Isle casinos more valuable than Lee newspaper chain

Amid the ruin from Wall Street's decline, an astonishing re-shuffling has occurred in local stocks: the Isle of Capri Casinos, Inc. ($3.40 per share; $104 million market cap as of 12/3/08) is now worth more than Lee Enterprises ($.67 per share; $30.2 million market cap as of 12/3/08).

Lee (parent of the Quad City Times) has continued its steady decline falling from $15 a share a year ago to well below $1 a share this week. Isle has been on a steep fall-off from $18 a share a year ago, but at this writing is three times the value of the fourth largest owner of daily newspapers (7th largest in daily circulation) in the country. Lee owns 49 daily newspapers and 300 weekly newspapers, but is carrying the burden of more than $1.3 billion in debt, principally from the purchase of the St. Louis Post-Dispatch in June 2005.

Lee recently reported fourth quarter financial results (ended Sept. 28) of 12 cents per share, down from 43 cents per share for the same quarter last year. For the year ended Sept. 28, Lee lost $15.23 per share, compared with earnings of $1.77 per share for the same period in 2007.

Total advertising revenue for the 52-week period ended Sept. 28 totaled $865 million, down 9.4 percent compared with the 12-months ended Sept. 30, 2007. The decline in daily newspaper revenues included a 5 percent drop in retail display advertising, a 17 percent drop in classified advertising, a 20 percent decline in national display ads and a 2 percent decline in online advertising revenues.

The Isle casinos earlier this week released its second quarter results, reporting a loss of 43 cents per share, an improvement over the same period a year ago when it lost 80 cents a share. Net revenues in the second quarter ended Oct. 26 totaled $254 million, down from $279 million for the same period in 2007. One of bright spot for the Isle was its Iowa casinos which posted a slight gain in quarterly revenues, $65 million versus $64 million in the second quarter of 2007. Nearly all of the gain came from the Isle's newest Iowa casino in Waterloo.

Newspapers not the only media on the decline

KWQC-TV's parent, Young Broadcasting, is down to a "penny stock" at 4 cents a share. A year ago, it was worth $1.43 a share. Young's decline has been fueled by the loss of its NBC affiliation at its largest property, KRON in San Francisco. Young has been unsuccessful in finding a buyer for the station and in a November SEC filing said it was negotiating with its major creditors to restructure $825 million in outstanding long-term debt.

"If the Company is unsuccessful in improving cash flow and completing these financing alternatives, the Company may fail to comply with the covenant in its Senior Credit Facility requiring maintenance of $10 million of cash and short term investments and in the future may be unable to meet certain of its obligations as they come due," according to Young's SEC filing. "An event of default under any of the Company's debt instruments could result in the acceleration of the Company's payment obligations under that debt, which could have a material adverse effect on the Company's business, consolidated financial results and operations, and could require the Company to seek protection under Chapter 11 of the United States Bankruptcy Code."

Other stations in the broadcasting group are: Green Bay WI, Sioux Falls SD, Lansing MI, Richmond VA, Knoxville TN, Nashville TN, and Lafayette LA. Among Young's 11 percent staff cuts of nearly a year ago was popular KWQC weatherman Terry Swails. Way back in 1999, Young stock traded as high as $65 per share.

Joining the growing newspaper layoff list

Joining the list of newspapers cutting staff in recent months was privately held Small Newspaper Group, owner of the Daily Dispatch/Argus newspapers. The family owned chain, which also includes the Kankakee Journal and Rochester (MN) Post-Bulletin, trimmed 11 positions locally, including one editorial department job.

The Gannett newspaper chain, which owns the Des Moines Register, announced another round of staff cuts Dec. 3.

And, debt-rating service Fitch Ratings expects additional newspapers and newspaper groups will default on their debt next year, leaving "several cities" without a daily newspaper.