Lee Enterprises Reports Earnings for 4th Quarter and Fiscal Year
DAVENPORT, Iowa--(BUSINESS WIRE)--Nov. 9, 2006--Lee Enterprises, Incorporated (NYSE:LEE), reported today that diluted earnings per common share from continuing operations were 33 cents for its fourth fiscal quarter ended Sept. 30, 2006, compared with 25 cents a year ago.
Including discontinued operations, net income for the quarter totaled $10.9 million, or 24 cents per common share, compared with 29 cents in 2005. In the current year quarter, expenses related to the acquisition of Pulitzer Inc. reduced income from continuing operations 2 cents per share and losses on the sales of discontinued operations reduced net income an additional 11 cents per share. A year ago, acquisition expenses and an early retirement program decreased income from continuing operations 22 cents per share.
On a reported basis, total revenue for the quarter increased 0.2 percent from a year ago to $279.7 million. Total advertising revenue declined 0.3 percent, with retail advertising down 1.4 percent, classified down 1.9 percent and national down 8.6 percent. Online advertising revenue increased 43.1 percent, and niche advertising increased 9.0 percent. Circulation revenue decreased 0.2 percent.
On a same property (1) basis, which excludes the impact of acquisitions and divestitures made in the current or prior year, total revenue for the quarter increased 0.5 percent from a year ago. Total advertising also increased 0.5 percent, with retail down 1.2 percent, classified up 0.3 percent and national down 16.1 percent. Online advertising revenue increased 46.0 percent, and niche advertising increased 10.5 percent. Circulation revenue increased 0.3 percent.
Total operating expenses, excluding depreciation and amortization, for the quarter decreased 4.8 percent on a reported basis, reflecting cycling of substantial transition and early retirement costs a year ago related to the acquisition of Pulitzer. Excluding unusual costs and depreciation and amortization, total operating expenses increased 2.0 percent. Compensation declined 2.8 percent. Newsprint and ink expense rose 5.6 percent, and other cash operating expenses increased 8.2 percent.
Same property operating expenses, excluding depreciation and amortization, increased 4.9 percent for the quarter, with compensation up 1.8 percent, newsprint and ink up 6.7 percent, and other operating expenses up 9.6 percent. Same property other operating expenses in 2005 had declined 3.1 percent compared with 2004.
Operating cash flow (2) increased 20.0 percent to $67.2 million, including acquisitions and related costs. Operating income, which includes equity in earnings of associated companies and depreciation and amortization, increased 20.5 percent to $47.4 million. Non-operating expenses, which include financial expense related to the acquisition of Pulitzer, increased 14.1 percent to $25.2 million, reflecting higher interest rates and writedown of other investments, partially offset by lower debt balances. Income from continuing operations before income taxes increased 28.8 percent to $22.2 million. Income from continuing operations increased 31.3 percent, to $15.0 million. Net income, which was substantially impacted by the losses on sales of discontinued operations, as noted above, decreased 16.7 percent.
Results in all periods reflect the impact of stock compensation expense, which Lee has been recognizing since October 2002.
Mary Junck, chairman and chief executive officer, said: "Lee continues to drive advertising revenue aggressively both in print and online, well ahead of the industry average. At the same time, we're rapidly building larger online audiences while protecting our strong base of paid newspaper circulation. A standout in circulation growth is the St. Louis Post-Dispatch, and the success of the Cardinals in the World Series enhances our prospects for a good start to our new fiscal year in St. Louis, where new management and new sales programs are gaining traction. Meanwhile, due primarily to our strong cash flow, we reduced net debt by $179 million in 2006."
CIRCULATION AND ONLINE AUDIENCES
On Nov. 1, Lee announced that 37 of its daily newspapers reported year-over-year circulation gains for the six-month Audit Bureau of Circulations Fas-Fax period ended Sept. 30, 2006.
Lee's 51 newspapers that are members of ABC reported combined declines of 0.2 percent daily and 0.5 percent Sunday. Nationally, newspapers reported average decreases of 2.8 percent daily and 3.4 percent Sunday.
Meanwhile, use of Lee newspaper online sites, as measured by page views, increased 43 percent from September 2005 to September 2006, further extending audience reach.
Lee newspapers with gains include Lee's largest newspaper, the St. Louis Post-Dispatch, one of only a few major metropolitan dailies in the country to report growth. At the Post-Dispatch, daily circulation climbed 0.7 percent to 276,588, despite a strategic reduction in lower value distribution outside the metropolitan area. The Post-Dispatch reported Sunday circulation of 418,262, a decline of 2.4 percent, reflecting an increase in the Sunday single copy price, as well as the distribution change.
Of the 37 Lee newspapers with circulation growth, 27 reported gains daily, 28 reported gains Sunday, and 18 reported gains both daily and Sunday. The newspapers reporting gains are located in Flagstaff and Tucson, Ariz.; Hanford, Lompoc and Santa Maria, Calif.; Lihue, Hawaii; Mason City, Sioux City and Waterloo, Iowa; Twin Falls, Idaho; Bloomington, Carbondale, Charleston, Decatur and DeKalb, Ill.; Munster, Ind.; Winona, Minn.; Park Hills and St. Louis, Mo.; Billings, Butte and Helena, Mont.; Fremont and Lincoln, Neb.; Bismarck, N.D.; Albany and Coos Bay, Ore.; Carlisle, Pa; Orangeburg, S.C.; Provo, Utah; Longview, Wash.; Baraboo, Chippewa Falls, La Crosse, Portage and Racine, Wis.; and Casper, Wyo.
Lee's newspapers have circulation of 1.6 million daily and 1.9 million Sunday, reaching more than four million readers daily. Lee's online sites reach more than two million users, and Lee's weekly publications have distribution of more than 4.5 million households.
FISCAL YEAR
On a reported basis, for the year ended Sept. 30, 2006, income from continuing operations was $71.1 million, or $1.56 per diluted common share, the same as a year ago.
Net income for the year totaled $70.8 million, or $1.56 per share, compared with $1.70 in 2005. Discontinued operations, including losses on sales, accounted for a loss of 1 cent per share in 2006 and income of 13 cents in 2005.
Comparisons include the addition of Pulitzer in June 2005. Transition costs, an early retirement program and a re-evaluation of intangible assets related to the acquisition of Pulitzer reduced diluted earnings per common share from continuing operations by 27 cents in 2006. In 2005, transition costs, the early retirement program and loss on early extinguishment of debt related to Pulitzer reduced earnings by 39 cents.
Including acquisitions and divestitures, for the fiscal year ended Sept. 30, 2006, advertising revenue increased 40.1 percent to $874.6 million, and total operating revenue increased 37.8 percent to $1.13 billion. Operating expenses, excluding depreciation and amortization, increased 38.3 percent to $849.3 million.
On a same property basis, advertising revenue increased 1.7 percent, total operating revenue increased 1.1 percent, and operating expenses, excluding depreciation and amortization, increased 3.9 percent.
Operating income rose 28.9 percent to $204.0 million. Non-operating expenses, which include financial expense related to the Pulitzer acquisition, totaled $91.9 million, compared with $46.8 million a year ago.
UNUSUAL COSTS
The following tables summarize the impact on income from continuing operations from unusual costs related to the Pulitzer acquisition:
Three Months Ended Sept. 30
----------------------------------------------------------------------
2006 2005
--------------- ---------------
(Thousands, Except EPS Data) Amount Per Amount Per
Share Share
-------- ------ -------- ------
Income from continuing operations, as
reported............................. $14,985 $0.33 $11,410 $0.25
Adjustments to income from
continuing operations:
Early retirement program............ - 9,124
Transition costs.................... 1,759 7,387
----------------------------------------------------------------------
1,759 16,511
Income tax benefits of adjustments,
net................................ (654) (6,439)
----------------------------------------------------------------------
1,105 0.02 10,072 0.22
Income from continuing operations, as
adjusted............................. $16,090 $0.35 $21,482 $0.47
======================================================================
Year Ended Sept. 30
----------------------------------------------------------------------
2006 2005
--------------- ---------------
(Thousands, Except EPS Data) Amount Per Amount Per
Share Share
-------- ------ -------- ------
Income from continuing operations, as
reported............................. $71,136 $1.56 $70,862 $1.56
Adjustments to income from
continuing operations:
Early retirement program............ 8,654 9,124
Reduction of value of identified
intangible assets.................. 5,526 -
Transition costs.................... 4,589 8,929
Loss on extinguishment of debt...... - 11,181
----------------------------------------------------------------------
18,769 29,234
Income tax benefits of adjustments,
net................................ (6,316) (11,401)
----------------------------------------------------------------------
12,453 0.27 17,833 0.39
----------------------------------------------------------------------
Income from continuing operations, as
adjusted............................. $83,589 $1.84 $88,695 $1.96
======================================================================
DISCONTINUED OPERATIONS
On Oct. 3, Lee announced the completion of the sales of stand-alone publications and commercial printing operations in the Pacific Northwest and northern Wisconsin.
Lee received $51.7 million for the Pacific Northwest properties, which included rack shoppers and commercial printing operations based in Seattle and Spokane, Wash.; rack shopper operations in Portland, Ore., and a twice-weekly newspaper in Newport, Ore. Also in October, Lee sold a weekly newspaper in Cottage Grove, Ore., and closed a nearby weekly newspaper in Springfield, Ore. None of the properties were located in markets where Lee operates daily newspapers. $33 million of proceeds was received in September 2006 and was primarily used to reduce debt in the quarter. The remaining proceeds will also be used to reduce debt as Lee continues to focus on its core publishing and online operations.
In Wisconsin, Lee sold its smallest daily newspaper, located in Rhinelander, for $2.2 million. At the same time, Madison Newspapers, Inc., which is owned jointly by Lee and The Capital Times Co., sold a small daily newspaper and commercial printing operation in Shawano to an affiliate of the same buyer.
Lee recorded an aggregate loss after income taxes of $5.2 million, or 11 cents per diluted common share, which is recorded in discontinued operations. The Company had previously announced an estimated loss of 15 cents per share. Results of the enterprises sold, up to the respective dates of sale, are also included in discontinued operations.
Consolidated statements of income, balance sheet items and selected statistics follow.
LEE ENTERPRISES, INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
----------------------------------------------------------------------
Three Months Ended
Sept. 30
----------------------------------------------------------------------
(Thousands, Except EPS Data) 2006 2005 %
----------------------------------------------------------------------
Advertising revenue:
Retail................................... $110,441 $112,033 (1.4)%
National................................. 12,229 13,375 (8.6)
Classified:
Daily newspapers:
Employment............................. 23,649 23,994 (1.4)
Automotive............................. 16,204 17,617 (8.0)
Real estate............................ 16,947 17,004 (0.3)
All other.............................. 10,113 10,136 (0.2)
Other publications...................... 12,093 11,754 2.9
----------------------------------------------------------------------
Total classified......................... 79,006 80,505 (1.9)
Online................................... 10,400 7,270 43.1
Niche publications....................... 4,279 3,927 9.0
----------------------------------------------------------------------
Total advertising revenue................. 216,355 217,110 (0.3)
----------------------------------------------------------------------
Circulation............................... 51,585 51,696 (0.2)
Commercial printing....................... 4,200 3,831 9.6
Online services & other................... 7,529 6,543 15.1
----------------------------------------------------------------------
Total operating revenue................... 279,669 279,180 0.2
----------------------------------------------------------------------
Operating expenses:
Compensation............................. 107,182 110,278 (2.8)
Newsprint and ink........................ 30,755 29,130 5.6
Other operating expenses................. 72,790 67,261 8.2
Transition costs......................... 1,759 7,387 NM
Early retirement program................. - 9,124 NM
----------------------------------------------------------------------
Operating expenses,
excluding depreciation
and amortization......................... 212,486 223,180 (4.8)
----------------------------------------------------------------------
Operating cash flow(2).................... 67,183 56,000 20.0
Depreciation.............................. 9,286 8,057 15.3
Amortization.............................. 15,066 13,861 8.7
Equity in earnings of
associated companies:
Tucson partnership...................... 2,573 2,742 (6.2)
Madison Newspapers...................... 1,999 2,505 (20.2)
----------------------------------------------------------------------
Operating income.......................... 47,403 39,329 20.5
----------------------------------------------------------------------
Non-operating income
(expense):
Financial income......................... 1,509 1,348 11.9
Financial expense........................ (24,640) (23,408) 5.3
Loss on early
extinguishment of debt.................. - - NM
Other, net............................... (2,037) - NM
----------------------------------------------------------------------
(25,168) (22,060) 14.1
----------------------------------------------------------------------
Income from continuing
operations before income
taxes.................................... 22,235 17,269 28.8
Income tax expense........................ 6,910 5,845 18.2
Minority interest......................... 340 14 NM
----------------------------------------------------------------------
Income from continuing operations......... 14,985 11,410 31.3
Discontinued operations................... (4,069) 1,696 NM
----------------------------------------------------------------------
Net income................................ $10,916 $13,106 (16.7)%
======================================================================
Earnings per common share:
Basic:
Continuing operations................... $0.33 $0.25 32.0 %
Discontinued operations................. (0.09) 0.04 NM
$0.24 $0.29 (17.2)%
======================================================================
Diluted:
Continuing operations................... $0.33 $0.25 32.0 %
Discontinued operations. (0.09) 0.04 NM
----------------------------------------------------------------------
$0.24 $0.29 (17.2)%
======================================================================
Average common shares:
Basic................................... 45,546 45,201
Diluted................................. 45,657 45,459
======================================================================
Year Ended
Sept. 30
----------------------------------------------------------------------
(Thousands, Except EPS Data) 2006 2005 %
----------------------------------------------------------------------
Advertising revenue:
Retail................................... $463,991 $341,977 35.7 %
National................................. 57,869 33,031 75.2
Classified:
Daily newspapers:
Employment............................. 90,472 63,923 41.5
Automotive............................. 60,953 49,320 23.6
Real estate............................ 63,802 47,171 35.3
All other.............................. 39,253 29,200 34.4
Other publications...................... 45,868 28,411 61.4
----------------------------------------------------------------------
Total classified......................... 300,348 218,025 37.8
Online................................... 35,769 17,983 98.9
Niche publications....................... 16,591 13,093 26.7
----------------------------------------------------------------------
Total advertising revenue................. 874,568 624,109 40.1
----------------------------------------------------------------------
Circulation............................... 205,718 153,571 34.0
Commercial printing....................... 17,265 14,766 16.9
Online services & other................... 31,097 26,444 17.6
------------------------------------------
Total operating revenue................... 1,128,648 818,890 37.8
----------------------------------------------------------------------
Operating expenses:
Compensation............................. 435,836 325,959 33.7
Newsprint and ink........................ 120,191 79,331 51.5
Other operating expenses................. 280,018 190,768 46.8
Transition costs......................... 4,589 8,929 NM
Early retirement program................. 8,654 9,124 NM
----------------------------------------------------------------------
Operating expenses,
excluding depreciation
and amortization......................... 849,288 614,111 38.3
----------------------------------------------------------------------
Operating cash flow(2).................... 279,360 204,779 36.4
Depreciation.............................. 33,903 23,754 42.7
Amortization.............................. 62,167 35,495 75.1
Equity in earnings of
associated companies:
Tucson partnership...................... 12,882 3,740 244.4
Madison Newspapers...................... 7,857 9,044 (13.1)
----------------------------------------------------------------------
Operating income.......................... 204,029 158,314 28.9
----------------------------------------------------------------------
Non-operating income
(expense):
Financial income......................... 6,054 2,824 114.4
Financial expense........................ (95,939) (38,038) 152.2
Loss on early
extinguishment of debt.................. - (11,181) NM
Other, net............................... (2,037) (439) NM
----------------------------------------------------------------------
(91,922) (46,834) NM
----------------------------------------------------------------------
Income from continuing
operations before income
taxes.................................... 112,107 111,480 0.6
Income tax expense........................ 39,740 40,458 (1.8)
Minority interest......................... 1,231 160 NM
----------------------------------------------------------------------
Income from continuing operations......... 71,136 70,862 0.4
Discontinued operations................... (304) 6,016 NM
----------------------------------------------------------------------
Net income................................ $70,832 $76,878 (7.9)%
======================================================================
Earnings per common share:
Basic:
Continuing operations................... $1.57 $1.57 - %
Discontinued operations................. (0.01) 0.13 NM
$1.56 $1.70 (8.2)%
======================================================================
Diluted:
Continuing operations................... $1.56 $1.56 - %
Discontinued operations. (0.01) 0.13 NM
----------------------------------------------------------------------
$1.56 $1.70 (8.2)%
======================================================================
Average common shares:
Basic................................... 45,421 45,118
Diluted................................. 45,546 45,348
======================================================================
SELECTED BALANCE SHEET INFORMATION
----------------------------------------------------------------------
Sept. 30
----------------------------------------------------------------------
(Thousands) 2006 2005
----------------------------------------------------------------------
Cash.................................. $8,638 $7,543
Restricted cash and investments....... 96,060 81,060
Debt (principal amount)............... 1,525,000 1,688,000
======================================================================
SELECTED STATISTICAL INFORMATION
----------------------------------------------------------------------
Three Months Ended Year Ended
Sept. 30 Sept. 30
----------------------------------------------------------------------
(Dollars in
thousands) 2006 2005 % 2006 2005 %
----------------------------------------------------------------------
Capital expenditures $13,128 $12,654 3.7 % $32,458 $25,455 27.5 %
Same property
newsprint volume
(tonnes)........... 24,752 26,033 (4.9) 101,302 103,332 (2.0)
Same property full-
time equivalent
employees.......... 5,378 5,413 (0.6) 5,378 5,398 (0.4)
======================================================================
NOTES:
(1) Same property comparisons exclude acquisitions (including
Pulitzer) and divestitures made in the current and prior year.
Same property revenue also excludes revenue of Madison
Newspapers, Inc., in which Lee owns a 50% share. It is 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 earnings of associated
companies, is a non-GAAP financial measure. 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.
(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.
Lee Enterprises is a premier publisher of local news, information and advertising in primarily midsize markets, with 51 daily newspapers and a joint interest in five others, rapidly growing online sites and more than 300 weekly newspapers and specialty publications in 23 states. Lee's newspaper markets include St. Louis, Mo.; Lincoln, Neb.; Madison, Wis.; Davenport, Iowa; Billings, Mont.; Bloomington, Ill.; Tucson, Ariz.; and Napa, Calif. 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.
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, energy costs, 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, Incorporated