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):  January 22, 2008

 

_______________________________________________________________________

LEE ENTERPRISES, INCORPORATED

(Exact name of Registrant as specified in its charter)

 

_______________________________________________________________________

 

Commission File Number 1-6227

 

Delaware

(State of Incorporation)

42-0823980

(I.R.S. Employer Identification No.)

 

 

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))

 

 

 


Item 2.02.

Results of Operations and Financial Condition.

 

On January 22, 2008, Lee Enterprises, Incorporated (the “Company”) reported its results for the first fiscal quarter ended December 30, 2007. 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, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

Item 9.01.

Financial Statements and Exhibits.

 

 

(c)

Exhibits

 

 

 

 

 

 

 

 

 

99.1

Earnings Release – First Quarter Ended December 30, 2007

 

 

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:  January 22, 2008

By:

/s/Carl G. Schmidt

 

 

Carl G. Schmidt

 

 

Vice President, Chief Financial Officer,

 

 

and Treasurer

 

2

 

INDEX TO EXHIBITS

 

Exhibit No.

Description

 

99.1

Earnings Release – First Quarter Ended December 30, 2007

 

 

3

 

Exhibit 99.1

 


 

201 N. Harrison St., Davenport, IA 52801

 

(563) 383-2100

 

www.lee.net

 

NEWS RELEASE

 

Lee Enterprises reports earnings for first fiscal quarter

 

DAVENPORT, Iowa (Jan. 22, 2008) — Lee Enterprises, Incorporated (NYSE: LEE), reported today that diluted earnings per common share from continuing operations were 48 cents for its first fiscal quarter ended December 2007.

 

The results compare with 58 cents a year ago in a quarter that included an additional publishing day, a Sunday, and the benefit of the World Series in St. Louis. The additional Sunday a year ago and sales related to the World Series resulted in an estimated $7 million of revenue and $4 million of operating cash flow (1). The quarter a year ago also benefited from an additional publishing week in Tucson, Ariz., which is recorded in equity in earnings of associated companies. The impact of these events on prior year earnings for the quarter was approximately six cents per common share.

 

Mary Junck, chairman and chief executive officer, said: “We believe we’re weathering the current economic slowdown as well as possible in light of the wide-ranging impact of the real estate slump. Our audiences continue to grow, and we continue to focus on our top priorities of revenue growth, online innovation, strong local news, people development and cost control. We believe we have the right strategies and the right people to continue building on our position as, by far, the leading provider of local news, information and advertising in our markets.”

 

The loss of the Sunday and World Series affected nearly all revenue categories. Total operating revenue from continuing operations for the quarter decreased 6.2 percent from a year ago to $279.9 million. Total advertising revenue decreased 6.5 percent, to $217.6 million, with online advertising revenue up 24.0 percent. Combined print and online retail advertising decreased 2.5 percent. Combined print and online classified advertising revenue decreased 9.5 percent, with employment down 7.9 percent, automotive down 9.5 percent and real estate down 19.8 percent. National advertising revenue decreased 24.1 percent. Circulation revenue decreased 4.3 percent. Same property (2) revenue results were identical.

 

Operating expenses, exclusive of depreciation and amortization, decreased 4.9 percent, with compensation down 3.6 percent, newsprint and ink down 18.8 percent and other cash costs down 1.1 percent. Same property operating expenses decreased 4.3 percent for the quarter compared with a year ago, with compensation down 1.9 percent, newsprint and ink down 19.4 percent and other cash costs down 1.2 percent.

 

1

 

Compared with a year ago, operating cash flow decreased 10.0 percent to $72.4 million. Operating income, which includes equity in earnings of associated companies and depreciation and amortization, decreased 15.8 percent to $53.7 million.

 

Non-operating expenses, which consist primarily of financial expense, net of financial income, decreased 13.1 percent to $19.1 million. Income from continuing operations before income taxes decreased 17.2 percent to $34.6 million. Income from continuing operations decreased 17.9 percent, to $21.8 million. Net income, including discontinued operations, decreased 17.0 percent to $22.1 million.

 

Free cash flow(3) totaled $48.1 million for the quarter, compared with $42.0 million a year ago. Timing of income tax payments had a positive impact on results for the current year quarter. Recent declines in LIBOR and continuing debt reduction are expected to favorably impact interest expense and free cash flow for the rest of the year. Net debt was reduced by $33.0 million in the quarter.

 

STOCK REPURCHASE

 

On Jan. 7, Lee announced that its board of directors has authorized the purchase of up to $30 million of Lee common stock. The repurchase is expected to take place in open market purchases or privately negotiated transactions as warranted beginning after today’s earnings announcement.

 

FINANCIAL CALENDAR

 

Because of the adoption of period accounting this fiscal year, most enterprises will have one fewer publishing day in 2008 than in 2007. The lost publishing day is a Sunday, which affects year-over-year comparisons, as Sundays provide significantly more revenue than any other day of the week. Compared with 2007, the 2008 financial calendar loses a Sunday in the first fiscal quarter, regains one Sunday in the second quarter and loses it again in the fourth quarter.

 

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 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 nearly 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.

 

 

2

 

 

 


LEE ENTERPRISES, INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Periods Ended December

 

(Thousands, except EPS data)

 

2007

 

2006

 

%

 

Advertising revenue:

 

 

 

 

 

 

 

 

 

 

Retail

 

$

127,569

 

$

131,721

 

 

(3.2

)%

National

 

 

13,582

 

 

17,903

 

 

(24.1

)

Classified:

 

 

 

 

 

 

 

 

 

 

Daily newspapers:

 

 

 

 

 

 

 

 

 

 

Employment

 

 

15,367

 

 

19,150

 

 

(19.8

)

Automotive

 

 

11,729

 

 

13,996

 

 

(16.2

)

Real estate

 

 

11,543

 

 

14,786

 

 

(21.9

)

All other

 

 

9,988

 

 

9,343

 

 

6.9

 

Other publications

 

 

10,673

 

 

11,262

 

 

(5.2

)

Total classified

 

 

59,300

 

 

68,537

 

 

(13.5

)

Online

 

 

13,475

 

 

10,867

 

 

24.0

 

Niche publications

 

 

3,644

 

 

3,561

 

 

2.3

 

Total advertising revenue

 

 

217,570

 

 

232,589

 

 

(6.5

)

Circulation

 

 

49,805

 

 

52,036

 

 

(4.3

)

Commercial printing

 

 

4,175

 

 

4,184

 

 

(0.2

)

Online services and other

 

 

8,306

 

 

9,680

 

 

(14.2

)

Total operating revenue

 

 

279,856

 

 

298,489

 

 

(6.2

)

Operating expenses:

 

 

 

 

 

 

 

 

 

 

Compensation

 

 

108,194

 

 

112,191

 

 

(3.6

)

Newsprint and ink

 

 

25,103

 

 

30,925

 

 

(18.8

)

Other operating expenses

 

 

74,126

 

 

74,923

 

 

(1.1

)

Operating expenses, excluding depreciation and amortization

 

 

207,423

 

 

218,039

 

 

(4.9

)

Operating cash flow(1)

 

 

72,433

 

 

80,450

 

 

(10.0

)

Depreciation

 

 

8,159

 

 

8,248

 

 

(1.1

)

Amortization

 

 

14,872

 

 

14,955

 

 

(0.6

)

Equity in earnings of associated companies:

 

 

 

 

 

 

 

 

 

 

Tucson partnership

 

 

2,412

 

 

3,912

 

 

(38.3

)

Madison Newspapers

 

 

1,889

 

 

2,593

 

 

(27.2

)

Operating income

 

 

53,703

 

 

63,752

 

 

(15.8

)

Non-operating income (expense):

 

 

 

 

 

 

 

 

 

 

Financial income

 

 

1,796

 

 

1,509

 

 

19.0

 

Financial expense

 

 

(20,850

)

 

(23,435

)

 

(11.0

)

 

 

 

(19,054

)

 

(21,926

)

 

(13.1

)

 

3


 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations before income taxes

 

 

34,649

 

 

41,826

 

 

(17.2

)

Income tax expense

 

 

12,254

 

 

14,799

 

 

(17.2

)

Minority interest

 

 

607

 

 

504

 

 

20.4

 

Income from continuing operations

 

 

21,788

 

 

26,523

 

 

(17.9

)

Discontinued operations

 

 

338

 

 

128

 

 

NM

 

Net income

 

$

22,126

 

$

26,651

 

 

(17.0

)%

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.48

 

$

0.58

 

 

(17.2

)%

Discontinued operations

 

 

0.01

 

 

—

 

 

NM

 

 

 

$

0.48

 

$

0.58

 

 

(17.2

)%

Diluted:

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

0.48

 

$

0.58

 

 

(17.2

)%

Discontinued operations

 

 

0.01

 

 

—

 

 

NM

 

 

 

$

0.49

 

$

0.58

 

 

(15.5

)%

Average common shares:

 

 

 

 

 

 

 

 

 

 

Basic

 

 

45,746

 

 

45,573

 

 

 

 

Diluted

 

 

45,515

 

 

45,637

 

 

 

 

SELECTED BALANCE SHEET INFORMATION
(Unaudited)

 

 

 

 

 

 

 

 

(Thousands)

 

December 30,
2007

 

December 31,
2006

 

Cash

 

$

7,732

 

$

10,743

 

Restricted cash and investments

 

 

114,810

 

 

99,810

 

Debt (principal amount)

 

 

1,374,625

 

 

1,487,000

 

SELECTED STATISTICAL INFORMATION
(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Periods Ended December

 

(Dollars in thousands)

 

2007

 

2006

 

%

 

Capital expenditures

 

$

6,036

 

$

5,644

 

 

6.9

%

Same property newsprint volume (tonnes)

 

 

40,542

 

 

44,015

 

 

(7.9

)

Same property full-time equivalent employees

 

 

7,980

 

 

8,161

 

 

(2.2

)

 

4


FREE CASH FLOW(3)

 

 

 

 

 

 

 

 

 

 

Three Periods Ended December

(Thousands)

 

2007

 

2006

 

Operating income

 

$

53,703

 

$

63,752

 

Depreciation and amortization

 

 

24,616

 

 

24,788

 

Stock compensation

 

 

1,514

 

 

2,109

 

Financial expense

 

 

(21,931

)

 

(24,420

)

Financial income

 

 

1,796

 

 

1,509

 

Cash income taxes

 

 

(4,963

)

 

(19,628

)

Minority interest

 

 

(607

)

 

(504

)

Capital expenditures

 

 

(6,036

)

 

(5,644

)

 

 

$

48,092

 

$

41,962

 

SELECTED COMBINED PRINT AND ONLINE ADVERTISING REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Periods Ended December

 

(Thousands, same property)

 

2007

 

2006

 

%

 

Retail

 

$

128,140

 

$

131,373

 

 

(2.5

)%

 

Classified:

 

 

 

 

 

 

 

 

 

 

Employment

 

 

23,125

 

 

25,105

 

 

(7.9

)

Automotive

 

 

16,576

 

 

18,316

 

 

(9.5

)

Real estate

 

 

15,279

 

 

19,045

 

 

(19.8

)

Other

 

 

17,198

 

 

17,286

 

 

(0.5

)

Total classified revenue

 

$

72,178

 

$

79,752

 

 

(9.5

)%

REVENUE BY REGION

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Periods Ended December

 

(Thousands, same property)

 

2007

 

2006

 

%

 

Midwest

 

$

170,729

 

$

183,628

 

 

(7.0

)%

Mountain West

 

 

50,882

 

 

52,542

 

 

(3.2

)%

West

 

 

35,446

 

 

39,491

 

 

(10.2

)%

East/other

 

 

22,799

 

 

22,828

 

 

(0.1

)%

Total

 

$

279,856

 

$

298,489

 

 

(6.2

)%

DAILY NEWSPAPER ADVERTISING VOLUME

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Periods Ended December

 

(Thousands of inches,
same property)

 

2007

 

2006

 

%

 

Retail

 

 

3,526

 

 

3,684

 

 

(4.3

)%

National

 

 

180

 

 

202

 

 

(10.9

)

Classified

 

 

3,598

 

 

3,912

 

 

(8.0

)

Total

 

 

7,304

 

 

7,798

 

 

(6.3

)%

 

5

NOTES:

 

 

 

 

 

(1)

Operating cash flow, which is defined as operating income before depreciation, amortization and equity in earnings of associated companies, is a non-GAAP (Generally Accepted Accounting Principles) financial measure. 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, the most directly comparable GAAP measure, are included in tables 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 and Tucson, which are reported using the equity method of accounting. Same property comparisons also exclude corporate office costs.

 

 

(3)

Free cash flow, which is defined as operating income, plus depreciation and amortization, 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, the most directly comparable GAAP measure, are included in a table 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, 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: dan.hayes@lee.net, (563) 383-2100

 

 

6