SEC Comment Letter for LEE ENTERPRISES, Inc (LEE) (CIK 0000058361) (LEE) — May 1, 2008
LEE ENTERPRISES, Inc (LEE) (CIK 0000058361)
Date: May 1, 2008 · CIK: 0000058361 · Accession: 0000000000-08-022437
AI Filing Summary & Sentiment
Reasoning
Letter
Mail Stop 3561 February 14, 2008 Via Fax & U.S. Mail Ms. Mary E. Junck Chief Executive Officer Lee Enterprises, Inc. 201 N. Harrison Street Suite 600 Davenport, Iowa 52801
Re: Lee Enterprises, Inc. Form 10-K for the year ended September 30, 2007 Filed November 29, 2007 File No. 1-06227
Dear Ms. Junck:
We have reviewed your filing and have the following comments. Unless otherwise indicated, we think you should revise your future filings in response to these comments. If you disagree, we will consider your explanation as to why our comment is inapplicable or a revision is unnecessary. Please be as detailed as necessary in your explanation. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure. After reviewi ng this information, we may raise additional comments.
Please understand that the purpose of our re view process is to assist you in your compliance with the applicable disclosure requirements and to enhance the overall disclosure in your filing. We look forward to working with you in these respects. We welcome any questions you may have about ou r comments or any other aspect of our review. Feel free to call us at the telephone numbers listed at the end of this letter.
Please respond to confirm that such comments will be complied with, or, if certain of the comments are deemed inappropria te, advise the staff of your reason. Your response should be submitted in electronic fo rm, under the label “corresp” with a copy to the staff. Please respond w ithin ten (10) business days.
Ms. Mary E. Junck Lee Enterprises, Inc. February 14, 2008 Page 2
Critical Accounting Policies, page 17
1. We note your section on critical accounting policies. It appears that the items included are a mere repetition of your Si gnificant Accounting Policies section of the notes to your financial statements. Pu rsuant to FR-60, this section is intended to focus on the sensitivity aspects of your critical accounting polic ies, that is, the likelihood that materially different am ounts would be reported under different conditions or using different assumptions. In making disclosures under FR-60, registrants need not repeat information th at is already included in the financial statements. With a view towards expa nded disclosure and considering the comments which follow concerning goodwill and intangible assets, please revise future filings accordingly.
Consolidated Balance Sheets Note 6. Goodwill and Other In tangible Assets, page 56
2. We note that during the Company’s most recent fiscal year, and the subsequent interim period since the co mpletion of the Company’s 2007 fiscal year, the Company’s common share price and its related market capitalization has significantly declined and totaled a pproximately $700 million at December 31, 2007. We also note that the amount of the Company’s current market capitalization is significantly belo w the book value of the Company’s stockholder’s equity at September 30, 2007, and that the Company’s book value at this date included a significant amount of goodwill and other intangible assets, which aggregated approximately $2.4 bill ion. This decline in the Company’s market capitalization, coupled with decl ines in various categories of the Company’s revenues in fiscal 2007 and the first quarter of fiscal 2008, may be indicative of a potential impairment of th e Company’s recorded investment in its intangible assets and goodwill. Based on the guidance in SFAS 142, and in light of the fact that the company’s market capitalization has been steadily declining during the fiscal year en ded September 30, 2007, supplementally advise us what consideration was given to recognizing an impairment of the Company’s recorded investment in goodwill and other intangible assets.
Ms. Mary E. Junck Lee Enterprises, Inc. February 14, 2008 Page 3
As part of your response , specifically address the reasons you believe these intangible assets are more valuable than the market’s valuat ion of the entire company as a whole, and provide us with a detailed analysis of significant assumptions involved, that include, but are not limited to:
For intangible assets other than goodwill:
• Future income and expense projections associated with these assets with a justification of any projected or expected increases/decreases,
• The reasons the Company believes customers and newspaper subscribers will continue to use/subscribe to publicat ions at the rates included in your assumptions, with an explanation of actual and estimated attrition for each material acquired customer and newspape r subscriber list throughout its economic life,
• A discussion of whether online growth has been considered in this analysis and if so, explain its relevance at the time of your impairment analysis as compared to the time of the acquisition, and,
• Any other matters or assumptions which were relevant to your analysis of potential impairments in your inta ngible assets other than goodwill.
For goodwill:
• Please indicate the date the Company’s most recent goodwill impairment analysis was completed and explain how the Comp any was organized into reporting units for purposes of completing its impairment analysis.
• Explain the methods and significant a ssumptions used in the Company’s impairment analysis for its various reporti ng units and provide us with the results of the most recently completed impairment analysis.
• Given the significant disparity betw een the Company’s current market capitalization and its book value, please explain the facts and circumstances which management believes are responsible for the significant disparity between the Company’s market capitalization and the book value of the Company’s equity.
Ms. Mary E. Junck Lee Enterprises, Inc. February 14, 2008 Page 4
We may have further comments upon re viewing your response. Assuming a satisfactory response, the notes to your financial statements and Management’s Discussion and Analysis should be si gnificantly expanded to summarize your methodology, analysis, and conclusions of your impairment test s, including the reasons management believes no write -downs are required. Your revised discussion should include a discussion of the significant declin e in the market capitalization of the Company which has occurred over the past year and should also include a discussion of why manage ment does not believe this decline in market capitalization is indicative of a potential impairment in the Company’s recorded investment in indefinite lived intangible assets and goodwill.
Notes to Financial Statements Advertising Costs 3. In future filings, please revise to disclose the amount of advertising costs incurred during each period presented in the Co mpany’s consolidated statement of operations. Refer to the disclosure requirements outlined in paragraph 49 of SOP 93-7.
Note 19. Commitments and Contingent Liabilities PD LLC Operating Agreement 4. We note from the disclosure in Note 19, that pursuant to the terms of the operating agreement governing PD LLC, Hera ld owns a 5% interest in PD LLC, of which Pulitzer is the managing member and owns the remaining 95% interest. We also note that under the terms of th e operating agreement governing PD LLC, on May 1, 2010, Herald will have a one-tim e right to require PD LLC to redeem Herald’s interest in PD LLC, together w ith Heralds’ interest in DS LLC, another entity in which Pulitzer is the managing member and which is engaged in the business of delivering publications a nd products in the greater St. Louis metropolitan area. We further note that the May 1, 2010 redemption price for the Herald’s interest will be calculated pursuan t to a formula that is further described in Note 19 to the financial statements.
Ms. Mary E. Junck Lee Enterprises, Inc. February 14, 2008 Page 5
In this regard, pl ease explain how the Herald’s redemption right on May 1, 2010 with respect to its equity interest in PD LLC is being accounted for in the Company’s consolidated financial statemen ts pursuant to the guidance in EITF D- 98, SFAS No. 133, and/or SFAS No.150, as app licable. As part of your response, please explain what your expected obligati on to redeem the Herald’s interest on May 1, 2010 would be, based on facts and circumstances existing at the most recent balance sheet date. Also, please explain how changes in the potential redemption value of the Herald’s inte rest are being acc ounted for in the Company’s consolidated financial statem ents. If no obligati on for the Herald’s redemption right is being r ecognized in the Company’ s consolidated financial statements, please explain in detail why the Company believes this treatment is appropriate. We may have further co mment upon receipt of your response.
Other
5. We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filing to be certain that the filing includes all information required under the Securitie s Exchange Act of 1934 and that they have provided all information investors require for an informed investment decision. Since the company and its management are in possession of all facts relating to a company’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made.
In connection with responding to our comments, please provide, in writing, a statement from the company acknowledging that:
the company is responsible for the adequacy and accuracy of the disclosure in the filing;
staff comments or changes to disclosu re in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and
the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
Ms. Mary E. Junck Lee Enterprises, Inc. February 14, 2008 Page 6
In addition, please be advise d that the Division of Enfo rcement has access to all information you provide to the staff of the Divi sion of Corporation Fi nance in our review of your filing or in response to our comments on your filing.
You may contact Effie Simpson at (202) 551-3346, or the undersigned if you have questions regarding comments on the financial statements and related matters. Please contact me at (202) 551-3813 with any other questions.
Sincerely,
Linda Cvrkel
Branch Chief
Show Raw Text
Mail Stop 3561
February 14, 2008
Via Fax & U.S. Mail
Ms. Mary E. Junck
Chief Executive Officer
Lee Enterprises, Inc.
201 N. Harrison Street
Suite 600
Davenport, Iowa 52801
Re: Lee Enterprises, Inc.
Form 10-K for the year ended September 30, 2007
Filed November 29, 2007
File No. 1-06227
Dear Ms. Junck:
We have reviewed your filing and have the following comments. Unless
otherwise indicated, we think you should revise your future filings in response to these
comments. If you disagree, we will consider your explanation as to why our comment is
inapplicable or a revision is unnecessary. Please be as detailed as necessary in your
explanation. In some of our comments, we may ask you to provide us with information
so we may better understand your disclosure. After reviewi ng this information, we may
raise additional comments.
Please understand that the purpose of our re view process is to assist you in your
compliance with the applicable disclosure requirements and to enhance the overall disclosure in your filing. We look forward to working with you in these respects. We
welcome any questions you may have about ou r comments or any other aspect of our
review. Feel free to call us at the telephone numbers listed at the end of this letter.
Please respond to confirm that such comments will be complied with, or, if
certain of the comments are deemed inappropria te, advise the staff of your reason. Your
response should be submitted in electronic fo rm, under the label “corresp” with a copy to
the staff. Please respond w ithin ten (10) business days.
Ms. Mary E. Junck
Lee Enterprises, Inc.
February 14, 2008 Page 2
Critical Accounting Policies, page 17
1. We note your section on critical accounting policies. It appears that the items
included are a mere repetition of your Si gnificant Accounting Policies section of
the notes to your financial statements. Pu rsuant to FR-60, this section is intended
to focus on the sensitivity aspects of your critical accounting polic ies, that is, the
likelihood that materially different am ounts would be reported under different
conditions or using different assumptions. In making disclosures under FR-60,
registrants need not repeat information th at is already included in the financial
statements. With a view towards expa nded disclosure and considering the
comments which follow concerning goodwill and intangible assets, please revise future filings accordingly.
Consolidated Balance Sheets
Note 6. Goodwill and Other In tangible Assets, page 56
2. We note that during the Company’s most recent fiscal year, and the subsequent
interim period since the co mpletion of the Company’s 2007 fiscal year, the
Company’s common share price and its related market capitalization has
significantly declined and totaled a pproximately $700 million at December 31,
2007. We also note that the amount of the Company’s current market
capitalization is significantly belo w the book value of the Company’s
stockholder’s equity at September 30, 2007, and that the Company’s book value
at this date included a significant amount of goodwill and other intangible assets,
which aggregated approximately $2.4 bill ion. This decline in the Company’s
market capitalization, coupled with decl ines in various categories of the
Company’s revenues in fiscal 2007 and the first quarter of fiscal 2008, may be
indicative of a potential impairment of th e Company’s recorded investment in its
intangible assets and goodwill. Based on the guidance in SFAS 142, and in light
of the fact that the company’s market capitalization has been steadily declining
during the fiscal year en ded September 30, 2007, supplementally advise us what
consideration was given to recognizing an impairment of the Company’s recorded
investment in goodwill and other intangible assets.
Ms. Mary E. Junck
Lee Enterprises, Inc.
February 14, 2008 Page 3
As part of your response , specifically address the reasons you believe these
intangible assets are more valuable than the market’s valuat ion of the entire
company as a whole, and provide us with a detailed analysis of significant
assumptions involved, that include, but are not limited to:
For intangible assets other than goodwill:
• Future income and expense projections associated with these assets with a
justification of any projected or expected increases/decreases,
• The reasons the Company believes customers and newspaper subscribers will
continue to use/subscribe to publicat ions at the rates included in your
assumptions, with an explanation of actual and estimated attrition for each material acquired customer and newspape r subscriber list throughout its economic
life,
• A discussion of whether online growth has been considered in this analysis and if
so, explain its relevance at the time of your impairment analysis as compared to
the time of the acquisition, and,
• Any other matters or assumptions which were relevant to your analysis of
potential impairments in your inta ngible assets other than goodwill.
For goodwill:
• Please indicate the date the Company’s most recent goodwill impairment analysis
was completed and explain how the Comp any was organized into reporting units
for purposes of completing its impairment analysis.
• Explain the methods and significant a ssumptions used in the Company’s
impairment analysis for its various reporti ng units and provide us with the results
of the most recently completed impairment analysis.
• Given the significant disparity betw een the Company’s current market
capitalization and its book value, please explain the facts and circumstances
which management believes are responsible for the significant disparity between
the Company’s market capitalization and the book value of the Company’s equity.
Ms. Mary E. Junck
Lee Enterprises, Inc.
February 14, 2008 Page 4
We may have further comments upon re viewing your response. Assuming a
satisfactory response, the notes to your financial statements and Management’s
Discussion and Analysis should be si gnificantly expanded to summarize your
methodology, analysis, and conclusions of your impairment test s, including the
reasons management believes no write -downs are required. Your revised
discussion should include a discussion of the significant declin e in the market
capitalization of the Company which has occurred over the past year and should
also include a discussion of why manage ment does not believe this decline in
market capitalization is indicative of a potential impairment in the Company’s
recorded investment in indefinite lived intangible assets and goodwill.
Notes to Financial Statements
Advertising Costs
3. In future filings, please revise to disclose the amount of advertising costs incurred
during each period presented in the Co mpany’s consolidated statement of
operations. Refer to the disclosure requirements outlined in paragraph 49 of SOP 93-7.
Note 19. Commitments and Contingent Liabilities
PD LLC Operating Agreement
4. We note from the disclosure in Note 19, that pursuant to the terms of the
operating agreement governing PD LLC, Hera ld owns a 5% interest in PD LLC,
of which Pulitzer is the managing member and owns the remaining 95% interest.
We also note that under the terms of th e operating agreement governing PD LLC,
on May 1, 2010, Herald will have a one-tim e right to require PD LLC to redeem
Herald’s interest in PD LLC, together w ith Heralds’ interest in DS LLC, another
entity in which Pulitzer is the managing member and which is engaged in the business of delivering publications a nd products in the greater St. Louis
metropolitan area. We further note that the May 1, 2010 redemption price for the
Herald’s interest will be calculated pursuan t to a formula that is further described
in Note 19 to the financial statements.
Ms. Mary E. Junck
Lee Enterprises, Inc.
February 14, 2008 Page 5
In this regard, pl ease explain how the Herald’s redemption right on May 1, 2010
with respect to its equity interest in PD LLC is being accounted for in the
Company’s consolidated financial statemen ts pursuant to the guidance in EITF D-
98, SFAS No. 133, and/or SFAS No.150, as app licable. As part of your response,
please explain what your expected obligati on to redeem the Herald’s interest on
May 1, 2010 would be, based on facts and circumstances existing at the most
recent balance sheet date. Also, please explain how changes in the potential
redemption value of the Herald’s inte rest are being acc ounted for in the
Company’s consolidated financial statem ents. If no obligati on for the Herald’s
redemption right is being r ecognized in the Company’ s consolidated financial
statements, please explain in detail why the Company believes this treatment is
appropriate. We may have further co mment upon receipt of your response.
Other
5. We urge all persons who are responsible for the accuracy and adequacy of the
disclosure in the filing to be certain that the filing includes all information
required under the Securitie s Exchange Act of 1934 and that they have provided
all information investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating to a
company’s disclosure, they are responsible for the accuracy and adequacy of the
disclosures they have made.
In connection with responding to our comments, please provide, in writing, a
statement from the company acknowledging that:
the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
staff comments or changes to disclosu re in response to staff comments do
not foreclose the Commission from taking any action with respect to the filing;
and
the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the federal securities
laws of the United States.
Ms. Mary E. Junck
Lee Enterprises, Inc.
February 14, 2008 Page 6
In addition, please be advise d that the Division of Enfo rcement has access to all
information you provide to the staff of the Divi sion of Corporation Fi nance in our review
of your filing or in response to our comments on your filing.
You may contact Effie Simpson at (202) 551-3346, or the undersigned if you have
questions regarding comments on the financial statements and related matters. Please
contact me at (202) 551-3813 with any other questions.
Sincerely,
Linda Cvrkel
Branch Chief
Via Fax: Mr. Carl. G. Schmidt, CFO
(563) 328-4322