UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported):  July 30, 2009

 

_______________________________________________________________________

LEE ENTERPRISES, INCORPORATED

(Exact name of Registrant as specified in its charter)

 

_______________________________________________________________________

 

Commission File Number 1-6227

 

 

 

201 N. Harrison Street, Davenport, Iowa 52801

(Address of Principal Executive Offices)

 

(563) 383-2100

Registrant’s telephone number, including area code

 

_____________________________________________________________________________________

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

On July 30, 2009, Lee Enterprises, Incorporated (the “Company”) reported its results for the third fiscal quarter ended June 28, 2009. The Company is furnishing the related earnings release under Item 2.02. A copy of the earnings release is furnished as Exhibit 99.1 to this Form 8-K.

 

This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended (“Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

 

On July 30, 2009, the Chairman, President and Chief Executive Officer of the Company, Mary E. Junck, sent a letter to the Company’s stockholders. A copy of the stockholder letter is furnished with this report as Exhibit 99.2.

 

To supplement the Company’s consolidated operating results presented in accordance with generally accepted accounting principles or GAAP, the Company is using the following non-GAAP financial measures in the letter: operating cash flow and operating cash flow margin. Operating cash flow, which is defined as operating income before depreciation, amortization, impairment charges and equity in earnings of associated companies, and operating cash flow margin (operating cash flow divided by operating revenue) are non-GAAP financial measures. The Company’s reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are contained in the earnings release attached as Exhibit 99.1, which can also be accessed on the Company’s website at www.lee.net by clicking on “Financial” and “Quarterly Earnings Releases.” No non-GAAP financial measure should be considered as a substitute for any related GAAP financial measure.  The Company believes that operating cash flow and operating cash flow margin are useful measures of evaluating its financial performance because of their focus on the Company’s results from operations before depreciation and amortization and liquidity, respectively. The Company also believes that these measures are two of the alternative financial measures of performance used by investors, lenders, rating agencies and financial analysts to estimate the value of a company and evaluate its ability to meet debt service requirements.

 

This information shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference in any filing under the Securities Act, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

		LEE ENTERPRISES, INCORPORATED
Date: July 31, 2009	By:
		Carl G. Schmidt
		Vice President, Chief Financial Officer,
		and Treasurer

 

 

2

 

 

 

 

 

INDEX TO EXHIBITS

 

 

 

 

Exhibit 99.1 - Earnings Release – Third fiscal quarter ended June 28, 2009

 

                                                                                                              

                           201 N. Harrison St.

                           Davenport, IA 52801

                           www.lee.net

 

NEWS RELEASE

 

Lee Enterprises reports results for third fiscal quarter  

 

DAVENPORT, Iowa (July 30, 2009) — Lee Enterprises, Incorporated (NYSE: LEE), reduced cash operating expenses, excluding unusual items⁽¹⁾, 22.0 percent in its third fiscal quarter ended June 28, 2009, as operating revenue declined 20.5 percent. Excluding non-cash impairment charges and other unusual items, diluted earnings per common share were 12 cents, compared with 30 cents a year ago. Free cash flow⁽²⁾ totaled $22.1 million, compared with $34.2 million in 2008.

 

Including non-cash impairment charges, Lee recorded a loss per diluted common share of 55 cents for the quarter, compared with earnings of 6 cents per share a year ago.

 

“We are continuing to position Lee so it will emerge strong when the recession ends,” said Mary Junck, chairman and chief executive officer. “We reduced debt by $18 million during the quarter and again performed well within projections we provided to lenders in February. While overall business remains sluggish, it has stabilized, and many of our publishers are reporting cautious optimism from an increasing number of local advertisers. We are also encouraged by our efforts to expand our local advertising market share and the response we have received to new sales programs that reach non-traditional advertisers. Beginning this next quarter, we also expect an enthusiastic response to our rollout of online behavioral targeting advertising through the new Yahoo platform.”

 

She added: “Our streamlining of costs also remains on track, and, thanks in part to 22 percent reductions in the June quarter, we expect to reduce full-year 2009 cash costs, about 17 percent below 2008, a decrease of nearly $140 million. We have completed page width reduction across the company, realigned staffing and consolidated or outsourced printing and distribution in several more locations. As a result of those actions and many more, the overall rate of decline in our operating cash flow⁽³⁾ has slowed dramatically since last quarter, and more individual enterprises have begun exceeding prior year. Our operating cash flow margin⁽³⁾, which includes corporate costs, has improved to 21.9 percent from 21.0 percent a year ago.”

 

THIRD QUARTER OPERATING RESULTS

 

Total operating revenue from continuing operations for the quarter decreased 20.5 percent from a year ago to $203.8 million. Combined print and online advertising revenue decreased 24.3 percent to $148.0 million, with retail advertising down 18.4 percent, and classified down 35.2 percent. Combined print and online employment advertising revenue decreased 60.4 percent, automotive decreased 30.9 percent and real estate decreased 35.0 percent. Online advertising revenue declined 29.3 percent, with online retail advertising down 1.7 percent and online classified advertising down 45.8 percent. National advertising revenue decreased 11.4 percent. Circulation revenue declined 6.3 percent, partially a result of elimination of less profitable delivery areas.

 

Operating expenses, excluding unusual items, depreciation and amortization, decreased 22.0 percent to $157.6 million and decreased 21.5 percent in total. Compensation, excluding unusual items, declined 22.4 percent, with the average number of full-time equivalent employees down 16.8 percent. Newsprint and ink expense decreased 41.4 percent, a result of a reduction in newsprint volume of 36.4 percent and more favorable newsprint prices.

 

 

Operating cash flow decreased 16.9 percent compared with a year ago to $44.7 million. Including equity in earnings (loss) of associated companies, depreciation and amortization, as well as adjustments for impairment and other non-cash charges, the operating loss was $13.8 million.

 

ADJUSTED EARNINGS AND EPS

 

Unusual items, primarily non-cash impairment charges, affected year-over-year comparisons for the quarter. The following table summarizes the impact from unusual items on net income (loss) available to common stockholders and earnings (loss) per diluted common share. Per share amounts may not add due to rounding.

 

YEAR TO DATE OPERATING RESULTS

Total operating revenue from continuing operations for the nine months decreased 17.6 percent from a year ago to $646.2 million. Combined print and online advertising revenue decreased 20.9 percent to $474.1 million, with retail advertising down 14.9 percent, and classified down 32.4 percent. Combined print and online employment advertising revenue decreased 53.6 percent, automotive decreased 27.0 percent and real estate decreased 32.3 percent. Online advertising revenue declined 23.4 percent, with online retail advertising up 9.6 percent and online classified advertising down 40.8 percent. National advertising revenue decreased 10.1 percent. Circulation revenue declined 4.9 percent.

 

Operating expenses, excluding unusual items, depreciation and amortization, decreased 15.9 percent to $515.0 million. Compensation, excluding unusual items, declined 18.3 percent, with the average number of full-time equivalent employees down 14.6 percent. Newsprint and ink expense decreased 19.3 percent and other cash costs decreased 11.3 percent.

 

Operating cash flow decreased 25.8 percent compared with a year ago to $126.5 million. Including equity in earnings of associated companies, depreciation and amortization, as well as adjustments for impairment and other non-cash charges, the operating loss was $194.3 million.

 

YEAR TO DATE ADJUSTED EARNINGS AND EPS

 

Unusual items affected year-over-year comparisons for the year to date. In both years, unusual items included adjustments for impairment of goodwill and other assets. Also, $71.3 million of the liability related to the redemption of the minority interest in St. Louis initially recorded in 2008 was reversed in 2009, increasing 2009 results by $57.1 million. Unusual items in 2009 also included the incremental cost of debt refinancing. The following table summarizes the impact from unusual items on net income (loss) available to common stockholders and earnings (loss) per diluted common share. Per share amounts may not add due to rounding.

 

PRINT AND ONLINE AUDIENCES

 

The Lee Audience Report for January-June 2009 showed continued strength of both print and online audiences across all age groups.

 

Combined print and online reach of newspapers and online sites over the course of a week in Lee’s 10 largest markets grew to 68 percent of all adults in January-June 2009, compared with 66 percent for the same period two years ago. Reach of the newspapers alone remained steady at 61 percent. The report, from Thoroughbred Research, formerly Wilkerson & Associates, carries an overall margin of error of 1 percentage point.

 

The number of unique visitors at all Lee online sites increased 5.4 percent to 40.2 million in the quarter compared with the previous year, with page views up 7.7 percent to 559.4 million.

 

DEBT AND FREE CASH FLOW

 

Debt was reduced $18 million in the quarter and $144 million year to date, including $120 million as a result of refinancing of the Pulitzer Notes in February. Also in February, Lee restructured future payments on its $1.1 billion bank commitment.

 

Carl Schmidt, Lee vice president, chief financial officer and treasurer, said Lee remains well within all of its financial covenants. Liquidity at the end of the quarter totaled $112 million, against $96.9 million of debt repayments due in the next four quarters, substantially all of which are expected to be met from ongoing cash flow.

 

Free cash flow in the quarter totaled $22.1 million, compared with $34.2 million a year ago. Year to date, free cash flow totaled $36.6 million versus $92.1 million a year ago, reflecting debt financing costs of $26.0 million in the current year.

 

IMPAIRMENT CHARGES

 

Non-cash charges for impairment of goodwill and other intangible assets, including TNI Partners, totaled $39.7 million in the quarter and finalized an estimate that was recorded the previous quarter. Year to date, impairment charges total $264.5 million. The charges have no effect on cash flows but reduce reported earnings per common share, which resulted in a loss for the quarter and will result in a loss for the full year ending September 27, 2009.

 

Impairment testing is performed in accordance with generally accepted accounting principles, which, among other factors, require consideration of differences between current book value and the fair value of all of the company's assets, including current market capitalization. The charges are consistent with the manner in which other publishing companies and those in other industries have responded to current equity market valuation issues.

 

ABOUT LEE

 

Lee Enterprises is a premier provider of local news, information and advertising in primarily midsize markets, with 49 daily newspapers and a joint interest in four others, online sites and more than 300 specialty publications in 23 states. Lee’s newspapers have circulation of 1.5 million daily and 1.8 million Sunday, reaching four million readers daily. Lee’s online sites attract 14 million unique visits monthly, and Lee’s weekly publications have distribution of more than four million households. Lee’s markets include St. Louis, Mo.; Lincoln, Neb.; Madison, Wis.; Davenport, Iowa; Billings, Mont.; Bloomington, Ill.; and Tucson, Ariz. Lee stock is traded on the New York Stock Exchange under the symbol LEE. For more information about Lee, please visit www.lee.net.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                         

 

                         

NOTES:

FORWARD-LOOKING STATEMENTS — 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, 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, which in some instances are beyond its control, are the Company’s ability to generate cash flows and maintain liquidity sufficient to service its debt, and comply with or obtain amendments or waivers of the financial covenants contained in its credit facilities, if necessary. Other risks and uncertainties include the impact of continuing adverse economic conditions, potential changes in advertising demand, newsprint and other commodity prices, energy costs, interest rates and the availability of credit due to instability in the credit markets, labor costs, legislative and regulatory rulings and other results of operations or financial conditions, difficulties in maintaining employee and customer relationships, increased capital and other costs, competition 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 28, 2008. Any statements that are not statements of historical fact (including statements containing the words “may,” “will,” “would,” “could,” “believes,” “expects,” “anticipates,” “intends,” “plans,” “projects,” “considers” 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. The Company does not undertake to publicly update or revise its forward-looking statements.

 

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

 

Exhibit 99.2 - Letter to the stockholders of Lee Enterprises, Incorporated from its Chairman, President and Chief Executive Officer

                          www.lee.net                                                                                  (563) 383-2100

 

 

July 30, 2009

 

Dear Lee Stockholder:

 

As Lee enters the final quarter of fiscal 2009, I’d like to give you another update.

 

The key headline is: We are continuing to position Lee so it will emerge strong when the recession ends.

 

In the quarter that just ended, we reduced debt by $18 million and again performed well within projections we provided to lenders in February.

 

Operating revenue declined 20.5 percent in the quarter, while cash costs, excluding unusual items, decreased 22.0 percent, one of the best showings in the industry on both counts. Free cash flow totaled $22.1 million, compared with $34.2 million in 2008.

 

While overall business remains sluggish, it has stabilized, and many of our publishers are reporting cautious optimism from an increasing number of local advertisers. We are especially encouraged by the response we have received to new sales programs that reach non-traditional advertisers and by our efforts to expand our lion’s share of local advertising spending. Since October, we have taken more than 10,700 local accounts from print, broadcast, online, yellow page and direct mail competitors. We expect this “steal share” campaign to pay off when the advertising pie grows larger again.

 

Our streamlining of costs also remains on track. Thanks in part to 22 percent reductions in the third quarter, we expect to reduce full-year 2009 cash costs, excluding unusual items, about 17 percent below 2008, a decrease of nearly $140 million. Among our many cost actions, we have completed page width reduction across the company, realigned staffing and consolidated or outsourced printing and distribution in several more locations.

 

As a result of those actions and many more, the overall rate of decline in our operating cash flow has slowed dramatically since last quarter, and more individual enterprises have begun exceeding prior year. Our operating cash flow margin, which includes corporate costs, has improved to 21.9 percent from 21.0 percent a year ago. Excluding non-cash impairment charges and other unusual items, diluted earnings per common share for the third quarter were 12 cents, compared with 30 cents a year ago. A full report is available at lee.net, or you may request a printed copy by calling 563-383-2100.

 

At the annual meeting in March, shareholders granted the board of directors discretionary authority until June 30 to decide whether to enact a reverse stock split. After considering current market conditions, business forecasts and other factors that could affect shareholder value, including the prospect of remaining in compliance with New York Stock Exchange rules for continued listing, the board decided against a reverse split. We believe our true long-term outlook will become apparent to more investors as the recession begins to recede.

 

Currently, we are aggressively rolling out online behavioral targeted advertising through the new Yahoo platform. We will be able to serve targeted ads based on a user’s interest as indicated

 

(over)

 

through searches made, content accessed or ads clicked. The platform has received enthusiastic response from advertisers, and we expect it to generate significant new revenue. 

 

Other top priorities include developing next steps for paid online content, launching an initiative to drive real estate advertising, continue separating sales of print and online recruitment advertising, and focusing circulation initiatives on key days of the week and in key geographic areas desirable to advertisers.

 

We’re also launching a public relations campaign for employees and advertisers to counter the continuing, irrational negativity about the future of newspapers. The campaign will be locally focused and tailored to each location.

 

Here’s a simple, rock-solid fact: In a time of rapidly evolving digital interactivity, our newspapers and online sites remain first and best in our communities, surpassing all print, online and broadcast competitors, by far, as the primary source for local news, information and advertising.

 

Among key points in our public relations campaign:

 

 

 

 

 

 

Our campaign is titled “First. Best. Today. Tomorrow.” As technology and media use evolve, we are evolving, too, and will remain head and shoulders above all others as the leading provider of local news, information and advertising in our communities.

 

Thank you again for standing by Lee in this challenging time.

 

 

Mary Junck

Chairman, President and Chief Executive Officer

 

FORWARD-LOOKING STATEMENTS – The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This letter contains information that may be deemed forward-looking, 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, which in some instances are beyond its control, are the Company’s ability to generate cash flows and maintain liquidity sufficient to service its debt, and comply with or obtain amendments or waivers of the financial covenants contained in its credit facilities, if necessary. Other risks and uncertainties include the impact of continuing adverse economic conditions, potential changes in advertising demand, newsprint and other commodity prices, energy costs, interest rates and the availability of credit due to instability in the credit markets, labor costs, legislative and regulatory rulings and other results of operations or financial conditions, difficulties in maintaining employee and customer relationships, increased capital and other costs, competition 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 28, 2008. Any statements that are not statements of historical fact (including statements containing the words “may,” “will,” “would,” “could,” “believes,” “expects,” “anticipates,” “intends,” “plans,” “projects,” “considers” 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 letter. The Company does not undertake to publicly update or revise its forward-looking statements.