Lee Enterprises Reports Second Quarter Earnings
DAVENPORT, Iowa--(BUSINESS WIRE)--April 23, 2007--Lee Enterprises, Incorporated (NYSE: LEE), reported today that diluted earnings per common share from continuing operations were 26 cents for its second fiscal quarter ended March 31, 2007, compared with 30 cents a year ago.
Including discontinued operations, net income for the quarter totaled 26 cents per diluted common share, compared with 32 cents a year ago.
"Online advertising revenue climbed 54 percent in the quarter, and that rapid growth continues to offset softness in print advertising, particularly classified employment, automotive and real estate," said Mary Junck, Lee chairman and chief executive officer. "Our rollout of Yahoo! HotJobs over the last two months has received a terrific reception, and our customers have already placed more than 30,000 postings on the network. While that rollout still gathers momentum, we are moving quickly on new initiatives with Yahoo and other top newspaper companies to extend our online advertising capabilities and attract even larger audiences to our sites. At the same time, we remain keenly focused on driving print revenue, increasing print and online audiences, emphasizing strong local news and controlling costs."
Total revenue for the quarter from continuing operations decreased 1.7 percent from a year ago to $261.7 million. Total advertising revenue decreased 2.2 percent, with online advertising up 53.9 percent and national down 8.3 percent. On a combined basis, print and online retail advertising decreased 1.5 percent, and classified advertising decreased 2.0 percent. Print-only retail advertising declined 2.8 percent, and print-only classified decreased 6.5 percent. Circulation revenue declined 1.5 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 decreased 1.9 percent from a year ago.
The quarter included one fewer Sunday and one additional Saturday compared with a year ago, affecting year-over-year comparisons, as Sundays normally generate substantially more print advertising revenue than any other day of the week. Day exchanges affect newspapers owned before the Pulitzer acquisition, which account for about 60 percent of revenue. The former Pulitzer newspapers use period accounting and are not affected by day exchanges.
Total operating expenses, excluding depreciation and amortization, decreased 1.3 percent for the quarter, reflecting lower newsprint costs, along with curtailment gains related to defined pension benefit and postretirement medical plans in the current year, and early retirement and transition costs in the prior year. Other operating expenses increased 4.8 percent, reflecting revenue initiatives in print and online.
Same property operating expenses, excluding unusual items, depreciation and amortization, increased 1.6 percent over a year ago, with compensation up 0.2 percent, newsprint and ink down 2.4 percent, and other operating expenses up 5.6 percent.
Operating cash flow (2) decreased 3.2 percent to $58.4 million. Operating income, which includes equity in earnings of associated companies and depreciation and amortization, decreased 8.0 percent to $40.0 million. Non-operating expenses, which are primarily financial expense, declined 4.8 percent to $21.0 million. Income from continuing operations before income taxes decreased 11.2 percent to $18.9 million. Income from continuing operations decreased 11.1 percent, to $11.9 million. Net income decreased 17.6 percent to $11.9 million.
YEAR TO DATE
For the six months ended March 31, 2007, total revenue from continuing operations increased 0.7 percent from a year ago to $562.2 million. Total advertising revenue increased 0.2 percent, with online advertising up 53.5 percent and national down 2.9 percent. On a combined basis, print and online retail advertising increased 0.4 percent, and classified advertising also increased 0.4 percent. Print-only retail advertising declined 0.7 percent, and print-only classified decreased 3.5 percent. Circulation revenue declined 0.1 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 six months increased 0.4 percent from a year ago.
Total operating expenses, excluding depreciation and amortization, for the six months decreased 0.8 percent, reflecting lower newsprint costs, along with curtailment gains related to the freezing of defined pension benefit plans for certain employees and modifications in defined postretirement medical benefits for certain employees in the current year, and early retirement and transition costs in the prior year. Other operating expenses increased 5.9 percent, reflecting revenue initiatives in print and online.
Same property operating expenses, excluding unusual items, depreciation and amortization, increased 2.1 percent for the six months compared with a year ago, with compensation up 0.2 percent, newsprint and ink up 1.1 percent, and other operating expenses up 5.6 percent.
There were no significant day exchanges for the six months, as the first fiscal quarter included an additional Sunday compared with a year ago, and the second quarter contained one fewer. At Lee's 50 percent partnership in Tucson, which uses calendar year period accounting, a 53rd week of the 2006 calendar year was recognized in December 2006. Tucson results are reported as equity in earnings of associated companies. The remaining former Pulitzer enterprises will record a 53rd week in September 2007.
Operating cash flow (2) increased 5.3 percent to $139.3 million. Operating income, which includes equity in earnings of associated companies and depreciation and amortization, increased 4.2 percent to $104.0 million. Non-operating expenses, which are primarily financial expense, declined 4.1 percent to $42.9 million. Income from continuing operations before income taxes increased 10.9 percent to $61.0 million. Income from continuing operations increased 10.9 percent, to $38.6 million. Net income increased 3.6 percent to $38.5 million.
For the first and second fiscal quarters combined, diluted earnings per common share from continuing operations were 84 cents, compared with 77 cents a year ago.
Tables follow.
Lee Enterprises is a premier provider 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 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 more than 11 million visits monthly, and Lee's weekly publications are distributed to more than 4.5 million households. Lee's 55 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.
ADJUSTED EARNINGS AND EPS (3)
The following tables summarize the impact on income from continuing operations and earnings per diluted common share from unusual costs and one-time items. Per share amounts may not add due to rounding.
Three Months Ended March 31
----------------------------------------------------------------------
2007 2006
---------------- ------------------
Per Per
(Thousands, except EPS) Amount Share Amount Share
-------- ------- --------- --------
Income from continuing operations,
as reported $11,945 $ 0.26 $ 13,441 $ 0.30
----------------------------------------------------------------------
Adjustments to income from
continuing operations:
Curtailment gains (3,731) -
Curtailment gains, Tucson (1,037) -
Early retirement program - 281
Transition costs - 801
----------------------------------------------------------------------
(4,768) 1,082
Income tax expense (benefits) of
adjustments, net 1,683 (388)
----------------------------------------------------------------------
(3,085) (0.07) 694 0.02
----------------------------------------------------------------------
Income from continuing operations,
as adjusted $ 8,860 $ 0.19 $ 14,135 $ 0.31
======================================================================
Six Months Ended March 31
----------------------------------------------------------------------
2007 2006
---------------- ------------------
Per Per
(Thousands, except EPS) Amount Share Amount Share
-------- ------- --------- --------
Income from continuing operations,
as reported $38,634 $ 0.84 $ 34,835 $ 0.77
----------------------------------------------------------------------
Adjustments to income from
continuing operations:
Curtailment gains (3,731) -
Curtailment gains, Tucson (1,037) -
Early retirement program - 8,654
Transition costs - 1,153
----------------------------------------------------------------------
(4,768) 9,807
Income tax expense (benefits) of
adjustments, net 1,683 (3,521)
----------------------------------------------------------------------
(3,085) (0.07) 6,286 0.14
----------------------------------------------------------------------
Income from continuing operations,
as adjusted $35,549 $ 0.78 $ 41,121 $ 0.90
======================================================================
LEE ENTERPRISES, INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
----------------------------------------------------------------------
Three Months Ended Six Months Ended
March 31 March 31
----------------------------------------------------------------------
(Thousands,
Except EPS
Data) 2007 2006 % 2007 2006 %
----------------------------------------------------------------------
Advertising
revenue:
Retail $101,298 $104,188 (2.8)% $233,941 $235,533 (0.7)%
National 12,954 14,121 (8.3) 30,856 31,779 (2.9)
Classified:
Daily
newspapers:
Employment 20,424 22,738 (10.2) 39,717 42,865 (7.3)
Automotive 13,144 14,573 (9.8) 27,182 28,786 (5.6)
Real estate 13,861 14,962 (7.4) 28,752 30,348 (5.3)
All other 8,604 9,151 (6.0) 18,061 18,292 (1.3)
Other
publications 11,624 10,926 6.4 23,048 21,405 7.7
----------------------------------------------------------------------
Total
classified 67,657 72,350 (6.5) 136,760 141,696 (3.5)
Online 12,595 8,185 53.9 23,508 15,319 53.5
Niche
publications 4,318 4,476 (3.5) 7,917 7,889 0.4
----------------------------------------------------------------------
Total
advertising
revenue 198,822 203,320 (2.2) 432,982 432,216 0.2
----------------------------------------------------------------------
Circulation 50,119 50,903 (1.5) 102,390 102,490 (0.1)
Commercial
printing 3,922 4,146 (5.4) 8,132 8,466 (3.9)
Online services
& other 8,797 7,821 12.5 18,646 15,263 22.2
----------------------------------------------------------------------
Total operating
revenue 261,660 266,190 (1.7) 562,150 558,435 0.7
----------------------------------------------------------------------
Operating
expenses:
Compensation 109,668 109,393 0.3 222,680 220,316 1.1
Newsprint and
ink 27,235 28,511 (4.5) 58,336 58,671 (0.6)
Other
operating
expenses 70,096 66,892 4.8 145,542 137,376 5.9
Curtailment
gains (3,731) - NM (3,731) - NM
Transition
costs - 801 NM - 1,153 NM
Early
retirement
program - 281 NM - 8,654 NM
----------------------------------------------------------------------
Operating
expenses,
excluding
depreciation
and
amortization 203,268 205,878 (1.3) 422,827 426,170 (0.8)
----------------------------------------------------------------------
Operating cash
flow(2) 58,392 60,312 (3.2) 139,323 132,265 5.3
Depreciation 8,691 8,005 8.6 17,038 16,039 6.2
Amortization 15,059 13,924 8.2 30,140 27,771 8.5
Equity in
earnings of
associated
companies:
Tucson
partnership 3,963 3,550 11.6 7,875 7,688 2.4
Madison
Newspapers 1,342 1,467 (8.5) 3,935 3,632 8.3
----------------------------------------------------------------------
Operating
income 39,947 43,400 (8.0) 103,955 99,775 4.2
----------------------------------------------------------------------
Non-operating
income
(expense):
Financial
income 1,522 1,610 (5.5) 3,031 2,966 2.2
Financial
expense (22,544) (23,694) (4.9) (45,979) (47,731) (3.7)
----------------------------------------------------------------------
(21,022) (22,084) (4.8) (42,948) (44,765) (4.1)
----------------------------------------------------------------------
Income from
continuing
operations
before income
taxes 18,925 21,316 (11.2) 61,007 55,010 10.9
Income tax
expense 6,680 7,611 (12.2) 21,569 19,652 9.8
Minority
interest 300 264 13.6 804 523 53.7
----------------------------------------------------------------------
Income from
continuing
operations 11,945 13,441 (11.1) 38,634 34,835 10.9
Discontinued
operations (54) 994 NM (92) 2,364 NM
----------------------------------------------------------------------
Net income $ 11,891 $ 14,435 (17.6)% $ 38,542 $ 37,199 3.6 %
======================================================================
Earnings per
common share:
Basic:
Continuing
operations $ 0.26 $ 0.30 (13.3)% $ 0.85 $ 0.77 10.4 %
Discontinued
operations - 0.02 NM - 0.05 NM
----------------------------------------------------------------------
$ 0.26 $ 0.32 (18.8)% $ 0.85 $ 0.82 3.7 %
======================================================================
Diluted:
Continuing
operations $ 0.26 $ 0.30 (13.3)% $ 0.84 $ 0.77 9.1 %
Discontinued
operations - 0.02 NM - 0.05 NM
----------------------------------------------------------------------
$ 0.26 $ 0.32 (18.8)% $ 0.84 $ 0.82 2.4 %
======================================================================
Average common
shares:
Basic 45,625 45,390 45,599 45,325
Diluted 45,805 45,526 45,721 45,462
======================================================================
SELECTED BALANCE SHEET INFORMATION
----------------------------------------------------------------------
March 31
----------------------------------------------------------------------
(Thousands) 2007 2006
----------------------------------------------------------------------
Cash $ 10,821 $ 7,918
Restricted cash and investments 103,560 88,560
Debt (principal amount) 1,463,375 1,606,000
======================================================================
SELECTED STATISTICAL INFORMATION
---------------------------------------------------------------------
Three Months Ended Six Months Ended
March 31 March 31
----------------------------------------------------------------------
(Dollars in
thousands) 2007 2006 % 2007 2006 %
----------------------------------------------------------------------
Capital expenditures $ 7,004 $ 6,446 8.7 % $12,705 $11,485 10.6 %
Same property
newsprint volume
(tonnes) 40,938 42,665 (4.0) 85,198 89,238 (4.5)
Same property full-
time equivalent
employees 8,063 8,147 (1.0) 8,137 8,242 (1.3)
======================================================================
NOTES:
(1) 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.
(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. Reconciliations of
operating cash flow to operating income, the most directly
comparable measure under accounting principles generally accepted
in the United States (GAAP), are included in tables accompanying
this release.
(3) Adjusted earnings from continuing operations and adjusted earnings
per common share, which are defined as income from continuing
operations and earnings per common share adjusted to exclude
matters of a substantially non-recurring nature, represent
non-GAAP financial measures. Reconciliations of adjusted earnings
from continuing operations and adjusted EPS to income from
continuing operations and earnings per common share are included
in tables 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 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