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Lee Report Paints an Uncertain Future

Lee Enterprises, the Davenport, Iowa-based publisher that owns the Arizona Daily Star, ended 2008 with an announcement that it might not have the cash flow necessary to handle operating expenses in 2009.

In its annual report, filed with the Securities and Exchange Commission on Dec. 30 after a delay of nearly a month, Lee says the debt incurred from its $1.5 billion purchase of Pulitzer in 2005 has tapped out the company's operating capital.

Lee remains profitable. It has $162 million on hand, but it owes $142.5 million in principal payments in 2009, and $166.3 million in 2010. Lee hopes to extend or refinance $306 million in Pulitzer notes--but there are legitimate fears that Lee will not survive while covering debt obligations and operating expenses.

Lee has been working to rearrange its debt structure, and faces two deadlines: one in mid-January, and another in March.

Locally, the revenue at Tucson Newspapers--the joint operation between Lee and Gannett, which owns the Tucson Citizen--tumbled to $98 million in the fiscal year that concluded on Sept. 30; that's way down from the year before, when Tucson Newspapers brought in $118 million. Expenses were trimmed, but only from $81.5 million to $77 million. That means operating income at TNI slipped from $36.5 million to $21.1 million.

The New York Stock Exchange has filed a formal warning that Lee's stock faces delisting. Lee's stock has sold below the required $1 threshold since Nov. 26. It has six months to reach a dollar--and about a week to explain how it plans to accomplish that goal. Lee stock has been selling for about 40 cents for the last couple weeks.

In addition to its overextension on the Pulitzer sale, Lee is struggling with a dramatic slide in advertising and classifieds revenue that has hindered some of the nation's largest newspaper companies.


RAYCOM, COX REACH BROADCAST AGREEMENT

KOLD Channel 13's viewers may have witnessed a curious message during some of the station's local newscasts on Dec. 30. The Raycom-operated CBS affiliate asked viewers to call Cox Communications regarding the possibility that the station wouldn't be carried on the cable outlet as of the new year, when their agreement expired.

Raycom stations across the country broadcast similar messages; a deal was reached before the deadline.

The Raycom/Cox conflict was dwarfed by another 11th-hour clash: Viacom and Time Warner's agreement was also expiring, and Viacom wanted Time Warner to pay about 12 percent more to carry its channels such as Comedy Central, MTV and Nickelodeon.

Viacom mounted a newspaper campaign claiming that Time Warner was pulling the plug on Dora the Explorer and SpongeBob SquarePants. The campaign clogged Time Warner's customer-service lines, and a deal was reached at the last minute.

More by John Schuster

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