by James C. Sherlock
Lee Enterprises, about whose frantic search for cash I wrote yesterday, owns a dozen newspapers in Virginia.
For now.
- The Daily Progress – Charlottesville
- The Free Lance-Star – Fredericksburg
- Register & Bee/Go Dan River – Danville
- Bristol Herald Courier – Tricities – Bristol
- Martinsville Bulletin – Martinsville
- The News & Advance – Lynchburg
- The News Virginian – Waynesboro
- Richmond Times-Dispatch – Richmond
- The Roanoke Times – Roanoke
- Culpeper Star-Exponent – Culpeper
- SWVA Today – Wytheville
- The Franklin News-Post – Rocky Mount
Lee’s current nationwide total of what it calls news “brands” is 85. It is a small and highly leveraged business.
This morning its stock (LEE:NASDAQ) market cap is about $81M at $13.37 per share at yesterday’s close. With $433M in debt, the enterprise value is $524M (Schwab).
Lee is teetering financially, and has been since it successfully but expensively fought off a late 2021 hostile takeover bid from Alden Global Capital, a hedge fund.
Alden owns The Virginian-Pilot, the Commonwealth’s largest daily, and the Daily Press on the Peninsula. It has been written that Alden’s business model is simple:
gut the staff, sell the real estate, jack up subscription prices, and wring out as much cash as possible.
We have already seen Lee Enterprises gut the staffs of its Virginia papers.
I haven’t tracked the real estate transactions, but now it is jacking up subscription prices to avoid selling its inventory or trying to obtain additional financing.
We’ve seen this play before.
The quick ratio describes a company’s short-term liquidity position — the ability to meet its short-term obligations with its most liquid assets. If the quick ratio is less than one, it will have to raise cash or sell assets to meet those obligations if called.
Lee’s three-year average quick ratio has been 0.63 (Reuters).
The current ratio compares all of a firm’s current assets to its current liabilities. Lee’s current ratio is 0.83 (Reuters). That means it may have problems meeting its current obligations.
With a debt-to-equity ratio of 44.9 (Reuters) — the ideal ratio is considered less than 1 — borrowing more money at affordable rates doesn’t seem an option.
The picture has been worsening (Reuters):
For the 26 weeks ended 26 March 2023, Lee Enterprises Inc revenues decreased 9% to $355.8M. Net loss totaled $4.8M vs. income of $5.4M. Revenues reflect Page Views (User Traffic) – Number – Tot decrease of 7% to 699M, Advertising and marketing services decrease of 10% to $167.3M, Subscription decrease of 9% to $158.3M. Net loss reflects Assets loss (gain) on sales, impairments decrease of 73% to $3.4M (income), Other.
Lee’s stock lost half its value between February 1 and May 5 of this year.
That is the background for its current attempt at massive subscription price raises.
Not even Alden, which offered $24 a share in cash in the takeover attempt in late 2021, may want Lee’s newspapers if it sells off what is left of the real estate assets.
