Delaware
(State of Incorporation)
|
42-0823980
(I.R.S. Employer Identification No.)
|
Item 2.02.
|
Results of Operation and Financial Condition.
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Item 5.02.
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Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
|
·
|
Base Salary and Bonus: Highest monthly base salary (annualized) times 1.0 to 3.0 (3.0 for Ms. Junck, 2.0 for Mr. Mowbray and 1.0 for all other executives listed in the table below). Greater of (a) highest annual bonus during the years preceding the change of control, or (b) the current target bonus (100% for Ms. Junck, 50% for Messrs. Mowbray and Mayo and 25% for all of the other executives listed in the table below) times 1.0 to 3.0;
|
·
|
Defined Contribution Plans: Payment of 1.0 to 3.0 times the Company’s average annual Retirement Account Plan contributions for the three years preceding the change of control (3.0 for Ms. Junck, 2.0 for Mr. Mowbray and 1.0 for all other executives listed in the table below);
|
·
|
Legal Fees: Any legal fees and expenses incurred by the executive in asserting legal rights in connection with the agreement; and
|
·
|
Welfare Benefits: Continued welfare benefits (three years for Ms. Junck, two years for Mr. Mowbray and one year for all executives listed in the table below) and outplacement services for two years for each of the executives listed in the table below.
|
(Dollars)
|
Estimated Net Present
Value of Change of
Control Severance and Benefits
|
Potential Excise
Tax Liability and
Gross Up for
Excise Taxes
|
Total
|
|||
Mary E. Junck
Chairman, President and Chief Executive Officer
|
5,605,000
|
0
|
5,605,000
|
|||
Kevin D. Mowbray
Executive Vice President and Chief Operating Officer
|
1,485,000
|
0
|
1,485,000
|
|||
Ronald A. Mayo
Vice President – Chief Financial Officer and Treasurer
|
765,000
|
0
|
765,000
|
|||
James A. Green
Vice President - Digital
|
484,000
|
0
|
484,000
|
|||
Paul M. Farrell
Vice President – Sales and Marketing
|
484,000
|
0
|
484,000
|
|||
Michael R. Gulledge
Vice President – Advertising Sales Leadership
|
495,000
|
0
|
495,000
|
|||
Astrid J. Garcia
Vice President – Human Resources
|
413,000
|
0
|
413,000
|
|||
Gregory P. Schemer
Vice President – Strategy
|
369,000
|
0
|
369,000
|
|||
Nathan E. Bekke
Vice President – Consumer Sales and Marketing
|
424,000
|
0
|
424,000
|
|||
10,524,000
|
Item 9.01.
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Financial Statements and Exhibits.
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(d)
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Exhibits
|
||
The following exhibits are filed as part of this Report.
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|||
10.1
|
Amended and Restated 1990 Long-Term Incentive Plan (effective October 1, 1999, as amended effective December 7, 2015)
|
||
10.2
|
Form of Amended and Restated Employment Agreement between Lee Enterprises, Incorporated and its Chairman, President and Chief Executive Officer
|
||
10.3
|
Form of Amended and Restated Employment Agreement between Lee Enterprises, Incorporated and its Executive Vice President and Chief Operating Officer
|
||
10.4
|
Form of Employment Agreement between Lee Enterprises, Incorporated and Certain of its Senior Executive Officers
|
||
99.1
|
News Release dated December 10, 2015 – Fourth fiscal quarter ended September 27, 2015
|
LEE ENTERPRISES, INCORPORATED
|
||
![]() |
||
Date: December 11, 2015
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By:
|
|
Ronald A. Mayo
|
||
Vice President, Chief Financial Officer,
|
||
and Treasurer
|
a.
|
There shall be reserved for issuance pursuant to the Plan a total of 5,600,309 shares of Common Stock, together with sufficient shares to cover outstanding grants under the Plan as of December 26, 2014. In the event that (i) a stock option expires or is terminated unexercised as to any shares covered thereby, (ii) shares are forfeited for any reason under the Plan, or (iii) shares are tendered as consideration for the exercise of options under Section 2.3 or for withholding of taxes under Section 1.7, such shares shall thereafter be again available for issuance pursuant to the Plan. In the event that a stock option is surrendered for payment pursuant to Section 1.6(b) hereof, the shares covered by the stock option shall not thereafter be available for issuance pursuant to the Plan.
|
b.
|
In the event of any change in the outstanding shares of Common Stock by reason of any stock dividend or split, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other corporate change, or any distributions to common shareholders other than cash dividends, the Committee shall make such substitution or adjustment, if any, as it deems to be equitable to accomplish fairly the purposes of the Plan and to preserve the intended benefits of the Plan to the Participants and the Corporation, as to the number (including the number specified in Section 1.5(a) above) or kind of shares of Common Stock or other securities issued or reserved for issuance pursuant to the Plan, including the number of outstanding stock options, the option prices thereof, and the number of outstanding Awards of other types.
|
a.
|
Notwithstanding any other provision of the Plan to the contrary, in the event of a Change of Control: any stock options and Stock Appreciation Rights outstanding as of the date such Change of Control is determined to have occurred, and which are not then exercisable and vested, shall not immediately vest, and any Restricted Stock shall remain subject to any applicable restrictions, but shall remain in effect in accordance with their terms, unless the Participant is terminated from his or her employment with the Corporation within one (1) year following a Change of Control described in this subsection, in which case (i) such stock options and Stock Appreciation Rights shall become fully exercisable and vested to the full extent of the original grant; and (ii) the restrictions and deferral limitations applicable to any Restricted Stock shall lapse, and such Restricted Stock shall become free of all restrictions and become fully vested and transferable to the full extent of the original grant. For purposes of this subsection, a Participant shall be deemed to have been immediately terminated from his or her employment with the Corporation in the event of a Change of Control described in Sections 1.6(d)(iii) or (iv).
|
b.
|
Notwithstanding any other provision of the Plan to the contrary, if, following a Change of Control an optionee is terminated from his or her employment with the Corporation within one (1) year following a Change of Control, then, during the 60-day period from and after such termination of employment (the “Exercise Period”), unless the Committee shall determine otherwise at the time of grant, the optionee shall have the right, whether or not the stock option is fully exercisable and in lieu of the payment of the exercise price for the shares of Common Stock being purchased under the stock option and by giving notice to the Company, to elect (within the Exercise Period) to surrender all or part of the stock option to the Company and to receive cash, within 30 days of such notice, in an amount equal to the amount by which the Change of Control Price per share of Common Stock on the date of such election shall exceed the exercise price per share of Common Stock under the stock option multiplied by the number of shares of Common Stock granted under the stock option as to which the right granted under this Section 1.6(b) shall have been exercised (“Stock Appreciation Rights”). For purposes of this subsection, a Participant shall be deemed to have been immediately terminated from his or her employment with the Corporation in the event of a Change of Control described in Sections 1.6(d)(iii) or (iv).
|
c.
|
For purposes of the Plan, “Change of Control Price” means the higher of (i) the highest reported sales price, regular way, of a share of Common Stock in any transaction reported on the New York Stock Exchange - Composite Tape or other national exchange on which such shares are listed or on NASDAQ during the 60-day period prior to and including the date of a Change of Control or (ii) if the Change of Control is the result of a tender or exchange offer or a Business Combination, the highest price per share of Common Stock paid in such tender or exchange offer or Business Combination; provided, however, that in the case of incentive stock options and Stock Appreciation Rights relating to incentive stock options, the Change of Control Price shall be in all cases the Fair Market Value of the Common Stock on the date such incentive stock option or Stock Appreciation Right is exercised. To the extent that the consideration paid in any such transaction described above consists all or in part of securities or other noncash consideration, the value of such securities or other noncash consideration shall be determined in the sole discretion of the Board.
|
d.
|
For purposes of this Plan, a “Change of Control” means:
|
i.
|
the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) (“Beneficial Ownership”) of 15% or more of the Common Stock; provided, however, that for purposes of this subsection (i), the following acquisitions do not constitute a Change of Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company (D) any acquisition by a Person of Beneficial Ownership of less than 25% of the Common Stock if such Person reports, or is required to report such Beneficial Ownership on Schedule 13G under the Exchange Act or Schedule 13D of the Exchange Act (or any comparable or successor report), which Schedule 13D does not state any present intention to (or reserve the right to) hold such Common Stock with the purpose or effect of changing or influencing the control of the Company, nor in connection with or as a participant in any transaction having such purpose or effect, or (E) any acquisition pursuant to a transaction that complies with clauses (A) or (B) of subsection (iii) below; or
|
ii.
|
individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or
|
iii.
|
consummation of a reorganization, merger, statutory share exchange or consolidation or similar transaction involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets or stock of another (entity by the Company or any of its subsidiaries (each, a “Business Combination”), in each case, unless, following such Business Combination, (A) (1) all or substantially all of the individuals and entities that were the beneficial owners, respectively, of the Common Stock immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the Common Stock or, with respect to an entity other than the Company, the then outstanding shares of common stock (or, for a non-corporate entity, equivalent securities) and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors (or, for a non-corporate entity, equivalent governing body) of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Common Stock, (2) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of the Common Stock or, with respect to an entity other than the Company, the then outstanding shares of common stock of the corporation resulting from such Business Combination (or, for a non-corporate entity, equivalent securities) or the combined voting power of the then outstanding voting securities of such entity, except to the extent that such ownership existed prior to the Business Combination and (3) at least a majority of the members of the board of directors (or, for a non-corporate entity, equivalent governing body) of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (B) if the Business Combination is the result of a reorganization, merger, statutory share exchange or consolidation or similar transaction involving the Company or any of its subsidiaries in which the Company is not the resulting entity, or a sale or other disposition of all or substantially all of the assets of the Company, then each Award then-outstanding shall have been cancelled and substituted with a Replacement Award of equity in the acquiring entity; or
|
iv.
|
approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
|
a.
|
The Board of Directors may amend, suspend or terminate the Plan or any portion thereof and any Award hereunder at any time, provided that no amendment shall be made without stockholder approval which shall (i) increase (except as provided in Section 1.5(b) hereof) the total number of shares reserved for issuance pursuant to the Plan; (ii) change the class of Employees eligible to be Participants; (iii) decrease the minimum option prices stated herein (other than to change the manner of determining Fair Market Value to conform to any then applicable provision of the Code or regulations thereunder); (iv) extend the expiration date of the Plan as it applies to incentive stock options; or (v) withdraw the administration of the Plan from a committee consisting of three or more members, each of whom is a Non-Employee Director. Notwithstanding anything to the contrary contained herein, the Committee may amend the Plan in such manner as may be necessary so as to have the Plan conform with applicable law and rules and regulations thereunder. Notwithstanding anything in this Plan to the contrary, following a Change of Control the Board may not amend the Plan in a manner that would adversely affect any outstanding Award of a Participant without the written consent of such Participant.
|
b.
|
Without limiting the power of the Board of Directors under Section 1.11(a), the Committee, with the Participant’s consent, may amend, modify or terminate any outstanding Award at any time prior to payment or exercise in any manner not inconsistent with the terms of the Plan, including without limitation, to change the date or dates as of which (i) a stock option becomes exercisable; (ii) or a Restricted Stock becomes nonforfeitable; or (iii) to cancel and reissue an Award under such different terms and conditions as it determines appropriate.
|
a.
|
The Committee may determine that any stock option shall become exercisable in installments and may determine that the right to exercise such stock option as to such installments shall expire on different dates or on the same date. Incentive stock options may not be exercisable later than ten years after their date of grant.
|
b.
|
In the event a Participant ceases to be an Employee with the consent of the Committee, or upon the occurrence of his or her death, Normal Retirement Date (or, if approved in writing by the Committee, his or her actual retirement date) or Disability Date, his or her stock options shall be exercisable at any time prior to a date established by the Committee at the date of grant. Except as otherwise provided by the Committee, if a Participant ceases to be an Employee for any other reason, his or her rights under all stock options shall terminate no later than the thirtieth (30th) day after such cessation of employment.
|
c.
|
Each stock option shall be confirmed by a stock option agreement executed by the Company and by the Participant. The option price of each share as to which an option is exercised shall be paid in full at the time of such exercise. Such payment shall be made in cash, by tender of shares of Common Stock owned by the Participant valued at Fair Market Value as of the date of exercise, subject to such limitations on the tender of Common Stock as the Committee may impose, or by a combination of cash and shares of Common Stock. In addition, the Committee may provide the Participant with assistance in financing the option price and applicable withholding taxes, on such terms and conditions as it determines appropriate.
|
d.
|
Stock options granted under the Plan may include the right to acquire an Accelerated Ownership Non-Qualified Stock Option (“AO”). If an option grant contains an AO, and if a Participant pays all or part of the purchase price of the option with shares of Common Stock held by the Participant for at least one (1) year, then upon exercise of the option the Participant shall be granted the additional option to purchase, at the Fair Market Value as of the date of the AO grant, the number of shares of Common Stock equal to the number of whole shares of Common Stock used by the Participant in payment of the purchase price and the number of whole shares of Common Stock, if any, withheld by the Company as payment for applicable withholding taxes. An AO may be exercised no earlier than one (1) year after its grant and no later than the date of expiration of the option to which the AO is related;
|
e.
|
Stock options may be exercised during the option term (as specified in the option agreement), by giving written notice of exercise to the Company specifying the number of shares to be purchased. Such notice shall be accompanied by payment in full of the purchase price, either by check, note or such other type of instrument as may be determined from time to time to be acceptable by the Committee or in accordance with procedures established by the Committee. As determined by, or in accordance with procedures established by, the Committee, in its sole discretion, at or after grant, payment in full or in part may also be made in the case of the exercise of a non-qualified stock option in the form of Restricted Stock subject to an Award hereunder (based, in each case, on the Fair Market Value of the Common Stock on the date the option is exercised, as determined by the Committee). If payment of the option exercise price of a non-qualified stock option is made in whole or in part in the form of Restricted Stock, such Restricted Stock (and any replacement shares relating thereto) shall remain (or be) restricted, as the case may be, in accordance with the original terms of the Restricted Stock award in question, and any additional Common Stock received upon the exercise shall be subject to the same forfeiture restrictions, unless otherwise determined by, or in accordance with procedures established by, the Committee, in its sole discretion, at or after grant.
|
LEE ENTERPRISES, INCORPORATED
|
||||
By:
|
||||
Executive Vice President and Chief Operating
|
||||
Officer
|
LEE ENTERPRISES, INCORPORATED
|
||||
By:
|
||||
Chairman, President and Chief Executive
|
||||
Officer
|
LEE ENTERPRISES, INCORPORATED
|
||||
By:
|
||||
Executive Vice President and Chief Operating
|
||||
Officer
|
•
|
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%.
|
•
|
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.
|
•
|
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.
|
13 Weeks Ended
|
|||||||||||
September 27
2015
|
September 28
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
|
13 Weeks Ended
|
||||||
(Thousands of Dollars)
|
Sept 27
2015
|
Sept 28
2014
|
Percent
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
|
)
|
52 Weeks Ended
|
|||||||||||
September 27
2015
|
September 28
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
|
52 Weeks Ended
|
||||||
(Thousands of Dollars)
|
Sept 27
2015
|
Sept 28
2014
|
Percent
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
|
)
|
•
|
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.
|
13 Weeks Ended
|
52 Weeks Ended
|
||||||||||||
(Thousands of Dollars, Except Per Share Data)
|
Sept 27
2015
|
Sept 28
2014
|
Percent
Change
|
Sept 27
2015
|
Sept 28
2014
|
Percent
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
|
13 Weeks Ended
|
|
52 Weeks Ended
|
|||||||
(Thousands of Dollars)
|
Sept 27
2015
|
|
Sept 28
2014
|
|
Sept 27
2015
|
|
Sept 28
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
|
13 Weeks Ended
|
52 Weeks Ended
|
||||||||
(Thousands of Dollars)
|
Sept 27
2015
|
Sept 28
2014
|
Sept 27
2015
|
Sept 28
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
|
13 Weeks Ended
|
52 Weeks Ended
|
||||||||
(Thousands of Dollars)
|
Sept 27
2015
|
Sept 28
2014
|
Sept 27
2015
|
Sept 28
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
|
(Thousands of Dollars)
|
September 27
2015
|
September 28
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
|
13 Weeks Ended
|
52 Weeks Ended
|
||||||||||||
Sept 27
2015
|
Sept 28
2014
|
Percent
Change
|
Sept 27
2015
|
Sept 28
2014
|
Percent
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
|
(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 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.
|
||||||
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
|
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.
|
||||||
ž
|
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.
|
||||||
ž
|
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.
|