Lee Enterprises Reports Earnings for Third Fiscal Quarter
DAVENPORT, Iowa--(BUSINESS WIRE)--July 24, 2008--Lee Enterprises, Incorporated (NYSE: LEE), reported today that diluted earnings per common share from continuing operations were 6 cents for its third fiscal quarter ended June 29, 2008. Earnings were reduced 19 cents as a result of the final determination of previously announced non-cash impairment charges related to goodwill, other assets and the company's investment in TNI Partners.
Excluding the impairment charges and other unusual items(1), earnings per share were 28 cents, compared with 49 cents a year ago.
Mary Junck, chairman and chief executive officer, said: "Economic conditions continued to deteriorate during the quarter, resulting in reduced advertising spending, especially in classified employment. We believe the advertising slump will reverse when the economy improves, and we continue to position our company to weather the downturn and remain strong. Our massive audiences continue to grow, reaching more than 70 percent of the adults in our markets. Even in the downturn, retail revenue has stayed relatively stable and we remain an industry leader in revenue performance. We continue to produce strong cash flow, allowing us to reduce net debt by $4.8 million during the quarter and also complete the planned liquidation of a $17.9 million unfunded retirement plan. We believe our financial outlook remains solid."
She added: "Because we cannot foresee the length of the economic downturn, we are focusing on rigorous cost reductions through staff reorganizations, narrower page widths, newsprint conservation programs and other efficiencies, as well as reduced capital spending. In our fiscal year that begins this fall, assuming no new surprises in newsprint prices, we are aiming for a further reduction in cash costs of 5-7 percent."
Total operating revenue from continuing operations for the quarter decreased 8.3 percent from a year ago to $256.4 million. Print advertising revenue declined 10.1 percent, and online advertising revenue declined 9.1 percent. Combined print and online advertising revenue decreased 10.0 percent to $195.5 million. On a same property basis, combined retail advertising revenue declined 3.1 percent and classified decreased 17.2 percent. Combined same property print and online employment advertising revenue decreased 26.5 percent, automotive decreased 12.2 percent and real estate decreased 24.2 percent. Combined same property print and online national advertising revenue decreased 21.2 percent. Circulation revenue decreased 2.7 percent. Total same property revenue declined 8.2 percent. There were no day exchanges between the quarters.
Operating expenses, excluding depreciation and amortization and unusual items, decreased 2.3 percent to $202.1 million, with compensation down 3.0 percent, newsprint and ink down 0.2 percent and other cash costs down 2.1 percent. Same property operating expenses, excluding unusual items, decreased 3.2 percent. Compensation declined 3.6 percent, with full-time equivalent employees down 4.9 percent. Newsprint and ink decreased 5.0 percent and other cash costs decreased 1.9 percent.
Operating cash flow(3) decreased 26.0 percent compared with a year ago to $53.8 million. Operating income, which includes equity in earnings of associated companies, depreciation and amortization, and non-cash charges for impairment of goodwill and other assets, decreased 61.3 percent to $21.0 million.
Non-operating expense, which consists primarily of financial expense, net of financial income, decreased 23.3 percent to $15.0 million. Income from continuing operations before income taxes decreased 82.7 percent to $6.0 million. Income from continuing operations decreased 84.0 percent to $3.5 million. Net income, including discontinued operations, also totaled $3.5 million.
Free cash flow(4) totaled $34.2 million for the quarter, compared with $42.4 million a year ago.
Net debt was reduced $4.8 million, and an additional $17.9 million of cash flow was used, as planned, to liquidate an unfunded retirement plan.
IMPAIRMENT CHARGE
Lee recorded preliminary, non-cash charges in the quarter ended March 30, 2008, to reduce the carrying value of goodwill, other assets and the company's investment in TNI Partners by $709 million after tax. The company recently completed the complex calculations required to make a final determination of the adjustments, which resulted in additional charges totaling $13.4 million pre-tax, $8.6 million after tax, for the quarter ended June 29, 2008.
ADJUSTED EARNINGS AND EPS(1)
Unusual matters affecting year-over-year comparisons for the quarter included, in 2008, final adjustments to impairment of goodwill, other assets and reduction in the carrying value of the company's investment in TNI Partners, workforce adjustments at several locations, transition costs at Madison Newspapers, Inc. related to publication changes at The Capital Times, and adjusting of the current value of the company's future liability related to acquisition of the 5 percent minority share in its St. Louis partnership.
The following table summarizes the impact from unusual items on income available to common stockholders and earnings per diluted common share. Per share amounts may not add due to rounding.
13 Weeks Ended 3 Months Ended
June 29, 2008 June 30, 2007
------------------ -----------------
(Thousands, except EPS) Amount Per Share Amount Per Share
-------- --------- ------- ---------
Income available to common
stockholders, as reported....... $ 2,832 $0.06 $22,491 $0.49
----------------------------------------------------------------------
Adjustments:
Impairment charges............. 10,360 -
Reduction of investment in TNI
Partners...................... 3,000 -
Workforce adjustments and
transition costs.............. 707 -
----------------------------------------------------------------------
14,067 -
Income tax benefit of
adjustments, net, and impact on
minority interest............... (4,980) -
----------------------------------------------------------------------
9,087 0.20 - -
Net income available to common
stockholders, as adjusted....... 11,919 0.27 22,491 0.49
Change in redeemable minority
interest liability.............. 655 0.01 - -
----------------------------------------------------------------------
Net income, as adjusted(1)....... $12,574 $0.28 $22,491 $0.49
======================================================================
YEAR-TO-DATE OPERATING RESULTS
Total operating revenue from continuing operations for the three quarters ended June 29, 2008, decreased 6.4 percent from a year ago to $784.0 million. Print advertising revenue declined 8.2 percent, and online advertising revenue increased 5.3 percent. Combined print and online advertising revenue decreased 7.4 percent to $599.2 million. On a same property basis, combined retail advertising revenue declined 2.1 percent and classified decreased 13.1 percent. Combined same property print and online employment advertising revenue decreased 17.0 percent, automotive decreased 11.2 percent and real estate decreased 22.0 percent. Combined same property print and online national advertising revenue decreased 19.7 percent. Circulation revenue decreased 2.9 percent. There were no day exchanges between the year-to-date periods.
Operating expenses, excluding depreciation and amortization and unusual items, decreased 2.8 percent to $612.7 million, with compensation down 3.2 percent, newsprint and ink down 10.2 percent and other cash costs up 0.6 percent. Same property operating expenses, excluding unusual items decreased 3.1 percent, with compensation down 2.5 percent, newsprint and ink down 12.5 percent and other cash costs flat.
Operating cash flow(3) decreased 19.3 percent compared with a year ago to $170.4 million. The impairment charges resulted in an operating loss of $834.4 million year to date.
Free cash flow(4) totaled $92.1 million year to date, compared with $101.4 million a year ago.
Net debt was reduced by $45.0 million. An additional $17.9 million of cash flow was used to liquidate an unfunded retirement plan, and $19 million of Lee common stock was repurchased.
YEAR-TO-DATE ADJUSTED EARNINGS AND EPS(1)
As reported, diluted per common share results, including non-cash impairment charges, totaled a loss of $15.30 for the three fiscal quarters ended June 29, 2008, compared with earnings of $1.33 cents a year ago. Excluding unusual items(1), diluted earnings per share were 85 cents, compared with $1.27 a year ago.
Unusual matters affecting year-to-date comparisons included, in 2008, impairment of goodwill and other assets, reduction of the carrying value of the company's investment in TNI Partners, workforce adjustments, transition costs in Madison and recording of the current value of the company's future liability related to acquisition of the 5 percent minority share in its St. Louis partnership. Unusual matters in 2007 included gains related to benefit curtailment for certain groups of employees in Lee and in TNI Partners.
The following table summarizes the impact from unusual items on income (loss) available to common stockholders and earnings (loss) per diluted common share.
39 Weeks Ended 9 Months Ended
June 29, 2008 June 30, 2007
--------------------- ------------------
(Thousands, except EPS) Amount Per Share Amount Per Share
----------- --------- -------- ---------
Income (loss) available to
common stockholders, as
reported.................... $ (688,079) $(15.30) $61,033 $ 1.33
----------------------------------------------------------------------
Adjustments:
Impairment charges......... 851,365 -
Reduction of investment in
TNI Partners.............. 93,384 -
Workforce adjustments and
transition costs.......... 1,643 -
Curtailment gains.......... - (3,731)
Curtailment gains, TNI
Partners.................. - (1,037)
----------------------------------------------------------------------
946,392 (4,768)
Income tax expense (benefit)
of adjustments, net, and
impact on minority interest. (228,011) 1,799
----------------------------------------------------------------------
718,381 15.97 (2,969) (0.06)
----------------------------------------------------------------------
Net income available to
common stockholders, as
adjusted.................... 30,302 0.67 58,064 1.27
Change in redeemable minority
interest liability.......... 8,138 0.18 - -
----------------------------------------------------------------------
Net income, as adjusted(1)... $ 38,440 $ 0.85 $58,064 $ 1.27
======================================================================
ABOUT LEE
Lee Enterprises is a premier provider of local news, information and advertising in primarily midsize markets, with 50 daily newspapers and a joint interest in four 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 12 million unique visitors monthly, and Lee's weekly publications are distributed to more than 4.5 million households. Lee's markets include St. Louis, Mo.; Lincoln, Neb.; Madison, Wis.; Davenport, Iowa; Billings, Mont.; Bloomington, Ill.; Tucson, Ariz.; and Napa, Calif. Lee stock is traded on the New York Stock Exchange under the symbol LEE. For more information about Lee, please visit www.lee.net.
LEE ENTERPRISES, INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
13 3 39 9
Weeks Months Weeks Months
Ended Ended Ended Ended
(Thousands, Jun 29, Jun 30, Jun 29, Jun 30,
Except EPS) 2008 2007 % 2008 2007 %
----------------------------------------------------------------------
Advertising
revenue:
Retail...... $106,694 $111,706 (4.5)% $ 333,360 $343,961 (3.1)%
National.... 9,375 11,976 (21.7) 34,190 42,830 (20.2)
Classified:
Daily
newspapers:
Employment 15,099 21,099 (28.4) 46,166 60,494 (23.7)
Automotive 11,797 13,975 (15.6) 34,421 41,087 (16.2)
Real
estate... 11,009 14,965 (26.4) 33,082 43,479 (23.9)
All other. 11,907 10,758 10.7 31,700 28,645 10.7
Other
publi-
cations.... 11,143 12,428 (10.3) 32,665 35,178 (7.1)
----------------------------------------------------------------------
Total
classified. 60,955 73,225 (16.8) 178,034 208,883 (14.8)
Online...... 14,655 16,124 (9.1) 41,624 39,546 5.3
Niche
publi-
cations..... 3,823 4,254 (10.1) 11,997 12,019 (0.2)
----------------------------------------------------------------------
Total
advertising
revenue..... 195,502 217,285 (10.0) 599,205 647,239 (7.4)
----------------------------------------------------------------------
Circulation.. 48,344 49,698 (2.7) 147,236 151,646 (2.9)
Commercial
printing.... 4,433 4,294 3.2 12,413 12,386 0.2
Online
services &
other....... 8,115 8,223 (1.3) 25,121 26,685 (5.9)
----------------------------------------------------------------------
Total
operating
revenue..... 256,394 279,500 (8.3) 783,975 837,956 (6.4)
----------------------------------------------------------------------
Operating
expenses:
Compensation 103,984 107,160 (3.0) 317,753 328,289 (3.2)
Newsprint
and ink.... 26,859 26,921 (0.2) 76,311 84,932 (10.2)
Other
operating
expenses... 71,211 72,751 (2.1) 218,587 217,332 0.6
Curtailment
gains...... - - - - (3,731) NM
Workforce
adjustments 544 - NM 954 - NM
----------------------------------------------------------------------
Operating
expenses,
excluding
depreciation
and
amortization 202,598 206,832 (2.0) 613,605 626,822 (2.1)
----------------------------------------------------------------------
Operating
cash flow(3) 53,796 72,668 (26.0) 170,370 211,134 (19.3)
Depreciation. 8,828 7,896 11.8 25,804 24,735 4.3
Amortization. 13,138 14,941 (12.1) 42,878 44,829 (4.4)
Impairment
charges..... 10,360 - NM 851,365 - NM
Equity in
earnings of
associated
companies:
TNI
Partners.. 1,842 2,590 (28.9) 5,475 10,465 (47.7)
Madison
Newspapers 707 1,927 (63.3) 3,183 5,862 (45.7)
Reduction
in
investment
in TNI
Partners.. (3,000) - NM (93,384) - NM
----------------------------------------------------------------------
Operating
income
(loss)...... 21,019 54,348 (61.3) (834,403) 157,897 NM
----------------------------------------------------------------------
Non-operating
income
(expense):
Financial
income.... 1,386 2,491 (44.4) 4,702 5,522 (14.8)
Financial
expense... (15,988) (22,027) (27.4) (55,662) (68,006) (18.2)
Other, net. (393) (21) NM (369) (21) NM
----------------------------------------------------------------------
(14,995) (19,557) (23.3) (51,329) (62,505) (17.9)
----------------------------------------------------------------------
Income (loss)
from
continuing
operations
before
income taxes 6,024 34,791 (82.7) (885,732) 95,392 NM
Income tax
expense
(benefit)... 2,372 12,281 (80.7) (206,215) 33,707 NM
Minority
interest.... 113 371 (69.5) 709 1,175 (39.7)
----------------------------------------------------------------------
Income (loss)
from
continuing
operations.. 3,539 22,139 (84.0) (680,226) 60,510 NM
Discontinued
operations.. (52) 352 NM 285 523 (45.5)
----------------------------------------------------------------------
Net income
(loss)...... 3,487 22,491 (84.5) (679,941) 61,033 NM
----------------------------------------------------------------------
Change in
redeemable
minority
interest
liability... 655 - NM 8,138 NM
----------------------------------------------------------------------
Net income
(loss)
available to
common
stockholders $ 2,832 22,491 (87.4)% $(688,079 )$ 61,033 NM
======================================================================
Earnings
(loss) per
common
share:
Basic:
Continuing
operations. $ 0.07 $ 0.48 (85.4)% $ (15.31) $ 1.33 NM
Discon-
tinued
operations. - 0.01 NM 0.01 0.01 NM
----------------------------------------------------------------------
$ 0.06 $ 0.49 (87.8)% $ (15.30) $ 1.34 NM
======================================================================
Diluted:
Continuing
operations. $ 0.06 $ 0.48 (87.5)% $ (15.31) $ 1.32 NM
Discon-
tinued
operations. - 0.01 NM 0.01 0.01 NM
----------------------------------------------------------------------
$ 0.06 $ 0.49 (87.8)% $ (15.30) $ 1.33 NM
======================================================================
Average
common
shares:
Basic....... 44,265 45,715 44,971 45,638
Diluted..... 44,553 45,887 44,971 45,776
======================================================================
SELECTED COMBINED PRINT AND ONLINE ADVERTISING REVENUE
13 Weeks 3 Months 39 Weeks 9 Months
Ended Ended Ended Ended
(Thousands, Jun 29, Jun 30 Jun 29, Jun 30,
same property) 2008 2007, % 2008 2007 %
----------------------------------------------------------------------
Retail........... $108,517 $111,983 (3.1)% $336,537 $343,585 (2.1)%
Classified:
Employment...... 23,331 31,732 (26.5) 70,388 84,854 (17.0)
Automotive...... 16,243 18,497 (12.2) 47,955 53,989 (11.2)
Real estate..... 14,609 19,283 (24.2) 43,776 56,156 (22.0)
Other........... 19,428 19,365 0.3 53,693 53,235 0.9
----------------------------------------------------------------------
Total classified. $ 73,611 $ 88,877 (17.2) $215,812 $248,234 (13.1)%
======================================================================
REVENUE BY REGION
13 Weeks 3 Months 39 Weeks 9 Months
Ended Ended Ended Ended
(Thousands, Jun 29, Jun 30, Jun 29, Jun 30,
same property) 2008 2007 % 2008 2007 %
----------------------------------------------------------------------
Midwest........... $154,589 $169,186 (8.6)% $473,829 $510,563 (7.2)%
Mountain West..... 48,532 51,636 (6.0) 144,405 149,732 (3.6)
West.............. 32,628 37,134 (12.1) 99,099 110,851 (10.6)
East/Other........ 20,531 21,346 (3.8) 66,174 66,225 (0.1)
----------------------------------------------------------------------
Total............. $256,280 $279,302 (8.2)% $783,507 $837,371 (6.4)%
======================================================================
DAILY NEWSPAPER ADVERTISING VOLUME
13 Weeks 3 Months 39 Weeks 9 Months
Ended Ended Ended Ended
(Thousands, Jun 29, Jun 30, Jun 29, Jun 30,
same property) 2008 2007 % 2008 2007 %
----------------------------------------------------------------------
Retail........... 3,182 3,286 (3.2)% 9,671 9,975 (3.0)%
National......... 143 163 (12.3) 484 528 (8.3)
Classified....... 3,775 4,104 (8.0) 10,686 11,614 (8.0)
----------------------------------------------------------------------
Total............ 7,100 7,553 (6.0)% 20,841 22,117 (5.8)%
======================================================================
SELECTED BALANCE SHEET INFORMATION
Jun 29, Jun 30,
(Thousands) 2008 2007
----------------------------------------------------------------------
Cash........................................... $ 4,654 $ 9,221
Restricted cash and investments................ 122,310 107,310
Debt (principal amount)........................ 1,367,000 1,426,500
----------------------------------------------------------------------
Net debt....................................... 1,240,036 1,309,969
======================================================================
SELECTED STATISTICAL INFORMATION
13 Weeks 3 Months 39 Weeks 9 Months
Ended Ended Ended Ended
(Dollars in Jun 29, Jun 30, Jun 29, Jun 30,
thousands) 2008 2007 % 2008 2007 %
----------------------------------------------------------------------
Capital
expenditures.... $ 2,956 $ 7,913 (62.6)% $ 13,796 $ 20,562 (32.9)%
Same property
newsprint volume
(tonnes)........ 37,123 41,392 (10.3) 114,778 126,024 (8.9)
Same property
full-time
equivalent
employees....... 7,628 8,020 (4.9) 7,793 8,059 (3.3)
======================================================================
FREE CASH FLOW(4)
13 Weeks 3 Months 39 Weeks 9 Months
Ended Ended Ended Ended
Jun 29, Jun 30, Jun 29, Jun 30,
(Thousands) 2008 2007 2008 2007
----------------------------------------------------------------------
Operating income (loss)...... $ 21,019 $ 54,348 $(834,403) $157,897
Depreciation and amortization 22,629 24,422 72,515 74,319
Impairment charges........... 10,360 - 851,365 -
Reduction in investment in
TNI Partners................ 3,000 - 93,384 -
Stock compensation........... 1,166 1,703 4,290 5,667
Cash interest expense........ (17,122) (23,062) (58,986) (71,036)
Financial income............. 1,386 2,491 4,702 5,522
Cash income taxes............ (5,170) (9,176) (26,295) (49,280)
Minority interest............ (113) (371) (709) (1,175)
Capital expenditures......... (2,956) (7,913) (13,796) (20,562)
----------------------------------------------------------------------
$ 34,199 $ 42,442 $ 92,067 $101,352
======================================================================
NOTES:
(1) Adjusted net income and adjusted earnings per common share, which
are defined as income available to common stockholders and
earnings per common share adjusted to exclude unusual matters and
those of a substantially non-recurring nature, are non-GAAP
(Generally Accepted Accounting Principles) financial measures.
Reconciliations of adjusted net income and adjusted earnings per
common share to income (loss) available to common stockholders
and earnings (loss) per common share are included in a table
accompanying this release.
No non-GAAP financial measure should be considered as a substitute
for any related GAAP financial measure. However, the company
believes the use of non-GAAP financial measures provides
meaningful supplemental information with which to evaluate its
financial performance, or assist in forecasting and analyzing
future periods. The company also believes such non-GAAP financial
measures are alternative indicators of performance used by
investors, lenders, rating agencies and financial analysts to
estimate the value of a publishing business and its ability to
meet debt service requirements.
(2) 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 Newspapers, Inc. and TNI
Partners, which are reported using the equity method of
accounting. Same property comparisons also exclude corporate
office costs.
(3) Operating cash flow, which is defined as operating income before
depreciation, amortization, impairment charges and equity in
earnings of associated companies, is a non-GAAP financial
measure. See (1) above. The company believes operating cash flow
provides meaningful supplemental information because of its focus
on results from operations before depreciation and amortization
and earnings from equity investments. Reconciliations of
operating cash flow to operating income (loss), the most directly
comparable GAAP measure, are included in a table accompanying
this release.
(4) Free cash flow, which is defined as operating income, plus
depreciation and amortization, impairment charges, stock
compensation and financial income, minus financial expense
(exclusive of non-cash amortization and accretion), cash income
taxes, capital expenditures and minority interest, is a non-GAAP
financial measure. See (1) above. The company believes free cash
flow provides meaningful supplemental information because of its
focus on results from operations after inclusion or exclusion of
the several factors noted above. Reconciliations of free cash
flow to operating income (loss), the most directly comparable
GAAP measure, are included in a table accompanying this release.
(5) There were no day exchanges between the 2008 and 2007 quarter or
year-to-date periods.
(6) 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.
(7) 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, increased capital and other costs 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 30, 2007. 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
Dan Hayes, 563-383-2100
dan.hayes@lee.net
SOURCE:
Lee Enterprises, Incorporated