Lee Enterprises Swings to Profit -- But on Ad Revenue That Continues to Decline

By: Mark Fitzgerald Lee Enterprises, the first newspaper to report the results of the final quarter of 2009, said Tuesday the quarter was profitable, and that advertising and overall revenue continued to decline, but at a slower pace.

For its first fiscal quarter ended Dec. 27, Lee recorded diluted earnings per share of 62 cents compared with a loss of $1.10 per share a year ago. Excluding a non-cash curtailment gain of $31.1 million -- related to the cancellation or modification of medical benefits for some retirees -- in the current quarter and an impairment charge in 2008, earnings were 25 cents per share, compared with 24 cents a year ago.

Operating revenue fell 13.8% for the quarter to $209.8 million. Lee noted that in the three previous quarters revenue had declined an average of 20%.

Ad revenue, both in print and online, fell 16.4% on continuing grim results in all categories -- especially classified.

Retail advertising revenue was down 15.0%, national 16.1% and classified 19.7%.

Inside classified, automotive fell 19.6%, real estate dropped 21.0% -- and help-wanted was down 41.6%.

Online advertising revenue declined 8.4% in the quarter compared to a year ago, and circulation revenue also fell. Lee attributed the decline of 5.1% in circ revenue partly to the "elimination of less profitable distribution."

Lee's results show that cost-cutting -- which has been the key to the improved bottom-line results newspaper companies have reported in recent quarters -- continued through the end of the year.

Operating expenses, excluding the curtailment gain and other unusual items, plunged 17.6%.

The average number of full-time equivalent employees fell 13.4%, dropping compensation costs 13.1%.

Lee got a break on ink and paper, with that expense down 49.5% on reduced cost and volume of newsprint.

Chairman and CEO Mary Junck said there was some good news in the fiscal Q1 results.

"Advertising sales strengthened throughout the quarter, and the improved trend appears to be continuing into January and February," she said in a statement. "A small but growing number of our enterprises have begun reporting positive year-over-year revenue. We credit our continuing aggressive sales initiatives and a gradual brightening in the advertising environment. This upturn, coupled with our streamlined cost structure, has enabled Lee to post earnings growth for the second quarter in a row, and we believe we are well positioned to continue meaningful growth as the economy recovers."