Lee Enterprises Earnings Reflect Pulitzer Acquisition
DAVENPORT, Iowa--(BUSINESS WIRE)--July 21, 2005--Newspaper publisher Lee Enterprises, Incorporated (NYSE:LEE), reported today that diluted earnings per common share from continuing operations were 41 cents for its third fiscal quarter ended June 30, 2005. The results represent a decrease of 13 cents from a year ago, reflecting 17 cents per common share of expenses related to the acquisition of Pulitzer Inc. on June 3, 2005.
"Lee's acquisition of Pulitzer is off to an exceptionally smooth, rapid start, and we're right on course in every way, from retail and classified initiatives, to circulation and online programs, to sales blitzes, to integration of finance, systems, news resources and operations," said Mary Junck, Lee chairman and chief executive officer. "We're thrilled with the new people, newspapers and markets we've gained. Although the real work is just beginning, less than two months into the process, we're excited about our progress and prospects."
Discussing the impact of the acquisition on earnings, Carl
Schmidt, Lee vice president, chief financial officer and treasurer,
said:
-- Because of the timing, size and complexity of the transaction,
Lee has not yet completed the required determination of fair
value of the assets and liabilities of Pulitzer and related
allocation of the purchase price. Lee's financial results this
quarter and in the future are significantly influenced by the
allocation process. There is no impact on operating cash
flow(1) from this process, but reported earnings per common
share are impacted. June quarter results reflect current
estimates, which will be finalized by the end of the fiscal
year. The final determination of value could result in an
increase or decrease in depreciation, amortization or interest
expense in future periods from the amounts estimated for the
quarter ended June 30, 2005, and in reported results overall.
-- Refinancing of Lee's 1998 Notes and 2002 credit agreement
resulted in a one-time pretax loss from early extinguishment
of debt of $11.2 million, or 15 cents per diluted common
share. These facilities were replaced with a new $1.55 billion
Credit Agreement entered into in conjunction with the
acquisition of Pulitzer.
-- Transition expenses related to the Pulitzer acquisition total
$1.5 million before income tax benefit, or 2 cents per diluted
common share, year to date, substantially all of which were
incurred in the June quarter. Lee expects to continue to incur
additional transition costs for the remainder of the calendar
year.
OPERATING RESULTS
For the quarter ended June 30, 2005, combining Lee results with Pulitzer operating results since the June 3 date of acquisition, advertising revenue for the quarter increased 27.0 percent from a year ago to $166.7 million, with growth of 22.9 percent in retail, 28.2 percent in classified, 63.3 percent in national, 9.4 percent in niche and 69.5 percent in online advertising. Circulation revenue increased 17.6 percent. Total operating revenue increased 23.8 percent to $217.9 million. On a same property basis, which excludes the impact of Pulitzer and other acquisitions and divestitures made in the current or prior year, total advertising revenue for the quarter increased 4.1 percent from a year ago, circulation revenue decreased 1.5 percent, and total operating revenue increased 3.0 percent.
Operating expenses, combining Lee's results for the quarter and Pulitzer's results since June 3, excluding depreciation and amortization, increased 25.3 percent to $156.9 million, with compensation up 23.7 percent, newsprint and ink up 31.7 percent and other expenses up 25.3 percent. All categories of expenses were affected by acquisitions, and transition costs were $1.5 million. Same property operating expenses, excluding depreciation and amortization, increased 1.2 percent in the quarter, with compensation up 1.8 percent, newsprint and ink up 6.5 percent and other operating expenses down 2.2 percent.
Operating cash flow increased 20.2 percent to $60.9 million. Operating cash flow margin(1) was 28.0 percent, compared with 28.8 percent a year ago, reflecting the overall lower margin of the Pulitzer newspapers. Operating income, which includes equity in net income of associated companies and depreciation and amortization, rose 19.3 percent to $48.7 million. Non-operating expenses, which include financial expense related to the Pulitzer acquisition and loss on early extinguishment of debt, totaled $19.2 million, compared with $2.6 million a year ago. As a result, income from continuing operations decreased 23.8 percent to $18.7 million. Net income decreased 23.6 percent to $18.7 million.
YEAR TO DATE
Including acquisitions, for the nine months ended June 30, advertising revenue increased 14.6 percent to $431.6 million, and total operating revenue increased 12.0 percent to $570.6 million. Operating expenses, excluding depreciation and amortization, rose 12.1 percent to $413.5 million. On a same property basis, advertising revenue increased 5.0 percent, total operating revenue increased 3.7 percent, and operating expenses, excluding depreciation and amortization, increased 2.8 percent.
Including acquisitions, operating cash flow increased 11.9 percent, to $157.1 million, operating cash flow margin was 27.5 percent, compared with 27.6 percent a year ago. Operating income rose 13.1 percent to $125.7 million. Income from continuing operations decreased 2.2 percent to $63.8 million. Net income decreased 1.5 percent to $63.8 million.
With the acquisition of Pulitzer, Lee owns 52 daily newspapers and a joint interest in six others. Lee also operates associated online services and more than 300 weekly newspapers, shoppers and classified and specialty publications. Lee is based in Davenport, Iowa, and its stock is traded on the New York Stock Exchange under the symbol LEE. More information about Lee Enterprises is available at www.lee.net.
Tables follow. Expanded tables with same property comparisons are available at www.lee.net/financial. Revenue statistics for June also are available at www.lee.net/financial.
LEE ENTERPRISES, INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
June 30 June 30
----------------------------------------------------------------------
(Thousands,
Except EPS
Data) 2005 2004 % 2005 2004 %
----------------------------------------------------------------------
Operating
revenue:
Advertising
revenue:
Retail........ $89,656 $72,930 22.9% $241,524 $216,802 11.4%
National...... 7,432 4,551 63.3 19,689 13,844 42.2
Classified:
Daily
newspapers:
Employment.. 16,907 12,132 39.4 40,072 32,006 25.2
Automotive.. 12,616 10,488 20.3 31,722 30,149 5.2
Real estate. 12,245 8,742 40.1 29,785 24,773 20.2
All other... 7,825 7,359 6.3 19,317 18,419 4.9
Other
publications 11,529 8,972 28.5 28,492 24,409 16.7
----------------------------------------------------------------------
Total
classified... 61,122 47,693 28.2 149,388 129,756 15.1
Niche
publications. 3,408 3,115 9.4 9,342 8,228 13.5
Online........ 5,091 3,004 69.5 11,667 7,989 46.0
----------------------------------------------------------------------
Total
advertising
revenue....... 166,709 131,293 27.0 431,610 376,619 14.6
----------------------------------------------------------------------
Circulation.... 38,045 32,363 17.6 102,303 97,872 4.5
Commercial
printing...... 5,470 5,388 1.5 15,977 15,115 5.7
Online services
& other....... 7,632 6,922 10.3 20,744 19,688 5.4
----------------------------------------------------------------------
Total operating
revenue....... 217,856 175,966 23.8 570,634 509,294 12.0
----------------------------------------------------------------------
Operating
expenses:
Compensation.. 85,173 68,838 23.7 227,856 206,196 10.5
Newsprint and
ink.......... 21,478 16,314 31.7 54,371 46,528 16.9
Other
operating
expenses..... 50,284 40,117 25.3 131,309 116,199 13.0
----------------------------------------------------------------------
Operating
expenses,
excluding
depreciation
and
amortization.. 156,935 125,269 25.3 413,536 368,923 12.1
----------------------------------------------------------------------
Operating cash
flow(1)....... 60,921 50,697 20.2 157,098 140,371 11.9
Depreciation... 6,387 5,179 23.3 16,497 14,801 11.5
Amortization... 9,067 6,855 32.3 22,037 20,520 7.4
----------------------------------------------------------------------
Operating
income, before
equity in net
income of
associated
companies..... 45,467 38,663 17.6 118,564 105,050 12.9
Equity in
income of
associated
companies..... 3,276 2,209 48.3 7,156 6,090 17.5
----------------------------------------------------------------------
Operating
income........ 48,743 40,872 19.3 125,720 111,140 13.1
----------------------------------------------------------------------
Non-operating
income:
Financial
income....... 1,009 243 315.2 1,476 808 82.7
Financial
expense...... (9,044) (2,867) 215.5 (14,630) (9,801) 49.3
Loss on early
extinguish-
ment of debt. (11,181) - NM (11,181) - NM
Other, net.... 7 - NM (58) (294) NM
----------------------------------------------------------------------
(19,209) (2,624) 632.1 (24,393) (9,287) 162.7
----------------------------------------------------------------------
Income from
continuing
operations
before income
taxes......... 29,534 38,248 (22.8) 101,327 101,853 (0.5)
Income tax
expense....... 10,691 13,696 (21.9) 37,410 36,632 2.1
Minority
interest...... 145 - NM 145 - NM
----------------------------------------------------------------------
Income from
continuing
operations.... 18,698 24,552 (23.8) 63,772 65,221 (2.2)
Discontinued
operations.... - (88) NM - (464) NM
----------------------------------------------------------------------
Net income..... $18,698 $24,464 (23.6)% $63,772 $64,757 (1.5)%
======================================================================
Earnings per
common share:
Basic:
Continuing
operations.. $0.41 $0.55 (25.5)% $1.41 $1.46 (3.4)%
Discontinued
operations.. - - - - (0.01) -
----------------------------------------------------------------------
Net income..... $0.41 $0.55 (25.5)% $1.41 $1.45 (2.8)%
======================================================================
Diluted:
Continuing
operations.. $0.41 $0.54 (24.1)% $1.41 $1.45 (2.8)%
Discontinued
operations.. - - - - (0.01) -
----------------------------------------------------------------------
Net income..... $0.41 $0.54 (24.1)% $1.41 $1.44 (2.1)%
======================================================================
Average common
shares:
Basic......... 45,156 44,884 45,090 44,733
Diluted....... 45,374 45,205 45,311 45,032
======================================================================
SELECTED BALANCE SHEET INFORMATION
June 30
----------------------------------------------------------------------
(Thousands) 2005 2004
----------------------------------------------------------------------
Cash.......................................... $50,529 $8,251
Restricted cash and investments............... 77,310 -
Debt (principal amount)....................... 1,758,000 234,600
======================================================================
NOTES:
(1) Operating cash flow, which is defined as operating income before
depreciation, amortization and equity in net income of associated
companies, and operating cash flow margin (operating cash flow
divided by operating revenue) represent non-GAAP financial
measures. A reconciliation of operating cash flow to operating
income, the most directly comparable measure under accounting
principles generally accepted in the United States (GAAP), is
reflected in the tables accompanying this release. The Company
believes that operating cash flow and the related margin ratio are
useful measures of evaluating its financial performance because of
their focus on the Company's results from operations before
depreciation and amortization. The Company also believes that
these measures are several of the alternative financial measures
of performance used by investors, rating agencies and financial
analysts to estimate the value of a company and evaluate its
ability to meet debt service requirements.
(2) Certain amounts as previously reported have been reclassified to
conform with the current period presentation. The prior period has
been restated for comparative purposes, and the reclassifications
have no impact on earnings.
(3) Same property comparisons exclude acquisitions and divestitures
made in the current or prior year. Same property revenue also
excludes revenue of Madison Newspapers, Inc., (MNI). Lee owns 50%
of the capital stock of MNI, which for financial reporting
purposes is reported using the equity method of accounting. Same
property comparisons also exclude corporate office costs.
(4) The Company disclaims responsibility for updating information
beyond the release date.
The Private Securities Litigation Reform Act of 1995 provides a "Safe Harbor" for forward-looking statements. This release contains information that may be deemed forward-looking and that is based largely on the Company's current expectations and is subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those anticipated. Among such risks, trends and other uncertainties are changes in advertising demand, newsprint prices, interest rates, labor costs, legislative and regulatory rulings and other results of operations or financial conditions, difficulties in integration of acquired businesses or maintaining employee and customer relationships and increased capital and other costs. The words "may," "will," "would," "could," "believes," "expects," "anticipates," "intends," "plans," "projects," "considers" and similar expressions generally identify forward-looking statements. Readers are cautioned not to place undue reliance on such forward-looking statements, which are made as of the date of this release. The Company does not publicly undertake to update or revise its forward-looking statements.
CONTACT: Lee Enterprises, Davenport
Dan Hayes, 563-383-2100
dan.hayes@lee.net
SOURCE: Lee Enterprises