Lee Enterprises first quarter profit falls as ad sales drop

Wednesday, January 21, 2009 | 4:48 p.m. CST; updated 5:26 p.m. CST, Wednesday, January 21, 2009

DAVENPORT, Iowa — Lee Enterprises Inc., publisher of the St. Louis Post-Dispatch and other newspapers, said its fiscal first-quarter earnings tumbled 69 percent as the nation's recession exacerbated advertising declines.

Earnings after a non-cash charge related to minority interest slid to $6.8 million, or 15 cents per share, from $22.1 million, or 48 cents per share, in the prior-year period.

Excluding a $2.2 million write-down in the value of unused equipment and other items, profit totaled 21 cents per share in the latest period. Lee Enterprises said Tuesday its results are preliminary and don't include the potential impact of impairment charges.

Total revenue fell 13 percent to $243.6 million, as total advertising revenue slid 15 percent to $184.6 million. As companies slashed jobs and the housing and auto markets continued their downward spiral, employment ad sales plunged nearly 44 percent, real estate ads fell nearly 30 percent and auto ad sales dropped more than 26 percent.

Chairman and Chief Executive Mary Junck said in a statement that the company is cutting costs, eliminating more than 10 percent of its work force during the quarter, with additional cuts recently announced. Lee Enterprises also has outsourced or combined printing operations at several sites and outsourced some of its distribution efforts.

Junck said the company expects these moves, along with narrower page widths for its papers and the termination of some specialty publications, will lower cash costs by 10 percent to 11 percent this year.

Lee may also ask shareholders to approve a reverse stock split so its shares can regain compliance with New York Stock Exchange $1 minimum bid listing standards, Junck added. The company's stock price, which traded at $13.31 a year ago, closed Friday at 36 cents. Shares of Lee Enterprises rose 6 cents, or 19.4 percent, to 37 cents in Wednesday trading.

Lee has seen advertising drop sharply as the recession compounded declines that began with the migration of readers and advertisers to the Internet. Lee depends on advertising for about three-quarters of its revenue.

Earlier this month, Lee Enterprises said in a regulatory filing that it would have trouble paying its debt over the next two years because of severe reductions in revenue. On Friday, Lee received a waiver on $306 million worth of debt held by its St. Louis Post-Dispatch LLC until Jan. 30, staving off a technical default on debt agreements.

The publisher is far from alone in its financial struggle. During the quarter Chicago-based Tribune, which owns the Los Angeles Times, Chicago Tribune, The (Baltimore) Sun, The Hartford Courant and other dailies, as well as 23 television stations and the Cubs, sought bankruptcy protection because of dwindling advertising revenues.

Lee's daily papers include the Post-Dispatch, the Lincoln Journal Star in Nebraska, the Wisconsin State Journal in Madison, Wis., and the Quad-City Times in Davenport.

Lee expects to report its final quarterly results around Feb. 6.

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