Lee Enterprises, Incorporated (NYSE: LEE), notified the Securities and
Exchange Commission today that it plans to delay the filing of its
Annual Report on Form 10-K until on or before Dec. 29, 2008.
In the notification, which was filed on Form 12b-25, Lee said it needs
additional time to complete the complex calculations required to
determine the extent of additional non-cash charges to reduce the
carrying value of goodwill and other intangible assets, a result of
increasing financial market volatility and deteriorating economic
conditions. The prospect of such charges was announced by Lee in its
preliminary earnings release on Nov. 13, 2008. Lee is also analyzing
certain deferred income tax matters related to its accounting for
intangible assets. None of the matters under review would impact cash
flows, but per share results will be reduced, as will stockholders’
equity.
Lee said it expects the impairment charges to total at least $180
million after tax for the fourth quarter of the fiscal year ended Sept.
28, 2008. A portion of a charge of that magnitude would also reduce the
stockholders’ equity of Pulitzer Inc., a wholly owned subsidiary of Lee,
and trigger the need for the noteholders to waive the minimum net worth
covenant in the guaranty agreement related to the $306 million Senior
Notes (Pulitzer Notes), a debt facility originated in 2000 by St. Louis
Post-Dispatch LLC, a Pulitzer Inc. subsidiary. Without such a waiver by
the noteholders, the reduction in Pulitzer Inc.’s stockholders’ equity
would constitute an event of default in the guaranty agreement. Unless
waived, the condition also would cause a cross-default in Lee’s recently
amended bank credit agreement, dating to Lee’s acquisition of Pulitzer
Inc. in 2005. Notice of an event of default would allow creditors to
exercise certain remedies granted by the various debt agreements.
Timing of the delivery of various financial statements required by the
Pulitzer Notes, guaranty agreement and credit agreement could also be
delayed by the matters noted above, requiring additional waivers from
the noteholders and Lee’s bank lenders.
The Pulitzer Notes mature in April 2009. On Dec. 12, 2008, KPMG LLP,
Lee’s independent registered public accounting firm, formally notified
Lee’s Audit Committee chairman that, in the absence of further
information in support of the Lee’s ability to meet its obligations as
they become due and comply with certain debt covenants, its auditors’
report on the consolidated financial statements for the year ended Sept.
28, 2008, to be included in the Annual Report on Form 10-K will include
an explanatory paragraph relating to Lee’s ability to continue as a
going concern.
Such a modification of the auditors’ report would, unless waived by the
lenders, constitute an event of default under Lee’s bank credit
agreement. KPMG LLP said it will, for the same reasons, also modify its
auditors’ reports on the separate financial statements of Pulitzer Inc.
and St. Louis Post-Dispatch LLC, requiring the need for additional
waivers under Lee’s various debt agreements.
Mary Junck, chairman and chief executive officer, said: "As the economy
has continued to worsen, Lee is actively engaged in discussions with the
noteholders to extend or renew the Pulitzer Notes as soon as possible,
and we are simultaneously working to obtain the necessary waivers under
our various debt agreements. Although the credit markets remain very
difficult, lenders have shown a willingness to work toward acceptable
solutions to help us avoid violating performance conditions in our debt
agreements. Even in this recession, Lee continues to generate
substantial cash flow, and we continue to believe that Lee will emerge
strong when all the national economic turbulence ends.”
Lee Enterprises is a premier publisher of local news, information and
advertising in primarily midsize markets, with 49 daily newspapers and a
joint interest in four others, expanding online sites and more than 300
weekly newspapers and specialty publications in 23 states. Lee’s
newspapers have circulation of 1.5 million daily and 1.9 million Sunday,
reaching more than four million readers daily. Lee’s online sites
attract 12 million unique visitors monthly, and Lee’s weekly
publications have distribution of more than 4.5 million households.
Lee’s markets include St. Louis, Mo.; Lincoln, Neb.; Madison, Wis.;
Davenport, Iowa; Billings, Mont.; Bloomington, Ill., and Tucson, Ariz.
Lee stock is traded on the New York Stock Exchange under the symbol LEE.
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor” for forward-looking statements. This release contains
information that may be deemed forward-looking, that is based largely on
the Company’s current expectations, and is subject to certain risks,
trends and uncertainties that could cause actual results to differ
materially from those anticipated. Among such risks, trends and other
uncertainties, which in some instances are beyond the Company’s control,
are the Company’s ability to generate cash flows and maintain liquidity
sufficient to service its debt, and comply with or obtain amendments or
waivers of the financial covenants contained in its credit facilities,
if necessary. Other risks and uncertainties include the impact of
continuing adverse economic conditions, potential changes in advertising
demand, newsprint and other commodity prices, energy costs, interest
rates and the availability of credit due to instability in the credit
markets, labor costs, legislative and regulatory rulings and other
results of operations or financial conditions, difficulties in
maintaining employee and customer relationships, increased capital and
other costs, competition and other risks detailed from time to time in
the Company’s publicly filed documents. The words "may,” "will,”
"would,” "could,” "believes,” "expects,” "anticipates,” "intends,”
"plans,” "projects,” "considers” and similar expressions generally
identify forward-looking statements. Readers are cautioned not to place
undue reliance on such forward-looking statements, which are made as of
the date of this report. The Company does not undertake to publicly
update or revise its forward-looking statements.
