Lee Enterprises Swings to Fiscal Q2 Profit As Revenue Decreases Moderates

By: Mark Fitzgerald

Davenport, Iowa-based Lee Enterprises reported Tuesday it swung to a profit in the second quarter of its fiscal year, helped by swelling cash flow, moderating declines in advertising and easier comparables with the year-ago period.

Lee, publisher of 49 dailies including the St. Louis Post-Dispatch, said its earnings per diluted share were 7 cents compared with a loss of $1.16 per share a year ago. The Q2 2009 results included non-cash impairment charges and a non-recurring debt refinancing charge.

Total revenue was down 6.6% to $185.7 million, which represented another easing of the revenue slump. Revenue was down 13.8% in Lee’s first fiscal quarter and averaged 20% in the three quarters before that.

“Lee posted another good quarter, with steadily improving revenue trends, a 14% jump in online advertising sales and continued earnings growth,” Chairman/CEO Mary Junck said in a statement. “Aggressive new sales initiatives have driven nearly 4,700 new online accounts since November and are gaining momentum. The gradually brightening business environment is also helping, and earlier Easter advertising caused March to be easily the best month of the quarter. We expect our revenue performance to continue improving in a still-rough economy, and we also remain focused on careful, long-term cost control.”

Combined print and online advertising revenue decreased 7.7% to $130.6 million. Retail fell 6.4%, national was also down 6.4%, and classified dropped10.2%.

Inside classified, combined print and online employment advertising revenue was down 16.5%, automotive decreased 11.9%, and real estate was off 17.7%.

Online ad revenue increased 14.1% to $11.3 million, and now represents 8.7% of total advertising revenue., Lee said

Online was up on a jump in retail advertising of 21.2%, and tick up in classified of 3.9%. Unique visitors at Lee Websites increased 13.2% in the quarter to 47.4 million.

Lee cut operating expenses 10.4% in the quarter compared to a year ago. Compensation costs fell 5.9% as the number of full-time equivalent employees dropped 7.7%. Newsprint and ink expense plunged 36.8% on reduced cost and a reduction in use of 12.7%.

Lee said its operating income margin for the quarter was 14.4%.

Lee reduced its debt by $27.1 million in the quarter and by 83.2 million in the last 12 months.

CFO Carl Schmidt said Lee continues to meet all its financial covenants and expects to pay debt primarily with cash flow. Liquidity is unchanged from a year ago at $92.5 million, with debt repayments of $72 million to $76.5 million coming due in the next four quarters.


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