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, 2007
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LEE ENTERPRISES, INCORPORATED
(Exact name of Registrant as specified in its charter)
_______________________________________________________________________
Commission File Number 1-6227
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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, 2007, Lee Enterprises, Incorporated (the "Company") reported its results for the first fiscal quarter ended December 31, 2006. 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.
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: adjusted income from continuing operations (and related earnings per share) 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 its comparative presentation of adjusted income from continuing operations provides meaningful supplemental information to investors and financial analysts with which to evaluate its financial performance by identifying fiscal year 2006 expenses related to the acquisition of Pulitzer Inc. that may not be indicative of its core business operating results and 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.
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.
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.
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LEE ENTERPRISES, INCORPORATED |
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Date: January 23, 2007 |
By: |
/s/Carl G. Schmidt |
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Carl G. Schmidt |
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Vice President, Chief Financial Officer, |
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and Treasurer |
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INDEX TO EXHIBITS
Exhibit No. Description
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99.1 |
Earnings Release – First Quarter Ended December 31, 2006 |
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Exhibit 99.1
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201 N. Harrison St., Davenport, IA 52801 | ||
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(563) 383-2100 |
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www.lee.net |
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NEWS RELEASE
Lee Enterprises reports first quarter earnings
DAVENPORT, Iowa (Jan. 22, 2007) — Lee Enterprises, Incorporated (NYSE: LEE), reported today that diluted earnings per common share from continuing operations were 58 cents for its first fiscal quarter ended Dec. 31, 2006.
The results compare with 47 cents a year ago, when early retirement and transition costs related to the acquisition of Pulitzer Inc. reduced earnings 12 cents.
Including discontinued operations, net income for the quarter totaled $26.7 million, or 58 cents per diluted common share, compared with 50 cents a year ago.
“Our online advertising revenue for the quarter grew at a strong pace of 53 percent over a year ago,” said Mary Junck, chairman and chief executive officer. “This rapid online growth, coupled with a solid performance in print, helped us deliver another good quarter and exceed earnings expectations. In the coming quarter, we plan to lay the foundation for more online growth with the co-branded rollout of our local employment listings into Yahoo’s HotJobs platform. Also, in February we’re kicking off a major internal initiative, called Lee Online University, to speed more interactive innovation in news and sales.”
Total revenue for the quarter increased 2.8 percent from a year ago to $300.5 million. Total advertising revenue increased 2.3 percent, with online advertising up 53.0 percent, retail advertising up 1.0 percent, classified down 0.4 percent, national up 1.4 percent and niche advertising up 5.4 percent. Circulation revenue increased 1.3 percent.
On a same property (1) basis, which excludes the impact of acquisitions and divestitures made in the current or prior year, total revenue for the quarter increased 2.5 percent from a year ago. Total advertising revenue increased 2.3 percent, with online advertising up 53.0 percent, retail up 1.0 percent, classified down 0.4 percent, national up 1.4 percent and niche advertising up 5.4 percent. Circulation revenue increased 1.3 percent.
Total operating expenses, excluding depreciation and amortization, for the quarter decreased 0.3 percent on a reported basis, reflecting cycling of unusual transition and early retirement costs a year ago related to Pulitzer. Excluding the unusual costs and depreciation and amortization, total operating expenses increased 3.8 percent. Compensation expense increased 1.9 percent. Newsprint and ink expense increased 3.1 percent, and other cash operating expenses increased 7.0 percent.
Same property operating expenses, excluding the unusual costs, depreciation and amortization, increased 2.6 percent over a year ago, with compensation up 0.2 percent, newsprint and ink up 4.3 percent, and other operating expenses up 5.7 percent.
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Operating cash flow (2) increased 12.5 percent to $80.9 million. Operating income, which includes equity in earnings of associated companies and depreciation and amortization, increased 13.5 percent to $64.0 million. Non-operating expenses, which include financial expense related to the acquisition of Pulitzer, decreased 3.3 percent to $21.9 million. Income from continuing operations before income taxes increased 24.9 percent to $42.1 million. Income from continuing operations also increased 24.7 percent, to $26.7 million. Net income also totaled $26.7 million, an increase of 17.1 percent over a year ago.
Day exchanges in the quarter affected results in varying degrees. The Lee newspapers owned before the Pulitzer acquisition, which account for about 60 percent of revenue, recorded 14 Sundays in the 2006 quarter, compared with 13 a year ago. Sundays normally generate more advertising revenue than any other day of the week. In December 2006, however, the last two Sundays preceded holidays, which tends to diminish retail and classified advertising. The former Pulitzer newspapers use period accounting and were not affected by day exchanges, with the exception of Tucson. Many public publishing companies using calendar year period accounting will recognize a 53rd week of the 2006 year in December 2006. At Lee’s 50 percent partnership in Tucson, which uses calendar year period accounting, the additional week was recognized in December 2006. Tucson results are reported as equity in earnings of associated companies. For Lee’s September 2007 fiscal year, the remaining former Pulitzer enterprises will record this week in September 2007.
UNUSUAL COSTS
The following table summarizes the impact on income from continuing operations and earnings per diluted common share from unusual costs related to the Pulitzer acquisition:
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Three Months Ended Dec. 31 | |||||||||||||||||
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(Thousands, Except EPS Data) |
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2006 |
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2005 | ||||||||||||||||
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Amount |
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Per Share |
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Amount |
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Per Share | |||||||||||
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Income from continuing operations, as reported |
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$ |
26,689 |
$ |
0.58 |
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$ |
21,394 |
$ |
0.47 | ||||||||||||
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Adjustments to income from continuing operations: |
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Early retirement program |
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- |
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8,373 |
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Transition costs |
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- |
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352 |
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8,725 |
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Income tax benefits of |
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adjustments, net |
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- |
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(3,133) |
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5,592 |
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0.12 | ||||||||||
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Income from continuing operations, as adjusted |
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$ |
26,689 |
$ |
0.58 |
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$ |
26,986 |
$ |
0.59 | ||||||||||||
Consolidated statements of income, selected balance sheet items and selected statistics follow.
Lee Enterprises is a premier provider of local news, information and advertising in primarily midsize markets, with 51 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 more than three million users, and Lee’s weekly publications are distributed to more than 4.5 million households. Lee’s 55 newspaper markets include St. Louis, Mo.; Lincoln, Neb.; Madison, Wis.; Davenport, Iowa; Billings, Mont.; Bloomington, Ill.; Tucson, Ariz.; and Napa, Calif. 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 | ||||||||
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CONSOLIDATED STATEMENTS OF INCOME | ||||||||
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(Unaudited)
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Three Months Ended Dec. 31 | ||||||
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(Thousands, Except EPS Data) |
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2006 |
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2005 |
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% |
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Advertising revenue: |
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Retail |
$ |
132,643 |
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$ |
131,346 |
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1.0 |
% |
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National |
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17,902 |
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17,659 |
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1.4 |
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Classified: |
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Daily newspapers: |
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Employment |
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19,248 |
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20,091 |
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(4.2 |
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Automotive |
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14,038 |
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14,212 |
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(1.2 |
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Real estate |
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14,891 |
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15,387 |
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(3.2 |
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All other |
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9,502 |
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9,177 |
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3.5 |
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Other publications |
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11,424 |
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10,479 |
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9.0 |
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Total classified |
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69,103 |
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69,346 |
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(0.4 |
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Online |
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10,913 |
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7,134 |
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53.0 |
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Niche publications |
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3,599 |
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3,414 |
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5.4 |
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Total advertising revenue |
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234,160 |
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228,899 |
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2.3 |
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Circulation |
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52,271 |
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51,587 |
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1.3 |
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Commercial printing |
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4,210 |
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4,320 |
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(2.5 |
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Online services and other |
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9,849 |
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7,439 |
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32.4 |
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Total operating revenue |
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300,490 |
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292,245 |
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2.8 |
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Operating expenses: |
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Compensation |
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113,012 |
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110,923 |
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1.9 |
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Newsprint and ink |
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31,101 |
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30,160 |
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3.1 |
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Other operating expenses |
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75,446 |
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70,484 |
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7.0 |
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Transition costs |
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- |
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352 |
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NM |
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Early retirement program |
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- |
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8,373 |
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NM |
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Operating expenses, excluding |
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depreciation and amortization |
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219,559 |
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220,292 |
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(0.3 |
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Operating cash flow(2) |
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80,931 |
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71,953 |
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12.5 |
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Depreciation |
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8,347 |
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8,034 |
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3.9 |
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Amortization |
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15,081 |
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13,847 |
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8.9 |
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Equity in earnings of associated |
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companies: |
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Tucson partnership |
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3,912 |
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4,138 |
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(5.5 |
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Madison Newspapers |
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2,593 |
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2,165 |
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19.8 |
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Operating income |
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64,008 |
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56,375 |
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13.5 |
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Non-operating income (expense): |
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Financial income |
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1,509 |
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1,356 |
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11.3 |
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Financial expense |
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(23,435 |
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(24,037 |
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(2.5 |
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(21,926 |
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(22,681 |
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(3.3 |
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Income from continuing operations |
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before income taxes |
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42,082 |
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33,694 |
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24.9 |
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Income tax expense |
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14,889 |
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12,041 |
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23.7 |
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Minority interest |
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504 |
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259 |
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94.6 |
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Income from continuing operations |
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26,689 |
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21,394 |
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24.7 |
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Discontinued operations |
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(38 |
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1,370 |
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NM |
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Net income |
$ |
26,651 |
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$ |
22,764 |
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17.1 |
% |
3
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Earnings per common share: |
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Basic: |
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Continuing operations |
$ |
0.59 |
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$ |
0.47 |
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25.5 |
% | ||||||||||
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Discontinued operations |
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- |
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0.03 |
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NM |
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$ |
0.58 |
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$ |
0.50 |
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16.0 |
% | ||||||||||
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Diluted: |
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Continuing operations |
$ |
0.58 |
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$ |
0.47 |
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23.4 |
% | ||||||||||
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Discontinued operations |
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- |
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0.03 |
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NM |
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$ |
0.58 |
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$ |
0.50 |
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16.0 |
% | ||||||||||
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Average common shares: |
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Basic |
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45,573 |
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45,260 |
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Diluted |
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45,637 |
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45,400 |
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SELECTED BALANCE SHEET INFORMATION | |||||||||
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(Unaudited) | |||||||||
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Dec. 31 | |||
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(Thousands) |
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2006 |
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2005 | ||
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Cash |
$ |
10,743 |
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$ |
11,379 | ||||
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Restricted cash and investments |
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99,810 |
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84,810 | ||||
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Debt (principal amount) |
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1,487,000 |
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1,660,000 | ||||
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SELECTED STATISTICAL INFORMATION |
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(Unaudited) |
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Three Months Ended Dec. 31 |
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(Dollars in thousands) |
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2006 |
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2005 |
% |
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Capital expenditures: |
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$ |
5,701 |
$ |
5,039 |
13.1 |
% |
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Same property newsprint |
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volume (tonnes) |
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44,363 |
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47,287 |
(6.2) |
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Same property full-time |
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equivalent employees |
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8,213 |
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8,333 |
(1.4) |
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NOTES: |
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(1) |
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. | ||||
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(2) |
Operating cash flow, which is defined as operating income before depreciation, amortization and equity in earnings 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. | ||||
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(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. | ||||
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(4) |
The Company disclaims responsibility for updating information beyond the release date.
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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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