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):  April 20, 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 April 20, 2006, Lee Enterprises, Incorporated (the "Company") reported its results for the second fiscal quarter ended March 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.

 

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.

 

Item 9.01 Financial Statements and Exhibits.

 

(c)

Exhibits

 

 99.1

Earnings Release – Second Quarter Ended March 31, 2006

 

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: April 24, 2006

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 – Second Quarter Ended March 31, 2006

 

 

 

 

 

3

 


 

 

EXHIBIT 99.1 - News Release

 

 

 

 201 N. Harrison St.

 

Davenport, IA 52801-1939

www.lee.net

 

 

NEWS RELEASE

 

Lee Enterprises reports earnings for second fiscal quarter

 

DAVENPORT, Iowa (April 20, 2006) — Lee Enterprises, Incorporated (NYSE: LEE), reported today that diluted earnings per common share from continuing operations were 32 cents for its second fiscal quarter ended March 31, 2006, compared with 40 cents a year ago, reflecting additional financial expense and amortization of intangible assets from the acquisition of Pulitzer Inc. in June 2005.

 

Early retirement and transition costs related to the acquisition of Pulitzer reduced diluted earnings per common share from continuing operations by 2 cents. Earnings in both the current and prior year reflect the impact of stock compensation expense, which Lee has been recognizing since October 2002.

 

Mary Junck, chairman and chief executive officer, said: “Strong growth in online, employment and niche advertising revenue helped offset slower spending by automotive, national and department store customers. As a result of continued strong cash flow, we were able to reduce debt in the quarter by $54.0 million and continue delivering on our successful acquisition of Pulitzer.”

 

On a reported basis, which includes the addition of Pulitzer in the current year, advertising revenue for the quarter increased 68.6 percent from a year ago to $210.9 million, with growth of 57.3 percent in retail, 72.1 percent in classified and 147.7 percent in national. Online advertising revenue increased 146.1 percent, and niche advertising rose 39.7 percent. Circulation revenue increased 60.7 percent. Total operating revenue increased 63.5 percent to $275.8 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 1.7 percent from a year ago, with retail up 0.3 percent, classified up 1.6 percent, national down 8.8 percent and online advertising revenue up 38.2 percent. Circulation revenue decreased 1.9 percent, and total operating revenue increased 0.8 percent.

 

Operating expenses, on a reported basis, excluding depreciation and amortization, increased 68.2 percent to $213.5 million for the quarter, also reflecting the acquisition of Pulitzer. Compensation expense increased 60.0 percent, newsprint and ink increased 85.7 percent, and other expenses increased 73.3 percent. Transition and early retirement costs related to the acquisition of Pulitzer added $1.1 million.

 

Same property operating expenses, excluding depreciation and amortization, increased 3.2 percent in the quarter, with compensation up 1.4 percent, newsprint and ink up 8.5 percent, and other operating expenses up 4.1 percent.

 

 

 


 

 

Operating cash flow (2) increased 49.1 percent to $62.3 million, including acquisitions and related costs. Operating income, which includes equity in earnings of associated companies and depreciation and amortization, increased 43.0 percent to $45.0 million. Non-operating expenses, which include financial expense related to Pulitzer, totaled $22.1 million, compared with $2.6 million a year ago. As a result, income from continuing operations before income taxes decreased 20.5 percent to $22.9 million. Net income decreased 20.1 percent to $14.4 million.

 

YEAR TO DATE

 

For the six months ended March 31, diluted earnings per common share from continuing operations total 82 cents, compared with $1.00 a year ago. Excluding 14 cents of early retirement and transition costs related to the acquisition of Pulitzer, diluted earnings per common share from continuing operations total 96 cents.

 

On a reported basis, including acquisitions, advertising revenue for the six months increased 69.1 percent to $448.0 million, and total operating revenue increased 64.0 percent to $578.4 million. Operating expenses, excluding depreciation and amortization, rose 72.1 percent to $441.5 million. On a same property basis, advertising revenue increased 1.5 percent, total operating revenue increased 0.6 percent, and operating expenses, excluding depreciation and amortization, increased 3.1 percent.

 

Including acquisitions, operating cash flow increased 42.3 percent, to $136.9 million. Operating income rose 34.6 percent to $103.6 million. Income from continuing operations before income taxes decreased 18.0 percent to $58.9 million. Net income decreased 17.5 percent to $37.2 million.

 

PULITZER TRANSITION COSTS

 

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 March 31

Six Months Ended March 31

Diluted EPS, continuing operations

$

0.32

$

0.82

 

Early retirement program and other

 

 

 

0.02

 

0.14

Pulitzer transition costs

Diluted EPS, excluding costs

$

0.33*

$

0.96

related to Pulitzer acquisition

*Amounts do not add due to rounding

 

Consolidated statements of income and selected balance sheet tables follow. Expanded tables with same property comparisons, as well as revenue statistics for March, 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. Lee’s newspaper online sites reach more than two million users, and Lee’s 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.

 

2

 


 

 

 

LEE ENTERPRISES, INCORPORATED

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

 

March 31

 

March 31

 

(Thousands, Except EPS Data)

2006    

2005    

%        

2006    

2005    

%       

Operating revenue:

 

 

 

 

 

 

 

 

 

Advertising revenue:

 

 

 

 

 

 

 

 

 

Retail

 $107,940 

 $ 68,642 

 57.3 

%

 $243,470 

 $152,104 

 60.1 

% 

National

 14,138 

 5,708 

 147.7 

 

 31,812 

 12,257 

 159.5 

 

Classified:

 

 

 

 

 

 

 

 

 

Daily newspapers:

 

 

 

 

 

 

 

 

 

Employment

 22,749 

 12,302 

 84.9 

 

 42,883 

 23,084 

 85.8 

 

Automotive

 14,577 

 9,233 

 57.9 

 

 28,815 

 19,096 

 50.9 

 

Real Estate

 14,965 

 8,754 

 71.0 

 

 30,304 

 17,975 

 68.6 

 

All other

 9,225 

 5,445 

 69.4 

 

 18,454 

 11,148 

 65.5 

 

Other publications

 14,259 

 8,292 

 72.0 

 

 28,232 

 16,728 

 68.8 

 

Total classified

 75,775 

 44,026 

 72.1 

 

 148,688 

 88,031 

 68.9 

 

Online

 8,498 

 3,453 

 146.1 

 

 15,969 

 6,577 

 142.8 

 

Niche publications

 4,567 

 3,268 

 39.7 

 

 8,054 

 5,934 

 35.7 

 

Total advertising revenue

 210,918 

 125,097 

 68.6 

 

 447,993 

 264,903 

 69.1 

 

Circulation

 51,121 

 31,807 

 60.7 

 

 102,941 

 64,258 

 60.2 

 

Commercial printing

 5,643 

 5,127 

 10.1 

 

 11,652 

 10,507 

 10.9 

 

Online services & other

 8,087 

 6,664 

 21.4 

 

 15,822 

 13,111 

 20.7 

 

Total operating revenue

 275,769 

 168,695 

 63.5 

 

 578,408 

 352,779 

 64.0 

 

Operating expenses:

 

 

 

 

 

 

 

 

Compensation

 113,553 

 70,954 

 60.0 

 

 228,624 

 142,683 

 60.2 

 

Newsprint and ink

 29,830 

 16,066 

 85.7 

 

 61,392 

 32,893 

 86.6 

 

Other operating expenses

 69,012 

 39,813 

 73.3 

 

 141,707 

 80,922 

 75.1 

 

Transition costs

 801 

 93 

 NM 

 

 1,153 

 103 

 NM 

 

Early retirement program

 281 

- 

 NM 

 

 8,654 

 - 

 NM 

 

Operating expenses,

 

 

 

 

 

 

 

 

excluding depreciation

 

 

 

 

 

 

 

 

and amortization

 213,477 

 126,926 

 68.2 

 

 441,530 

 256,601 

 72.1 

 

Operating cash flow(2)

 62,292 

 41,769 

 49.1 

 

 136,878 

 96,178 

 42.3 

 

Depreciation

 8,265 

 5,165 

 60.0 

 

 16,596 

 10,110 

 64.2 

 

Amortization

 14,030 

 6,409 

 118.9 

 

 27,984 

 12,970 

 115.8 

 

Equity in earnings of

 

 

 

 

 

 

 

 

associated companies:

 

 

 

 

 

 

 

 

Tucson partnership

 3,550 

 - 

 NM 

 

 7,688 

 - 

 NM 

 

Madison Newspapers

 1,467 

 1,635 

 (10.3)

 

 3,632 

 4,261 

 (14.8)

 

Other

 - 

 (348)

 NM 

 

 - 

 (381)

 NM 

 

Operating income

 45,014 

 31,482 

 43.0 

 

 103,618 

 76,978 

 34.6 

 

 

 

3

 


 

 

 

Non-operating income:

 

 

 

 

 

 

 

 

Financial income

 1,610 

 189 

 751.9 

 

 2,966 

 467 

 535.1 

 

Financial expense

 (23,694)

 (2,747)

 762.5 

 

 (47,731)

 (5,586)

 754.5 

 

Other, net

 - 

 (65)

 NM 

 

- 

 (65)

 NM 

 

 

 

 

 (22,084)

 (2,623)

 741.9 

 

 (44,765)

 (5,184)

763.5 

 

Income before

 

 

 

 

 

 

 

 

income taxes

 22,930 

 28,859 

 (20.5)

 

 58,853 

 71,794 

 (18.0)

 

Income tax expense

 8,231 

 10,795 

 (23.8)

 

 21,131 

 26,719 

 (20.9)

 

Minority interest

 264 

- 

 NM 

 

 523 

- 

 NM 

 

Net income

 $  14,435 

 $  18,064 

 (20.1)

% 

 $  37,199 

 $  45,075 

 (17.5)

% 

Earnings per common share:

 

 

 

 

 

 

 

 

Basic

 $  0.32 

 $  0.40 

 (20.0)

% 

 $  0.82 

 $  1.00 

 (18.0)

% 

Diluted

 $  0.32 

 $  0.40 

 (20.0)

% 

 $  0.82 

 $  1.00 

 (18.0)

% 

Average common shares:

 

 

 

 

 

 

 

 

Basic

 45,390 

 45,086 

 

 

 45,325 

 45,057 

 

 

Diluted

 45,526 

 45,315 

 

 

 45,462 

 45,279 

 

 

 

 

 

 

 

 

 

 

 

 

 

SELECTED BALANCE SHEET INFORMATION

 

 

 

 

 

 

 

March 31

(Thousands)

 

 

 

 

 

2006     

 

2005     

Cash

 

 

 

$

7,918

$

1,168

Restricted cash and investments

 

 

 

88,560

 

-

Debt (principal amount)

 

 

 

1,606,000

 

165,000

 

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

 

 

4