities are comprised of websites and investments in
three internet service companies. These activities are reported and managed as a
part of the Company's publishing operations. The Company expects significant
growth from these operations in 2001.
The Company has an 81% interest in INN Partners, L.C. d/b/a International
Newspaper Network, a provider of web solutions for small daily and weekly
newspapers and shoppers. The Company has a 6.3% interest in Ad One, LLC, a
provider of integrated online classified solutions for the newspaper industry.
The Company has an agreement to invest up to $1,500,000 in three-year
subordinated convertible debentures of CityXpress.com Corp., an integrator of
online editorial content with transactional and promotional opportunities.
The Company's strategy is to increase its share of local advertising in its
existing markets, and over time, to increase circulation through internal
expansion into contiguous markets and make selective acquisitions.
The basic raw material of newspapers, 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 to its needs. Newsprint prices are volatile and fluctuate
based upon factors which 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 "Management Discussion and Analysis of Financial Condition and
Results of Operations" under Item 7, herein.
Publishing revenue has traditionally been highest in the quarter ended December
31 and, likewise, has been lowest in the quarter ended March 31.
The Company's newspapers, classified and specialty publications compete with
newspapers having national or regional circulation, magazines, radio,
television, other advertising media such as billboards, classified and specialty
publications and direct mail, as well as other information content providers
such as on-line services. In addition, several of the Company's daily and Sunday
newspapers compete with other newspapers in nearby cities and towns.
OTHER MATTERS
In the opinion of management, compliance with present statutory and regulatory
requirements respecting environmental quality will not necessitate significant
capital outlays, or materially affect the earning power of the business of the
Company, or cause material changes in the Company's business, whether present or
intended.
In September 2000, the Company, its subsidiaries and associated companies had
approximately 5,900 employees, including approximately 1,400 part-time
employees. This included approximately 1,400 employees, including approximately
100 part-time employees, in the Company's Broadcast division which was sold on
October 1, 2000.
Item 2. Properties
The Company's executive offices are located in facilities leased at 215 North
Main Street, Davenport, Iowa.
All of the printing plants (except Madison, Wisconsin which is owned by Madison
Newspapers, Inc. and a leased plant in Spokane, Washington) are owned by the
Company. All printing plants (including Madison) are well maintained, are in
good condition, and are suitable for the present office and publishing
operations and are adequately equipped with typesetting, printing and other
required equipment.
Item 3. Legal Proceedings
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Executive Officers of the Company
The following table shows the names and ages of all executive officers of the
Company, the period of service for each with the Company, the period during
which each has held his or her present office and the office held by each.
Period of Period In
Service with Present
Name Age Company Office Present Office
- ---------------------------------------------------------------------------------------------------------------
Richard D. Gottlieb 58 37 years 9 months Chairman and Chief Executive
Officer
Mary E. Junck 53 2 years 9 months President and Chief Operating
Officer
Phil E. Blake 56 21 years 1 year Vice President - Publishing
John VanStrydonck 47 19 years 3 months Vice President - Publishing
Greg R. Veon 48 24 years 1 year Vice President - Publishing
James W. Hopson 54 2 months 2 months Vice President - Publishing
Vytenis P. Kuraitis 52 6 years 4 years Vice President - Human
Resources
Charles D. Waterman, III 54 11 years 11 years Secretary
George C. Wahlig 53 11 years 1 month Vice President - Finance, Interim
Chief Financial Officer and
Chief Accounting Officer
Gregory P. Schermer 46 12 years 3 years Vice President - Interactive
Media
Michael E. Phelps 54 8 months 8 months Vice President - Sales & Marketing
Richard D. Gottlieb was elected Chairman in January 2000. He had been President
and Chief Executive Officer since 1991. The Company anticipates that Mr.
Gottlieb will retire as Chief Executive Officer in January 2001 and continue as
a non-executive Chairman of the Board of Directors of the Company.
Mary E. Junck was elected Executive Vice President and Chief Operating Officer
in May 1999 and President in January 2000. 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. The Company anticipates that Ms. Junck will be elected President
and Chief Executive Officer of the Company in January 2001.
Phil E. Blake was elected Vice President - Publishing in November 1999. For more
than the past 5 years has been, publisher of the Wisconsin State Journal and
publisher and treasurer of Madison Newspapers, Inc. Mr. Blake retired as
publisher of the Wisconsin State Journal in July 2000, and will retire from the
Company on December 31, 2000.
John VanStrydonck was elected Vice President - Publishing in June 2000; from
September 1994 to June 2000 he was publisher of the Rapid City Journal and was
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 was Vice President - Marketing; from 1992
through November 1995 he was Vice President and General Manager of KOIN-TV,
Portland, Oregon.
James W. Hopson was elected Vice President - Publishing and publisher of the
Wisconsin State Journal in July 2000. For more than the past 5 years he has been
Chief Executive Officer of Thomson Newspapers Central Ohio Strategic Marketing
Group.
Vytenis P. Kuraitis was elected Vice President - Human Resources in January
1997. From August 1994 through January 1997 he was Director of Human Resources.
Charles D. Waterman, III was elected Secretary of the Company in November 1989.
He is presently, and for more than the past five years has been, a partner in
the law firm of Lane & Waterman, Davenport, Iowa, general counsel of the
Company.
George C. Wahlig was appointed interim Chief Financial Officer in September
2000. For more than 5 years he has been Vice President - Finance and Chief
Accounting Officer.
Gregory P. Schermer was elected Vice President - Interactive Media in November
1997; from 1989 through November 1997 he was, and continues to serve as,
corporate counsel for the Company.
Michael E. Phelps was elected Vice President - Sales and Marketing in February
2000. For more than the past 5 years he has been managing principal of Phelps,
Cutler & Associates newspaper management consultants.
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters
COMMON STOCK PRICES AND DIVIDENDS
Lee Common Stock is listed on the New York Stock Exchange. Lee 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 the option of the holder into
Lee Common Stock. The table below shows the high and low prices of Lee Common
Stock for each quarter during the past three years, the closing price at the end
of each quarter and the dividends paid per share.
Quarter
---------------------------------------------
4th 3rd 2nd 1st
---------------------------------------------
STOCK PRICES
2000
High $28 15/16 $26 3/16 $31 9/16 $32 1/4
Low 23 1/4 20 1/2 19 11/16 27 1/4
Closing 28 7/8 23 5/16 26 1/8 31 15/16
1999
High $31 1/16 $30 1/2 $31 7/16 $31 1/2
Low 26 1/8 27 1/2 26 5/16 21 13/16
Closing 27 3/8 30 1/2 29 31 1/2
1998
High $31 3/4 $33 7/8 $33 9/16 $29 13/16
Low 23 1/2 27 5/16 28 25 1/2
Closing 25 15/16 30 5/8 33 9/16 29 9/16
DIVIDENDS PAID
2000 $ 0.16 $ 0.16 $ 0.16 $ 0.16
1999 0.15 0.15 0.15 0.15
1998 0.14 0.14 0.14 0.14
For a description of the relative rights of Common Stock and Class B Common
Stock, see Note 7 of the Notes to Consolidated Financial Statements under Item
8, herein.
At September 30, 2000, the Company had 3,185 holders of Common Stock and 2,064
holders of Class B Common Stock.
Item 6. Selected Financial Data
FIVE YEAR FINANCIAL PERFORMANCE
Year Ended September 30: 2000 1999 1998 1997 1996
---------------------------------------------------------
(In Thousands Except Per Share Data)
OPERATIONS
Operating revenue $ 431,513 $ 413,846 $ 391,261 $ 326,197 $ 309,572
=========================================================
Income from continuing
operations $ 69,875 $ 56,821 $ 47,674 $ 49,879 $ 40,363
---------------------------------------------------------
Discontinued operations 4,738 11,152 14,559 12,866 21,032
Gain (loss) on disposition
of discontinued operations 9,050 -- -- 1,485 (15,948)
---------------------------------------------------------
13,788 11,152 14,559 14,351 5,084
---------------------------------------------------------
Net income $ 83,663 $ 67,973 $ 62,233 $ 64,230 $ 45,447
=========================================================
PER SHARE AMOUNTS
Weighted average shares:
Basic 44,005 44,273 44,829 46,393 46,973
Diluted 44,360 44,861 45,557 47,243 47,899
Basic:
Income from continuing operations $ 1.59 $ 1.29 $ 1.07 $ 1.07 $ 0.86
Discontinued operations 0.11 0.25 0.32 0.28 0.44
Gain (loss) on disposition
of discontinued operations 0.20 -- -- 0.03 (0.33)
---------------------------------------------------------
Net income $ 1.90 $ 1.54 $ 1.39 $ 1.38 $ 0.97
=========================================================
Diluted:
Income from continuing operations $ 1.58 $ 1.27 $ 1.05 $ 1.06 $ 0.84
Discontinued operations 0.11 0.25 0.32 0.27 0.44
Gain (loss) on disposition
of discontinued operations 0.20 -- -- 0.03 (0.33)
---------------------------------------------------------
Net income $ 1.89 $ 1.52 $ 1.37 $ 1.36 $ 0.95
=========================================================
Dividends $ 0.64 $ 0.60 $ 0.56 $ 0.52 $ 0.48
=========================================================
OTHER DATA
Total assets $ 746,233 $ 679,513 $ 660,585 $ 650,963 $ 527,416
Debt, including current maturities 222,932 204,625 219,481 203,735 95,503
Stockholders' equity 395,167 354,329 319,759 319,390 324,954
Item 7. Management Discussion and Analysis of Financial Condition
and Results of Operations
This Management Discussion and Analysis of Financial Condition and Results of
Operations contains certain forward-looking statements that are based largely on
the Company's current expectations and are subject to certain risks, trends, and
uncertainties that could cause actual results to differ materially from those
anticipated. Among such risks, trends, and uncertainties are changes in
advertising demand, newsprint prices, interest rates, and other economic
conditions and the effect of acquisitions, investments, and dispositions on the
Company's results of operations or financial condition. The words "believe,"
"expect," "anticipate," "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 as of
the date of this filing.
Operating results are summarized below:
2000 1999 1998
---------------------------------
(Dollars in Thousands, Except
Per Share Data)
Operating revenue $431,513 $413,846 $391,261
Percent change 4.3% 5.8% 19.9%
Income before depreciation, amortization,
interest and taxes (EBITDA) * 131,793 124,955 113,990
Percent change 5.5% 9.6% 15.7%
Operating income 102,467 97,369 87,899
Percent change 5.2% 10.8% 7.3%
Non-operating (income) expense, net (7,748) 10,205 12,715
Income from continuing operations 69,875 56,821 47,674
Percent change 23.0% 19.2% (4.4%)
Earnings per share, continuing operations
Basic 1.59 1.29 1.07
Percent change 23.3% 20.6% 0.0%
Diluted 1.58 1.27 1.05
Percent change 24.4% 21.0% (0.9%)
* EBITDA is not a financial performance measurement under generally accepted
accounting principles (GAAP), and should not be considered in isolation or a
substitute for GAAP performance measurements. EBITDA is also not reflected in
the Company's consolidated statement of cash flows, but it is a common and
meaningful alternative performance measurement for comparison to other
companies in the newspaper industry. The computation excludes other
non-operating items which are primarily the gain on sale of businesses.
Operating revenue consists of the following:
2000 1999 1998
---------------------------------------
(Dollars in Thousands)
Advertising revenue:
Retail advertising:
Retail - "run-of-press" $ 110,996 $ 108,203 $ 106,889
Retail - preprint and other 48,944 46,344 44,477
---------------------------------------
Total retail advertising 159,940 154,547 151,366
Percent change 3.5% 2.1% 21.9%
National 9,318 8,737 7,613
Percent change 6.6% 14.8% 8.2%
Classified 101,061 95,854 87,622
Percent change 5.4% 9.4% 34.5%
Other 5,894 5,254 4,783
Percent change 12.2% 9.8% 26.4%
Total advertising 276,213 264,392 251,384
Percent change 4.5% 5.2% 25.6%
Circulation revenue 80,468 83,102 83,091
Percent change (3.2%) - % 2.8%
Other revenue 65,455 57,114 48,419
Percent change 14.6% 18.0% 29.2%
The following advertising and circulation revenue results are presented
exclusive of acquisitions and dispositions.
Retail "run-of-press" advertising is advertising by merchants in the local
community which is printed in the newspaper, rather than "preprints", which are
printed separately by the Company or others and inserted into the newspaper.
Retail revenue increased .5% in 2000, .4% in 1999, and decreased (.3%) in 1998.
Retail revenue increases were caused primarily by an increase in volume as a
result of the continuing emphasis on price incentives in return for larger or
more frequent ads.
Total revenue realized from retail and national merchants includes preprints,
which have lower-priced, higher-volume distribution rates. Preprint revenue
increased 2.9% in 2000, 4.2% in 1999, and 4.4% in 1998.
Classified advertising revenue increased approximately 4.9% in 2000, 5.3% in
1999, and 8.1% in 1998. In 2000 growth in advertising revenue was in the
employment and automotive categories. In 1999 growth in advertising revenue was
in the automotive and to a lesser extent in the employment categories. This
growth offset a decrease in real estate. In 1998 continued significant growth in
employment and real estate advertising offset a small reduction in automotive.
In total, advertising revenue increased 3.1%, 3.2%, and 3.6%.
In 2000 circulation revenue decreased (2.4%) primarily as a result of a decrease
in units. In 1999 circulation revenue decreased by (.3%) as a result of a
decrease in volume offset by higher rates. In 1998 circulation revenue decreased
(.8%) as a result of a decrease in volume.
Other revenue consists of revenue from commercial printing, products, and
services delivered outside the newspaper (which include activities such as
target marketing, special event production, and online service) and editorial
service contracts with Madison Newspapers, Inc.
Other revenue by category is as follows:
2000 1999 1998
----------------------------------
(In Thousands)
Commercial printing $ 26,789 $ 23,774 $ 22,278
----------------------------------
New revenue:
Niche publications 13,929 10,702 5,500
Internet/online 3,250 1,597 924
Other 12,543 12,297 11,349
----------------------------------
Total new revenue 29,722 24,596 17,773
----------------------------------
Editorial service contracts 8,944 8,744 8,368
----------------------------------
$ 65,455 $ 57,114 $ 48,419
==================================
In 2000, 1999, and 1998, exclusive of the effects of acquisitions and
dispositions, other revenue increased 6.2%, 16.5%, and 3.6%, respectively.
Commercial printing increased (decreased) by (5.4%), 2.7%, and (4.3%),
respectively, due primarily to changes in sales volumes. Niche publications
revenue increased 24.6%, 95.3%, and 28.8%, respectively, with the introduction
of new products. Internet/online revenue increased 103.7%, 73.8%, and 336.9%,
respectively, due to growth in advertising revenue.
The following table sets forth the percentage of revenue of certain items.
2000 1999 1998
-----------------------------
Revenue 100.0% 100.0% 100.0%
-----------------------------
Compensation costs 36.8 36.4 36.1
Newsprint and ink 9.0 9.0 10.5
Other operating expenses 23.7 24.4 24.2
-----------------------------
69.5 69.8 70.8
-----------------------------
Income before depreciation, amortization,
interest and taxes 30.5 30.2 29.2
Depreciation and amortization 6.8 6.7 6.7
-----------------------------
Operating margin wholly-owned properties 23.7% 23.5% 22.5%
=============================
Exclusive of the effects of acquisitions and dispositions, in 2000 costs other
than depreciation and amortization increased by 2.0%. Newsprint and ink costs
decreased by (2.7%) due primarily to lower prices paid for newsprint in the
first six months of the fiscal year. Compensation costs increased 4.0% primarily
due to an increase in average compensation rates. Other operating costs
increased .9%.
Exclusive of the effects of acquisitions, in 1999 costs other than depreciation
and amortization increased by 2.7%. Newsprint and ink costs decreased by (10.0%)
due to lower prices for newsprint offset by a slight increase in usage.
Compensation costs increased 5.2% due to an increase in average compensation and
hours worked. Other operating costs increased 4.6%.
Exclusive of the effects of acquisitions, in 1998 costs other than depreciation
and amortization increased 4.9%. Newsprint and ink costs increased 12.1% due to
higher prices for newsprint and greater consumption. Compensation costs
increased 5.0% due to an increase in average compensation and hours worked.
Other operating costs increased 2.0%.
NON-OPERATING INCOME AND EXPENSE
Financial expense decreased by approximately $(220,000) in 2000 primarily due to
payments on long-term debt and increased capitalized interest of $686,000 offset
by interest on short-term borrowings and increased deferred compensation costs.
Financial expense decreased by approximately $(1,748,000) in 1999 primarily due
to payments on long-term debt and a $500,000 increase in capitalized interest
offset by additional deferred compensation costs. Financial expense increased by
approximately $6,300,000 in 1998 due to borrowings to finance The Pacific
Northwest Group acquisition. Interest on deferred compensation arrangements for
executives and others is offset by financial income earned on the invested funds
held in trust. Financial income and expense included $858,000, $501,000, and
$24,000 in 2000, 1999, and 1998, respectively, as a result of these
arrangements.
In 2000, financial income increased by approximately $1,339,000 due primarily to
an increase in income earned on short-term investments, notes receivable, and
deferred compensation funds. Financial income remained relatively unchanged in
1999 and 1998.
In 2000, other non-operating income, net consists primarily of a $18,439,000
gain from the sale of publishing properties and losses related to its 6.3%
interest in Ad One, LLC, a provider of integrated online classified solutions
for the newspaper industry. In 1999, other non-operating income, net represents
the gain from the sale of a shopper publication.
INCOME TAXES
Income taxes were 36.6%, 34.8%, and 36.6% of pretax income in 2000, 1999, and
1998, respectively. In 1999 income taxes were reduced by $1,500,000 due to a
settlement of a contingency. Exclusive of the settlement, income taxes were
36.5% of pretax income.
DISCONTINUED OPERATIONS
On October 1, 2000, the Company consummated the sale of substantially all of its
broadcasting properties for approximately $565,000,000, net of selling expenses.
The results for the broadcast properties have been classified as discontinued
operations for all periods presented. For additional information related to the
disposition, see Note 2 of the Notes to Consolidated Financial Statements under
Item 8, herein.
LIQUIDITY, CAPITAL RESOURCES AND COMMITMENTS
Cash provided by operations totaled $126,889,000 in 2000. The Company has a
$50,000,000 revolving credit arrangement with banks which expires in 2003. The
major sources and uses of cash in 2000 were as follows:
(In Thousands)
Sources of cash:
Operations $ 126,889
Short-term borrowings 30,500
Proceeds from sale of properties 8,775
All other 5,139
---------
171,303
---------
Uses of cash:
Acquisitions, net 71,609
Purchase of property and equipment 32,494
Cash dividends paid 28,288
Purchase of Lee Enterprises, Incorporated stock 20,021
---------
152,412
---------
Increase in cash $ 18,891
=========
Capital expenditures for new and improved facilities and equipment are expected
to be approximately $12,000,000 in 2001.
The Company anticipates that funds necessary for capital expenditures and other
requirements will be available from internally generated funds, net after-tax
proceeds from the sale of its broadcast properties, which are expected to be
approximately $390,000,000, and the Company's revolving credit agreements.
Under the terms of its senior note agreement, the Company will be required to
repay the outstanding balance of $173,400,000 on October 1, 2001 unless the
Company reinvests the net proceeds of the broadcast sale or obtains a waiver of
that provision of the agreement. Covenants under these agreements are not
considered restrictive to normal operations or anticipated stockholder
dividends.
DIVIDENDS AND COMMON STOCK PRICES
The current quarterly cash dividend is 17 cents per share, an annual rate of 68
cents.
During the fiscal year ended September 30, 2000, the Company paid dividends of
$28,288,000 or 33.8% of fiscal year 2000 net income. The Company will continue
to review its dividend policy to assure that it remains consistent with its
capital demands. Covenants under borrowing arrangements are not considered
restrictive to payment of dividends. Lee Common Stock is listed on the New York
Stock Exchange. The table under Item 5 herein shows the high and low prices of
Lee Common Stock for each quarter during the past three years. It also shows the
closing price at the end of each quarter and the dividends paid in the quarter.
INFLATION
The net effect of inflation on operations has not been material in the last
several years because of efforts by the Company to lessen the effect of rising
costs through a strategy of improving productivity, controlling costs and, where
conditions permit, increasing selling prices.
QUARTERLY RESULTS
The Company's largest source of publishing revenue, retail run-of-press
advertising, is seasonal and tends to fluctuate with retail sales in markets
served. Historically, retail run-of-press advertising is higher in the first and
third fiscal quarters. Newspaper classified advertising revenue (which includes
real estate and automobile ads) is lowest in January and February, which are
included in the second fiscal quarter.
Quarterly results of operations are summarized under Item 8, herein.
Item 8. Financial Statements and Supplementary Data
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
September 30,
------------------------------
ASSETS 2000 1999 1998
- --------------------------------------------------------------------------------
(Dollars in Thousands)
Current Assets:
Cash and cash equivalents $ 29,427 $ 10,536 $ 16,941
Trade receivables, less allowance for doubtful
accounts 2000 $3,344; 1999 $4,460;
1998 $4,110 41,212 67,122 60,443
Receivables from associated companies 1,500 1,438 1,437
Inventories 4,280 3,625 3,878
Other 7,380 19,822 16,892
Net assets of discontinued operations 167,767 -- --
------------------------------
Total current assets 251,566 102,543 99,591
------------------------------
Investments:
Associated companies 19,155 16,326 14,107
Other 15,021 15,819 12,364
------------------------------
34,176 32,145 26,471
------------------------------
Property and Equipment:
Land and improvements 11,473 14,103 13,856
Buildings and improvements 63,893 67,342 65,945
Equipment 172,366 246,484 219,491
------------------------------
247,732 327,929 299,292
Less accumulated depreciation 120,376 188,726 170,920
------------------------------
127,356 139,203 128,372
------------------------------
Intangibles and Other Assets:
Intangibles 332,520 396,392 398,111
Other 615 9,230 8,040
------------------------------
333,135 405,622 406,151
------------------------------
$746,233 $679,513 $660,585
==============================
See Notes to Consolidated Financial Statements.
LIABILITIES AND STOCKHOLDERS' September 30,
-----------------------------------
EQUITY 2000 1999 1998
- -------------------------------------------------------------------------------------------
(Dollars in Thousands)
Current Liabilities:
Notes payable and current maturities of long-term
debt $ 49,532 $ 17,620 $ 33,453
Accounts payable 14,242 11,764 14,277
Compensation and other accruals 27,603 26,551 26,966
Income taxes payable 7,799 5,378 6,475
Unearned income 18,451 18,135 16,890
----------------------------------
Total current liabilities 117,627 79,448 98,061
----------------------------------
Long-Term Debt, net of current maturities 173,400 187,005 186,028
----------------------------------
Deferred Items:
Retirement and compensation 13,418 13,781 13,117
Income taxes 46,621 44,950 43,620
----------------------------------
60,039 58,731 56,737
----------------------------------
Stockholders' Equity:
Capital stock:
Serial convertible preferred, no par value;
authorized 500,000 shares; issued none -- -- --
Common, $2 par value; authorized
60,000,000 shares; issued and outstanding
2000 33,070,000 shares 66,140 66,142 65,144
Class B, common, $2 par value; authorized
30,000,000 shares; issued and outstanding
2000 10,740,000 shares 21,480 22,376 23,556
Additional paid-in capital 37,330 32,641 28,715
Unearned compensation (1,227) (961) (650)
Retained earnings 271,444 234,131 202,994
----------------------------------
395,167 354,329 319,759
----------------------------------
$746,233 $679,513 $660,585
==================================
CONSOLIDATED STATEMENTS OF INCOME
Year Ended September 30,
----------------------------------
2000 1999 1998
----------------------------------
(In Thousands Except Per
Share Data)
Operating revenue:
Advertising $ 276,213 $ 264,392 $ 251,384
Circulation 80,468 83,102 83,091
Other 65,455 57,114 48,419
Equity in net income of associated
companies 9,377 9,238 8,367
---------------------------------
431,513 413,846 391,261
---------------------------------
Operating expenses:
Compensation costs 158,884 150,462 141,261
Newsprint and ink 38,625 37,447 41,165
Depreciation 14,546 13,766 12,403
Amortization of intangibles 14,780 13,820 13,688
Other 102,211 100,982 94,845
---------------------------------
329,046 316,477 303,362
---------------------------------
Operating income 102,467 97,369 87,899
---------------------------------
Non-operating (income) expense, net:
Financial expense 12,643 12,863 14,611
Financial (income) (3,259) (1,920) (1,896)
Other, net (17,132) (738) --
---------------------------------
(7,748) 10,205 12,715
---------------------------------
Income from continuing operations
before taxes on income 110,215 87,164 75,184
Income taxes 40,340 30,343 27,510
---------------------------------
Income from continuing operations 69,875 56,821 47,674
---------------------------------
Discontinued operations:
Income from discontinued operations, net of
income tax effect 4,738 11,152 14,559
Gain on disposition of discontinued
operations, net of income tax effect 9,050 -- --
----------------------------------
13,788 11,152 14,559
----------------------------------
Net income $ 83,663 $ 67,973 $ 62,233
==================================
Earnings per share:
Basic:
Income from continuing operations $ 1.59 $ 1.29 $ 1.07
Income from discontinued operations 0.31 0.25 0.32
----------------------------------
Net income $ 1.90 $ 1.54 $ 1.39
==================================
Diluted:
Income from continuing operations $ 1.58 $ 1.27 $ 1.05
Income from discontinued operations 0.31 0.25 0.32
----------------------------------
Net income $ 1.89 $ 1.52 $ 1.37
==================================
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Year Ended September 30,
--------------------------------------------------------------------------
Amount Shares
----------------------------------- ----------------------------------
2000 1999 1998 2000 1999 1998
--------------------------------------------------------------------------
(In Thousands Except Per Share Data)
Common Stock:
Balance, beginning $ 66,142 $ 65,144 $ 66,719 33,071 32,572 33,359
Conversion from Class B
Common Stock 770 1,116 649 385 558 325
Shares issued 478 286 286 239 143 143
Shares reacquired (1,250) (404) (2,510) (625) (202) (1,255)
--------------------------------------------------------------------------
Balance, ending $ 66,140 $ 66,142 $ 65,144 33,070 33,071 32,572
==========================================================================
Class B Common Stock:
Balance, beginning $ 22,376 $ 23,556 $ 24,298 11,188 11,778 12,149
Conversion to Common
Stock (770) (1,116) (649) (385) (558) (325)
Shares reacquired (126) (64) (93) (63) (32) (46)
--------------------------------------------------------------------------
Balance, ending $ 21,480 $ 22,376 $ 23,556 10,740 11,188 11,778
==========================================================================
Additional Paid-In Capital:
Balance, beginning $ 32,641 $ 28,715 $ 25,629
Shares issued 4,689 3,926 3,086
-----------------------------------
Balance, ending $ 37,330 $ 32,641 $ 28,715
===================================
Unearned Compensation:
Balance, beginning $ (961) $ (650) $ (493)
Restricted shares issued (1,364) (1,081) (714)
Restricted shares canceled 283 45 7
Amortization 815 725 550
-----------------------------------
Balance, ending $ (1,227) $ (961) $ (650)
===================================
Retained Earnings:
Balance, beginning $ 234,131 $ 202,994 $ 203,237
Net income 83,663 67,973 62,233
Cash dividends per share
2000 $.64; 1999 $.60;
1998 $.56 (28,288) (26,623) (25,160)
Shares reacquired (18,062) (10,213) (37,316)
-----------------------------------
Balance, ending $ 271,444 $ 234,131 $ 202,994
===================================
Stockholders' Equity $ 395,167 $ 354,329 $ 319,759 43,810 44,259 44,350
==========================================================================
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended September 30,
-----------------------------------
2000 1999 1998
-----------------------------------
(In Thousands)
Cash Provided by Operating Activities:
Net income $ 83,663 $ 67,973 $ 62,233
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 41,263 39,748 37,576
Gain on sale of publishing properties (18,439) (738) --
Distributions less than earnings of associated
companies (2,891) (2,220) (1,922)
Change in assets and liabilities, net of effects
from business acquisitions:
(Increase) decrease in receivables 3,727 (6,154) (3,131)
(Increase) decrease in inventories and
other 1,424 (749) 1,427
Increase (decrease) in accounts payable,
accrued expenses and unearned income 7,831 (2,117) 2,370
Increase (decrease) in income taxes payable 2,421 (1,097) 1,721
Other, primarily deferred items 7,890 3,206 465
-----------------------------------
Net cash provided by operating
activities 126,889 97,852 100,739
-----------------------------------
Cash (Required for) Investing Activities:
Acquisitions, net (71,609) (15,416) (11,944)
Purchase of property and equipment (32,494) (32,431) (26,725)
Proceeds from sale of publishing properties 8,775 492 --
Other 929 (3,867) (952)
-----------------------------------
Net cash (required for) investing
activities (94,399) (51,222) (39,621)
-----------------------------------
Cash (Required for) Financing Activities:
Purchase of common stock (20,021) (11,830) (51,388)
Cash dividends paid (28,288) (26,623) (25,160)
Proceeds from long-term borrowings -- -- 185,000
Proceeds from (payments on) short-term
notes payable, net 30,500 6,000 (145,000)
Principal payments on long-term borrowings -- (25,000) (25,000)
Other 4,210 4,418 3,208
-----------------------------------
Net cash (required for) financing
activities (13,599) (53,035) (58,340)
-----------------------------------
Net increase (decrease) in cash and
cash equivalents 18,891 (6,405) 2,778
Cash and cash equivalents:
Beginning 10,536 16,941 14,163
-----------------------------------
Ending $ 29,427 $ 10,536 $ 16,941
===================================
See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Business and Significant Accounting Policies
Nature of business:
As of September 30, 2000, operating divisions and associated companies
publish 28 daily newspapers and more than 100 other weekly, classified and
specialty publications and operate more than 75 Web sites.
Significant accounting policies:
Accounting estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Principles of consolidation: The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries. All
significant intercompany items have been eliminated.
Inventories: Newsprint inventories are priced at the lower of cost or market
with cost being determined primarily by the last-in, first-out method.
Newsprint inventories as of September 30, 2000, 1999, and 1998 were less than
replacement cost by $4,481,000, $4,710,000, and $4,815,000, respectively.
Investments: Investments in the common stock or joint venture capital of
associated companies are reported at cost plus the Company's share of
undistributed earnings since acquisition, less amortization of intangibles
and share of losses.
Long-term loans to associated companies are included in investments in
associated companies.
Other investments primarily consist of various marketable securities held in
trust under a deferred compensation arrangement. These investments are
classified as trading securities and carried at fair value with gains and
losses reported in the consolidated statements of income.
Property and equipment: Property and equipment is carried at cost. Equipment,
except for printing presses, is depreciated primarily by declining-balance
methods. The straight-line method is used for all other assets. The estimated
useful lives in years are as follows:
Years
-------
Buildings and improvements 5 - 25
Publishing:
Printing presses 15 - 20
Other major equipment 3 - 11
The Company capitalizes interest as part of the cost of constructing major
facilities.
Intangibles: Intangibles include covenants not to compete, consulting
agreements, customer lists, newspaper subscriber lists, and the excess costs
over fair value of net assets of businesses acquired.
The excess costs over fair value of net tangible assets include $6,493,000
incurred prior to October 31, 1970, which is not being amortized. Excess
costs related to specialty publications are being amortized over 10 to 15
year periods. Intangibles representing non-compete covenants, consulting
agreements, customer lists, and newspaper subscriber lists are being
amortized over periods of 3 to 40 years. The remaining costs are being
amortized over a period of 40 years. All intangibles are amortized by the
straight-line method.
The Company reviews its intangibles and other long-lived assets annually to
determine potential impairment. In performing the review, the Company
estimates the future cash flows expected to result from the use of the asset
and its eventual disposition. If the sum of the expected future cash flows
(undiscounted and without interest charges) is less than the carrying amount
of the asset, an impairment is recognized. The amount of impairment is
measured based upon projected discounted future cash flows using a discount
rate reflecting the Company's average cost of funds.
Unearned income: Unearned income arises in the ordinary course of business
from advance subscription payments for newspapers. 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 taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary differences and
loss carryforwards and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax basis. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the
deferred tax assets will not be realized. Deferred tax assets and liabilities
are adjusted for the effects of changes in tax laws and rates on the date of
enactment.
Cash and cash equivalents: For the purpose of reporting cash flows, the
Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less at date of acquisition to be cash
equivalents.
Restricted stock: The Company amortizes as compensation cost the value of
restricted stock, issued under a long-term incentive plan, by the
straight-line method over the three-year restriction period.
Reclassification: Certain items on the consolidated statements of income for
the years ended September 30, 1999 and 1998 have been reclassified, with no
effect on income or earnings per share, to be consistent with the
classifications adopted for the year ended September 30, 2000.
Note 2. Discontinued Operations and Subsequent Event
On March 1, 2000, the Company decided to discontinue the operations of the
Broadcast division. On May 7, 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 closed October 1, 2000. The net proceeds are
approximately $565,000,000 resulting in an after-tax gain for financial
reporting purposes of approximately $250,000,000. The results for the Broadcast
operations have been classified as discontinued operations for all periods
presented in the consolidated statements of income. The assets and liabilities
of discontinued operations have been classified in the consolidated balance
sheet as "net assets of discontinued operations" as of September 30, 2000.
The income from discontinued operations consists of the following:
Year Ended September 30,
-------------------------------
2000 1999 1998
-------------------------------
(In Thousands)
Income from discontinued operations $23,620 $19,371 $24,948
Income taxes 9,832 8,219 10,389
-------------------------------
$13,788 $11,152 $14,559
===============================
As of September 30, 2000, the assets and liabilities of the Broadcast division
consisted of the following (in thousands):
Assets:
Accounts receivable, net $ 23,493
Program rights and other 8,190
Property and equipment, net 29,775
Intangibles and other assets 122,310
--------
183,768
--------
Liabilities:
Current liabilities 13,072
Deferred items and other 2,929
--------
16,001
--------
Net assets of discontinued operations $167,767
========
Note 3. Acquisitions and Dispositions of Publishing Properties
On October 1, 1999 the Company acquired a daily newspaper and specialty
publications in Beatrice, Nebraska and received $9,300,000 of cash in exchange
for all the assets used in, and liabilities related to, the publication,
marketing, and distribution of two daily newspapers and the related specialty
and classified publications in Kewanee, Geneseo, and Aledo, Illinois and
Ottumwa, Iowa.
In addition, the Company acquired three daily newspapers, eleven weekly
newspapers, and fifteen classified or specialty publications in 2000, one daily
newspaper, two weekly, and four classified or specialty publications in 1999,
and five classified or specialty publications and one commercial printer in
1998.
All acquisitions were accounted for as a purchase and the results of operations
since the date of acquisition are included in the consolidated financial
statements. These acquisitions and dispositions had the effect of increasing
revenue and operating income by approximately $8,300,000 and $150,000,
respectively, for the year ended September 30, 2000, as compared to the prior
year.
The purchase price of business acquisitions was allocated as follows:
Year Ended September 30,
-----------------------------------
2000 1999 1998
-----------------------------------
(In Thousands)
Noncash working capital operations $ 1,475 $ (100) $ 377
Property and equipment 8,197 1,207 1,326
Intangibles 74,745 16,048 11,485
Other long-term assets 54 -- --
Issuance of note payable (432) (1,000) (1,194)
Deferred items (1,170) (739) (50)
-----------------------------------
82,869 15,416 11,944
Less fair value of assets exchanged 11,260 -- --
----------------------------------
Total cash purchase price $ 71,609 $ 15,416 $ 11,944
==================================
Proceeds from the sale of properties consisted of the following:
Year Ended
September 30,
2000
--------------
(In Thousands)
Noncash working capital $ 111
Property and equipment 764
Intangible assets 721
-------
1,596
Gain recognized on sale of properties 18,439
-------
20,035
Less fair value of assets exchanged 11,260
-------
Proceeds from sale of properties $ 8,775
=======
Note 4. Investments in Associated Companies
The Company has a 50% ownership interest in Madison Newspapers, Inc., a
newspaper company which publishes daily, Sunday, and weekly publications in
Madison and three other daily newspapers, seven weekly publications, and various
other classified publications in Wisconsin and interest in Internet service
ventures.
Summarized financial information of Madison Newspapers, Inc. is as follows:
Combined Associates 2000 1999 1998
- --------------------------------------------------------------------------------
(In Thousands)
ASSETS
Current assets $28,102 $30,337 $25,732
Investments and other assets 34,025 6,011 5,919
Property and equipment, net 14,044 9,531 9,997
-----------------------------
$76,171 $45,879 $41,648
=============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $23,394 $14,023 $14,472
Long-term debt 16,000 -- --
Stockholders' equity 36,777 31,856 27,176
-----------------------------
$76,171 $45,879 $41,648
=============================
Revenue $97,279 $90,626 $85,302
Income before depreciation, amortization,
interest, and income taxes 32,482 31,920 29,439
Operating income 29,781 29,325 26,671
Net income 18,791 18,461 16,881
Current receivables from associated companies consist of dividends from Madison
Newspapers, Inc. Certain information relating to Company investment in Madison
Newspapers, Inc. is as follows:
2000 1999 1998
-------------------------------------
(In Thousands)
Share of:
Stockholders' equity $18,388 $15,928 $13,588
Undistributed earnings 18,164 15,704 13,364
Note 5. Debt
The Company has a $50,000,000 unsecured revolving loan agreement with a bank
group which expires in 2003. Interest rates float at rates specified in the
agreement. The Company has borrowings of $37,500,000 and $6,000,000 under this
agreement as of September 30, 2000 and 1999, respectively.
The Company has long-term obligations, net of current maturities, as follows:
September 30,
------------------------------
2000 1999 1998
------------------------------
(In Thousands)
Insurance companies senior notes payable,
6.14% to 6.64%, due in varying amounts
from 2001 to 2013 $173,400 $185,000 $185,000
Program contracts, noninterest bearing, due
through 2002 -- 2,005 1,028
------------------------------
$173,400 $187,005 $186,028
==============================
Aggregate maturities during the next five years are $11,600,000, $11,600,000,
$11,600,000, $36,600,000, and $11,600,000. Under the terms of its senior note
agreement, the Company will be required to repay the outstanding balance of
$173,400,000 on October 1, 2001 unless the Company reinvests the net proceeds of
its broadcast sale or obtains a waiver of that provision of the agreement.
Covenants under these agreements are not considered restrictive to normal
operations or anticipated stockholder dividends.
Note 6. Retirement and Compensation Plans
Substantially all the Company's employees are covered by a qualified defined
contribution retirement plan. The Company has other retirement and compensation
plans for executives and others. Retirement and compensation plan costs,
including interest on deferred compensation costs, charged to operations were
$10,400,000 in 2000, $9,700,000 in 1999, and $8,300,000 in 1998.
Note 7. 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; however, Class B Common Stock is at all
times convertible into shares of Common Stock on a share-for-share basis. Common
Stock and Class B Common Stock have identical rights with respect to cash
dividends and upon liquidation. All outstanding Class B Common Stock converts to
Common Stock when the shares of Class B Common Stock total less than 5,600,000
shares.
On May 7, 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 Common and Class B Common share
(collectively "Common Shares") of the Company. The Rights are attached to and
automatically trade with the outstanding shares of the Company's Common Shares.
The Rights will 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 shareholders 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 on
May 31, 2008.
Note 8. Stock Option, Restricted Stock, and Stock Purchase Plans
At September 30, 2000, the Company has three stock-based compensation plans
which are described below. As permitted under generally accepted accounting
principles, grants under those plans are accounted for following APB Opinion No.
25 and related interpretations. Accordingly, no compensation cost has been
recognized for grants under the stock option or the 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 No. 123), reported net income and earnings per common share would have
been reduced to the pro forma amounts shown below:
2000 1999 1998
------------------------------------------
(Thousands, Except Per Share Data)
Net income:
As reported $ 83,663 $ 67,973 $ 62,233
Pro forma 82,035 66,600 60,945
Earnings per share:
Basic:
As reported $ 1.90 $ 1.54 $ 1.39
Pro forma 1.86 1.50 1.36
Diluted:
As reported 1.89 1.52 1.37
Pro forma 1.85 1.49 1.34
Stock option and restricted stock plans:
The Company has reserved 4,910,000 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 in 2000, 1999, and
1998, respectively: dividend rates of 2.0% to 2.52%, 2.06%, and 1.95%; price
volatility of 18.5% to 19.4%, 18.5%, and 14.5%; risk-free interest rates
based upon the life of the option ranging from 6.03% to 6.72%, 4.84% to
6.03%, and 5.29% to 5.77%; and expected lives based upon the life of the
option ranging from .7 to 8 years.
A summary of the stock option plan is as follows:
Number of Shares
---------------------------
2000 1999 1998
---------------------------
(In Thousands)
Under option, beginning of year 1,258 1,491 1,509
Granted 282 185 190
Terminated and canceled (26) (21) (5)
Exercised (336) (397) (203)
---------------------------
Under option, end of year 1,178 1,258 1,491
===========================
Options exercisable, end of year 767 945 1,110
===========================
Average Price
---------------------------
2000 1999 1998
---------------------------
Granted during the year $29.11 $27.62 $27.18
Exercised during the year 14.15 15.45 15.88
Under option, end of year 22.72 19.09 17.15
Weighted-average fair value per
option of options granted 7.75 6.55 6.95
A further summary of options outstanding as of September 30, 2000 is as
follows:
Options Outstanding
------------------------------------
Weighted- Options Exercisable
Average ----------------------
Number Remaining Weighted- Number Weighted-
Outstanding Contractual Average Exercisable Average
Range of (In Life Exercise (In Exercise
Exercise Prices Thousands) (In Years) Price Thousands) Price
- --------------------------------------------------------------------------------
$11 to $14 106 1.1 $11.04 106 $11.04
$15 to $20 371 3.8 17.38 371 17.38
$20 to $23 102 6.3 21.58 95 21.49
$25 to $30 582 7.9 28.16 178 27.01
$31 to $34 17 2.1 32.46 17 32.46
--------------------------------------------------------
1,178 5.8 22.72 767 19.58
========================================================
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
2000, 1999, and 1998, the Company granted 46,000, 39,000, and 26,000 shares,
respectively, of restricted stock to employees. As of September 30, 2000,
92,000 shares of restricted stock were outstanding.
At September 30, 2000, 3,732,000 shares were available for granting of stock
options or issuance of restricted stock.
Stock purchase plan:
The Company has 1,072,000 shares of Common Stock available for issuance
pursuant to an employee stock purchase plan. April 30, 2001 is the exercise
date for the current offering. The purchase price is the lower of 85% of the
fair market value at the date of the grant or the exercise date, which is one
year from the date of the grant. The weighted-average fair values per share
of purchase rights granted in 2000, 1999, and 1998 computed using the
Black-Scholes option-pricing model were $5.32, $6.34, and $6.65,
respectively.
In 2000, 1999, and 1998 employees purchased 124,000, 97,000, and 95,000
shares, respectively, at a per share price of $19.31 in 2000, $24.78 in 1999,
and $20.98 in 1998.
Note 9. Income Tax Matters
Components of income tax expense consist of the following:
Year Ended September 30,
---------------------------
2000 1999 1998
---------------------------
(In Thousands)
Paid or payable on currently taxable income:
Federal $36,036 $30,633 $29,943
State 6,612 5,652 5,525
Net increase due to deferred income taxes 7,524 2,277 2,431
---------------------------
$50,172 $38,562 $37,899
===========================
The total tax provision has been allocated to the following financial statement
items:
Year Ended September 30,
---------------------------------
2000 1999 1998
---------------------------------
(In Thousands)
Income from continuing operations $40,340 $30,343 $27,510
Discontinued operations 9,832 8,219 10,389
---------------------------------
$50,172 $38,562 $37,899
=================================
Income tax expense for the years ended September 30, 2000, 1999, and 1998 is
different 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:
% of Pretax Income
-----------------------
2000 1999 1998
-----------------------
Computed "expected" income tax expense 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit 4.0 3.9 3.9
Net income of associated companies taxed
at dividend rates (1.9) (2.7) (2.6)
Goodwill amortization 1.3 1.6 1.7
Other (0.9) (1.6) (0.2)
-----------------------
37.5% 36.2% 37.8%
=======================
Foreign taxes are not material.
Net deferred tax liabilities consist of the following components as of September
30, 2000, 1999, and 1998:
2000 1999 1998
---------------------------
(In Thousands)
Deferred tax liabilities:
Property and equipment $10,190 $ 8,863 $ 8,334
Equity in undistributed earnings of affiliates 1,457 1,267 1,096
Deferred gain on sale of broadcast properties 3,266 3,308 3,308
Identifiable intangible assets 38,168 34,163 32,653
Other 178 2,831 2,981
---------------------------
53,259 50,432 48,372
---------------------------
Deferred tax assets:
Accrued compensation 8,181 8,309 7,747
Receivable allowance 1,341 1,060 728
Loss carryforwards acquired -- 5,588 6,774
Capital loss carryforward 4,161 7,591 8,121
Other 1,443 1,708 1,745
---------------------------
15,126 24,256 25,115
Less valuation allowance 4,161 13,179 15,325
---------------------------
10,965 11,077 9,790
---------------------------
$42,294 $39,355 $38,582
===========================
The components giving rise to the net deferred tax liabilities described above
have been included in the accompanying balance sheets as of September 30, 2000,
1999, and 1998 as follows:
2000 1999 1998
---------------------------------------
(In Thousands)
Current assets $ 4,327 $ 5,595 $ 5,038
Noncurrent liabilities (46,621) (44,950) (43,620)
--------------------------------------
$(42,294) $(39,355) $(38,582)
======================================
The Company provided a valuation allowance due to limitations imposed by the tax
laws on the Company's ability to realize the benefit of capital loss and net
operating loss carryforwards. During the year ended September 30, 2000,
management determined the valuation allowance and tax contingency on the
acquired loss carryforward of SJL of Kansas Corp (SJL), which was sold on
October 1, 2000, should be reduced by $1,155,000 and $1,312,000, respectively,
with a corresponding $2,467,000 reduction to goodwill. The remaining net
operating loss carryforwards of $11,142,000 will be transferred to the acquiror
on October 1, 2000. Therefore, the deferred taxes for the net operating loss and
the valuation allowance for $4,433,000 have been eliminated. During the years
ended September 30, 2000 and 1999, $3,430,000 and $2,146,000, respectively, of
the valuation allowance was transferred to the tax contingency which is included
in income taxes payable with no effect on tax expense.
Note 10. Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value.
The carrying amounts of cash and cash equivalents, temporary investments,
receivables, and accounts payable approximate fair value because of the short
maturity of those instruments. The carrying value of other investments
consisting of debt and equity securities in a deferred compensation trust are
carried at fair value based upon quoted market prices, and $4,040,000 of equity
securities, consisting primarily of the Company's 17% ownership of the nonvoting
common stock of The Capital Times Company, which are carried at cost, as the
fair value is not readily determinable. The remaining $2,194,000 is an
investment in debt and equity securities of Ad One, LLC (a 6.3% interest) which
is being accounted for similar to the equity method.
The fair value of the Company's debt is estimated based on the quoted market
prices for the same or similar issues or on the current rates offered to the
Company for debt of the same remaining maturities. The estimated fair values of
the Company's debt instruments are as follows:
Carrying
Amount Fair Value
------------------------
(In Thousands)
September 30:
2000 $222,932 $216,262
1999 204,625 202,047
1998 219,481 245,784
Note 11. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per
share (in thousands except per share amounts):
Year Ended September 30,
------------------------------------
2000 1999 1998
------------------------------------
Numerator:
Income applicable to common shares:
Income from continuing operations $ 69,875 $ 56,821 $ 47,674
Income from discontinued operations 13,788 11,152 14,559
------------------------------------
$ 83,663 $ 67,973 $ 62,233
====================================
Denominator:
Basic-weighted average common shares
outstanding 44,005 44,273 44,829
Dilutive effect of employee stock options 355 588 728
------------------------------------
Diluted outstanding shares 44,360 44,861 45,557
====================================
Basic earnings per share:
Income from continuing operations $ 1.59 $ 1.29 $ 1.07
Income from discontinued operations 0.31 0.25 0.32
------------------------------------
Net income $ 1.90 $ 1.54 $ 1.39
====================================
Diluted earnings per share:
Income from continuing operations $ 1.58 $ 1.27 $ 1.05
Income from discontinued operations 0.31 0.25 0.32
------------------------------------
Net income $ 1.89 $ 1.52 $ 1.37
====================================
Note 12. Other Information
Balance sheet information:
Other current assets consist of the following:
September 30,
------------------------------
2000 1999 1998
------------------------------
(In Thousands)
Program rights $ -- $ 9,650 $ 8,140
Deferred income taxes 4,327 5,595 5,038
Other 3,053 4,577 3,714
------------------------------
$ 7,380 $ 19,822 $ 16,892
==============================
Intangibles consist of the following:
September 30,
------------------------------
2000 1999 1998
------------------------------
(In Thousands)
Goodwill $296,130 $345,937 $332,821
Less accumulated amortization 54,170 71,503 63,584
------------------------------
241,960 274,434 269,237
------------------------------
Noncompete covenants and consulting
agreements 23,878 28,023 28,213
Less accumulated amortization 22,552 25,497 23,522
------------------------------
1,326 2,526 4,691
------------------------------
Customer lists, broadcasting licenses and
agreements, and newspaper subscriber lists 113,084 159,805 157,011
Less accumulated amortization 23,850 40,373 32,828
------------------------------
89,234 119,432 124,183
------------------------------
$332,520 $396,392 $398,111
==============================
Compensation and other accruals consist of the following:
September 30,
-------------------------------
2000 1999 1998
-------------------------------
(In Thousands)
Compensation $ 9,136 $ 11,214 $ 12,092
Vacation pay 4,695 5,402 4,384
Retirement and stock purchase plans 4,915 5,324 5,005
Interest 6,022 9 519
Other 2,835 4,602 4,966
-------------------------------
$ 27,603 $ 26,551 $ 26,966
===============================
Cash flows information:
Year Ended September 30,
-------------------------------
2000 1999 1998
-------------------------------
(In Thousands)
Cash payments for:
Interest, net of capitalized interest
2000 $1,389; 1999 $703; 1998 $169 $ 6,630 $ 13,373 $ 15,731
===============================
Income taxes $ 42,345 $ 39,528 $ 33,747
===============================
Program rights were acquired by issuing
long-term contracts as follows $ 7,794 $ 12,417 $ 9,017
===============================
Issuance of restricted common stock, net $ 1,081 $ 1,006 $ 682
===============================
Accounts payable for stock acquired $ (317) $ 317 $(10,926)
===============================
Note received in connection with sale of
businesses $ -- $ 525 $ --
===============================
Capital expenditures related to broadcast
properties $ 7,102 $ 7,493 $ 6,825
===============================
SUPPLEMENTARY DATA
QUARTERLY RESULTS (UNAUDITED)
4th 3rd 2nd 1st
-----------------------------------------------------
(In Thousands Except Per Share Data)
2000 Quarter:
Operating revenue $ 111,928 $ 109,925 $ 100,973 $ 108,687
=====================================================
Income from continuing operations $ 15,787 $ 15,955 $ 11,737 $ 26,396
Income from discontinued operations 3,558 4,218 1,864 4,148
-----------------------------------------------------
Net income $ 19,345 $ 20,173 $ 13,601 $ 30,544
=====================================================
Earnings per share:
Basic:
Income from continuing operations $ 0.36 $ 0.36 $ 0.27 $ 0.60
Income from discontinued operations 0.08 0.10 0.04 0.09
-----------------------------------------------------
Net income $ 0.44 $ 0.46 $ 0.31 $ 0.69
=====================================================
Diluted:
Income from continuing operations $ 0.36 $ 0.36 $ 0.27 $ 0.59
Income from discontinued operations 0.08 0.10 0.04 0.09
-----------------------------------------------------
Net income $ 0.44 $ 0.46 $ 0.31 $ 0.68
=====================================================
1999 Quarter:
Operating revenue $ 105,622 $ 105,163 $ 96,524 $ 106,537
=====================================================
Income from continuing operations $ 15,556 $ 16,436 $ 11,007 $ 13,822
Income from discontinued operations 1,366 3,008 961 5,817
-----------------------------------------------------
Net income $ 16,922 $ 19,444 $ 11,968 $ 19,639
=====================================================
Earnings per share:
Basic:
Income from continuing operations $ 0.35 $ 0.37 $ 0.25 $ 0.31
Income from discontinued operations 0.03 0.07 0.02 0.13
-----------------------------------------------------
Net income $ 0.38 $ 0.44 $ 0.27 $ 0.44
=====================================================
Diluted:
Income from continuing operations $ 0.35 $ 0.36 $ 0.25 $ 0.31
Income from discontinued operations 0.03 0.07 0.02 0.13
-----------------------------------------------------
Net income $ 0.38 $ 0.43 $ 0.27 $ 0.44
=====================================================
1998 Quarter:
Operating revenue $ 100,315 $ 100,544 $ 90,398 $ 100,004
=====================================================
Income from continuing operations $ 12,209 $ 12,808 $ 9,373 $ 13,284
Income from discontinued operations 2,738 5,283 3,238 3,300
-----------------------------------------------------
Net income $ 14,947 $ 18,091 $ 12,611 $ 16,584
=====================================================
Earnings per share:
Basic:
Income from continuing operations $ 0.27 $ 0.29 $ 0.21 $ 0.30
Income from discontinued operations 0.06 0.12 0.07 0.07
-----------------------------------------------------
Net income $ 0.33 $ 0.41 $ 0.28 $ 0.37
=====================================================
Diluted:
Income from continuing operations $ 0.27 $ 0.28 $ 0.21 $ 0.29
Income from discontinued operations 0.06 0.12 0.07 0.07
-----------------------------------------------------
Net income $ 0.33 $ 0.40 $ 0.28 $ 0.36
=====================================================
Item 9. Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure
Not applicable.
PART III
The information called for by Part III of this Form 10-K is omitted in
accordance with General Instruction G because the Company will file with the
Commission a definitive proxy statement pursuant to Regulation 14A not later
than 120 days after the close of the Company's fiscal year ended September 30,
2000.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K
Page Number
-----------
(a) 1. Financial Statements
Independent Auditor's Report
Financial Statements
Consolidated balance sheets as of
September 30, 2000, 1999 and 19998
Consolidated statements of income years ended
September 30, 2000, 1999 and 1998
Consolidated statements of stockholders' equity
years ended September 30, 2000, 1999 and 1998
Consolidated statements of cash flows years ended
September 30, 2000, 1999 and 1998
Notes to consolidated financial statements
(a) 2. Financial Statements Schedule
Schedule
II - Valuation and qualifying accounts years ended
September 30, 2000, 1999 and 1998
All other schedules have been omitted as not required,
not applicable; not deemed material or because the
information is included in the Notes to Financial Statements.
(a) 3. Exhibits (listed by numbers corresponding to the
Exhibit Table of Item 601 in Regulation S-K).
21 Subsidiaries
23 Consent of McGladrey & Pullen, LLP
24 Power of Attorney
27 Financial Data Schedule
(b) The following reports on Form 8-K were filed for the three months
ended September 30, 2000.
None
* * * * *
For the purposes of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1991) under the Securities Act of 1933, the
undersigned registrant hereby undertakes as follows, which undertaking
shall be incorporated by reference into registrant's Registration
Statements on Form S-8 Nos. 2-56652 (filed June 17, 1976), 2-58393
(filed March 11, 1977), 2-77121 (filed April 22, 1982), 33-19725 (filed
January 20, 1988), 33-46708 (filed March 31, 1992), and 333-6435 and
333-6433 (filed June 20, 1996).
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act of 1933, and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling person
of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of
such issue.
INDEPENDENT AUDITOR'S REPORT
To the Stockholders
Lee Enterprises, Incorporated
and subsidiaries
Davenport, Iowa
We have audited the accompanying consolidated balance sheets of Lee Enterprises,
Incorporated and subsidiaries as of September 30, 2000, 1999, and 1998 and the
related consolidated statements of income, stockholders' equity, and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Lee Enterprises,
Incorporated and subsidiaries as of September 30, 2000, 1999, and 1998 and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
In our opinion, Schedule II included in this Annual Report on Form 10-K for the
year ended September 30, 2000, present fairly the information set forth therein,
in conformity with generally accepted accounting principles.
/s/ McGladrey & Pullen, LLP
- ---------------------------
Davenport, Iowa
November 10, 2000
LEE ENTERPRISES, INCORPORATED
AND WHOLLY-OWNED SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
Column A Column B Column C Column D Column E
(1)
Balance at Additions Charged Deduction Balance
Beginning Charged to Other from at Close
Description of Period to Income Accounts Reserves of Period
- --------------------------------------------------------------------------------
Allowance for doubtful
accounts:
For the year ended
September 30, 2000 $ 4,460 $ 3,445 $(1,203)(2) $ 3,358 $ 3,344
For the year ended
September 30, 1999 4,110 3,776 -- 3,426 4,460
For the year ended
September 30, 1998 4,600 3,486 -- 3,976 4,110
(1) Represents accounts written off as uncollectible, net of recoveries which
are immaterial.
(2) September 30, 1999 balance for discontinued broadcast segment.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this annual report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: December 21, 2000 LEE ENTERPRISES, INCORPORATED
-----------------
/s/ Richard D. Gottlieb /s/ G.C. Wahlig
- --------------------------------------- -----------------------------------
Richard D. Gottlieb, G. C. Wahlig,
Chairman and Chief Executive Officer Vice President of Finance, Interim
Chief Financial Officer and Chief
Accounting Officer
We, the undersigned directors of Lee Enterprises, Incorporated, hereby severally
constitute Richard D. Gottlieb and G.C. Wahlig, 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, 2000 to
be filed herewith and any amendments to said Annual Report, and generally do all
such things in our name and behalf in our capacities as directors to enable Lee
Enterprises, Incorporated to comply with the provisions of the Securities
Exchange Act of 1934 as amended, and all requirements of the Securities and
Exchange Commission, hereby ratifying and confirming our signatures as they may
be signed by our said attorneys, or either of them, to said Annual Report on
Form 10-K and any and all amendments thereto.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated:
Signature Date
- ----------------------------------------- -----------------
/s/ Rance E. Crain
- -----------------------------------------
Rance E. Crain, Director November 15, 2000
/s/ J. P. Guerin
- -----------------------------------------
J. P. Guerin, Director November 15, 2000
/s/ Mary E. Junck
- -----------------------------------------
Mary E. Junck, Director November 15, 2000
/s/ William E. Mayer
- -----------------------------------------
William E. Mayer, Director November 15, 2000
/s/ Andrew E. Newman
- -----------------------------------------
Andrew E. Newman, Director November 15, 2000
/s/ Gordon Prichett
- -----------------------------------------
Gordon Prichett, Director November 15, 2000
/s/ Ronald L. Rickman
- -----------------------------------------
Ronald L. Rickman, Director November 15, 2000
/s/ Gregory P. Schermer
- -----------------------------------------
Gregory P. Schermer, Director November 15, 2000
/s/ Phyllis Sewell
- -----------------------------------------
Phyllis Sewell, Director November 15, 2000
/s/ Mark Vittert
- -----------------------------------------
Mark Vittert, Director November 15, 2000