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Daily Star parent reports $26 million Q2 loss

Lee Enterprises, the beleaguered parent of the Arizona Daily Star, reported a $26.6 million second-quarter loss, mostly related to its recent bankruptcy, with advertising dipping another 5.3 percent for the period ending March 25.

Lee, which publishes the Star, the St. Louis Post-Dispatch, and dozens of other newspapers around the U.S., saw quarterly losses increase to $1.3 million for costs the newspaper chain didn't attribute to its bankruptcy earlier this year. Last year, Lee had a $1.5 million loss in the second quarter.

Lee's stock dropped nearly 14 percent on the news Tuesday.

"Revenue trends improved modestly," Lee CEO Mary Junck said in a press release Tuesday. Junck touted growth in digital advertising, and reduced costs.

"We continue to transform our business, which allowed us to reduce cash costs 6.1 percent in the March quarter," she said.

Revenue fell 3.6 percent, with advertising revenues continuing to slide; it declined 5.3 percent to $117.5 million, Lee said in a filing Tuesday. Digital advertising bumped 9.9 percent, to $15.7 million.

As a result of continuing layoffs, Lee's total employee compensation dropped 5.2 percent, while the average number of employees was down 7.5 percent.

Junck also reiterated Lee's plans to charge online readers.

Junck was awarded a $500,000 bonus after the troubled newspaper chain emerged from bankruptcy, the firm disclosed in a March regulatory filing.

Junck was paid the half-million dollar bonus by the company's board after the publisher of 50-some newspapers exited a pre-packaged bankruptcy earlier this year. Lee also gave a $250,000 bonus to CFO Carl Schmidt.

A pre-packaged bankruptcy filing by Lee was approved by a federal judge in January.

Lee has been laboring under a $1 billion debt, much of which was to become due in April. The bankruptcy prepared by the chain pushed the due dates back to December 2015 and April 2017, while hiking interest rates from 5.1 to 9.2 percent and diluting the company's shares by 13 percent.

The company contended the Chapter 11 reorganization would give it time to right its finances.

The company reached terms with the majority of its debt holders last year, but had to go to court to force the terms on a minority of its lenders.

While the majority of Lee's debt holders agreed to push back the due date on the loans two years, about 3 percent of the company's lenders were non-consenting, Schmidt said in a release at the time.

Lee owns 48 newspapers around the country, with joint interest in four others, including the Star.

Last summer, the Star laid off 52 workers, including about 15 newsroom employees, in a cost-cutting move.

The company's partner in the Tucson paper, Gannett Inc., is the former publisher of the Tucson Citizen. While the press stopped rolling for that paper in 2009, Gannett and Lee remain partners in the South Park operation.

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Lee took on the huge debt load to finance the 2005 acquisition of the Pulitzer newspaper chain for $1.46 billion, which brought it the Star and the St. Louis Post-Dispatch, among others. Lee publishes nearly 50 daily newspapers across the country.

Part of Lee's debt, $138 million known as the Pulitzer Notes, was inherited with that purchase, and is secured by the assets of the former Pulitzer chain, including the Star.

Lee was faced with having its stock delisted from the New York Stock Exchange after trading below $1 for months. That threat has abated somewhat since the bankruptcy filing, as Lee has traded at slightly more than the dollar threshold.

Tuesday, Lee dropped 18 cents to $1.13, down 13.6 percent, on the news.

In 2004, Lee stock sold for $49.

Paywall prospects

Lee plans to charge readers to access the chain's websites, the company announced last month.

That plan was reiterated in Tuesday's press release.

"Our pay for digital content initiative is on track to have most enterprises operating paid sites by the end of this year," Junck said.

Lee is expected to introduce "digital subscriptions" within three months, and to build paywalls at most of the company's websites by the end of the year, Junck said in March at Lee's annual meeting.

It's not known if the Star will institute a paywall, or what it might cost. Company spokesman Dan Hayes said timing and pricing "will be determined market by market."

Lee rolled out paywalls at its six papers in Wyoming and Montana last year. Readers with a paid subscription to the print newspaper were charged about $20 per year to read stories online, while nonprint readers were charged $50-$75 per year.

The papers let readers access 15-20 stories before the paywall kicked in.

"We're excited about the opportunities we see for digital subscriptions," Junck told stockholders last month.

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1 comment on this story

Apr 17, 2012, 3:00 pm
-0 +0

I’m wondering if Junck’s $500k bonus is included in the -$26m figure. I’m also wondering how a CEO of a company that’s hemorrhaging money like this one is deserves a bonus of any kind. Just sayin’...

I’ll go on record now and predict the Star will indeed institute a paywall. My reasoning is that, for whatever reason, a majority of the commentators on the ADS website disagree with the thinly-veiled heavy liberal slant of the paper. They’re a thorn in the side to the point where the ADS is starting to pick and choose which stories can and can’t be commented on. What better way to get rid of the dissenters than by charging them to read and post?

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Lee CEO Mary Junck