Lee Enterprises Inc (LEE) 2002 Q1 法說會逐字稿

Good morning, my name is

and I will be conference facilitator today. At the time I would like to welcome everyone to the Pulitzer first quarter earnings conference call. All lines have been placed on mute to prevent any background noise. There will be a question, answer session. If you would like to ask a question, please press star, then the number one on your telephone keypad.

Leading today's calls will be Robert Woodworth, President and Chief Executive Officer, and Alan Silverglat, Senior Vice President of Finance. Today's conference is being recorded and will also be available via the website at www.pulitzerinc.com. The website will be available until Friday, May 24th, a replay for this conference will be available through April 30th.

Statements on this conference call concerning the company's business outlook or future economic performance, anticipated profitability, revenues, expenses, or other financial items, together with other statements that are not historical facts are forward looking statements. As such when it's defined through the federal securities laws. Forward looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from those aided in such statements.

Such risks, uncertainties, and other factors include but are not limited to the seasonal nature of the business, changes in pricing by competitors or suppliers, including newsprints, capital requirements and

economic conditions. Any of which may impact advertising and circulation revenues and various types of expenses, as well as other risks, details in the company's filings with the Securities and Exchange Commission.

Although the company believes that the expectations reflected in forward

statements are reasonable, they can not guarantee future results, levels of activities, performance, or achievements.

Thank you gentlemen, you may begin your conference.

Thank you,

. Good morning. We appreciate you joining us. I'm Bob Woodworth, president and CEO of Pulitzer. Earlier this morning we released our financial results for our 2002 first quarter. With me today are Alan Silverglat, Senior Vice President, Finance,

Vice President and Publisher of the Saint Louis Post Dispatch. And

our Senior Vice President of Pulitzer Newspapers Inc.

I'll start today by spending a few moments reviewing the first quarter. Alan will then provide more detail about the numbers, and then we'll open it up for your questions. Now then, our results. Net income from continuing operation for the quarter was $6.8 million dollars or 32 cents per diluted share. This result include a non-operating investment valuation and adjustment.

Earnings absent this items, or base earnings, would have been 34 cents per diluted share. Overall this was an encouraging quarter, one in which we saw positive contributions from our revenue growth initiatives and our cost control effort. As a result, and with the help of lower newsprint prices, on an apples to apples basis, that is excluding

amortization from both years, operating income was actually up 3.5 percent.

Overall we believe the steps we have been taking have us well positioned to take full advantage of any economic upswing that may occur. Our strategies flow from having a broad portfolio of products that meet the needs of both readers and advertisers. We realize the value of that portfolio by keeping our focus local and managing our local retail sales territories for maximum productivity.

Each of our markets we are being opportunistic on rates and executing specific programs that could help us take share of other media. In that

need strategies, our objective to achieve base earnings growth meaningfully greater than that of other newspaper companies in comparable markets. Now turning to the first quarter performance.

The

revenue, that is revenue excluding the impact of the properties bought in 2001, or comparable non-ownership periods, declined 1.9 percent for the quarter. Comparable ad revenue was down 2.2 percent for the quarter, a marked improvement from the 6.7 percent decline in the, in the fourth quarter. Comparable retail revenue including preprints was up 6.6 percent in the first quarter. And we, we continue to see gains in our local retail territories.

Which is one of our key growth initiatives. National ad revenue was up 5.3 percent after being up 2.3 percent in the fourth quarter, and circulational revenue rose about four 10ths of a percent. As was the case throughout last year, comparable revenue declines were greatest in classified advertising, which were down 13.2 percent for the quarter. Most of the classified decline came in help wanted, which was down 35 percent in St. Louis, and 32 percent in Tucson.

We did see some improvement in help wanted for both properties in March. Now I'll briefly discuss each of our three operating groups. In St. Louis ad revenue was down 3.5 percent for the first quarter, compared to 7.1 percent in the fourth quarter of last year. Retail was strong. Retail revenue including preprints, up 7.3 percent for the quarter, compared with a decline of 3.8 percent in the fourth quarter of 01.

We continue to see weakness in help wanted. At the Post Dispatch, the other major classified categories showed mixed results with automotive up 9.6 percent and real estate down 4.4 percent. Our acquisition of the

Journals has enabled us to sell St. Louis market as a package to national advertisers. We continue to take advantage of that opportunity in the first quarter, helping to drive a national

advertising increase in St. Louis of seven percent.

Looking at online operations, in St. Louis the online offerings including our core site, STL Today Dot Com, averaged four million page views per week in the first quarter, making them the

the most popular local site in St. Louis. During the first quarter, we named

formerly VP of Marketing at the Post Dispatch, as General Manager. Our focus is on driving online revenues by leveraging our St. Louis portfolio.

And we've made online

priority. We've all partaken steps to reduce our costs. Turning now to Pulitzer Newspapers Inc,

comparable ad revenue was up 1.4 percent for the quarter, compared with a 5.6 percent decline in the fourth quarter. Just as in St. Louis, we are seeing

local retail territories rather

markets. As a result of our increased sales activity and management of rate structures.

P And I Newspapers increased the number of active advertisers by 15 percent in the first quarter following an increase of seven percent for the full year in 2001. P And I, P And I, being media operations, also continued to be an effective and profitable compliment to our print properties. Traffic is strong with a weekly average of 1.8 million total page views in the first quarter. In Tucson, ad revenues were down 9 percent, a noticeable improvement over the fourth quarter.

The first quarter decline, though, reflects weakness in both help wanted classified and retail. Looking now at expenses on a consolidated level, our focus on operating costs continued in the first quarter as comparable expenses decreased 3.4 percent due primarily to lower newsprint costs. Alan will provide some additional detail on our cost control programs. Looking ahead, we continue to expect base earnings per diluted share from continuing operations to be in the upper end of current analysts' estimates.

Which range from $1.44 to $1.67. Even if revenues are unchanged from last year. We will review our earnings forecast within the next month or so, assessing the impact of an economic environment that appears to be improving. As I noted previously, the implementation of new accounting standards will, over the course of 2002, eliminate amortization.

That amounted to 69 cents per diluted share in 2001 and we currently do not expect to take any impairment charges. In summary, we continue to believe we have the right strategies in place in each of our markets, and we're executing those strategies vigorously for benefit readers, advertisers and stock holders. The initiatives we undertook throughout 2001 are both eliminating costs

have left us in a good position to deliver growth. Now I'll turn it over to Alan.

Thank you Bob, and good morning everyone. As Bob indicated, I will review our first quarter results in a little more detail. Starting with earnings per share, we report net income from continuing operations of 6.8 million, or 32 cents per diluted share during the quarter. At detail, when released, these results include a pre-tax charge of 750,000 dollars, which

a carrying value investment.

Earnings from continuing operations absent this item, our base earnings, would have been 34 cents per diluted share in a quarter. Operating income from continuing operations for the first quarter increased to $17.1 million from $11 million one year ago.

In 2001, operating profits to remove amortization of intangible assets no longer

in our Financial Standard Number 142 produces a comparable 2001 operating profit level of 16.3 million.

The

quarter to quarter increase in operating profits are 4.5 percent. The operating profit increase results principally from a decrease, number one, a decrease in revenue from continuing operations, at 1.3 million or 1.3 percent. As Bob discussed, this decline was weak classified advertising, principally help wanted in our larger market, largely offset by growth in retail advertising in St. Louis and P And I, and national advertising in

.

27 percent, or 4 million dollar decrease in newsprint costs principally are the

of a 20 percent price decrease.

A payroll reduction of 3.5 percent, rising principally from the elimination of about 145

's. Four, increased distribution costs in St. Louis on the year over year infrastructure build that exceeds costs reductions to date. We expect those costs to decrease over the course of 2002.

Five, an increase our

of $450,000. These are principally all of the revenue generated from the three markets during the quarter. We will

these reserves if cash comes in, which should begin to do in April. And finally, in tangible asset amortization decreased by $5.3 million under the provisions of Financial Standard 142. We are pleased with the advertising revenue trends documented in our press release.

When our revenues are adjusted to include the 50 percent of Tucson that influences our consolidated results, combined advertising revenue declined by 3.1 percent in the first quarter of 2002. This compares to a comparable revenue decline in the fourth quarter of 2001 of 7.6 percent. Finally, Pulitzer ended the quarter in strong financial position, with cash reserves around $164 million.

The $30 million dollar decrease from year end reflects

funding, certain employee benefits,

and circulation

in St. Louis. Now I'll turn the call to, back to Bob.

Thanks, we'll pause and take your questions now.

Thank you. I would like to remind everyone, if you would like to ask a question, please press star, then the number one on your telephone keypad. Your first question comes from

of Merrill Lynch.

Hi there, thank you. Just a couple questions. One, could you drill down a little bit more in St. Louis and help us understand where this

in retail came from. Were there new

or specific retailers that were strong? I'm wondering also if you could quantify, if you thought there was any impact from Easter, I know it benefits retail and hurt classified, but whether you thought that influenced a result at all in March in particular.

And then what you're seeing in April so far, in terms of ad revenue trends.

Good morning

, it's Bob. I'll let, since your question really focused on St. Louis, I'll let Gerry take the lead on it.

, yeah actually there were a couple of new markets, major accounts,

electronics and home goods were two of the notables. We also some expansion in the home improvement categories on the major side. But we also saw continued growth in the local retail territories, active advertisers were approximately 10 percent for the quarter, and again that was coming off a pretty good base from last year.

So we're very encouraged by that. There was some softness with the major department stores, but, we're seeing signs that their business is picking up, so we're a little more optimistic for the balance of year there. And there will be a, a new mall, a reopening if you will, later this year, that will include Nordstrom, Century, the market that, that will be in the late third quarter. Regarding Easter, you, you nailed it.

You usually do see some pickup with the retail side and some, some hits at classified overall. But coming out of that, so far in the fourth period, you know it's been, it's been a bit of a mixed result on the retail side. We had, you know, a couple of very good weeks and one that was a little bit softer.

And April trends, I guess, over all?

Overall April trends, right now, you know, still continue to look pretty decent.

Will we see sequential improvement for March?

Yeah, just a little bit too early to tell.

I thank you.

Your next question from

of A.C. Edwards.

Thank you. I was, I have quite a few questions here. I was wondering if you can quantify the impact from the, the Rams and Super Bowl features that you had in the quarter. And then also you can talk about the rate increases that you've managed to pass along in aggregate, that you mentioned in, at the P And I Group end in St. Louis as well.

And then, finally, if you could talk about Tucson, and it seems like it's gonna perform relative to what you've seen in St. Louis and at the P And I Group. And if you can add some color on weakness in the

picture there. Is it a management issue or can you talk about what the economic situation might be in Tucson there.

Okay, Mike, good morning.

Morning.

I'll, I'll let Terry talk about the Super Bowl and also the rate increases in St. Louis. He can be joined by Mark on the rate increases. Then I'll, I'll comment on Tucson.

Okay Michael on the, as we talked before, that was an expensive field goal at the end for us. But basically we, we, we attributed about $600,000 of incremental advertising, circulation, revenue to the Super Bowl, offset by just over $100,000 expense from non-newsprint investments there. And you know, we think that that number would've been, like I say, north of a million had, had we won the Super Bowl. Regarding the rates, again we, we try to be strategic with rates.

It isn't always just raising rates, sometimes it's in, in, in, in setting volume. And we're seeing some of that pay off in the retail side. We had a particular opportunity in the preprint category and again we had quite a ways to go just to get close to our peer group. And so we tried to exercise that. But some of those advertisers are able to now buy the market more efficiently also. We have introduced now one stop shopping for preprint buys for all of St. Louis.

So that they can buy a combination of the

and the Journals. And the major accounts seem to be pretty pleased about that.

Michael, I, I would just say that the, that the P And I Group, that we, we view rates on a market by market basis and deeper than that we, we go category by category by

. We just got finished with a, a rate strategy process in each of our markets and what you're seeing in the first quarter is partially a result of that, but partially a result of extra sales pressure as well as a focus on, on active advertisers, and the benefit of some of the acquisitions we made last year.

Where we now have a greater share of, of advertising in most of our markets, and that's what we attribute much of the increase to.

Mike could I just, before I talk about Tucson, I'd underscore a point really from

's question. But the growth of active advertisers at P And I and in St. Louis is a very encouraging trend. As, as you're aware, that is one of, in my view, it's one of the primary indicators of the health of the, of the newspaper or publishing property. So we're really pretty encouraged there. Tucson, without talking about the past, legally we really do have some up side there.

To apply some of the same methodologies that we were using in St. Louis and, at the P And I papers. Fortunately we've gotten, particularly recently, good support from our partner there,

and we had a meeting out there in January with, and we spent about four hours really reviewing the very specific strategy to grow revenue. So we hope we see some, some beneficial results from that.

One other thing in Tucson, I think I've mentioned this on previous calls, is obviously help wanteds an issue, but in addition to help wanted, we've not had the, the growth in automotive there that we've had in both St. Louis and at the P&I papers. That really

on a particular situation there that developed over a number of years which we had to address. But we have addressed it and we're moving pretty aggressively to grow that business.

And over all

you, you can't quantify what the rates have gone up though? I know that you're, you're trying to say that it, some of it's volume and

but you're, you don't have a, an aggregate rate increase that you had for either the St. Louis or P And I Group?

Well Mike, we had aggregate rate increases. I mean, if we look at internally. But I'd just as soon, you know, not comment on that directly. But I think the important point there is that we look at rates very, very carefully. I mean, by volume, in some cases by advertiser. And I think that focus on the, you know, the specifics somewhat are

categories within the weight structures is really how you drive rates. So, we're selective in terms of categories of advertising volume breaks, those kinds of things, where you, where you're always trying to get the rate that's it's

for advertisers.

And within the last few weeks have we seen a marked improvement in, upon it advertising particularly in

with some recent aerospace ones?

Well we're, I'll comment on this too. March was better in help wanted. The early look for April continues to look better. So we're really, we're somewhat encouraged by that. But we don't want to get too far ahead of ourselves because with from my experience in an uncertain economy help wanted can be pretty capricious.

And you're meaning, you're statement that it's improved meaning that it's climbed from the last that it was in March or are you're saying that it's up?

No. Declined is less.

No

Right. Okay.

Yes, Michael, we had as you recall some very tough accounts that were particularly relative to the industry and help wanted for the first quarter. Because we were, we performed much better than our pier group of first quarter of '01 but as Bob said that we saw a slight improvement on that trend in March and April does look more favorable but we're not ready to celebrate that quite yet.

Okay thank you very much and congratulations on a pretty decent quarter given the environment.

Thanks Mike.

Okay and if you would like to ask a question, please press the star then the number one on your telephone keypad. Your next question comes from James

from CSSC.

Yes, good morning. Alan you mentioned that spending for distribution in St.. Louis is currently seen in the cost reduction there. And you said that would improve in the future. I was wondering if you just had any time length for that and if you could remind us what steps you're taking with that. And also if you have an aggregate non-newsprint cash expense number for the quarter?

Yeah, sure. The activities in which we'll, or I'll speak to the activities underway first. They're really multi-faceted. But they're all directed to giving the daily newspapers to a lot of home delivery readers and our single copy distributors. But as they're more reliably and at a lower cost. The, and then secondarily or as importantly, to just increase the effectiveness of the circulation sales activities that were, you know, that were present when our carriers owned the routes.

The process to get there is

actionalize the activity and bring it, you know, under rational management. We own about two-thirds of the home's delivery routes and less than that, or around half, I believe, of the single copy routes. The pace of which we proceed is a matter of negotiation with the route owners. It has shows in our financial statements that there's litigation that is part of that but nevertheless purchases continue.

The actual pace of that it's hard to predict given

. It's also geared by how many we can effectively accommodate at any one point in time. So there's just the natural pacing the work as well. Another big effort is the plant expansion in St.. Louis that we previously discussed with you that will consolidate three facilities into one and derive some cost savings there. That product should be complete within the third quarter of this year and we'll see additions as well.

James, this is Bob. The way to think about the circulation issues is we have created FDL Distribution as a separate company to distribute not only the Post Dispatch but other products within the St.. Louis market. And if you think about it, you need to build up that infrastructure to handle what is really the quite complicated issue day in and day out before you can totally rationalize the

associated with the tradition structure.

So we're kind of in that bridge area right now. But, as we said in the script we certainly expect our costs on a year to year basis for that component to come down at the end of the years. I think we're kind of on under that bubble now but there's good news ahead.

Get and then actually the

non newsprint cash?

We allow newsprint expense has increased 1.3 percent, quote, unquote.

Great. That's good details. Thank you very much.

Thank you.

At this time gentlemen there are no further questions. You do have a follow up from

of A.C. Edwards.

I was wondering in terms of your guidance, you said that it was at the upper end of range and you also, because of that, you might relook at that guidance in terms of the economy which appears to be firming. And I was just wondering in terms of the current expectations of the guidance, what are your expectations for the balance of the year given what you currently have out there in terms of the economy, in terms of what your seeing in newsprint and so forth?

Michael this is Alan. The range for right now is fully, fairly broad and we're comfortable saying that we'll be in the upper end of that range. Some of the questions eluded to, we'd like to get April under our belt, make sure that we understand any shift that may or may not have occurred and we will have looked to supply, I think, some documents that would make it easier for you all to tie in your range.

We'll be a little more specific, certainly, about the second quarter. And so that should follow the April close.

Okay and in terms of newsprint prices do you have, I know that the Dow is probably both reported to you right? Do you have any expectations with your guidance in terms of newsprint prices?

Well our guidance anticipates some sharp price increases in the second half of the year. So if that doesn't occur, you know, we appreciate

from our projections.

Okay great, thank you.

At this time there are no further questions.

Good. Thank you. Just a closing comment here as I said

that I think this was an encouraging quarter for us. We stuck to our plan and we executed on our strategies, I think during some tough periods. And we're really beginning to see the benefits of our revenue and cost control initiatives. We remain confident that our

market and our ability to leverage our portfolio products will enable us to deliver value market by market in the coming year. Again we appreciate your time and thanks for joining us.

Thank you again everyone for your participation in Pulitzer's first quarter earnings conference call. This does conclude the conference, you may disconnect at this time.

Thank you,

.

You're very welcome.

END