Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - LEE ENTERPRISES, Inc | form8k120715.htm |
| EX-10.2 - FORM OF CIC FOR PRES. & CEO - LEE ENTERPRISES, Inc | ex102.htm |
| EX-10.3 - FORM OF CIC FOR VICE PRES. & COO - LEE ENTERPRISES, Inc | ex103.htm |
| EX-10.1 - AMENDED & RESTATED LTIP - LEE ENTERPRISES, Inc | ex101.htm |
| EX-10.4 - FORM OF CIC FOR SENIOR EXEC. - LEE ENTERPRISES, Inc | ex104.htm |
Exhibit 99.1 - News Release dated December 10, 2015 – Fourth fiscal quarter ended September 27, 2015
201 N. Harrison St.
Davenport, IA 52801
www.lee.net
Lee Enterprises reports fourth quarter earnings
DAVENPORT, Iowa (December 10, 2015) — Lee Enterprises, Incorporated (NYSE: LEE), a major provider of local news, information and advertising in 50 markets, today reported preliminary(1) results for its fourth fiscal quarter and fiscal year ended September 27, 2015.
Fourth quarter financial highlights include:
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•
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Fourth quarter operating cash flow(2) growth of 5.0% and 7.5% adjusted EBITDA(2) growth.
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•
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Subscription revenue increased 6.1% excluding the subscription-related expense reclassification.
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•
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Total digital revenue, including subscription and TownNews, grew 23.9%.
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•
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Digital ad revenue was up 5.1%, representing 21.6% of total advertising revenue in the quarter.
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•
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Mobile advertising revenue, which is included in digital advertising, increased 10.6%.
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•
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Digital services revenue, primarily TownNews, increased 11.3% to $3.3 million.
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•
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Overall revenue on a comparable basis decreased 4.4% in fourth quarter, which is an improvement from the June quarterly trend. Total advertising and marketing services revenue decreased 9.0%.
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•
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Total cash costs excluding the subscription-related expense reclassification and workforce adjustment costs decreased 7.8%, exceeding previously announced guidance of down 5.5%-6.0%.
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“We are very pleased with our fourth quarter results, especially our cash flow growth,” Mary Junck, chairman and chief executive officer said. "We continue to see revenue growth in digital advertising, digital services, and subscription revenue from our full access and premium day initiatives as compared to the same quarter of the prior year. These growing revenue categories made up almost 47% of our total revenue, for the quarter."
Junck said several key initiatives launched in 2015 helped drive fourth quarter results and also should impact 2016. Those include:
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•
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Accelerating digital revenue growth with expanded audience reach and advertising services.
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Redesigning all of our products including mobile, desktop and print throughout 2016 to improve reader engagement, drive revenue and provide cost efficiencies.
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Phase 2 of the Lee Design Centers through the "daVinci Project."
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Implemented a sweeps program that drives programmatic digital advertising revenue by increasing page views and reader engagement at attractive advertising rates.
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Circulation revenue growth with continued increases in digital subscription activation along with selective price increases and premium days.
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"We have very strong local audiences across all age groups," Junck said. "In the markets we serve, we reach 76% of adults with our print and digital platforms, including more than 70% of those under forty years old. We'll continue to refine and develop our products to best meet the needs of our readers and provide large, relevant audiences to our advertisers — both print and digital."
"We also had outstanding results at two of our larger newspaper subsidiaries — Madison Newspapers(3) (MNI) and Tucson Newspapers(3) (TNI), which are accounted for under the equity method," Junck added. "Combined, our share of EBITDA from these operations for the quarter grew 4.3% in the fourth quarter of
1
2015. The company received $2.9 million in dividends from MNI and TNI in the quarter and $11.0 million for the year."
Earnings of 18 cents per diluted common share were reported for the quarter compared to earnings of 6 cents a year ago. Excluding unusual matters, adjusted earnings per diluted common share(2) totaled 10 cents, compared with earnings of 2 cents a year ago.
Ron Mayo, chief financial officer and treasurer, said the company will continue to use substantially all of its free cash flow(2) to reduce debt and strengthen the company's capital structure.
"We reduced debt by $19.1 million in the fourth quarter and $78.9 million in the 2015 fiscal year," he said. "And, we expect to continue to repay debt at a similar pace in 2016."
Mayo also noted:
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As of September 27, 2015, the principal amount of debt was $725.9 million.
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•
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Interest expense to be settled in cash was reduced $4.9 million in 2015 as a result of debt reductions, which provides additional free cash flow that will be used for future debt reductions.
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Approximately $3.3 million of the September quarter Pulitzer excess cash flow payment was not rejected, and accordingly, in November of 2015, $3.3 million of 2nd Lien Term Loan(3) was repaid at par.
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"Lee also has more than $10 million of real estate assets listed for sale, including properties in Bloomington, Illinois; Portage, Wisconsin; and St. Louis, Missouri at September 27, 2015," Mayo said. "In October 2015, we closed the sale of the Provo, Utah land and building, netting $2.3 million, which was used to repay the 2nd Lien Term Loan at par."
"In 2015, we exceeded cash costs guidance, and we'll continue to implement our business transformation and related cost reductions in the coming year," Mayo said. "In fiscal year 2016, we expect cash cost reductions, as compared to the prior year, to be in the 3.5% to 4.0% range."
Operating revenue for the 13 weeks ended September 27, 2015 totaled $156.1 million, a decrease of 4.3% compared with a year ago. Excluding the impact of the subscription-related expense reclassification, operating revenue decreased 4.4%. The delivery expense reclassification increases both print subscription revenue and other operating expenses with no impact on operating cash flow(2) or operating income. Certain delivery expenses were previously reported as a reduction of revenue. Tables later in this release detail the impact of the reclassification on revenue and cash costs.
Advertising and marketing services revenue combined decreased 9.0% to $97.3 million, with retail advertising down 7.1%, classified down 13.9% and national down 11.7%. Digital advertising and marketing services revenue on a stand-alone basis increased 5.1% to $21.0 million.
Subscription revenue increased 5.4%. Excluding the impact of the subscription-related expense reclassification, subscription revenue increased 6.1%.
Average daily newspaper circulation, including TNI and MNI and digital subscribers, totaled 0.9 million in the 13 weeks ended September 27, 2015. Sunday circulation totaled 1.3 million.
Total digital revenue, including advertising, marketing services, subscriptions and digital businesses, totaled $31.1 million in the quarter, up 23.9%, and represents 19.9% of total operating revenue.
Cash costs decreased 6.8% for the 13 weeks ended September 27, 2015. Excluding the impact of the subscription-related expense reclassification and workforce adjustments, cash costs decreased 7.8% for the 13 weeks ended September 27, 2015, exceeding guidance of down 5.5%-6.0%. Compensation decreased 6.7%, primarily as a result of reduced staffing levels. Newsprint and ink expense decreased 28.6%, primarily the result of lower newsprint prices and a reduction in newsprint volume of 11.3%. Other operating expenses
2
decreased 5.4%. The acceleration of cost reductions in the second half of fiscal year 2015 is expected to have a favorable impact on the fiscal year 2016 cash costs.
Operating cash flow increased 5.0% from a year ago to $35.4 million. Excluding workforce adjustments, operating cash flow increased 8.0%. Operating cash flow margin(2) increased to 22.7%, compared to 20.7% a year ago. Including equity in earnings of associated companies, depreciation and amortization, as well as unusual matters in both years, operating income totaled $26.8 million in the current year quarter, compared with $20.7 million a year ago. Adjusted EBITDA for the quarter was $40.0 million, a 7.5% increase over prior year.
Non-operating expenses decreased 17.2% for the 13 weeks ended September 27, 2015. Interest expense decreased 8.5%, or $1.6 million, due to lower debt balances. We also recognized $6.9 million and $5.5 million of non-operating income in the current year quarter and prior year quarter, respectively, due to the change in fair value of stock warrants issued in connection with our refinancing in 2014. Partially offsetting those expense reductions, we expensed $1.4 million of debt refinancing costs in the current year quarter compared to $1.0 million in the prior year quarter. Income attributable to Lee Enterprises, Incorporated for the quarter totaled $9.9 million, compared with income of $3.2 million a year ago.
The following table summarizes the impact from unusual matters on income attributable to Lee Enterprises, Incorporated and earnings per diluted common share. Per share amounts may not add due to rounding.
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13 Weeks Ended
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September 27
2015
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September 28
2014
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(Thousands of Dollars, Except Per Share Data)
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Amount
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Per Share
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Amount
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Per Share
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|||||||
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Income attributable to Lee Enterprises, Incorporated, as reported
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9,881
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0.18
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3,162
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0.06
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Adjustments:
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|||||||||||
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Impairment of intangible and other assets
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—
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2,644
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|||||||||
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Debt financing costs
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1,393
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992
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|||||||||
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Warrants fair value adjustment
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(6,880
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)
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(5,543
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)
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Other, including workforce adjustments
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2,467
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1,316
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(3,020
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)
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(591
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)
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Income tax effect of adjustments, net
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(1,321
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)
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(1,733
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)
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|||||||
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(4,341
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)
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(0.08
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)
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(2,324
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)
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(0.04
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)
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Income attributable to Lee Enterprises, Incorporated, as adjusted
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5,540
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0.10
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838
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0.02
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3
SUBSCRIPTION EXPENSE RECLASSIFICATION
Certain results, excluding the impact of the subscription-related expense reclassification, are as follows:
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13 Weeks Ended
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(Thousands of Dollars)
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Sept 27
2015
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Sept 28
2014
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Percent
Change
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Subscription revenue, as reported
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48,570
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46,081
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5.4
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Adjustment for subscription-related expense reclassification
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(4,376
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)
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(4,442
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)
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(1.5
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)
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Subscription revenue, as adjusted
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44,194
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41,639
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6.1
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Total operating revenue, as reported
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156,099
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163,173
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(4.3
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)
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Adjustment for subscription-related expense reclassification
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(4,376
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)
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(4,442
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)
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(1.5
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)
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Total operating revenue, as adjusted
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151,723
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158,731
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(4.4
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)
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Other cash costs, as reported
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55,523
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58,700
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(5.4
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)
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Adjustment for subscription-related expense reclassification
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(4,376
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)
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(4,442
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)
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(1.5
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)
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Other cash costs, as adjusted
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51,147
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54,258
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(5.7
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)
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Total cash costs excluding unusual matters
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119,271
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129,085
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(7.6
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)
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Adjustment for subscription-related expense reclassification
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(4,376
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)
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(4,442
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)
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(1.5
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)
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Total cash costs excluding unusual matters, as adjusted
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114,895
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124,643
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(7.8
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)
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Total cash costs, as reported
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120,667
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129,426
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(6.8
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)
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Adjustment for subscription-related expense reclassification
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(4,376
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)
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(4,442
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)
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(1.5
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)
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Total cash costs, as adjusted
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116,291
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124,984
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(7.0
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)
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Approximately $4,036,000, or 92.2% of the reclassification impacts revenue and cash costs of our Lee Legacy(2) operations, and approximately $340,000, or 7.8% impacts Pulitzer(2).
Operating revenue for fiscal year 2015 totaled $648.5 million, a decrease of 1.9% compared with fiscal year 2014. Excluding the impact of the subscription-related expense reclassification, operating revenue decreased 3.7%.
Advertising and marketing services revenue combined decreased 7.0% to $412.1 million, retail advertising decreased 6.7%, classified decreased 8.6% and national decreased 9.8%. Digital advertising and marketing services revenue on a stand-alone basis increased 6.9% to $81.7 million. Mobile advertising revenue increased 24.8%.
Subscription revenue increased 10.0%. Excluding the impact of the subscription-related expense reclassification, subscription revenue increased 3.6%.
Total digital revenue was $116.9 million year to date, up 27.8% compared with a year ago.
Cash costs for 2015 decreased 0.8% compared to the same period a year ago. Excluding the impact of the subscription-related expense reclassification and workforce adjustments, cash costs decreased 3.6%. Compensation decreased 1.7%, due to a decrease in the average number of full-time equivalent employees of 4.9%, partially offset by company-wide salary increases and higher pension costs. Newsprint and ink expense decreased 20.3%, due to the combination of lower newsprint prices and a reduction in newsprint volume of 12.3%. Other operating expenses increased 2.5% and excluding the impact of the subscription-related expenses reclassification, other operating expense decreased 2.7%, or $5.9 million.
4
Operating cash flow decreased 5.3% from a year ago to $146.8 million. Excluding workforce adjustments, operating cash flow decreased 4.0%. Operating cash flow margin decreased to 22.6% from 23.5% a year ago. The subscription-related expense reclassification reduced operating cash flow margin by 0.7%. Including equity in earnings of associated companies, depreciation and amortization, as well as unusual matters in both years, operating income decreased to $109.4 million in 2015, compared with $113.2 million a year ago. Adjusted EBITDA for the year was $163.3 or 3.4% decrease from the prior year.
Non-operating expenses decreased 28.0% in 2015 compared to 2014. We recognized $5.4 million of debt financing costs in 2015 compared to $22.9 million in 2014 due to costs charged to expense at the closing of our 2014 refinancing. Interest expense settled in cash decreased 6.4%, or $4.9 million, due to lower debt balances in the current year. We also recognized non-cash interest expense of $2.4 million in the prior year. The income related to the change in fair value of stock warrants was $6.6 million and $6.1 million in 2015 and 2014, respectively. Income attributable to Lee Enterprises, Incorporated for the year totaled $23.3 million, compared to income of $6.8 million a year ago.
The following table summarizes the impact from unusual matters on income attributable to Lee Enterprises, Incorporated and earnings per diluted common share. Per share amounts may not add due to rounding.
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52 Weeks Ended
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September 27
2015
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September 28
2014
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(Thousands of Dollars, Except Per Share Data)
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Amount
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Per Share
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Amount
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Per Share
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Income attributable to Lee Enterprises, Incorporated,
as reported
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23,316
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0.43
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6,795
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0.13
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Adjustments:
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Impairment of intangible and other assets
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—
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2,980
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Debt financing costs
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5,433
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22,927
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|||||||||
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Amortization of debt present value adjustment
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—
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2,394
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|||||||||
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Warrants fair value adjustment
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(6,568
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)
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(6,122
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)
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Litigation settlement
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—
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2,300
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Other, including workforce adjustments
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4,037
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2,319
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|||||||||
|
2,902
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26,798
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||||||||||
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Income tax effect of adjustments, net
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(3,217
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)
|
(11,487
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)
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|||||||
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(315
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)
|
(0.01
|
)
|
15,311
|
0.28
|
||||||
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Income attributable to Lee Enterprises, Incorporated, as adjusted
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23,001
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0.43
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22,106
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0.41
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|||||||
5
SUBSCRIPTION EXPENSE RECLASSIFICATION
Certain results, excluding the impact of the subscription-related expense reclassification, are as follows:
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52 Weeks Ended
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||||||
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(Thousands of Dollars)
|
Sept 27
2015
|
Sept 28
2014
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Percent
Change
|
|||
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Subscription revenue, as reported
|
194,474
|
176,826
|
10.0
|
|||
|
Adjustment for subscription-related expense reclassification
|
(18,300
|
)
|
(6,707
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)
|
NM
|
|
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Subscription revenue, as adjusted
|
176,174
|
170,119
|
3.6
|
|||
|
Total operating revenue, as reported
|
648,543
|
660,877
|
(1.9
|
)
|
||
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Adjustment for subscription-related expense reclassification
|
(18,300
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)
|
(6,707
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)
|
NM
|
|
|
Total operating revenue, as adjusted
|
630,243
|
654,170
|
(3.7
|
)
|
||
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Other cash costs, as reported
|
229,165
|
223,509
|
2.5
|
|||
|
Adjustment for subscription-related expense reclassification
|
(18,300
|
)
|
(6,707
|
)
|
NM
|
|
|
Other cash costs, as adjusted
|
210,865
|
216,802
|
(2.7
|
)
|
||
|
Total cash costs excluding unusual matters
|
498,456
|
504,557
|
(1.2
|
)
|
||
|
Adjustment for subscription-related expense reclassification
|
(18,300
|
)
|
(6,707
|
)
|
NM
|
|
|
Total cash costs excluding unusual matters, as adjusted
|
480,156
|
497,850
|
(3.6
|
)
|
||
|
Total cash costs, as reported
|
501,760
|
505,822
|
(0.8
|
)
|
||
|
Adjustment for subscription-related expense reclassification
|
(18,300
|
)
|
(6,707
|
)
|
NM
|
|
|
Total cash costs, as adjusted
|
483,460
|
499,115
|
(3.1
|
)
|
||
Approximately $16,918,000, or 92.4% of the reclassification impacts revenue and cash costs of our Lee Legacy operations, and approximately $1,382,000, or 7.6% impacts Pulitzer.
Debt was reduced $19.1 million in the quarter and $78.9 million for the fiscal year. Strong free cash flow coupled with selective asset sales helped fund debt reduction in 2015, which we expect to continue at a similar rate in 2016. As of September 27, 2015 the principal amount of debt was $725.9 million.
Unlevered free cash flow(2) increased 9.0% in the current year quarter to $35.4 million compared to $32.5 million in the same quarter a year ago. Unlevered free cash flow totaled $149.3 million for 2015 compared to $160.5 million in 2014. Tax refunds of $6.0 million increased our free cash flow in 2014. At September 27, 2015, liquidity, including cash and availability under our Revolving Facility, totaled $44.1 million compared to $25.0 million of required debt principal payments over the next twelve months.
As previously announced, we will hold an earnings conference call and audio webcast later today at 9 a.m. Central Daylight Time. The live webcast will be accessible at www.lee.net and will be available for replay two hours later. Several analysts have been invited to ask questions on the call. Questions from other participants may be submitted by participating in the webcast. The call also may be monitored on a listen-only conference line by dialing (toll free) 888-505-4389 and entering a conference passcode of 563694 at least five minutes before the scheduled start. Participants on the listen-only line will not have the opportunity to ask questions.
6
ABOUT LEE
Lee Enterprises is a leading provider of local news and information, and a major platform for advertising, in its markets, with 46 daily newspapers and a joint interest in four others, rapidly growing digital products and nearly 300 specialty publications in 22 states. Lee's newspapers have circulation of 0.9 million daily and 1.3 million Sunday, reaching over three million readers in print alone. Lee's markets include St. Louis, MO; Lincoln, NE; Madison, WI; Davenport, IA; Billings, MT; Bloomington, IL; and Tucson, AZ. Lee Common Stock is traded on the New York Stock Exchange under the symbol LEE. For more information about Lee, please visit www.lee.net.
FORWARD-LOOKING STATEMENTS — The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This release contains information that may be deemed forward-looking that is based largely on our current expectations, and is subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those anticipated. Among such risks, trends and other uncertainties, which in some instances are beyond our control, are:
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Our ability to generate cash flows and maintain liquidity sufficient to service our debt;
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Our ability to comply with the financial covenants in our credit facilities;
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Our ability to refinance our debt as it comes due;
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That the warrants issued in our refinancing will not be exercised;
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The impact and duration of adverse conditions in certain aspects of the economy affecting our business;
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Changes in advertising demand;
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Potential changes in newsprint, other commodities and energy costs;
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Interest rates;
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Labor costs;
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Legislative and regulatory rulings;
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Our ability to achieve planned expense reductions;
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Our ability to maintain employee and customer relationships;
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Our ability to manage increased capital costs;
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Our ability to maintain our listing status on the NYSE;
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Competition; and
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•
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Other risks detailed from time to time in our publicly filed documents.
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Any statements that are not statements of historical fact (including statements containing the words “may”, “will”, “would”, “could”, “believes”, “expects”, “anticipates”, “intends”, “plans”, “projects”, “considers” and similar expressions) generally should be considered forward-looking statements. Readers are cautioned not to place undue reliance on such forward-looking statements, which are made as of the date of this release. We do not undertake to publicly update or revise our forward-looking statements, except as required by law.
Contact:
Charles Arms
Director of Communications
IR@lee.net
(563) 383-2100
7
(UNAUDITED)
|
13 Weeks Ended
|
52 Weeks Ended
|
||||||||||||
|
(Thousands of Dollars, Except Per Share Data)
|
Sept 27
2015
|
Sept 28
2014
|
Percent
Change
|
Sept 27
2015
|
Sept 28
2014
|
Percent
Change
|
|||||||
|
Advertising and marketing services:
|
|||||||||||||
|
Retail
|
61,382
|
66,056
|
(7.1
|
)
|
264,334
|
283,366
|
(6.7
|
)
|
|||||
|
Classified
|
27,650
|
32,126
|
(13.9
|
)
|
114,225
|
124,955
|
(8.6
|
)
|
|||||
|
National
|
5,287
|
5,988
|
(11.7
|
)
|
22,422
|
24,867
|
(9.8
|
)
|
|||||
|
Niche publications and other
|
2,999
|
2,788
|
7.6
|
11,118
|
10,059
|
10.5
|
|||||||
|
Total advertising and marketing services revenue
|
97,318
|
106,958
|
(9.0
|
)
|
412,099
|
443,247
|
(7.0
|
)
|
|||||
|
Subscription
|
48,570
|
46,081
|
5.4
|
194,474
|
176,826
|
10.0
|
|||||||
|
Commercial printing
|
3,045
|
2,880
|
5.7
|
11,875
|
12,050
|
(1.5
|
)
|
||||||
|
Digital services
|
3,254
|
2,924
|
11.3
|
12,522
|
10,181
|
23.0
|
|||||||
|
Other
|
3,912
|
4,330
|
(9.7
|
)
|
17,573
|
18,573
|
(5.4
|
)
|
|||||
|
Total operating revenue
|
156,099
|
163,173
|
(4.3
|
)
|
648,543
|
660,877
|
(1.9
|
)
|
|||||
|
Operating expenses:
|
|||||||||||||
|
Compensation
|
57,413
|
61,511
|
(6.7
|
)
|
239,028
|
243,054
|
(1.7
|
)
|
|||||
|
Newsprint and ink
|
6,335
|
8,874
|
(28.6
|
)
|
30,263
|
37,994
|
(20.3
|
)
|
|||||
|
Other operating expenses
|
55,523
|
58,700
|
(5.4
|
)
|
229,165
|
223,509
|
2.5
|
||||||
|
Workforce adjustments
|
1,396
|
341
|
NM
|
3,304
|
1,265
|
NM
|
|||||||
|
Cash costs
|
120,667
|
129,426
|
(6.8
|
)
|
501,760
|
505,822
|
(0.8
|
)
|
|||||
|
Operating cash flow
|
35,432
|
33,747
|
5.0
|
146,783
|
155,055
|
(5.3
|
)
|
||||||
|
Depreciation
|
4,558
|
5,220
|
(12.7
|
)
|
18,418
|
20,920
|
(12.0
|
)
|
|||||
|
Amortization
|
6,548
|
6,880
|
(4.8
|
)
|
27,145
|
27,591
|
(1.6
|
)
|
|||||
|
Loss (gain) on sales of assets, net
|
(328
|
)
|
284
|
NM
|
106
|
(1,338
|
)
|
NM
|
|||||
|
Impairment of intangible and other assets
|
—
|
2,644
|
NM
|
—
|
2,980
|
NM
|
|||||||
|
Equity in earnings of associated companies
|
2,141
|
1,949
|
9.9
|
8,254
|
8,297
|
(0.5
|
)
|
||||||
|
Operating income
|
26,795
|
20,668
|
29.6
|
109,368
|
113,199
|
(3.4
|
)
|
||||||
|
Non-operating income (expense):
|
|||||||||||||
|
Financial income
|
79
|
79
|
—
|
337
|
385
|
(12.5
|
)
|
||||||
|
Interest expense
|
(17,095
|
)
|
(18,691
|
)
|
(8.5
|
)
|
(72,409
|
)
|
(79,724
|
)
|
(9.2
|
)
|
|
|
Debt financing and administrative costs
|
(1,393
|
)
|
(992
|
)
|
40.4
|
(5,433
|
)
|
(22,927
|
)
|
(76.3
|
)
|
||
|
Other, net
|
5,992
|
4,607
|
30.1
|
6,049
|
3,028
|
99.8
|
|||||||
|
(12,417
|
)
|
(14,997
|
)
|
(17.2
|
)
|
(71,456
|
)
|
(99,238
|
)
|
(28.0
|
)
|
||
|
Income before income taxes
|
14,378
|
5,671
|
NM
|
37,912
|
13,961
|
NM
|
|||||||
|
Income tax expense
|
4,244
|
2,296
|
84.8
|
13,594
|
6,290
|
NM
|
|||||||
|
Net income
|
10,134
|
3,375
|
NM
|
24,318
|
7,671
|
NM
|
|||||||
|
Net income attributable to non-controlling interests
|
(253
|
)
|
(213
|
)
|
18.8
|
(1,002
|
)
|
(876
|
)
|
14.4
|
|||
|
Income attributable to Lee Enterprises, Incorporated
|
9,881
|
3,162
|
NM
|
23,316
|
6,795
|
NM
|
|||||||
|
Earnings per common share:
|
|||||||||||||
|
Basic
|
0.18
|
0.06
|
NM
|
0.44
|
0.13
|
NM
|
|||||||
|
Diluted
|
0.18
|
0.06
|
NM
|
0.43
|
0.13
|
NM
|
|||||||
8
(UNAUDITED)
|
13 Weeks Ended
|
|
52 Weeks Ended
|
|||||||
|
(Thousands of Dollars)
|
Sept 27
2015
|
|
Sept 28
2014
|
|
Sept 27
2015
|
|
Sept 28
2014
|
||
|
Advertising and marketing services
|
97,318
|
106,958
|
412,099
|
443,247
|
|||||
|
Subscription
|
48,570
|
46,081
|
194,474
|
176,826
|
|||||
|
Other
|
10,211
|
10,134
|
41,970
|
40,804
|
|||||
|
Total operating revenue
|
156,099
|
163,173
|
648,543
|
660,877
|
|||||
|
Compensation
|
57,413
|
61,511
|
239,028
|
243,054
|
|||||
|
Newsprint and ink
|
6,335
|
8,874
|
30,263
|
37,994
|
|||||
|
Other operating expenses
|
55,523
|
58,700
|
229,165
|
223,509
|
|||||
|
Depreciation and amortization
|
11,106
|
12,100
|
45,563
|
48,511
|
|||||
|
Loss (gain) on sales of assets, net
|
(328
|
)
|
284
|
106
|
(1,338
|
)
|
|||
|
Impairment of goodwill and other assets
|
—
|
2,644
|
—
|
2,980
|
|||||
|
Workforce adjustments
|
1,396
|
341
|
3,304
|
1,265
|
|||||
|
Total operating expenses
|
131,445
|
144,454
|
547,429
|
555,975
|
|||||
|
Equity in earnings of TNI and MNI
|
2,141
|
1,949
|
8,254
|
8,297
|
|||||
|
Operating income
|
26,795
|
20,668
|
109,368
|
113,199
|
|||||
|
Adjusted to exclude:
|
|||||||||
|
Depreciation and amortization
|
11,106
|
12,100
|
45,563
|
48,511
|
|||||
|
Loss (gain) on sales of assets, net
|
(328
|
)
|
284
|
106
|
(1,338
|
)
|
|||
|
Impairment of intangible and other assets
|
—
|
2,644
|
—
|
2,980
|
|||||
|
Equity in earnings of TNI and MNI
|
(2,141
|
)
|
(1,949
|
)
|
(8,254
|
)
|
(8,297
|
)
|
|
|
Operating cash flow
|
35,432
|
33,747
|
146,783
|
155,055
|
|||||
|
Add:
|
|||||||||
|
Ownership share of TNI and MNI EBITDA (50%)
|
2,814
|
2,697
|
11,246
|
11,236
|
|||||
|
EBITDA
|
38,246
|
36,444
|
158,029
|
166,291
|
|||||
|
Adjusted to exclude:
|
|||||||||
|
Workforce adjustments
|
1,396
|
341
|
3,304
|
1,265
|
|||||
|
Stock compensation
|
326
|
400
|
1,971
|
1,481
|
|||||
|
Adjusted EBITDA(2)
|
39,968
|
37,185
|
163,304
|
169,037
|
|||||
|
Adjusted to exclude:
|
|||||||||
|
Ownership share of TNI and MNI EBITDA (50%)
|
(2,814
|
)
|
(2,697
|
)
|
(11,246
|
)
|
(11,236
|
)
|
|
|
Add (deduct):
|
|||||||||
|
Distributions from TNI and MNI
|
2,862
|
2,342
|
10,975
|
9,996
|
|||||
|
Capital expenditures, net of insurance proceeds
|
(2,016
|
)
|
(3,620
|
)
|
(9,707
|
)
|
(11,824
|
)
|
|
|
Pension contributions
|
(2,012
|
)
|
(800
|
)
|
(3,577
|
)
|
(1,522
|
)
|
|
|
Cash income tax refunds (payments)
|
(549
|
)
|
89
|
(485
|
)
|
6,022
|
|||
|
Unlevered free cash flow
|
35,439
|
32,499
|
149,264
|
160,473
|
|||||
|
Add (deduct):
|
|||||||||
|
Financial income
|
79
|
79
|
337
|
385
|
|||||
|
Interest expense to be settled in cash
|
(17,095
|
)
|
(18,691
|
)
|
(72,409
|
)
|
(77,330
|
)
|
|
|
Debt financing and administrative costs paid
|
(256
|
)
|
(311
|
)
|
(733
|
)
|
(31,587
|
)
|
|
|
Free cash flow
|
18,167
|
13,576
|
76,459
|
51,941
|
|||||
9
SELECTED LEE LEGACY(2) ONLY FINANCIAL INFORMATION
(UNAUDITED)
|
13 Weeks Ended
|
52 Weeks Ended
|
||||||||
|
(Thousands of Dollars)
|
Sept 27
2015
|
Sept 28
2014
|
Sept 27
2015
|
Sept 28
2014
|
|||||
|
Advertising and marketing services
|
67,944
|
75,543
|
287,417
|
307,254
|
|||||
|
Subscription
|
33,417
|
30,492
|
131,352
|
113,992
|
|||||
|
Other
|
8,719
|
8,545
|
35,328
|
34,353
|
|||||
|
Total operating revenue
|
110,080
|
114,580
|
454,097
|
455,599
|
|||||
|
Compensation
|
43,329
|
45,606
|
180,035
|
180,641
|
|||||
|
Newsprint and ink
|
4,670
|
6,461
|
22,307
|
27,084
|
|||||
|
Other operating expenses
|
32,100
|
32,696
|
130,530
|
120,552
|
|||||
|
Depreciation and amortization
|
7,683
|
8,529
|
31,534
|
33,163
|
|||||
|
Loss (gain) on sales of assets, net
|
40
|
281
|
(285
|
)
|
(1,362
|
)
|
|||
|
Impairment of goodwill and other assets
|
—
|
42
|
—
|
378
|
|||||
|
Workforce adjustments
|
228
|
116
|
983
|
551
|
|||||
|
Total operating expenses
|
88,050
|
93,731
|
365,104
|
361,007
|
|||||
|
Equity in earnings of MNI
|
1,115
|
1,152
|
3,416
|
3,384
|
|||||
|
Operating income
|
23,145
|
22,001
|
92,409
|
97,976
|
|||||
|
Adjusted to exclude:
|
|||||||||
|
Depreciation and amortization
|
7,683
|
8,529
|
31,534
|
33,163
|
|||||
|
Loss (gain) on sales of assets, net
|
40
|
281
|
(285
|
)
|
(1,362
|
)
|
|||
|
Impairment of intangible and other assets
|
—
|
42
|
—
|
378
|
|||||
|
Equity in earnings of MNI
|
(1,115
|
)
|
(1,152
|
)
|
(3,416
|
)
|
(3,384
|
)
|
|
|
Operating cash flow
|
29,753
|
29,701
|
120,242
|
126,771
|
|||||
|
Add:
|
|||||||||
|
Ownership share of MNI EBITDA (50%)
|
1,683
|
1,795
|
5,989
|
5,905
|
|||||
|
EBITDA
|
31,436
|
31,496
|
126,231
|
132,676
|
|||||
|
Adjusted to exclude:
|
|||||||||
|
Workforce adjustments
|
228
|
116
|
983
|
551
|
|||||
|
Stock compensation
|
326
|
400
|
1,971
|
1,481
|
|||||
|
Adjusted EBITDA
|
31,990
|
32,012
|
129,185
|
134,708
|
|||||
|
Adjusted to exclude:
|
|||||||||
|
Ownership share of MNI EBITDA (50%)
|
(1,683
|
)
|
(1,795
|
)
|
(5,989
|
)
|
(5,905
|
)
|
|
|
Add (deduct):
|
|||||||||
|
Distributions from MNI
|
1,500
|
1,000
|
5,500
|
4,750
|
|||||
|
Capital expenditures, net of insurance proceeds
|
(1,668
|
)
|
(2,543
|
)
|
(6,747
|
)
|
(9,688
|
)
|
|
|
Pension contributions
|
—
|
(70
|
)
|
—
|
(87
|
)
|
|||
|
Cash income tax refunds (payments)
|
(549
|
)
|
51
|
(396
|
)
|
(266
|
)
|
||
|
Intercompany charges not settled in cash
|
—
|
(3,381
|
)
|
(6,953
|
)
|
(9,678
|
)
|
||
|
Other
|
—
|
—
|
(2,000
|
)
|
(2,000
|
)
|
|||
|
Unlevered free cash flow
|
29,590
|
25,274
|
112,600
|
111,834
|
|||||
10
SELECTED PULITZER(2) ONLY FINANCIAL INFORMATION
(UNAUDITED)
|
13 Weeks Ended
|
52 Weeks Ended
|
||||||||
|
(Thousands of Dollars)
|
Sept 27
2015
|
Sept 28
2014
|
Sept 27
2015
|
Sept 28
2014
|
|||||
|
Advertising and marketing services
|
29,374
|
31,415
|
124,682
|
135,993
|
|||||
|
Subscription
|
15,153
|
15,589
|
63,122
|
62,834
|
|||||
|
Other
|
1,492
|
1,589
|
6,642
|
6,451
|
|||||
|
Total operating revenue
|
46,019
|
48,593
|
194,446
|
205,278
|
|||||
|
Compensation
|
14,084
|
15,905
|
58,993
|
62,413
|
|||||
|
Newsprint and ink
|
1,665
|
2,413
|
7,956
|
10,910
|
|||||
|
Other operating expenses
|
23,423
|
26,004
|
98,635
|
102,957
|
|||||
|
Depreciation and amortization
|
3,423
|
3,571
|
14,029
|
15,348
|
|||||
|
Loss (gain) on sales of assets, net
|
(368
|
)
|
3
|
391
|
24
|
||||
|
Impairment of goodwill and other assets
|
—
|
2,602
|
—
|
2,602
|
|||||
|
Workforce adjustments
|
1,168
|
225
|
2,321
|
714
|
|||||
|
Total operating expenses
|
43,395
|
50,723
|
182,325
|
194,968
|
|||||
|
Equity in earnings of TNI
|
1,026
|
797
|
4,838
|
4,913
|
|||||
|
Operating income (loss)
|
3,650
|
(1,333
|
)
|
16,959
|
15,223
|
||||
|
Adjusted to exclude:
|
|||||||||
|
Depreciation and amortization
|
3,423
|
3,571
|
14,029
|
15,348
|
|||||
|
Loss (gain) on sales of assets, net
|
(368
|
)
|
3
|
391
|
24
|
||||
|
Impairment of intangible and other assets
|
—
|
2,602
|
—
|
2,602
|
|||||
|
Equity in earnings of TNI
|
(1,026
|
)
|
(797
|
)
|
(4,838
|
)
|
(4,913
|
)
|
|
|
Operating cash flow
|
5,679
|
4,046
|
26,541
|
28,284
|
|||||
|
Add:
|
|||||||||
|
Ownership share of TNI EBITDA (50%)
|
1,131
|
902
|
5,257
|
5,331
|
|||||
|
EBITDA
|
6,810
|
4,948
|
31,798
|
33,615
|
|||||
|
Adjusted to exclude:
|
|||||||||
|
Workforce adjustments
|
1,168
|
225
|
2,321
|
714
|
|||||
|
Adjusted EBITDA
|
7,978
|
5,173
|
34,119
|
34,329
|
|||||
|
Adjusted to exclude:
|
|||||||||
|
Ownership share of TNI EBITDA (50%)
|
(1,131
|
)
|
(902
|
)
|
(5,257
|
)
|
(5,331
|
)
|
|
|
Add (deduct):
|
|||||||||
|
Distributions from TNI
|
1,362
|
1,342
|
5,475
|
5,246
|
|||||
|
Capital expenditures, net of insurance proceeds
|
(348
|
)
|
(1,077
|
)
|
(2,960
|
)
|
(2,136
|
)
|
|
|
Pension contributions
|
(2,012
|
)
|
(730
|
)
|
(3,577
|
)
|
(1,435
|
)
|
|
|
Cash income tax refunds (payments)
|
—
|
38
|
(89
|
)
|
6,288
|
||||
|
Intercompany charges not settled in cash
|
—
|
3,381
|
6,953
|
9,678
|
|||||
|
Other
|
—
|
—
|
2,000
|
2,000
|
|||||
|
Unlevered free cash flow
|
5,849
|
7,225
|
36,664
|
48,639
|
|||||
11
|
(Thousands of Dollars)
|
September 27
2015
|
September 28
2014
|
|||
|
Cash
|
11,134
|
16,704
|
|||
|
Debt (Principal Amount):
|
|||||
|
Revolving Facility
|
—
|
5,000
|
|||
|
1st Lien Term Loan
|
180,872
|
226,750
|
|||
|
Notes
|
400,000
|
400,000
|
|||
|
2nd Lien Term Loan
|
145,000
|
150,000
|
|||
|
Pulitzer Notes
|
—
|
23,000
|
|||
|
725,872
|
804,750
|
||||
|
13 Weeks Ended
|
52 Weeks Ended
|
||||||||||||
|
Sept 27
2015
|
Sept 28
2014
|
Percent
Change
|
Sept 27
2015
|
Sept 28
2014
|
Percent
Change
|
||||||||
|
Capital expenditures, net of insurance proceeds (Thousands of Dollars)
|
2,016
|
3,620
|
(44.3
|
)
|
9,707
|
11,824
|
(17.9
|
)
|
|||||
|
Newsprint volume (Tonnes)
|
12,145
|
13,691
|
(11.3
|
)
|
50,895
|
58,007
|
(12.3
|
)
|
|||||
|
Average full-time equivalent employees
|
4,160
|
4,443
|
(6.4
|
)
|
4,292
|
4,515
|
(4.9
|
)
|
|||||
|
Average common shares - basic (Thousands of Shares)
|
53,637
|
52,442
|
2.3
|
52,640
|
52,273
|
0.7
|
|||||||
|
Average common shares - diluted (Thousands of Shares)
|
54,515
|
53,988
|
1.0
|
53,931
|
53,736
|
0.4
|
|||||||
|
Shares outstanding at end of period (Thousands of Shares)
|
54,679
|
53,747
|
1.7
|
||||||||||
12
|
(1)
|
This earnings release is a preliminary report of results for the periods included. The reader should refer to the Company's most recent reports on Form 10-Q and on Form 10-K for definitive information.
|
||||||
|
(2)
|
The following are non-GAAP (Generally Accepted Accounting Principles) financial measures for which reconciliations to relevant GAAP measures are included in tables accompanying this release:
|
||||||
|
ž
|
Adjusted EBITDA is defined as as operating income (loss), plus depreciation, amortization, loss (gain) on sale of assets, impairment charges, workforce adjustment costs, stock compensation and our 50% share of EBITDA from TNI and MNI, minus equity in earnings of TNI and MNI and curtailment gains.
|
||||||
|
ž
|
Adjusted Income (Loss) and Adjusted Earnings (Loss) Per Common Share are defined as income (loss) attributable to Lee Enterprises, Incorporated and earnings (loss) per common share adjusted to exclude both unusual matters and those of a substantially non-recurring nature.
|
||||||
|
ž
|
Cash Costs are defined as compensation, newsprint and ink, other operating expenses and certain unusual matters, such as workforce adjustment costs. Depreciation, amortization, impairment charges, other non-cash operating expenses and other unusual matters are excluded.
|
||||||
|
ž
|
EBITDA is defined as operating income (loss), plus depreciation, amortization, loss (gain) on sale of assets, impairment charges and our 50% share of EBITDA from TNI and MNI, minus equity in earnings of TNI and MNI and curtailment gains.
|
||||||
|
ž
|
Operating Cash Flow is defined as operating income (loss) plus depreciation, amortization, loss (gain) on sale of assets and impairment charges, minus equity in earnings of TNI and MNI and curtailment gains. We also present Operating Cash Flow excluding workforce adjustment costs. Operating Cash Flow Margin is defined as operating cash flow divided by operating revenue.
|
||||||
|
ž
|
Unlevered Free Cash Flow is defined as operating income (loss), plus depreciation, amortization, loss (gain) on sale of assets, impairment charges, workforce adjustment costs, stock compensation, distributions from TNI and MNI and cash income tax (payments) refunds, minus equity in earnings of TNI and MNI, curtailment gains, cash income taxes, pension contributions and capital expenditures. Changes in working capital, asset sales, minority interest and discontinued operations are excluded. Free Cash Flow also includes financial income, interest expense and debt financing and reorganization costs.
|
||||||
|
We also present selected information for Lee Legacy and Pulitzer Inc. ("Pulitzer"). Lee Legacy constitutes the business of the Company excluding Pulitzer, a wholly-owned subsidiary of the Company.
|
|||||||
|
No non-GAAP financial measure should be considered as a substitute for any related GAAP financial measure. However, the Company believes the use of non-GAAP financial measures provides meaningful supplemental information with which to evaluate its financial performance, or assist in forecasting and analyzing future periods. The Company also believes such non-GAAP financial measures are alternative indicators of performance used by investors, lenders, rating agencies and financial analysts to estimate the value of a publishing business and its ability to meet debt service requirements.
|
|||||||
|
(3)
|
The 1st Lien Term Loan is the $250 million first lien term loan and $40 million revolving facility under a First Lien Credit Agreement dated as of March 31, 2014. The 2nd Lien Term Loan is the $150 million second lien term loan under the Second Lien Loan Agreement dated as of March 31, 2014. TNI refers to TNI Partners publishing operations in Tucson, AZ. MNI refers to Madison Newspapers, Inc. publishing operations in Madison, WI.
|
||||||
|
(4)
|
Certain amounts as previously reported have been reclassified to conform with the current period presentation. The prior periods have been adjusted for comparative purposes, and the reclassifications have no impact on earnings.
|
||||||
13