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 5, 2015
_______________________________________________________________________
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 5, 2015, Lee Enterprises, Incorporated reported its preliminary results for the first fiscal quarter ended December 28, 2014. A copy of the news release is furnished as Exhibit 99.1 to this Form 8-K and information from the news release is hereby incorporated by reference. The information under Item 2.02 of this report shall not be treated as filed for purposes of the Securities Exchange Act of 1934, as amended.
Item 9.01. Financial Statements and Exhibits.
|
| | | |
| | | |
| (d) | Exhibits | |
| | 99.1 | News Release dated February 5, 2015 |
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.
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| | | | |
| | | LEE ENTERPRISES, INCORPORATED | |
| | | | |
| | | |
Date: | February 5, 2015 | By: | |
| | | Carl G. Schmidt | |
| | | Vice President, Chief Financial Officer, | |
| | | and Treasurer | |
INDEX TO EXHIBITS
|
| |
Exhibit No. | Description |
| |
99.1 | News Release dated February 5, 2015 |
Exhibit 99.1 - News Release – First fiscal quarter ended December 28, 2014.
201 N. Harrison St.
Davenport, IA 52801
www.lee.net
NEWS RELEASE
Lee Enterprises reports results for first fiscal quarter
DAVENPORT, Iowa (February 5, 2015) — Lee Enterprises, Incorporated (NYSE: LEE), a major provider of local news, information and advertising in 50 markets, today reported preliminary(1) earnings of 18 cents per diluted common share for its first fiscal quarter ended December 28, 2014, compared with earnings of 22 cents a year ago. Excluding unusual matters, adjusted earnings per diluted common share(2) totaled 22 cents, compared with earnings of 24 cents a year ago.
Mary Junck, chairman and chief executive officer, said: "We're off to a strong start in FY2015 with total digital revenue continuing to grow at an impressive pace — up 25.6% in the quarter. Our audiences remain massive as mobile, tablet, desktop and app page views increased 7.7% to 226 million and unique visitors in the month of December 2014 increased 7.8% to 28 million. Our latest independent research shows that over the course of one week our newspapers and digital products reach almost 80% of all adults and almost three-quarters of adults ages 18-29 in our larger markets."
"Also of significant note, we continued our now more than six year run of strong and stable cash flow with unlevered free cash(2) flow totaling $154.9 million for the last twelve months ended December 28, 2014. And, we aim to keep the string going."
She added: "Lee's full-access subscription model helped produce quarter-over-quarter subscription revenue growth, exceeding previously announced guidance. And through our business transformation efforts we exceeded our cash cost reduction goal for the quarter."
She also noted the following financial highlights for the quarter:
| |
• | Total digital revenue increased 25.6% from the same quarter a year ago, our fifth consecutive quarter of double digit growth; |
| |
• | Digital advertising and marketing services revenue increased 7.1% and mobile advertising revenue, which is included in digital advertising, increased 32.4%; |
| |
• | Subscription revenue, excluding the subscription-related expense reclassification discussed more fully below, increased 0.3% and we expect full year 2015 subscription revenue, excluding the subscription-related expense reclassification, to increase 2.5%-3.0%; |
| |
• | Total cash costs(2), excluding the subscription-related expense reclassification, decreased 2.1%. Our ongoing cost control will continue and we anticipate full year cash costs, excluding the subscription-related expense reclassification, to decrease 0.5%-1.0% in 2015; and |
| |
• | Debt was reduced $20.3 million in the quarter and another $12.3 million since then. |
FIRST QUARTER OPERATING RESULTS
Operating revenue for the 13 weeks ended December 28, 2014 totaled $176.2 million, a decrease of 0.7% 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 increases both print subscription revenue and operating expenses, with no impact on operating cash flow(2) or operating income. Certain delivery expenses were previously reported as a reduction of revenue. A table later in this release details the impact of the reclassification on revenue and cash costs.
Combined print and digital advertising and marketing services revenue decreased 5.6% to $115.5 million, with retail advertising down 6.6%, classified down 3.4% and national down 4.9%. Retail preprint advertising decreased 8.1%. Combined print and digital classified employment revenue increased 3.0%, while automotive decreased 9.9%, real estate decreased 7.8% and other classified decreased 0.9%. Digital advertising and marketing services revenue on a stand-alone basis increased 7.1% to $19.9 million and now totals 17.3% of total advertising and marketing services revenue. Mobile advertising revenue increased 32.4%. Print advertising and marketing services revenue on a stand-alone basis decreased 7.9%.
Subscription revenue increased 10.9%. Excluding the impact of the subscription-related expense reclassification, subscription revenue increased 0.3%. Our average daily newspaper circulation, including TNI, MNI and digital subscribers, totaled 1.1 million in the 2015 Quarter. Sunday circulation totaled 1.5 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 $27.2 million in the quarter, up 25.6%.
Cash costs increased 1.6% for the 13 weeks ended December 28, 2014. Compensation decreased 0.3%, with the average number of full-time equivalent employees down 3.5%. Newsprint and ink expense decreased 16.2%, primarily the result of a reduction in newsprint volume of 13.3%. Other operating expenses increased 7.3%. Excluding the impact of the subscription-related expense reclassification, cash costs decreased 2.1%. We expect our cash costs, excluding the subscription-related expense reclassification, to decrease 0.5%-1.0% in 2015.
Operating cash flow decreased 6.8% from a year ago to $46.0 million. Operating cash flow margin(2) decreased to 26.1%, compared to 27.8% a year ago. Including equity in earnings of associated companies, depreciation and amortization, as well as unusual matters in both years, operating income totaled $37.5 million in the current year quarter, compared with operating income of $40.2 million a year ago. Operating income margin was 21.3% in the current year quarter, compared with 22.7% a year ago. The subscription expense reclassification reduced operating cash flow margin and operating income margin by 0.8% and 0.6%, respectively.
Non-operating expenses increased 1.3% for the 13 weeks ended December 28, 2014. Amortization of debt financing costs were $1.1 million in the current year quarter compared to $0.1 million in the prior year quarter. We also recognized $1.3 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. Interest expense decreased 9.8% in the current year quarter due to lower debt balances and non-cash interest expense of $1.2 million in the prior year quarter. Income attributable to Lee Enterprises, Incorporated for the quarter totaled $9.8 million, compared with income of $11.9 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 28
2014 | | | December 29
2013 | |
(Thousands of Dollars, Except Per Share Data) | Amount |
| | Per Share |
| | Amount |
| | Per Share |
|
| | | |
Income attributable to Lee Enterprises, Incorporated, as reported | 9,753 |
| | 0.18 |
| | 11,892 |
| | 0.22 |
|
Adjustments: | | | | | | | |
Debt financing costs | 1,102 |
| | | | 104 |
| | |
Amortization of debt present value adjustment | — |
| | | | 1,198 |
| | |
Warrants fair value adjustment | 1,302 |
| | | | — |
| | |
Other, net | (54 | ) | | | | 163 |
| | |
| 2,350 |
| | | | 1,465 |
| | |
Income tax effect of adjustments, net | (367 | ) | | | | (512 | ) | | |
| 1,983 |
| | 0.04 |
| | 953 |
| | 0.02 |
|
Income attributable to Lee Enterprises, Incorporated, as adjusted | 11,736 |
| | 0.22 |
| | 12,845 |
| | 0.24 |
|
SUBSCRIPTION EXPENSE RECLASSIFICATION
Certain results, excluding the impact of the subscription-related expense reclassification, are as follows:
|
| | | | | | |
| 13 Weeks Ended | |
(Thousands of Dollars) | December 28
2014 |
| December 29
2013 |
| Percent Change |
|
| | | |
Subscription revenue, as reported | 50,399 |
| 45,452 |
| 10.9 |
|
Adjustment for subscription-related expense reclassification | (4,807 | ) | — |
| NM |
|
Subscription revenue, as adjusted | 45,592 |
| 45,452 |
| 0.3 |
|
| | | |
Total operating revenue, as reported | 176,154 |
| 177,385 |
| (0.7 | ) |
Adjustment for subscription-related expense reclassification | (4,807 | ) | — |
| NM |
|
Total operating revenue, as adjusted | 171,347 |
| 177,385 |
| (3.4 | ) |
| | | |
Other cash costs, as reported | 59,181 |
| 55,157 |
| 7.3 |
|
Adjustment for subscription-related expense reclassification | (4,807 | ) | — |
| NM |
|
Other cash costs, as adjusted | 54,374 |
| 55,157 |
| (1.4 | ) |
| | | |
Total cash costs, as reported | 130,175 |
| 128,068 |
| 1.6 |
|
Adjustment for subscription-related expense reclassification | (4,807 | ) | — |
| NM |
|
Total cash costs, as adjusted | 125,368 |
| 128,068 |
| (2.1 | ) |
Approximately $4,444,000, or 92.4% of the reclassification impacts revenue and cash costs of our Lee Legacy operations, and approximately $363,000, or 7.6% impacts Pulitzer.
FULL ACCESS SUBSCRIPTION INITIATIVE
As previously reported, we launched our full access subscription initiative in April 2014. As of today, 30 markets have been launched and we are on track to launch all of our markets before June 2015. More than 200,000 subscribers have activated their access to our digital content to date. As previously reported, due to the timing of the rollout and subscriber renewal dates, the bulk of the positive revenue from this initiative should be realized in 2015 and we expect 2015 subscriber revenue, excluding the subscription-related expense reclassification, to increase 2.5-3.0%.
DEBT AND FREE CASH FLOW(2)
Debt was reduced $20.3 million in the quarter and by an additional $12.3 million since then. Including $32.0 million borrowed to pay 2014 refinancing costs that has since been repaid, debt has been reduced $80.5 million in the last twelve months ended December 2014.
Unlevered free cash flow totaled $45.8 million in the current year quarter compared to $50.1 million in the same quarter a year ago and $154.9 million over the last twelve months. Liquidity at December 28, 2014 totaled $48.5 million compared to $28.2 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 9:00 a.m. Central Standard 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) 888-510-1767 and entering a conference passcode of 108037 at least five minutes before the scheduled start. Please note that this is a different number than what was previously communicated. 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 1.1 million daily and 1.5 million Sunday, reaching over three million readers in print alone. Lee's websites and mobile and tablet products attracted 27.6 million unique visitors in December 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:
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• | 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; |
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• | That the warrants issued in our refinancing will not be exercised; |
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• | The impact and duration of adverse conditions in certain aspects of the economy affecting our business; |
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• | Changes in advertising demand; |
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• | Potential changes in newsprint, other commodities and energy costs; |
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• | Legislative and regulatory rulings; |
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• | Our ability to achieve planned expense reductions; |
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• | Our ability to maintain employee and customer relationships; |
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• | Our ability to manage increased capital costs; |
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• | Our ability to maintain our listing status on the NYSE; |
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• | 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
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
| | | | | | |
| 13 Weeks Ended | |
(Thousands of Dollars, Except Per Share Data) | December 28
2014 |
| December 29
2013 |
| Percent Change |
|
| | | |
Advertising and marketing services: | | | |
Retail | 76,814 |
| 82,279 |
| (6.6 | ) |
Classified: | | | |
Employment | 7,425 |
| 7,209 |
| 3.0 |
|
Automotive | 7,335 |
| 8,140 |
| (9.9 | ) |
Real estate | 4,074 |
| 4,419 |
| (7.8 | ) |
All other | 10,361 |
| 10,453 |
| (0.9 | ) |
Total classified | 29,195 |
| 30,221 |
| (3.4 | ) |
National | 7,151 |
| 7,517 |
| (4.9 | ) |
Niche publications and other | 2,317 |
| 2,374 |
| (2.4 | ) |
Total advertising and marketing services revenue | 115,477 |
| 122,391 |
| (5.6 | ) |
Subscription | 50,399 |
| 45,452 |
| 10.9 |
|
Commercial printing | 2,816 |
| 3,032 |
| (7.1 | ) |
Digital services and other | 7,462 |
| 6,510 |
| 14.6 |
|
Total operating revenue | 176,154 |
| 177,385 |
| (0.7 | ) |
Operating expenses: | | | |
Compensation | 61,937 |
| 62,142 |
| (0.3 | ) |
Newsprint and ink | 8,846 |
| 10,562 |
| (16.2 | ) |
Other operating expenses | 59,181 |
| 55,157 |
| 7.3 |
|
Workforce adjustments | 211 |
| 207 |
| 1.9 |
|
Cash costs | 130,175 |
| 128,068 |
| 1.6 |
|
Operating cash flow | 45,979 |
| 49,317 |
| (6.8 | ) |
Depreciation | 4,616 |
| 5,131 |
| (10.0 | ) |
Amortization | 6,880 |
| 6,893 |
| (0.2 | ) |
Loss (gain) on sales of assets, net | (257 | ) | 10 |
| NM |
|
Equity in earnings of associated companies | 2,757 |
| 2,919 |
| (5.5 | ) |
Operating income | 37,497 |
| 40,202 |
| (6.7 | ) |
|
| | | | | | |
CONSOLIDATED STATEMENTS OF OPERATIONS, continued |
| | | |
| 13 Weeks Ended | |
(Thousands of Dollars and Shares, Except Per Share Data) | December 28
2014 |
| December 29
2013 |
| Percent Change |
|
| | | |
Non-operating income (expense): | | | |
Financial income | 78 |
| 120 |
| (35.0 | ) |
Interest expense | (18,790 | ) | (20,827 | ) | (9.8 | ) |
Debt financing costs | (1,102 | ) | (104 | ) | NM |
|
Other, net | (1,178 | ) | 94 |
| NM |
|
| (20,992 | ) | (20,717 | ) | 1.3 |
|
Income before income taxes | 16,505 |
| 19,485 |
| (15.3 | ) |
Income tax expense | 6,498 |
| 7,383 |
| (12.0 | ) |
Net income | 10,007 |
| 12,102 |
| (17.3 | ) |
Net income attributable to non-controlling interests | (254 | ) | (210 | ) | 21.0 |
|
Income attributable to Lee Enterprises, Incorporated | 9,753 |
| 11,892 |
| (18.0 | ) |
| | | |
Earnings per common share: | | | |
Basic | 0.19 |
| 0.23 |
| (17.4 | ) |
Diluted | 0.18 |
| 0.22 |
| (18.2 | ) |
| | | |
Average common shares: | | | |
Basic | 52,471 |
| 52,081 |
| |
Diluted | 53,954 |
| 53,259 |
| |
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
|
| | | | | | | |
| 13 Weeks Ended | | | 52 Weeks Ended |
|
(Thousands of Dollars) | December 28
2014 |
| December 29
2013 |
| | December 28
2014 |
|
| | | | |
Advertising and marketing services | 115,477 |
| 122,391 |
| | 435,087 |
|
Subscription | 50,399 |
| 45,452 |
| | 181,773 |
|
Other | 10,278 |
| 9,542 |
| | 38,606 |
|
Total operating revenue | 176,154 |
| 177,385 |
|
| 655,466 |
|
Compensation | 61,937 |
| 62,142 |
| | 242,849 |
|
Newsprint and ink | 8,846 |
| 10,562 |
| | 36,278 |
|
Other operating expenses | 59,181 |
| 55,157 |
| | 223,353 |
|
Depreciation and amortization | 11,496 |
| 12,024 |
| | 47,983 |
|
Loss (gain) on sales of assets, net | (257 | ) | 10 |
| | (1,605 | ) |
Impairment of goodwill and other assets | — |
| — |
| | 2,980 |
|
Workforce adjustments | 211 |
| 207 |
| | 1,271 |
|
Total operating expenses | 141,414 |
| 140,102 |
| | 553,109 |
|
Equity in earnings of TNI and MNI | 2,757 |
| 2,919 |
| | 8,135 |
|
Operating income | 37,497 |
| 40,202 |
| | 110,492 |
|
Adjusted to exclude: | | | | |
Depreciation and amortization | 11,496 |
| 12,024 |
| | 47,983 |
|
Loss (gain) on sales of assets, net | (257 | ) | 10 |
| | (1,605 | ) |
Impairment of intangible and other assets | — |
| — |
| | 2,980 |
|
Equity in earnings of TNI and MNI | (2,757 | ) | (2,919 | ) | | (8,135 | ) |
Operating cash flow | 45,979 |
| 49,317 |
| | 151,715 |
|
Add: | | | | |
Ownership share of TNI and MNI EBITDA(2) (50%) | 3,756 |
| 3,921 |
| | 11,071 |
|
Adjusted to exclude: | | | | |
Stock compensation | 443 |
| 264 |
| | 1,660 |
|
Adjusted EBITDA(2) | 50,178 |
| 53,502 |
| | 164,446 |
|
Adjusted to exclude: | | | | |
Ownership share of TNI and MNI EBITDA (50%) | (3,756 | ) | (3,921 | ) | | (11,071 | ) |
Add (deduct): | | | | |
Distributions from TNI and MNI | 2,944 |
| 2,815 |
| | 10,125 |
|
Capital expenditures, net of insurance proceeds | (3,547 | ) | (2,295 | ) | | (13,076 | ) |
Pension contributions | — |
| — |
| | (1,522 | ) |
Cash income tax refunds (payments) | (4 | ) | (14 | ) | | 6,032 |
|
Unlevered free cash flow | 45,815 |
| 50,087 |
| | 154,934 |
|
Add (deduct): | | | | |
Financial income | 78 |
| 120 |
| | 343 |
|
Interest expense to be settled in cash | (18,790 | ) | (19,628 | ) | | (76,492 | ) |
Debt financing costs paid | (17 | ) | (2 | ) | | (31,602 | ) |
Free cash flow | 27,086 |
| 30,577 |
| | 47,183 |
|
SELECTED LEE LEGACY(2) ONLY FINANCIAL INFORMATION
(UNAUDITED)
|
| | | | | | | |
| 13 Weeks Ended | | | 52 Weeks Ended |
|
(Thousands of Dollars) | December 28
2014 |
| December 29
2013 |
| | December 28
2014 |
|
| | | | |
Advertising and marketing services | 80,055 |
| 83,209 |
| | 303,664 |
|
Subscription | 33,546 |
| 28,749 |
| | 118,789 |
|
Other | 8,780 |
| 8,217 |
| | 33,771 |
|
Total operating revenue | 122,381 |
| 120,175 |
| | 456,224 |
|
Compensation | 46,246 |
| 45,826 |
| | 181,061 |
|
Newsprint and ink | 6,523 |
| 7,338 |
| | 26,269 |
|
Other operating expenses | 33,577 |
| 29,120 |
| | 123,430 |
|
Depreciation and amortization | 7,951 |
| 8,082 |
| | 33,031 |
|
Loss (gain) on sales of assets, net | (79 | ) | (15 | ) | | (1,426 | ) |
Impairment of goodwill and other assets | — |
| — |
| | 378 |
|
Workforce adjustments | 72 |
| 49 |
| | 576 |
|
Total operating expenses | 94,290 |
| 90,400 |
| | 363,319 |
|
Equity in earnings of MNI | 1,112 |
| 1,130 |
| | 3,366 |
|
Operating income | 29,203 |
| 30,905 |
| | 96,271 |
|
Adjusted to exclude: | | | | |
Depreciation and amortization | 7,951 |
| 8,082 |
| | 33,031 |
|
Loss (gain) on sales of assets, net | (79 | ) | (15 | ) | | (1,426 | ) |
Impairment of intangible and other assets | — |
| — |
| | 378 |
|
Equity in earnings of MNI | (1,112 | ) | (1,130 | ) | | (3,366 | ) |
Operating cash flow | 35,963 |
| 37,842 |
| | 124,888 |
|
Add: | | | | |
Ownership share of MNI EBITDA (50%) | 2,007 |
| 2,027 |
| | 5,885 |
|
Adjusted to exclude: | | | | |
Stock compensation | 443 |
| 264 |
| | 1,660 |
|
Adjusted EBITDA | 38,413 |
| 40,133 |
| | 132,433 |
|
Adjusted to exclude: | | | | |
Ownership share of MNI EBITDA (50%) | (2,007 | ) | (2,027 | ) | | (5,885 | ) |
Add (deduct): | | | | |
Distributions from MNI | 1,750 |
| 1,500 |
| | 5,000 |
|
Capital expenditures, net of insurance proceeds | (2,080 | ) | (2,163 | ) | | (8,775 | ) |
Pension contributions | — |
| — |
| | (87 | ) |
Cash income tax refunds (payments) | (4 | ) | (14 | ) | | (256 | ) |
Intercompany charges not settled in cash | (2,318 | ) | (2,099 | ) | | (9,897 | ) |
Other | — |
| — |
| | (2,000 | ) |
Unlevered free cash flow | 33,754 |
| 35,330 |
| | 110,533 |
|
Add (deduct): | | | | |
Financial income | 78 |
| 120 |
| | 343 |
|
Interest expense to be settled in cash | (18,330 | ) | (18,355 | ) | | (73,466 | ) |
Debt financing costs paid | (17 | ) | (2 | ) | | (31,594 | ) |
Free cash flow | 15,485 |
| 17,093 |
| | 5,816 |
|
SELECTED PULITZER(2) ONLY FINANCIAL INFORMATION
(UNAUDITED)
|
| | | | | | | |
| 13 Weeks Ended | | | 52 Weeks Ended |
|
(Thousands of Dollars) | December 28
2014 |
| December 29
2013 |
| | December 28
2014 |
|
| | | | |
Advertising and marketing services | 35,422 |
| 39,182 |
| | 131,423 |
|
Subscription | 16,853 |
| 16,703 |
| | 62,984 |
|
Other | 1,498 |
| 1,325 |
| | 4,835 |
|
Total operating revenue | 53,773 |
| 57,210 |
| | 199,242 |
|
Compensation | 15,691 |
| 16,316 |
| | 61,788 |
|
Newsprint and ink | 2,323 |
| 3,224 |
| | 10,009 |
|
Other operating expenses | 25,604 |
| 26,037 |
| | 99,923 |
|
Depreciation and amortization | 3,545 |
| 3,942 |
| | 14,952 |
|
Loss (gain) on sales of assets, net | (178 | ) | 25 |
| | (179 | ) |
Impairment of goodwill and other assets | — |
| — |
| | 2,602 |
|
Workforce adjustments | 139 |
| 158 |
| | 695 |
|
Total operating expenses | 47,124 |
| 49,702 |
| | 189,790 |
|
Equity in earnings of TNI | 1,645 |
| 1,789 |
| | 4,769 |
|
Operating income | 8,294 |
| 9,297 |
| | 14,221 |
|
Adjusted to exclude: | | | | |
Depreciation and amortization | 3,545 |
| 3,942 |
| | 14,952 |
|
Loss (gain) on sales of assets, net | (178 | ) | 25 |
| | (179 | ) |
Impairment of intangible and other assets | — |
| — |
| | 2,602 |
|
Equity in earnings of TNI | (1,645 | ) | (1,789 | ) | | (4,769 | ) |
Operating cash flow | 10,016 |
| 11,475 |
| | 26,827 |
|
Add: | | | | |
Ownership share of TNI EBITDA (50%) | 1,749 |
| 1,894 |
| | 5,186 |
|
Adjusted EBITDA | 11,765 |
| 13,369 |
| | 32,013 |
|
Adjusted to exclude: | | | | |
Ownership share of TNI EBITDA (50%) | (1,749 | ) | (1,894 | ) | | (5,186 | ) |
Add (deduct): | | | | |
Distributions from TNI | 1,194 |
| 1,315 |
| | 5,125 |
|
Capital expenditures, net of insurance proceeds | (1,467 | ) | (132 | ) | | (4,301 | ) |
Pension contributions | — |
| — |
| | (1,435 | ) |
Cash income tax refunds (payments) | — |
| — |
| | 6,288 |
|
Intercompany charges not settled in cash | 2,318 |
| 2,099 |
| | 9,897 |
|
Other | — |
| — |
| | 2,000 |
|
Unlevered free cash flow | 12,061 |
| 14,757 |
| | 44,401 |
|
Add (deduct): | | | | |
Interest expense to be settled in cash | (460 | ) | (1,273 | ) | | (3,026 | ) |
Debt financing costs paid | — |
| — |
| | (8 | ) |
Free cash flow | 11,601 |
| 13,484 |
| | 41,367 |
|
REVENUE BY REGION
|
| | | | | | |
| 13 Weeks Ended | |
(Thousands of Dollars) | December 28
2014 |
| December 29
2013 |
| Percent Change |
|
| | | |
Midwest | 109,266 |
| 111,945 |
| (2.4 | ) |
Mountain West | 35,740 |
| 34,684 |
| 3.0 |
|
West | 11,964 |
| 11,662 |
| 2.6 |
|
East/Other | 19,184 |
| 19,094 |
| 0.5 |
|
Total | 176,154 |
| 177,385 |
| (0.7 | ) |
SELECTED BALANCE SHEET INFORMATION
|
| | | | | | |
(Thousands of Dollars) | February 5
2015 |
| December 28
2014 |
| September 28
2014 |
|
| | | |
Cash | | 15,943 |
| 16,704 |
|
| | | |
Debt (Principal Amount): | | | |
Revolving Facility | — |
| — |
| 5,000 |
|
1st Lien Term Loan | 207,250 |
| 215,500 |
| 226,750 |
|
Notes | 400,000 |
| 400,000 |
| 400,000 |
|
2nd Lien Term Loan | 150,000 |
| 150,000 |
| 150,000 |
|
Pulitzer Notes | 15,000 |
| 19,000 |
| 23,000 |
|
| 772,250 |
| 784,500 |
| 804,750 |
|
SELECTED STATISTICAL INFORMATION
|
| | | | | | |
| 13 Weeks Ended | |
| December 28
2014 |
| December 29
2013 |
| Percent Change |
|
| | | |
Capital expenditures, net of insurance proceeds (Thousands of Dollars) | 3,547 |
| 2,295 |
| 54.6 |
|
Newsprint volume (Tonnes) | 13,816 |
| 15,931 |
| (13.3 | ) |
Average full-time equivalent employees | 4,457 |
| 4,617 |
| (3.5 | ) |
Shares outstanding at end of period (Thousands of Shares) | 54,492 |
| 53,449 |
| 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: |
| ž | Adjusted EBITDA is defined as operating income (loss), plus depreciation, amortization, impairment charges, stock compensation and 50% of EBITDA from associated companies, minus equity in earnings of associated companies and curtailment gains. |
| ž | Adjusted Income (Loss) and Adjusted Earnings (Loss) Per Common Share are defined as income (loss) attributable to Lee Enterprises, Incorporated and earnings (loss) per common share adjusted to exclude both unusual matters and those of a substantially non-recurring nature. |
| ž | Cash Costs are defined as compensation, newsprint and ink, other operating expenses and certain unusual matters, such as workforce adjustment costs. Depreciation, amortization, impairment charges, other non-cash operating expenses and other unusual matters are excluded. |
| ž | Operating Cash Flow is defined as operating income (loss) plus depreciation, amortization and impairment charges, minus equity in earnings of associated companies and curtailment gains. Operating Cash Flow margin is defined as operating cash flow divided by operating revenue. The terms operating cash flow and EBITDA are used interchangeably. |
| ž | Unlevered Free Cash Flow is defined as operating income (loss), plus depreciation, amortization, impairment charges, stock compensation, distributions from associated companies and cash income tax refunds, minus equity in earnings of associated companies, curtailment gains, cash income taxes, pension contributions and capital expenditures. Changes in working capital, asset sales, minority interest and discontinued operations are excluded. Free Cash Flow also includes financial income, interest expense and debt financing and reorganization costs. |
| We also present selected information for Lee Legacy and Pulitzer Inc. ("Pulitzer"). Lee Legacy constitutes the business of the Company excluding Pulitzer, a wholly-owned subsidiary of the Company. |
| No non-GAAP financial measure should be considered as a substitute for any related GAAP financial measure. However, the Company believes the use of non-GAAP financial measures provides meaningful supplemental information with which to evaluate its financial performance, or assist in forecasting and analyzing future periods. The Company also believes such non-GAAP financial measures are alternative indicators of performance used by investors, lenders, rating agencies and financial analysts to estimate the value of a publishing business and its ability to meet debt service requirements. |
| | | | | | | |
(3) | Certain amounts as previously reported have been reclassified to conform with the current period presentation. The prior periods have been adjusted for comparative purposes, and the reclassifications have no impact on earnings. |
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