Lee Enterprises Reports Earnings for Fourth Fiscal Quarter

http://www.businesswire.com/news/home/20091112005334/en

DAVENPORT, Iowa--(Business Wire)--
Lee Enterprises, Incorporated (NYSE:LEE), recorded diluted earnings per common
share of 4 cents for its fourth fiscal quarter ended Sept. 27, 2009, compared
with a loss of $4.34 per share a year ago. Excluding non-cash impairment charges
and other unusual items(1), earnings were 5 cents, compared with 13 cents a year
ago.

Operating cash flow(2) increased 10.5 percent in the quarter compared with a
year ago, as Lee reduced cash operating expenses, excluding unusual items, 25.5
percent.

"We feel good about the quarter and our direction," said Mary Junck, chairman
and chief executive officer. "Cost reductions and lower newsprint prices enabled
us to post a strong increase in cash flow and continue to reduce debt
substantially, by $20 million in the quarter and $164 million in the fiscal
year."

She said September was Lee`s best month for year-over-year advertising revenue
since December 2008, and October results were similar. She said additional
improvement in the revenue trend is expected in November. Cash costs are
expected to decrease 15-16 percent in the December 2009 quarter versus a year
ago and 6-7 percent in fiscal 2010.

"While we can`t predict the timing of the economic recovery, we believe our
streamlining of costs, aggressive sales programs and unmatched delivery of local
news, information and advertising have positioned Lee to emerge strong," she
said. "In 2009, we increased local market share by taking millions of
advertising dollars from competitors, and in 2010 we expect to gain further
share through our rollout of online behavioral targeting advertising and other
intensive sales programs."

She added: "Meanwhile, our online audiences continue to grow rapidly - up 18
percent in the quarter - and our print audiences remain huge and stable.
Combined, our newspapers and online sites reach up to three-fourths of adults in
our markets. We`re strong across all age groups, reaching 60 percent or more of
18- to 29-year-olds. We`re first and best in local news, with more journalists
than all of our competitors combined. No competitor can match the results we
deliver for advertisers through our newspapers, niche publications and online.
Even in a difficult economy, we continue to generate significant cash flow."

FOURTH QUARTER OPERATING RESULTS

Total operating revenue from continuing operations for the quarter decreased
20.0 percent from a year ago to $195.8 million. Combined print and online
advertising revenue decreased 23.8 percent to $140.5 million, with retail
advertising down 19.7 percent, national down 14.8 percent and classified down
31.8 percent. Combined print and online employment advertising revenue decreased
56.1 percent, automotive decreased 30.8 percent and real estate decreased 28.9
percent. Online advertising revenue declined 24.7 percent, attributable to
weakness in classified advertising. Circulation revenue declined 6.3 percent,
partially a result of elimination of less profitable distribution.

Operating expenses, excluding unusual items, depreciation and amortization,
decreased 25.5 percent. Compensation declined 23.5 percent, with the average
number of full-time equivalent employees down 15.1 percent. Newsprint and ink
expense decreased 61.1 percent, a result of a reduction in newsprint volume of
32.9 percent and reduced cost of newsprint.

Operating cash flow increased 10.5 percent compared with a year ago to $40.5
million, and operating cash flow margin(2) increased from 15.0 to 20.7 percent.
Including equity in earnings of associated companies, depreciation and
amortization, as well as adjustments for impairment and other non-cash charges,
operating income increased to $21.0 million from a deficit of $214.7 million a
year ago. Non-operating expenses, primarily interest, resulted in net income
available to common stockholders of $1.8 million.

ADJUSTED EARNINGS AND EPS FOR THE QUARTER

Unusual items, primarily non-cash impairment charges in the prior year, affected
year-over-year comparisons for the quarter. The following table summarizes the
impact from unusual items on net income (loss) available to common stockholders
and earnings (loss) per diluted common share. Per share amounts may not add due
to rounding.

13 Weeks Ended
Sep 27,2009 Sep 28, 2008
(Thousands, except per share) Amount Per Share Amount Per Share
Net income (loss) available to common stockholders, as reported $ 1,755 $ 0.04 $ (192,237 ) $ (4.34 )
Adjustments:
Impairment of goodwill and other assets, including TNI Partners 1,381 230,537
Debt financing costs 1,833 876
Other, net 2,095 2,820
5,309 234,233
Income tax effect of adjustments, net, other unusual tax items, and impact on minority interest (4,651 ) (37,048 )
658 0.01 197,185 4.45
Net income available to common stockholders, as adjusted 2,413 0.05 4,948 0.11

Change in redeemable minority interest liability - - 700 0.02
Net income, as adjusted $ 2,413 $ 0.05 $ 5,648 $ 0.13

OPERATING RESULTS FOR FISCAL 2009

Total operating revenue from continuing operations for the 12 months decreased
18.2 percent from a year ago to $842.0 million. Combined print and online
advertising revenue decreased 21.6 percent to $614.7 million, with retail
advertising down 16.0 percent, national down 10.1 percent and classified down
32.2 percent. Combined print and online employment advertising revenue decreased
54.2 percent, automotive decreased 27.9 percent and real estate decreased 31.5
percent. Online advertising revenue declined 23.7 percent. Circulation revenue
declined 5.3 percent.

Operating expenses, excluding unusual items, depreciation and amortization,
decreased $150 million, or 18.3 percent, to $668.4 million. Compensation
declined 19.6 percent, with the average number of full-time equivalent employees
down 14.7 percent. Newsprint and ink expense decreased 30.4 percent and other
cash costs decreased 12.2 percent.

Operating cash flow decreased 19.3 percent compared with a year ago to $167.0
million, and operating cash flow margin decreased from 20.1 to 19.8 percent.
Including equity in earnings of associated companies, depreciation and
amortization, as well as adjustments for impairment and other non-cash charges,
the operating loss was $173.4 million. For the year, Lee reported a loss per
diluted common share from continuing operations of $2.77, compared with a loss
of $19.65 in 2008. Excluding non-cash impairment charges and other unusual
items, earnings were 35 cents in 2009, compared with $1.02 in 2008.

ADJUSTED EARNINGS AND EPS FOR FISCAL 2009

Unusual items affected comparisons for the year. In both years, unusual items
included adjustments for impairment of goodwill and other assets. Also, $71.3
million of the liability related to the redemption of the minority interest in
St. Louis initially recorded in 2008 was reversed in 2009, increasing 2009
results by $57.1 million. Unusual items in 2009 also included the incremental
cost of debt refinancing. The following table summarizes the impact from unusual
items on net income (loss) available to common stockholders and earnings (loss)
per diluted common share. Per share amounts may not add due to rounding.

52 Weeks Ended
Sep 27, 2009 Sep 28, 2008
(Thousands, except per share) Amount Per Share Amount Per Share
Net loss available to common stockholders, as reported $ (123,191 ) $ (2.77 ) $ (880,316 ) $ (19.64 )
Adjustments:
Impairment of goodwill and other assets, including TNI Partners 265,904 1,175,286
Debt financing costs 17,467 3,505
Other, net 6,848 4,463
290,219 1,183,254
Income tax effect of adjustments, net, other unusual tax items, and impact on minority interest (94,518 ) (265,979 )
195,701 4.40 917,275 20.47
Net income available to common stockholders, as adjusted 72,510 1.63 36,959 0.82
Change in redeemable minority interest liability (57,055 ) (1.28 ) 8,838 0.20
Net income, as adjusted $ 15,455 $ 0.35 $ 45,797 $ 1.02

AUDIENCES

The number of unique visitors at Lee online sites increased 17.9 percent to 44.4
million in the quarter compared with the previous year, with page views up 11.0
percent to 602.6 million.

While print audiences continue to remain stable, paid circulation decreased in
the six-month Audit Bureau of Circulations Fas-Fax period ended Sept. 30, 2009.
Lee newspapers posted declines of 6.4 percent daily and 5.8 percent Sunday,
compared with industry average declines of 10.6 percent daily and 7.4 percent
Sunday. A majority of the decrease in paid circulation is estimated to be
attributable to planned reductions, such as elimination of bulk programs and
reduced distribution in lower-density circulation areas.

Although paid circulation has been allowed to decline in non-core regions, Lee`s
local market reach totals nearly seven out of 10 adults, far more than any local
competitor. Combined print and online reach of newspapers and online sites over
the course of a week in Lee`s 10 largest markets grew to 68 percent of all
adults in January-June 2009, compared with 66 percent for the same period two
years ago. Reach of the newspapers alone remained steady at 61 percent. The
report, from Thoroughbred Research, formerly Wilkerson & Associates, carries an
overall margin of error of 1 percentage point.

DEBT AND FREE CASH FLOW(3)

Debt was reduced $20.0 million in the quarter and $164.0 million in the fiscal
year, including $120 million as a result of refinancing of the Pulitzer Notes in
February. Also in February, Lee restructured future payments on its $1.1 billion
bank commitment. Reduction in debt, coupled with improved operating cash flow,
resulted in improvement in the company`s leverage ratio in the quarter.

Carl Schmidt, vice president, chief financial officer and treasurer, said Lee
continues to meet all financial covenants and expects to continue repaying debt,
primarily with ongoing cash flow. Liquidity at the end of the quarter totaled
$99.9 million, against $89.8 million of debt repayments due in the next four
quarters.

Free cash flow in the quarter totaled $20.4 million. For the 2009 fiscal year,
free cash flow totaled $57.0 million, including $26.0 million for debt
refinancing costs. Free cash flow in fiscal 2008 totaled $112.4 million.

IMPAIRMENT CHARGES

Non-cash charges for the writedown of equipment no longer in use totaled $1.4
million in the quarter. For the fiscal year, impairment charges for goodwill and
other assets totaled $265.9 million. The charges have no effect on cash flows
but reduced reported earnings per common share, which resulted in a loss for the
year.

Impairment testing is performed in accordance with generally accepted accounting
principles, which, among other factors, require consideration of differences
between the book value and the fair value of all of the company's assets,
including the consideration of current market capitalization.

ABOUT LEE

Lee Enterprises is a leading provider of local news, information and advertising
in primarily midsize markets, with 49 daily newspapers and a joint interest in
four others, online sites and more than 300 specialty publications in 23 states.
Lee`s newspapers have circulation of 1.4 million daily and 1.7 million Sunday,
reaching nearly four million readers daily. Lee`s online sites attract nearly 15
million unique visits monthly, and Lee`s weekly publications have distribution
of four million households. Lee`s markets include St. Louis, Mo.; Lincoln, Neb.;
Madison, Wis.; Davenport, Iowa; Billings, Mont.; Bloomington, Ill.; and Tucson,
Ariz. Lee stock is traded on the New York Stock Exchange under the symbol LEE.
For more information about Lee, please visit www.lee.net.

LEE ENTERPRISES, INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Thousands, except per share)

13 Weeks Ended 52 Weeks Ended
Sep 27 Sep 28 Sep 27 Sep 28
2009 2008 % 2009 2008 %
Advertising revenue:
Retail $ 79,828 $ 100,625 (20.7 )% $ 358,104 $ 434,069 (17.5 )%
National 8,300 9,953 (16.6 ) 39,047 44,143 (11.5 )
Classified:
Daily newspapers:
Employment 5,550 13,291 (58.2 ) 26,489 59,457 (55.4 )
Automotive 6,754 10,967 (38.4 ) 30,465 45,388 (32.9 )
Real estate 7,302 10,200 (28.4 ) 30,066 43,282 (30.5 )
All other 12,063 11,286 6.9 44,635 43,006 3.8
Other publications 7,367 10,780 (31.7 ) 30,660 43,361 (29.3 )
Total classified 39,036 56,524 (30.9 ) 162,315 234,494 (30.8 )
Online 10,183 13,515 (24.7 ) 42,073 55,119 (23.7 )
Niche publications 3,181 3,877 (18.0 ) 13,135 15,874 (17.3 )
Total advertising revenue 140,528 184,494 (23.8 ) 614,674 783,699 (21.6 )
Circulation 45,192 48,221 (6.3 ) 185,154 195,457 (5.3 )
Commercial printing 2,887 3,580 (19.4 ) 12,895 15,993 (19.4 )
Online services & other 7,219 8,598 (16.0 ) 29,307 33,719 (13.1 )
Total operating revenue 195,826 244,893 (20.0 ) 842,030 1,028,868 (18.2 )
Operating expenses:
Compensation 79,533 103,899 (23.5 ) 339,014 421,652 (19.6 )
Newsprint and ink 10,741 27,615 (61.1 ) 72,311 103,926 (30.4 )
Other operating expenses 63,121 74,253 (15.0 ) 257,060 292,840 (12.2 )
Workforce adjustments and transition costs 1,920 2,474 NM 6,650 3,428 NM
Operating expenses, excluding depreciation and amortization 155,315 208,241 (25.4 ) 675,035 821,846 (17.9 )
Operating cash flow 40,511 36,652 10.5 166,995 207,022 (19.3 )
Depreciation 8,048 8,866 (9.2 ) 32,807 34,670 (5.4 )
Amortization 11,000 13,530 (18.7 ) 46,792 56,408 (17.0 )
Impairment of goodwill and other assets 1,381 219,443 NM 245,953 1,070,808 NM
Equity in earnings of associated companies:
TNI Partners 229 696 (67.1 ) 2,511 6,171 (59.3 )
Madison Newspapers 641 857 (25.2 ) 2,609 4,040 (35.4 )
Reduction in investment in TNI Partners - 11,094 NM 19,951 104,478 NM
Operating income (loss) 20,952 (214,728 ) NM (173,388 ) (1,049,131 ) NM

Non-operating income (expense):
Financial income 10 1,155 (99.1 ) 1,886 5,857 (67.8 )
Financial expense (20,503 ) (14,934 ) 37.3 (75,425 ) (67,967 ) 11.0
Debt financing costs (1,833 ) (876 ) NM (17,467 ) (3,505 ) NM
Other, net - 1,254 NM 1,823 885 NM
(22,326 ) (13,401 ) 66.6 (89,183 ) (64,730 ) 37.8
Loss from continuing operations before income taxes (1,374 ) (228,129 ) NM (262,571 ) (1,113,861 ) NM
Income tax benefit (3,156 ) (36,418 ) NM (82,509 ) (242,633 ) NM
Minority interest 27 (174 ) NM 179 535 (66.5 )
Income (loss) from continuing operations 1,755 (191,537 ) NM (180,241 ) (871,763 ) NM
Discontinued operations - - NM (5 ) 285 NM
Net income (loss) 1,755 (191,537 ) NM (180,246 ) (871,478 ) NM
Change in redeemable minority interest liability - (700 ) NM 57,055 (8,838 ) NM
Net income (loss) available to common stockholders $ 1,755 $(192,237 ) NM $(123,191 ) $(880,316 ) NM
Earnings (loss) per common share:
Basic:
Continuing operations $ 0.04 $ (4.34 ) NM $ (2.77 ) $ (19.65 ) NM
Discontinued operations - - NM - 0.01 NM
$ 0.04 $ (4.34 ) NM $ (2.77 ) $ (19.64 ) NM
Diluted:
Continuing operations $ 0.04 $ (4.34 ) NM $ (2.77 ) $ (19.65 ) NM
Discontinued operations - - NM - 0.01 NM
$ 0.04 $ (4.34 ) NM $ (2.77 ) $ (19.64 ) NM
Average common shares:
Basic 44,461 44,344 44,442 44,813
Diluted 45,349 44,344 44,442 44,813

FREE CASH FLOW
(Thousands)

13 Weeks Ended 52 Weeks Ended
Sep 27 Sep 28 Sep 27 Sep 28
2009 2008 2009 2008
Operating income (loss) $ 20,952 $ (214,728 ) $ (173,388 ) $ (1,049,131 )
Depreciation and amortization 19,381 22,982 81,024 95,497
Impairment of goodwill and other assets 1,381 219,443 245,953 1,070,808
Reduction in investment in TNI Partners - 11,094 19,951 104,478
Stock compensation 676 1,615 3,013 5,905
Cash interest expense (20,676 ) (16,970 ) (79,231 ) (75,956 )
Debt financing costs paid (56 ) - (26,061 ) -
Financial income 10 1,155 1,886 5,857
Cash income tax benefit (paid) 476 122 (5,260 ) (26,173 )
Minority interest (27 ) 174 (179 ) (535 )
Capital expenditures (1,738 ) (4,585 ) (10,702 ) (18,381 )
Total $ 20,379 $ 20,302 $ 57,006 $ 112,369

SELECTED COMBINED PRINT AND ONLINE ADVERTISING REVENUE
(Thousands)

13 Weeks Ended 52 Weeks Ended
Sep 27 Sep 28 Sep 27 Sep 28
2009 2008 % 2009 2008 %
Retail $ 82,587 $ 102,825 (19.7 )% $ 369,304 $ 439,680 (16.0 )%
National 8,588 10,082 (14.8 ) 39,989 44,482 (10.1 )

Classified:
Employment 8,970 20,452 (56.1 ) 41,625 90,841 (54.2 )
Automotive 10,496 15,163 (30.8 ) 45,574 63,190 (27.9 )
Real estate 9,636 13,548 (28.9 ) 39,329 57,389 (31.5 )
Other 17,070 18,546 (8.0 ) 65,719 72,242 (9.0 )
Total classified $ 46,172 $ 67,709 (31.8 )% $ 192,247 $ 283,662 (32.2 )%

REVENUE BY REGION
(Thousands)

13 Weeks Ended 52 Weeks Ended
Sep 27 Sep 28 Sep 27 Sep 28
2009 2008 % 2009 2008 %
Midwest $ 115,418 $ 146,718 (21.3 )% $ 502,533 $ 620,600 (19.0 )%
Mountain West 38,104 46,120 (17.4 ) 158,851 190,937 (16.8 )
West 24,155 30,213 (20.1 ) 102,952 129,312 (20.4 )
East/Other 18,149 21,842 (16.9 ) 77,694 88,019 (11.7 )
Total $ 195,826 $ 244,893 (20.0 )% $ 842,030 $ 1,028,868 (18.2 )%

DAILY NEWSPAPER ADVERTISING VOLUME
(Thousands of inches)

13 Weeks Ended 52 Weeks Ended
Sep 27 Sep 28 Sep 27 Sep 28
2009 2008 % 2009 2008 %
Retail 2,560 2,968 (13.7 )% 10,993 12,639 (13.0 )%
National 116 128 (9.4 ) 488 612 (20.3 )
Classified 2,952 3,631 (18.7 ) 11,607 14,317 (18.9 )
Total 5,628 6,727 (16.3 )% 23,088 27,568 (16.3 )%

SELECTED BALANCE SHEET INFORMATION
(Thousands)

Sep 27 Sep 28
2009 2008
Cash $ 7,905 $ 23,459
Restricted cash and investments 9,324 126,060
Debt (principal amount) 1,168,335 1,332,375

SELECTED STATISTICAL INFORMATION
(Dollars in Thousands)

13 Weeks Ended 52 Weeks Ended
Sep 27 Sep 28 Sep 27 Sep 28
2009 2008 % 2009 2008 %
Capital expenditures $ 1,738 $ 4,585 (62.1 )% $ 10,702 $ 18,381 (41.8 )%
Newsprint volume (tonnes) 23,608 35,173 (32.9 ) 103,324 150,041 (31.1 )
Average full-time equivalent employees 6,444 7,590 (15.1 ) 6,718 7,874 (14.7 )

NOTES:

(1) Adjusted net income and adjusted earnings per common share, which are defined as net income (loss) available to common stockholders and earnings (loss) per common share adjusted to exclude unusual items and those of a substantially non-recurring nature,
are non-GAAP (Generally Accepted Accounting Principles) financial measures. Reconciliations of adjusted net income and adjusted earnings per common share to income (loss) available to common stockholders and earnings (loss) per common share are included in
tables in this release.

No non-GAAP financial measure should be considered as a substitute for any related GAAP financial measure. However, the company believes the use of non-GAAP financial measures provides meaningful supplemental information with which to evaluate its
financial performance, or assist in forecasting and analyzing future periods. The company also believes such non-GAAP financial measures are alternative indicators of performance used by investors, lenders, rating agencies and financial analysts to
estimate the value of a publishing business and its ability to meet debt service requirements.

(2) Operating cash flow, which is defined as operating income before depreciation, amortization, impairment charges and equity in earnings of associated companies, and operating cash flow margin (operating cash flow divided by operating revenue) are non-GAAP
financial measures. See (1) above. Reconciliations of operating cash flow to operating income (loss), the most directly comparable GAAP measure, are included in a table accompanying this release.

(3) Free cash flow, which is defined as operating income, plus depreciation and amortization, impairment charges, stock compensation and financial income, minus financial expense (exclusive of non-cash amortization and accretion), cash income taxes, capital
expenditures and minority interest, is a non-GAAP financial measure. See (1) above. Reconciliations of free cash flow to operating income (loss), the most directly comparable GAAP measure, are included in a table accompanying this release.

(4) Certain amounts as previously reported have been reclassified to conform with the current period presentation. The prior period has been adjusted for comparative purposes, and the reclassifications have no impact on earnings.

FORWARD-LOOKING STATEMENTS - 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, 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, which in
some instances are beyond its control, are the Company`s ability to generate
cash flows and maintain liquidity sufficient to service its debt, and comply
with or obtain amendments or waivers of the financial covenants contained in its
credit facilities, if necessary. Other risks and uncertainties include the
impact of continuing adverse economic conditions, potential changes in
advertising demand, newsprint and other commodity prices, energy costs, interest
rates and the availability of credit due to instability in the credit markets,
labor costs, legislative and regulatory rulings and other results of operations
or financial conditions, difficulties in maintaining employee and customer
relationships, increased capital and other costs, competition and other risks
detailed from time to time in the Company`s publicly filed documents, including
the Company Annual Report on Form 10-K for the year ended September 28, 2008.
Any statements that are not statements of historical fact (including statements
containing the words "may," "will," "would," "could," "believes," "expects,"
"anticipates," "intends," "plans," "projects," "considers" 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. The Company does not undertake to
publicly update or revise its forward-looking statements.

Lee Enterprises
Dan Hayes, 563-383-2100
dan.hayes@lee.net

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