Iowa-based newspaper publisher Lee Enterprises reports $45 million in cuts to print business
After battling a hostile hedge fund takeover, executives at Davenport-based newspaper publisher Lee Enterprises say they're cutting $45 million in costs from the print side of their business this spring.
Chief Financial Officer Tim Millage said during an earnings call Thursday that the cuts followed a 14-week "deep dive" into print finances, looking at distribution, manufacturing, information technology, marketing, finance and content. The company reported a $3 million operating loss for the most recent quarter, ending in March, but also saw growth in its online business, previously announced as the company's priority for the future.
"We have the right strategy," CEO Kevin Mowbray told investors Thursday, reading from a script.
The company did not disclose specific cuts, but the call came after Axios on Tuesday cited unnamed sources as saying Lee will cut 400 jobs this year. That would amount to about 10% of the company's total headcount as of September, when Lee last filed an annual report.
A company spokesperson did not confirm layoffs to Axios or the Des Moines Register but said in a statement, "These reductions are specifically tied to our legacy print business and in areas where we can become more efficient through business transformation."
The company's holdings include the St. Louis Post-Dispatch, the Omaha World Herald, the Buffalo (New York) News and 10 papers in Iowa, among them the Quad-City Journal, the Waterloo Courier, the Sioux City Journal and the Mason City Globe Gazette.
In its report Thursday, the company disclosed that its digital business is growing at about the same dollar-for-dollar amount that its print business is shrinking. Overall operating revenues for the quarter totaled $192 million, down from about $190 million in the same period in 2021.
Lee acknowledges some first-quarter layoffs
Digital subscriptions and advertising revenue was $53.5 million, a $14.6 million increase over last year. The company reported 492,000 digital-only subscribers across its newspapers in 77 markets, up from 450,000 subscribers in the previous quarter.
Mowbray told investors that the company is charging more for those subscriptions after trying to lure readers with heavy discounts. Revenue per digital subscriber was about $20 last quarter, up from about $10 in the previous quarter.
Print subscriptions and advertising revenue generated $121.5 million, a $15 million decrease from last year.
Lee's operating expenses, meanwhile, were $194.6 million — up $9.1 million.
"Restructuring costs" drove the company's increased spending, rising to $10.6 million from $1.3 million last year. Millage told investors that severance packages for laid-off workers made up some of that expense.
Those severance packages would have gone out in the period from January to March, on top of the additional $45 million in reductions that the company disclosed Thursday.
Some jobs lost in Iowa
While the company has not disclosed the impact on its newsrooms around the country, reports of layoffs have trickled out from some reporters and editors who lost their jobs.
Jaci Smith, a newsroom veteran who became Lee's Mason City-based North Iowa editor in 2019, announced Feb. 7 that the company had laid her off. Smith did not return a call or email this week but has landed a job as an assistant managing editor with Law360, according to her LinkedIn page.
Laid off today, friends. Please support local journalism. It's so important. And yeah, send any winning lottery tickets my way. :) #journalismmatters
— Jaci Smith (@IowaJaci) February 7, 2022
In Sioux City, entertainment and features writer Earl Horlyk said company executives have not commented on the Axios report to newsroom staff. They also have not disclosed any plans for future cuts, he said.
Horlyk, a 15-year veteran of the paper and vice president of Sioux City Newspaper Guild Local 37123, said the newsroom has not laid off any workers since 2020, when an editorial editor and the editor of the paper's weekly entertainment publication lost their jobs. He said he has absorbed responsibility for overseeing the weekly on top of his daily reporting duties.
More recently, the newspaper's editors said they would replace a sports writer who is leaving the paper, which other reporters took as a promising sign. At the same time, they were greeted by the empty desks of three advertising employees last week.
"There wasn't any communication from the publisher — at least to the reporters," Horlyk said. "Just one day, Gloria's here. And then Gloria's gone."
He said the newspaper's bargaining unit was meeting Tuesday night to ratify a new 2-year contract with Lee that included 2% raises and a company match to 401(k) contributions, a benefit that Horlyk said the company previously suspended.
Including a janitor and an employee from the circulation department, he said, the bargaining unit consists of about 10 workers. In 2012, according to filings with the U.S. Department of Labor, the union had about 22 members.
In addition to the wage and benefit bumps, Horlyk said the contract includes a guarantee of severance pay should the company lay off employees.
"That was kind of the motivation (for ratifying the contract)," he said. "Just to make sure we're protecting ourselves."
Lee resists Alden takeover bid
Lee purchased 30 daily newspapers from Warren Buffett's Berkshire Hathaway for $140 million in January 2020, just as the COVID-19 pandemic applied more pressure to the advertising market. Lee reported a $1.3 million loss that year, down from a $15.9 million profit in 2019 and a $47 million profit in 2018.
Alden Capital, which owns about 200 newspapers, offered to buy Lee's titles for $141 million in November. The hedge fund has built a reputation in the journalism industry for mass layoffs that harm papers' long-term value and decimate their local journalism, with The Atlantic claiming that the company is "gutting newsrooms" in a lengthy October 2021 story.
To block a takeover, Lee executives enacted a shareholders rights plan that stopped Alden from buying more than 10% of Lee's shares for one year.
After the Lee board denied Alden's takeover bid and blocked its slate of candidates to the board of directors, Alden sued, demanding that its proposed candidates be subjected to a shareholders vote at Lee's annual meeting. A judge ruled in favor of Lee in March.
Tyler Jett covers jobs and the economy for the Des Moines Register. Reach him at tjett@registermedia.com, 515-284-8215, or on Twitter at @LetsJett.
This article originally appeared on Des Moines Register: $45 million in cuts announced by newspaper publisher Lee Enterprises
