News Release Details

THIRD QUARTER OPERATING RESULTS

Operating revenue for the quarter totaled $179.3 million, a decrease of 4.3% compared with a year ago. Combined print and digital advertising revenue decreased 5.8% to $125.3 million, with retail advertising down 3.8%, classified down 6.9% and national down 17.2%. Combined print and digital classified employment revenue increased 1.4%, while automotive decreased 4.8%, real estate decreased 16.1% and other classified decreased 9.9%. Digital advertising revenue on a stand-alone basis increased 10.0% to $17.3 million. Print revenue on a stand-alone basis decreased 7.9%. Circulation revenue decreased 1.1%.

Lee's websites and mobile and tablet products attracted 22.2 million unique visitors in the month of June 2012, an increase of 3.1% from a year ago. Mobile page views in June increased 156% to 45.5 million.

Operating expenses, excluding depreciation, amortization and unusual matters, decreased 4.1%. Compensation decreased 3.5%, with the average number of full-time equivalent employees down 7.5%. Newsprint and ink expense decreased 10.0%, a result of a reduction in newsprint volume of 6.7%. Other operating expenses decreased 3.4%. Excluding a 53rd week of business activity, 2012 fiscal year operating expenses, excluding depreciation, amortization and unusual matters are expected to decrease 3.5-4.5%⁽³⁾ from the comparative 2011 level, in line with previous guidance.

Operating cash flow decreased 6.8% from a year ago to $37.4 million. Operating cash flow margin⁽²⁾ decreased to 20.9% from 21.4% a year ago. Including equity in earnings of associated companies, depreciation and amortization, as well as unusual matters in both years, the company recognized operating income of $22.6 million, compared with an operating loss of $171.6 million a year ago. Non-operating expenses, primarily interest expense and debt financing costs, increased 32.4%, due to higher interest rates. Loss attributable to Lee Enterprises, Incorporated for the quarter totaled $1.5 million, compared with a loss of $155.5 million a year ago.  

ADJUSTED EARNINGS AND EPS FOR THE QUARTER

Unusual matters affecting year-over-year comparisons include reorganization costs in 2012, non-cash impairment charges and a curtailment gain in 2011, and debt financing costs and other unusual matters in both years. The following table summarizes the impact from unusual matters on loss attributable to Lee Enterprises, Incorporated and loss per diluted common share. Per share amounts may not add due to rounding.

YEAR TO DATE OPERATING RESULTS

Operating revenue for the 39 weeks ended June 24, 2012, totaled $551.1 million, a decrease of 3.9% compared with a year ago. Combined print and digital advertising revenue decreased 5.8% to $385.3 million, with retail advertising down 4.3%, classified down 7.9% and national down 7.3%. Combined print and digital classified employment revenue increased 0.3%, while automotive decreased 4.3%, real estate decreased 15.5% and other classified decreased 12.2%. Digital advertising revenue on a stand-alone basis increased  10.1% to $49.2 million. Print revenue on a stand-alone basis decreased  7.7%.  Circulation revenue
increased 0.6%.

Operating expenses, excluding depreciation, amortization and unusual matters, decreased 5.1%. Compensation decreased 4.8%, with the average number of full-time equivalent employees down 7.4%. Newsprint and ink expense decreased 9.0%, a result of a reduction in newsprint volume of 7.3%. Other operating expenses decreased 4.5%.

Operating cash flow decreased 0.5% from a year ago to $123.1 million. Operating cash flow margin increased to 22.3% from 21.6% a year ago. Including equity in earnings of associated companies, depreciation and amortization, as well as unusual matters in both years, operating income totaled $78.2 million, compared with an operating loss of $108.3 million a year ago. Non-operating expenses, primarily interest expense and debt financing costs, increased 21.5%, due to higher interest rates. The company recognized $37.6 million of reorganization costs resulting in a loss attributable to Lee Enterprises, Incorporated of $13.5 million, compared with a loss of $138.0 million a year ago.
  

DEBT AND FREE CASH FLOW⁽⁴⁾

Debt was reduced $9.5 million in the quarter and $38.3 million for the year to date. Payments totaling $50.5 million year to date were offset by $12.3 million of non-cash fees in the form of additional debt granted to lenders in the refinancing of the company's debt in January 2012. Free cash flow totaled $7.0 million for the quarter, compared with $22.5 million a year ago. Debt financing and reorganization costs totaling $7.8 million and an increase in interest expense in the current year quarter adversely impacted free cash flow. Free cash flow in the 52 weeks ended June 2012 totaled $53.9 million, net of $38.3 million of debt financing and reorganization costs paid. Approximately $1.0 million of debt financing and reorganization costs remained unpaid as of June 24, 2012.  Liquidity at the end of the quarter totaled $49.1 million, compared to required debt payments of $14.9 million in the next 12 months.

NO REVERSE STOCK SPLIT

As announced June 28, 2012, the Board of Directors of Lee Enterprises, Incorporated has elected not to effect a reverse stock split. At the annual meeting in March, stockholders had granted the board discretionary authority until June 30 to decide.

The board considered current market conditions, business forecasts and other factors that could affect shareholder value, including the prospect for continued listing on the New York Stock Exchange.

Lee received notification in February 2012 that it had returned to compliance with an NYSE listing standard requiring an average closing price of at least $1.00 per share over 30 consecutive days of trading. The NYSE has granted Lee until February 2013 to return to compliance with a standard requiring average equity market capitalization of not less than $50 million over 30 consecutive days of trading.

Carl Schmidt, Lee vice president, chief financial officer and treasurer, said Lee's average equity market capitalization has exceeded $50 million since February 2012. As of July 16, 2012, with approximately 51.8 million shares outstanding and a closing price of $1.51 per share, Lee's average equity market capitalization totaled $76.4 million.

Schmidt said the NYSE continues to monitor the company's compliance with the equity market capitalization standard, and Lee continues to be listed under a plan approved by the NYSE. He said the company expects future issues, if any, to be successfully addressed within the time frame required under the NYSE rules.

ABOUT LEE

Lee Enterprises is a leading provider of local news and information, and a major platform for advertising, in its markets, with 48 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 1.3 million daily and 1.6 million Sunday, reaching nearly four million readers in print alone. Lee's websites and mobile and tablet products attracted 22.2 million unique visitors in June 2012. Lee's markets include St. Louis, MO; Lincoln, NE; Madison, WI; Davenport, IA; Billings, MT; Bloomington, IL; and Tucson, AZ. Lee Common 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 our 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 our control, are our ability to generate cash flows and maintain liquidity sufficient to service our debt, comply with or obtain amendments or waivers of the financial covenants contained in our credit facilities, if necessary, and to refinance our debt as it comes due. 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, labor costs, legislative and regulatory rulings, difficulties in achieving planned expense reductions, maintaining employee and customer relationships, increased capital costs, maintaining our listing status on the NYSE, competition and other risks detailed from time to time in our publicly filed documents. Any statements that are not statements of historical fact (including statements containing the words "may", "will", "would", "could", "believe", "expect", "anticipate", "intend", "plan", "project", "consider" 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. We do not undertake to publicly update or revise our forward-looking statements.

Contact: dan.hayes@lee.net, (563) 383-2100

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