News Release Details

DAVENPORT, Iowa (January 18, 2011) -- Lee Enterprises, Incorporated (NYSE: LEE) reported today that for its first fiscal quarter ended December 26, 2010, digital advertising sales increased 37.8 percent compared with a year ago, while the decline in total revenue moderated to 1.0 percent, as forecast. Cash costs decreased 2.0 percent, more than forecast, and operating cash flow(1)  increased 1.8 percent.
 
Earnings per diluted common share were 42 cents, compared with 62 cents a year ago. Excluding non-cash curtailment gains and other unusual matters in both years, adjusted earnings per diluted common share(2)  increased to 29 cents from 22 cents a year ago.
 
Mary Junck, chairman and chief executive officer, said:
 
"Our digital growth continues at an aggressive pace. In addition to our 38 percent growth in digital advertising revenue, we're up 25 percent in online unique visitors and 256 percent in mobile page views. As we introduce more new digital services and as the economy further recovers, we expect total revenue comparisons will continue to improve.
 
"In driving our strong digital growth, we have established robust mobile sites in all our markets, along with separate smartphone applications in most locations. Last fall we rolled out additional mobile apps in 19 markets providing in-depth coverage of local sports. Also, we have expanded our digital product portfolio to meet the increasing needs of our customers with capabilities for video, local business directories, digital couponing and search engine optimization.
 
"All by themselves, our newspapers remain, by far, the primary source of local news, information and advertising in our communities. Our online sites and digital products are expanding that reach through smartphones, e-readers and tablets. The result is a huge, growing audience spanning all ages. Our latest independent research shows that, over the course of a week, our newspapers and digital products touch 82 percent of all adults in our larger markets and 77 percent of 18- to 29-year-olds. In many of our smaller markets, our reach is even higher."
 
FIRST QUARTER OPERATING RESULTS
 
Operating revenue for the quarter totaled $207.7 million, a decline of 1.0 percent compared with a year ago. Combined print and digital advertising revenue decreased 1.7 percent to $151.8 million, with retail advertising down 1.9 percent, national down 5.8 percent and classified down 0.2 percent. Combined print and digital employment advertising revenue increased 12.7 percent. Automotive increased 8.4 percent, real estate decreased 20.3 percent and other classified decreased 1.4 percent.  Digital advertising revenue on a stand-alone basis increased 37.8 percent to $14.7 million, representing 9.7 percent of total advertising revenue. Digital retail advertising revenue increased 49.1 percent and digital classified advertising increased 7.3 percent.
 
Lee's digital sites attracted 51.4 million unique visitors during the quarter, an increase of 25.1 percent from a year ago, with approximately 517.0 million page views. The number of mobile page views grew 256 percent to 25.8 million. Circulation revenue increased 0.8 percent, the company's first quarterly increase since 2007.
 
Operating expenses, excluding depreciation and amortization, decreased 2.0 percent. Compensation declined 5.0 percent, with the average number of full-time equivalent employees down 3.2 percent. Newsprint and ink expense increased 23.5 percent, a result of higher prices partially offset by a reduction in newsprint volume of 2.8 percent. Other operating expenses decreased 2.9 percent. Despite the increased cost of newsprint, operating expenses, excluding depreciation, amortization and unusual matters, are expected to increase less than 1 percent for the year.
 
Operating cash flow increased 1.8 percent from a year ago to $54.1 million. Operating cash flow margin(1) increased to 26.1 percent from 25.3 percent a year ago. Including equity in earnings of associated companies, depreciation and amortization, as well as unusual matters in both years, operating income totaled $49.2 million, compared with $67.8 million a year ago, due to a smaller curtailment gain in the current year quarter. Operating income margin was 23.7 percent in the current year quarter. Non-operating expenses, primarily interest expense and debt financing costs, declined $5.9 million.  Income attributable to Lee Enterprises, Incorporated totaled $18.9 million, compared with $27.9 million a year ago.
 
CURTAILMENT GAIN
 
A $10.2 million pretax non-cash curtailment gain resulted from changes during the quarter to postretirement medical plans for certain retirees. In addition, the plan changes reduced benefit liabilities by $15.1 million.
 
ADJUSTED EARNINGS AND EPS FOR THE QUARTER
 
Unusual matters affecting year-over-year comparisons consist primarily of curtailment gains in both years. The following table summarizes the impact from unusual matters on income attributable to Lee Enterprises, Incorporated and earnings per diluted common share. Per share amounts may not add due to rounding.
 

DEBT AND FREE CASH FLOW(4)
 
Debt was reduced $29.7 million in the quarter, compared with $7.1 million in the prior year quarter. Debt, net of changes in cash, has been reduced $111.4 million in the last 12 months.
 
Carl Schmidt, vice president, chief financial officer and treasurer, said Lee remains in compliance with financial covenants and expects to continue repaying debt primarily with ongoing cash flow. Liquidity(5) at the end of the quarter totaled $103.8 million, which is comparable to the September 2010 level, and compares to $82.0 million of debt repayments due in the next four quarters.
 
Free cash flow totaled $41.1 million for the quarter, an 18.4 percent increase from $34.7 million a year ago. Free cash flow in the last 12 months totaled $110.6 million.
 
ABOUT LEE

Lee Enterprises is a premier provider of local news, information and advertising in primarily midsize markets, with 49 daily newspapers and a joint interest in four others, rapidly growing digital products and nearly 300 specialty publications in 23 states. Lee's newspapers have circulation of 1.4 million daily and 1.7 million Sunday, reaching nearly four million readers daily. Lee's digital sites attract more than 19 million unique visitors monthly. Lee's markets include St. Louis, Mo.; Lincoln, Neb.; Madison, Wis.; Davenport, Iowa; Billings, Mont.; Bloomington, Ill.; and Tucson, Ariz. Lee stock is traded on the New York Stock Exchange under the symbol LEE. For more information about Lee, please visit www.lee.net.

FORWARD-LOOKING STATEMENTS -- The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. This news release contains information that may be deemed forward-looking that is based largely on Lee Enterprises, Incorporated'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, which in some instances are beyond its control, are the Company's ability to generate cash flows and maintain liquidity sufficient to service its debt, and comply with or obtain amendments or waivers of the financial covenants contained in its credit facilities, if necessary. Other risks and uncertainties include the impact and duration of continuing adverse economic conditions, changes in advertising demand, potential changes in newsprint and other commodity prices, energy costs, interest rates and the availability of credit due to instability in the credit markets, labor costs, legislative and regulatory rulings, difficulties in achieving planned expense reductions, maintaining employee and customer relationships, increased capital costs, competition and other risks detailed from time to time in the Company's publicly filed documents, including the Company Annual Report on Form 10-K for the year ended September 26, 2010. Any statements that are not statements of historical fact (including statements containing the words "may," "will," "would," "could," "believes," "expects," "anticipates," "intends," "plans," "projects," "considers" and similar expressions) generally should be considered 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 undertake to publicly update or revise its forward-looking statements.
   
Contact: dan.hayes@lee.net, (563) 383-2100


LEE ENTERPRISES, INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

FREE CASH FLOW

SELECTED COMBINED PRINT AND DIGITAL ADVERTISING REVENUE

REVENUE BY REGION

DAILY NEWSPAPER ADVERTISING VOLUME

SELECTED BALANCE SHEET INFORMATION

 
SELECTED STATISTICAL INFORMATION

NOTES: