UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended March 31, 2003
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
(Exact name of Registrant as specified in its Charter)
Delaware 42-0823980
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
215 N. Main Street, Davenport, Iowa 52801
(Address of principal executive offices)
(563) 383-2100
(Registrant's telephone number, including area code)
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 whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [x] No [ ]
As of March 31, 2003, 34,968,895 shares of Common Stock and 9,456,438 shares of
Class B Common Stock of the Registrant were outstanding.
LEE ENTERPRISES, INCORPORATED
TABLE OF CONTENTS PAGE
- ----------------------------------------------------------------------------------------- -------------------------
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Income - 1
Three months and six months ended March 31, 2003
and 2002
Consolidated Balance Sheets - 2
March 31, 2003 and September 30, 2002
Consolidated Statements of Cash Flows - 3
Six months ended March 31, 2003 and 2002
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About 14
Market Risk
Item 4. Controls and Procedures 15
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders 15
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 16
CERTIFICATIONS 17
EXHIBITS
99.6 Sarbanes-Oxley Act Section 906 Certification 19
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
LEE ENTERPRISES, INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
March 31 March 31
- ---------------------------------------------------------------------------------------------------------------------------------
(Thousands, except per common share data) 2003 2002 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Operating revenue:
Advertising $ 103,082 $ 61,332 $ 221,884 $ 133,009
Circulation 33,113 20,030 66,725 40,452
Other 19,138 15,146 37,271 30,407
- ---------------------------------------------------------------------------------------------------------------------------------
155,333 96,508 325,880 203,868
- ---------------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Compensation 67,414 40,598 135,906 81,082
Newsprint and ink 13,316 8,153 27,766 17,930
Depreciation 4,811 3,517 9,220 7,500
Amortization of intangible assets 6,902 1,818 13,864 3,676
Other 37,249 23,975 75,606 49,606
- ---------------------------------------------------------------------------------------------------------------------------------
129,692 78,061 262,362 159,794
- ---------------------------------------------------------------------------------------------------------------------------------
Operating income, before equity in net
income of associated companies 25,641 18,447 63,518 44,074
Equity in net income of associated companies 1,553 1,752 3,771 3,929
- ---------------------------------------------------------------------------------------------------------------------------------
Operating income 27,194 20,199 67,289 48,003
- ---------------------------------------------------------------------------------------------------------------------------------
Nonoperating income (expense), net:
Financial income 203 2,468 543 5,235
Financial expense (4,270) (2,844) (8,960) (5,882)
Other, net (43) (1) (387) (308)
- ---------------------------------------------------------------------------------------------------------------------------------
(4,110) (377) (8,804) (955)
- ---------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes 23,084 19,822 58,485 47,048
Income tax expense 8,460 7,155 21,383 16,767
- ---------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 14,624 12,667 37,102 30,281
- ---------------------------------------------------------------------------------------------------------------------------------
Discontinued operations:
Loss from discontinued operations, net of
income tax effect - (103) (1) (140)
Loss on disposition, net of income tax effect - - (19) -
- ---------------------------------------------------------------------------------------------------------------------------------
- (103) (20) (140)
- ---------------------------------------------------------------------------------------------------------------------------------
Net income $ 14,624 $ 12,564 $ 37,082 $ 30,141
- ---------------------------------------------------------------------------------------------------------------------------------
Earnings per common share:
Basic:
Continuing operations $ 0.33 $ 0.29 $ 0.84 $ 0.68
Discontinued operations - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Net income $ 0.33 $ 0.29 $ 0.84 $ 0.68
- ---------------------------------------------------------------------------------------------------------------------------------
Diluted:
Continuing operations $ 0.33 $ 0.29 $ 0.84 $ 0.68
Discontinued operations - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
Net income $ 0.33 $ 0.29 $ 0.84 $ 0.68
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends per common share $ 0.17 $ 0.17 $ 0.34 $ 0.34
- ---------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes are an integral part of the Consolidated Financial Statements.
1
LEE ENTERPRISES, INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------------------------
March 31 September 30
(Thousands, except per share data) 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 17,380 $ 14,381
Accounts receivable, net 55,403 57,313
Receivable from associated companies - 1,500
Inventories 9,322 10,166
Other 11,464 10,798
Assets of discontinued operations - 7,723
- ---------------------------------------------------------------------------------------------------------------------------------
Total current assets 93,569 101,881
- ---------------------------------------------------------------------------------------------------------------------------------
Investments 28,243 28,776
Property and equipment, net 199,773 204,297
Goodwill 611,625 611,938
Other intangible assets 499,778 513,109
Other 3,620 3,829
- ---------------------------------------------------------------------------------------------------------------------------------
$ 1,436,608 $ 1,463,830
- ---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities of long-term debt $ 36,600 $ 14,600
Accounts payable 17,158 21,015
Compensation and other accrued liabilities 30,361 32,591
Income taxes payable 9,586 5,103
Dividends payable 7,552 7,533
Liabilities of discontinued operations - 157
Unearned revenue 29,268 27,750
- ---------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 130,525 108,749
- ---------------------------------------------------------------------------------------------------------------------------------
Long-term debt, net of current maturities 320,600 394,700
Deferred items 216,336 216,612
Other 968 995
Stockholders' equity:
Serial convertible preferred stock, no par value; - -
authorized 500 shares: none issued
Common Stock, $2 par value; authorized 60,000 69,938 69,242
shares; issued and outstanding:
March 31, 2003 34,969 shares;
September 30, 2002 34,621 shares
Class B Common Stock, $2 par value; authorized 18,912 19,380
30,000 shares; issued and outstanding:
March 31, 2003 9,456 shares;
September 30, 2002 9,690 shares
Additional paid-in capital 71,798 67,084
Unearned compensation (3,339) (1,845)
Retained earnings 610,870 588,913
- ---------------------------------------------------------------------------------------------------------------------------------
768,179 742,774
- ---------------------------------------------------------------------------------------------------------------------------------
$ 1,436,608 $ 1,463,830
- ---------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes are an integral part of the Consolidated Financial Statements.
2
LEE ENTERPRISES, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------------------------
Six Months Ended
March 31
- ---------------------------------------------------------------------------------------------------------------------------------
(Thousands) 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Cash provided by operating activities:
Net income $ 37,082 $ 30,141
Loss from discontinued operations 20 140
- ---------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 37,102 30,281
Adjustments to reconcile income from continuing operations to net
cash provided by operating activities of continuing operations:
Depreciation and amortization 23,084 11,463
Stock compensation expense 2,268 1,882
Distributions in excess of current earnings of associated companies 356 198
Other, net 3,893 (3,586)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 66,703 40,238
- ---------------------------------------------------------------------------------------------------------------------------------
Cash provided by (required for) investing activities:
Proceeds from sales of temporary cash investments, net - 102,841
Purchases of property and equipment (5,569) (4,235)
Proceeds from sales of assets 3,970 7,130
Other (532) (148)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (required for) investing activities (2,131) 105,588
- ----------------------------------------------------------------------- -------------- ------------------ -------------------
Cash provided by (required for) financing activities:
Payments on notes payable (3,000) -
Proceeds from long-term debt 17,000 -
Payments on long-term debt (66,100) -
Common stock transactions (272) (207)
Dividends paid (15,083) (7,503)
Other 1,274 3,560
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash required for financing activities (66,181) (4,150)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (required for) discontinued operations 4,608 (43,195)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 2,999 98,481
Cash and cash equivalents:
Beginning of period 14,381 272,169
- ---------------------------------------------------------------------------------------------------------------------------------
End of period $ 17,380 $ 370,650
- ---------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes are an integral part of the Consolidated Financial Statements.
3
LEE ENTERPRISES, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1 Basis of Presentation
The Consolidated Financial Statements included herein are unaudited. In the
opinion of management, these financial statements contain all adjustments
(consisting of only normal recurring items) necessary to present fairly the
financial position of Lee Enterprises, Incorporated and subsidiaries (the
Company) as of March 31, 2003 and its results of operations and cash flows
for the periods presented. These Consolidated Financial Statements should
be read in conjunction with the Consolidated Financial Statements and Notes
thereto included in the Company's 2002 Annual Report on Form 10-K.
Because of seasonal and other factors, the results of operations for the
three months and six months ended March 31, 2003 are not necessarily
indicative of the results to be expected for the full year.
Effective October 1, 2002, the Company adopted the fair value provisions of
FASB Statement 123, Accounting for Stock-Based Compensation, as amended by
FASB Statement 148, Accounting for Stock-Based Compensation - Transition
and Disclosure, and all prior periods have been restated. See Note 5.
Certain amounts as previously reported have been reclassified to conform
with the current period presentation.
2 Acquisitions
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
to be 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.
In July 2002, the Company acquired the remaining 50% interest in SCN from a
privately owned company. The transaction was valued at $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 was paid in
November 2002. The Company's Flathead group of weekly newspapers in Montana
was transferred as partial consideration for the purchase.
The pro forma consolidated statement of income information for the three
months and six months ended March 31, 2002, set forth below, presents the
results of operations as if the acquisitions of Howard and SCN had occurred
at the beginning of the periods and is not necessarily indicative of future
results or actual results that would have been achieved had the
acquisitions occurred as of the beginning of the period.
--------------------------------------------------------------------------
Three Months Six Months
Ended Ended
March 31 March 31
(Thousands, except per common share data) 2002 2002
--------------------------------------------------------------------------
Operating revenue $ 148,862 $ 315,563
Income from continuing operations 14,283 34,140
Earnings per common share:
Basic $ 0.32 $ 0.77
Diluted 0.32 0.77
--------------------------------------------------------------------------
4
3 Investment 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, and other Wisconsin locations and also holds
interests in internet service ventures.
Summarized financial information of MNI is as follows:
-----------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
March 31 March 31
-----------------------------------------------------------------------------------------------------------------------
(Thousands) 2003 2002 2003 2002
-----------------------------------------------------------------------------------------------------------------------
Operating revenue $ 26,591 $ 24,400 $ 55,798 $ 50,870
Operating expenses, excluding depreciation
and amortization 20,058 17,718 40,523 36,043
Depreciation and amortization 1,407 971 2,770 1,975
Operating income 5,126 5,711 12,505 12,852
Net income 3,106 3,503 7,542 7,859
-----------------------------------------------------------------------------------------------------------------------
Debt of MNI totaled $32,344,000 at March 31, 2003 and September 30, 2002.
4 Goodwill and Other Intangible Assets
Changes in the carrying amount of goodwill are as follows:
-----------------------------------------------------------------------------------------------------------------------
Six Months Ended
(Thousands) March 31 2003
-----------------------------------------------------------------------------------------------------------------------
Goodwill, beginning of period $ 611,938
Goodwill adjustments related to acquisitions (313)
-----------------------------------------------------------------------------------------------------------------------
Goodwill, end of period $ 611,625
-----------------------------------------------------------------------------------------------------------------------
Identified intangible assets related to continuing operations consist of
the following:
-----------------------------------------------------------------------------------------------------------------------
March 31 September 30
(Thousands) 2003 2002
-----------------------------------------------------------------------------------------------------------------------
Unamortizable intangible assets:
Mastheads $ 26,022 $ 26,022
Amortizable intangible assets:
Noncompete convenants and consulting agreements 28,406 28,406
Less accumulated amortization (23,063) (21,967)
-----------------------------------------------------------------------------------------------------------------------
5,343 6,439
-----------------------------------------------------------------------------------------------------------------------
Customer and newspaper subscriber lists 525,757 525,224
Less accumulated amortization (57,344) (44,576)
-----------------------------------------------------------------------------------------------------------------------
468,413 480,648
-----------------------------------------------------------------------------------------------------------------------
$ 499,778 $ 513,109
-----------------------------------------------------------------------------------------------------------------------
Annual amortization of intangible assets related to continuing operations
for the five years ending March 2008 is estimated to be $27,710,000,
$26,425,000, $23,727,000, $23,216,000 and $23,037,000, respectively.
5
5 Stock Ownership Plans
A summary of activity related to the Company's stock option plan is as
follows:
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Weighted Average
Exercise Price
(Thousands, except per common share data) Shares
-----------------------------------------------------------------------------------------------------------------------
Outstanding at September 30, 2002 1,049 $ 29.04
Granted 300 32.52
Exercised (52) 25.56
Cancelled (8) 30.79
-----------------------------------------------------------------------------------------------------------------------
Outstanding at March 31, 2003 1,289 $ 29.98
-----------------------------------------------------------------------------------------------------------------------
At March 31, 2003, the Company has three stock-based employee compensation
plans. Prior to October 1, 2002, the Company accounted for those plans
under the recognition and measurement provisions of APB Opinion 25,
Accounting for Stock Issued to Employees, and related interpretations.
Accordingly, no compensation cost had been recognized for grants under the
stock option or stock purchase plans. Effective October 1, 2002, the
Company adopted the fair value recognition provisions of FASB Statement
123, Accounting for Stock-Based Compensation, for stock-based employee
compensation, as amended by FASB Statement 148, Accounting for Stock-Based
Compensation - Transition and Disclosure. All prior periods presented have
been restated to reflect the compensation cost that would have been
recognized had the recognition provisions of Statements 123 and 148 been
applied to all awards granted to employees after October 1, 1995. The
cumulative effect of the adoption of Statements 123 and 148 decreased
non-current deferred income tax liabilities and increased stockholders'
equity by $1,518,000 at September 30, 2002.
The impact of the adoption of Statements 123 and 148 on both income from
continuing operations and diluted earnings per common share is as follows:
-----------------------------------------------------------------------------------------------------------------------
Three Months Ended Year Ended
-----------------------------------------------------------------------------------------------------------------------
(Thousands, except per December 31 March 31 June 30 September 30 September 30
common share data) 2001 2002 2002 2002 2002
-----------------------------------------------------------------------------------------------------------------------
Income from continuing
operations:
As reported $ 18,037 $ 13,226 $ 30,756 $ 19,010 $ 81,029
Additional stock
compensation expense
(net of income tax
expense) (423) (559) (569) (594) (2,145)
-----------------------------------------------------------------------------------------------------------------------
As adjusted $ 17,614 $ 12,667 $ 30,187 $ 18,416 $ 78,884
-----------------------------------------------------------------------------------------------------------------------
Diluted earnings per
common share:
As reported $ 0.41 $ 0.30 $ 0.69 $ 0.43 $ 1.83
Additional stock
compensation expense (0.01) (0.01) (0.01) (0.01) (0.05)
-----------------------------------------------------------------------------------------------------------------------
As adjusted $ 0.40 $ 0.29 $ 0.68 $ 0.42 $ 1.78
-----------------------------------------------------------------------------------------------------------------------
Options to purchase 1,092,801 shares of common stock with a weighted
average exercise price of $28.69 per share were outstanding at March 31,
2002.
6 Income Taxes
The provision for income taxes includes deferred taxes and is based upon
estimated annual effective tax rates in the tax jurisdictions in which the
Company operates.
6
7 Earnings Per Common Share
The following table sets forth the computation of basic and diluted
earnings per common share:
-----------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
March 31 March 31
-----------------------------------------------------------------------------------------------------------------------
(Thousands, except per common share data) 2003 2002 2003 2002
-----------------------------------------------------------------------------------------------------------------------
Income applicable to common stock:
Continuing operations $ 14,624 $ 12,667 $ 37,102 $ 30,281
Discontinued operations - (103) (20) (140)
-----------------------------------------------------------------------------------------------------------------------
Net income $ 14,624 $ 12,564 $ 37,082 $ 30,141
-----------------------------------------------------------------------------------------------------------------------
Weighted average common shares outstanding 44,423 44,164 44,397 44,125
Less non-vested restricted stock 166 123 158 116
-----------------------------------------------------------------------------------------------------------------------
Basic average common shares 44,257 44,041 44,239 44,009
Dilutive stock options and restricted stock 148 290 140 277
-----------------------------------------------------------------------------------------------------------------------
44,405 44,331 44,379 44,286
-----------------------------------------------------------------------------------------------------------------------
Earnings per common share:
Basic:
Continuing operations $ 0.33 $ 0.29 $ 0.84 $ 0.68
Discontinued operations - - - -
-----------------------------------------------------------------------------------------------------------------------
Net income $ 0.33 $ 0.29 $ 0.84 $ 0.68
-----------------------------------------------------------------------------------------------------------------------
Diluted:
Continuing operations $ 0.33 $ 0.29 $ 0.84 $ 0.68
Discontinued operations - - - -
-----------------------------------------------------------------------------------------------------------------------
Net income $ 0.33 $ 0.29 $ 0.84 $ 0.68
-----------------------------------------------------------------------------------------------------------------------
8 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.
On January 17, 2003, the FASB issued Interpretation 46, Consolidation of
Variable Interest Entities - an interpretation of ARB No. 51
(Interpretation 46). This interpretation provides new consolidation
accounting guidance for entities involved with special purpose entities
(SPE). This guidance will require a primary beneficiary, defined as an
entity which participates in either a majority of the risks or rewards of
such SPE, to consolidate the SPE. An SPE would not be subject to this
interpretation if such entity has sufficient voting equity capital
(presumed to require a minimum of 10%), such that the entity is able to
finance its activities without additional subordinated financial support
from other parties. Interpretation 46 is not expected to have a material
effect on the Company's Consolidated Financial Statements.
Item 2. 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
months and six months ended March 31, 2003. This discussion should be read in
conjunction with the Consolidated Financial Statements and related Notes thereto
and the 2002 Annual Report on Form 10-K.
7
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.
NON-GAAP FINANCIAL MEASURES
Operating Cash Flow
Operating cash flow, which is defined as operating income before depreciation,
amortization, and equity in net income of associated companies, and operating
cash flow margin (operating cash flow divided by operating income) represent
non-GAAP financial measures that are used in the analyses below. A
reconciliation of operating cash flow to operating income, the most directly
comparable measure under accounting principles generally accepted in the United
States of America (GAAP), is included in tables under the captions Operating
Expenses and Results of Operations. The Company believes that operating cash
flow and the related margin percentage are useful measures of evaluating its
financial performance because of their focus on the Company's results from
operations before depreciation and amortization. The Company also believes that
these measures are several of the alternative financial measures of performance
used by investors, rating agencies and financial analysts to estimate the value
of a company and evaluate its ability to meet debt service requirements.
Same Property Comparisons
Certain information below, as noted, is presented on a same property basis,
which is exclusive of acquisitions and divestitures. The Company believes such
comparisons provide meaningful information for an understanding of changes in
its revenue and operating expenses. Same property also excludes Madison
Newspapers, Inc. (MNI), in order to comply with newly issued SEC regulations
related to disclosure of non-GAAP financial measures. Lee owns 50% of the
capital stock of MNI which for financial reporting purposes is reported using
the equity method of accounting.
CONTINUING OPERATIONS - THREE MONTHS ENDED MARCH 31, 2003
Operating results, as reported in the Consolidated Financial Statements, are
summarized below:
- -----------------------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31
- -----------------------------------------------------------------------------------------------------------------------------
(Thousands, except per common share data) 2003 2002 Percent Change
- -----------------------------------------------------------------------------------------------------------------------------
Operating revenue $ 155,333 $ 96,508 61.0%
Operating cash flow 37,354 23,782 57.1
Operating income 27,194 20,199 34.6
Nonoperating expense, net (4,110) (377) NM
Income from continuing operations 14,624 12,667 15.4
Earnings per common share:
Basic $ 0.33 $ 0.29 13.8%
Diluted 0.33 0.29 13.8
- -----------------------------------------------------------------------------------------------------------------------------
8
Operating Revenue
Revenue, as reported in the Consolidated Financial Statements, consists of the
following:
- -----------------------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31 Percent Change
- -----------------------------------------------------------------------------------------------------------------------------
(Thousands) 2003 2002 Total Same Property
- -----------------------------------------------------------------------------------------------------------------------------
Advertising revenue:
Retail $ 60,771 $ 36,682 65.7% 3.0%
National 3,760 2,484 51.4 (3.4)
Classified:
Employment 9,247 5,097 81.4 (0.8)
Automotive 9,538 4,857 96.4 1.8
Real estate 7,482 3,655 104.7 12.3
All other 12,284 8,557 43.6 0.3
- -----------------------------------------------------------------------------------------------------------------------------
Total classified 38,551 22,166 73.9 2.4
- -----------------------------------------------------------------------------------------------------------------------------
Total advertising 103,082 61,332 68.1 2.5
- -----------------------------------------------------------------------------------------------------------------------------
Circulation 33,113 20,030 65.3 (0.3)
Other:
Commercial printing 5,198 5,129 1.3 (4.8)
Online 2,698 1,572 71.6 35.6
Niche publications and other 11,242 8,445 33.1 16.9
- -----------------------------------------------------------------------------------------------------------------------------
Total operating revenue $ 155,333 $ 96,508 61.0% 3.3%
- -----------------------------------------------------------------------------------------------------------------------------
All categories of revenue were substantially impacted by the acquisition of
Howard, which the Company purchased in April 2002. In total, acquisitions
accounted for $56,643,000 of revenue growth in the current year quarter.
Businesses sold in the year ended September 2002, but still included in
continuing operations, did not impact the current year quarter but accounted for
$1,013,000 of revenue in the prior year quarter. See Note 2 to the Consolidated
Financial Statements included herein.
Sundays generate substantially more advertising and circulation revenue than any
other day of the week. The quarter ended March 31, 2003 had the same number of
Sundays as the same period last year.
For the quarter ended March 31, 2003, total same property revenue increased
$3,195,000, or 3.3%, and total same property advertising revenue increased
$1,515,000, or 2.5%. Same property retail revenue increased $1,081,000, or 3.0%.
Average same property retail rate, excluding preprint insertions, increased
2.7%.
Same property classified advertising revenue increased approximately 2.4% for
the quarter ended March 31, 2003, the second consecutive quarterly increase.
Higher margin employment advertising at the daily newspapers decreased 0.8% on a
same property basis for the quarter, but was more than offset by a significant
same property revenue increase in real estate of 12.3%. Real estate interest
rates remain favorable. Same property automotive classified advertising
increased 1.8%. Same property average classified rate declined 0.1%.
Advertising lineage, as reported on a same property basis for the Company's
daily newspapers, consists of the following:
- -----------------------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31
- -----------------------------------------------------------------------------------------------------------------------------
(Thousands of Inches) 2003 2002 Percent Change
- -----------------------------------------------------------------------------------------------------------------------------
Retail 1,345 1,319 2.0%
National 69 83 (16.9)
Classified 1,319 1,290 2.2
- -----------------------------------------------------------------------------------------------------------------------------
2,733 2,692 1.5%
- -----------------------------------------------------------------------------------------------------------------------------
Same property circulation revenue decreased $54,000, or 0.3%, in the current
year quarter. The Company's unaudited same property average daily newspaper
circulation units increased 0.2% and Sunday circulation declined 0.1% for the
three months ended March 2003, compared to the same period in the prior year.
The Company remains focused on growing circulation units and revenue through a
number of initiatives.
9
Same property commercial printing revenue declined $245,000, or 4.8%. Same
property online revenue increased $559,000, or 35.6%, due to growth in
advertising revenue and cross-selling with the Company's newspapers.
Operating Expenses and Results of Operations
The following table sets forth the Company's operating expenses and results of
operations, as reported in the Consolidated Financial Statements:
- -----------------------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31
- -----------------------------------------------------------------------------------------------------------------------------
(Thousands) 2003 2002 Percent Change
- -----------------------------------------------------------------------------------------------------------------------------
Compensation $ 67,414 $ 40,598 66.1%
Newsprint and ink 13,316 8,153 63.3
Other operating expenses 37,249 23,975 55.4
- -----------------------------------------------------------------------------------------------------------------------------
117,979 72,726 62.2
- -----------------------------------------------------------------------------------------------------------------------------
Operating cash flow 37,354 23,782 57.1
Depreciation and amortization 11,713 5,335 119.6
- -----------------------------------------------------------------------------------------------------------------------------
Operating income, before equity in net income
of associated companies 25,641 18,447 39.0
Equity in net income of associated companies 1,553 1,752 (11.4)
- -----------------------------------------------------------------------------------------------------------------------------
Operating income $ 27,194 $ 20,199 34.6%
- -----------------------------------------------------------------------------------------------------------------------------
Costs other than depreciation and amortization increased $45,253,000, or 62.2%.
All categories of expenses were substantially impacted by the acquisition of
Howard, which the Company purchased in April 2002. In total, acquisitions
accounted for $42,693,000 of operating costs, excluding depreciation and
amortization, in the current year quarter. Businesses sold did not impact
operating expenses in the current year quarter, but accounted for $1,062,000 of
operating expenses other than depreciation and amortization in the prior year
quarter. On a same property basis, such costs increased 3.6%. Compensation
expense increased $26,816,000, or 66.1%, in the current year quarter due to
costs of acquired businesses and a 7.0% increase in same property compensation
expense. Higher medical expenses, normal salary adjustments, higher incentive
compensation from increasing revenue, and one-time and permanent cost reductions
in benefit programs in the prior year quarter contributed to the increase in
same property costs. Same property full time equivalent employees decreased 1.4%
year over year. Exclusive of the prior year changes in benefit programs, same
property compensation expense increased 4.1% in the current year quarter.
Newsprint and ink costs increased $5,163,000, or 63.3%, in the current year
quarter as volume increases related to acquired businesses more than offset same
property declines. Same property newsprint and ink expense decreased by 5.1% in
the quarter and volume declined 2.4%. Other operating costs, exclusive of
depreciation and amortization, increased $13,274,000, or 55.4%, in the current
year quarter. On a same property basis, other operating costs increased 1.3%.
The increase in depreciation and amortization expense is primarily due to the
acquisitions of Howard and SCN.
Operating cash flow improved 57.1% to $37,354,000 in the current year quarter
from $23,782,000 in the prior year. Operating cash flow margin declined to 24.0%
from 24.6% in the prior year. Lower newsprint prices were offset by lower
margins of acquired businesses and other cost increases as noted above.
Operating income increased 34.6% to $27,194,000. Operating income margin
decreased to 17.5% from 20.9% for the same reasons, but was further impacted by
a higher level of amortization expense from acquisitions.
Nonoperating Income and Expense
Financial income decreased $2,265,000 to $203,000. The Company's invested
balances were substantially reduced in April 2002 by the acquisition of Howard.
Financial expense increased due to debt from the acquisitions of Howard and SCN,
offset by lower interest rates and debt reduction from operating cash flow.
10
Overall Results
The effective income tax rates were 36.6% and 36.1% for the quarters ended March
31, 2003 and 2002, respectively. The prior year tax rate was lower primarily due
to tax-exempt interest income.
As a result of all of the above, earnings per diluted common share from
continuing operations increased 13.8% to $0.33 per share from $0.29 per share in
the prior year quarter. The adoption of FASB Statements 123 and 148 reduced the
prior year's quarterly results by $0.01 per share.
CONTINUING OPERATIONS - SIX MONTHS ENDED MARCH 31, 2003
Operating results, as reported in the Consolidated Financial Statements, are
summarized below:
- -----------------------------------------------------------------------------------------------------------------------------
Six Months Ended
March 31
- -----------------------------------------------------------------------------------------------------------------------------
(Thousands, except per common share data) 2003 2002 Percent Change
- -----------------------------------------------------------------------------------------------------------------------------
Operating revenue $ 325,880 $ 203,868 59.8%
Operating cash flow 86,602 55,250 56.7
Operating income 67,289 48,003 40.2
Nonoperating expense, net (8,804) (955) NM
Income from continuing operations 37,102 30,281 22.5
Earnings per common share:
Basic $ 0.84 $ 0.68 23.5%
Diluted 0.84 0.68 23.5
- -----------------------------------------------------------------------------------------------------------------------------
Operating Revenue
Revenue, as reported in the Consolidated Financial Statements, consists of the
following:
- -----------------------------------------------------------------------------------------------------------------------------
Six Months Ended Percent Change
March 31
- -----------------------------------------------------------------------------------------------------------------------------
(Thousands) 2003 2002 Total Same Property
- -----------------------------------------------------------------------------------------------------------------------------
Advertising revenue:
Retail $ 136,612 $ 82,626 65.3% 3.1%
National 7,832 5,154 52.0 (4.2)
Classified:
Employment 17,997 10,187 76.7 (2.6)
Automotive 19,648 10,169 93.2 1.3
Real estate 14,655 7,505 95.3 9.1
All other 25,140 17,368 44.7 1.9
- -----------------------------------------------------------------------------------------------------------------------------
Total classified 77,440 45,229 71.2 1.9
- -----------------------------------------------------------------------------------------------------------------------------
Total advertising 221,884 133,009 66.8 2.4
- -----------------------------------------------------------------------------------------------------------------------------
Circulation 66,725 40,452 64.9 (0.2)
Other:
Commercial printing 10,857 11,003 (1.3) (7.3)
Online 5,179 3,046 70.0 37.3
Niche publications and other 21,235 16,358 29.8 12.9
- -----------------------------------------------------------------------------------------------------------------------------
Total operating revenue $ 325,880 $ 203,868 59.8% 2.7%
- -----------------------------------------------------------------------------------------------------------------------------
All categories of revenue were substantially impacted by the acquisition of
Howard, which the Company purchased in April 2002. In total, acquisitions
accounted for $119,685,000 of revenue growth in the six months ended March 31,
2003. Businesses sold in the year ended September 2002, but still included in
continuing operations, did not impact the six months ended March 31, 2003 but
accounted for $3,148,000 of revenue in the prior year six month period.
11
Sundays generate substantially more advertising and circulation revenue than any
other day of the week. The six months ended March 31, 2003 had the same number
of Sundays as the same period last year.
For the six months ended March 31, 2003, total same property revenue increased
$5,475,000, or 2.7%, and total same property advertising revenue increased
$3,107,000, or 2.4%. Same property retail revenue increased $2,469,000, or 3.1%.
Same property average retail rate, excluding preprint insertions, increased
3.0%.
Same property classified advertising revenue increased approximately 1.9% for
the six months ended March 31, 2003. Higher margin employment advertising at the
daily newspapers decreased 2.6% for the six month period, but was more than
offset by a significant revenue increase in same property real estate of 9.1%.
Real estate interest rates remain favorable. Same property automotive
advertising increased 1.3%. Same property classified average rates increased
0.3%.
Advertising lineage, as reported on a same property basis for the Company's
daily newspapers, consists of the following:
- -----------------------------------------------------------------------------------------------------------------------------
Six Months Ended
March 31
- -----------------------------------------------------------------------------------------------------------------------------
(Thousands of Inches) 2003 2002 Percent Change
- -----------------------------------------------------------------------------------------------------------------------------
Retail 3,057 3,045 0.4%
National 145 172 (15.7)
Classified 2,712 2,685 1.0
- -----------------------------------------------------------------------------------------------------------------------------
5,914 5,902 0.2%
- -----------------------------------------------------------------------------------------------------------------------------
Same property circulation revenue decreased $61,000, or 0.2%, in the current
year six month period. The Company's same property ABC Publisher's Statement
FAS/FAX showed that average daily newspaper circulation units increased 1.1% and
Sunday circulation declined 0.1% for the six months ended March 2003, compared
to the same period in the prior year. Overall daily circulation increased 0.7%
and Sunday increased 0.3% due to improving circulation of newspapers acquired in
2002. The Company remains focused on growing circulation units and revenue
through a number of initiatives.
Same property commercial printing revenue declined $806,000, or 7.3%. Same
property online revenue increased $1,134,000, or 37.3%, due to growth in
advertising revenue and cross-selling with the Company's newspapers.
Operating Expenses and Results of Operations
The following table sets forth the Company's operating expenses and results of
operations, as reported in the Consolidated Financial Statements:
- -----------------------------------------------------------------------------------------------------------------------------
Six Months Ended
March 31
- -----------------------------------------------------------------------------------------------------------------------------
(Thousands) 2003 2002 Percent Change
- -----------------------------------------------------------------------------------------------------------------------------
Compensation $ 135,906 $ 81,082 67.6%
Newsprint and ink 27,766 17,930 54.9
Other operating expenses 75,606 49,606 52.4
- -----------------------------------------------------------------------------------------------------------------------------
239,278 148,618 61.0
- -----------------------------------------------------------------------------------------------------------------------------
Operating cash flow 86,602 55,250 56.7
Depreciation and amortization 23,084 11,176 106.5
- -----------------------------------------------------------------------------------------------------------------------------
Operating income, before equity in net income
of associated companies 63,518 44,074 44.1
Equity in net income of associated companies 3,771 3,929 (4.0)
- -----------------------------------------------------------------------------------------------------------------------------
Operating income $ 67,289 $ 48,003 40.2%
- -----------------------------------------------------------------------------------------------------------------------------
12
Costs other than depreciation and amortization increased $90,660,000, or 61.0%.
All categories of expenses were substantially impacted by the acquisition of
Howard, which the Company purchased in April 2002. In total, acquisitions
accounted for $86,179,000 of operating costs, excluding depreciation and
amortization, in the current year six month period. Businesses sold did not
impact operating expenses in the current year six month period, but accounted
for $2,780,000 of operating expenses other than depreciation and amortization in
the prior year six month period. On a same property basis, such costs increased
2.9%. Compensation expense increased $54,824,000, or 67.6%, in the current year
six month period due to costs of acquired businesses and a 7.1% increase in same
property compensation expense. Higher medical expenses, normal salary
adjustments, higher incentive compensation from increasing revenue, and one-time
and permanent cost reductions in benefit programs in the prior year six month
period contributed to the increase in same property costs. Same property full
time equivalent employees decreased 1.1% year over year. Exclusive of the prior
year changes in benefit programs, same property compensation expense increased
4.3% in the current year six month period. Newsprint and ink costs increased
$9,836,000, or 54.9%, in the current year six month period as volume increases
related to acquired businesses and price increases more than offset same
property declines. Same property newsprint and ink expense decreased by 10.1% in
the six month period and volume declined 1.8%. Other operating costs, exclusive
of depreciation and amortization, increased $26,000,000, or 52.4%, in the
current year six month period. On a same property basis, other operating costs
increased 1.4%. The increase in depreciation and amortization expense is
primarily due to the acquisitions of Howard and SCN.
Operating cash flow improved 56.7% to $86,602,000 in the current year six month
period from $55,250,000 in the prior year. Operating cash flow margin declined
to 26.6% from 27.1% in the prior year. Lower newsprint prices were offset by
lower margins of acquired businesses and other cost increases as noted above.
Operating income increased 40.2% to $67,289,000. Operating income margin
decreased to 20.6% from 23.5% for the same reasons, but was further impacted by
a higher level of amortization expense from acquisitions.
Nonoperating Income and Expense
Financial income decreased $4,692,000 to $543,000. The Company's invested
balances were substantially reduced in April 2002 by the acquisition of Howard.
Financial expense increased due to debt from the acquisitions of Howard and SCN,
offset by lower interest rates and debt reduction from operating cash flow.
Overall Results
The effective income tax rates were 36.6% and 35.6% for the six month period
ended March 31, 2003 and 2002, respectively. The prior year tax rate was lower
primarily due to tax-exempt interest income.
As a result of all of the above, earnings per diluted common share from
continuing operations increased 23.5% to $0.84 per share from $0.68 per share in
the prior year six month period. The adoption of FASB Statements 123 and 148
reduced the prior year's results by $0.02 per share.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities of continuing operations was $66,703,000
for the six months ended March 31, 2003 and $40,238,000 for the same period in
2002. Increased income from continuing operations and changes in working capital
account for the change between years.
Cash required for investing activities totaled $2,131,000 for the six months
ended March 31, 2003, and provided $105,588,000 in the same period in 2002.
Proceeds from the sale of temporary cash investments were responsible for the
primary source of funds in the prior year.
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 or, if necessary, by accessing the capital markets.
Cash required for financing activities totaled $66,181,000 during the six months
ended March 31, 2003, and $4,150,000 in the prior year. Debt repayments totaling
$69,100,000 and dividends were the primary uses of funds in the current year
period.
13
Cash provided by discontinued operations totaling $4,608,000 in the current year
primarily reflects net proceeds from the sale of businesses. Cash required for
discontinued operations totaled $43,195,000 during the six months ended March
31, 2002, primarily for income tax payments related to the gain on sale of
discontinued operations.
Cash and cash equivalents increased $2,999,000 for the six months ended March
31, 2003 and $98,481,000 for the same period in 2002.
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.
In February 2003, several newsprint manufacturers announced price increases of
$50 per metric ton, effective for deliveries in March 2003. The final extent of
changes in current prices, if any, is subject to negotiation between such
manufacturers and the Company.
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 in the 2002 Annual
Report on Form 10-K, for a description of the Company's accounting policies used
in the preparation of its Consolidated Financial Statements.
Item 3. 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 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 to LIBOR would decrease
income from continuing operations before income taxes on an annualized basis by
approximately $2,070,000, based on floating rate debt outstanding at March 31,
2003, excluding MNI.
14
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 ton newsprint price increase would result in, excluding MNI, an
annualized reduction in income from continuing operations before income taxes of
approximately $1,115,000, 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 the Company's fixed-rate debt, which
totals $150,200,000 at March 31, 2003.
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 March 31, 2003 is approximately $6,682,000. There is no impact on
operating results from such changes in interest rates.
Item 4. 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 March 31, 2003, 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 March 31, 2003.
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of the Company was held on January 22, 2003.
William E. Mayer, Gregory P. Schermer, and Mark Vittert were elected as
directors for a three-year terms expiring at the 2005 annual meeting.
Votes were cast, all by proxy, for nominees for director as follows:
- --------------------------------------------------------------------------------
For Withheld
- --------------------------------------------------------------------------------
William E. Mayer 107,803,581 620,570
Gregory P. Schermer 103,726,652 4,697,499
Mark Vittert 107,434,994 988,157
- --------------------------------------------------------------------------------
The Stock Plan for Non-Employee Directors (Stock Plan) was amended to increase
the number of shares annually awarded to non-employee directors to 1,500 shares
from 500 shares and to increase the number of shares reserved for the Stock Plan
from 50,000 shares to 150,000 shares. Votes were 98,256,614 for the amendment
and 9,545,819 against the amendment, with 621,718 that abstained from voting.
15
Item 6. Exhibits and Reports on Form 8-K
Exhibits
Exhibit 99.6 Sarbanes-Oxley Act Section 906 Certification
Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended March 31, 2003.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LEE ENTERPRISES, INCORPORATED
/s/ Carl G. Schmidt DATE: May 14, 2003
- -----------------------------------------------------
Carl G. Schmidt
Vice President, Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
16
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Mary E. Junck, certify that:
1. I have reviewed this quarterly report on Form 10-Q (Quarterly Report) of
Lee Enterprises, Incorporated (Registrant);
2. Based on my knowledge, this Quarterly Report does not contain any untrue
statement of a material fact or omit to state a 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 Quarterly Report;
3. Based on my knowledge, the Consolidated Financial Statements, and other
financial information included in this Quarterly 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
Quarterly 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 we 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 Quarterly
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 Quarterly Report (the Evaluation Date); and
c) presented in this Quarterly 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 Registrant's Board of Directors (or persons performing the
equivalent function):
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
Quarterly Report whether or not 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: May 14, 2003
/s/ Mary E. Junck
----------------------------------------------
Mary E. Junck
Chairman, President and Chief Executive Officer
17
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Carl G. Schmidt, certify that:
1. I have reviewed this quarterly report on Form 10-Q (Quarterly Report) of
Lee Enterprises, Incorporated (Registrant);
2. Based on my knowledge, this Quarterly Report does not contain any untrue
statement of a material fact or omit to state a 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 Quarterly Report;
3. Based on my knowledge, the Consolidated Financial Statements, and other
financial information included in this Quarterly 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
Quarterly 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 we 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 Quarterly
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 Quarterly Report (the Evaluation Date); and
c) presented in this Quarterly 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 Registrant's Board of Directors (or persons performing the
equivalent function):
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
Quarterly Report whether or not 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: May 14, 2003
/s/ Carl G. Schmidt
----------------------------------------------------
Carl G. Schmidt
Vice President, Chief Financial Officer and Treasurer
18
EXHIBIT 99.6
The following statement is being furnished 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 to our
knowledge:
(i) this quarterly report on Form 10-Q for the period ended March 31, 2003
(Quarterly Report), 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 Quarterly Report fairly presents, in all
material respects, the financial condition and results of operations of Lee
Enterprises, Incorporated for the periods presented in the Quarterly
Report.
Dated as of this 14th day of May, 2003
/s/ Mary E. Junck /s/ Carl G. Schmidt
- -------------------------------- -------------------------------------
Mary E. Junck Carl G. Schmidt
Chairman, President and Vice President, Chief Financial Officer
Chief Executive Officer and Treasurer
A signed original of this written statement required by Section 906 has been
provided to Lee Enterprises, Incorporated and will be retained by Lee
Enterprises, Incorporated and furnished to the Securities and Exchange
Commission upon request.
19