4th quarter earnings out; expect more cuts

Lee reported a profit in its fourth quarter of about 4 cents per share, or $1.8 million. Operating cash flow grew 10.5 percent and operating expenses were cut 25.5 percent. Furloughs and layoffs cut compensation by 23.5 percent, and the number of full-time employees by 15.1 percent.

Lee will cut costs even more: 15 percent to 16 percent in the current quarter, and 6 percent to 7 percent overall in fiscal year 2010, according to the earnings report.

"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," CEO Mary Junck said in a statement. “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.”

Junck said September and October were the best months for advertising revenue in fiscal year 2009, but there has been a 19.7 percent drop in retail ad revenue, a 24.7 percent drop in online ad revenue and a 31.8 percent drop in classified advertising. Circulation revenue fell 6.3 percent.

Lee did reduce its debt ... to $1.1 billion.

See the full fourth quarter report.

Lee refinances debt; what does it really mean?

Lee Enterprises has refinance its $1.1 billion bank credit agreement; the final payment is due in April 2012. Lee repaid $120 million of the $306 million that was due next month; the rest of that bill was refinanced.

Is this good news? Bad news? What does it really mean? No idea. Editor & Publisher's Fitz & Jen have the best explanation I've seen so far. Please, help shed light on what this may mean for the rest of us.

One interesting piece to come of this: Lee was still dealing with a joint operating agreement between the St. Louis Post-Dispatch and the now defunct St. Louis Globe-Democrat, owned by Newhouse. Newhouse and Pulitzer shared the profits and expenses from the Post-Dispatch. Before Lee bought the Post-Dispatch in 2005, Pulitzer bought out 95 percent of Newhouse's interest. Lee finally got rid of that last 5 percent in this deal.

The memo from CEO Mary Junck:

February 19, 2009

Dear Lee Employee:

There’s good news today about Lee’s financial health. Lee has completed comprehensive changes to all of our debt obligations.

These changes will help us weather the recession. They also alleviate concerns among some investors that Lee would not be able to handle our debt during the combination of a severe economic downturn and an extremely tight credit market. Our ability to do so underscores the long-term strength of our company.

Today, we repaid $120 million of the principal amount of our $306 million Pulitzer Notes debt and refinanced the balance over the next three years. We also have amended the credit terms for our $1.1 billion of bank debt to provide a revised repayment schedule. In addition, we have redeemed the remaining 5 percent share of the St. Louis Post-Dispatch from the minority partner. I am attaching a news release with details.

Although significant economic challenges continue, our focus has been riveted on protecting our ability to grow in the long term. Even in this horrible economy, we remain, by far, the leading provider of local news, information and advertising in our markets. Our strength in print continues to be vast and stable, and our online reach continues to grow.

While revenue has decreased because of the recession, Lee continues to be an industry leader in advertising revenue performance. Lee has outperformed the industry average every quarter since 2003, and Lee’s advantage over the last two years has averaged nearly 5 percentage points per quarter. In 2009, we have ramped up our efforts to provide even greater value and effectiveness for advertisers. We believe our vigorous sales programs will help us further increase our lion’s share of local advertising spending, which should pay off even more when the recession ends. Meanwhile, as you well know, we have had to implement many cost reductions, some of which have impacted you directly.

Thank you for your hard work, dedication, determination and good spirits. I appreciate how you are staying the course with continued enthusiasm, creativity and absolute faith in our ability to assure our strong future.

Thank you again for all you’re doing to help our company remain strong during some of the worst economic conditions in our lifetimes.

With appreciation and best regards,

Mary Junck

The official release from Lee

Waiver extended again -- due Feb. 6

Lee got another extension on that waiver on its $306 million debt from buying the Pulitzer papers. It was supposed to expire (again) on Friday. Now the company has until Feb. 6 to figure out something else or beg for another extension.

Still no word what the company plans to do when the notes on the Pulitzer purchase come due in April.

Waiver extended ... until Jan. 30

Lee did get an extension on that waiver on its $306 million debt from buying the Pulitzer papers. It was supposed to expire Friday. Now the company has until Jan. 30 to figure out something else. The extension does help the paper avoid technical default, and land in bankruptcy.

The notes on the Pulitzer purchase are due in April. No word on what the company will do then either.

Jan. 16 could be make or break day

Jan. 16 could determine Lee's future.

Lee hasn't been doing so well with deadlines. The last one was Dec. 29, when Lee's 10-K was to be filed with the SEC. It was filed Dec. 30. That report included a note from the auditor that it has "substantial doubt about (Lee's) ability to continue as a going concern."

The first test will be whether the company manages to iron out a deal on the terms of a loan used to finance the buying the Pulitzer papers. Either the company will have an agreement by Friday, or it will be in default, which could then force it to file for Chapter 11 bankruptcy protection. (Tribune Co. recently filed for Chapter 11. It also has sold papers and listed property for sale. Lee hasn't sold any papers or property -- unless you count Lee Lodge.)

If the company does get a deal, then it is scheduled to repay $306 million in April. Lee has already said it doesn't have the money.

What's next for Lee?

Lee finally filed that end-of-year report and, as expected, the auditor added a line saying it has "substantial doubt about (Lee's) ability to continue as a going concern." $306 million in debt is due in April.

The New York Stock Exchange also warned that the stock will be delisted if performance doesn't improve.

Newsosaur Alan Mutter has a comprehensive look at what's next for Lee.

Newsosaur examines Lee's debt

Newsosaur Alan Mutter has a post on Lee's debt. As Mutter points out, Lee is worth about $13.5 million. Before buying the Pulitzer chain, Lee was worth $1.5 billion, then borrowed almost that much to get the Pulitzer papers.

Of course, we're still waiting to see what will happen with that annual report.