Lee Enterprises Reports Earnings for First Fiscal Quarter
The results compare with 58 cents a year ago in a quarter that included an additional publishing day, a Sunday, and the benefit of the World Series in St. Louis. The additional Sunday a year ago and sales related to the World Series resulted in an estimated $7 million of revenue and $4 million of operating cash flow(1). The quarter a year ago also benefited from an additional publishing week in Tucson, Ariz., which is recorded in equity in earnings of associated companies. The impact of these events on prior year earnings for the quarter was approximately six cents per common share.
Mary Junck, chairman and chief executive officer, said: "We believe we're weathering the current economic slowdown as well as possible in light of the wide-ranging impact of the real estate slump. Our audiences continue to grow, and we continue to focus on our top priorities of revenue growth, online innovation, strong local news, people development and cost control. We believe we have the right strategies and the right people to continue building on our position as, by far, the leading provider of local news, information and advertising in our markets."
The loss of the Sunday and World Series affected nearly all revenue categories. Total operating revenue from continuing operations for the quarter decreased 6.2 percent from a year ago to $279.9 million. Total advertising revenue decreased 6.5 percent, to $217.6 million, with online advertising revenue up 24.0 percent. Combined print and online retail advertising decreased 2.5 percent. Combined print and online classified advertising revenue decreased 9.5 percent, with employment down 7.9 percent, automotive down 9.5 percent and real estate down 19.8 percent. National advertising revenue decreased 24.1 percent. Circulation revenue decreased 4.3 percent. Same property(2) revenue results were identical.
Operating expenses, exclusive of depreciation and amortization, decreased 4.9 percent, with compensation down 3.6 percent, newsprint and ink down 18.8 percent and other cash costs down 1.1 percent. Same property operating expenses decreased 4.3 percent for the quarter compared with a year ago, with compensation down 1.9 percent, newsprint and ink down 19.4 percent and other cash costs down 1.2 percent.
Compared with a year ago, operating cash flow decreased 10.0 percent to $72.4 million. Operating income, which includes equity in earnings of associated companies and depreciation and amortization, decreased 15.8 percent to $53.7 million.
Non-operating expenses, which consist primarily of financial expense, net of financial income, decreased 13.1 percent to $19.1 million. Income from continuing operations before income taxes decreased 17.2 percent to $34.6 million. Income from continuing operations decreased 17.9 percent, to $21.8 million. Net income, including discontinued operations, decreased 17.0 percent to $22.1 million.
Free cash flow(3) totaled $48.1 million for the quarter, compared with $42.0 million a year ago. Timing of income tax payments had a positive impact on results for the current year quarter. Recent declines in LIBOR and continuing debt reduction are expected to favorably impact interest expense and free cash flow for the rest of the year. Net debt was reduced by $33.0 million in the quarter.
STOCK REPURCHASE
On Jan. 7, Lee announced that its board of directors has authorized the purchase of up to $30 million of Lee common stock. The repurchase is expected to take place in open market purchases or privately negotiated transactions as warranted beginning after today's earnings announcement.
FINANCIAL CALENDAR
Because of the adoption of period accounting this fiscal year, most enterprises will have one fewer publishing day in 2008 than in 2007. The lost publishing day is a Sunday, which affects year-over-year comparisons, as Sundays provide significantly more revenue than any other day of the week. Compared with 2007, the 2008 financial calendar loses a Sunday in the first fiscal quarter, regains one Sunday in the second quarter and loses it again in the fourth quarter.
ABOUT LEE
Lee Enterprises is a premier provider of local news, information and advertising in primarily midsize markets, with 50 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 newspapers have circulation of 1.6 million daily and 1.9 million Sunday, reaching more than four million readers daily. Lee's online sites attract nearly 12 million unique visitors monthly, and Lee's weekly publications are distributed to more than 4.5 million households. Lee's markets include St. Louis, Mo.; Lincoln, Neb.; Madison, Wis.; Davenport, Iowa; Billings, Mont.; Bloomington, Ill.; Tucson, Ariz.; and Napa, Calif. Lee stock is traded on the New York Stock Exchange under the symbol LEE. For more information about Lee, please visit www.lee.net.
LEE ENTERPRISES, INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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Three Periods Ended December
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(Thousands, except EPS data) 2007 2006 %
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Advertising revenue:
Retail $ 127,569 $131,721 (3.2)%
National 13,582 17,903 (24.1)
Classified:
Daily newspapers:
Employment 15,367 19,150 (19.8)
Automotive 11,729 13,996 (16.2)
Real estate 11,543 14,786 (21.9)
All other 9,988 9,343 6.9
Other publications 10,673 11,262 (5.2)
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Total classified 59,300 68,537 (13.5)
Online 13,475 10,867 24.0
Niche publications 3,644 3,561 2.3
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Total advertising revenue 217,570 232,589 (6.5)
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Circulation 49,805 52,036 (4.3)
Commercial printing 4,175 4,184 (0.2)
Online services and other 8,306 9,680 (14.2)
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Total operating revenue 279,856 298,489 (6.2)
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Operating expenses:
Compensation 108,194 112,191 (3.6)
Newsprint and ink 25,103 30,925 (18.8)
Other operating expenses 74,126 74,923 (1.1)
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Operating expenses, excluding
depreciation and amortization 207,423 218,039 (4.9)
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Operating cash flow(1) 72,433 80,450 (10.0)
Depreciation 8,159 8,248 (1.1)
Amortization 14,872 14,955 (0.6)
Equity in earnings of associated
companies:
Tucson partnership 2,412 3,912 (38.3)
Madison Newspapers 1,889 2,593 (27.2)
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Operating income 53,703 63,752 (15.8)
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Non-operating income (expense):
Financial income 1,796 1,509 19.0
Financial expense (20,850) (23,435) (11.0)
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(19,054) (21,926) (13.1)
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Income from continuing operations before
income taxes 34,649 41,826 (17.2)
Income tax expense 12,254 14,799 (17.2)
Minority interest 607 504 20.4
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Income from continuing operations 21,788 26,523 (17.9)
Discontinued operations 338 128 NM
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Net income $ 22,126 $ 26,651 (17.0)%
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Earnings per common share:
Basic:
Continuing operations $ 0.48 $ 0.58 (17.2)%
Discontinued operations 0.01 - NM
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$ 0.48 $ 0.58 (17.2)%
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Diluted:
Continuing operations $ 0.48 $ 0.58 (17.2)%
Discontinued operations 0.01 - NM
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$ 0.49 $ 0.58 (15.5)%
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Average common shares:
Basic 45,746 45,573
Diluted 45,515 45,637
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SELECTED BALANCE SHEET INFORMATION
(Unaudited)
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December 30, December 31,
(Thousands) 2007 2006
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Cash $ 7,732 $ 10,743
Restricted cash and investments 114,810 99,810
Debt (principal amount) 1,374,625 1,487,000
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SELECTED STATISTICAL INFORMATION
(Unaudited)
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Three Periods Ended December
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(Dollars in thousands) 2007 2006 %
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Capital expenditures $ 6,036 $ 5,644 6.9%
Same property newsprint volume (tonnes) 40,542 44,015 (7.9)
Same property full-time equivalent
employees 7,980 8,161 (2.2)
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FREE CASH FLOW(3)
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Three Periods Ended December
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(Thousands) 2007 2006
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Operating income $ 53,703 $ 63,752
Depreciation and amortization 24,616 24,788
Stock compensation 1,514 2,109
Financial expense (21,931) (24,420)
Financial income 1,796 1,509
Cash income taxes (4,963) (19,628)
Minority interest (607) (504)
Capital expenditures (6,036) (5,644)
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$ 48,092 $ 41,962
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SELECTED COMBINED PRINT AND ONLINE ADVERTISING REVENUE
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Three Periods Ended December
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(Thousands, same property) 2007 2006 %
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Retail $ 128,140 $ 131,373 (2.5)%
Classified:
Employment 23,125 25,105 (7.9)
Automotive 16,576 18,316 (9.5)
Real estate 15,279 19,045 (19.8)
Other 17,198 17,286 (0.5)
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Total classified revenue $ 72,178 $ 79,752 (9.5)%
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REVENUE BY REGION
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Three Periods Ended December
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(Thousands, same property) 2007 2006 %
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Midwest $ 170,729 $ 183,628 (7.0)%
Mountain West 50,882 52,542 (3.2)%
West 35,446 39,491 (10.2)%
East/other 22,799 22,828 (0.1)%
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Total $ 279,856 $ 298,489 (6.2)%
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DAILY NEWSPAPER ADVERTISING VOLUME
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Three Periods Ended December
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(Thousands of inches, same property) 2007 2006 %
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Retail 3,526 3,684 (4.3)%
National 180 202 (10.9)
Classified 3,598 3,912 (8.0)
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Total 7,304 7,798 (6.3)%
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NOTES:
(1) Operating cash flow, which is defined as operating income before
depreciation, amortization and equity in earnings of associated
companies, is a non-GAAP (Generally Accepted Accounting
Principles) financial measure. The Company believes operating
cash flow provides meaningful supplemental information because of
its focus on results from operations before depreciation and
amortization and earnings from equity investments.
Reconciliations of operating cash flow to operating income, the
most directly comparable GAAP measure, are included in tables
accompanying this release.
No non-GAAP financial measure should be considered as a substitute
for any related GAAP financial measure. However, the Company
believes the use of non-GAAP financial measures provides
meaningful supplemental information with which to evaluate its
financial performance, or assist in forecasting and analyzing
future periods. The Company also believes such non-GAAP financial
measures are alternative indicators of performance used by
investors, lenders, rating agencies and financial analysts to
estimate the value of a publishing business and its ability to
meet debt service requirements.
(2) Same property comparisons exclude acquisitions and divestitures
made in the current and prior year. Same property revenue also
excludes Lee's 50% ownership in Madison and Tucson, which are
reported using the equity method of accounting. Same property
comparisons also exclude corporate office costs.
(3) Free cash flow, which is defined as operating income, plus
depreciation and amortization, stock compensation and financial
income, minus financial expense (exclusive of non-cash
amortization and accretion), cash income taxes, capital
expenditures and minority interest, is a non-GAAP financial
measure. See (1) above. The Company believes free cash flow
provides meaningful supplemental information because of its focus
on results from operations after inclusion or exclusion of the
several factors noted above. Reconciliations of free cash flow to
operating income, the most directly comparable GAAP measure, are
included in a table accompanying this release.
(4) 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.
(5) 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, 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, increased capital and other costs 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 30, 2007. 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.
SOURCE:
Lee Enterprises, Incorporated
Lee Enterprises
Dan Hayes, 563-383-2100
dan.hayes@lee.net