Lee Enterprises, Incorporated (NYSE:LEE), a major provider of
local news, information and advertising in 50 markets, today
reported a preliminary(1) loss of 19 cents per diluted common share
for its third fiscal quarter ended June 29, 2014, compared with
earnings of 3 cents a year ago. Excluding unusual matters, adjusted
earnings per diluted common share(2) totaled 11 cents, compared
with earnings of 6 cents a year ago.
Mary Junck, chairman and chief executive officer, said: "Total
digital revenue in the third quarter continued its impressive
growth, increasing over 17%, thanks to 13% digital advertising
growth and the launch of our full-access subscription model. Our
optimism about the full access subscription model is growing as we
have now launched in fourteen, primarily larger markets, with the
early results promising. We plan to continue the roll out to the
majority of our markets by the end of the fiscal year and while the
third quarter results are impacted by our debt refinancing costs,
our enterprises continue to drive strong cash flows."
She also noted:
- Revenue trends improved again this
quarter, with total revenue down 2.3% from the same quarter a year
ago;
- Mobile advertising revenue increased
25.1%, to $1.9 million;
- Digital audiences continued to grow at
a double digit clip with 211.4 million mobile, tablet, desktop and
app page views and 23.1 million unique visitors in the month of
June 2014;
- We are on track to achieve our 3.0-3.5%
cash cost(2) reduction target for 2014; and
- Since our March 31, 2014 refinancing
and prior to the end of the third quarter, we have repaid $30.0
million of debt, bringing the balance largely in line with where it
was before the refinancing was completed.
THIRD QUARTER OPERATING RESULTS
Operating revenue for the 13 weeks ended June 29, 2014
totaled $163.1 million, a decrease of 2.3% 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
3.4%. This reclassification will increase both print subscription
revenue and operating expenses, with no impact on operating cash
flow(2) or operating income. 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 3.2% to $110.3 million, an improvement from
recent trends, with retail advertising down 3.1%, classified down
4.6% and national up 5.6%. Retail preprint advertising decreased
1.3%. Combined print and digital classified employment revenue
increased 5.1%, while automotive decreased 14.0%, real estate
decreased 6.1% and other classified decreased 4.5%. Digital
advertising and marketing services revenue on a stand-alone basis
increased 13.0% to $19.5 million and now totals 17.7% of total
advertising and marketing services revenue. Print advertising and
marketing services revenue on a stand-alone basis decreased
6.1%.
Subscription revenue decreased 0.6%. Excluding the impact of the
subscription-related expense reclassification, subscription revenue
decreased 4.8%.
Total digital revenue, including advertising, marketing
services, subscriptions and digital businesses, totaled $23.4
million in the quarter, up 17.4%.
Cash costs decreased 2.7% for the 13 weeks ended June 29, 2014.
Compensation decreased 3.2%, with the average number of full-time
equivalent employees down 3.5%. Newsprint and ink expense decreased
11.9%, primarily a result of a reduction in newsprint volume of
11.9%. Other operating expenses increased 0.7%. Excluding the
impact of the subscription-related expense reclassification, cash
costs decreased 4.1%.
Operating cash flow decreased 1.2% from a year ago to $39.3
million. Operating cash flow margin(2) increased to 24.1%, compared
to 23.8% a year ago. Including equity in earnings of associated
companies, depreciation and amortization, as well as unusual
matters in both years, operating income increased 6.2% to $28.6
million in the current year quarter, compared with $26.9 million a
year ago. Operating income margin increased to 17.5% up from 16.1%
a year ago.
Non-operating expenses increased 97.2% for the 13 weeks ended
June 29, 2014. We charged $21.7 million of debt financing costs to
expense and also recorded a $2.3 million loss related to a
litigation settlement in the current year quarter. Interest expense
decreased by 10.6% due to lower debt balances and the refinancing
of the Pulitzer Notes in May 2013. Loss attributable to Lee
Enterprises, Incorporated for the quarter totaled $9.7 million,
compared with income of $1.8 million a year ago.
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
June 29 June 30 2014 2013
(Thousands of Dollars, Except Per Share
Data)
Amount Per Share Amount
Per Share Income (loss) attributable to Lee
Enterprises, Incorporated, as reported (9,746 ) (0.19 )
1,795 0.03 Adjustments: Impairment of intangible and other
assets 336 — Litigation settlement 2,300 — Debt financing and
reorganization costs 21,732 468 Amortization of debt present value
adjustment — 1,216 Other, net (153 )
544 24,215 2,228 Income tax effect of
adjustments, net (8,472 ) (763 )
15,743 0.30
1,465 0.03 Income attributable to Lee Enterprises,
Incorporated, as adjusted 5,997 0.11
3,260 0.06
FULL-ACCESS SUBSCRIPTION
INITIATIVE
As previously reported, we launched our full-access subscription
initiative in April. As of today, fourteen markets have been
launched and we are on track to launch the majority of our markets
before the end of our fiscal year. Early results are
promising, with more than 20% of print subscribers activating their
digital subscriptions in several of the early launch markets. And,
thanks, in part, to a major customer service initiative, subscriber
losses have been lower than expected. Digital subscription
revenue increased 116.0% in the quarter, largely due to
full-access. Also as previously reported, due to the timing of the
rollout and subscriber renewal dates, we expect the bulk of the
revenue from this initiative to be realized in 2015.
YEAR-TO-DATE OPERATING
RESULTS(3)
Operating revenue for the 39 weeks ended June 29, 2014,
totaled $494.6 million, a decrease of 3.5% compared with the 39
weeks ended June 30, 2013. Excluding the impact of the
subscription-related expense reclassification, operating revenue
decreased 3.9%.
Combined print and digital advertising and marketing services
revenue decreased 4.2% to $335.4 million, retail advertising
decreased 3.1%, classified decreased 8.1% and national increased
3.0%. Combined print and digital classified employment revenue
decreased 2.5%, while automotive decreased 14.4%, real estate
decreased 5.9% and other classified decreased 8.3%. Digital
advertising and marketing services revenue on a stand-alone basis
increased 11.0% to $55.5 million. Mobile advertising revenue
increased 23.6%, to $5.1 million.
Print advertising and marketing services revenue on a
stand-alone basis decreased 6.8%.
Subscription revenue decreased 2.1%. Excluding the impact of the
subscription-related expense reclassification, subscription revenue
decreased 3.8%.
Total digital revenue totaled $65.5 million year to date, up
14.5% compared with a year ago.
Cash costs for the 39 weeks ended June 29, 2014 decreased
4.0% compared to the same period a year ago. Compensation decreased
5.7%, with the average number of full-time equivalent employees
down 5.2%. Newsprint and ink expense decreased 12.7%, a result of a
reduction in newsprint volume of 11.8%. Other operating expenses
increased 0.5%. Excluding the impact of the subscription-related
expense reclassification, cash costs decreased 4.6%.
Operating cash flow decreased 1.6% from a year ago to $121.3
million. Operating cash flow margin increased to 24.5% from 24.1% a
year ago. Including equity in earnings of associated companies,
depreciation and amortization, as well as unusual matters in both
years, operating income increased 8.7% to $92.5 million in the 39
weeks ended June 29, 2014, compared with $85.1 million a year
ago.
Non-operating expenses increased 37.5%, as we charged $21.9
million of debt financing costs to expense in the current year
period. These costs were partially offset by a 10.8% decrease in
interest expense in the current year due to lower debt balances and
the refinancing of the Pulitzer Notes in May 2013. We recorded a
$6.9 million gain on sale of an investment in the prior year
period. Income attributable to Lee Enterprises, Incorporated
totaled $3.6 million, compared to $10.4 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 29 June 30 2014
2013 (Thousands of Dollars, Except Per Share Data)
Amount Per Share Amount
Per Share Income attributable to Lee Enterprises,
Incorporated, as reported 3,632 0.07 10,372 0.20
Adjustments: Impairment of intangible and other assets 336 — Gain
on sale of investment, net — (6,909 ) Litigation settlement 2,300 —
Debt financing and reorganization costs 21,935 557 Amortization of
debt present value adjustment 2,394 3,932 Other, net 424
2,170
27,389 (250 ) Income tax effect of adjustments, net (9,551 )
102 17,838 0.33
(148 ) — Unusual matters related to discontinued operations
— — 1,014 0.02 Income
attributable to Lee Enterprises, Incorporated, as adjusted
21,470 0.40 11,238 0.22
Certain results, excluding the impact of the
subscription-related expense reclassification, are as follows:
13
Weeks Ended 39 Weeks Ended June 29
June 30
Percent
June 29 June 30
Percent
(Thousands of Dollars)
2014 2013
Change
2014 2013
Change
Subscription revenue, as reported 43,339 43,583 (0.6
) 130,744 133,609 (2.1 ) Adjustment for subscription-related
expense reclassification (1,842 ) — NM
(2,242 ) — NM
Subscription revenue, as adjusted 41,497
43,583 (4.8 ) 128,502 133,609
(3.8 ) Total operating revenue, as reported
163,125 167,019 (2.3 ) 494,603 512,277 (3.5 ) Adjustment for
subscription-related expense reclassification (1,842 )
— NM (2,242 ) —
NM Total operating revenue, as adjusted
161,283 167,019 (3.4 ) 492,361
512,277 (3.9 ) Total cash costs,
as reported 123,813 127,217 (2.7 ) 373,296 389,051 (4.0 )
Adjustment for subscription-related expense reclassification
(1,842 ) — NM (2,242 ) —
NM Total cash costs, as adjusted
121,971 127,217 (4.1 ) 371,054
389,051 (4.6 )
DEBT AND FREE CASH FLOW(2)
The principal amount of debt totaled $815.0 million at
June 29, 2014. As previously announced, on March 31,
2014, subsequent to the end of the March quarter, we completed a
comprehensive refinancing of our long-term debt and incurred an
additional $32.0 million of debt in order to pay related debt
refinancing costs. Debt payments since the refinancing totaled
$30.0 million in the quarter, resulting in a $2.0 million increase
in debt in the June quarter. Debt has been reduced $58.5 million in
the last twelve months. We expect debt principal payments to
fluctuate more in the future due to the semi-annual timing of
Senior Notes interest payments in March and September.
Unlevered free cash flow increased 25.5%, due primarily to the
timing of an income tax refund in the current year quarter and
pension contributions in the prior year quarter. Free cash flow was
negative $5.8 million for the quarter due to $31.0 million of debt
refinancing costs paid, compared with free cash flow of $14.4
million a year ago. In the last twelve months, free cash flow
totaled $64.8 million.
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 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)
877-407-0613 and entering a conference passcode of 13581947 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 1.2
million daily and 1.5 million Sunday, reaching nearly four million
readers in print alone. Lee's websites and mobile and tablet
products attracted 23.1 million unique visitors in June 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 or obtain
amendments or waivers of the financial covenants contained in our
credit facilities, if necessary;
- 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 29 June 30 Percent June 29
June 30 Percent
(Thousands of Dollars and Shares, Except
Per Share Data)
2014 2013 Change 2014
2013 Change Advertising
and marketing services Retail 69,507 71,718 (3.1 ) 216,591 223,438
(3.1 ) Classified: Employment 9,277 8,824 5.1 24,546 25,165 (2.5 )
Automotive 7,266 8,452 (14.0 ) 22,309 26,074 (14.4 ) Real estate
4,569 4,864 (6.1 ) 13,113 13,941 (5.9 ) All other 11,926
12,491 (4.5 ) 32,683
35,634 (8.3 ) Total classified 33,038 34,631 (4.6 )
92,651 100,814 (8.1 ) National 5,268 4,988 5.6 18,879 18,327 3.0
Niche publications and other 2,471 2,607
(5.2 ) 7,273 7,646 (4.9 )
Total advertising and marketing services revenue 110,284
113,944 (3.2 ) 335,394
350,225 (4.2 ) Subscription 43,339 43,583 (0.6 )
130,744 133,609 (2.1 ) Commercial printing 3,147 3,258 (3.4 ) 9,170
9,681 (5.3 ) Digital services and other 6,355 6,234
1.9 19,295 18,762
2.8 Total operating revenue 163,125
167,019 (2.3 ) 494,603 512,277
(3.5 ) Operating expenses: Compensation 60,330 62,340
(3.2 ) 181,543 192,505 (5.7 ) Newsprint and ink 9,224 10,471 (11.9
) 29,120 33,357 (12.7 ) Other operating expenses 53,840 53,461 0.7
161,708 160,929 0.5 Workforce adjustments 419 945
(55.7 ) 925 2,260
(59.1 ) Cash costs 123,813 127,217 (2.7
) 373,296 389,051 (4.0 )
Operating cash flow 39,312 39,802 (1.2 ) 121,307 123,226 (1.6 )
Depreciation 5,293 5,327 (0.6 ) 15,700 16,123 (2.6 ) Amortization
6,901 9,542 (27.7 ) 20,710 28,635 (27.7 ) Loss (gain) on sales of
assets, net 9 (112 ) NM (1,622 ) 23 NM Impairment of intangible and
other assets 336 — NM 336 — NM Equity in earnings of associated
companies 1,836 1,893 (3.0 )
6,348 6,671 (4.8 ) Operating income
28,609 26,938 6.2 92,531
85,116 8.7
CONSOLIDATED STATEMENTS OF OPERATIONS, continued
13 Weeks Ended 39 Weeks Ended
June 29 June 30 Percent June 29
June 30 Percent (Thousands of Dollars and Shares, Except Per
Share Data) 2014 2013 Change
2014 2013 Change
Non-operating income (expense): Financial income 85 134
(36.6 ) 306 219 39.7 Interest expense (19,654 ) (21,991 ) (10.6 )
(61,033 ) (68,390 ) (10.8 ) Debt financing costs (21,732 ) (468 )
NM (21,935 ) (557 ) NM Other, net (1,701 ) 520
NM (1,579 ) 7,466 NM
(43,002 ) (21,805 ) 97.2
(84,241 ) (61,262 ) 37.5 Income (loss)
before income taxes (14,393 ) 5,133 NM 8,290 23,854 (65.2 ) Income
tax expense (benefit) (4,882 ) 3,165 NM
3,995 11,805 (66.2 )
Income (loss) from continuing operations (9,511 ) 1,968 NM 4,295
12,049 (64.4 ) Discontinued operations, net of income taxes
— — NM —
(1,247 ) NM Net income (loss) (9,511 ) 1,968 NM 4,295
10,802 (60.2 ) Net income attributable to non-controlling interests
(235 ) (173 ) 35.8 (663 )
(430 ) 54.2 Income (loss) attributable to Lee
Enterprises, Incorporated (9,746 ) 1,795
NM 3,632 10,372
(65.0 ) Income (loss) from continuing operations
attributable to Lee Enterprises, Incorporated (9,746 )
1,795 NM 3,632
11,619 (68.7 ) Earnings (loss) per common
share: Basic: Continuing operations (0.19 ) 0.03 NM 0.07 0.22 (68.2
) Discontinued operations — — NM
— (0.02 ) NM
(0.19 ) 0.03 NM 0.07
0.20 (65.0 ) Diluted: Continuing
operations (0.19 ) 0.03 NM 0.07 0.22 (68.2 ) Discontinued
operations — — NM
— (0.02 ) NM (0.19 )
0.03 NM 0.07 0.20
(65.0 ) Average common shares: Basic 52,344
51,825 52,215 51,805 Diluted 52,344 52,038
53,655 51,912
SELECTED CONSOLIDATED FINANCIAL
INFORMATION
(UNAUDITED)
52 Weeks 13 Weeks
Ended 39 Weeks Ended Ended June
29 June 30 June 29 June 30 June 29
(Thousands of Dollars)
2014 2013 2014
2013 2014 Advertising and marketing
services 110,284 113,944 335,394 350,225 445,709 Subscription
43,339 43,583 130,744 133,609 174,192 Other 9,502
9,492 28,465 28,443
37,165 Total operating revenue 163,125
167,019 494,603 512,277
657,066 Compensation 60,330 62,340 181,543 192,505
243,870 Newsprint and ink 9,224 10,471 29,120 33,357 39,244 Other
operating expenses 53,840 53,461 161,708 160,929 213,800
Depreciation and amortization 12,194 14,869 36,410 44,758 47,180
Loss (gain) on sales of assets, net 9 (112 ) (1,622 ) 23 (1,535 )
Impairment of goodwill and other assets 336 — 336 — 171,430
Workforce adjustments 419 945
925 2,260 1,344 Total operating
expenses 136,352 141,974 408,420 433,832 715,333 Equity in earnings
of associated companies 1,836 1,893
6,348 6,671 8,362
Operating income (loss) 28,609 26,938 92,531 85,116 (49,905 )
Adjusted to exclude: Depreciation and amortization 12,194 14,869
36,410 44,758 47,180 Loss (gain) on sales of assets, net 9 (112 )
(1,622 ) 23 (1,535 ) Impairment of intangible and other assets 336
— 336 — 171,430 Equity in earnings of associated companies
(1,836 ) (1,893 ) (6,348 ) (6,671 )
(8,362 ) Operating cash flow 39,312 39,802 121,307 123,226 158,808
Add: Ownership share of TNI and MNI EBITDA (50%) 2,587 2,770 8,540
9,310 11,009 Adjusted to exclude: Stock compensation 397
377 1,081 1,109
1,233 Adjusted EBITDA(2) 42,296 42,949 130,928
133,645 171,050 Adjusted to exclude: Ownership share of TNI and MNI
EBITDA (50%) (2,587 ) (2,770 ) (8,540 ) (9,310 ) (11,009 ) Add
(deduct): Distributions from TNI and MNI 2,346 3,394 7,654 8,179
10,873 Capital expenditures (3,309 ) (2,136 ) (8,204 ) (6,835 )
(11,109 ) Pension contributions (17 ) (5,741 ) (722 ) (6,016 ) (722
) Cash income tax refunds (payments) 6,051 (27
) 5,933 (360 ) 15,419 Unlevered
free cash flow (2) 44,780 35,669 127,049 119,303 174,502 Add
(deduct): Financial income 85 134 306 219 387 Interest expense
settled in cash (19,654 ) (20,775 ) (58,639 ) (64,141 ) (78,510 )
Debt financing costs paid (31,008 ) (666 )
(31,276 ) (766 ) (31,581 ) Free cash flow (deficit)
(5,797 ) 14,362 37,440
54,615 64,798
SELECTED LEE LEGACY(2)
ONLY FINANCIAL INFORMATION
(UNAUDITED)
52
Weeks 13 Weeks Ended 39 Weeks Ended
Ended June 29 June 30 June 29
June 30 June 29
(Thousands of Dollars)
2014 2013 2014
2013 2014 Advertising and marketing
services 76,148 78,266 231,411 240,241 308,331 Subscription 28,022
27,092 83,499 83,028 110,807 Other 8,330 7,774
24,959 23,446 32,591
Total operating revenue 112,500 113,132
339,869 346,715 451,729
Compensation
45,086 45,457 135,035 139,412 181,094 Newsprint and ink 6,550 7,224
20,623 22,992 27,826 Other operating expenses 28,954 27,741 86,706
85,605 113,869 Depreciation and amortization 8,322 6,837 24,633
20,569 31,314 Loss (gain) on sales of assets, net 8 (98 ) (1,643 )
52 (1,561 ) Impairment of goodwill and other assets 336 — 336 — 859
Workforce adjustments 265 572
436 1,185 796 Total operating
expenses 89,521 87,733 266,126 269,815 354,197 Equity in earnings
of associated companies 790 877
2,232 2,658 3,084 Operating
income 23,769 26,276 75,975 79,558 100,616 Adjusted to exclude:
Depreciation and amortization 8,322 6,837 24,633 20,569 31,314 Loss
(gain) on sales of assets, net 8 (98 ) (1,643 ) 52 (1,561 )
Impairment of intangible and other assets 336 — 336 — 859 Equity in
earnings of associated companies (790 ) (877 )
(2,232 ) (2,658 ) (3,084 ) Operating cash flow 31,645
32,138 97,069 97,521 128,144 Add: Ownership share of MNI EBITDA
(50%) 1,436 1,598 4,110 4,781 5,311 Adjusted to exclude: Stock
compensation 397 377 1,081
1,109 1,233 Adjusted EBITDA
33,478 34,113 102,260 103,411 134,688 Adjusted to exclude:
Ownership share of MNI EBITDA (50%) (1,436 ) (1,598 ) (4,110 )
(4,781 ) (5,311 ) Add (deduct): Distributions from MNI 1,000 1,850
3,750 4,000 5,000 Capital expenditures (2,900 ) (1,685 ) (7,145 )
(5,127 ) (9,731 ) Pension contributions (17 ) — (17 ) — (17 ) Cash
income tax refunds (payments) (199 ) (27 ) (317 ) (360 ) (322 )
Intercompany charges not settled in cash (2,099 ) (2,146 ) (6,297 )
(6,438 ) (8,255 ) Other (2,000 ) —
(2,000 ) (2,000 ) (2,000 ) Unlevered free cash flow
25,827 30,507 86,124 88,705 114,052 Add (deduct): Financial income
85 134 306 219 387 Interest expense settled in cash (18,834 )
(18,619 ) (55,397 ) (56,454 ) (73,584 ) Debt financing costs paid
(31,000 ) — (31,268 ) (100 )
(31,308 ) Free cash flow (deficit) (23,922 )
12,022 (235 ) 32,370 9,547
SELECTED PULITZER(2) ONLY
FINANCIAL INFORMATION
(UNAUDITED)
52
Weeks 13 Weeks Ended 39 Weeks Ended
Ended June 29 June 30 June 29
June 30 June 29
(Thousands of Dollars)
2014 2013 2014
2013 2014 Advertising and marketing
services 34,136 35,678 103,983 109,984 137,378 Subscription 15,317
16,491 47,245 50,581 63,385 Other 1,172 1,718
3,506 4,997 4,574
Total operating revenue 50,625 53,887
154,734 165,562 205,337
Compensation 15,244 16,883 46,508 53,093 62,776 Newsprint and ink
2,674 3,247 8,497 10,365 11,418 Other operating expenses 24,886
25,720 75,002 75,324 99,931 Depreciation and amortization 3,872
8,032 11,777 24,189 15,866 Loss (gain) on sales of assets, net 1
(14 ) 21 (29 ) 26 Impairment of goodwill and other assets — — — —
170,571 Workforce adjustments 154 373
489 1,075 548 Total
operating expenses 46,831 54,241 142,294 164,017 361,136 Equity in
earnings of associated companies 1,046 1,016
4,116 4,013 5,278
Operating income (loss) 4,840 662 16,556 5,558 (150,521 ) Adjusted
to exclude: Depreciation and amortization 3,872 8,032 11,777 24,189
15,866 Loss (gain) on sales of assets, net 1 (14 ) 21 (29 ) 26
Impairment of intangible and other assets — — — — 170,571 Equity in
earnings of associated companies (1,046 ) (1,016 )
(4,116 ) (4,013 ) (5,278 ) Operating cash flow
7,667 7,664 24,238 25,705 30,664 Add: Ownership share of TNI EBITDA
(50%) 1,151 1,172 4,430
4,529 5,698 Adjusted EBITDA 8,818 8,836
28,668 30,234 36,362 Adjusted to exclude: Ownership share of TNI
EBITDA (50%) (1,151 ) (1,172 ) (4,430 ) (4,529 ) (5,698 ) Add
(deduct): Distributions from TNI 1,346 1,544 3,904 4,179 5,873
Capital expenditures (409 ) (451 ) (1,059 ) (1,708 ) (1,378 )
Pension contributions — (5,741 ) (705 ) (6,016 ) (705 ) Cash income
tax refunds (payments) 6,250 — 6,250 — 15,741 Intercompany charges
not settled in cash 2,099 2,146 6,297 6,438 8,255 Other
2,000 — 2,000 2,000
2,000 Unlevered free cash flow 18,953 5,162
40,925 30,598 60,450 Add (deduct): Interest expense settled in cash
(820 ) (2,156 ) (3,242 ) (7,687 ) (4,926 ) Debt financing costs
paid (8 ) (666 ) (8 ) (666 )
(273 ) Free cash flow 18,125 2,340
37,675 22,245 55,251
REVENUE BY REGION
13 Weeks Ended 39
Weeks Ended June 29 June 30 Percent
June 29 June 30 Percent
(Thousands of Dollars)
2014 2013 Change 2014
2013 Change Midwest 102,194 105,858 (3.5 )
308,841 322,468 (4.2 ) Mountain West 33,455 33,510 (0.2 ) 98,558
101,179 (2.6 ) West 11,070 11,273 (1.8 ) 32,875 34,050 (3.5 )
East/Other 16,406 16,378 0.2
54,329 54,580 (0.5 ) Total 163,125
167,019 (2.3 ) 494,603 512,277 (3.5 )
SELECTED BALANCE SHEET
INFORMATION
June 29 June 30
(Thousands of Dollars)
2014 2013 Cash 17,758 11,630
Debt (Principal Amount)
815,000 873,500
SELECTED STATISTICAL
INFORMATION
13 Weeks Ended 39
Weeks Ended June 29 June 30 Percent
June 29 June 30 Percent 2014
2013 Change 2014 2013
Change Capital expenditures (Thousands of Dollars)
3,309 2,136 54.9 8,204 6,835 20.0 Newsprint volume (Tonnes) 14,405
16,353 (11.9 ) 44,317 50,226 (11.8 ) Average full-time equivalent
employees 4,514 4,678 (3.5 ) 4,539 4,787 (5.2 ) Shares outstanding
at end of period (Thousands of Shares)
53,694 52,389 2.5
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.
•
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 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.
•
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.
Lee EnterprisesDan Hayes, 563-383-2100dan.hayes@lee.net
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