Lee Enterprises Reports Q3 Earnings
DAVENPORT, Iowa--(BUSINESS WIRE)--July 21, 2003--Lee Enterprises, Incorporated (NYSE:LEE), reported today that diluted earnings per common share from continuing operations were 48 cents for its third quarter ended June 30, 2003.
Last year's earnings of 68 cents per diluted common share from continuing operations included the favorable resolution of tax issues amounting to $10.0 million, or 22 cents. On an adjusted basis, this year's earnings represent an increase of 4.4 percent over 46 cents a year ago. Earnings in 2002 have been restated to include employee stock option expense.
Operating cash flow(2) increased 3.9 percent to $47.6 million, at a margin of 28.3 percent, compared with 28.7 percent a year ago. Revenue increased 5.5 percent to $168.2 million. Operating income, which includes equity in net income of associated companies, depreciation and amortization, increased 4.4 percent. Income from continuing operations declined 28.9 percent in comparison with a year ago, which included gains of $10.0 million resulting from favorable resolution of tax issues, as noted above.
Operating expenses, excluding depreciation and amortization, increased 6.1 percent to $120.7 million. Current year expenses were increased by the inclusion of $3.4 million of operating costs of Sioux City Newspapers (SCN). Adjusting for this factor, operating expenses, excluding depreciation and amortization, increased 3.1 percent. Expenses in the current year were further influenced by a 14.1% increase in newsprint costs (including SCN). Lee's purchase of Howard Publications in April 2002 included 15 daily newspapers and a 50 percent interest in SCN. Lee acquired the remaining 50 percent interest in SCN in July 2002.
On a same property basis, which excludes the impact of acquisitions and divestitures made in the current or prior year, total revenue for the quarter ended June 30, 2003, increased 1.0 percent from a year ago. Total advertising revenue decreased 0.5 percent. Retail increased 1.1 percent. Classified revenue decreased 2.9 percent, with employment advertising in the daily newspapers down 10.7 percent. National advertising, a small category for Lee, decreased 1.3 percent. Circulation revenue decreased 0.8 percent. Online revenue increased 28.8 percent.
At the 15 newspapers Lee acquired in their entirety in April 2002, revenue for the quarter increased 4.4 percent(3). Publishing revenue of the former Howard newspapers increased 14.9 percent on a reported basis, due to the inclusion of SCN in revenue in the current year.
Mary Junck, chairman and chief executive officer, said: "We continue to benefit from our acquisitions in 2002, and we remain fully focused on our five top priorities of driving revenue, improving readership and circulation, emphasizing strong local news, expanding our online services and carefully controlling our costs. As our performance shows, especially in comparison with a very strong quarter a year ago, we're doing the right things and doing them well in a tough economic environment."
YEAR TO DATE
For the nine months ended June 30, 2003, total revenue on a same property basis increased 2.1 percent. On a reported basis, revenue increased 36.0 percent. Operating expenses, excluding depreciation and amortization, increased 37.2 percent, and operating cash flow increased 32.8 percent. Operating cash flow margin(2) was 27.2 percent, compared with 27.8 percent a year ago. Operating income increased 24.7 percent.
Diluted earnings per common share from continuing operations totaled $1.32, compared with $1.36 a year ago, which included the 22 cents of tax benefits noted above.
EMPLOYEE STOCK OPTIONS
In 2003, Lee has begun expensing employee stock option grants and has chosen to restate prior years. This will reduce 2003 results 5 to 6 cents per diluted common share for the full year and had an impact of one cent per share in the June quarter. Year to date results in the prior year were reduced four cents per diluted common share from the previously reported amount of $1.43 cents.
Tables follow.
Lee Enterprises is based in Davenport, Iowa, and is the premier publisher of daily newspapers in midsize markets. Lee owns 38 daily newspapers and a joint interest in six others, along with associated online services. Lee also publishes more than 175 weekly newspapers, shoppers and classified and specialty publications. Lee stock is traded on the New York Stock Exchange under the symbol LEE. More information about Lee Enterprises is available at www.lee.net.
LEE ENTERPRISES, INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
Unaudited. (Thousands, Except Per Common Share Data)
Three Months Ended Nine Months Ended
June 30, June 30,
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2003 2002 % 2003 2002 %
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Operating
revenue: (4) (4)
Advertising....$115,099 $110,208 4.4 $336,983 $243,217 38.6
Circulation.... 33,052 31,567 4.7 99,777 72,019 38.5
Other.......... 20,098 17,771 13.1 57,369 48,178 19.1
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168,249 159,546 5.5 494,129 363,414 36.0
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Operating
expenses:
Compensation... 67,884 63,280 7.3 203,790 144,362 41.2
Newsprint and
ink........... 15,124 13,258 14.1 42,890 31,188 37.5
Other.......... 37,680 37,216 1.2 113,286 86,822 30.5
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Operating
expenses
excluding
depreciation and
amortization.... 120,688 113,754 6.1 359,966 262,372 37.2
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Operating cash
flow............ 47,561 45,792 3.9 134,163 101,042 32.8
Depreciation and
amortization.... 11,447 12,197 (6.1) 34,531 23,373 47.7
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Operating income,
before equity in
net income of
associated
companies....... 36,114 33,595 7.5 99,632 77,669 28.3
Equity in net
income of
associated
companies....... 1,962 2,867 (31.6) 5,733 6,796 (15.6)
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Operating income 38,076 36,462 4.4 105,365 84,465 24.7
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Non-operating
income(expense),
net:
Financial
income........ 373 470 (20.6) 916 5,705 (83.9)
Financial
expense....... (4,072) (5,117) (20.4) (13,032) (10,999) 18.5
Other, net..... (408) 9 NM (795) (299) NM
----------------------------------------------------------------------
(4,107) (4,638) (11.4) (12,911) (5,593) 130.8
----------------------------------------------------------------------
Income from
continuing
operations before
income taxes.... 33,969 31,824 6.7 92,454 78,872 17.2
Income tax expense 12,511 1,637 NM 33,894 18,404 84.2
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Income from
continuing
operations...... 21,458 30,187 (28.9) 58,560 60,468 (3.2)
Discontinued
operations...... -- 1,333 -- (20) 1,193 NM
----------------------------------------------------------------------
Net income....... $21,458 $31,520 (31.9) $58,540 $61,661 (5.1)
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Earnings per
common share:
Basic:
Continuing
operations.... $0.48 $0.68 (29.4) $1.32 $1.37 (3.6)
Discontinued
operations.... -- 0.03 -- 0.03
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Net income..... $0.48 $0.71 (32.4) $1.32 $1.40 (5.7)
----------------------------------------------------------------------
Diluted:
Continuing
operations.... $0.48 $0.68 (29.4) $1.32 $1.36 (2.9)
Discontinued
operations.... -- 0.03 -- 0.03
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Net income..... $0.48 $0.71 (32.4) $1.32 $1.39 (5.0)
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Average
outstanding
shares:
Basic.......... 44,351 44,144 44,277 44,054
Diluted........ 44,574 44,474 44,444 44,349
SELECTED BALANCE SHEET INFORMATION June 30,
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2003 2002
----------------------------------------------------------------------
Cash and temporary cash investments...... $ 20,960 $ 72,710
Total assets............................. 1,436,029 1,400,576
Debt, including current maturities....... 331,200 425,799
Stockholders' equity..................... 787,798 730,494
(1) Beginning in March 2003, same property revenue excludes revenue of
Madison Newspapers, Inc., (MNI) in order to comply with newly
issued SEC regulations related to disclosure of non-GAAP financial
measures. Lee owns 50% of the capital stock of MNI, which for
financial reporting purposes is reported using the equity method
of accounting.
(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
included 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) Same property revenue related to newspapers acquired from Howard
Publications excludes revenue of Sioux City Newspapers (SCN). Lee
owned 50% of the capital stock of SCN during the period from April
through June 2002, which was accounted for using the equity method
of accounting. Year to date same property revenue information is
not meaningful due to the consummation of the acquisition at a
date during the fiscal year. The following table reconciles Howard
acquisition revenue on a same property basis to revenue as
reported.
Three months ended
June 30,
-----------------------------
(Thousands) 2003 2002 %
Howard acquisition revenue............ $56,576 $54,193 4.4%
SCN................................... 5,718 -- NM
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Total publishing revenue.............. $62,294 $54,193 14.9%
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(4) Certain amounts as previously reported have been reclassified to
conform with the current period presentation. The presentation of
equity in net income of associated companies has been revised to
exclude those amounts from revenue. Fiscal 2002 amounts have been
restated to include expense relating to employee stock options.
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, Incorporated, Davenport Dan Hayes, 563-383-2163
dan.hayes@lee.net www.lee.net
SOURCE: Lee Enterprises, Incorporated