$45 million in cuts announced by newspaper publisher Lee Enterprises

After battling a hostile hedge fund takeover, executives at Davenport-based newspaper publisher Lee Enterprises said they were cutting costs on the print side of their business by $45 million this spring.

Chief Financial Officer Tim Millage said in an earnings call on Thursday that the cuts followed a 14-week “deep dive” into print finances, looking at distribution, manufacturing, technologies information, marketing, finance and content. The company posted an operating loss of $3 million for the last quarter, which ended in March, but also saw growth in its online business, previously announced as the company’s priority for the coming.

“We have the right strategy,” CEO Kevin Mowbray told investors Thursday, reading from a script.

The company didn’t disclose specific discounts, but the call came after Axios on Tuesday quoted unnamed sources as saying Lee will cut 400 jobs this year. That would represent about 10% of the company’s total workforce as of September, when Lee filed its last annual report.

he Omaha World Herald in downtown Omaha, Nebraska is among the holdings of Iowa-based Lee Enterprises.

A company spokesperson did not confirm the layoffs to Axios or the Des Moines Register, but said in a statement, “These reductions are specifically related to our legacy printing business and in areas where we can become more efficient through business transformation”.

Company holdings include the St. Louis Post-Dispatch, Omaha World Herald, Buffalo (New York) News and 10 newspapers in Iowa, including the Quad-City Journal, Waterloo Courier, Sioux City Journal and the Mason City. Globe Gazette.

In its Thursday report, the company revealed that its digital business is growing at roughly the same dollar-for-dollar amount as its print business is shrinking. Overall operating revenue for the quarter totaled $192 million, down from around $190 million in the same period in 2021.

Lee acknowledges a few layoffs in the first quarter

Digital subscriptions and advertising revenue were $53.5 million, an increase of $14.6 million 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 the company was charging more for these subscriptions after trying to entice readers with deep discounts. Revenue per digital subscriber was around $20 last quarter, compared to around $10 in the prior quarter.

Print subscriptions and advertising revenue generated $121.5 million, down $15 million from last year.

Lee’s operating expenses, meanwhile, were $194.6 million, up $9.1 million.

“Restructuring costs” caused the company’s expenses to rise to $10.6 million from $1.3 million last year. Millage told investors that severance packages for laid-off workers accounted for a portion of those expenses.

Those severance packages would have been paid during the January-March period, in addition to the additional $45 million in cuts the company disclosed on Thursday.

Some jobs lost in Iowa

Although the company did not disclose the impact on its newsrooms across the country, reports of layoffs were reported by some journalists and editors who lost their jobs.

Jaci Smith, a newsroom veteran who became managing editor of Lee’s Mason City in northern Iowa in 2019, announced Feb. 7 that the company had fired her. Smith didn’t return a call or email this week, but landed a job as an associate editor at Law360, according to her LinkedIn page.

In Sioux City, entertainment and reporting writer Earl Horlyk said company executives did not comment on Axios’ report to newsroom staff. They also did not disclose any plans for future cuts, he said.

Horlyk, a 15-year newspaper veteran and vice president of Sioux City Newspaper Guild Local 37123, said the newsroom hasn’t laid off any workers since 2020, when an editor and the editor of the newspaper’s weekly entertainment publication lost their jobs. He said he took on the responsibility of overseeing the weekly in addition to his day-to-day reporting duties.

More recently, the paper’s editors said they would replace a sports reporter who leaves the paper, which other reporters saw as a promising sign. At the same time, they were greeted last week by the empty offices of three advertisers.

“There was no communication from the editor – at least with journalists,” Horlyk said. “Just one day, Gloria is here. And then Gloria is 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 company matching with 401(k) contributions, a benefit that Horlyk said the company had previously suspended.

Including a janitor and a traffic department employee, he said, the bargaining unit consists of about 10 workers. In 2012, according to documents filed with the US Department of Labor, the union had about 22 members.

In addition to salary and benefit increases, Horlyk said the contract includes a severance guarantee if the company lays off employees.

“That was kind of the motivation (to ratify the contract),” he said. “Just to make sure we protect ourselves.”

Lee Resists Alden Takeover

Lee bought 30 daily newspapers from Warren Buffett’s Berkshire Hathaway for $140 million in January 2020, just as the COVID-19 pandemic put additional pressure on the advertising market. Lee reported a loss of $1.3 million that year, compared to a profit of $15.9 million in 2019 and a profit of $47 million in 2018.

Alden Capital, which owns about 200 newspapers, offered to buy Lee’s securities for $141 million in November. The hedge fund has built a reputation in the journalism industry for its mass layoffs that are hurting the long-term value of newspapers and decimating their local journalism, with The Atlantic saying the company is “eviscerating newsrooms” by a long story from October 2021.

To block a takeover, Lee’s executives passed a shareholder rights plan that barred Alden from buying more than 10% of Lee’s stock for one year.

After Lee’s board of directors rejected Alden’s takeover bid and blocked its slate of board nominees, Alden filed a lawsuit, demanding that its proposed nominees be subjected to a shareholder 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. Join it at [email protected]515-284-8215, or on Twitter at @LetsJett.