Lee Enterprises, Incorporated (NYSE:LEE), a major provider of
local news, information and advertising in 50 markets, today
reported preliminary(1) results for its fourth fiscal quarter and
fiscal year ended September 27, 2015.
Fourth quarter financial highlights include:
- Fourth quarter operating cash flow(2)
growth of 5.0% and 7.5% adjusted EBITDA(2) growth.
- Subscription revenue increased 6.1%
excluding the subscription-related expense reclassification.
- Total digital revenue, including
subscription and TownNews, grew 23.9%.
- Digital ad revenue was up 5.1%,
representing 21.6% of total advertising revenue in the
quarter.
- Mobile advertising revenue, which is
included in digital advertising, increased 10.6%.
- Digital services revenue, primarily
TownNews, increased 11.3% to $3.3 million.
- Overall revenue on a comparable basis
decreased 4.4% in fourth quarter, which is an improvement from the
June quarterly trend. Total advertising and marketing services
revenue decreased 9.0%.
- Total cash costs excluding the
subscription-related expense reclassification and workforce
adjustment costs decreased 7.8%, exceeding previously announced
guidance of down 5.5%-6.0%.
“We are very pleased with our fourth quarter results, especially
our cash flow growth,” Mary Junck, chairman and chief executive
officer said. “We continue to see revenue growth in digital
advertising, digital services, and subscription revenue from our
full access and premium day initiatives as compared to the same
quarter of the prior year. These growing revenue categories made up
almost 47% of our total revenue, for the quarter.”
Junck said several key initiatives launched in 2015 helped drive
fourth quarter results and also should impact 2016. Those
include:
- Accelerating digital revenue growth
with expanded audience reach and advertising services.
- Redesigning all of our products
including mobile, desktop and print throughout 2016 to improve
reader engagement, drive revenue and provide cost
efficiencies.
- Phase 2 of the Lee Design Centers
through the "daVinci Project."
- Implemented a sweeps program that
drives programmatic digital advertising revenue by increasing page
views and reader engagement at attractive advertising rates.
- Circulation revenue growth with
continued increases in digital subscription activation along with
selective price increases and premium days.
“We have very strong local audiences across all age groups,”
Junck said. “In the markets we serve, we reach 76% of adults with
our print and digital platforms, including more than 70% of those
under forty years old. We'll continue to refine and develop our
products to best meet the needs of our readers and provide large,
relevant audiences to our advertisers — both print and
digital.”
“We also had outstanding results at two of our larger newspaper
subsidiaries — Madison Newspapers(3) (MNI) and Tucson Newspapers(3)
(TNI), which are accounted for under the equity method,” Junck
added. “Combined, our share of EBITDA from these operations for the
quarter grew 4.3% in the fourth quarter of 2015. The company
received $2.9 million in dividends from MNI and TNI in the quarter
and $11.0 million for the year.”
Earnings of 18 cents per diluted common share were reported for
the quarter compared to earnings of 6 cents a year ago. Excluding
unusual matters, adjusted earnings per diluted common share(2)
totaled 10 cents, compared with earnings of 2 cents a year ago.
Ron Mayo, chief financial officer and treasurer, said the
company will continue to use substantially all of its free cash
flow(2) to reduce debt and strengthen the company's capital
structure.
“We reduced debt by $19.1 million in the fourth quarter and
$78.9 million in the 2015 fiscal year,” he said. “And, we expect to
continue to repay debt at a similar pace in 2016.”
Mayo also noted:
- As of September 27, 2015, the principal
amount of debt was $725.9 million.
- Interest expense to be settled in cash
was reduced $4.9 million in 2015 as a result of debt reductions,
which provides additional free cash flow that will be used for
future debt reductions.
- Approximately $3.3 million of the
September quarter Pulitzer excess cash flow payment was not
rejected, and accordingly, in November of 2015, $3.3 million of 2nd
Lien Term Loan(3) was repaid at par.
“Lee also has more than $10 million of real estate assets listed
for sale, including properties in Bloomington, Illinois; Portage,
Wisconsin; and St. Louis, Missouri at September 27, 2015,” Mayo
said. “In October 2015, we closed the sale of the Provo, Utah land
and building, netting $2.3 million, which was used to repay the 2nd
Lien Term Loan at par.”
“In 2015, we exceeded cash costs guidance, and we'll continue to
implement our business transformation and related cost reductions
in the coming year,” Mayo said. “In fiscal year 2016, we expect
cash cost reductions, as compared to the prior year, to be in the
3.5% to 4.0% range.”
FOURTH QUARTER OPERATING
RESULTS
Operating revenue for the 13 weeks ended September 27, 2015
totaled $156.1 million, a decrease of 4.3% compared with a year
ago. Excluding the impact of the subscription-related expense
reclassification, operating revenue decreased 4.4%. 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
9.0% to $97.3 million, with retail advertising down 7.1%,
classified down 13.9% and national down 11.7%. Digital advertising
and marketing services revenue on a stand-alone basis increased
5.1% to $21.0 million.
Subscription revenue increased 5.4%. Excluding the impact of the
subscription-related expense reclassification, subscription revenue
increased 6.1%.
Average daily newspaper circulation, including TNI and MNI and
digital subscribers, totaled 0.9 million in the 13 weeks ended
September 27, 2015. Sunday circulation totaled 1.3
million.
Total digital revenue, including advertising, marketing
services, subscriptions and digital businesses, totaled $31.1
million in the quarter, up 23.9%, and represents 19.9% of total
operating revenue.
Cash costs decreased 6.8% for the 13 weeks ended
September 27, 2015. Excluding the impact of the
subscription-related expense reclassification and workforce
adjustments, cash costs decreased 7.8% for the 13 weeks ended
September 27, 2015, exceeding guidance of down 5.5%-6.0%.
Compensation decreased 6.7%, primarily as a result of reduced
staffing levels. Newsprint and ink expense decreased 28.6%,
primarily the result of lower newsprint prices and a reduction in
newsprint volume of 11.3%. Other operating expenses decreased 5.4%.
The acceleration of cost reductions in the second half of fiscal
year 2015 is expected to have a favorable impact on the fiscal year
2016 cash costs.
Operating cash flow increased 5.0% from a year ago to $35.4
million. Excluding workforce adjustments, operating cash flow
increased 8.0%. Operating cash flow margin(2) increased to 22.7%,
compared to 20.7% a year ago. Including equity in earnings of
associated companies, depreciation and amortization, as well as
unusual matters in both years, operating income totaled $26.8
million in the current year quarter, compared with $20.7 million a
year ago. Adjusted EBITDA for the quarter was $40.0 million, a 7.5%
increase over prior year.
Non-operating expenses decreased 17.2% for the 13 weeks ended
September 27, 2015. Interest expense decreased 8.5%, or $1.6
million, due to lower debt balances. We also recognized $6.9
million and $5.5 million of non-operating income in the current
year quarter and prior year quarter, respectively, due to the
change in fair value of stock warrants issued in connection with
our refinancing in 2014. Partially offsetting those expense
reductions, we expensed $1.4 million of debt refinancing costs in
the current year quarter compared to $1.0 million in the prior year
quarter. Income attributable to Lee Enterprises, Incorporated for
the quarter totaled $9.9 million, compared with income of $3.2
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 September 27
September 28 2015
2014
(Thousands of Dollars, Except Per Share
Data)
Amount Per Share
Amount Per Share
Income attributable to Lee Enterprises,
Incorporated, as reported 9,881 0.18 3,162 0.06 Adjustments:
Impairment of intangible and other assets — 2,644 Debt financing
costs 1,393 992 Warrants fair value adjustment (6,880 ) (5,543 )
Other, including workforce adjustments 2,467
1,316
(3,020 ) (591 ) Income tax effect of
adjustments, net (1,321 )
(1,733 )
(4,341 ) (0.08 )
(2,324 ) (0.04 ) Income attributable to Lee
Enterprises, Incorporated, as adjusted 5,540
0.10 838
0.02
SUBSCRIPTION EXPENSE
RECLASSIFICATION
Certain results, excluding the impact of the
subscription-related expense reclassification, are as follows:
13
Weeks Ended Sept 27 Sept 28
Percent
(Thousands of Dollars)
2015
2014
Change
Subscription revenue, as reported 48,570 46,081 5.4
Adjustment for subscription-related expense reclassification
(4,376 ) (4,442 ) (1.5 )
Subscription revenue, as adjusted 44,194
41,639 6.1
Total operating revenue, as reported 156,099 163,173 (4.3 )
Adjustment for subscription-related expense reclassification
(4,376 ) (4,442 ) (1.5 )
Total operating revenue, as adjusted 151,723
158,731 (4.4 )
Other cash costs, as reported 55,523 58,700 (5.4 ) Adjustment for
subscription-related expense reclassification
(4,376 ) (4,442 ) (1.5 ) Other cash
costs, as adjusted 51,147
54,258 (5.7 ) Total cash costs
excluding unusual matters 119,271 129,085 (7.6 ) Adjustment for
subscription-related expense reclassification
(4,376 ) (4,442 ) (1.5 ) Total cash
costs excluding unusual matters, as adjusted
114,895 124,643 (7.8 )
Total cash costs, as reported 120,667 129,426 (6.8 )
Adjustment for subscription-related expense reclassification
(4,376 ) (4,442 ) (1.5 )
Total cash costs, as adjusted 116,291
124,984 (7.0 )
Approximately $4,036,000, or 92.2% of the reclassification
impacts revenue and cash costs of our Lee Legacy(2) operations, and
approximately $340,000, or 7.8% impacts Pulitzer(2).
YEAR-TO-DATE OPERATING
RESULTS(4)
Operating revenue for fiscal year 2015 totaled $648.5 million, a
decrease of 1.9% compared with fiscal year 2014. Excluding the
impact of the subscription-related expense reclassification,
operating revenue decreased 3.7%.
Advertising and marketing services revenue combined decreased
7.0% to $412.1 million, retail advertising decreased 6.7%,
classified decreased 8.6% and national decreased 9.8%. Digital
advertising and marketing services revenue on a stand-alone basis
increased 6.9% to $81.7 million. Mobile advertising revenue
increased 24.8%.
Subscription revenue increased 10.0%. Excluding the impact of
the subscription-related expense reclassification, subscription
revenue increased 3.6%.
Total digital revenue was $116.9 million year to date, up 27.8%
compared with a year ago.
Cash costs for 2015 decreased 0.8% compared to the same period a
year ago. Excluding the impact of the subscription-related expense
reclassification and workforce adjustments, cash costs decreased
3.6%. Compensation decreased 1.7%, due to a decrease in the average
number of full-time equivalent employees of 4.9%, partially offset
by company-wide salary increases and higher pension costs.
Newsprint and ink expense decreased 20.3%, due to the combination
of lower newsprint prices and a reduction in newsprint volume of
12.3%. Other operating expenses increased 2.5% and excluding the
impact of the subscription-related expenses reclassification, other
operating expense decreased 2.7%, or $5.9 million.
Operating cash flow decreased 5.3% from a year ago to $146.8
million. Excluding workforce adjustments, operating cash flow
decreased 4.0%. Operating cash flow margin decreased to 22.6% from
23.5% 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 $109.4 million in 2015, compared with $113.2 million a year ago.
Adjusted EBITDA for the year was $163.3 or 3.4% decrease from the
prior year.
Non-operating expenses decreased 28.0% in 2015 compared to 2014.
We recognized $5.4 million of debt financing costs in 2015 compared
to $22.9 million in 2014 due to costs charged to expense at the
closing of our 2014 refinancing. Interest expense settled in cash
decreased 6.4%, or $4.9 million, due to lower debt balances in the
current year. We also recognized non-cash interest expense of $2.4
million in the prior year. The income related to the change in fair
value of stock warrants was $6.6 million and $6.1 million in 2015
and 2014, respectively. Income attributable to Lee Enterprises,
Incorporated for the year totaled $23.3 million, compared to income
of $6.8 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.
52 Weeks Ended September 27
September 28 2015
2014
(Thousands of Dollars, Except Per Share
Data)
Amount Per Share
Amount Per Share Income
attributable to Lee Enterprises, Incorporated, as reported 23,316
0.43 6,795 0.13 Adjustments: Impairment
of intangible and other assets — 2,980 Debt financing costs 5,433
22,927 Amortization of debt present value adjustment — 2,394
Warrants fair value adjustment (6,568 ) (6,122 ) Litigation
settlement — 2,300 Other, including workforce adjustments
4,037
2,319 2,902 26,798 Income tax
effect of adjustments, net (3,217 )
(11,487 )
(315 ) (0.01 )
15,311 0.28 Income attributable to Lee
Enterprises, Incorporated, as adjusted 23,001
0.43 22,106
0.41
SUBSCRIPTION EXPENSE
RECLASSIFICATION
Certain results, excluding the impact of the
subscription-related expense reclassification, are as follows:
52 Weeks Ended Sept 27
Sept 28 Percent
(Thousands of Dollars)
2015 2014 Change
Subscription revenue, as reported 194,474 176,826 10.0 Adjustment
for subscription-related expense reclassification
(18,300 ) (6,707 )
NM
Subscription revenue, as adjusted
176,174 170,119 3.6 Total
operating revenue, as reported 648,543 660,877 (1.9 ) Adjustment
for subscription-related expense reclassification
(18,300 ) (6,707 ) NM Total operating
revenue, as adjusted 630,243
654,170 (3.7 ) Other cash costs, as reported
229,165 223,509 2.5 Adjustment for subscription-related expense
reclassification (18,300 ) (6,707 )
NM Other cash costs, as adjusted
210,865 216,802 (2.7 ) Total
cash costs excluding unusual matters 498,456 504,557 (1.2 )
Adjustment for subscription-related expense reclassification
(18,300 ) (6,707 ) NM Total cash
costs excluding unusual matters, as adjusted
480,156 497,850 (3.6 ) Total
cash costs, as reported 501,760 505,822 (0.8 ) Adjustment for
subscription-related expense reclassification
(18,300 ) (6,707 ) NM Total cash costs, as
adjusted 483,460 499,115
(3.1 )
Approximately $16,918,000, or 92.4% of the reclassification
impacts revenue and cash costs of our Lee Legacy operations, and
approximately $1,382,000, or 7.6% impacts Pulitzer.
DEBT AND FREE CASH FLOW
Debt was reduced $19.1 million in the quarter and $78.9 million
for the fiscal year. Strong free cash flow coupled with selective
asset sales helped fund debt reduction in 2015, which we expect to
continue at a similar rate in 2016. As of September 27, 2015
the principal amount of debt was $725.9 million.
Unlevered free cash flow(2) increased 9.0% in the current year
quarter to $35.4 million compared to $32.5 million in the same
quarter a year ago. Unlevered free cash flow totaled $149.3 million
for 2015 compared to $160.5 million in 2014. Tax refunds of $6.0
million increased our free cash flow in 2014. At September 27,
2015, liquidity, including cash and availability under our
Revolving Facility, totaled $44.1 million compared to $25.0 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) 888-505-4389 and
entering a conference passcode of 563694 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 0.9
million daily and 1.3 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 52 Weeks Ended
Sept 27 Sept 28 Percent
Sept 27 Sept 28 Percent
(Thousands of Dollars, Except Per Share
Data)
2015 2014 Change
2015 2014 Change
Advertising and marketing services: Retail 61,382
66,056 (7.1 ) 264,334 283,366 (6.7 ) Classified 27,650 32,126 (13.9
) 114,225 124,955 (8.6 ) National 5,287 5,988 (11.7 ) 22,422 24,867
(9.8 ) Niche publications and other 2,999
2,788 7.6 11,118
10,059 10.5 Total advertising
and marketing services revenue 97,318
106,958 (9.0 ) 412,099
443,247 (7.0 ) Subscription 48,570 46,081 5.4
194,474 176,826 10.0 Commercial printing 3,045 2,880 5.7 11,875
12,050 (1.5 ) Digital services 3,254 2,924 11.3 12,522 10,181 23.0
Other 3,912 4,330
(9.7 ) 17,573 18,573 (5.4
) Total operating revenue 156,099
163,173 (4.3 ) 648,543
660,877 (1.9 ) Operating expenses:
Compensation 57,413 61,511 (6.7 ) 239,028 243,054 (1.7 ) Newsprint
and ink 6,335 8,874 (28.6 ) 30,263 37,994 (20.3 ) Other operating
expenses 55,523 58,700 (5.4 ) 229,165 223,509 2.5 Workforce
adjustments 1,396 341
NM 3,304 1,265
NM Cash costs 120,667
129,426 (6.8 ) 501,760
505,822 (0.8 ) Operating cash flow 35,432
33,747 5.0 146,783 155,055 (5.3 ) Depreciation 4,558 5,220 (12.7 )
18,418 20,920 (12.0 ) Amortization 6,548 6,880 (4.8 ) 27,145 27,591
(1.6 ) Loss (gain) on sales of assets, net (328 ) 284 NM 106 (1,338
) NM Impairment of intangible and other assets — 2,644 NM — 2,980
NM Equity in earnings of associated companies
2,141 1,949 9.9
8,254 8,297 (0.5 ) Operating income
26,795 20,668 29.6
109,368 113,199
(3.4 ) Non-operating income (expense): Financial income 79 79 — 337
385 (12.5 ) Interest expense (17,095 ) (18,691 ) (8.5 ) (72,409 )
(79,724 ) (9.2 ) Debt financing and administrative costs (1,393 )
(992 ) 40.4 (5,433 ) (22,927 ) (76.3 ) Other, net
5,992 4,607 30.1
6,049 3,028 99.8
(12,417 ) (14,997 ) (17.2 )
(71,456 ) (99,238 ) (28.0 ) Income
before income taxes 14,378 5,671 NM 37,912 13,961 NM Income tax
expense 4,244 2,296
84.8 13,594 6,290
NM Net income 10,134 3,375 NM 24,318 7,671 NM Net
income attributable to non-controlling interests
(253 ) (213 ) 18.8 (1,002
) (876 ) 14.4 Income attributable to Lee
Enterprises, Incorporated 9,881
3,162 NM 23,316
6,795 NM Earnings per common share:
Basic 0.18 0.06 NM 0.44 0.13 NM Diluted 0.18
0.06 NM 0.43
0.13 NM
SELECTED CONSOLIDATED FINANCIAL
INFORMATION
(UNAUDITED)
13 Weeks Ended
52 Weeks Ended Sept 27
Sept 28 Sept 27
Sept 28
(Thousands of Dollars)
2015 2014
2015 2014 Advertising and marketing
services 97,318 106,958 412,099 443,247 Subscription 48,570 46,081
194,474 176,826 Other 10,211
10,134 41,970 40,804
Total operating revenue 156,099
163,173 648,543 660,877
Compensation 57,413 61,511 239,028 243,054 Newsprint and ink 6,335
8,874 30,263 37,994 Other operating expenses 55,523 58,700 229,165
223,509 Depreciation and amortization 11,106 12,100 45,563 48,511
Loss (gain) on sales of assets, net (328 ) 284 106 (1,338 )
Impairment of goodwill and other assets — 2,644 — 2,980 Workforce
adjustments 1,396 341
3,304 1,265 Total operating
expenses 131,445 144,454 547,429 555,975 Equity in earnings of TNI
and MNI 2,141 1,949
8,254 8,297 Operating income
26,795 20,668 109,368 113,199 Adjusted to exclude: Depreciation and
amortization 11,106 12,100 45,563 48,511 Loss (gain) on sales of
assets, net (328 ) 284 106 (1,338 ) Impairment of intangible and
other assets — 2,644 — 2,980 Equity in earnings of TNI and MNI
(2,141 ) (1,949 ) (8,254
) (8,297 ) Operating cash flow 35,432 33,747 146,783 155,055
Add: Ownership share of TNI and MNI EBITDA (50%)
2,814 2,697 11,246
11,236 EBITDA 38,246 36,444 158,029 166,291 Adjusted
to exclude: Workforce adjustments 1,396 341 3,304 1,265 Stock
compensation 326 400
1,971 1,481 Adjusted EBITDA(2)
39,968 37,185 163,304 169,037 Adjusted to exclude: Ownership share
of TNI and MNI EBITDA (50%) (2,814 ) (2,697 ) (11,246 ) (11,236 )
Add (deduct): Distributions from TNI and MNI 2,862 2,342 10,975
9,996 Capital expenditures, net of insurance proceeds (2,016 )
(3,620 ) (9,707 ) (11,824 ) Pension contributions (2,012 ) (800 )
(3,577 ) (1,522 ) Cash income tax refunds (payments)
(549 ) 89 (485 ) 6,022
Unlevered free cash flow 35,439 32,499 149,264 160,473 Add
(deduct): Financial income 79 79 337 385 Interest expense to be
settled in cash (17,095 ) (18,691 ) (72,409 ) (77,330 ) Debt
financing and administrative costs paid (256 )
(311 ) (733 ) (31,587 ) Free cash flow
18,167 13,576
76,459 51,941
SELECTED LEE LEGACY(2)
ONLY FINANCIAL INFORMATION
(UNAUDITED)
13 Weeks Ended
52 Weeks Ended Sept 27
Sept 28 Sept 27 Sept 28
(Thousands of Dollars)
2015 2014
2015 2014 Advertising and marketing
services 67,944 75,543 287,417 307,254 Subscription 33,417 30,492
131,352 113,992 Other 8,719
8,545 35,328 34,353 Total
operating revenue 110,080
114,580 454,097 455,599
Compensation 43,329 45,606 180,035 180,641 Newsprint and ink 4,670
6,461 22,307 27,084 Other operating expenses 32,100 32,696 130,530
120,552 Depreciation and amortization 7,683 8,529 31,534 33,163
Loss (gain) on sales of assets, net 40 281 (285 ) (1,362 )
Impairment of goodwill and other assets — 42 — 378 Workforce
adjustments 228 116
983 551 Total operating expenses
88,050 93,731 365,104 361,007 Equity in earnings of MNI
1,115 1,152 3,416
3,384 Operating income 23,145 22,001 92,409
97,976 Adjusted to exclude: Depreciation and amortization 7,683
8,529 31,534 33,163 Loss (gain) on sales of assets, net 40 281 (285
) (1,362 ) Impairment of intangible and other assets — 42 — 378
Equity in earnings of MNI (1,115 )
(1,152 ) (3,416 ) (3,384 ) Operating cash flow
29,753 29,701 120,242 126,771 Add: Ownership share of MNI EBITDA
(50%) 1,683 1,795
5,989 5,905 EBITDA 31,436 31,496
126,231 132,676 Adjusted to exclude: Workforce adjustments 228 116
983 551 Stock compensation 326
400 1,971 1,481 Adjusted
EBITDA 31,990 32,012 129,185 134,708 Adjusted to exclude: Ownership
share of MNI EBITDA (50%) (1,683 ) (1,795 ) (5,989 ) (5,905 ) Add
(deduct): Distributions from MNI 1,500 1,000 5,500 4,750 Capital
expenditures, net of insurance proceeds (1,668 ) (2,543 ) (6,747 )
(9,688 ) Pension contributions — (70 ) — (87 ) Cash income tax
refunds (payments) (549 ) 51 (396 ) (266 ) Intercompany charges not
settled in cash — (3,381 ) (6,953 ) (9,678 ) Other
— — (2,000 )
(2,000 ) Unlevered free cash flow 29,590
25,274 112,600
111,834
SELECTED PULITZER(2) ONLY
FINANCIAL INFORMATION
(UNAUDITED)
13 Weeks
Ended 52 Weeks Ended Sept 27 Sept 28 Sept 27
Sept 28
(Thousands of Dollars)
2015 2014 2015 2014
Advertising and marketing services 29,374 31,415
124,682 135,993 Subscription 15,153 15,589 63,122 62,834 Other
1,492 1,589 6,642
6,451 Total operating revenue 46,019
48,593 194,446 205,278
Compensation 14,084 15,905 58,993 62,413 Newsprint and ink 1,665
2,413 7,956 10,910 Other operating expenses 23,423 26,004 98,635
102,957 Depreciation and amortization 3,423 3,571 14,029 15,348
Loss (gain) on sales of assets, net (368 ) 3 391 24 Impairment of
goodwill and other assets — 2,602 — 2,602 Workforce adjustments
1,168 225 2,321
714 Total operating expenses 43,395 50,723
182,325 194,968 Equity in earnings of TNI
1,026 797 4,838 4,913
Operating income (loss) 3,650 (1,333 ) 16,959 15,223
Adjusted to exclude: Depreciation and amortization 3,423 3,571
14,029 15,348 Loss (gain) on sales of assets, net (368 ) 3 391 24
Impairment of intangible and other assets — 2,602 — 2,602 Equity in
earnings of TNI (1,026 ) (797 )
(4,838 ) (4,913 ) Operating cash flow 5,679 4,046 26,541
28,284 Add: Ownership share of TNI EBITDA (50%)
1,131 902 5,257
5,331 EBITDA 6,810 4,948 31,798 33,615 Adjusted to exclude:
Workforce adjustments 1,168 225
2,321 714 Adjusted EBITDA 7,978
5,173 34,119 34,329 Adjusted to exclude: Ownership share of TNI
EBITDA (50%) (1,131 ) (902 ) (5,257 ) (5,331 ) Add (deduct):
Distributions from TNI 1,362 1,342 5,475 5,246 Capital
expenditures, net of insurance proceeds (348 ) (1,077 ) (2,960 )
(2,136 ) Pension contributions (2,012 ) (730 ) (3,577 ) (1,435 )
Cash income tax refunds (payments) — 38 (89 ) 6,288 Intercompany
charges not settled in cash — 3,381 6,953 9,678 Other
— — 2,000 2,000
Unlevered free cash flow 5,849
7,225 36,664 48,639
SELECTED BALANCE SHEET
INFORMATION
September 27 September 28
(Thousands of Dollars)
2015 2014 Cash 11,134
16,704
Debt (Principal Amount):
Revolving Facility — 5,000 1st Lien Term Loan 180,872 226,750 Notes
400,000 400,000 2nd Lien Term Loan 145,000 150,000 Pulitzer Notes
— 23,000 725,872
804,750
SELECTED STATISTICAL
INFORMATION
13 Weeks Ended
52 Weeks Ended Sept 27 Sept 28
Percent Sept 27 Sept 28 Percent
2015 2014 Change
2015 2014 Change
Capital expenditures, net of insurance
proceeds (Thousands of Dollars)
2,016 3,620 (44.3 ) 9,707 11,824 (17.9 )
Newsprint volume (Tonnes)
12,145 13,691 (11.3 ) 50,895 58,007 (12.3 ) Average full-time
equivalent employees 4,160 4,443 (6.4 ) 4,292 4,515 (4.9 )
Average common shares - basic(Thousands of
Shares)
53,637 52,442 2.3 52,640 52,273 0.7
Average common shares - diluted(Thousands
of Shares)
54,515 53,988 1.0 53,931 53,736 0.4
Shares outstanding at end of
period(Thousands of Shares)
54,679 53,747 1.7
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, loss (gain) on sale
of assets, impairment charges, workforce adjustment costs, stock
compensation and our 50% share of EBITDA from TNI and MNI, minus
equity in earnings of TNI and MNI and curtailment gains.
•
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.
•
EBITDA is defined as operating income (loss), plus depreciation,
amortization, loss (gain) on sale of assets, impairment charges and
our 50% share of EBITDA from TNI and MNI, minus equity in earnings
of TNI and MNI and curtailment gains.
•
Operating Cash Flow is defined as operating income (loss) plus
depreciation, amortization, loss (gain) on sale of assets and
impairment charges, minus equity in earnings of TNI and MNI and
curtailment gains. We also present Operating Cash Flow excluding
workforce adjustment costs. Operating Cash Flow Margin is defined
as operating cash flow divided by operating revenue.
•
Unlevered Free Cash Flow is defined as operating income (loss),
plus depreciation, amortization, loss (gain) on sale of assets,
impairment charges, workforce adjustment costs, stock compensation,
distributions from TNI and MNI and cash income tax (payments)
refunds, minus equity in earnings of TNI and MNI, curtailment
gains, cash income taxes, pension contributions and capital
expenditures. Changes in working capital, asset sales, minority
interest and discontinued operations are excluded. Free Cash Flow
also includes financial income, interest expense and debt financing
and reorganization costs. We also present selected
information for Lee Legacy and Pulitzer Inc. ("Pulitzer"). Lee
Legacy constitutes the business of the Company excluding Pulitzer,
a wholly-owned subsidiary of the Company. No non-GAAP
financial measure should be considered as a substitute for any
related GAAP financial measure. However, the Company believes the
use of non-GAAP financial measures provides meaningful supplemental
information with which to evaluate its financial performance, or
assist in forecasting and analyzing future periods. The Company
also believes such non-GAAP financial measures are alternative
indicators of performance used by investors, lenders, rating
agencies and financial analysts to estimate the value of a
publishing business and its ability to meet debt service
requirements. (3) The 1st Lien Term Loan is the $250 million
first lien term loan and $40 million revolving facility under a
First Lien Credit Agreement dated as of March 31, 2014. The 2nd
Lien Term Loan is the $150 million second lien term loan under the
Second Lien Loan Agreement dated as of March 31, 2014. TNI refers
to TNI Partners publishing operations in Tucson, AZ. MNI refers to
Madison Newspapers, Inc. publishing operations in Madison, WI.
(4) Certain amounts as previously reported have been
reclassified to conform with the current period presentation. The
prior periods have been adjusted for comparative purposes, and the
reclassifications have no impact on earnings.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20151210005343/en/
Lee EnterprisesCharles Arms, 563-383-2100Director of
CommunicationsIR@lee.net
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