Lee Enterprises, Incorporated (NYSE: LEE), a major provider of
local news, information and advertising in 50 markets, today
reported preliminary(1) earnings of 3 cents per diluted common
share for its third fiscal quarter ended June 28, 2015,
compared to a loss of 19 cents a year ago. Excluding unusual
matters, adjusted earnings per diluted common share(2) totaled 9
cents, compared with earnings of 11 cents a year ago.
“We continue to see strong growth in digital advertising,
digital services and subscription revenue,” Mary Junck, chairman
and chief executive officer said. “Total digital revenue increased
28.6% in the quarter,” she said. “We also had significant growth in
digital services — up 19.7% in the quarter — largely fueled by
TownNews.com, a Lee Enterprises subsidiary that provides digital
services including web hosting and content management for web,
print and mobile products to Lee Enterprises properties as well as
1,500 other newspapers. Digital advertising revenue increased 6.5%
for the quarter driven by strong growth in retail," Junck
added.
“We are using substantially all of our free cash flow(2) to
reduce debt,” Junck said. "In the third fiscal quarter, we repaid
$19.3 million in debt including the milestone of paying off the
Pulitzer Notes almost two years early. The repayment of the
Pulitzer Notes not only reduces our debt but also simplifies our
capital structure and should result in a more rapid paydown of our
debt under the 1st Lien Term Loan(3)."
She added: "In the third quarter, we reduced cash costs(2) on a
comparable basis after excluding unusual matters, 3.9%, or $4.8
million. Our keen focus on cost control allows us to improve our
guidance, and we now expect fourth quarter cash costs to decrease
between 5.5%-6.0%.
“Lee also has an active real estate monetization program with
more than $15 million of real estate assets listed for sale,
including the headquarters of the St. Louis Post-Dispatch."
Junck also noted the following financial highlights for the
quarter:
- Digital advertising revenue increased
6.5% and represents 20.7% of our total advertising revenue. Digital
retail advertising increased 12.0%.
- Mobile advertising revenue, which is
included in digital advertising, increased 23.2%.
- Subscription revenue, excluding the
subscription-related expense reclassification discussed more fully
below, increased 3.4%, and we expect full year 2015 subscription
revenue, excluding the impact of the reclassification, to increase
2.5-3.0%.
- Debt was reduced $70.0 million in the
last twelve months.
THIRD QUARTER OPERATING RESULTS
Operating revenue for the 13 weeks ended June 28, 2015
totaled $157.5 million, a decrease of 3.4% compared with a year
ago. However, the month-over-month revenue trend improved in both
May and June of 2015.
Excluding the impact of a subscription-related expense
reclassification as a result of moving to fee-for-service delivery
contracts at most of our newspapers, operating revenue decreased
5.1%. 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
8.9% to $100.5 million, with retail advertising down 8.3%,
classified down 11.9% and national down 12.5%. Combined print and
digital classified employment revenue decreased 14.5%, while
automotive decreased 14.5%, real estate decreased 16.0% and other
classified decreased 6.6%. Digital advertising and marketing
services revenue on a stand-alone basis increased 6.5% to $20.8
million.
Subscription revenue increased 9.4%. Excluding the impact of the
subscription-related expense reclassification, subscription revenue
increased 3.4%. Average daily newspaper circulation, including
TNI(3) and MNI(3) and digital subscribers, totaled 1.0 million in
the 13 weeks ended June 28, 2015. Sunday circulation totaled
1.4 million. Amounts are not comparable to the prior year period
due to changes in measurements by the Alliance for Audited
Media.
Total digital revenue, including advertising, marketing
services, subscriptions and digital businesses, totaled $30.1
million in the quarter, up 28.6%, and represents 19.1% of total
operating revenue.
Cash costs decreased 1.2% for the 13 weeks ended June 28,
2015. Excluding the impact of the subscription-related expense
reclassification and unusual matters, cash costs decreased 3.9% for
the 13 weeks ended June 28, 2015. Compensation decreased 3.1%,
primarily as a result of reduced staffing levels. Newsprint and ink
expense decreased 19.5%, primarily the result of lower newsprint
prices and a reduction in newsprint volume of 13.4%. Other
operating expenses increased 2.9%. Excluding the
subscription-related expense reclassification, other operating
expense decreased 2.1%.
We expect our fourth quarter cash costs, excluding the impact of
the subscription-related expense reclassification and unusual
matters, to decrease between 5.5%-6.0%, a further improvement from
the decrease of 2.2% for the 39 weeks ended June 28, 2015. These
additional cost reductions in the second half of fiscal year 2015
are expected to have a favorable impact on the fiscal year 2016
cash costs.
Operating cash flow decreased 10.4% from a year ago to $35.2
million. Excluding unusual matters, operating cash flow decreased
8.7%. Operating cash flow margin(2) decreased to 22.4%, compared to
24.1% 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 totaled
$24.8 million in the current year quarter, compared with $28.6
million a year ago.
Non-operating expenses decreased 52.2% for the 13 weeks ended
June 28, 2015 due to the debt refinancing costs paid in the
same quarter of the prior year. Interest expense decreased 7.8%, or
$1.5 million, due to lower debt balances. We recognized $1.4
million of debt refinancing costs in the current year quarter
compared to $21.7 million in the prior year quarter. We recognized
$1.1 million of non-operating expense 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 $1.9 million,
compared with a loss of $9.7 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 June 28 June 29 2015
2014 (Thousands of Dollars, Except Per Share Data) Amount
Per Share Amount Per Share Income
(loss) attributable to Lee Enterprises, Incorporated, as reported
1,882 0.03 (9,746 ) (0.19 ) Adjustments: Impairment
of intangible and other assets — 336 Debt financing costs 1,445
21,732 Warrants fair value adjustment 1,091 (579 ) Litigation
settlement — 2,300 Workforce adjustments and other, net
1,188 426 3,724
24,215 Income tax effect of adjustments, net (866 )
(8,675 ) 2,858
0.05 15,540 0.30 Income
attributable to Lee Enterprises, Incorporated, as adjusted
4,740 0.09 5,794 0.11
SUBSCRIPTION EXPENSE
RECLASSIFICATION
Certain results, excluding the impact of the
subscription-related expense reclassification, are as follows:
13 Weeks Ended
June 28 June 29 Percent
(Thousands of Dollars)
2015 2014 Change Subscription revenue,
as reported 47,394 43,339 9.4 Adjustment for subscription-related
expense reclassification (4,512 ) (1,864 ) NM
Subscription revenue, as adjusted 42,882
41,475 3.4 Total operating
revenue, as reported 157,546 163,125 (3.4 ) Adjustment for
subscription-related expense reclassification (4,512 )
(1,864 ) NM Total operating revenue, as
adjusted 153,034 161,261 (5.1 )
Other cash costs, as reported 55,405 53,840 2.9 Adjustment
for subscription-related expense reclassification (4,512 )
(1,864 ) NM Other cash costs, as adjusted
50,893 51,976 (2.1 )
Total cash cost excluding unusual matters 121,268 123,394 (1.7 )
Adjustment for subscription-related expense reclassification
(4,512 ) (1,864 ) NM Total cash cost excluding
unusual matters, as adjusted 116,756 121,530
(3.9 ) Total cash costs, as reported 122,325
123,813 (1.2 ) Adjustment for subscription-related expense
reclassification (4,512 ) (1,864 ) NM
Total cash costs, as adjusted 117,813 121,949
(3.4 )
Approximately $4,166,000, or 92.3% of the reclassification
impacts revenue and cash costs of our Lee Legacy(2) operations, and
approximately $346,000, or 7.7% impacts Pulitzer(2).
FULL ACCESS SUBSCRIPTION
INITIATIVE
As previously reported, we launched our full access subscription
initiative in our first markets more than a year ago and as of
today substantially all of our markets have launched a full access
subscription model. We expect subscription revenue for 2015,
excluding the impact of the subscription-related expense
reclassification, to increase 2.5-3.0%.
YEAR-TO-DATE OPERATING
RESULTS(4)
Operating revenue for the 39 weeks ended June 28, 2015,
totaled $489.2 million, a decrease of 1.1% compared with the 39
weeks ended June 29, 2014. Excluding the impact of the
subscription-related expense reclassification, operating revenue
decreased 3.5%.
Advertising and marketing services revenue combined decreased
6.5% to $313.6 million, retail advertising decreased 6.7%,
classified decreased 6.9% and national decreased 9.2%. Combined
print and digital classified employment revenue decreased 6.3%,
while automotive decreased 11.3%, real estate decreased 11.4% and
other classified decreased 2.5%. Digital advertising and marketing
services revenue on a stand-alone basis increased 7.3% to $59.5
million. Mobile advertising revenue increased 30.7%.
Subscription revenue increased 11.6%. Excluding the impact of
the subscription-related expense reclassification, subscription
revenue increased 2.7%. Our average daily newspaper circulation,
including TNI and MNI and digital subscribers, totaled 1.0 million
in the 39 weeks ended June 28, 2015. Sunday circulation
totaled 1.4 million.
Total digital revenue was $84.7 million year to date, up 29.3%
compared with a year ago.
Cash costs for the 39 weeks ended June 28, 2015 increased
1.2% compared to the same period a year ago. Excluding the impact
of the subscription-related expense reclassification and unusual
matters, cash costs decreased 2.2%. Compensation increased
slightly, due to an increase in employee medical and pension costs
as well as salary increases, partially offset by a decrease in the
average number of full-time equivalent employees of 4.5%. Newsprint
and ink expense decreased 17.8%, primarily the result of lower
newsprint prices and a reduction in newsprint volume of 12.6%.
Other operating expenses increased 5.4% and excluding the impact of
the subscription-related expenses reclassification other operating
expense decreased 1.8%, or $2.9 million.
Operating cash flow decreased 8.2% from a year ago to $111.4
million. Operating cash flow margin decreased to 22.8% from 24.5% 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 $82.6
million in the 39 weeks ended June 28, 2015, compared with
$92.5 million a year ago.
Non-operating expenses decreased 29.9% in the 39 weeks ended
June 28, 2015 compared to the same period a year ago. Cash
interest expense decreased 5.7%, or $3.3 million, due to lower debt
balances in the current year. We recognized non-cash interest
expense of $2.4 million in the prior year to date period. We
recognized $4.0 million of debt financing costs in the current year
period compared to $21.9 million in the prior year period. Income
attributable to Lee Enterprises, Incorporated for the year totaled
$13.4 million, compared to income of $3.6 million a year ago.
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.
39 Weeks Ended June 28
June 29 2015 2014 (Thousands of Dollars,
Except Per Share Data) Amount Per Share Amount
Per Share Income attributable to Lee Enterprises,
Incorporated, as reported 13,435 0.25 3,632 0.07
Adjustments: Impairment of intangible and other assets — 336 Debt
financing costs 4,040 21,935 Amortization of debt present value
adjustment — 2,394 Warrants fair value adjustment 312 (579 )
Litigation settlement — 2,300 Workforce adjustments and other, net
1,570 1,003
5,922 27,389 Income tax effect of adjustments, net (1,897 )
(9,754 ) 4,025
0.07 17,635 0.33 Income
attributable to Lee Enterprises, Incorporated, as adjusted
17,460 0.32 21,267 0.40
SUBSCRIPTION EXPENSE
RECLASSIFICATION
Certain results, excluding the impact of the
subscription-related expense reclassification, are as follows:
39 Weeks Ended
June 28 June 29 Percent
(Thousands of Dollars)
2015 2014 Change Subscription revenue,
as reported 145,904 130,744 11.6 Adjustment for
subscription-related expense reclassification (13,924 )
(2,265 ) NM Subscription revenue, as adjusted
131,980 128,479 2.7
Total operating revenue, as reported 489,229 494,603 (1.1 )
Adjustment for subscription-related expense reclassification
(13,924 ) (2,265 ) NM Total operating revenue,
as adjusted 475,305 492,338 (3.5
) Other cash costs, as reported 170,426 161,708 5.4
Adjustment for subscription-related expense reclassification
(13,924 ) (2,265 ) NM Other cash costs, as
adjusted 156,502 159,443 (1.8 )
Total cash costs excluding unusual matters 375,969 372,371
1.0 Adjustment for subscription-related expense reclassification
(13,924 ) (2,265 ) NM Total cash cost
excluding unusual matters, as adjusted 362,045
370,106 (2.2 ) Total cash costs, as reported
377,877 373,296 1.2 Adjustment for subscription-related expense
reclassification (13,924 ) (2,265 ) NM
Total cash costs, as adjusted 363,953 371,031
(1.9 )
Approximately $12,883,000, or 92.5% of the reclassification
impacts revenue and cash costs of our Lee Legacy operations, and
approximately $1,041,000, or 7.5% impacts Pulitzer.
DEBT AND FREE CASH FLOW
Debt was reduced $19.3 million in the quarter, $59.8 million
fiscal year to date and $70.0 million in the last twelve months
ended June 28, 2015. As of June 28, 2015 the principal
amount of debt was $745.0 million.
Unlevered free cash flow(2) totaled $34.7 million in the current
year quarter compared to $44.8 million in the same quarter a year
ago. Unlevered free cash flow totaled $111.9 million for the fiscal
year to date compared to $127.0 million a year ago and $144.1
million over the last twelve months. Tax refunds of $6.1 million in
the 13 weeks ended June 29, 2014 increased our free cash flow in
the prior year periods. At June 28, 2015, liquidity, including
cash and availability under our Revolving Facility, totaled $51.8
million compared to $32.9 million of required debt principal
payments over the next twelve months.
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) 888-481-2848 and
entering a conference passcode of 899517 at least five minutes
before the scheduled start. Participants on the listen-only line
will not have the opportunity to ask questions.
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 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.
CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)
13
Weeks Ended 39 Weeks Ended June 28 June 29
Percent June 28 June 29 Percent
(Thousands of Dollars, Except Per Share
Data)
2015 2014 Change 2015 2014
Change Advertising and marketing services: Retail
63,754 69,507 (8.3 ) 202,086 216,591 (6.7 ) Classified: Employment
7,929 9,277 (14.5 ) 23,000 24,546 (6.3 ) Automotive 6,213 7,266
(14.5 ) 19,793 22,309 (11.3 ) Real estate 3,837 4,569 (16.0 )
11,619 13,113 (11.4 ) All other 11,143 11,926
(6.6 ) 31,881 32,683 (2.5 ) Total
classified 29,122 33,038 (11.9 ) 86,293 92,651 (6.9 ) National
4,608 5,268 (12.5 ) 17,134 18,879 (9.2 ) Niche publications and
other 3,006 2,471 21.7
8,119 7,273 11.6 Total advertising and
marketing services revenue 100,490 110,284
(8.9 ) 313,632 335,394 (6.5 )
Subscription 47,394 43,339 9.4 145,904 130,744 11.6 Commercial
printing 3,239 3,147 2.9 8,830 9,170 (3.7 ) Digital services 3,070
2,565 19.7 9,267 7,257 27.7 Other 3,353 3,790
(11.5 ) 11,596 12,038 (3.7 ) Total
operating revenue 157,546 163,125 (3.4
) 489,229 494,603 (1.1 ) Operating expenses:
Compensation 58,442 60,330 (3.1 ) 181,615 181,543 — Newsprint and
ink 7,421 9,224 (19.5 ) 23,928 29,120 (17.8 ) Other operating
expenses 55,405 53,840 2.9 170,426 161,708 5.4 Workforce
adjustments 1,057 419 NM
1,908 925 NM Cash costs 122,325
123,813 (1.2 ) 377,877 373,296
1.2 Operating cash flow 35,221 39,312 (10.4 ) 111,352
121,307 (8.2 ) Depreciation 4,559 5,293 (13.9 ) 13,860 15,700 (11.7
) Amortization 6,836 6,901 (0.9 ) 20,597 20,710 (0.5 ) Loss (gain)
on sales of assets, net 686 9 NM 434 (1,622 ) NM Impairment of
intangible and other assets — 336 NM — 336 NM Equity in earnings of
associated companies 1,705 1,836 (7.1 )
6,114 6,348 (3.7 ) Operating income
24,845 28,609 (13.2 ) 82,575
92,531 (10.8 ) Non-operating income
(expense): Financial income 79 85 (7.1 ) 258 306 (15.7 ) Interest
expense (18,121 ) (19,654 ) (7.8 ) (55,314 ) (61,033 ) (9.4 ) Debt
financing costs (1,445 ) (21,732 ) (93.4 ) (4,040 ) (21,935 ) (81.6
) Other, net (1,082 ) (1,701 ) (36.4 )
58 (1,579 ) NM (20,569 )
(43,002 ) (52.2 ) (59,038 ) (84,241 )
(29.9 ) Income (loss) before income taxes 4,276 (14,393 ) NM
23,537 8,290 NM Income tax expense (benefit) 2,141
(4,882 ) NM 9,353 3,995
NM Net income (loss) 2,135 (9,511 ) NM 14,184
4,295 NM Net income attributable to non-controlling interests
(253 ) (235 ) 7.7 (749 )
(663 ) 13.0 Income (loss) attributable to Lee
Enterprises, Incorporated 1,882 (9,746 )
NM 13,435 3,632 NM
Earnings (loss) per common share: Basic 0.04 (0.19 )
NM 0.26 0.07 NM Diluted 0.03 (0.19 ) NM
0.25 0.07 NM
SELECTED CONSOLIDATED FINANCIAL
INFORMATION(UNAUDITED)
52 Weeks 13 Weeks Ended 39 Weeks Ended
Ended June 28 June 29 June 28 June 29 June 28
(Thousands of Dollars)
2015 2014 2015 2014 2015
Advertising and marketing services 100,490 110,284 313,632 335,394
420,240 Subscription 47,394 43,339 145,904 130,744 191,986 Other
9,662 9,502 29,693
28,465 39,097 Total operating revenue
157,546 163,125 489,229
494,603 651,323 Compensation 58,442 60,330
181,615 181,543 243,126 Newsprint and ink 7,421 9,224 23,928 29,120
32,802 Other operating expenses 55,405 53,840 170,426 161,708
228,047 Depreciation and amortization 11,395 12,194 34,457 36,410
48,492 Loss (gain) on sales of assets, net 686 9 434 (1,622 ) 894
Impairment of goodwill and other assets — 336 — 336 532 Workforce
adjustments 1,057 419 1,908
925 2,249 Total operating
expenses 134,406 136,352 412,768 408,420 556,142 Equity in earnings
of TNI and MNI 1,705 1,836 6,114
6,348 8,063 Operating income
24,845 28,609 82,575 92,531 103,244 Adjusted to exclude:
Depreciation and amortization 11,395 12,194 34,457 36,410 48,492
Loss (gain) on sales of assets, net 686 9 434 (1,622 ) 894
Impairment of intangible and other assets — 336 — 336 532 Equity in
earnings of TNI and MNI (1,705 ) (1,836 )
(6,114 ) (6,348 ) (8,063 ) Operating cash flow 35,221
39,312 111,352 121,307 145,099 Add: Ownership share of TNI and MNI
EBITDA (50%) 2,464 2,587 8,432 8,540 11,129 Adjusted to exclude:
Stock compensation 562 397 1,645
1,081 2,045 Adjusted EBITDA(2)
38,247 42,296 121,429 130,928 158,273 Adjusted to exclude:
Ownership share of TNI and MNI EBITDA (50%) (2,464 ) (2,587 )
(8,432 ) (8,540 ) (11,129 ) Add (deduct): Distributions from TNI
and MNI 2,041 2,346 8,113 7,654 10,455 Capital expenditures, net of
insurance proceeds (2,011 ) (3,309 ) (7,686 ) (8,204 ) (11,306 )
Pension contributions (1,130 ) (17 ) (1,565 ) (722 ) (2,365 ) Cash
income tax refunds (payments) (1 ) 6,051
63 5,933 152 Unlevered
free cash flow 34,682 44,780 111,922 127,049 144,080 Add (deduct):
Financial income 79 85 258 306 337 Interest expense to be settled
in cash (18,121 ) (19,654 ) (55,314 ) (58,639 ) (74,005 ) Debt
financing costs paid (395 ) (31,008 ) (477 )
(31,276 ) (788 ) Free cash flow 16,245
(5,797 ) 56,389 37,440
69,624
SELECTED LEE LEGACY(2) ONLY FINANCIAL
INFORMATION(UNAUDITED)
52 Weeks 13 Weeks Ended 39 Weeks Ended
Ended June 28 June 29 June 28 June 29 June 28
(Thousands of Dollars) 2015 2014 2015
2014 2015 Advertising and marketing services 69,973
76,148 219,046 231,411 294,454 Subscription 31,876 28,022 97,935
83,499 128,428 Other 8,391 8,330
25,764 24,959 34,012 Total
operating revenue 110,240 112,500
342,745 339,869 456,894
Compensation 44,187 45,086 136,706 135,035 182,312 Newsprint and
ink 5,387 6,550 17,637 20,623 24,098 Other operating expenses
31,660 28,954 97,157 86,706 129,424 Depreciation and amortization
7,839 8,322 23,850 24,633 31,712 Loss (gain) on sales of assets,
net (73 ) 8 (324 ) (1,643 ) 133 Impairment of goodwill and other
assets — 336 — 336 532 Workforce adjustments 442
265 755 436 871
Total operating expenses 89,442 89,521 275,781 266,126
369,082 Equity in earnings of MNI 746 790
2,301 2,232 3,453
Operating income 21,544 23,769 69,265 75,975 91,265 Adjusted to
exclude: Depreciation and amortization 7,839 8,322 23,850 24,633
31,712 Loss (gain) on sales of assets, net (73 ) 8 (324 ) (1,643 )
133 Impairment of intangible and other assets — 336 — 336 532
Equity in earnings of MNI (746 ) (790 ) (2,301
) (2,232 ) (3,453 ) Operating cash flow 28,564 31,645
90,490 97,069 120,189 Add: Ownership share of MNI EBITDA (50%)
1,401 1,436 4,306 4,110 6,101 Adjusted to exclude: Stock
compensation 562 397 1,645
1,081 2,045 Adjusted EBITDA
30,527 33,478 96,441 102,260 128,335 Adjusted to exclude: Ownership
share of MNI EBITDA (50%) (1,401 ) (1,436 ) (4,306 ) (4,110 )
(6,101 ) Add (deduct): Distributions from MNI 1,000 1,000 4,000
3,750 5,000 Capital expenditures, net of insurance proceeds (1,556
) (2,900 ) (5,074 ) (7,145 ) (7,617 ) Pension contributions — (17 )
— (17 ) (70 ) Cash income tax refunds (payments) (1 ) (199 ) 152
(317 ) 203 Intercompany charges not settled in cash (2,317 ) (2,099
) (6,953 ) (6,297 ) (10,334 ) Other (2,000 ) (2,000 )
(2,000 ) (2,000 ) (2,000 ) Unlevered free cash
flow 24,252 25,827 82,260 86,124 107,416 Add (deduct): Financial
income 79 85 258 306 337 Interest expense to be settled in cash
(18,000 ) (18,834 ) (54,415 ) (55,397 ) (72,509 ) Debt financing
costs paid (296 ) (31,000 ) (378 )
(31,268 ) (689 ) Free cash flow 6,035
(23,922 ) 27,725 (235 ) 34,555
SELECTED PULITZER(2) ONLY FINANCIAL
INFORMATION(UNAUDITED)
52 Weeks 13 Weeks Ended 39 Weeks Ended
Ended June 28 June 29 June 28 June 29 June 28
(Thousands of Dollars)
2015 2014 2015 2014 2015
Advertising and marketing services 30,517 34,136 94,586 103,983
125,786 Subscription 15,518 15,317 47,969 47,245 63,558 Other
1,271 1,172 3,929
3,506 5,085 Total operating revenue
47,306 50,625 146,484
154,734 194,429 Compensation 14,255 15,244
44,909 46,508 60,814 Newsprint and ink 2,034 2,674 6,291 8,497
8,704 Other operating expenses 23,745 24,886 73,269 75,002 98,623
Depreciation and amortization 3,556 3,872 10,607 11,777 16,780 Loss
(gain) on sales of assets, net 759 1 758 21 761 Workforce
adjustments 615 154 1,153
489 1,378 Total operating expenses
44,964 46,831 136,987 142,294 187,060 Equity in earnings of TNI
959 1,046 3,813
4,116 4,610 Operating income 3,301 4,840
13,310 16,556 11,979 Adjusted to exclude: Depreciation and
amortization 3,556 3,872 10,607 11,777 16,780 Loss (gain) on sales
of assets, net 759 1 758 21 761 Equity in earnings of TNI
(959 ) (1,046 ) (3,813 ) (4,116 )
(4,610 ) Operating cash flow 6,657 7,667 20,862 24,238 24,910 Add:
Ownership share of TNI EBITDA (50%) 1,063
1,151 4,126 4,430 5,028
Adjusted EBITDA 7,720 8,818 24,988 28,668 29,938 Adjusted to
exclude: Ownership share of TNI EBITDA (50%) (1,063 ) (1,151 )
(4,126 ) (4,430 ) (5,028 ) Add (deduct): Distributions from TNI
1,041 1,346 4,113 3,904 5,455 Capital expenditures, net of
insurance proceeds (455 ) (409 ) (2,612 ) (1,059 ) (3,689 ) Pension
contributions (1,130 ) — (1,565 ) (705 ) (2,295 ) Cash income tax
refunds (payments) — 6,250 (89 ) 6,250 (51 ) Intercompany charges
not settled in cash 2,317 2,099 6,953 6,297 10,334 Other
2,000 2,000 2,000 2,000
2,000 Unlevered free cash flow 10,430 18,953
29,662 40,925 36,664 Deduct: Interest expense to be settled in cash
(121 ) (820 ) (899 ) (3,242 ) (1,496 ) Debt financing costs paid
(99 ) (8 ) (99 ) (8 ) (99 ) Free
cash flow 10,210 18,125 28,664
37,675 35,069
REVENUE BY REGION
13 Weeks Ended
39 Weeks Ended June 28 June 29 Percent
June 28 June 29 Percent
(Thousands of Dollars)
2015 2014 Change 2015 2014
Change Midwest 98,512 102,194 (3.6 ) 302,773 308,841
(2.0 ) Mountain West 31,779 33,455 (5.0 ) 98,536 98,558 — West
10,995 11,070 (0.7 ) 33,478 32,875 1.8 East/Other 16,260
16,406 (0.9 ) 54,442
54,329 0.2 Total 157,546
163,125 (3.4 ) 489,229
494,603 (1.1 )
SELECTED BALANCE SHEET INFORMATION
June 28 September
28 (Thousands of Dollars) 2015 2014 Cash
18,904 16,704 Debt (Principal Amount): Revolving Facility —
5,000 1st Lien Term Loan 195,000 226,750 Notes 400,000 400,000 2nd
Lien Term Loan 150,000 150,000 Pulitzer Notes —
23,000 745,000 804,750
SELECTED STATISTICAL INFORMATION
13 Weeks Ended
39 Weeks Ended June 28 June 29 Percent
June 28 June 29 Percent 2015
2014 Change 2015 2014 Change
Capital expenditures, net of insurance proceeds (Thousands
of Dollars) 2,011 3,309 (39.2 ) 7,686 8,204 (6.3 ) Newsprint volume
(Tonnes) 12,471 14,405 (13.4 ) 38,749 44,317 (12.6 ) Average
full-time equivalent employees 4,237 4,514 (6.1 ) 4,335 4,539 (4.5
) Average common shares - basic (Thousands of Shares) 52,597 52,344
0.5 52,521 52,216 0.6 Average common shares - diluted (Thousands of
Shares) 54,056 52,344 3.3 53,957 53,655 0.6 Shares outstanding at
end of period (Thousands of Shares)
54,749 53,694 2.0
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:
--
Adjusted EBITDA is defined as operating income (loss), plus
depreciation, amortization, impairment charges, stock compensation
and 50% of EBITDA from TNI and MNI, minus equity in earnings of TNI
and MNI and curtailment gains.
--
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.
--
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.
--
Operating Cash Flow is defined as operating income (loss) plus
depreciation, amortization and impairment charges, minus equity in
earnings of TNI and MNI 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.
--
Unlevered Free Cash Flow is defined as operating income (loss),
plus depreciation, amortization, impairment charges, stock
compensation, distributions from TNI and MNI and cash income tax
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. 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150806005250/en/
Lee Enterprises, IncorporatedCharles Arms, 563-383-2100Director
of CommunicationsIR@lee.net
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