Stock Report for Lee Enterprises Inc. (LEE)

Lee Enterprises (LEE) is a provider of local news and information, and a platform for advertising, in its markets, with 48 daily newspapers and a joint interest in four others, rapidly growing digital products and nearly 300 specialty publications in 23 states. The Company’s newspapers have circulation of 1.3 million daily and 1.6 million Sunday, reaching nearly four million readers in print alone. Its digital sites attracted 21.6 million unique visitors in September 2011. LEE’s markets include St. Louis, Mo.; Lincoln, Neb.; Madison, Wis.; Davenport, Iowa; Billings, Mont.; Bloomington, Ill.; and Tucson, Ariz.

Share Statistics (05-Dec-11)   FY

2009

FY

2010

%

Chg

Q4

2009

Q4

2010

%

Chg

Symbol LEE Revenue, $Mn 842.03 780.65 -7.3% 188.66 187.31 -0.7%
Current price $0.71 Gross marg. 51.2% 52.6% 2.7% 51.8% 52.4% 1.2%
52wk Range: $0.49-$3.47 Oper. margin 18.9% 91.6%
Avg Vol (3m): 198,289 Net margin -14.6% 5.9% 140.4% 2.8% -83.0% 3064.3%
Market Cap. 31.92M              
Shares Outstanding 44.96M EPS, $ 0.83 1.07 28.9% 0.12 -0.75 -725.0%

Source: Reuters.com, SEC Filings.

Investment Highlights

LEE shares advanced as much as 40% in Monday’s trade, following Friday’s report that the embattled media company is preparing to file for a bankruptcy relief.  Shares added $0.18 to close the session at $0.71.  Over 2.03 million traded hands during the session, dwarfing the 10-day average of 194.86 K.  Over the last 52 weeks, the stock has reached a low of $0.49 and a high of $3.47.  It is currently above its 50-day moving average of $0.66 and below its 200-day moving average of $0.81.

Shares of the Davenport, Iowa-based news and advertising services provider have gained 24.6% in the last five days, though the stock dropped 4.1% in the last month.  Year-to-date, the stock is down 65.7%.

In a release on Friday, the Company said it had reached a key agreement necessary to proceed with a comprehensive refinancing of its debt, extending its Pulitzer Notes debt maturity to December 2015 and enabling implementation of the overall refinancing plan it announced in September.

The Company previously said its credit facility will be amended and extended beyond its current maturity of April 2012 in a structure of first and second lien debt.

“This is welcome news for all who have a stake in Lee,” Mary Junck, chairman and CEO of LEE, said in a statement. “While such a filing falls under bankruptcy laws, it differs significantly from most such filings because it preserves interests of our current stockholders and all other parties. In our case, the process will simply provide a favorable legal framework for implementing the pre-negotiated refinancing on an expedited basis while business continues as usual with no impact on employees, vendors and customers.”

Back in September, the Company announced its credit facility will be amended and extended beyond its current maturity of April 2012 in a structure of first and second lien debt. The first lien debt consists of a term loan of $689.5 million, as well as a new $40 million revolving credit facility that is not expected to be drawn at closing, both of which mature in December 2015. The second lien debt consists of a $175 million term loan maturing in April 2017.

Carl Schmidt, LEE vice president, CFO and treasurer, said the Company and its majority-owned subsidiaries expect to initiate the voluntary pre-packaged Chapter 11 filing on or about December 12, 2011.

According to him, the refinancing process is not expected to affect the trading of LEE common stock on the New York Stock Exchange in light of the expected meaningful continuing equity value to be retained by current common equity holders.

Source: http://www.lee.net/newsreleases/pdf/Lee%20NR%20refinancing%20120211.pdf

Financial Summary

LEE reported total operating revenue of  $182.4 million for its fourth fiscal quarter ended September 25, 2011, down 3.3% from last year’s figure.

The Company posted a loss of $0.20 per diluted common share for the quarter, citing impairment charges and other unusual matters.  Excluding those items, adjusted earnings per diluted common share were $0.20 for the quarter, compared with $0.16 a year ago

Operating cash flow increased 2.4% from a year ago to $39.0 million. Operating cash flow margin increased to 21.4% from 20.2% a year ago. Including equity in earnings of associated companies, depreciation and amortization, as well as unusual matters in both years, operating income totaled $5.0 million, compared with $22.6 million a year ago.

Operating income margin was 2.7% in the current year quarter. Non-operating expenses, primarily interest expense and debt financing costs, declined 12.0% to $14.9 million from $16.9 million a year ago. The resulting loss attributable to LEE totaled $8.8 million, compared with income of $5.2 million a year ago.

The Company reported its debt was reduced $10.0 million in the quarter and $87.3 million for the year. Its liquidity at the end of the quarter totaled $104.2 million. Free cash flow totaled $14.1 million for the quarter, compared with $19.6 million a year ago. LEE attributed the decline to capitalized costs related to refinancing of the Company’s debt paid in the quarter.

Source: http://finance.yahoo.com/news/Lee-Enterprises-reports-thomsonreuters-1595592921.html?x=0&.v=1

Financial Strength (05-Dec-2011)

Company

Industry

Sector

S&P 500

Quick Ratio (MRQ) 0.10 1.29 1.14 0.77
Current Ratio (MRQ) 0.11 1.56 1.40 1.14
LT Debt to Equity (MRQ) 41.37 60.67 109.52
Total Debt to Equity (MRQ) 45.05 101.13 147.52
Interest Coverage (TTM) 1.95 0.51 0.32 12.79

Source: Reuters.com, SEC Filings.

Technical Analysis

Source: http://stockcharts.com

LEE is presently near its upper Bollinger Band. This suggests that it is at a high level relative to recent action.

LEE’s MACD is currently indicating a weak bullish signal. Although the MACD is trending above the signal line, the indicator is still below 0, which suggests that the underlying moving averages are bearish.

Comparative Analysis

Company Name Ticker Price per Mrkt. Cap. P/E P/S
Dec-05-2011 symbol Share, $ $ Mn 2011 2012 2011 2012
Gannett Co. Inc. GCI 13.13 3.13B 6.19 6.08 0.60 0.59
Journal Communications Inc. JRN 4.47 249.90M 13.15 9.31 0.70 0.67
Publishing – Newspapers Median       21.45 n/a 0.96 n/a
Lee Enterprises Inc. LEE 0.71 31.92M 7.10 3.55 0.04 0.04

Source: Thomson Financial

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