Lee Enterprises Inc. Reports Operating Results (10-Q)
Lee Entrprs has a market cap of $130.5 million; its shares were traded at around $2.9 with a P/E ratio of 3.9 and P/S ratio of 0.2. Lee Entrprs had an annual average earning growth of 4.8% over the past 10 years.Mutual Fund and Other Gurus that owns LEE: John Rogers of ARIEL CAPITAL MANAGEMENT LLC.
Highlight of Business Operations:In the 2011 Quarter, advertising revenue decreased $2,636,000, or 1.7%. On a combined basis, print and digital retail advertising decreased 1.9%. Print retail revenue decreased $3,288,000, or 3.5%, in the 2011 Quarter while daily newspaper retail advertising lineage increased 2.1%. Average retail rates, excluding preprint insertions, decreased 9.3% in the 2011 Quarter. Retail preprint insertion revenue decreased 0.2%. Digital retail advertising increased 49.1%, partially offsetting print declines.
On a combined basis, print and digital classified revenue decreased 0.2%. Print classified advertising revenue decreased $1,656,000, or 4.7%, in the 2011 Quarter. Digital classified advertising increased 7.3%. Higher rate print employment advertising in our daily newspapers increased 9.5% and digital employment advertising increased 19.2%. As a result, this category increased 12.7% overall. Print automotive advertising decreased 7.0% and digital automotive advertising increased 11.1%. As a result, this category increased 8.4% overall. Print real estate advertising decreased 21.6% in a weak housing market nationally, which also negatively impacted the home improvement, furniture and home electronics categories of retail revenue. Digital real estate advertising decreased 17.1%. Other daily newspaper print classified advertising decreased 0.8%. Daily newspaper classified advertising rates decreased 4.2%.
National print advertising decreased $1,642,000, or 15.4%, due to a 23.1% decrease in lineage and a 6.7% decrease in average national rate. Digital national advertising increased 317.4%. Advertising in niche publications decreased 2.5%.
As a result of the factors noted above, operating cash flow increased 1.8% to $54,113,000 in the 2011 Quarter compared to $53,135,000 in the 2010 Quarter. Operating cash flow margin increased to 26.1% from 25.3% a year ago reflecting a smaller percentage decrease in operating revenue than the decrease in operating expenses, as well as decreased workforce adjustment costs in 2011.
As more fully discussed in Note 4 of the Notes to Consolidated Financial Statements, included herein, amendments to our Credit Agreement consummated in 2009 increased financial expense in 2009 in relation to LIBOR. We are now subject to minimum LIBOR levels, which are currently in excess of actual LIBOR. The maximum rate has been increased to the LIBOR minimum plus 450 basis points, and we could also be subject to additional non-cash payment-in-kind interest if leverage increases above specified levels. At the December 2010 leverage level, our debt under the Credit Agreement will be priced at the applicable LIBOR minimum of 1.25% plus 3.00% . The interest rate on the Pulitzer Notes increased 1% to 9.05% in February 2009 and increased 0.5% in April 2010 to 9.55%. The interest rate will increase by 0.5% per year thereafter.
Our debt under the Credit Agreement is subject to minimum interest rate levels of 1.25%, 2.0% and 2.5% for borrowings for one month, three month and six month periods, respectively. At December 26, 2010, all of our outstanding debt under the Credit Agreement is based on one month borrowing. Based on the difference between interest rates at the end of January 2011 and our 1.25% minimum rate for one month borrowing, 30 day LIBOR would need to increase approximately 100 basis points before our borrowing cost would begin to be impacted by an increase in interest rates.
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