View:
Download DOC
Download PDF
Download XLS
Q4 2014 Release 8-K






UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 8-K


CURRENT REPORT


PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934


Date of Report (Date of earliest event reported):  December 11, 2014


_______________________________________________________________________
LEE ENTERPRISES, INCORPORATED
(Exact name of Registrant as specified in its charter)

_______________________________________________________________________

Commission File Number 1-6227

Delaware
(State of Incorporation)
42-0823980
(I.R.S. Employer Identification No.)


201 N. Harrison Street, Davenport, Iowa 52801
(Address of Principal Executive Offices)


(563) 383-2100
Registrant's telephone number, including area code

_____________________________________________________________________________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))






Item 2.02.
Results of Operation and Financial Condition.

On December 11, 2014, Lee Enterprises, Incorporated reported its preliminary results for the fourth fiscal quarter ended September 28, 2014.  A copy of the news release is furnished as Exhibit 99.1 to this Form 8-K and information from the news release is hereby incorporated by reference.  The information under Item 2.02 of this report shall not be treated as filed for purposes of the Securities Exchange Act of 1934, as amended.

Item 9.01. Financial Statements and Exhibits.
 
 
 
 
 
(d)
Exhibits
 
 
 
99.1
News Release dated December 11, 2014

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
LEE ENTERPRISES, INCORPORATED
 
 
 
 
 
 
 
 
 
 
Date:
December 11, 2014
By:
 
 
 
 
Carl G. Schmidt
 
 
 
 
Vice President, Chief Financial Officer,
 
 
 
 
and Treasurer
 


INDEX TO EXHIBITS

Exhibit No.
Description
 
 
99.1
News Release dated December 11, 2014




2014 Q4 Earnings Release


Exhibit 99.1 - News Release – Fourth fiscal quarter ended September 28, 2014.
201 N. Harrison St.
Davenport, IA 52801
www.lee.net

NEWS RELEASE    
 
Lee Enterprises reports results for fourth fiscal quarter
 
(A previous version of this news release should have said that debt reduction since the end of the fiscal year ended September 28, 2014, totaled $15.3 million, rather than $12.3 million. The corrected amount is included below. The change has no impact on any reported amounts for the quarter or the full year.)

DAVENPORT, Iowa (December 11, 2014) — Lee Enterprises, Incorporated (NYSE: LEE), a major provider of local news, information and advertising in 50 markets, today reported preliminary(1) earnings of 6 cents per diluted common share for its fourth fiscal quarter ended September 28, 2014, compared with a loss of $1.71 a year ago. Excluding unusual matters, adjusted earnings per diluted common share(2) totaled 2 cents, compared with earnings of 25 cents a year ago. For the full year, earnings per diluted common share totaled $0.13 compared to a loss of $1.51 in the prior year, and adjusted earnings per diluted common share decreased to $0.41 from $0.47.

Mary Junck, chairman and chief executive officer, said: "Lee continues to drive digital revenue and audiences at an accelerating pace. Our rapid digital growth, along with our many print and new digital initiatives, positions us especially well, we believe, for a strong 2015. Our successful introduction of full access subscriptions also continues to heighten our optimism, as our unmatched local news gives us a powerful advantage in every market.”

She added: “For the fiscal year, through our business transformation initiatives, we reduced cash costs(2) 2.4% as reported, and 3.7% excluding the subscription-related expense reclassification, exceeding our previous guidance of a decrease of 3.0-3.5%. Since 2007 we have reduced cash costs by more than 37%, totaling $297 million. Additionally, we achieved our sixth consecutive year of strong and stable adjusted EBITDA(2) and unlevered free cash flow(2) and returned to profitability for the first year since 2010.”

She also noted the following financial highlights for the quarter:

•
Total digital revenue increased 24.6% from the same quarter a year ago, with the trend improving each quarter of this year;

•
Digital advertising revenue increased 14.8% and represented 18.5% of total advertising revenue;

•
Mobile advertising revenue increased 38.3%;

•
We have rolled out our full access subscription model in the majority of our markets;

•
Overall revenue trends improved again this quarter, with total revenue down 0.2% from the same quarter a year ago;

•
Digital audiences continued to grow at a double digit clip with 231.3 million mobile, tablet, desktop and app page views and 30.0 million unique visitors in the month of September 2014; and

1



•
Debt was reduced $10.3 million in the quarter and another $15.3 million since the end of our fiscal year.

FOURTH QUARTER OPERATING RESULTS

Operating revenue for the 13 weeks ended September 28, 2014 totaled $162.1 million, a decrease of 0.2% compared with a year ago. Excluding the impact of a subscription-related expense reclassification as a result of moving to fee-for-service delivery contracts at several of our newspapers, operating revenue decreased 3.0%. This reclassification will increase both print subscription revenue and operating expenses, with no impact on operating cash flow(2) or operating income. Certain delivery expenses were previously reported as a reduction of revenue. A table later in this release details the impact of the reclassification on revenue and cash costs.

Combined print and digital advertising and marketing services revenue decreased 3.4% to $106.6 million, with retail advertising down 4.6%, classified down 3.6% and national up 5.6%. Retail preprint advertising decreased 4.9%. Combined print and digital classified employment revenue increased 2.2%, while automotive decreased 13.3%, real estate decreased 6.8% and other classified increased 0.5%. Digital advertising and marketing services revenue on a stand-alone basis increased 14.8% to $19.7 million and now totals 18.5% of total advertising and marketing services revenue. Mobile advertising revenue increased 38.3%. Print advertising and marketing services revenue on a stand-alone basis decreased 6.7%.

Subscription revenue increased 6.1%. Excluding the impact of the subscription-related expense reclassification, subscription revenue decreased 4.2%.

Total digital revenue, including advertising, marketing services, subscriptions and digital businesses, totaled $24.7 million in the quarter, up 24.6%.

Cash costs increased 2.7% for the 13 weeks ended September 28, 2014. Compensation decreased 1.3%, with the average number of full-time equivalent employees down 3.3%. Newsprint and ink expense decreased 12.3%, primarily the result of a reduction in newsprint volume of 10.7%. Other operating expenses increased 10.6%. Excluding the impact of the subscription-related expense reclassification, cash costs decreased 0.8%. We expect our cash costs, excluding the subscription-related expense reclassification, to decrease 1.0-2.0% in the December 2014 quarter.

Operating cash flow decreased 10.0% from a year ago to $33.7 million. Operating cash flow margin(2) decreased to 20.8%, compared to 23.1% a year ago. We recorded $2.6 million of non-cash impairment losses in the current year quarter compared to $171.1 million in the prior year quarter. Including equity in earnings of associated companies, depreciation and amortization, as well as unusual matters in both years, operating income totaled $20.7 million in the current year quarter, compared with an operating loss of $142.4 million a year ago. Operating income margin was 12.8% in the current year quarter.

Non-operating expenses decreased 27.4% for the 13 weeks ended September 28, 2014. Interest expense decreased 11.2% due to lower debt balances and non-cash interest expense of $1.2 million in the prior year quarter. We recognized $5,543,000 of non-operating income in the current year quarter due to the change in fair value of stock warrants issued in connection with our refinancing in 2014. Income attributable to Lee Enterprises, Incorporated for the quarter totaled $3.2 million, compared with a loss of $88.7 million a year ago.


2


ADJUSTED EARNINGS AND EPS FOR THE QUARTER

The following table summarizes the impact from unusual matters on income (loss) attributable to Lee Enterprises, Incorporated and earnings (loss) per diluted common share. Per share amounts may not add due to rounding.
 
 
 
13 Weeks Ended
 
 
September 28
2014
 
 
September 29
2013
 
(Thousands of Dollars, Except Per Share Data)
Amount

 
Per Share

 
Amount

 
Per Share

 
 
 
 
Income (loss) attributable to Lee Enterprises, Incorporated, as reported
3,162

 
0.06

 
(88,697
)
 
(1.71
)
Adjustments:
 
 
 
 
 
 
 
Impairment of intangible and other assets
2,644

 
 
 
171,094

 
 
Debt financing and reorganization costs
992

 
 
 
88

 
 
Other, net
(4,227
)
 
 
 
1,726

 
 
 
(591
)
 
 
 
172,908

 
 
Income tax effect of adjustments, net
(1,733
)
 
 
 
(71,093
)
 
 
 
(2,324
)
 
(0.04
)
 
101,815

 
1.96

Income attributable to Lee Enterprises, Incorporated, as adjusted
838

 
0.02

 
13,118

 
0.25

FULL ACCESS SUBSCRIPTION INITIATIVE

As previously reported, we launched our full access subscription initiative in April. As of today, 30 markets have been launched and we are on track to launch all of our markets before June 2015. Early results are promising, with large numbers of print subscribers activating their digital subscriptions in the markets launched. And, thanks in part to a major customer service initiative, subscriber losses have been lower than expected. We expect subscription revenue in the December 2014 quarter, excluding the impact of the subscription-related expense reclassification, to be comparable to the prior year level. Also as previously reported, due to the timing of the rollout and subscriber renewal dates, we expect the bulk of the positive revenue from this initiative to be realized in 2015. 

YEAR-TO-DATE OPERATING RESULTS(3) 

In 2014, we continued to drive strong digital revenue growth, transform our business, and rapidly reduce debt. Highlights for the year include the following:

•
Digital advertising revenue reached $75.2 million for the year, an increase of 12.0%, contributing to total digital revenue growth of 17.1% and improved overall advertising trends compared to the prior year;

•
We reduced reported cash costs 2.4%, and 3.7% excluding the subscription-related expense reclassification, exceeding guidance of a decrease of 3.0-3.5%. Since 2007 we have reduced cash costs of our continuing operations by more than 37%, totaling $297 million;

•
We achieved our sixth consecutive year of strong and stable adjusted EBITDA and unlevered free cash flow;

•
The Company returned to profitability, as reported, for the first year since 2010;

•
We completed a comprehensive refinancing of our long-term debt, significantly extending maturities, improving operating flexibility and providing a substantial runway for the future;


3


•
Debt principal reduction totaled $42.8 million in 2014 and $32 million borrowed to fund refinancing costs was also repaid; and

•
The Company’s stock price increased 24% during the year, resulting in an increase in equity value to stockholders of $38 million.

Operating revenue for the 52 weeks ended September 28, 2014, totaled $656.7 million, a decrease of 2.7% compared with the 52 weeks ended September 29, 2013. Excluding the impact of the subscription-related expense reclassification, operating revenue decreased 3.7%.

Combined print and digital advertising and marketing services revenue decreased 4.0% to $442.0 million, retail advertising decreased 3.4%, classified decreased 7.0% and national increased 3.6%. Retail preprint advertising decreased 1.7%. Combined print and digital classified employment revenue decreased 1.3%, while automotive decreased 14.2%, real estate decreased 6.2% and other classified decreased 6.1%. Digital advertising and marketing services revenue on a stand-alone basis increased 12.0% to $75.2 million. Mobile advertising revenue increased 27.6%. Print advertising and marketing services revenue on a stand-alone basis decreased 6.8%.

Subscription revenue decreased 0.1%. Excluding the impact of the subscription-related expense reclassification, subscription revenue decreased 3.9%.

Total digital revenue totaled $90.2 million year to date, up 17.1% compared with a year ago.

Cash costs for the 52 weeks ended September 28, 2014 decreased 2.4% compared to the same period a year ago. Compensation decreased 4.6%, with the average number of full-time equivalent employees down 4.8%. Newsprint and ink expense decreased 12.6%, primarily the result of a reduction in newsprint volume of 11.5%. Other operating expenses increased 3.0%. Excluding the impact of the subscription-related expense reclassification, cash costs decreased 3.7%.

Operating cash flow decreased 3.5% from a year ago to $155.1 million. Operating cash flow margin decreased to 23.6% from 23.8% a year ago. We recorded $3.0 million of noncash impairment losses in the current year compared to $171.1 million in the prior year. Including equity in earnings of associated companies, depreciation and amortization, as well as unusual matters in both years, operating income increased to $113.2 million in the 52 weeks ended September 28, 2014, compared with an operating loss of $57.3 million a year ago.

Non-operating expenses increased 21.2%, as we charged $22.9 million of debt financing costs to expense and recorded a $2.3 million loss related to a litigation settlement in 2014. These costs were partially offset by a 10.9% decrease in interest expense in the current year, due to lower debt balances and the refinancing of the Pulitzer Notes in May 2013, and $6,122,000 of non-operating income from the change in fair value of stock warrants. We recorded a $6.9 million gain on sale of an investment in the prior year period. Income attributable to Lee Enterprises, Incorporated for the year totaled $6.8 million, compared to a loss of $78.3 million a year ago.


4


ADJUSTED EARNINGS AND EPS FOR THE YEAR TO DATE

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.
 
 
 
 
 
52 Weeks Ended
 
 
September 28
2014
 
 
September 29
2013
 
(Thousands of Dollars, Except Per Share Data)
Amount

 
Per Share

 
Amount

 
Per Share

 
 
 
 
Income (loss) attributable to Lee Enterprises, Incorporated, as reported
6,795

 
0.13

 
(78,317
)
 
(1.51
)
Adjustments:
 
 
 
 
 
 
 
Impairment of intangible and other assets
2,980

 
 
 
171,094

 
 
Gain on sale of investment, net
—

 
 
 
(6,909
)
 
 
Debt financing and reorganization costs
22,927

 
 
 
646

 
 
Other, net
891

 
 
 
7,828

 
 
 
26,798

 
 
 
172,659

 
 
Income tax effect of adjustments, net
(11,487
)
 
 
 
(70,991
)
 
 
 
15,311

 
0.28

 
101,668

 
1.96

Unusual matters related to discontinued operations
—

 
—

 
1,014

 
0.02

Income attributable to Lee Enterprises, Incorporated, as adjusted
22,106

 
0.41

 
24,365

 
0.47


SUBSCRIPTION EXPENSE RECLASSIFICATION

Certain results, excluding the impact of the subscription-related expense reclassification, are as follows:
 
13 Weeks Ended
 
 
52 Weeks Ended
 
(Thousands of Dollars)
Sept 28
2014

Sept 29
2013

Percent Change

 
Sept 28
2014

Sept 29
2013

Percent Change

 
 
 
 
 
 
 
 
Subscription revenue, as reported
46,081

43,447

6.1

 
176,826

177,056

(0.1
)
Adjustment for subscription-related expense reclassification
(4,442
)
—

NM

 
(6,707
)
—

NM

Subscription revenue, as adjusted
41,639

43,447

(4.2
)
 
170,119

177,056

(3.9
)
 
 
 
 
 
 
 
 
Total operating revenue, as reported
162,094

162,462

(0.2
)
 
656,697

674,740

(2.7
)
Adjustment for subscription-related expense reclassification
(4,442
)
—

NM

 
(6,707
)
—

NM

Total operating revenue, as adjusted
157,652

162,462

(3.0
)
 
649,990

674,740

(3.7
)
 
 
 
 
 
 
 
 
Total cash costs, as reported
128,347

124,959

2.7

 
501,642

514,013

(2.4
)
Adjustment for subscription-related expense reclassification
(4,442
)
—

NM

 
(6,707
)
—

NM

Total cash costs, as adjusted
123,905

124,959

(0.8
)
 
494,935

514,013

(3.7
)


5


DEBT AND FREE CASH FLOW(2) 

Debt was reduced $10.3 million in the quarter and by a net amount of $42.8 million for the fiscal year. As of September 28, 2014 the principal amount of debt was $804.8 million. As previously announced, on March 31, 2014, we completed a comprehensive refinancing of our long-term debt and borrowed an additional $32.0 million of debt in order to pay related debt refinancing costs, which was also repaid during the year.

Unlevered free cash flow totaled $32.2 million in the current year quarter compared to $47.5 million in the same quarter a year ago. Timing of receipt of income tax refunds was the biggest reason for the decrease. Unlevered free cash flow totaled $159.2 million for the fiscal year compared to $166.8 million in the prior year.

CONFERENCE CALL INFORMATION

As previously announced, we will hold an earnings conference call and audio webcast later today at 9 a.m. Central Standard Time. The live webcast will be accessible at lee.net and will be available for replay two hours later. The call also may be monitored on a listen-only conference line by dialing (toll free) 888-397-5339 and entering a conference passcode of 354430 at least five minutes before the scheduled start.

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 1.1 million daily and 1.4 million Sunday, reaching nearly four million readers in print alone. Lee's websites and mobile and tablet products attracted 30.0 million unique visitors in September 2014. 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:

•
Our ability to generate cash flows and maintain liquidity sufficient to service our debt;
•
Our ability to comply with the financial covenants in our credit facilities;
•
Our ability to refinance our debt as it comes due;
•
That the warrants issued in our refinancing will not be exercised;
•
The impact and duration of adverse conditions in certain aspects of the economy affecting our business;
•
Changes in advertising demand;
•
Potential changes in newsprint, other commodities and energy costs;
•
Interest rates;
•
Labor costs;
•
Legislative and regulatory rulings;
•
Our ability to achieve planned expense reductions;
•
Our ability to maintain employee and customer relationships;
•
Our ability to manage increased capital costs;
•
Our ability to maintain our listing status on the NYSE;
•
Competition; and
•
Other risks detailed from time to time in our publicly filed documents.

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: dan.hayes@lee.net, (563) 383-2100


6


CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
13 Weeks Ended
 
 
52 Weeks Ended
 
(Thousands of Dollars, Except Per Share Data)
Sept 28
2014

Sept 29
2013

Percent Change

 
Sept 28
2014

Sept 29
2013

Percent Change

 
 
 
 
 
 
 
 
Advertising and marketing services:
 
 
 
 
 
 
 
Retail
65,815

68,979

(4.6
)
 
282,407

292,417

(3.4
)
Classified:
 
 
 
 
 
 
 
Employment
8,576

8,395

2.2

 
33,123

33,560

(1.3
)
Automotive
7,238

8,350

(13.3
)
 
29,547

34,424

(14.2
)
Real estate
4,586

4,920

(6.8
)
 
17,699

18,862

(6.2
)
All other
11,618

11,566

0.5

 
44,298

47,197

(6.1
)
Total classified
32,018

33,231

(3.6
)
 
124,667

134,043

(7.0
)
National
5,988

5,672

5.6

 
24,867

23,999

3.6

Niche publications and other
2,787

2,433

14.5

 
10,060

10,081

(0.2
)
Total advertising and marketing services revenue
106,608

110,315

(3.4
)
 
442,001

460,540

(4.0
)
Subscription
46,081

43,447

6.1

 
176,826

177,056

(0.1
)
Commercial printing
2,880

2,945

(2.2
)
 
12,050

12,625

(4.6
)
Digital services and other
6,525

5,755

13.4

 
25,820

24,519

5.3

Total operating revenue
162,094

162,462

(0.2
)
 
656,697

674,740

(2.7
)
Operating expenses:
 
 
 
 
 
 
 
Compensation
61,511

62,327

(1.3
)
 
243,054

254,831

(4.6
)
Newsprint and ink
8,874

10,123

(12.3
)
 
37,994

43,481

(12.6
)
Other operating expenses
57,621

52,090

10.6

 
219,329

213,021

3.0

Workforce adjustments
341

419

(18.6
)
 
1,265

2,680

(52.8
)
Cash costs
128,347

124,959

2.7

 
501,642

514,013

(2.4
)
Operating cash flow
33,747

37,503

(10.0
)
 
155,055

160,727

(3.5
)
Depreciation
5,220

5,179

0.8

 
20,920

21,302

(1.8
)
Amortization
6,880

5,590

23.1

 
27,591

34,225

(19.4
)
Loss (gain) on sales of assets, net
284

87

NM

 
(1,338
)
110

NM

Impairment of intangible and other assets
2,644

171,094

(98.5
)
 
2,980

171,094

(98.3
)
Equity in earnings of associated companies
1,949

2,015

(3.3
)
 
8,297

8,685

(4.5
)
Operating income (loss)
20,668

(142,432
)
NM

 
113,199

(57,319
)
NM



7


CONSOLIDATED STATEMENTS OF OPERATIONS, continued
 
 
 
 
 
 
 
 
 
 
 
 
 
13 Weeks Ended
 
 
52 Weeks Ended
 
(Thousands of Dollars and Shares, Except Per Share Data)
Sept 28
2014

Sept 29
2013

Percent Change

 
Sept 28
2014

Sept 29
2013

Percent Change

 
 
 
 
 
 
 
 
Non-operating income (expense):
 
 
 
 
 
 
 
Financial income
79

81

(2.5
)
 
385

300

28.3

Interest expense
(18,691
)
(21,056
)
(11.2
)
 
(79,724
)
(89,447
)
(10.9
)
Debt financing costs
(992
)
(88
)
NM

 
(22,927
)
(646
)
NM

Other, net
4,607

411

NM

 
3,028

7,889

(61.6
)
 
(14,997
)
(20,652
)
(27.4
)
 
(99,238
)
(81,904
)
21.2

Income (loss) before income taxes
5,671

(163,084
)
NM

 
13,961

(139,223
)
NM

Income tax expense (benefit)
2,296

(74,548
)
NM

 
6,290

(62,745
)
NM

Income (loss) from continuing operations
3,375

(88,536
)
NM

 
7,671

(76,478
)
NM

Discontinued operations, net of income taxes
—

1

NM

 
—

(1,246
)
NM

Net income (loss)
3,375

(88,535
)
NM

 
7,671

(77,724
)
NM

Net income attributable to non-controlling interests
(213
)
(162
)
31.5

 
(876
)
(593
)
47.7

Income (loss) attributable to Lee Enterprises, Incorporated
3,162

(88,697
)
NM

 
6,795

(78,317
)
NM

 
 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Lee Enterprises, Incorporated
3,162

(88,698
)
NM

 
6,795

(77,071
)
NM

 
 
 
 
 
 
 
 
Earnings (loss) per common share:
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
Continuing operations
0.06

(1.71
)
NM

 
0.13

(1.49
)
NM

Discontinued operations
—

—

NM

 
—

(0.02
)
NM

 
0.06

(1.71
)
NM

 
0.13

(1.51
)
NM

 
 
 
 
 
 
 
 
Diluted:
 
 
 
 
 
 
 
Continuing operations
0.06

(1.71
)
NM

 
0.13

(1.49
)
NM

Discontinued operations
—

—

NM

 
—

(0.02
)
NM

 
0.06

(1.71
)
NM

 
0.13

(1.51
)
NM

 
 
 
 
 
 
 
 
Average common shares:
 
 
 
 
 
 
 
Basic
52,442

51,916

 
 
52,273

51,833

 
Diluted
53,988

51,916

 
 
53,736

51,833

 


8


SELECTED CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
 
13 Weeks Ended
 
 
52 Weeks Ended
 
(Thousands of Dollars)
Sept 28
2014

Sept 29
2013

 
Sept 28
2014

Sept 29
2013

 
 
 
 
 
 
Advertising and marketing services
106,608

110,315

 
442,001

460,540

Subscription
46,081

43,447

 
176,826

177,056

Other
9,405

8,700

 
37,870

37,144

Total operating revenue
162,094

162,462

 
656,697

674,740

Compensation
61,511

62,327

 
243,054

254,831

Newsprint and ink
8,874

10,123

 
37,994

43,481

Other operating expenses
57,621

52,090

 
219,329

213,021

Depreciation and amortization
12,100

10,769

 
48,511

55,527

Loss (gain) on sales of assets, net
284

87

 
(1,338
)
110

Impairment of goodwill and other assets
2,644

171,094

 
2,980

171,094

Workforce adjustments
341

419

 
1,265

2,680

Total operating expenses
143,375

306,909

 
551,795

740,744

Equity in earnings of associated companies
1,949

2,015

 
8,297

8,685

Operating income (loss)
20,668

(142,432
)
 
113,199

(57,319
)
Adjusted to exclude:
 
 
 
 
 
Depreciation and amortization
12,100

10,769

 
48,511

55,527

Loss (gain) on sales of assets, net
284

87

 
(1,338
)
110

Impairment of intangible and other assets
2,644

171,094

 
2,980

171,094

Equity in earnings of associated companies
(1,949
)
(2,015
)
 
(8,297
)
(8,685
)
Operating cash flow
33,747

37,503

 
155,055

160,727

Add:
 
 
 
 
 
Ownership share of TNI and MNI EBITDA (50%)
2,697

2,451

 
11,236

11,761

Adjusted to exclude:
 
 
 
 
 
Stock compensation
400

152

 
1,481

1,261

Adjusted EBITDA(2)
36,844

40,106

 
167,772

173,749

Adjusted to exclude:
 
 
 
 
 
Ownership share of TNI and MNI EBITDA (50%)
(2,697
)
(2,451
)
 
(11,236
)
(11,761
)
Add (deduct):
 
 
 
 
 
Distributions from TNI and MNI
2,342

3,219

 
9,996

11,398

Capital expenditures, net of insurance proceeds
(3,620
)
(2,905
)
 
(11,824
)
(9,740
)
Pension contributions
(800
)
—

 
(1,522
)
(6,016
)
Cash income tax refunds (payments)
89

9,486

 
6,022

9,126

Unlevered free cash flow (2)
32,158

47,455

 
159,208

166,756

Add (deduct):
 
 
 
 
 
Financial income
79

81

 
385

300

Interest expense to be settled in cash
(18,692
)
(19,871
)
 
(77,330
)
(84,012
)
Debt financing costs paid
(311
)
(305
)
 
(31,587
)
(1,071
)
Free cash flow (deficit)
13,234

27,360

 
50,676

81,973



9


SELECTED LEE LEGACY(2) ONLY FINANCIAL INFORMATION
(UNAUDITED)
 
13 Weeks Ended
 
 
52 Weeks Ended
 
(Thousands of Dollars)
Sept 28
2014

Sept 29
2013

 
Sept 28
2014

Sept 29
2013

 
 
 
 
 
 
Advertising and marketing services
75,408

76,920

 
306,818

317,161

Subscription
30,492

27,307

 
113,992

110,335

Other
8,249

7,632

 
33,208

31,079

Total operating revenue
114,149

111,859

 
454,018

458,575

Compensation
45,606

46,059

 
180,641

185,470

Newsprint and ink
6,461

7,202

 
27,084

30,195

Other operating expenses
32,265

27,163

 
118,971

112,768

Depreciation and amortization
8,529

6,722

 
33,163

27,291

Loss (gain) on sales of assets, net
281

82

 
(1,362
)
134

Impairment of goodwill and other assets
42

523

 
378

523

Workforce adjustments
116

360

 
551

1,546

Total operating expenses
93,300

88,111

 
359,426

357,927

Equity in earnings of associated companies
1,152

852

 
3,384

3,509

Operating income
22,001

24,600

 
97,976

104,157

Adjusted to exclude:
 
 
 
 
 
Depreciation and amortization
8,529

6,722

 
33,163

27,291

Loss (gain) on sales of assets, net
281

82

 
(1,362
)
134

Impairment of intangible and other assets
42

523

 
378

523

Equity in earnings of associated companies
(1,152
)
(852
)
 
(3,384
)
(3,509
)
Operating cash flow
29,701

31,075

 
126,771

128,596

Add:
 
 
 
 
 
Ownership share of MNI EBITDA (50%)
1,795

1,183

 
5,905

5,964

Adjusted to exclude:
 
 
 
 
 
Stock compensation
400

152

 
1,481

1,261

Adjusted EBITDA
31,896

32,410

 
134,157

135,821

Adjusted to exclude:
 
 
 
 
 
Ownership share of MNI EBITDA (50%)
(1,795
)
(1,183
)
 
(5,905
)
(5,964
)
Add (deduct):
 
 
 
 
 
Distributions from MNI
1,000

1,250

 
4,750

5,250

Capital expenditures, net of insurance proceeds
(2,543
)
(2,586
)
 
(9,688
)
(7,713
)
Pension contributions
(70
)
—

 
(87
)
—

Cash income tax refunds (payments)
51

(5
)
 
(266
)
(365
)
Intercompany charges not settled in cash
(3,381
)
(1,958
)
 
(9,678
)
(8,396
)
Other
—

—

 
(2,000
)
(2,000
)
Unlevered free cash flow
25,158

27,928

 
111,283

116,633

Add (deduct):
 
 
 
 
 
Financial income
79

81

 
385

300

Interest expense to be settled in cash
(18,095
)
(18,187
)
 
(73,491
)
(74,641
)
Debt financing costs paid
(311
)
(40
)
 
(31,579
)
(140
)
Free cash flow
6,831

9,782

 
6,598

42,152







10


SELECTED PULITZER(2) ONLY FINANCIAL INFORMATION
(UNAUDITED)
 
13 Weeks Ended
 
 
52 Weeks Ended
 
(Thousands of Dollars)
Sept 28
2014

Sept 29
2013

 
Sept 28
2014

Sept 29
2013

 
 
 
 
 
 
Advertising and marketing services
31,200

33,395

 
135,183

143,379

Subscription
15,589

16,140

 
62,834

66,721

Other
1,156

1,068

 
4,662

6,065

Total operating revenue
47,945

50,603

 
202,679

216,165

Compensation
15,905

16,268

 
62,413

69,361

Newsprint and ink
2,413

2,921

 
10,910

13,286

Other operating expenses
25,356

24,927

 
100,358

100,253

Depreciation and amortization
3,571

4,047

 
15,348

28,236

Loss (gain) on sales of assets, net
3

5

 
24

(24
)
Impairment of goodwill and other assets
2,602

170,571

 
2,602

170,571

Workforce adjustments
225

59

 
714

1,134

Total operating expenses
50,075

218,798

 
192,369

382,817

Equity in earnings of associated companies
797

1,163

 
4,913

5,176

Operating income (loss)
(1,333
)
(167,032
)
 
15,223

(161,476
)
Adjusted to exclude:
 
 
 
 
 
Depreciation and amortization
3,571

4,047

 
15,348

28,236

Loss (gain) on sales of assets, net
3

5

 
24

(24
)
Impairment of intangible and other assets
2,602

170,571

 
2,602

170,571

Equity in earnings of associated companies
(797
)
(1,163
)
 
(4,913
)
(5,176
)
Operating cash flow
4,046

6,428

 
28,284

32,131

Add:
 
 
 
 
 
Ownership share of TNI EBITDA (50%)
902

1,268

 
5,331

5,797

Adjusted EBITDA
4,948

7,696

 
33,615

37,928

Adjusted to exclude:
 
 
 
 
 
Ownership share of TNI EBITDA (50%)
(902
)
(1,268
)
 
(5,331
)
(5,797
)
Add (deduct):
 
 
 
 
 
Distributions from TNI
1,342

1,969

 
5,246

6,148

Capital expenditures, net of insurance proceeds
(1,077
)
(319
)
 
(2,136
)
(2,027
)
Pension contributions
(730
)
—

 
(1,435
)
(6,016
)
Cash income tax refunds (payments)
38

9,491

 
6,288

9,491

Intercompany charges not settled in cash
3,381

1,958

 
9,678

8,396

Other
—

—

 
2,000

2,000

Unlevered free cash flow
7,000

19,527

 
47,925

50,123

Add (deduct):
 
 
 
 
 
Interest expense to be settled in cash
(597
)
(1,684
)
 
(3,839
)
(9,371
)
Debt financing costs paid
—

(265
)
 
(8
)
(931
)
Free cash flow
6,403

17,578

 
44,078

39,821



11


REVENUE BY REGION
 
13 Weeks Ended
 
 
52 Weeks Ended
 
(Thousands of Dollars)
Sept 28
2014

Sept 29
2013

Percent Change

 
Sept 28
2014

Sept 29
2013

Percent Change

 
 
 
 
 
 
 
 
Midwest
99,685

101,355

(1.6
)
 
408,526

423,823

(3.6
)
Mountain West
33,760

32,994

2.3

 
132,319

134,173

(1.4
)
West
11,053

10,820

2.2

 
43,928

44,870

(2.1
)
East/Other
17,596

17,293

1.8

 
71,924

71,874

0.1

Total
162,094

162,462

(0.2
)
 
656,697

674,740

(2.7
)

SELECTED BALANCE SHEET INFORMATION
(Thousands of Dollars)
September 28
2014

September 29
2013

 
 
 
Cash
16,704

17,562

Debt (Principal Amount)
804,750

847,500


SELECTED STATISTICAL INFORMATION
 
13 Weeks Ended
 
 
52 Weeks Ended
 
 
Sept 28
2014

Sept 29
2013

Percent Change

 
Sept 28
2014

Sept 29
2013

Percent Change

 
 
 
 
 
 
 
 
Capital expenditures, net of insurance proceeds (Thousands of Dollars)
3,620

2,905

24.6

 
11,824

9,740

21.4

Newsprint volume (Tonnes)
13,691

15,334

(10.7
)
 
58,007

65,560

(11.5
)
Average full-time equivalent employees
4,443

4,596

(3.3
)
 
4,515

4,740

(4.8
)
Shares outstanding at end of period (Thousands of Shares)
 
 
 
 
53,747

52,434

2.5



12


NOTES
(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 operating income (loss), plus depreciation, amortization, impairment charges, stock compensation and 50% of EBITDA from associated companies, minus equity in earnings of associated companies 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
Operating Cash Flow is defined as operating income (loss) plus depreciation, amortization and impairment charges, minus equity in earnings of associated companies and curtailment gains. Operating Cash Flow margin is defined as operating cash flow divided by operating revenue. The terms operating cash flow and EBITDA are used interchangeably.
 
ž
Unlevered Free Cash Flow is defined as operating income (loss), plus depreciation, amortization, impairment charges, stock compensation, distributions from associated companies and cash income tax refunds, minus equity in earnings of associated companies, 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)
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.
 
Results of North County Times operations and The Garden Island operations have been reclassified as discontinued operations for all periods presented.

13