Monday, December 15, 2008

Lee delays filing annual report

Lee Enterprises is delaying filing its annual report until Dec. 29. The company said it needs more time to calculate goodwill and intangible asset write-downs, which it says will total at least $180 million for the fourth quarter. In that quarter, Lee's net income fell 73 percent.

In case you missed it, here's the memo from CEO Mary Junck:
Dec. 15, 2008

Dear Lee Employee:

This afternoon, Lee announced difficult news. I want to assure you that we fully expect to overcome the challenges.

Because of worsening economic conditions, additional writedowns of intangible assets of Lee will be necessary. Also, our auditor, KPMG LLP, has informed us that it intends to issue a “going concern” opinion on Lee’s financial statements if our $306 million Pulitzer Notes debt has not been refinanced before our yearend financial statements are filed with the SEC in the next two weeks, even though that debt does not become due until April 2009.

These issues will create covenant problems under our various debt arrangements. We will be asking our lenders to waive the affected covenants in the short term, and we are also negotiating to extend or refinance the Pulitzer Notes as a longer-term solution. We are actively working with all parties and believe our lenders will help us get past these hurdles.

Although the credit markets remain extremely volatile, our lenders stand to benefit by sticking with us through this tough time. Lee continues to generate significant cash flow and continues to pay down debt. We have good relationships with our lenders, and they have shown a willingness to seek mutually beneficial arrangements. Other media companies with much more serious difficulties than ours have worked out such agreements with lenders, and we will continue to work toward a solution here.

These issues should have no meaningful effect on the way we operate our enterprises. In the meantime, unfortunately, you can expect to see negative speculation about Lee’s financial situation, much as we’ve been seeing about our industry for some time now.

As I mentioned in my note a few weeks ago, I fully believe that we’ll get though these challenges. It’s most important, especially in extraordinary times like this, to remember our strengths. We continue to be an industry leader in revenue and circulation performance, we continue to provide the great majority of people in our markets with vital local news and advertising that they cannot get anywhere else, and our audiences continue to grow. For those reasons and many others, we continue to believe that Lee will emerge strong when the national economic nightmare ends.

Thank you again for all you do for Lee, and for your perseverance in these painful economic times.

Mary Junck
We've seen worse, but Lee shares closed at 39 cents on Monday, down 20.4 percent.

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