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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):  February 4, 2016


_______________________________________________________________________
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 February 4, 2016, Lee Enterprises, Incorporated reported its preliminary results for the first fiscal quarter ended December 27, 2015. 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 February 4, 2016

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
 
 
 
 
/s/ Ronald A. Mayo
 
 
 
 
 
Date:
February 4, 2016
By:
 
 
 
 
Ronald A. Mayo
 
 
 
 
Vice President, Chief Financial Officer,
 
 
 
 
and Treasurer
 


INDEX TO EXHIBITS

Exhibit No.
Description
 
 
99.1
News Release dated February 4, 2016




Exhibit


Exhibit 99.1 - News Release – First fiscal quarter ended December 27, 2015.
201 N. Harrison St.
Davenport, IA 52801
www.lee.net

NEWS RELEASE    
 
Lee Enterprises reports first quarter earnings
 
DAVENPORT, Iowa (February 4, 2016) — Lee Enterprises, Incorporated (NYSE: LEE), a major provider of local news, information and advertising in 50 markets, today reported preliminary(1) results for its 2016 first fiscal quarter ended December 27, 2015.

"We are off to a strong start in 2016. Digital advertising, subscriptions, digital services, commercial printing and other revenue accounted for more than half of our total revenue in the quarter. All of these categories are growing, and we see opportunity for future expansion," Mary Junck, chairman and chief executive officer said.

"We continue to carefully manage cash costs(2) and expect 2016 to be another year of strong cash flow for Lee, allowing our aggressive debt reduction," She added. "In the first quarter of 2016, we reduced debt by nearly $22 million and have paid down more than $80 million in the last twelve months."

Other first quarter financial highlights include:

•
Digital ad revenue was up 7.2%, representing 20.6% of total advertising revenue in the quarter.
•
Mobile advertising revenue, which is included in digital advertising, increased 12.4%.
•
Digital services revenue, primarily TownNews.com, increased 5.7% to $3.3 million.
•
Subscription revenue increased 0.1%.
•
Overall revenue decreased 5.0% in first quarter and total advertising and marketing services revenue decreased 8.8%. Both categories improved steadily throughout the quarter.
•
Total cash costs excluding workforce adjustment costs decreased 5.2%.
•
First quarter operating cash flow(2) totaled $43.6 million, a 5.2% decline from the prior year quarter.
•
Our share of EBITDA(2) from MNI(3) and TNI(3) increased 1.4%.
•
Adjusted EBITDA(2) totaled $48.6 million, a 3.6% decline from the prior year quarter.

"We have made excellent progress with several key initiatives," Junck said. "In the first quarter, we re-launched several of our websites with a new design aimed at improving reader engagement and driving digital revenue. We'll transition all of our websites to the new design throughout this year.

"Re-designed print products have been introduced in many of our markets, and they have been very well received by our readers. This on-going re-design and transformation of how we produce and present news, which we call the 'daVinci Project,' not only improves the look and ease of use of our newspapers, but also, through resource consolidation, creates significant cost savings," she added.

"Currently, 40.3% of our print subscribers have activated the digital subscriptions available to them through our full access subscription model, which continues to grow, providing our print readers with on-demand breaking news. It also helps grow our digital audiences."

Earnings of 21 cents per diluted common share were reported for the quarter compared to earnings of 18 cents a year ago. Excluding unusual matters, adjusted earnings per diluted common share(2) totaled 22 cents, the same as a year ago.


1


"We continue to produce strong EBITDA and reduce debt," said Chief Financial Officer and Treasurer Ron Mayo. "For the last twelve months, EBITDA totaled $155.7 million, Adjusted EBITDA totaled $161.5 million and unlevered free cash flow(2) totaled $149.0 million. As of December 27, 2015, the principal amount of debt was $704.0 million. The company will continue to use substantially all of its free cash flow(2) to reduce debt and strengthen the company's capital structure.

"During the past twelve months, we reduced debt by $80.5 million, including $21.9 million in the first quarter of 2016," he added. "Our highest cost of capital, the 2nd Lien Term Loan(3), was reduced by $5.6 million, and we were able to repurchase $5 million of our Notes(3) at a substantial discount."

On January 15, 2016, Lee received payment of $30,645,628 from its insurer for its share of a subrogation recovery arising from the settlement of claims for damages suffered as a result of a 2009 loss at one of the Lee Legacy production facilities. 

"Of the total proceeds we received, $20 million was used to reduce outstanding debt under our 1st Lien Term Loan(3)," Mayo said. "To the extent permissible and available at a discount, we intend to use some portion of the remaining proceeds to repurchase outstanding Notes or further pay down the 1st Lien Term Loan."

Mayo continued, "Total debt as of today is $678 million after including $20 million of insurance proceeds already used to reduce the 1st Lien Term Loan in January 2016, along with required principal amortization."

Mayo also noted:

•
Interest expense to be settled in cash was reduced $1.6 million in the first quarter as a result of debt reductions, which provides additional free cash flow that will be used for future debt reductions.
•
Lee has initiated a comprehensive real estate monetization review program. The undepreciated book value of the land and buildings under review is in excess of $200 million.

"In fiscal year 2016, we expect cash costs excluding workforce adjustments to decline by 3.5% to 4.0%, reaffirming our guidance issued in December, " Mayo added.

FIRST QUARTER OPERATING RESULTS

Operating revenue for the 13 weeks ended December 27, 2015 totaled $168.4 million, a decrease of 5.0% compared with a year ago.

Advertising and marketing services revenue combined decreased 8.8% to $105.6 million, with retail advertising down 8.4%, classified down 13.4% and national down 5.7%. Digital advertising and marketing services revenue on a stand-alone basis increased 7.2% to $21.8 million.

Subscription revenue increased 0.1%.

Average daily newspaper circulation, including TNI and MNI and digital subscribers, totaled 1.0 million in the 13 weeks ended December 27, 2015. Sunday circulation totaled 1.4 million.

Including digital advertising, subscription, digital services, commercial printing and other revenue, 50.2% of revenue comes from growing categories.

Cash costs decreased 4.9% for the 13 weeks ended December 27, 2015. Compensation decreased 5.3%, primarily as a result of reduced staffing levels. Newsprint and ink expense decreased 24.4%, primarily the result of lower newsprint prices and a reduction in newsprint volume of 11.3%. Other operating expenses decreased 2.3%.

Operating cash flow decreased 5.2% from a year ago to $43.6 million. Excluding workforce adjustments, operating cash flow decreased 4.3%. Operating cash flow margin(2) was flat to the prior year quarter at 25.9%. Including equity in earnings of associated companies, depreciation and amortization, as well as unusual matters in both years, operating income totaled $36.4 million in the current year quarter, compared with $37.5 million a year ago. Adjusted EBITDA for the quarter was $48.6 million, a 3.6% decline from the prior year.

2



Non-operating expenses decreased 15.4% for the 13 weeks ended December 27, 2015. Interest expense decreased 8.8%, or $1.6 million, due to lower debt balances. Non-operating income of $0.1 million was recognized in the current year quarter compared to non-operating expense of $1.3 million in the prior year quarter due to the change in fair value of stock warrants issued in connection with the refinancing in 2014. Partially offsetting those expense reductions, $1.3 million of debt refinancing and administrative costs was expensed in the current year quarter compared to $1.1 million in the prior year quarter. Income attributable to Lee Enterprises, Incorporated for the quarter totaled $11.2 million, compared with income of $9.8 million a year ago.

ADJUSTED EARNINGS AND EPS FOR THE QUARTER

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.
 
 
 
13 Weeks Ended
 
 
December 27
2015
 
 
December 28
2014
 
(Thousands of Dollars, Except Per Share Data)
Amount

 
Per Share

 
Amount

 
Per Share

 
 
 
 
Income attributable to Lee Enterprises, Incorporated, as reported
11,237

 
0.21

 
9,753

 
0.18

Adjustments:
 
 
 
 
 
 
 
Debt financing costs
1,333

 
 
 
1,102

 
 
Warrants fair value adjustment
(73
)
 
 
 
1,302

 
 
Other, including workforce adjustments
54

 
 
 
(54
)
 
 
 
1,314

 
 
 
2,350

 
 
Income tax effect of adjustments, net
(494
)
 
 
 
(367
)
 
 
 
820

 
0.02

 
1,983

 
0.04

Income attributable to Lee Enterprises, Incorporated, as adjusted
12,057

 
0.22

 
11,736

 
0.22

DEBT AND FREE CASH FLOW

Debt was reduced $21.9 million in the quarter and $80.5 million over the last twelve months. As of December 27, 2015 the principal amount of debt was $704.0 million.

Unlevered free cash flow decreased 0.5% in the current year quarter to $45.8 million compared to $46.0 million in the same quarter a year ago. At December 27, 2015, liquidity, including cash and availability under our Revolving Facility(3), totaled $44.7 million compared to $26.1 million of required debt principal payments over the next twelve months.

As previously noted, of the total proceeds of $30,645,628 received by the company, in January 2016 $20 million was used to reduce outstanding debt under its 1st Lien Term Loan and, to the extent permissible and available at a discount, we intend to use some portion of the remaining proceeds to repurchase outstanding Notes or prepay the 1st Lien Term Loan.

CONFERENCE CALL INFORMATION

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) 888-516-2445 and entering a conference passcode of 699329 at least five minutes before the scheduled start. Participants on the listen-only line will not have the opportunity to ask questions.

3



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 1.0 million daily and 1.4 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:

•
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 and subscription 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:
Charles Arms
Director of Communications
IR@lee.net
(563) 383-2100


4


CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
13 Weeks Ended
 
(Thousands of Dollars, Except Per Share Data)
December 27
2015

December 28
2014

Percent Change

 
 
 
 
Advertising and marketing services:
 
 
 
Retail
70,587

77,083

(8.4
)
Classified
25,358

29,279

(13.4
)
National
6,746

7,151

(5.7
)
Niche publications and other
2,946

2,317

27.1

Total advertising and marketing services revenue
105,637

115,830

(8.8
)
Subscription
50,430

50,399

0.1

Commercial printing
3,226

2,816

14.6

Digital services
3,316

3,136

5.7

Other
5,796

5,029

15.3

Total operating revenue
168,405

177,210

(5.0
)
Operating expenses:
 
 
 
Compensation
58,665

61,937

(5.3
)
Newsprint and ink
6,685

8,846

(24.4
)
Other operating expenses
58,869

60,237

(2.3
)
Workforce adjustments
604

211

NM

Cash costs
124,823

131,231

(4.9
)
Operating cash flow
43,582

45,979

(5.2
)
Depreciation
4,327

4,616

(6.3
)
Amortization
6,616

6,880

(3.8
)
Gain on sales of assets, net
(971
)
(257
)
NM

Equity in earnings of associated companies
2,799

2,757

1.5

Operating income
36,409

37,497

(2.9
)
Non-operating income (expense):
 
 
 
Financial income
76

78

(2.6
)
Interest expense
(17,142
)
(18,790
)
(8.8
)
Debt financing and administrative costs
(1,333
)
(1,102
)
21.0

Other, net
645

(1,178
)
NM

 
(17,754
)
(20,992
)
(15.4
)
Income before income taxes
18,655

16,505

13.0

Income tax expense
7,147

6,498

10.0

Net income
11,508

10,007

15.0

Net income attributable to non-controlling interests
(271
)
(254
)
6.7

Income attributable to Lee Enterprises, Incorporated
11,237

9,753

15.2

 
 
 
 
Earnings per common share:
 
 
 
Basic
0.21

0.19

10.5

Diluted
0.21

0.18

16.7




5


SELECTED CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
 
13 Weeks Ended
 
 
52 Weeks Ended

(Thousands of Dollars)
December 27
2015

December 28
2014

 
December 27
2015

 
 
 
 
 
Advertising and marketing services
105,637

115,830

 
401,906

Subscription
50,430

50,399

 
194,505

Other
12,338

10,981

 
43,327

Total operating revenue
168,405

177,210

 
639,738

Compensation
58,665

61,937

 
235,756

Newsprint and ink
6,685

8,846

 
28,102

Other operating expenses
58,869

60,237

 
227,796

Depreciation and amortization
10,943

11,496

 
45,009

Gain on sales of assets, net
(971
)
(257
)
 
(608
)
Workforce adjustments
604

211

 
3,698

Total operating expenses
134,795

142,470

 
539,753

Equity in earnings of TNI and MNI
2,799

2,757

 
8,296

Operating income
36,409

37,497

 
108,281

Adjusted to exclude:
 
 
 
 
Depreciation and amortization
10,943

11,496

 
45,009

Gain on sales of assets, net
(971
)
(257
)
 
(608
)
Equity in earnings of TNI and MNI
(2,799
)
(2,757
)
 
(8,296
)
Operating cash flow
43,582

45,979

 
144,386

Add:
 
 
 
 
Ownership share of TNI and MNI EBITDA (50%)
3,809

3,757

 
11,298

EBITDA
47,391

49,736

 
155,684

Adjusted to exclude:
 
 
 
 
Workforce adjustments
604

211

 
3,698

Stock compensation
570

443

 
2,098

Adjusted EBITDA
48,565

50,390

 
161,480

Adjusted to exclude:
 
 
 
 
Ownership share of TNI and MNI EBITDA (50%)
(3,809
)
(3,757
)
 
(11,298
)
Add (deduct):
 
 
 
 
Distributions from TNI and MNI
3,229

2,944

 
11,260

Capital expenditures, net of insurance proceeds
(1,470
)
(3,547
)
 
(7,630
)
Pension contributions
(744
)
—

 
(4,321
)
Cash income tax refunds (payments)
11

(4
)
 
(470
)
Unlevered free cash flow
45,782

46,026

 
149,021

Add (deduct):
 
 
 
 
Financial income
76

78

 
335

Interest expense to be settled in cash
(17,142
)
(18,790
)
 
(70,761
)
Debt financing and administrative costs paid
(44
)
(17
)
 
(760
)
Free cash flow
28,672

27,297

 
77,835



6


SELECTED LEE LEGACY(2) ONLY FINANCIAL INFORMATION
(UNAUDITED)
 
13 Weeks Ended
 
 
52 Weeks Ended

(Thousands of Dollars)
December 27
2015

December 28
2014

 
December 27
2015

 
 
 
 
 
Advertising and marketing services
72,438

80,194

 
279,661

Subscription
34,538

33,546

 
132,344

Other
10,407

9,069

 
36,666

Total operating revenue
117,383

122,809

 
448,671

Compensation
44,848

46,246

 
178,637

Newsprint and ink
5,147

6,523

 
20,931

Other operating expenses
34,066

34,003

 
130,592

Depreciation and amortization
7,635

7,951

 
31,041

Loss (gain) on sales of assets, net
37

(79
)
 
7

Workforce adjustments
543

72

 
1,455

Total operating expenses
92,276

94,716

 
362,663

Equity in earnings of MNI
1,183

1,112

 
3,487

Operating income
26,290

29,205

 
89,495

Adjusted to exclude:
 
 
 
 
Depreciation and amortization
7,635

7,951

 
31,041

Loss (gain) on sales of assets, net
37

(79
)
 
7

Equity in earnings of MNI
(1,183
)
(1,112
)
 
(3,487
)
Operating cash flow
32,779

35,965

 
117,056

Add:
 
 
 
 
Ownership share of MNI EBITDA (50%)
2,089

2,008

 
6,070

EBITDA
34,867

37,973

 
123,126

Adjusted to exclude:
 
 
 
 
Workforce adjustments
543

72

 
1,455

Stock compensation
570

443

 
2,098

Adjusted EBITDA
35,980

38,488

 
126,679

Adjusted to exclude:
 
 
 
 
Ownership share of MNI EBITDA (50%)
(2,088
)
(2,008
)
 
(6,070
)
Add (deduct):
 
 
 
 
Distributions from MNI
1,750

1,750

 
5,500

Capital expenditures, net of insurance proceeds
(1,203
)
(2,080
)
 
(5,870
)
Cash income tax refunds (payments)
11

(4
)
 
(381
)
Intercompany charges not settled in cash
—

(2,318
)
 
(4,635
)
Other
(697
)
—

 
(2,697
)
Unlevered free cash flow
33,753

33,828

 
112,526










7


SELECTED PULITZER(2) ONLY FINANCIAL INFORMATION
(UNAUDITED)
 
13 Weeks Ended
 
 
52 Weeks Ended

(Thousands of Dollars)
December 27
2015

December 28
2014

 
December 27
2015

 
 
 
 
 
Advertising and marketing services
33,199

35,636

 
122,245

Subscription
15,892

16,853

 
62,161

Other
1,931

1,912

 
6,661

Total operating revenue
51,022

54,401

 
191,067

Compensation
13,817

15,691

 
57,119

Newsprint and ink
1,538

2,323

 
7,171

Other operating expenses
24,803

26,234

 
97,204

Depreciation and amortization
3,308

3,545

 
13,968

Gain on sales of assets, net
(1,008
)
(178
)
 
(615
)
Workforce adjustments
61

139

 
2,243

Total operating expenses
42,519

47,754

 
177,090

Equity in earnings of TNI
1,616

1,645

 
4,809

Operating income
10,119

8,292

 
18,786

Adjusted to exclude:
 
 
 
 
Depreciation and amortization
3,308

3,545

 
13,968

Gain on sales of assets, net
(1,008
)
(178
)
 
(615
)
Equity in earnings of TNI
(1,616
)
(1,645
)
 
(4,809
)
Operating cash flow
10,803

10,014

 
27,330

Add:
 
 
 
 
Ownership share of TNI EBITDA (50%)
1,721

1,749

 
5,228

EBITDA
12,524

11,763

 
32,558

Adjusted to exclude:
 
 
 
 
Workforce adjustments
61

139

 
2,243

Adjusted EBITDA
12,585

11,902

 
34,801

Adjusted to exclude:
 
 
 
 
Ownership share of TNI EBITDA (50%)
(1,721
)
(1,749
)
 
(5,228
)
Add (deduct):
 
 
 
 
Distributions from TNI
1,479

1,194

 
5,760

Capital expenditures, net of insurance proceeds
(267
)
(1,467
)
 
(1,760
)
Pension contributions
(744
)
—

 
(4,321
)
Cash income tax refunds (payments)
—

—

 
(89
)
Intercompany charges not settled in cash
—

2,318

 
4,635

Other
697

—

 
2,697

Unlevered free cash flow
12,029

12,198

 
36,495



8


SELECTED BALANCE SHEET INFORMATION
(Thousands of Dollars)
 
December 27
2015

September 27
2015

Cash
 
11,813

11,134

Debt (Principal Amount):
 
 
 
1st Lien Term Loan
 
169,622

180,872

Notes
 
395,000

400,000

2nd Lien Term Loan
 
139,374

145,000

 

703,996

725,872


SELECTED STATISTICAL INFORMATION
 
13 Weeks Ended
 
 
December 27
2015

December 28
2014

Percent Change

 
 
 
 
Capital expenditures, net of insurance proceeds (Thousands of Dollars)
1,470

3,547

(58.6
)
Newsprint volume (Tonnes)
12,261

13,816

(11.3
)
Average full-time equivalent employees
4,125

4,457

(7.4
)
Average common shares - basic (Thousands of Shares)
53,140

52,471

1.3

Average common shares - diluted (Thousands of Shares)
53,858

53,954

(0.2
)
Shares outstanding at end of period (Thousands of Shares)
55,499

54,492

1.8



9


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, 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. Cash costs are also presented excluding workforce adjustments.
 
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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.
 
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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.
 
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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 Notes are the $400 million senior secured notes pursuant to an indenture dated 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.

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