Lee Enterprises, Incorporated

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Lee Enterprises, Incorporated

400 Putnam Building
215 N. Main Street
Davenport, Iowa 52801-1924
U.S.A.
(319) 383-2100
Fax: (319) 323-9608

Public Company
Incorporated: 1890 as the Ottumwa Daily Courier
Employees: 5,000
Sales: $372.91 million
Stock Exchanges: New York
SICs: 2711 Newspaper Publishing and Printing; 4833
Television Broadcasting Stations

Lee Enterprises, Incorporated is a leading newspaper publisher and operator of television broadcasting stations. Besides publishing about 20 daily newspapers and more than 30 specialty publications, Lee owned and operated eight TV stations in 1994 and manufactured graphic arts systems that it sold to other publishers. Lee’s engaging history spans more than a century.

The publishing venture that would become Lee Enterprises was started when A. W. Lee purchased the Ottumwa (Iowa) Daily Courier in 1890. By that time, the 32-year-old Lee had worked in the industry for several years in Chicago and Iowa and was eager to start running his own newspaper. So, for $16,000, which was most of his savings combined with money invested by family and friends, Lee bought the Daily Courier and 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 vision for his newspaper was shaped by his conservative midwestern upbringing. After eloping in Philadelphia, Lee’s parents moved to Iowa City and became pioneer farmers—Lee’s mother abandoned her Quaker roots and his father left behind a family of aristocrats. 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., 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. He excelled at math, but Lee knew at that early age that he wanted to pursue a career related to writing and editing. He was a fan of Ralph Waldo Emerson and was heavily influenced by his writings. In fact, Lee was known for always carrying small pocket books with Emerson’s essays printed on them wherever he went. Importantly, 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. But, 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 and took over the Ottumwa Daily Courier. Lee’s writing and editing skills, combined with his keen bookkeeping knowledge, allowed Lee to prosper with his new venture during the 1890s. Furthermore, his emphasis on integrity and journalistic responsibility, which is documented in company annals, permeated his organization and became a hallmark of the Daily Courier. Also during the 1890s, Lee’s two sons died. To that tragedy was attributed Lee’s noted determination to help other young men achieve success in his company.

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 (Iowa) 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, moreover, he picked up the Hannibal Courier-Post, a nearby Missouri newspaper, and the La Crosse (Wisconsin) Tribune, which was just north of his 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, without having to rely on resources from other Lee 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 existence was evidenced by an attempt in 1917 to kidnap him from a hotel, stuff him in a trunk, and hold him for $40,000 ransom. Adler was able to escape from the two men who beat him and tried to stuff him in the trunk, and to capture one of the men 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, in fact, he had added five newspapers to the Lee fold, including publications in Nebraska and Illinois. The company 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.

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 lead 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 publisher of one of Lee’s newspapers. Although Adler disagreed with Loomis about whether or not the company should get into radio, the company’s policy of allowing its publishers autonomy prevailed. Loomis pioneered the foray into radio under Adler’s 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. Importantly, 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, in fact, 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, Incorporated.

Loomis passed the baton to Philip Adler, the son of E. P. Adler. He had worked as a reporter, editor, and then publisher for Lee since 1926, but had also served as editor on both his high school and college newspapers during the 1920s. Like those before him, Adler maintained the company’s emphasis on integrity and honesty. Earlier in his career, in fact, Adler was tested by several 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 pure 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, instead encouraging his publishers to generate copy in-house.

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 telecasting. 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 publisher of the Journal Times in Racine, Wisconsin, and the Corvallis Gazette-Times of Corvallis, Oregon, for $2 million. 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 upper-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.

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 outdoorsman 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 tenant 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 (North Dakota) Tribune in 1978. In 1979 and 1980, moreover, the company absorbed 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. But Schermer brought a new emphasis on productivity to the company. Augmenting his technical style was an in-bred 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, 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 (Iowa) Journal and helped to complete the 100 percent purchase of NAPP Systems Inc. for $100 million.

By 1990, on its 100-year anniversary, Lee was operating 19 newspapers in small- to medium-sized towns, and six television stations in 13 states. It also owned and operated in excess of 30 specialty publications, most of which were magazine-like weeklies that carried classified advertisements in the upper Midwest. 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 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, however, Lee was able to endure the downturn unscathed compared to 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.

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, moreover, Lee was beginning to eye new markets for growth, such as electronic multi-media opportunities related to delivering information, farm magazines, and book publishing. Finally, Lee’s NAPP subsidiary had developed and was selling a breakthrough photosensitive polymer printing plate that was receiving widespread market acceptance. As it focused on the remainder of the century, 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 media industry.