Lee Enterprises Reports Preliminary Results for Second Fiscal Quarter

Business Wire, April 21, 2008

DAVENPORT, Iowa -- As a result of a previously announced non-cash accounting charge, Lee Enterprises, Incorporated (NYSE:LEE), has recorded a loss of 10 cents per common share in preliminary results for its second fiscal quarter ended March 30, 2008, compared with earnings of 26 cents a year ago. Net income was $3.0 million, compared with $11.9 million a year ago. Adjusted(1) for unusual items, earnings per common share were 8 cents, compared with 19 cents a year ago.

As announced March 28, 2008, the preliminary results include a non-cash charge of 17 cents per share to record the current value of the company's future liability related to acquisition of the 5 percent minority share in its St. Louis partnership.

The preliminary results do not yet include non-cash charges for impairment of goodwill and potentially other intangible assets, also announced March 28, 2008. An estimate of those charges will be included in financial statements to be filed with the Securities and Exchange Commission in the company's Form 10-Q on or before May 9, 2008.

Mary Junck, chairman and chief executive officer, said: "The economic slowdown has taken a toll on classified advertising revenue, especially real estate and employment, and we're driving hard to perform well in a tough environment. Meanwhile, our audiences continue to grow both in print and online, further enhancing our position as the leading provider, by far, of local news, information and advertising in our markets."

The quarter included an additional business day, a Sunday, compared with a year ago for all except the former Pulitzer properties, affecting both revenue and expense comparisons.

Total operating revenue from continuing operations for the quarter decreased 4.7 percent from a year ago to $247.7 million. Total advertising revenue decreased 5.7 percent, to $186.1 million, with online advertising revenue up 7.5 percent. Combined print and online retail advertising decreased 0.4 percent. Combined print and online classified advertising revenue decreased 12.0 percent, with employment down 14.6 percent, automotive down 11.9 percent and real estate down 22.1 percent. National advertising revenue decreased 13.3 percent. Circulation revenue decreased 1.7 percent. Same property(2) revenue results were identical to reported results.

Operating expenses, excluding depreciation and amortization, increased 0.8 percent, with compensation down 2.7 percent, newsprint and ink down 10.1 percent and other cash costs up 5.2 percent. Same property operating expenses, excluding unusual items, declined 1.7 percent, with compensation down 2.1 percent, newsprint and ink down 12.1 percent and other cash costs up 3.1 percent.

Compared with a year ago, operating cash flow(3) decreased 23.9 percent to $44.1 million. Operating income, which includes equity in earnings of associated companies and depreciation and amortization, decreased 44.1 percent to $22.3 million.

Non-operating expenses, which consist primarily of financial expense, net of financial income, decreased 17.8 percent to $17.3 million. Income from continuing operations before income taxes decreased 73.5 percent to $5.0 million. Income from continuing operations decreased 74.4 percent, to $3.0 million. Net income, including discontinued operations, also totaled $3.0 million.

Free cash flow(4) totaled $9.8 million for the quarter, compared with $16.9 million a year ago. Net debt was reduced by $7.2 million in the quarter, and $19 million of Lee common stock was repurchased.

ADJUSTED EARNINGS AND EPS

Unusual matters affecting year-over-year comparisons for the quarter included, in 2008, workforce adjustments in several locations, including Madison Newspapers, Inc., and recording of the current value of the company's future liability related to acquisition of the 5 percent minority share in its St. Louis partnership. Unusual matters in 2007 included gains related to benefit curtailment for certain groups of employees in Lee and in the Tucson partnership.

The following table summarizes the impact on preliminary net income and earnings per diluted common share from unusual items. Per share amounts may not add due to rounding.

[TABLE OMITTED]

YEAR TO DATE

For the first and second fiscal quarters combined, there were no day exchanges compared with the previous year.

Total operating revenue from continuing operations for the two quarters decreased 5.5 percent from a year ago to $527.6 million. Total advertising revenue decreased 6.1 percent, to $403.7 million, with online advertising revenue up 15.1 percent. Combined print and online retail advertising decreased 1.6 percent. Combined print and online classified advertising revenue decreased 10.7 percent, with employment down 11.4 percent, automotive down 10.7 percent and real estate down 20.9 percent. National advertising revenue decreased 19.6 percent. Circulation revenue decreased 3.0 percent.

Operating expenses, excluding depreciation and amortization, decreased 2.1 percent, with compensation down 3.1 percent, newsprint and ink down 14.8 percent and other cash costs up 1.9 percent. Same property operating expenses, excluding unusual items, decreased 3.0 percent, with compensation down 2.0 percent, newsprint and ink down 16.0 percent and other cash costs up 0.9 percent.