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Posted Jul 17, 2012, 12:24 pm
Lee Enterprises, the troubled parent company of the Arizona Daily Star and about 50 other newspapers, reported a $1.5 million third-quarter loss, lower than last year's 3Q loss of $155 million. But the company's revenues fell 4.3 percent.
The newspaper chain, which went through a bankruptcy reorganization over the winter, reported Tuesday a loss of 3 cents per diluted common share in the quarter ending June 24. The 2011 third quarter loss was $3.46 per share.
But behind those numbers lies Lee's strategy of cutting costs faster than revenue declines, or, as CEO Mary Junck said in a press release, "Lee continues on course with waves of initiatives to speed the evolution of our business."
Lee publishes the Arizona Daily Star, St. Louis Post-Dispatch, and dozens of other newspapers around the U.S.
'We also continue to transform our business models with initiatives to facilitate innovation and reduce costs' — Lee CEO Junck
While operating revenue totaled $179.3 million for the chain, a decrease of 4.3 percent year over year, the company—which labors under a billion-dollar debt load—chopped expenses by 4.1 percent.
The number of full-time-equivalent employees was down 7.5 percent, while total compensation dropped 3.5 percent. Overall operating expenses were down 4.1 percent.
The one bright spot in Lee's revenue pie was digital advertising revenue, which was up 10 percent, but at $17.3 million amounts to a fraction of combined print and digital revenue - which fell 5.8 percent to $125.3 million.
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Print revenue fell 7.9 percent, while circulation revenue decreased 1.1 percent in the third quarter. Traffic to Lee websites, along with mobile and tablet readership, was up 3.1 percent as measured by unique visitors.
While Lee reported a $26 million loss in the second quarter, and went through a pre-packaged bankruptcy over the winter, Junck characterized the chain's performance as a bump in the road:
"In nearly all our markets, the slow economic recovery seems to start and stall unpredictably, producing erratic overall revenue results from month to month. In May, for example, total revenue equaled a year ago, making it our best month since December 2006. It was sandwiched between less desirable results in April and June, producing quarterly totals nearer the year-to-date trend. With a little more help from the economy, we hope to begin seeing many more upbeat months like May, and better."
Junck was paid a half-million dollar bonus by the company's board after the publisher of 50-some newspapers exited bankruptcy.
Non-operating expenses, mostly interest charges and debt financing costs, increased 32.4 percent in the third quarter. Lee had to agree to nearly double it interest rate on its $1 billion debt as part of the bankruptcy filing.
The paywall cometh
Lee plans to charge readers to access the chain's websites, the company announced in April.
Tuesday, Junck touted the success of the company's paywall plan, saying, "We introduced digital subscriptions in 11 more markets during the quarter, for a total of 17 so far, and expect nearly all of Lee's 52 markets to follow by the end of the calendar year."
It's not known if the Star will institute a paywall, or what it might cost. Company spokesman Dan Hayes said in April that 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 monthly before the paywall kicked in.
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.
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.
Last year, 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 9 cents to $1.42, after trading as low as $1.18.
In 2004, Lee stock sold for $49.