Lee Enterprises Reports Earnings for Second Fiscal Quarter

Business Wire, April 20, 2006

DAVENPORT, Iowa -- Lee Enterprises, Incorporated (NYSE:LEE), reported today that diluted earnings per common share from continuing operations were 32 cents for its second fiscal quarter ended March 31, 2006, compared with 40 cents a year ago, reflecting additional financial expense and amortization of intangible assets from the acquisition of Pulitzer Inc. in June 2005.

Early retirement and transition costs related to the acquisition of Pulitzer reduced diluted earnings per common share from continuing operations by 2 cents. Earnings in both the current and prior year reflect the impact of stock compensation expense, which Lee has been recognizing since October 2002.

Mary Junck, chairman and chief executive officer, said: "Strong growth in online, employment and niche advertising revenue helped offset slower spending by automotive, national and department store customers. As a result of continued strong cash flow, we were able to reduce debt in the quarter by $54.0 million and continue delivering on our successful acquisition of Pulitzer."

On a reported basis, which includes the addition of Pulitzer in the current year, advertising revenue for the quarter increased 68.6 percent from a year ago to $210.9 million, with growth of 57.3 percent in retail, 72.1 percent in classified and 147.7 percent in national. Online advertising revenue increased 146.1 percent, and niche advertising rose 39.7 percent. Circulation revenue increased 60.7 percent. Total operating revenue increased 63.5 percent to $275.8 million.

On a same property (1) basis, which excludes the impact of Pulitzer and other acquisitions and divestitures made in the current or prior year, total advertising revenue for the quarter increased 1.7 percent from a year ago, with retail up 0.3 percent, classified up 1.6 percent, national down 8.8 percent and online advertising revenue up 38.2 percent. Circulation revenue decreased 1.9 percent, and total operating revenue increased 0.8 percent.

Operating expenses, on a reported basis, excluding depreciation and amortization, increased 68.2 percent to $213.5 million for the quarter, also reflecting the acquisition of Pulitzer. Compensation expense increased 60.0 percent, newsprint and ink increased 85.7 percent, and other expenses increased 73.3 percent. Transition and early retirement costs related to the acquisition of Pulitzer added $1.1 million.

Same property operating expenses, excluding depreciation and amortization, increased 3.2 percent in the quarter, with compensation up 1.4 percent, newsprint and ink up 8.5 percent, and other operating expenses up 4.1 percent.

Operating cash flow (2) increased 49.1 percent to $62.3 million, including acquisitions and related costs. Operating income, which includes equity in earnings of associated companies and depreciation and amortization, increased 43.0 percent to $45.0 million. Non-operating expenses, which include financial expense related to Pulitzer, totaled $22.1 million, compared with $2.6 million a year ago. As a result, income from continuing operations before income taxes decreased 20.5 percent to $22.9 million. Net income decreased 20.1 percent to $14.4 million.

YEAR TO DATE

For the six months ended March 31, diluted earnings per common share from continuing operations total 82 cents, compared with $1.00 a year ago. Excluding 14 cents of early retirement and transition costs related to the acquisition of Pulitzer, diluted earnings per common share from continuing operations total 96 cents.

On a reported basis, including acquisitions, advertising revenue for the six months increased 69.1 percent to $448.0 million, and total operating revenue increased 64.0 percent to $578.4 million. Operating expenses, excluding depreciation and amortization, rose 72.1 percent to $441.5 million. On a same property basis, advertising revenue increased 1.5 percent, total operating revenue increased 0.6 percent, and operating expenses, excluding depreciation and amortization, increased 3.1 percent.

Including acquisitions, operating cash flow increased 42.3 percent, to $136.9 million. Operating income rose 34.6 percent to $103.6 million. Income from continuing operations before income taxes decreased 18.0 percent to $58.9 million. Net income decreased 17.5 percent to $37.2 million.

PULITZER TRANSITION COSTS

The following table summarizes the impact on earnings per diluted common share from early retirement and transition costs related to the acquisition of Pulitzer:

Three Months Ended Six Months Ended
                                        March 31          March 31
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Diluted EPS, continuing operations      $ 0.32                  $0.82

Early retirement program and other
  Pulitzer transition costs               0.02                   0.14
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Diluted EPS, excluding costs
  related to Pulitzer acquisition       $ 0.33 (a)              $0.96
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(a) Amounts do not add due to rounding