Lee Enterprises Reports Earnings for First Fiscal Quarter
DAVENPORT, Iowa, Jan 18, 2006 (BUSINESS WIRE) -- Lee Enterprises, Incorporated (NYSE:LEE), reported today that diluted earnings per common share from continuing operations were 50 cents for its first fiscal quarter ended Dec. 31, 2005, compared with 60 cents a year ago. Excluding 12 cents of early retirement and transition costs related to the acquisition of Pulitzer Inc., diluted earnings per common share from continuing operations were 62 cents.
Mary Junck, chairman and chief executive officer, said: "Continued strong cash flow enabled us to reduce debt and achieve internal and external earnings expectations despite the industry-wide slump in automotive advertising and other lackluster advertising factors in the quarter. Meanwhile, we kept our intense focus on revenue, drove strong online growth, continued to build larger audiences, completed our rapid integration of Pulitzer and controlled our expenses."
On a reported basis, year-over-year comparisons reflect the acquisition of Pulitzer on June 3, 2005. Advertising revenue for the quarter increased 69.6 percent from a year ago to $237.1 million, with growth of 62.4 percent in retail, 65.7 percent in classified and 169.9 percent in national. Online advertising revenue increased 139.1 percent, and niche advertising rose 30.8 percent. Circulation revenue increased 59.7 percent. Total operating revenue increased 64.4 percent to $302.6 million.
On a same property (1) basis, which excludes the impact of Pulitzer and other acquisitions and divestitures made in the current or prior year, total advertising revenue for the quarter increased 1.3 percent from a year ago, with retail up 0.7 percent, classified up 0.4 percent, national up 2.1 percent and online advertising revenue up 33.2 percent. Circulation revenue decreased 2.7 percent, and total operating revenue increased 0.4 percent. Factors affecting revenue in the quarter included a continuing industry-wide slowdown in classified automotive revenue, which was down 15.2 percent from the previous year; the loss of $1.6 million of political advertising revenue gained in the bi-annual elections of 2004; a detrimental impact of Christmas Day 2005 falling on a Sunday, and circulation sales promotions.
Operating expenses, excluding depreciation and amortization, increased 75.9 percent to $228.1 million for the quarter, also reflecting the acquisition of Pulitzer. Compensation was up 60.4 percent, newsprint and ink increased 87.6 percent, and other expenses increased 76.8 percent. Early retirement and transition costs related to the acquisition of Pulitzer added $8.7 million.
Same property operating expenses, excluding depreciation and amortization, increased 3.1 percent in the quarter, with compensation up 1.3 percent, newsprint and ink up 8.4 percent, and other operating expenses up 4.0 percent.
Operating cash flow (2) increased 37.1 percent to $74.6 million, including acquisitions and related costs. Operating income, which includes equity in earnings of associated companies and depreciation and amortization, increased 28.8 percent to $58.6 million. Non-operating expenses, which include financial expense related to Pulitzer, totaled $22.7 million, compared with $2.6 million a year ago. As a result, income from continuing operations before income taxes decreased 16.3 percent to $35.9 million. Net income decreased 15.7 percent to $22.8 million.
As a result of the strong cash flow, net debt was reduced $35.6 million in the quarter to $1.56 billion.
DEBT REFINANCING
In December 2005, Lee completed refinancing of its $1.55 billion credit facility. Interest rate margins under the new $1.44 billion credit facility are lower than under the previous agreement by 0.25% to 0.5%, which is expected to generate pretax savings of $9-10 million over the life of the debt. Other conditions of the amended agreement are largely unchanged from the original credit agreement.
PULITZER ACQUISITION COSTS
As previously announced, additional costs related to early retirement incentives at the St. Louis Post-Dispatch were $8.4 million for the quarter, and additional Pulitzer transition costs were $0.4 million pretax, amounting to a total of 12 cents per diluted common share for the quarter. The early retirement program, announced on Nov. 1, 2005, is expected to result in pretax savings of $6.0-6.5 million in the fiscal year ending Sept. 30, 2006. The total annualized pretax savings of the program is estimated to be $6.5-7.0 million.
The following table summarizes the impact on earnings per diluted common share from early retirement and transition costs related to the acquisition of Pulitzer:
Three Months Ended
Dec. 31, 2005
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Diluted EPS from continuing operations.......... $0.50
Early retirement program and other
Pulitzer transition costs.................... 0.12
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Diluted EPS, excluding costs related
to Pulitzer acquisition...................... $0.62
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Tables follow. Expanded tables with same property comparisons, as well as revenue statistics for December, are available at www.lee.net/financial.
Lee Enterprises is a premier publisher of newspapers in midsize markets, with 52 dailies and a joint interest in six others, a rapidly growing online business and more than 300 weekly newspapers and specialty publications in 23 states. Lee's newspapers have circulation of 1.7 million daily and 1.9 million Sunday, reaching more than four million readers daily, and its weekly publications have distribution of more than 4.5 million households. Lee's newspapers include such diverse markets as Napa, Calif.; Bloomington, Ill.; Billings, Mont.; Escondido, Calif.; Madison, Wis.; and St. Louis, Mo. 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.
LEE ENTERPRISES, INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Dec. 31
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(Thousands, Except EPS Data) 2005 2004 %
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Operating revenue:
Advertising revenue:
Retail.............................. $135,530 $83,462 62.4 %
National............................ 17,674 6,549 169.9
Classified:
Daily newspapers:
Employment..................... 20,134 10,782 86.7
Automotive..................... 14,238 9,863 44.4
Real estate.................... 15,339 9,221 66.3
All other...................... 9,229 5,703 61.8
Other publications............... 13,973 8,436 65.6
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Total classified.................... 72,913 44,005 65.7
Online.............................. 7,471 3,124 139.1
Niche publications.................. 3,487 2,666 30.8
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Total advertising revenue.............. 237,075 139,806 69.6
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Circulation............................ 51,820 32,451 59.7
Commercial printing.................... 6,009 5,380 11.7
Online services & other................ 7,735 6,447 20.0
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Total operating revenue................ 302,639 184,084 64.4
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Operating expenses:
Compensation........................ 115,071 71,729 60.4
Newsprint and ink................... 31,562 16,827 87.6
Other operating expenses............ 72,695 41,119 76.8
Transition costs.................... 352 - NM
Early retirement program............ 8,373 - NM
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Operating expenses, excluding
depreciation and amortization......... 228,053 129,675 75.9
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Operating cash flow(2)................. 74,586 54,409 37.1
Depreciation........................... 8,331 4,945 68.5
Amortization........................... 13,954 6,561 112.7
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Operating income, before equity in
net income of associated companies.... 52,301 42,903 21.9
Equity in net income of associated
companies:
Tucson newspaper partnership........ 4,138 - NM
Madison Newspapers.................. 2,165 2,626 (17.6)
Other............................... - (33) NM
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Operating income....................... 58,604 45,496 28.8
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Non-operating income:
Financial income.................... 1,356 278 NM
Financial expense................... (24,037) (2,839) NM
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(22,681) (2,561) NM
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Income from continuing operations
before income taxes................... 35,923 42,935 (16.3)
Income tax expense..................... 12,900 15,924 (19.0)
Minority interest...................... 259 - NM
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Income from continuing operations...... 22,764 27,011 (15.7)
Discontinued operations................ - - -
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Net income............................. $22,764 $27,011 (15.7)%
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Earnings per common share:
Basic:
Continuing operations............ $0.50 $0.60 (16.7)%
Discontinued operations.......... - - -
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Net income $0.50 $0.60 (16.7)%
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Diluted:
Continuing operations $0.50 $0.60 (16.7)%
Discontinued operations - - -
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Net income $0.50 $0.60 (16.7)%
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Average common shares:
Basic............................... 45,260 45,027
Diluted............................. 45,400 45,243
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SELECTED BALANCE SHEET INFORMATION
Dec. 31
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(Thousands) 2005 2004
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Cash........................................... $11,379 $12,891
Restricted cash and investments................ 84,810 -
Debt (principal amount)........................ 1,660,000 196,600
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NOTES:
(1) Same property comparisons exclude acquisitions and divestitures
made in the current and prior year. Same property revenue also
excludes revenue of Madison Newspapers, Inc. (MNI), in which Lee
owns a 50% share. It is 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 net income of associated
companies, is a non-GAAP financial measure. 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 reflected in the tables
accompanying this release.
(3) 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.
(4) 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.
SOURCE: Lee Enterprises, Incorporated
Lee Enterprises, Incorporated, Davenport
Dan Hayes, 563-383-2100
dan.hayes@lee.net