Lee Enterprises Inc.

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Lee Enterprises Inc.

201 Harrison Street
Davenport, Iowa 52801-1939
U.S.A.
Telephone: (563) 383-2100
Fax: (563) 323-9609
Web site: http://www.lee.net

Public Company
Incorporated: 1890 as the Ottumwa Daily Courier
Employees: 6,700
Sales: $656.7 million (2003)
Stock Exchanges: New York
Ticker Symbol: LEE
NAIC: 511110 Newspaper Publishers

Lee Enterprises Inc. is a leading newspaper publisher of daily newspapers in mid-size markets found in the Pacific Northwest, Midwest, and Northeastern United States. It owns and has stakes in approximately 45 newspapers that have a combined circulation of 1.1 million daily and 1.2 million Sunday. The company also publishes nearly 200 weekly newspapers, shoppers, and classified and specialty publications, and maintains Web sites for many of its papers. Lee sold off its broadcast holdings in 2000 in order to focus on its core printing and publishing operations.

Early History

The founder of the publishing venture that would become Lee Enterprises, A.W. Lee, was shaped by his conservative midwestern upbringing. Soon after marrying, Lee's parents moved from Philadelphia to Iowa City and became pioneer farmers. His mother abandoned her Quaker roots, and his father left behind a family that was well placed in society. Lee was exposed to both a strict upbringing and the newspaper business during his childhood. Besides working as a bookkeeper for the Muscatine Journal, Lee's father, John B. Lee, enjoyed writing and kept a detailed diary of the family's affairs. Even after his childhood, Lee would be exposed to his father's stern business ethics and attention to detail while working under him as a bookkeeper.

Before Lee took a job with his father at the Muscatine Journal, he distinguished himself at the age of 13 by being the youngest student ever admitted to the State University of Iowa. While he excelled at mathematics, Lee knew at that early age that he wanted to pursue a career related to writing and editing. He was an admirer of the writings of Ralph Waldo Emerson and always carried small pocket books of Emerson's essays wherever he went. Lee subscribed to Emerson's motto "trust thyself," which meant that individuals could improve their lives if they believed strongly in what they were doing and what they wanted to achieve.

A few years after graduating from college, Lee succeeded his father as head bookkeeper at the Muscatine Journal. However, because he wanted to write, he left that secure position to work for the Chicago Times. Following a two-year stint as a writer and part-time editor, he returned to Iowa. After getting together $16,000, which was most of his savings combined with money invested by family and friends, the 32-year-old Lee bought the Ottumwa Daily Courier in 1890. He then began to shape it into what he believed a newspaper should be: a medium that served the local community and had a duty, as well as a right, to provide the most reliable and most provocative news available. Above all, Lee believed his newspaper should conform to a high ethical standard that would instill confidence in its readers. Lee's writing and editing skills, combined with his training as a bookkeeper, contributed to his success in this new venture during the 1890s. Furthermore, his emphasis on integrity and journalistic responsibility, which is documented in company annals, became a hallmark of the Daily Courier. During the 1890s, Lee's two sons died, and to that misfortune was attributed his noted determination to help young men achieve success in his company.

Expansion Begins in the Late 1890s

Encouraged by the growth of the Daily Courier, Lee began seeking a way to expand his publishing operations near the turn of the century. In 1899, he purchased the Davenport Times, whose name he changed to the Daily Times, thus initiating a newspaper syndicate. He sent an associate and long-time Muscatine Journal employee, E.P. Adler, to help run the new concern. Lee had considered a number of potential acquisitions but selected the Davenport Times because of its solid reputation, untapped readership potential, and advertising opportunities. It was soon clear that Lee's perception of the publication's potential was correct, as readership and revenues climbed.

Recognizing the potential to improve and then profit from other holdings, Lee bought his old hometown newspaper, the Muscatine Journal, from his brother-in-law in 1903. In 1907, he picked up the Hannibal Courier-Post, a newspaper in nearby Missouri, and the La Crosse Tribune in Wisconsin, which was just north of Lee's Iowa operations. Lee achieved gains with those papers similar to those he had enjoyed with the Daily Times. His recipe for success was relatively straightforward: find a newspaper with promise in a small-to medium-sized town, increase its circulation and advertising sales, and hire an astute manager to operate it. An important element of Lee's strategy was management autonomy. The management team of each of his papers was allowed to run the organization almost as though it was their own business. Lee believed that each publication should be financially independent and should not rely on resources from his other holdings to support it.

Shortly after launching his aggressive acquisition program, Lee died as a result of heart failure during a 1907 vacation in Europe. Because he had hired capable and independent managers, however, the company was in good hands. Adler was selected to head the Lee Syndicate, as it had become known, and co-worker Jim Powell became his vice-president. Adler, once described as "a fire-eating and adventurous but resourceful pioneer," complemented Powell's more cautious nature. Adler's colorful life was evidenced in 1917 when several men attempted to kidnap him from a hotel, stuff him in a trunk, and hold him for $40,000 ransom. Adler was able to fend off the kidnappers as they beat him and captured one of them with the help of passersby. All of his attackers were eventually convicted, and one hanged himself in jail. Immediately after the renowned event, Adler sent this telling radiogram message to his family: "Have suddenly become famous. Slightly injured. Nothing serious. Home tonight. Don't worry.—Dad."

Adler ran Lee Syndicate until 1947. During that period he perpetuated A.W. Lee's legacy of ethical reporting and community service. In addition, he sustained efforts to expand the company by acquiring other newspapers and improving their performance. In 1915, he purchased the Democrat, a Davenport, Iowa, newspaper. By 1930, he had added five newspapers to the Lee fold, including publications in Nebraska and Illinois. The firm was organized as a holding company in 1928 under the name Lee Syndicate Company before postponing its acquisition activity during the Depression years. When it did resume expansion efforts, Adler took the company in a new direction.

Diversification and Reorganization: 1930s–60s

In 1937, Lee purchased its first broadcasting unit, KGLO, a radio station in Mason City, Iowa. In 1941, it purchased interests in a Nebraska station, and in 1944 Lee bought WTAD, of Quincy, Illinois. Lee's extension into the broadcasting industry was led by Lee P. Loomis, who had started with Lee in 1902 as a farm-to-farm subscription solicitor. Loomis was a nephew of A.W. Lee and had worked his way up to become publisher of one of Lee's newspapers. Adler had disagreed with Loomis about whether or not the company should get into radio but relented under the condition that the investments begin to show a profit within two years. Despite several hurdles, Loomis achieved profitability in radio. Lee's radio holdings were eventually jettisoned, however, in response to Federal Communication Commission requirements regarding simultaneous ownership of radio and newspaper concerns.

Adler died in 1949 after 42 years of leadership, and Loomis assumed the presidency. In 1950, all of Lee's holding were linked under a new corporate umbrella, Lee Enterprises, Incorporated. The company was reorganized, and some of its newspapers were consolidated. In 1953, Lee's first television station, KHQA-TV, began broadcasting to Hannibal and Quincy, Illinois. One year later, Lee started KGLO-TV in Mason City, Iowa. Loomis viewed the jump into television as a means of capturing the advertising market share that was shifting away from newspapers. He also continued to emphasize growth of Lee's core publications divisions. Just before retiring in 1960, Loomis oversaw the buyout of six Montana newspapers for $6 million. Also in 1960, all of Lee's holdings were officially consolidated under Lee Enterprises Inc.

Loomis passed the baton to Philip Adler, the son of E.P. Adler. The younger Adler had worked as a reporter, editor, and then publisher for Lee since 1926 and had also served as editor on both his high school and college newspapers during the 1920s. Like those before him, E.P. Adler maintained the company's emphasis on integrity and honesty. Earlier in his career, Adler was tested by a series of investigative pieces he wrote about a local businessman. Several readers canceled their subscriptions in protest, but Adler stuck to his story. After the businessman fled town with much of their money, most of those subscribers renewed. In addition to a strong code of ethics, Adler also worked to improve the quality of Lee's newspapers. He ended the practice of running many syndicated columns and press releases, for example, and instead encouraged his publishers to generate copy in-house.

Company Perspectives:

Our company is focused on five key operating priorities: Grow revenue creatively and rapidly; Improve readership and circulation; Emphasize strong local news; Build our online future; Exercise careful cost controls.

Adler served as president of Lee for ten years, during which he continued to increase its operations and holdings. In 1960, for example, KEYC-TV of Mankato, Minnesota, began broadcasting. In 1967, the company moved all of its newspaper and broadcasting divisions to a new corporate headquarters in Davenport, and in 1969 Lee made its first public stock offering to raise cash for a new round of acquisitions. Shortly thereafter, Lee bought the Journal Times in Racine, Wisconsin, and the Corvallis Gazette-Times of Corvallis, Oregon. It also completed the acquisition of a few newspapers in which it held a partial interest. By the time Adler retired in 1970, Lee was a diversified radio, television, and newspaper company active in ten midwestern and western states.

David K. Gottlieb succeeded Adler. Gottlieb started working for Lee in 1936 and worked his way up through the ranks to vice-president of the entire company by 1967. He served only three years before he died unexpectedly of a heart attack in 1973. His most important contribution to Lee during that period was the initiation of a joint venture with Nippon Paint Co., Ltd, of Japan. In 1972, the two companies formed NAPP Systems Inc. to manufacture an advanced printing device for sale to the publishing industry. NAPP's innovative printing plates significantly sped up the plate-making process and reduced the number of people required to accomplish a specific task by as much as 50 percent. Also under Gottlieb's leadership, Lee purchased WSAZ-TV, an NBC affiliate in North Carolina, and WMDR-FM in Illinois.

Continued Growth: 1970s–90s

Lloyd G. Schermer became president of Lee in 1973. The 46-year-old Schermer started with Lee in 1954 after receiving his masters degree in business administration from Harvard University. He moved from an advertising position to publisher of a Lee newspaper by 1961. Schermer was an avid outdoors-man and, like all of the Lee presidents before him, played a very active leadership role in local and regional volunteer programs. Schermer also emphasized reporting and broadcasting integrity as an integral tenet of the Lee Enterprises philosophy, and he sustained the steady expansion and acquisition activity that had made Lee a regional media contender. The first Lee purchase under Schermer's direction was KGMB-TV of Honolulu, Hawaii, in 1976. Lee also picked up KOIN-TV in Portland, Oregon, in 1977, and purchased the Bismarck Tribune (North Dakota) in 1978. In 1979, and 1980, moreover, the company acquired newspapers in Illinois and Minnesota. Acquisitions of TV stations in New Mexico, Arizona, and Nebraska followed in 1985 and 1986.

In addition to expanding Lee's holdings, Schermer drew on his Harvard-taught management techniques to whip the company's organizational structure into shape and boost its operating efficiency. Like A.W. Lee and his successors, Schermer believed in a relatively high level of autonomy for Lee's division managers, who knew better than central management how to serve their local markets. However, Schermer brought a new emphasis on productivity to the company. Augmenting his technical style was a penchant for taking calculated risks. Schermer came from a family of entrepreneurs and was not afraid to test new waters at Lee. In 1983, for example, Schermer initiated Call-It Co. as a subsidiary of Lee. Research and development of the innovative venture, which was inspired by Schermer's interest in the ballooning market for telecommunications services, continued into the early 1990s.

In 1986, Schermer became chief executive officer of the company and Richard D. Gottlieb, son of David Gottlieb, took over as president. The two ran the company together, with Schermer slowly transferring supervision of day-to-day management duties to Gottlieb. Gottlieb had been with the company since 1964 and worked his way up to vice-president of newspapers by 1980. Known for his human relations and managerial skills, Gottlieb maintained the management style and growth strategy that had become a legacy of Lee enterprises. In 1990, he oversaw the acquisition of the Rapid City Journal (Iowa) and helped to complete the 100 percent purchase of NAPP Systems Inc. for $100 million.

By 1990, the year of its 100th anniversary, Lee was operating 19 newspapers in small-to medium-sized towns and six television stations broadcasting to 13 states. It also owned and operated in excess of 30 specialty publications, most of which were magazine-like weeklies in the upper Midwest that carried classified advertisements. In addition, the company operated four printing facilities, NAPP Systems Inc., and Voice Response, Inc. (Call-It Co.). Despite heavy borrowing to feed its capital-intensive expansion program, the company was financially healthy and had succeeded in minimizing its debt load. Indeed, by 1990 Lee Enterprises was raking in $287 million annually and capturing $44 million per year in net income. As a result of its 1990 acquisitions, moreover, Lee's revenues leapt to $346 million.

Despite Lee's financial successes, the newspaper industry, as well as most other media sectors, encountered setbacks during the economic recession of the late 1980s and early 1990s. As the economy slumped, advertising revenues sagged. Furthermore, the newspaper industry, which accounted for the bulk of Lee's sales, was struggling under the pressure of increased competition from electronic media. Fortunately, Lee was able to endure the downturn unscathed, unlike many of its industry peers. Its stability was largely a result of geography: most of its holdings were located in the economically healthy upper Midwest. Nevertheless, Lee's net income slipped to $31.5 million in 1991 before buoying back up to about $39 million in 1992.

Key Dates:

1890:
A.W. Lee purchases the Ottumwa Daily Courier (Iowa).: 1899:
Lee purchases the Davenport Times (Iowa).: 1928:
The firm is organized as a holding company under the name Lee Syndicate Co.: 1937:
Lee acquires its first broadcasting unit.: 1950:
All of Lee's holdings are linked under a new corporate umbrella, Lee Enterprises Inc.: 1969:
Lee makes its first public stock offering.: 1997:
Pacific Northwest Publishing Group is acquired.: 2000:
Broadcasting properties are sold to Emmis Communications Corp.: 2002:
Howard Publications Inc. is purchased.

As Lee slowly added new radio and television holdings to its portfolio during the early 1990s, its balance sheet began to reflect the economic recovery. Sales swelled to $373 million in 1993 as net income rose to about $41 million. Furthermore, the company anticipated receipts of about $400 million during 1994 based on surging sales early in the year. Under Gottlieb's direction, Lee was beginning to eye new markets for growth, such as farm magazines, book publishing, and electronic multi-media opportunities. In addition, Lee's NAPP subsidiary had developed and was selling a breakthrough photosensitive polymer printing plate that was receiving widespread market acceptance.

Success in the Late 1990s and Beyond

Lee's growth strategy continued in the late 1990s and into the new century. The firm acquired the Pacific Northwest Publishing Group in 1997, which strengthened its foothold in Oregon and the surrounding Northwest region. Other dailies and weeklies were added the company's arsenal in the following years, including the Ravalli Republic, the Beatrice Daily Sun, the Columbus Telegram, and the Fremont Tribune. At this time, the company opted to focus solely on its core publishing and printing operations. As such, it sold most of its broadcasting holdings to Emmis Communications Corp. in 2000 in a $560 million deal.

Long-time newspaper executive Mary Junck was at the helm of Lee as president and CEO by 2001. She was named chairman in 2002 after Gottlieb retired. Eager to make use of the funds stemming from its broadcasting sell-off, Junck made it clear that the firm was looking to purchase daily newspapers in lucrative markets with circulations from 30,000 to 125,000. She orchestrated the largest deal in company history in 2002 when she announced the $694 million acquisition of Howard Publishing Inc. Overall, Lee added 16 daily newspapers to its holdings as a result of the buyout and became the 12th largest newspaper company in the United States. It acquired Iowa's daily Sioux City Journal later that year. By early 2003, Lee's revenue had climbed by 58.9 percent and its daily circulation was up by 75 percent to 1.13 million.

The company's achievements over the past several years left it in an enviable position among its competitors. Lee was reporting increases in sales and profits when many in the industry were suffering due to a weak economy and slowing advertising revenues. To ensure success in the years to come, Junck set forth five key operating priorities that included growing revenue creatively and rapidly, improving leadership and circulation, emphasizing local news, building an online future, and exercising careful cost controls. Employees at company headquarters carried cards with these priorities printed on them. As it focused on the future, Lee continued to draw on many of the principles established by its founder to achieve prosperity and to serve as a responsible leader in the newspaper industry.

Principal Subsidiaries

Lee Procurement Solutions Company; Lee Publications Inc.; Sioux City Newspapers; Journal Star Printing Company; Lee Consolidated Holdings Company; Accudata Inc.; LINT Company; Target Marketing Systems Inc.; K. Falls Basin Publishing Inc.; Madison Newspapers Inc. (50%); INN Partners L.C. (81%).