I'm no accountant, but the news today from Lee Enterprises -- parent of the Journal Times -- is dire.
The company sent out its Annual Report -- delayed more than two weeks -- as well as a notice from the New York Stock Exchange saying it is in non-compliance with NYSE listing standards, and de-listing from the exchange is a distinct possibility, unless it gets its stock price up over $1 and its total capitalization up over $25 million. Lee has 10 business days to respond to the NYSE with its plans for compliance.
But it is in the 190-page Annual Report where the real disaster is enumerated: Lee reported a loss to stockholders for the year of $888 million, and an operating loss of $1,049,000,000. Lee's accounting firm raised "substantial doubt" about the company's ability to continue as a going concern.
Wrote KPMG LLC of Chicago: "Our report dated Dec. 31, 2008, contains an explanatory paragraph that states that the company has short-term obligations that cannot be satisfied by available funds and has incurred violations of debt covenants that subject the related principal amounts to acceleration, all of which raise substantial doubt about its ability to continue as a going concern."
Lee reports that required debt payments of $142 million in 2009 "are expected to exceed the Company's cash flows available for such payments." (Another $166 million is due in 2010.) The company says it will have to tap its revolving credit to fund some of the 2009 and 2010 debt payments. Lee's total debt is $1.3 billion.
Lee also reported that "certain covenant violations" relating to its debt from the 2005 Pulitzer acquisition were waived in December 2008 -- at a cost of $1,874,000. Another credit agreement was amended -- at an additional cost of $6,277,000.
Overall, "Loss to common stockholders totaled $888,747,000 in 2008, compared to income available to common stockholders of $80,999,000 in 2007." Per share, that works out to a loss of $19.83 in 2008 for each share of Lee stock, compared to earnings of $1.77 per share in 2007. Pity, too, the poor Lee employees who bought a total of 73,000 shares of Lee stock in 2008, at an average price of $5.20. At the close of business today, each of those shares was worth 41 cents, which actually is up from where it's been lately. Nor did the company fare well with its own stock repurchasing efforts: it bought 1,722,280 shares at an average price of $10.98 apiece during 2008, spending almost $19 million on what today would cost $706,000.
Lee reported reducing operating expenses by 3.2% in 2008 "and expects to reduce such operating expenses by an additional 7-8% in 2009. Such expense reductions are not expected to significantly impact the Company's ability to deliver advertising and content to its customers," the report states.
Lee was not alone in 2008. The 14 major newspaper publishers in the U.S. lost a total of $64 billion in market value this year, according to an industry blog, Reflections of a Newsosaur.