LEE dropped from S&P Midcap 400

We've given a break to Lee Enterprises, parent company of the Racine Journal Times, in recent weeks, as the stock market has pummeled its stock.

It's been up and down: In July and August, it closed below $3 a share -- bad -- only to recover to $4 -- good. The company declared its regular dividend -- good -- but various investment funds divested their shares -- bad. Various Lee papers have been shedding staff -- most notably its Montana operations these days -- and others have been cutting newshole; the Wisconsin State Journal in Madison, Lee's flagship in the state, just yesterday announced it would reduce the number of sections printed daily.

More bad news came today. After the market closed, with the stock up 13 cents to $3.36 per share, Standard and Poor's dropped LEE from its S&P Midcap 400 index. Lee's market cap -- the total value of its shares -- is at $151 million, putting the company 400th in the listing. The change -- LEE will be replaced by United Therapeutics Corp. (UTHR), market cap $2.48 billion -- will take place after the close of trading Friday, and may further decrease demand for the stock, as investors and funds who buy the index divest.

Quite a comedown from Lee's $2.2 billion market cap back in 2004 before it bought Pulitzer newspapers for $1.46 billion. Ah, those were the days.

Lee president suggests end to holiday newspapers

A holiday from the Journal Times?

Hey, this wasn't our idea! Rather, it comes from the most unlikely of sources: Mary Junck, President, CEO and chairman of the board of Lee Enterprises, parent company of the Journal Times, 70 other dailies and 300 or so Pennysaver look-a-likes.

As everyone knows, newspapers are having a tough time, thanks to the desertion of both advertisers and readers, their twin raison d’être. Everyone in the industry is looking for ways to remake their newspapers and their business model. The Capital Times in Madison dropped its daily print edition entirely in April, leaving itself a web presence and two weekly tabloids. In September, the Superior Daily Telegram will go from a six-day daily to a twice-weekly. The Boston Globe has suggested that all its employees agree to a 10 percent pay cut. The Chicago Tribune and other papers in its chain have shed 500 pages weekly. Some newspapers have sold their buildings and presses, and outsourced printing; one California group cut its news staff from 48 to 10. Believe it or not, some newspapers have sent ad production, copy editing and even some reporting to India! And so it goes.

And now Mary Junck has come up with another idea. Here it is in her own words:

"There was a time when no one published on holidays. Maybe we should go back to that concept. We're considering the idea now."

Junck's suggestion came in an article published today in Editor and Publisher, the news industry's house organ (or at least it was years ago when it was the weekly source of happenings in the newsprint world and the best source of industry help wanted ads, yeah!; now it's on the web and published monthly, without so many help wanteds, donchaknow). The special report, Turn and Face the Change -- With Newspaper Industry in Crisis, 'Everything's on the Table,' quoted many industry leaders and their ideas for the future.

There was no elucidation from Junck; no information about how seriously the idea is being considered within Lee, no hint whether newsroom employees would be paid (HA!) for those unworked holidays. (They now get a day off, plus time-and-a-half for work done on the holiday.)

The article was full of more outside-the-box thinking; in many smaller communities, for example, you won't have to wait for actual holidays to break free from the daily newspaper habit -- how about newspaperless Mondays? And Tuesdays? Both are traditionally light on advertising which, as we all know by now, pays the freight. Monday publication has already been dropped by the Monmouth, IL, Daily Review Atlas and the Kewanee, IL, Star Courier.

If there are still any newspaper junkies out there, you can read E&P's entire article HERE. Oh, and don't worry about the advertising-insert-filled Thanksgiving Day newspaper; for most newspapers that's the most profitable edition of the year. Trust me; that will be the last to go.

Lee's second-largest investor bails...

Speaking of the stock market -- as we were in the previous post -- there's more bad news today for Lee Enterprises, parent of the Journal Times and 50 other dailies, including the Wisconsin State Journal in Madision.

Yes, Lee's stock is still down -- it's at a 28-year-low -- although unchanged this morning at $3.34 per share, up from its $3.16 low earlier this week. But the news is that Lee's second-largest shareholder, FMR LLC, a Boston investment company that had held a 13.12% stake in the company, has sold all but 1.2%. Putting those percentages against Lee's 44.9 million outstanding shares, means FMR has sold approximately 5.3 million shares. Just a year ago, those shares were worth $112 million; today, they'd bring just $17 million. Ouch!

(Of course, the stock market being what it is, somebody had enough confidence in Lee to buy all those shares FMR sold... )

Lee is, by no means, the only newspaper company having an annus horribilis, as the Queen might put it. Two other chains also hit all-time lows this week, and three more are at their lowest point in over a decade. Newspaper junkies go HERE for the details. The rest of you, go out and buy a paper, even if just for the horoscope and crossword puzzle, or to train the puppy on.

LEE's roller coaster ride continues...

(Updated below at the end of the orignal post.)

Ya gotta love some financial analysts. After the barn door has opened and the livestock escaped they tell you it might rain next week.

And so it goes with Deutsche Bank and its analysis of Lee Enterprises (NYSE:LEE), parent of the Journal Times, which we told you yesterday was having a particularly bad year (and in April, and in January, and...)

Today Deutsche Bank downgraded its recommendation of Lee to "hold." In other words, kids, don't rush out and buy any ... even though the price OMG! OMG! OMG! has just fallen through the floor again! Yesterday, it dropped 41 cents, to yet another historic low of $3.99 a share. (Remember, it had been at $49 four years ago, and at $21 last year at this time.)

Well, that was so yesterday. This morning, Lee fell another jaw-dropping 53 cents; it's down to $3.46 a share as I write this. (A 27-year low, according the Associated Press.) There was no apparent reason for today's decline, except for Deutsche Bank's downgrade, which is plenty.

Deutsche Bank has lowered its price target from $14 (good luck with that!) to $6 (ditto).

StreetInsider.com writes today:

Deutsche Bank cited a difficult ad environment, no foreseeable positive catalysts, and concerns over the company’s leverage as justification for the Hold rating.

In addition, the firm said, "Lee is trading at 6.4x FY08 EV/EBITDA, slightly above the newspaper peer average of 6.2x. We believe a premium to the group is warranted due to the company's small/mid-sized market portfolio, which gives LEE a superior growth profile. Our DCF suggests a $6 value, while our ROIC analysis points to $7. Nonetheless, the increasing possibility that LEE may have to obtain covenant relief, cut/suspend its dividend, or take other emergency actions leads us to conclude that the shares will continue to trade below fundamental value."

Lee wasn't the only newspaper stock hammered yesterday. MediaGeneral also fell 9%, and McClatchey -- stumbling over its purchase of Knight-Ridder much as Lee has suffered from its acquisition of Pulitzer newspapers -- fell 5% and was kicked off the Russell 1,000 list of America's largest publicly traded companies. Editor & Publisher magazine's story of yesterday's declines is HERE. No doubt there'll be more to say tomorrow...

Overall, the value of 11 major newspaper companies has dropped $23 billion in the past six months, according to an industry blog, Reflections of a Newsosaur. Now, don't you feel guilty for having taken two papers from that newsrack when you were a kid? Here's the chart they prepared. As always, click to enlarge:
Update, 7/2: OK, it's now the tomorrow we were talking about yesterday. LEE opened badly, dropping to $3.19 a share before climbing back to around $3.40. More speculation came from an article in the San Diego Reader, where Don Bauder wrote about "Newspapers' debt dilemma." Here's what he had to say about Lee:

Lee Enterprises... was supposed to feast on its collection of smaller papers with little competition... But Lee piled up a lot of debt to buy a big paper, the St. Louis Post-Dispatch, along with too many smaller ones. In its most recent quarter, Lee lost $713 million. In the quarter a year earlier, it had made $11.2 million. A year ago, the stock was above $20; now it’s around $4. The dividend yield is above 17 percent. Obviously, that won’t remain. “Lee Enterprises’ financial health is poor,” says analyst Tom Corbett of Morningstar, a stock-rating firm. “Lee has assumed a substantial debt load from its earlier acquisitions, and the company is closing in on the upper limits of its debt covenants.” That is a polite way of saying that it could default on its debt.

As have other reporters, Bauder notes that some other newspaper chains are in worse shape than Lee. He cites Gatehouse Media, an upstate New York chain:

GateHouse’s stock has plunged 85 percent. It’s now below $3. Astonishingly, the company has not dropped its dividend. The yield is almost a staggering 33 percent. I asked the company’s vice president of investor relations, Mark Maring, if he gets any questions about that yield. “Every day,” he joked. Don’t expect that dividend to last.

As LEE climbed to $3.38 this afternoon, its dividend yield is 22.3%. GateHouse Media, at $2.41 per share, is holding at 33.2%...

Your incredibly shrinking 401k ...(unless you invested in Twin Disc or CNH)

Three-year comparison (click to enlarge)

The stock market, once again, is not for the faint-of-heart.

Sad to say, the one sure-fire way to make $1,000 in the market -- start with $10,000 -- has come true for Lee Enterprises, the parent company of one key Racine employer, my old hangout, the Journal Times. (Full disclosure: I own none of the following stocks, and my own portfolio is nothing to brag about.)

Lee Enterprises shares fell to $3.81 this morning, a quick drop of almost 13% in the opening minutes. As I write this at about 10:30 a.m. it's "recovered" some of today's decline and has leveled off, back "up" to $3.97.

What a $4 per share price translates to is this:

If you had bought $10,000 worth of Lee stock five years ago, when it was selling at $38.13 per share it would be worth only $1,049 today.

If you had bought $10,000 worth of Lee stock one year ago, when it was selling for $21.16 per share, it would be worth $1,890 today. That's a decline of 81% in one year, 89% in five.

Lee is faring worst of all the local nationally listed companies I checked -- blame its industry more than its management -- but the situation for all of you whose 401k's are heavy in your employer's stock aren't doing much better.

--Marshall & Ilsley (parent of M&I Bank) hit $15.26 this morning -- it's back "up" to $15.50 -- compared to $48.03 a year ago, and $30.96 five years ago. That's a 67% drop in one year, and a 50% drop over five.

--Modine Manufacturing, at $12.92 today is off 32.9% from five years' ago, when it was at $20.16, and down 43% from last year's $22.60.

--Johnson Outdoors -- the only publicly-owned portion of SC Johnson -- is at $15.60 today, down 22.73% from last year's $20.39 on this date, but up 18.6% from its $13.15 per share price five years ago.

--Another local company with mixed results -- terrific over the past five years, not so hot this year -- is Case New Holland. CNH stock is at $33.85 as I write this. Five years ago it was selling for $9.65, a gain of 259%! This year, not so good: it's dropped 33% from its selling price of $51.09 on July 2 last year.

Racine has one real winner over both the five-year and one-year timeliness: Twin Disc. At $21.16 as I write this -- up 90 cents this morning! -- TWIN is still on a tear. Five years ago, the stock was selling for $1.83 per share. The five-year gain: 1,097%. In the past year, the stock has climbed from $17.97, a one-year gain of 17.75%.

Back to Lee. The blogosphere has been unrelenting recently, about the future of newspapers in general. The phrase "newspaper death watch" shows up more and more, as newspapers throughout the U.S. continue to cut staff -- about 1,000 journalists were laid off last week alone, One major publisher said recently he believed 19 of the nation's 50 largest newspapers were losing money, and he predicted that at least one major city newspaper would fold.

Lee is at the center of these death watch speculations, because of its $1.4 billion purchase of Pulitzer Newspapers three years ago. Total Lee capitalization -- share price times the total shares outstanding -- fell to $179 million today, an amazingly low figure, given Lee's ownership of 50 dailies and hundreds of weeklies and shoppers. At current prices, Lee would be a steal -- except for the fact that it still owes $1.3 billion for the Pulitzer purchase...

One area where Lee as an investment absolutely shines is its dividend. Thanks to the decline of the stock price, anyone who buys LEE now at $4 or so will receive a 19% annual dividend (19 cents per share, per quarter). But, although Lee has never missed a quarterly dividend in the almost 30 years I've followed the company, that dividend may be in jeopardy. The website Stockhouse, in an article about Gatehouse Media, a troubled New England newspaper owner (its stock has fallen from $19.60 to $2.79 in the past year), said it is "likely to suspend dividends and begin the sale of its properties." That's Gatehouse, not Lee. But the article concluded: "Newspaper chains McClatchy and Lee Enterprises may be facing the same fate." So if you're looking for dividends, caveat emptor.

The website 24/7 Wall Street recently rated Lee as having a 1 in 15 chance of filing for bankruptcy this year. (American Airlines was given a 1 in 2 chance; United, 1 in 4; Northwest, 1 in 5. General Motors, 1 in 30.) 24/7 wrote of Lee on June 9, when the stock was selling for 30% more than it is today:

LEE shares have dropped from a 52-week high of $24.97 to $5.57. The company wrote off $841 million in assets last quarter. Advertising revenue dropped almost 6% year-over-year, and that is almost certainly accelerating. Lee is sitting on almost $1.3 billion in debt and, before the end of the year, it probably will not have the operating income to cover debt service.

What to do? It's too late for advice, and if we had the secret we surely wouldn't post it here for free. We'll give the last word to Will Rogers, who sagely advised: "Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it."

Where have all the newspaper readers gone?

The Dead Tree Edition world is reeling this morning, as newspaper circulation figures for the past six months are released by the Audit Bureau of Circulations, the industry's accountant.

Big readership drops have been reported almost everywhere with two exceptions: fractional gains at the Wall Street Journal and USA Today, which already had the largest circulation in the U.S. Together, they gained 13,000 additional daily readers, to add to their existing 4.33 million -- a gain of .3%. Every one of the next 25 largest papers in the U.S. lost daily circulation, in chunks from 2% to 10.5%.

The news was worse on Sunday: 24 of the 25 largest papers lost circulation; the best-selling U.S. Sunday paper, the incomparable New York Times is down 9.26% (150,000 papers every week!); the Denver Post is down 4.7%; the Chicago Tribune is off 4.46%.

Remember, all these losses above took place over just six months -- since the papers last reported their circulation figures on Sept. 30, 2007.

So much for the big picture; what about here? How's the Journal Times doing? The story is mixed, although you probably won't read it in their pages. The following numbers compare March 2008 figures to March 2007.

The Journal Times' Sunday circulation grew in the past year, from 30,807 to 30,860, a gain of 53 new subscribers. But daily circulation dropped from 28,586 to 28,103, a loss of 483.

Five years ago, the Journal Times had 29,058 Sunday subscribers, and 31,399 daily.

The Kenosha News' Sunday circulation fell from 27,403 to 26,502, a loss of 901; daily dropped from 25,248 to 24,535, a loss of 713. Five years ago: Sunday, 26,613; daily, 29,065.

The bad numbers are bigger in Milwaukee. The Journal Sentinel's Sunday circulation dropped from 400,317 to 384,539, a loss of 15,778; daily dropped from 230,218 to 217,755, a loss of 12,463. Five years ago: Sunday, 434,668; daily, 257,599.

In Madison, the Wisconsin State Journal went from 143,512 to 138,276 on Sunday, a loss of 5,236; its combined daily circulation with the Capital Times went from 106,174 to 104,265, a loss of 1,909. The bittersweet news from Madison this weekend, as the 90-year-old CapTimes published its final edition, is that the WSJ reports retaining all of the CapTimes' 14,000 afternoon subscribers to its morning edition. Five years ago: Sunday, 154,588; daily, 113,189. The New York Times' CapTimes obiturary is HERE. Individual "obits" on all the CapTimes journalists who lost their jobs in the closure are HERE. The CapTimes' farewell editorial is HERE.

Editor and Publisher's list of the top 25 daily papers' numbers is HERE; the Sunday list is HERE.

Lee Enterprises hits 52-week low

Lee Enterprises, the owner of the JT and 49 other newspapers, continues to struggle. Once the darling of the newspaper industry, Lee reported a 17 percent drop in earnings in the second quarter compared to a year ago. That sent the company's stock price below $10 a share and to a 52-week low (the stock is back over $10 in after-hours trading as of this writing).

The news was more bad news for the newspaper industry as a whole. McClatchy's stock hit a 52-week low today on Lee's news.