2013-01-22 07:05:00 -
DAVENPORT, Iowa (January 22, 2013) -- Lee Enterprises, Incorporated (NYSE: LEE),
a major provider of local news, information and advertising in 51 markets, today
reported preliminary((1)) earnings of 28 cents per diluted common share for its
first fiscal quarter ended December 30, 2012, compared with 32 cents a year ago.
Excluding unusual matters, adjusted earnings per diluted common share((2))
totaled 20 cents, compared with earnings of 37 cents a year ago, primarily due
to higher interest cost in the current year quarter.
"Lee continues to post strong cash flow and reduce debt ahead of schedule as we
build on our ability to resume revenue growth," said Mary Junck, chairman and
chief executive officer. She also noted:
* Mobile advertising revenue continues to grow at a rapid pace, up 147%
in the
quarter to $1.3 million.
* All Lee markets plan to introduce the Google DoubleClick advertising
platform in the March quarter, further expanding effectiveness for digital
advertisers.
* Paid content initiatives have been introduced in nearly all markets and are
receiving good reception. Circulation revenue, which includes digital
subscriptions, increased 3.9% in the quarter.
* Lee reduced cash costs 3.7% in the quarter compared with a year ago, a
result of improved efficiencies through an ongoing transformation of
business models. Lee now expects operating expenses, excluding depreciation,
amortization and unusual matters, to be down 3.5% to 4.5% for the year,
which is improved from previous guidance.
* Debt payments totaled $29.0 million in the quarter, reducing the balance to
$916.9 million, and keeping Lee more than a year ahead of projections in
reducing debt.
FIRST QUARTER OPERATING RESULTS((3))
Operating revenue for the 13 weeks ended December 30, 2012, totaled $185.5
million, a decrease of 3.4% compared with a year ago. Combined print and digital
advertising revenue decreased 6.3% to $128.7 million, with retail advertising
down 3.8%, classified down 7.7% and national down 24.2%. Combined print and
digital classified employment revenue decreased 8.9%, while automotive decreased
6.9%, real estate decreased 11.5% and other classified decreased 5.9%. Digital
advertising revenue on a stand-alone basis increased 4.8% to $16.3 million.
Print advertising revenue on a stand-alone basis decreased 7.7%. Circulation
revenue increased 3.9%.
Operating expenses, excluding depreciation, amortization and unusual matters,
decreased 4.0%. Compensation decreased 4.9%, with the average number of full-
time equivalent employees down 8.1%. Newsprint and ink expense decreased 13.1%,
a result of a reduction in newsprint volume of 12.6%. Other operating expenses
decreased 0.6%.
Operating cash flow((4)) decreased 2.8% from a year ago to $51.5 million.
Operating cash flow margin increased to 27.8% from 27.6% a year ago. Including
equity in earnings of associated companies, depreciation and amortization, as
well as unusual matters in both years, operating income increased 1.2% to $39.3
million in the current year quarter, compared with $38.8 million a year ago.
Non-operating expenses increased 11.6% due to higher interest rates on debt,
partially offset by a $6.9 million gain on sale of an investment. As previously
reported, the Company completed the sale of the North County Times in the
quarter, resulting in a gain of $1.2 million after income taxes, which is
included in discontinued operations. Income attributable to Lee Enterprises,
Incorporated for the quarter totaled $14.6 million, the same as a year ago.
ADJUSTED EARNINGS AND EPS
The following table summarizes the impact from unusual matters on income
attributable to Lee Enterprises, Incorporated and income per diluted common
share. Per share amounts may not add due to rounding.
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13 Weeks Ended
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December 30 December 25
2012 2011
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(Thousands of Dollars, Except
Per Share Data) Amount Per Share Amount Per Share
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Income attributable to Lee
Enterprises, Incorporated, as
reported 14,566 0.28 14,554 0.32
Adjustments:
Debt financing and
reorganization costs 47 3,265
Gain on sale of investment (6,909 ) -
Other, net 2,424 155
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(4,438 ) 3,420
Income tax effect of
adjustments, net, and other
unusual tax matters 1,553 (1,193 )
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(2,885 ) (0.06 ) 2,227 0.05
Unusual matters related to
discontinued operations (1,167 ) (0.02 ) 25 -
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Income attributable to Lee
Enterprises, Incorporated, as
adjusted 10,514 0.20 16,806 0.37
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DEBT AND FREE CASH FLOW((5))
Debt was reduced $29.0 million in the quarter. Free cash flow from continuing
operations((3)) totaled $30.9 million for the quarter, compared with $28.7
million a year ago. An increase in interest expense in the current year quarter
adversely impacted free cash flow, while debt financing and reorganization costs
reduced prior year results. Absent a significant increase in LIBOR, Lee expects
financial expense to begin to decline in the June 2013 quarter due to lower debt
balances and cycling of interest rate changes. Free cash flow in the 53 weeks
ended December 2012 totaled $56.5 million, net of $22.2 million of debt
financing and reorganization costs paid. Liquidity at the end of the quarter
totaled $50.2 million, compared to required debt payments of $14.9 million in
the next 12 months.
NYSE LISTING STANDARDS
The New York Stock Exchange has returned Lee to full compliance with its
continued listing standards. In the notification letter, the NYSE noted Lee's
"consistent positive performance with respect to the original business plan
submission and the achievement of compliance with the NYSE's minimum market
capitalization and stockholders' equity requirement." Lee returned to compliance
with the NYSE minimum price standard in February 2012 after completing its debt
refinancing.
SALE OF THE GARDEN ISLAND
Lee has entered into an agreement to sell The Garden Island newspaper and
digital operations based in Lihue, HI to Oahu Publications, Inc. for $2 million.
The transaction, which is subject to customary closing conditions, is expected
to be completed in February.
The Garden Island serves the island of Kauai with daily and Sunday editions,
along with web, mobile and tablet news and advertising at www.kauaiworld.com.
For the 53 weeks ended December 30, 2012 The Garden Island had revenue of $3.4
million and operating cash flow, excluding unusual matters, of $0.1
million. Sales proceeds will be used to reduce debt.
ABOUT LEE
Lee Enterprises is a leading provider of local news and information, and a major
platform for advertising, in its markets, with 47 daily newspapers and a joint
interest in four others, rapidly growing digital products and nearly 300
specialty publications in 23 states. Lee's newspapers have circulation of 1.2
million daily and 1.4 million Sunday, reaching nearly four million readers in
print alone. Lee's websites and mobile and tablet products attracted 21.5
million unique visitors in December 2012. Lee's markets include St. Louis, MO;
Lincoln, NE; Madison, WI; Davenport, IA; Billings, MT; Bloomington, IL; and
Tucson, AZ. Lee Common Stock is traded on the New York Stock Exchange under the
symbol LEE. For more information about Lee, please visit www.lee.net.
FORWARD-LOOKING STATEMENTS -- The Private Securities Litigation Reform Act of
1995 provides a "safe harbor" for forward-looking statements. This news release
contains information that may be deemed forward-looking that is based largely on
our 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, which in some
instances are beyond our control, are our ability to generate cash flows and
maintain liquidity sufficient to service our debt, comply with or obtain
amendments or waivers of the financial covenants contained in our credit
facilities, if necessary, and to refinance our debt as it comes due. Other risks
and uncertainties include the impact and duration of continuing adverse economic
conditions, changes in advertising demand, potential changes in newsprint and
other commodity prices, energy costs, interest rates, labor costs, legislative
and regulatory rulings, difficulties in achieving planned expense reductions,
maintaining employee and customer relationships, increased capital costs,
maintaining our listing status on the NYSE, competition and other risks detailed
from time to time in our publicly filed documents. Any statements that are not
statements of historical fact (including statements containing the words "may",
"will", "would", "could", "believe",
"expect", "anticipate", "intend", "plan",
"project", "consider" and similar expressions) generally should be
considered
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.
We do not undertake to publicly update or revise our forward-looking statements.
Contact:
dan.hayes@lee.net, (563) 383-2100
LEE ENTERPRISES, INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
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13 Weeks Ended
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(Thousands of Dollars and Shares,
Except Per December 30 December 25
Share Data) 2012 2011 Percent Change
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Advertising revenue:
Retail 84,923 88,261 (3.8 )
Classified:
Employment 7,717 8,472 (8.9 )
Automotive 9,320 10,013 (6.9 )
Real estate 4,680 5,290 (11.5 )
All other 11,715 12,445 (5.9 )
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Total classified 33,432 36,220 (7.7 )
National 7,674 10,126 (24.2 )
Niche publications 2,661 2,715 (2.0 )
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Total advertising revenue 128,690 137,322 (6.3 )
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Circulation 46,226 44,506 3.9
Commercial printing 3,305 3,064 7.9
Other 7,238 7,150 1.2
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Total operating revenue 185,459 192,042 (3.4 )
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Operating expenses:
Compensation 66,435 69,839 (4.9 )
Newsprint and ink 12,247 14,086 (13.1 )
Other operating expenses 54,468 54,821 (0.6 )
Workforce adjustments 803 298 NM
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133,953 139,044 (3.7 )
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Operating cash flow 51,506 52,998 (2.8 )
Depreciation 5,526 6,041 (8.5 )
Amortization 9,704 10,924 (11.2 )
Equity in earnings of associated
companies 3,045 2,812 8.3
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Operating income 39,321 38,845 1.2
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CONSOLIDATED STATEMENTS OF
INCOME, continued
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13 Weeks Ended
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(Thousands of Dollars and Shares, December 30 December 25
Except Per Share Data) 2012 2011 Percent Change
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Non-operating income (expense):
Financial income 80 55 45.5
Financial expense (23,466 ) (12,752 ) 84.0
Debt financing costs (47 ) (2,024 ) (97.7 )
Other, net 7,007 - NM
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(16,426 ) (14,721 ) 11.6
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Income before reorganization
costs and income taxes 22,895 24,124 (5.1 )
Reorganization costs - 1,241 NM
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Income before income taxes 22,895 22,883 0.1
Income tax expense 9,379 8,477 10.6
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Income from continuing operations 13,516 14,406 (6.2 )
Discontinued operations, net of
income taxes 1,167 218 NM
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Net income 14,683 14,624 0.4
Net income attributable to non-
controlling interests (117 ) (70 ) NM
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Income attributable to Lee
Enterprises, Incorporated 14,566 14,554 0.1
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Earnings per common share:
Basic:
Continuing operations 0.26 0.32 (18.8 )
Discontinued operations 0.02 - NM
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0.28 0.32 (12.5 )
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Diluted:
Continuing operations 0.26 0.32 (18.8 )
Discontinued operations 0.02 - NM
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0.28 0.32 (12.5 )
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Average common shares:
Basic 51,794 44,958
Diluted 51,854 44,958
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FREE CASH FLOW FROM CONTINUING OPERATIONS
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13 Weeks Ended 53 Weeks Ended
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December
(Thousands of Dollars) December 30 2012 December 25 2011 30 2012
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Operating income 39,321 38,845 103,296
Depreciation and
amortization 15,411 17,145 64,906
Impairment of goodwill
and other assets - - 1,388
Stock compensation 366 146 1,287
Financial income 80 55 261
Cash interest expense (21,846 ) (15,326 ) (84,808 )
Debt financing and
reorganization costs
paid - (10,136 ) (22,164 )
Cash income tax
benefit (paid) (240 ) (132 ) 1,032
Non-controlling
interests (117 ) (70 ) (446 )
Capital expenditures (2,073 ) (1,875 ) (8,238 )
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Total 30,902 28,652 56,514
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REVENUE BY REGION
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13 Weeks Ended
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(Thousands of Dollars) December 30 2012 December 25 2011 Percent Change
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Midwest 116,734 122,043 (4.4 )
Mountain West 36,108 37,436 (3.5 )
West 13,112 13,748 (4.6 )
East/Other 19,505 18,815 3.7
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Total 185,459 192,042 (3.4 )
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SELECTED BALANCE SHEET INFORMATION
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(Thousands of Dollars) December 30 2012 December 25 2011
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Cash 20,284 31,428
Debt (Principal Amount) 916,850 983,615
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SELECTED STATISTICAL INFORMATION
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13 Weeks Ended
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December 30 2012 December 25 2011 Percent Change
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Capital expenditures
(Thousands of Dollars) 2,073 1,875 10.6
Newsprint volume
(Tonnes) 17,788 20,357 (12.6 )
Average full-time
equivalent employees 4,974 5,415 (8.1 )
Shares outstanding
(Thousands of Shares) 52,296 44,958 16.3
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NOTES
(1) This earnings release is a preliminary report of results for the periods
included. The reader should refer to the Company's Quarterly Reports on
Form 10-Q and Annual Reports on Form 10-K for actual information.
(2) Adjusted income and adjusted earnings per common share, which are defined
as income attributable to Lee Enterprises, Incorporated and earnings per
common share adjusted to exclude both unusual matters and those of a
substantially non-recurring nature, are non-GAAP (Generally Accepted
Accounting Principles) financial measures. Reconciliations of adjusted
income and adjusted earnings per common share to income attributable to
Lee Enterprises, Incorporated, and earnings 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.
(3) Certain amounts as previously reported have been reclassified to conform
with the current period presentation. The prior period has been adjusted
for comparative purposes, and the reclassifications have no impact on
earnings.
Results of North County Times operations have been reclassified as
discontinued operations for all periods presented. Results of The Garden
Island have not been reclassified as discontinued operations.
(4) Operating cash flow, which is defined as operating income before
depreciation, amortization, impairment charges, curtailment gains and
equity in earnings of associated companies, and operating cash flow margin
(operating cash flow divided by operating revenue) are non-GAAP financial
measures. See (2) above. Reconciliations of operating cash flow to
operating income, the most directly comparable GAAP measure, are included
in a table accompanying this release.
(5) Free cash flow from continuing operations, which is defined as operating
income, plus depreciation and amortization, impairment charges, stock
compensation, financial income and cash income tax benefit, minus
curtailment gains, financial expense (exclusive of non-cash amortization
and accretion), cash income taxes, capital expenditures and minority
interest, is a non-GAAP financial measure. See (2) above. Reconciliations
of free cash flow from continuing operations to operating income (loss),
the most directly comparable GAAP measure, are included in a table
accompanying this release. Changes in working capital, asset sales and
discontinued operations are excluded.
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Lee Enterprises Inc. via Thomson Reuters ONE
[HUG#1672025]
