Lee Enterprises Reports Results for Second Fiscal Quarter

DAVENPORT, Iowa (April 17, 2012) -- Lee Enterprises, Incorporated (NYSE: LEE) reported today for its second fiscal quarter ended March 25, 2012, a loss of 54 cents per diluted common share, compared with a loss of 3 cents a year ago. Excluding refinancing and reorganization costs along with other unusual matters, adjusted loss per diluted common share⁽¹⁾ was 3 cents, compared with a loss of 2 cents a year ago.  Operating cash flow⁽²⁾ increased 9.1% to $32.1 million.

Mary Junck, chairman and chief executive officer said: "Year over year revenue trends improved modestly in the March quarter, in line with previous guidance.  Digital advertising revenue again exhibited strong growth, up nearly 10%, the ninth consecutive quarter of growth in this category.  At the same time, we continue to transform our business, which allowed us to reduce cash costs 6.1% in the March quarter, exceeding the high end of our forecast.  As a result, both operating cash flow and operating income increased." 

Junck added: "We continue moving rapidly forward on both digital and print initiatives.  Just in the last few weeks, we agreed to participate in a venture to bring advertising preprints into the digital marketplace.  We also rolled out a major upgrade of mobile applications, improving the delivery of news and advertising in all 52 of our daily newspaper markets.  And our pay for digital content initiative is on track to have most enterprises operating paid sites by the end of this year, with 10 more launched this summer.  We expect that fast pace to continue for some time as our business evolves in the digital age."

SECOND QUARTER OPERATING RESULTS

Operating revenue for the quarter totaled $172.3 million, a decrease of 3.6% compared with a year ago. Combined print and digital advertising revenue decreased 5.3% to $117.5 million, with retail advertising down 3.5%, classified down 7.1% and national down 9.7%. Combined print and digital classified employment revenue decreased 0.3%, while automotive decreased 3.9%, real estate decreased 12.2% and other classified decreased 11.5%. Digital advertising revenue on a stand-alone basis increased 9.9% to $15.7 million. Print revenue on a stand-alone basis decreased 7.3%. Circulation revenue increased 0.1%.

Lee's websites and mobile and tablet products attracted 25.9 million unique visitors in the month of March 2012, an increase of 3.7% from a year ago. Mobile page views in March increased 174% to 43.9 million.

Operating expenses, excluding depreciation, amortization and unusual matters, decreased 6.2%. Compensation decreased 5.2%, with the average number of full-time equivalent employees down 7.5%. Newsprint and ink expense decreased 11.9%, a result of a reduction in newsprint volume of 9.5%. Other operating expenses decreased 6.0%. Excluding a 53rd week of business activity, 2012 fiscal year operating expenses, excluding depreciation, amortization and unusual matters are expected to decrease 3.5-4.5%⁽³⁾ from the comparative 2011 level, in line with previous guidance.

Operating cash flow increased 9.1% from a year ago to $32.1 million. Operating cash flow margin⁽²⁾ increased to 18.6% from 16.5% a year ago. Including equity in earnings of associated companies, depreciation and amortization, as well as unusual matters in both years, the company recognized operating income of $16.5 million, compared with $14.1 million a year ago. Non-operating expenses, primarily interest expense and debt financing costs, increased 37.5%, due to higher interest rates. The company recognized $36.6 million of reorganization costs in the quarter, resulting in a loss attributable to Lee Enterprises, Incorporated of $26.6 million, compared with a loss of $1.5 million a year ago.  Approximately $23.2 million of refinancing costs will be amortized over the term of the related debt as a yield adjustment.

ADJUSTED EARNINGS AND EPS FOR THE QUARTER

Unusual matters affecting year-over-year comparisons include debt financing costs in both years, reorganization costs in the current year and a non-cash curtailment gain in the prior year. The following table summarizes the impact from unusual matters on loss attributable to Lee Enterprises, Incorporated and loss per diluted common share. Per share amounts may not add due to rounding.

YEAR TO DATE OPERATING RESULTS

Operating revenue for the 26 weeks ended March 25, 2012 totaled $371.8 million, a decrease of 3.8% compared with a year ago. Combined print and digital advertising revenue decreased 5.7% to $260.0 million, with retail advertising down 4.6%, classified down 8.4% and national down 3.4%. Combined print and digital classified employment revenue decreased 0.4%, while automotive decreased 4.0%, real estate decreased 15.2% and other classified decreased 13.4%. Digital advertising revenue on a stand-alone basis increased 10.2% to $31.9 million. Print revenue on a stand-alone basis decreased 7.6%.  Circulation revenue
increased 1.4%.

Operating expenses, excluding depreciation, amortization and unusual matters, decreased 5.6%. Compensation decreased 5.5%, with the average number of full-time equivalent employees down 7.4%. Newsprint and ink expense decreased 8.5%, a result of a reduction in newsprint volume of 7.6%. Other operating expenses decreased 5.0%.

Operating cash flow increased 2.5% from a year ago to $85.6 million. Operating cash flow margin increased to 23.0% from 21.6% a year ago. Including equity in earnings of associated companies, depreciation and amortization, as well as unusual matters in both years, the company recognized operating income of $55.7 million, compared with $63.3 million a year ago. Non-cash curtailment gains totaling $12.2 million were recognized in the prior year, accounting for the decrease. Non-operating expenses, primarily interest expense and debt financing costs, increased 15.0%, due to higher interest rates. The company recognized $37.9 million of reorganization costs, resulting in a loss attributable to Lee Enterprises, Incorporated of $12.1 million, compared with income of $17.5 million a year ago.

ABOUT LEE

Lee Enterprises is a leading provider of local news and information, and a major platform for advertising, in its markets, with 48 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 1.3 million daily and 1.6 million Sunday, reaching nearly four million readers in print alone. Lee's websites and mobile and tablet products attracted 25.9 million unique visitors in March 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: carl.schmidt@lee.net, (563) 383-2100