NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: Nature of Business and  Significant Accounting Policies Nature of business: Significant accounting policies: NOTE 2: Discontinued Operations and Subsequent Event  As of September 30, 2000, operating divisions and associated companies publish 28 daily newspapers and more than 100 other weekly, classified and specialty publications, and operate more than 75 Web sites. Accounting estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Principles of consolidation: The consolidated financial state- ments include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany items have been elimi- nated. Inventories: Newsprint inventories are priced at the lower of cost or market with cost being determined primarily by the last-in, first-out method. Newsprint inventories as of September 30, 2000, 1999, and 1998 were less than replacement cost by $4,481,000, $4,710,000, and $4,815,000, respectively. Investments: Investments in the common stock or joint venture capital of associated companies are reported at cost plus the Company’s share of undistributed earnings since acquisition, less amortization of intangibles and share of losses. Long-term loans to associated companies are included in investments in associated companies. Other investments primarily consist of various marketable securities held in trust under a deferred compensation arrange- ment. These investments are classified as trading securities and carried at fair value with gains and losses reported in the consoli- dated statements of income. Property and equipment: Property and equipment is carried at cost. Equipment, except for printing presses, is depreciated primarily by declining-balance methods. The straight-line method is used for all other assets. The estimated useful lives in years are as follows: Years Buildings and improvements. . . . . . . . . . . . . . . . . . . . .  5-25 Publishing: Printing presses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15-20 Other major equipment. . . . . . . . . . . . . . . . . . . . . . . .  3-11 The Company capitalizes interest as part of the cost of constructing major facilities. Intangibles: Intangibles include covenants not to compete, consulting agreements, customer lists, newspaper subscriber lists, and the excess costs over fair value of net assets of businesses acquired. 18 LEE ENTERPRISES / 2000 Annual Report On March 1, 2000, the Company decided to discontinue the operations of the Broadcast division. On May 7, 2000, the Company entered into an agreement to sell substantially all of its broadcasting operations, consisting of eight network-affiliated and seven satellite television stations, to Emmis Communications Reclassification: Certain items on the consolidated state- ments of income for the years ended September 30, 1999 and 1998, have been reclassified, with no effect on income or earnings per share, to be consistent with the classifications adopted for the year ended September 30, 2000. Restricted stock: The Company amortizes as compensation cost the value of restricted stock, issued under a long-term incen- tive plan, by the straight-line method over the three-year restric- tion period. Cash and cash equivalents: For the purpose of reporting cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less at date of acquisition to be cash equivalents. Income taxes: Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Advertising costs: Advertising costs, which are not material, are expensed as incurred. Unearned income: Unearned income arises in the ordinary course of business from advance subscription payments for news - papers. Revenue is recognized in the period in which it is earned. The Company reviews its intangibles and other long-lived assets annually to determine potential impairment. In performing the review, the Company estimates the future cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment is recognized. The amount of impairment is measured based upon projected discounted future cash flows using a discount rate reflecting the Company’s average cost of funds. The excess costs over fair value of net tangible assets include $6,493,000 incurred prior to October 31, 1970, which is not being amortized. Excess costs related to specialty publications are being amortized over 10 to 15 year periods. Intangibles repre- senting non-compete covenants, consulting agreements, customer lists, and newspaper subscriber lists are being amortized over periods of 3 to 40 years. The remaining costs are being amortized over a period of 40 years. All intangibles are amortized by the straight-line method.