Lee Enterprises Reports Earnings for 4th Quarter and Fiscal Year
DAVENPORT, Iowa--(BUSINESS WIRE)--Nov. 14, 2005--Lee Enterprises, Incorporated (NYSE:LEE) reported today that, excluding costs related to the acquisition of Pulitzer Inc., diluted earnings per common share from continuing operations were 51 cents for its fourth quarter ended Sept. 30, 2005, and $2.09 for the fiscal year, compared with 47 cents in the quarter a year ago and $1.92 in fiscal 2004. Expenses related to the acquisition of Pulitzer on June 3, 2005 decreased earnings by 22 cents for the quarter and 39 cents for the year. Reported diluted earnings per common share from continuing operations were 29 cents for the fourth quarter ended Sept. 30, 2005, and $1.70 for the fiscal year.
"Integration of Pulitzer continues at a rapid and successful pace and, importantly, our other operations have again posted strong performances, especially in advertising revenue growth, up 4.7 percent this quarter. For the year, ad revenue on a same property basis grew 4.9 percent," said Mary Junck, Lee chairman and chief executive officer. "With the Pulitzer acquisition, this has been a landmark year for Lee, and we've set the stage for exciting opportunities in the years ahead."
OPERATING RESULTS FOR THE QUARTER
For the quarter ended Sept. 30, 2005, advertising revenue increased 73.7 percent from a year ago to $226.0 million, with growth of 65.1 percent in retail, 72.5 percent in classified, 191.6 percent in national, 42.5 percent in niche and 143.2 percent in online advertising. Circulation revenue increased 58.9 percent. Total operating revenue increased 66.8 percent to $290.2 million.
On a same property(1) 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 4.7 percent from a year ago, circulation revenue decreased 1.8 percent, and total operating revenue increased 3.1 percent.
Operating expenses, excluding depreciation and amortization, increased 80.3 percent to $231.1 million, with compensation up 63.4 percent, newsprint and ink up 80.8 percent and other expenses up 68.7 percent. All categories of expenses were affected by acquisitions and costs related to the acquisition of Pulitzer added $16.5 million.
Same property operating expenses, excluding depreciation and amortization, increased only 1.3 percent in the quarter, with compensation up 2.0 percent, newsprint and ink up 8.4 percent and other operating expenses down 3.1 percent.
Operating cash flow(2) increased 29.0 percent to $59.2 million, including acquisitions and related costs. Operating cash flow margin(2) was 20.4 percent, compared with 26.4 percent a year ago, reflecting the overall lower margin of the Pulitzer newspapers and costs related to the Pulitzer acquisition in the current year quarter. Operating income, which includes equity in earnings of associated companies and depreciation and amortization, rose 18.9 percent to $42.1 million. Non-operating expenses, which include financial expense related to the Pulitzer acquisition, totaled $22.1 million, compared with $2.6 million a year ago. As a result, income from continuing operations decreased 38.3 percent to $13.1 million. Net income decreased 38.5 percent to $13.1 million.
CIRCULATION RESULTS
As reported Nov. 7 by the Audit Bureau of Circulations, Lee's year-over-year circulation volume, including Pulitzer and Madison Newspapers, declined 1.8 percent daily and 2.2 percent Sunday in the six-month Fas-Fax period that ended Sept. 30. In comparison, the Newspaper Association of America reported that the average change for all newspapers during the period was minus 2.6 percent daily and minus 3.1 percent Sunday. Lee's 58 daily newspapers have combined paid circulation of 1.7 million weekdays and 1.9 million on Sundays.
FISCAL YEAR
Including acquisitions, for the year ended Sept. 30, advertising revenue increased 29.8 percent to $657.6 million, and total operating revenue increased 26.0 percent to $860.9 million. Operating expenses, excluding depreciation and amortization, rose 29.7 percent to $644.6 million. Expenses related to the acquisition of Pulitzer added $18.1 million.
On a same property basis, advertising revenue increased 4.9 percent, total operating revenue increased 3.6 percent, and operating expenses, excluding depreciation and amortization, increased 2.4 percent.
Including acquisitions and related costs, operating cash flow increased 16.1 percent, to $216.3 million, and operating cash flow margin was 25.1 percent, compared with 27.3 percent a year ago. Operating income rose 14.5 percent to $167.8 million. Non-operating expenses, which include financial expense related to the Pulitzer acquisition and an $11.2 million loss on early extinguishment of debt, totaled $46.5 million, compared with $11.9 million a year ago. As a result, income from continuing operations decreased 11.1 percent to $76.9 million. Net income decreased 10.7 percent to $76.9 million.
COSTS RELATED TO THE ACQUISITION OF PULITZER
On Nov. 1, 2005, Lee announced that the St. Louis Post-Dispatch concluded an offering of early retirement incentives that will result in an adjustment of staffing levels. A total of 129 employees volunteered to take advantage of the offer, which included enhanced pension and insurance benefits, and lump-sum cash payments based on continuous service. The annual pretax savings from the program, net of positions filled, is estimated to be $6.5-7.0 million, with savings of $6.0-6.5 million in the fiscal year ending Sept. 30, 2006. The cost will total about $17.5 million before income tax benefit, with $9.1 million, or 12 cents per diluted common share, recognized in the quarter ended Sept. 30, 2005, and about $8.4 million, or 11 cents per diluted common share, in the quarter ending Dec. 31, 2005. Approximately $7.0 million of the cost represents cash payments, with the remainder due primarily to enhancements of pension and other post retirement benefits.
Transition costs related to the acquisition of Pulitzer in the quarter ended Sept. 30, 2005, totaled $7.4 million before income tax benefit, or 10 cents per diluted common share, and $8.9 million, or 12 cents per diluted common share for the fiscal year. Lee expects to incur additional transition costs for the remainder of the calendar year.
In the quarter ended June 30, 2005, 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.
The following table summarizes the impact on earnings per diluted common share from costs related to the acquisition of Pulitzer:
Three Months Year
Ended Ended
Sept. 30, Sept. 30,
2005 2005
-------------------------------------------------------------
Diluted EPS from continuing operations $ 0.29 $ 1.70
-------------------------------------------------------------
Early retirement program 0.12 0.12
Transition costs 0.10 0.12
Loss on extinguishment of debt - 0.15
-------------------------------------------------------------
Total costs related to acquisition
of Pulitzer 0.22 0.39
-------------------------------------------------------------
Diluted EPS, excluding costs related
to acquisition of Pulitzer $0.51 $2.09
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Tables follow. Expanded tables with same property comparisons, as well as revenue statistics for September, are available at www.lee.net/financial.
Lee Enterprises is a premier publisher of newspapers in midsize markets, with 52 dailies and a joint interest in six others, a rapidly growing online business and more than 300 weekly newspapers and specialty publications in 23 states. Lee's newspapers have circulation of 1.7 million daily and 1.9 million Sunday, reaching more than four million readers daily, and its weekly publications have distribution of more than 4.5 million households. Lee's newspapers include such diverse markets as Napa, Calif.; Bloomington, Ill.; Billings, Mont.; Escondido, Calif.; Madison, Wis.; and St. Louis, Mo. Lee is based in Davenport, Iowa, and its stock is traded on the New York Stock Exchange under the symbol LEE. For more information about Lee Enterprises, please visit www.lee.net.
LEE ENTERPRISES, INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Year Ended
Sept. 30 Sept. 30
----------------------------------------------------------------------
(Thousands, Except
EPS Data) 2005 2004 % 2005 2004 %
----------------------------------------------------------------------
Operating revenue:
Advertising revenue:
Retail $116,371 $ 70,506 65.1%$358,253 $287,661 24.5%
National 13,386 4,590 191.6 33,075 18,434 79.4
Classified:
Daily newspapers:
Employment 24,050 12,556 91.5 64,122 44,562 43.9
Automotive 17,625 10,724 64.4 49,347 40,873 20.7
Real estate 17,023 9,308 82.9 46,808 34,081 37.3
All other 10,166 7,153 42.1 29,483 25,572 15.3
Other publications 15,537 9,181 69.2 43,672 33,237 31.4
----------------------------------------------------------------------
Total classified 84,401 48,922 72.5 233,432 178,325 30.9
Niche publications 4,253 2,984 42.5 13,595 11,212 21.3
Online 7,627 3,136 143.2 19,294 11,125 73.4
----------------------------------------------------------------------
Total advertising
revenue 226,038 130,138 73.7 657,649 506,757 29.8
----------------------------------------------------------------------
Circulation 51,927 32,680 58.9 154,226 130,552 18.1
Commercial printing 5,391 5,134 5.0 21,362 20,249 5.5
Online services &
other 6,868 6,078 13.0 27,622 25,766 7.2
----------------------------------------------------------------------
Total operating
revenue 290,224 174,030 66.8 860,859 683,324 26.0
----------------------------------------------------------------------
Operating expenses:
Compensation 114,381 70,008 63.4 342,237 276,204 23.9
Newsprint and ink 30,692 16,974 80.8 85,063 63,502 34.0
Other operating
expenses 69,470 41,178 68.7 199,237 157,377 26.6
Transition costs 7,387 - NM 8,929 - NM
Early retirement
program 9,124 - NM 9,124 - NM
----------------------------------------------------------------------
Operating expenses,
excluding
depreciation and
amortization 231,054 128,160 80.3 644,590 497,083 29.7
----------------------------------------------------------------------
Operating cash
flow(2) 59,170 45,870 29.0 216,269 186,241 16.1
Depreciation 8,316 5,777 44.0 24,813 20,578 20.6
Amortization 13,978 6,929 101.7 36,015 27,449 31.2
----------------------------------------------------------------------
Operating income,
before equity in
earnings of
associated
companies 36,876 33,164 11.2 155,441 138,214 12.5
Equity in earnings
of associated
companies:
Tucson newspaper
partnership 2,742 - NM 3,740 - NM
Madison Newspapers 2,505 2,433 3.0 9,044 8,523 6.1
Other - (183) NM (381) (183) NM
----------------------------------------------------------------------
Operating income 42,123 35,414 18.9 167,844 146,554 14.5
----------------------------------------------------------------------
Non-operating
income:
Financial income 1,348 258 422.5 2,824 1,066 164.9
Financial expense (23,408) (2,864) 717.3 (38,038) (12,665) 200.3
Loss on early
extinguishment
of debt. - - - (11,181) - NM
Other, net - - - (58) (294) (80.3)
----------------------------------------------------------------------
(22,060) (2,606) 746.5 (46,453) (11,893) 290.6
----------------------------------------------------------------------
Income from
continuing
operations before
income taxes 20,063 32,808 (38.8) 121,391 134,661 (9.9)
Income tax expense 6,943 11,560 (39.9) 44,353 48,192 (8.0)
Minority interest 14 - NM 160 - NM
----------------------------------------------------------------------
Income from
continuing
operations 13,106 21,248 (38.3) 76,878 86,469 (11.1)
Discontinued
operations - 66 NM - (398) NM
----------------------------------------------------------------------
Net income $ 13,106 $ 21,314 (38.5)%$ 76,878 $ 86,071 (10.7)%
======================================================================
Earnings per common
share:
Basic:
Continuing
operations $ 0.29 $ 0.47 (38.3)%$ 1.70 $ 1.93 (11.9)%
Discontinued
operations - - - - (0.01) -
----------------------------------------------------------------------
Net income $ 0.29 $ 0.47 (38.3)%$ 1.70 $ 1.92 (11.5)%
======================================================================
Diluted:
Continuing
operations $ 0.29 $ 0.47 (38.3)%$ 1.70 $ 1.92 (11.5)%
Discontinued
operations - - - - (0.01) -
----------------------------------------------------------------------
Net income $ 0.29 $ 0.47 (38.3)%$ 1.70 $ 1.91 (11.0)%
======================================================================
Average common
shares:
Basic 45,201 44,969 45,118 44,792
Diluted 45,459 45,271 45,348 45,092
======================================================================
SELECTED BALANCE SHEET INFORMATION
Sept. 30
----------------------------------------------------------------------
(Thousands) 2005 2004
----------------------------------------------------------------------
Cash......................................$ 7,543 $ 8,010
Restricted cash and investments...............81,060 -
Debt (principal amount)....................1,688,000 213,600
======================================================================
NOTES:
(1) Same property comparisons exclude acquisitions and divestitures
made in the current and prior year. Same property revenue also
excludes revenue of Madison Newspapers, Inc. (MNI), in which Lee
owns a 50% share, and Lee's 50% newspaper partnership in TNI
Partners in Tucson. Both are reported using the equity method of
accounting. Same property comparisons also exclude corporate
office costs.
(2) 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.
(3) 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.
(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 Dan Hayes, 563-383-2100 dan.hayes@lee.net SOURCE: Lee Enterprises