Lee Enterprises Trims Employee Benefits, Cuts Corporate Bonuses

By Robert Struckman, 10-31-08

At early morning meetings today at the Missoulian and other Lee Enterprises newspapers across the state and the nation, company officials announced plans to suspend profit-sharing with most employees, cut by half the company’s matching contributions to employee retirement accounts and suspend corporate executive bonuses for the year.

In addition, Lee Enterprises announced yesterday it had refinanced its $1 billion debt load and, as a condition of the deal, suspended dividends to shareholders.

Lee newspapers have significantly cut staff across the company in recent months in an effort to cut costs in the face of declining ad revenues and rising production costs.

These developments come as the newspaper industry suffers both advertising shortfalls due to the national slowdown and a broader media shakeout as online competition continues to erode newspapers as a business model.

In June, 2005, the Iowa-based company, then mainly a collection of small- and mid-sized newspapers, purchased the storied Pulitzer Newspaper Co. in a $1.46 billion debt-heavy deal described at the time as a minnow swallowing a whale. Since the purchase, Lee has paid down its debt by about $486 million, executives reported.

Yesterday’s debt restructuring will raise interest rates on some of the debt while allowing the company more flexibility in its repayment.

The compensation changes, which are roughly equivalent to slightly more than a 7 percent pay cut, will trim the company’s match for employee retirement accounts from 5 percent of an employee’s income to 2.5 percent, several sources reported. The changes will go into effect in December.

Lee officials remain upbeat about the company’s future profitability.

“We remain confident that Lee will emerge strong when the economy improves, but current trends indicate a need for this additional flexibility in meeting our debt obligations,” said CEO Mary Junck in the press release. “We look forward to the time when we can reinstate an appropriate dividend.”