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 18, 2006

 

_______________________________________________________________________

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 18, 2006, Lee Enterprises, Incorporated (the "Company") reported its results for the first fiscal quarter ended December 31, 2005. 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.

 

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 earnings release: non-GAAP earnings per share ("EPS") and operating cash flow. The Company's reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are contained in the attached earnings release.

 

The Company believes the use of non-GAAP EPS provides meaningful supplemental information to investors and financial analysts with which to evaluate its financial performance by excluding expenses and expenditures related to the acquisition of Pulitzer Inc. that may not be indicative of its core business operating results and, except as noted in the release, are of a substantially non-recurring nature. The Company also believes that both management and investors benefit from referring to this non-GAAP financial measure in assessing the Company's performance and in forecasting and analyzing future periods.

 

The Company believes that operating cash flow is a useful measure of evaluating its financial performance because of its focus on the Company's results from operations before depreciation and amortization. The Company also believes that this measure is one of the alternative financial measures of performance used by investors, rating agencies and financial analysts to estimate the value of a company and evaluate its ability to meet debt service requirements.

 

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 18, 2006

By:

/s/Carl G. Schmidt

 

 

Carl G. Schmidt

 

 

Vice President, Chief Financial Officer,

 

 

and Treasurer

 

 

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INDEX TO EXHIBITS

 

Exhibit No.          Description                                                                                                              

 

99.1

Earnings Release – First Quarter Ended December 31, 2005

 

 

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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. 18, 2006) — 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.

 

 

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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

Diluted EPS from continuing operations

 

$

0.50

Early retirement program and other

 

 

 

Pulitzer transition costs

 

 

0.12

 

Diluted EPS, excluding costs related

 

 

 

to Pulitzer acquisition

 

$

0.62

 

 

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.

 

 

 

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LEE ENTERPRISES, INCORPORATED

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                  Three Months Ended Dec. 31

(Thousands, Except EPS Data)

 

2005

 

 

2004

 

%

 

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

 

Total classified

 

72,913

 

 

44,005

 

65.7

 

Online

 

7,471

 

 

3,124

 

139.1

 

Niche publications

 

3,487

 

 

2,666

 

30.8

 

Total advertising revenue

 

237,075

 

 

139,806

 

69.6

 

Circulation

 

51,820

 

 

32,451

 

59.7

 

Commercial printing

 

6,009

 

 

5,380

 

11.7

 

Online services & other

 

7,735

 

 

6,447

 

20.0

 

Total operating revenue

 

302,639

 

 

184,084

 

64.4

 

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

 

Operating expenses, excluding

 

 

 

 

 

 

 

 

depreciation and amortization

 

228,053

 

 

129,675

 

75.9

 

Operating cash flow(2)

 

74,586

 

 

54,409

 

37.1

 

Depreciation

 

8,331

 

 

4,945

 

68.5

 

Amortization

 

13,954

 

 

6,561

 

112.7

 

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

 

Operating income

 

58,604

 

 

45,496

 

28.8

 

Non-operating income:

 

 

 

 

 

 

 

 

Financial income

 

1,356

 

 

278

 

NM

 

Financial expense

 

(24,037

)

 

(2,839

)

NM

 

 

 

(22,681

)

 

(2,561

)

NM

 

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

 

Income from continuing operations

 

22,764

 

 

27,011

 

(15.7

)

Discontinued operations

 

-

 

 

-

 

-

 

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

 

-

 

 

-

 

-

 

Net income

$

0.50

 

$

0.60

 

(16.7

)%

Diluted:

 

 

 

 

 

 

 

 

Continuing operations

$

0.50

 

$

0.60

 

(16.7

)%

Discontinued operations

 

-

 

 

-

 

-

 

Net income

$

0.50

 

$

0.60

 

(16.7

)%

Average common shares:

 

 

 

 

 

 

 

 

Basic

 

45,260

 

 

45,027

 

 

 

Diluted

 

45,400

 

 

45,243

 

 

 

 

 

 

 

 

 

 

 

 

 

SELECTED BALANCE SHEET INFORMATION

 

 

 

 

 

 

 

 

 

 

 

Dec. 31

(Thousands)

 

 

 

2005

 

 

2004

Cash

$

11,379

 

$

12,891

Restricted cash and investments

 

84,810

 

 

-

Debt (principal amount)

 

1,660,000

 

 

196,600

 

 

 

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.

 

 

 

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

 

 

 

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