DAVENPORT, Iowa (February 6, 2014) -- Lee
Enterprises, Incorporated (NYSE: LEE), a major provider of local
news, information and advertising in 50 markets, today reported
preliminary(1) earnings of
22 cents per diluted common share for its first fiscal quarter
ended December 29, 2013, compared with 28 cents a year ago.
Excluding unusual matters, adjusted earnings per diluted common
share(2) totaled 24
cents, compared with earnings of 20 cents a year ago.
Mary Junck, chairman and chief executive officer,
said: "Lee is off to a solid start in 2014. We grew digital revenue
and audiences at a double-digit clip, continued to reduce operating
expenses, again posted strong cash flow and carved off another
chunk of debt. We expect overall revenue trends to improve for
January and February. In the months ahead, we plan more digital and
audience initiatives and we expect continued expense benefit from
business transformation initiatives under way. Beginning in April,
we plan to launch new subscription models in several markets,
providing audiences with the printed newspaper along with full
access to all of our digital platforms, including web, app and
digital replica across desktop, mobile and tablet. We anticipate
good reception to this full-access approach and expect to add
additional markets as the year progresses.
She added: "Also, we have begun steps to refinance
our long-term debt, beginning with an agreement announced earlier
this week that will lower the interest rate on our second lien
facility and give us an even longer runway to continue reducing
debt aggressively. We are now turning our attention to the first
lien as a high priority and expect another successful outcome."
FIRST QUARTER OPERATING RESULTS(3)
Operating revenue for the 13 weeks ended
December 29, 2013 totaled $177.4 million, a decrease of 3.9%
compared with a year ago. Combined print and digital advertising
and marketing services revenue decreased 5.0% to $122.4 million,
improved from 2013 trends, with retail advertising down 3.7%,
classified down 9.2% and national down 3.6%. Combined print and
digital classified employment revenue decreased 6.2%, while
automotive decreased 12.8%, real estate decreased 5.0% and other
classified decreased 10.1%. Digital advertising and marketing
services revenue on a stand-alone basis increased 9.8% to $18.6
million and now totals 15.2% of total advertising and marketing
services revenue. Print advertising and marketing services revenue
on a stand-alone basis decreased 7.3%. Subscription revenue
decreased 1.1%.
Total digital revenue, including advertising,
marketing services, subscriptions and digital businesses, totaled
$21.6 million in the quarter, up 12.7% compared with the quarter a
year ago. Mobile advertising revenue increased 37.6%, to $1.7
million.
Digital audiences continued to grow. Mobile,
tablet, desktop and app page views increased 12.8% to 209.7
million, and monthly unique visitors increased 19.9% to 25.6
million. Increases from branded editions resulted in a 10.6%
increase in Sunday circulation during the quarter. Daily
circulation decreased 4.3%.
Operating expenses, excluding depreciation,
amortization and unusual matters, decreased 3.4% for the 13 weeks
ended December 29, 2013. Compensation decreased 5.8%, with the
average number of full-time equivalent employees down 5.9%.
Newsprint and ink expense decreased 13.2%, primarily a result of a
reduction in newsprint volume of 10.1%. Other operating expenses
increased 1.7%.
For the full year, 2014 cash costs are expected to
decrease 0.5-1.5%, excluding the impact of circulation-related
expense reclassification as a result of moving to fee-for-service
delivery contracts at several of our newspapers. This
reclassification will increase both revenue and operating expenses
beginning in the June quarter, with no impact on operating cash
flow(2) or
operating income.
Operating cash flowdecreased 4.3% from a year ago
to $49.3 million. Operating cash flow margin(2) was
27.8%, compared to 27.9% a year ago. Including equity in earnings
of associated companies, depreciation and amortization, as well as
other unusual matters in both years, operating income increased
1.7% to $40.2 million in the current year quarter, compared with
$39.5 million a year ago. Operating income margin increased to
22.7% up from 21.4% a year ago.
Non-operating expenses, primarily interest expense
and debt financing costs, increased 26.1%, as an 11.2% reduction in
interest expense was partially offset by a $6.9 million gain on
sale of an investment in the prior year quarter. Lower debt
balances and the refinancing of the Pulitzer Notes in May 2013
contributed to the interest expense reduction. Income attributable
to Lee Enterprises, Incorporated for the quarter totaled $11.9
million, compared with $14.6 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 29
2013 |
|
December 30
2012 |
| (Thousands of Dollars, Except Per Share
Data) |
Amount |
|
Per Share |
|
Amount |
|
Per Share |
|
|
|
|
| Income attributable to Lee Enterprises, Incorporated, as
reported |
11,892 |
|
|
0.22 |
|
|
14,580 |
|
|
0.28 |
|
| Adjustments: |
|
|
|
|
|
|
|
| Gain on sale of investment, net |
- |
|
|
|
|
(6,909 |
) |
|
|
| Debt financing and reorganization costs |
104 |
|
|
|
|
47 |
|
|
|
| Amortization of debt present value adjustment |
1,198 |
|
|
|
|
1,358 |
|
|
|
| Other, net |
163 |
|
|
|
|
1,066 |
|
|
|
|
1,465 |
|
|
|
|
(4,438 |
) |
|
|
| Income tax effect of adjustments, net |
(512 |
) |
|
|
|
1,553 |
|
|
|
|
953 |
|
|
0.02 |
|
|
(2,885 |
) |
|
(0.06 |
) |
| Unusual matters related to discontinued operations |
- |
|
|
- |
|
|
(1,167 |
) |
|
(0.02 |
) |
| Income attributable to Lee Enterprises, Incorporated, as
adjusted |
12,845 |
|
|
0.24 |
|
|
10,528 |
|
|
0.20 |
|
DEBT AND FREE CASH FLOW(2)
Debt was reduced $14.5 million in the quarter and
$83.9 million in the last twelve months. The principal amount
of debt totaled $833.0 million at December 29, 2013 and stands
at $828 million at the end of January. Free cash flow
increased to $30.6 million for the quarter compared with $29.9
million a year ago. Liquidity at the end of the quarter totaled
$42.6 million, compared to required debt principal payments of
$13.9 million in the next 12 months.
As previously announced, we reached an agreement
to refinance the $175,000,000 2nd Lien
Agreement with a new $200,000,000 facility (the "New 2nd Lien
Agreement"). The size of the facility may be reduced by up to
$75,000,000 with the proceeds of a refinancing of the 1st Lien
Agreement. The New 2nd Lien
Agreement, which is subject to customary closing conditions, will
bear interest at a reduced rate of 12.0%, payable quarterly, and
mature in December 2022.
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 1.2
million daily and 1.6 million Sunday, reaching nearly four million
readers in print alone. Lee's websites and mobile and tablet
products attracted 25.6 million unique visitors in December 2013.
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
lee.net.
FORWARD-LOOKING STATEMENTS - The Private
Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. This news 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, comply with or obtain
amendments or waivers of the financial covenants contained in our
credit facilities, if necessary, and to refinance our debt as it
comes due. Other risks and uncertainties include the impact and
duration of continuing adverse conditions in certain aspects of the
economy affecting our business, changes in advertising demand,
potential changes in newsprint and other commodity prices, energy
costs, interest rates, labor costs, legislative and regulatory
rulings, difficulties in achieving planned expense reductions,
maintaining employee and customer relationships, increased capital
costs, maintaining 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", "believe", "expect", "anticipate", "intend",
"plan", "project", "consider" 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.
Contact: dan.hayes@lee.net, (563) 383-2100
LEE ENTERPRISES,
INCORPORATED
CONSOLIDATED STATEMENTS OF
OPERATIONS
(UNAUDITED)
|
13 Weeks Ended |
(Thousands of Dollars and Shares, Except
Per
Share Data) |
December 29
2013 |
December 30
2012 |
Percent Change |
|
|
|
|
| Advertising and marketing services |
|
|
|
| Retail |
80,103 |
83,207 |
(3.7 |
) |
| Classified: |
|
|
|
| Employment |
7,209 |
7,683 |
(6.2 |
) |
| Automotive |
8,129 |
9,318 |
(12.8 |
) |
| Real estate |
4,419 |
4,652 |
(5.0 |
) |
| All other |
10,453 |
11,633 |
(10.1 |
) |
| Total classified |
30,210 |
33,286 |
(9.2 |
) |
| National |
7,517 |
7,794 |
(3.6 |
) |
| Niche publications and other |
4,561 |
4,612 |
(1.1 |
) |
| Total advertising and marketing services revenue |
122,391 |
128,899 |
(5.0 |
) |
| Subscription |
45,550 |
46,056 |
(1.1 |
) |
| Commercial printing |
3,032 |
3,302 |
(8.2 |
) |
| Digital services and other |
6,412 |
6,399 |
0.2 |
|
| Total operating revenue |
177,385 |
184,656 |
(3.9 |
) |
| Operating expenses: |
|
|
|
| Compensation |
62,142 |
65,955 |
(5.8 |
) |
| Newsprint and ink |
10,562 |
12,174 |
(13.2 |
) |
| Other operating expenses |
55,157 |
54,211 |
1.7 |
|
| Workforce adjustments |
207 |
803 |
(74.2 |
) |
|
128,068 |
133,143 |
(3.8 |
) |
| Operating cash flow |
49,317 |
51,513 |
(4.3 |
) |
| Depreciation |
5,141 |
5,487 |
(6.3 |
) |
| Amortization |
6,893 |
9,554 |
(27.9 |
) |
| Equity in earnings of associated companies |
2,919 |
3,045 |
(4.1 |
) |
| Operating income |
40,202 |
|
39,517 |
|
1.7 |
|
| CONSOLIDATED STATEMENTS OF
OPERATIONS, continued |
|
|
|
|
|
|
|
|
13 Weeks Ended |
| (Thousands of Dollars and Shares, Except
Per Share Data) |
December 29
2013 |
December 30
2012 |
Percent Change |
|
|
|
|
| Non-operating income (expense): |
|
|
|
| Financial income |
120 |
|
80 |
|
50.0 |
|
| Interest expense |
(20,827 |
) |
(23,466 |
) |
(11.2 |
) |
| Debt financing costs |
(104 |
) |
(47 |
) |
NM |
|
| Other, net |
94 |
|
7,007 |
|
(98.7 |
) |
|
(20,717 |
) |
(16,426 |
) |
26.1 |
|
| Income before income taxes |
19,485 |
|
23,091 |
|
(15.6 |
) |
| Income tax expense |
7,383 |
|
9,439 |
|
(21.8 |
) |
| Income from continuing operations |
12,102 |
|
13,652 |
|
(11.4 |
) |
| Discontinued operations, net of income taxes |
- |
|
1,046 |
|
NM |
|
| Net income |
12,102 |
|
14,698 |
|
(17.7 |
) |
| Net income attributable to non-controlling interests |
(210 |
) |
(118 |
) |
78.0 |
|
| Income attributable to Lee Enterprises, Incorporated |
11,892 |
|
14,580 |
|
(18.4 |
) |
|
|
|
|
| Income from continuing operations attributable to Lee
Enterprises, Incorporated |
11,892 |
|
13,534 |
|
(12.1 |
) |
|
|
|
|
| Income per common share: |
|
|
|
| Basic: |
|
|
|
| Continuing operations |
0.23 |
|
0.26 |
|
(11.5 |
) |
| Discontinued operations |
- |
|
0.02 |
|
NM |
|
|
0.23 |
|
0.28 |
|
(17.9 |
) |
|
|
|
|
| Diluted: |
|
|
|
| Continuing operations |
0.22 |
|
0.26 |
|
(15.4 |
) |
| Discontinued operations |
- |
|
0.02 |
|
NM |
|
|
0.22 |
|
0.28 |
|
(21.4 |
) |
|
|
|
|
| Average common shares: |
|
|
|
| Basic |
52,081 |
|
51,794 |
|
|
| Diluted |
53,259 |
|
51,854 |
|
|
ADJUSTED EBITDA AND FREE
CASH FLOW
|
13 Weeks Ended |
|
52 Weeks Ended |
| (Thousands of Dollars) |
December 29
2013 |
December 30
2012 |
|
December 29
2013 |
|
|
|
|
|
| Operating income |
40,202 |
|
39,517 |
|
|
(56,634 |
) |
| Equity in earnings of associated companies |
(2,919 |
) |
(3,045 |
) |
|
(8,559 |
) |
| Depreciation and amortization |
12,034 |
|
15,041 |
|
|
52,630 |
|
| Impairment of intangible and other assets |
- |
|
- |
|
|
171,094 |
|
| Operating cash flow |
49,317 |
|
51,513 |
|
|
158,531 |
|
| Ownership share of TNI EBITDA (50%) |
1,894 |
|
1,954 |
|
|
5,737 |
|
| Ownership share of MNI EBITDA (50%) |
2,027 |
|
2,255 |
|
|
5,753 |
|
| Stock compensation |
264 |
|
368 |
|
|
1,157 |
|
| Adjusted EBITDA |
53,502 |
|
56,090 |
|
|
171,178 |
|
| Ownership share of associated companies EBITDA (50%) |
(3,921 |
) |
(4,209 |
) |
|
(11,490 |
) |
| Distributions from associated companies |
2,815 |
|
2,070 |
|
|
12,143 |
|
| Capital expenditures |
(2,295 |
) |
(2,068 |
) |
|
(9,967 |
) |
| Pension contributions |
- |
|
- |
|
|
(6,016 |
) |
| Cash income tax refunds (paid) |
(14 |
) |
(240 |
) |
|
9,352 |
|
| Unlevered free cash flow |
50,087 |
|
51,643 |
|
|
165,200 |
|
| Financial income |
120 |
|
80 |
|
|
340 |
|
| Interest expense settled in cash |
(19,628 |
) |
(21,846 |
) |
|
(81,794 |
) |
| Debt financing and reorganization costs paid |
(2 |
) |
- |
|
|
(1,073 |
) |
| Free cash flow |
30,577 |
|
29,877 |
|
|
82,673 |
|
REVENUE BY
REGION
|
13 Weeks Ended |
| (Thousands of Dollars) |
December 29
2013 |
December 30
2012 |
Percent Change |
|
|
|
|
| Midwest |
111,945 |
|
116,736 |
|
(4.1 |
) |
| Mountain West |
34,684 |
|
36,108 |
|
(3.9 |
) |
| West |
11,662 |
|
12,307 |
|
(5.2 |
) |
| East/Other |
19,094 |
|
19,505 |
|
(2.1 |
) |
| Total |
177,385 |
|
184,656 |
|
(3.9 |
) |
SELECTED BALANCE SHEET
INFORMATION
| (Thousands of Dollars) |
December 29
2013 |
December 30
2012 |
|
|
|
| Cash |
12,655 |
|
20,284 |
|
| Debt (Principal Amount) |
833,000 |
|
916,850 |
|
SELECTED STATISTICAL
INFORMATION
|
13 Weeks Ended |
|
December 29
2013 |
December 30
2012 |
Percent Change |
|
|
|
|
| Capital expenditures (Thousands of
Dollars) |
2,295 |
|
2,068 |
|
11.0 |
|
| Newsprint volume (Tonnes) |
15,931 |
|
17,712 |
|
(10.1 |
) |
| Average full-time equivalent employees |
4,617 |
|
4,906 |
|
(5.9 |
) |
| Shares outstanding at end of period (Thousands of Shares) |
53,449 |
|
52,296 |
|
2.2 |
|
NOTES
|
(1) |
This earnings release is a
preliminary report of results for the periods included. The
reader should refer to the Company's Quarterly Reports on Form 10-Q
and Annual Reports 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 associated companies, minus equity in
earnings of associated companies and curtailment gains.
|
|
|
|
|
|
|
|
-
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.
|
|
|
|
-
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.
|
|
|
|
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. |
This
announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Lee Enterprises Inc. via Globenewswire
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