MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED) Income Taxes Discontinued Operations Inflation  Liquidity, Capital Resources and Commitments  Quarterly Results  12 LEE ENTERPRISES / 2000 Annual Report Dividends and Common Stock Prices  $1,339,000 due primarily to an increase in income earned on short-term investments, notes receivable, and deferred compensa - tion funds. Financial income remained relatively unchanged in 1999 and 1998. In 2000, other non-operating income, net consists primarily of a $18,439,000 gain from the sale of publishing properties and losses related to its 6.3% interest in Ad One, LLC, a provider of integrated online classified solutions for the newspaper industry. In 1999, other non-operating income, net represents the gain from the sale of a shopper publication. considered restrictive to normal operations or anticipated stock - holder dividends. The current quarterly cash dividend is 17 cents per share, an annual rate of 68 cents. During the fiscal year ended September 30, 2000, the Company paid dividends of $28,288,000 or 33.8% of fiscal year 2000 net income. The Company will continue to review its divi- dend policy to assure that it remains consistent with its capital demands. Covenants under borrowing arrangements are not considered restrictive to payment of dividends. Lee Common Stock is listed on the New York Stock Exchange. The Company paid dividends of 16 cents, 15 cents and 14 cents in each quarter of fiscal 2000, 1999 and 1998, respectively. For a description of the relative rights of Common Stock, Class B Common Stock and Preferred Stock Purchase Rights, see Note 7 of the Notes to Consolidated Financial Statements. At September 30, 2000, the Company had 3,185 holders of Common Stock and 2,064 holders of Class B Common Stock. Income taxes were 36.6%, 34.8%, and 36.6% of pretax income in 2000, 1999, and 1998, respectively. In 1999 income taxes were reduced by $1,500,000 due to a settlement of a contingency. Exclusive of the settlement, income taxes were 36.5% of pretax income. On October 1, 2000, the Company consummated the sale of substantially all of its broadcasting properties for approximately $565,000,000, net of selling expenses. The results for the broad- cast properties have been classified as discontinued operations for all periods presented. For additional information related to the disposition, see Note 2 of the Notes to Consolidated Financial Statements on Page 18. The net effect of inflation on operations has not been material in the last several years because of efforts by the Company to lessen the effect of rising costs through a strategy of improving productivity, controlling costs and, where conditions permit, increasing selling prices. The Company’s largest source of publishing revenue, retail run-of-press advertising, is seasonal and tends to fluctuate with retail sales in markets served. Historically, retail run-of-press advertising is higher in the first and third fiscal quarters. News - paper classified advertising revenue (which includes real estate and automobile ads) is lowest in January and February, which are included in the second fiscal quarter.  Quarterly results of operations are summarized on Page 24. Capital expenditures for new and improved facilities and equipment are expected to be approximately $12,000,000 in 2001.  The Company anticipates that funds necessary for capital expenditures and other requirements will be available from inter - nally generated funds, net after-tax proceeds from the sale of its broadcast properties which are expected to be approximately $390,000,000, and the Company’s revolving credit agreements. Under the terms of its senior note agreement, the Company will be required to repay the outstanding balance of $173,400,000 on October 1, 2001, unless the Company reinvests the net proceeds of the broadcast sale or obtains a waiver of that provi - sion of the agreement. Covenants under these agreements are not (In Thousands) Sources of cash: Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $126,889 Short-term borrowings. . . . . . . . . . . . . . . . . . . . .  30,500 Proceeds from sale of properties. . . . . . . . . . . . . .  8,775 All other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  5,139 171,303 Uses of cash: Acquisitions, net. . . . . . . . . . . . . . . . . . . . . . . . . .  $ 71,609 Purchase of property and equipment. . . . . . . . . . .  32,494 Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . .  28,288 Purchase of Lee Enterprises, Incorporated, stock. .  20,021 152,412 Increase in cash . . . . . . . . . . . . . . . . . . . . .  $ 18,891 Cash provided by operations totaled $126,889,000 in 2000. The Company has a $50,000,000 revolving credit arrangement with banks which expires in 2003. The major sources and uses of cash in 2000 were as follows: Quarterly Stock Prices Dec Mar Jun Sep 1997-1998 Dec Mar Jun Sep 1998-1999 Dec Mar Jun Sep 1999-2000 31 $^{1}$/2 29 30 $^{1}$/2 27$^{3}$/8 29 $^{9}$/16 33$^{9}$/16 30$^{5}$/8 31 $^{15}$/16 23 $^{5}$/16 28 $^{7}$/8 26 $^{1}$/8 25 $^{15}$/16 Close