Postretirement and Postemployment Benefits

12 Months Ended

Sep. 24, 2023

Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract]

Postretirement and Postemployment Benefits

DEFINED BENEFIT PENSION PLANS

During 2022, the Company made several changes to its defined benefit plans. At the beginning of 2022, the Company was the sponsor of seven single-employer defined benefit plans, two of which were frozen to new participants and future benefits. As of September 24, 2023, we are the sponsor of one single-employer defined benefit plan, which provide benefits to certain current and former employees of Lee.

During 2022 we notified certain participants in our defined benefit plans of changes to be made to the plans. The Company froze future benefits and participation for an additional four of the defined benefit plans. The freeze of future benefits resulted in a non-cash curtailment gain of $1.0 million related to the four plans. In connection with the freeze the Company provided certain benefit enhancements that resulted in an increase to our net pension liability and a decrease to accumulated other comprehensive income of $6.1 million. Additionally, the Company merged the six frozen plans into one fully-funded defined benefit plan, the Lee Enterprises Incorporated Pension Plan ("Plan") effective in the second quarter of fiscal 2022.

During September of 2022, as part of a pension de-risking strategy for the Plan, the Company, executed an agreement pursuant to which it transferred to a third-party insurance company (the "Insurer") $85.6 million of the Plan's liabilities in exchange for $81.4 million of Plan assets and recorded a non-cash settlement gain of $4.2 million in Pension and OPEB related benefit (cost) and other, net. Collectively, the transactions are known as the "Annuity Purchase"

During the year ended September 24, 2023, an immaterial defined benefit plan was merged into the Plan. The prior period net periodic pension cost (benefit) and changes in benefit obligations tables have been revised to include amounts from this plan that was previously excluded due to immateriality.

The net periodic cost (benefit) components of our pension plans are as follows:

(Thousands of Dollars)	2023	2022	2021
Service cost for benefits earned during the year	19	488	2,529
Interest cost on projected benefit obligation	10,368	7,999	7,147
Expected return on plan assets	(10,192)	(18,261)	(18,688)
Amortization of net (gain) loss	10	(3,317)	4,018
Amortization of prior service benefit	852	641	(6)
Settlement gain	—	(4,245)	—
Curtailment gain	—	(1,027)	—
Net periodic pension cost (benefit)	1,057	(17,722)	(5,000)

Changes in benefit obligations and plan assets are as follows:

(Thousands of Dollars)	2023	2022
Benefit obligation, beginning of year	210,806	386,832
Service cost	19	488
Interest cost	10,368	7,999
Plan amendments	—	6,077
Actuarial (gain) loss	(9,876)	(86,387)
Benefits paid	(12,130)	(21,799)
Liability (gain)/loss due to curtailment	—	(1,027)
Settlements	—	(81,377)
Benefit obligation, end of year	199,187	210,806
Fair value of plan assets, beginning of year:	211,058	400,907
Actual return on plan assets	12,638	(84,636)
Benefits paid	(12,130)	(21,799)
Administrative expenses paid	(1,535)	(2,149)
Settlements	—	(81,377)
Employer contributions	—	112
Fair value of plan assets, end of year	210,031	211,058
Funded status	10,844	252

Disaggregated amounts recognized in the Consolidated Balance Sheets are as follows:

(Thousands of Dollars)	September 24 2023	September 25 2022
Net pension assets	10,844	252
Accumulated other comprehensive income (before income taxes)	16,653	5,005

Amounts recognized in accumulated other comprehensive income (loss) are as follows:

(Thousands of Dollars)	September 24 2023	September 25 2022
Unrecognized net actuarial gain (loss)	21,246	10,450
Unrecognized prior service cost	(4,593)	(5,445)
	16,653	5,005

We expect to recognize $0.8 million of unrecognized prior service cost in net periodic pension costs in 2024.

Assumptions

Weighted-average assumptions used to determine benefit obligations are as follows:

(Percent)	September 24 2023	September 25 2022
Discount rate	5.7	5.3
Interest crediting rate	2.5	2.5

Weighted-average assumptions used to determine net periodic benefit cost are as follows:

(Percent)	2023	2022	2021
Discount rate - service cost	5.8	5.4	3.0
Discount rate - interest cost	5.7	5.3	1.9
Expected long-term return on plan assets	5.0	5.0	5.9

For 2023, the expected long-term return on Plan assets is 5.0%. The assumptions related to the expected long-term return on Plan assets are developed through an analysis of historical market returns, current market conditions and composition of Plan assets.

For the year ended September 24, 2023, the most significant driver of the decrease in benefit obligation was the actual return on assets exceeding expected returns and higher actuarial gains experienced by the Plan. The Plan recognized actuarial gains due to increases in bond yields that resulted in increases to the discount rate. For the year ended September 25, 2022, the most significant driver of the decrease in benefit obligation was the higher actuarial gains experienced by all plans and the Annuity Purchase mentioned above. The plans recognized actuarial gains due to significant increases in bond yields that resulted in increases to the discount rates. Discount rate increases were partially offset by actual return on assets falling behind expected returns for the year.

Plan Assets

The primary objective of our investment strategy is to satisfy our pension obligations at a reasonable cost. Assets are actively invested to balance real growth of capital through appreciation, reinvestment of dividend and interest income, and safety of invested funds.

Our investment policy outlines the governance structure for decision-making, sets investment objectives and restrictions and establishes criteria for selecting and evaluating investment managers. The use of derivatives is prohibited, except on a case-by-case basis where the manager has a proven capability, and only to hedge quantifiable risks such as exposure to foreign currencies. An investment committee, consisting of certain of our executives and supported by independent consultants, is responsible for monitoring compliance with the investment policy. Assets are periodically redistributed to maintain the appropriate policy allocation.

The weighted-average asset allocation of our pension assets, is as follows:

(Percent)	Policy Allocation	Actual Allocation
Asset Class	September 24 2023	September 24 2023	September 25 2022
Equity securities	25	25	41
Debt securities	65	62	43
Hedge fund investments	10	12	15
Cash and cash equivalents	1	1	1

Plan assets include no Company securities. Assets include cash and cash equivalents and receivables from time to time due to the need to reallocate assets within policy guidelines.

Due to the timing of the annuity purchase (as discussed above), funds were organized in a way that provided sufficient liquidity for the transaction. This caused our pension plans asset allocation to differ significantly from our desired policy as of September 25, 2022.

Fair Value Measurements

The fair value hierarchy of pension assets at September 24, 2023 is as follows:

(Thousands of Dollars)	NAV	Level 1	Level 2	Level 3
Cash and cash equivalents	—	1,937	—	—
Domestic equity securities	2,252	30,885	—	—
International equity securities	—	7,565	5,644	—
Emerging equity securities	—	6,263	—	—
Debt securities	—	78,740	52,304	—
Hedge fund investments	24,441	—	—	—

The fair value hierarchy of pension assets at September 25, 2022 was as follows:

(Thousands of Dollars)	NAV	Level 1	Level 2	Level 3
Cash and cash equivalents	—	1,562	—	—
Domestic equity securities	2,235	67,661	—	—
International equity securities	—	5,743	4,519	—
Emerging equity securities	—	4,996	—	—
Debt securities	—	25,742	65,364	—
Hedge fund investments	32,515	—	—	—

There were no purchases, sales or transfers of assets classified as Level 3 in 2023 or 2022. Pension assets that are excluded from the fair value hierarchy and are measured at net asset value or "NAV", include three investments:

• U.S. small cap value equity common/collective fund for which fund prices are not publicly available. The balance of this investment is $2.3 million and $2.2 million as of September 24, 2023 and September 25, 2022, respectively. We can redeem this fund on a monthly basis.

• Global equity long/short common/collective hedge fund-of-funds for which fund prices are established on a monthly basis. The balance of this investment is $11.7 million and $16.7 million as of September 24, 2023 and September 25, 2022, respectively. We can redeem up to 90% of our investment in this fund within 90-120 days of notice with the remaining distributed following completion of the audit of the Fund's financial statements for the year.

• Global equity long/short common/collective hedge fund-of-funds for which fund prices are established on a monthly basis. The balance of this investment is $12.7 million and $15.9 million as of September 24, 2023 and September 25, 2022, respectively. We can redeem up to 50% of our investment in this fund twice per year.

The activity within Other comprehensive income (loss) for both pension plans and postretirement plans was as follows:

(Thousands of Dollars)	2023	2022	2021
Comprehensive (loss) income, net of taxes:
Change in unrecognized benefit plan gain (loss) arising during the period, net of taxes $240, $279, and $19,148, respectively	(560)	(14,485)	59,663
Amortization of items to periodic pension and other post-employment benefit costs during the period, net of taxes $3,414, $6,389, and $819, respectively	10,750	(11,049)	2,574
Other comprehensive (loss) income recognized in operations, net of taxes	10,190	(25,534)	62,237

Cash Flows

Based on our forecast at September 24, 2023, we expect to make no contributions to our pension trust in 2024.

We anticipate future benefit payments to be paid from the pension trust as follows:

(Thousands of Dollars)
2024	16,262
2025	14,575
2026	14,816
2027	14,944
2028	15,021
2029-2033	74,092

Other Plans

We are the plan sponsor for other funded and unfunded defined benefit pension plans that are not considered material. The net benefit obligation for these plans are $0.6 million and $1.0 million at September 24, 2023 and September 25, 2022, respectively.

Subsequent Event

Subsequent to September 24, 2023, the Company offered a voluntary lump sum payment of future pension benefits to terminated vested participants of the Plan. As of November 30, 2023, 522 participants representing $22.6 million in Plan liabilities have elected to take the voluntary offer.

POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS

We provide retiree medical and life insurance benefits under postretirement plans at several of our operating locations. The level and adjustment of participant contributions vary depending on the specific plan. Our liability and related expense for benefits under the postretirement plans are recorded over the service period of active employees based upon annual actuarial calculations. We accrue postemployment disability benefits when it becomes probable that such benefits will be paid and when sufficient information exists to make reasonable estimates of the amounts to be paid.

The net periodic postretirement benefit cost (benefit) components for our postretirement plans are as follows:

(Thousands of Dollars)	2023	2022	2021
Service cost for benefits earned during the year	68	108	207
Interest cost on projected benefit obligation	598	340	429
Expected return on plan assets	(1,182)	(1,053)	(1,007)
Amortization of net actuarial gain	(1,014)	(994)	(685)
Amortization of prior service benefit	(647)	(647)	(647)
Curtailment gains	—	—	(23,830)
Net periodic postretirement benefit	(2,177)	(2,246)	(25,533)

Changes in benefit obligations and plan assets are as follows:

(Thousands of Dollars)	2023	2022
Benefit obligation, beginning of year	12,287	18,538
Service cost	68	108
Interest cost	598	340
Actuarial (gain) loss	(1,049)	(4,729)
Benefits paid, net of premiums received	(652)	(1,958)
Medicare Part D subsidies	—	(12)
Benefit obligation, end of year	11,252	12,287
Fair value of plan assets, beginning of year	23,903	26,802
Actual return on plan assets	2,393	(2,453)
Employer contributions	165	1,525
Benefits paid, net of premiums and Medicare Part D subsidies received	(660)	(2,105)
Plan participant contributions	8	134
Fair value of plan assets at measurement date	25,809	23,903
Funded status	14,557	11,616

Disaggregated amounts recognized in the Consolidated Balance Sheets are as follows:

(Thousands of Dollars)	September 24 2023	September 25 2022
Non-current assets	21,565	19,066
Postretirement benefit obligations	(7,008)	(7,450)
Accumulated other comprehensive income (before income tax benefit)	19,043	17,327

Amounts recognized in accumulated other comprehensive income (loss) before income tax benefit are as follows:

(Thousands of Dollars)	September 24 2023	September 25 2022
Unrecognized net actuarial gain	16,660	14,298
Unrecognized prior service benefit	2,383	3,029
	19,043	17,327

We expect to recognize $1.2 million and $0.4 million of unrecognized net actuarial gain and unrecognized prior service benefit, respectively, in net periodic postretirement benefit in 2024.

Assumptions

Weighted-average assumptions used to determine postretirement benefit obligations are as follows:

(Percent)	September 24 2023	September 25 2022
Discount rate	5.6	5.3
Expected long-term return on plan assets	5.0	5.0

The assumptions related to the expected long-term return on plan assets are developed through an analysis of historical market returns, current market conditions and composition of plan assets.

Weighted-average assumptions used to determine net periodic benefit cost are as follows:

(Percent)	2023	2022	2021
Discount rate - service cost	5.9	5.5	2.5
Discount rate - interest cost	5.5	5.1	1.9
Expected long-term return on plan assets	5.0	5.0	4.0

For 2023, the expected long-term return on plan assets is 5.0%. The assumptions related to the expected long-term return on plan assets are developed through an analysis of historical market returns, current market conditions and composition of plan assets.

Assumed health care cost trend rates are as follows:

(Percent)	September 24 2023	September 25 2022
Health care cost trend rates	3.9	10.6
Rate to which the cost trend rate is assumed to decline (the “Ultimate Trend Rate”)	4.5	4.5
Year in which the rate reaches the Ultimate Trend Rate	2033	2032

Administrative costs related to indemnity plans are assumed to increase at the health care cost trend rates noted above.

In 2021, we notified certain participants in one of our postemployment medical plans of changes to their plan, including elimination of coverage for certain participants. These changes resulted in a non-cash curtailment gain of $23.8 million in 2021. The curtailment gain is recorded in Curtailment gain in the Consolidated Statements of Income (loss) and Comprehensive Income (loss). These charges also reduced the postemployment benefit obligation by $23.8 million in 2021.

For the year ended September 24, 2023, the most significant driver of the decrease in benefit obligations for the plans was the higher actual return on assets compared to expectations. The plans also recognized actuarial gains due to increases in bond yields that resulted in increases to the discount rates. For the year ended September 25, 2022, the most significant driver of the decrease in benefit obligations for the plans was the higher actuarial gains experienced by all plans. The plans recognized actuarial gains due to significant increases in bond yields that resulted in increases to the discount rates. Discount rate increases were partially offset by actual return on assets falling behind expected returns for the year.

Plan Assets

Assets of the retiree medical plan are invested in a master trust. The master trust also pays benefits of active employee medical plans for the same union employees. The fair value of master trust assets allocated to the active employee medical plans at September 24, 2023 and September 25, 2022 is $0.4 million and $0.6 million, respectively, which are included within the tables below.

The primary objective of our investment strategy is to satisfy our postretirement obligations at a reasonable cost. Assets are actively invested to balance real growth of capital through appreciation and reinvestment of dividend and interest income and safety of invested funds.

Our investment policy outlines the governance structure for decision-making, sets investment objectives and restrictions and establishes criteria for selecting and evaluating investment managers. The use of derivatives is strictly prohibited, except on a case-by-case basis where the manager has a proven capability, and only to hedge quantifiable risks such as exposure to foreign currencies. An investment committee, consisting of certain of our executives and supported by independent consultants, is responsible for monitoring compliance with the investment policy. Assets are periodically redistributed to maintain the appropriate policy allocation.

The weighted-average asset allocation of our postretirement assets is as follows:

(Percent)	Policy Allocation	Actual Allocation
Asset Class	September 24 2023	September 24 2023	September 25 2022
Equity securities	20	20	17
Debt securities	70	68	71
Hedge fund investment	10	12	12
Cash and cash equivalents	—	—	—

Plan assets include no Company securities. Assets include cash and cash equivalents and receivables from time to time due to the need to reallocate assets within policy guidelines.

Fair Value Measurements

The fair value hierarchy of postretirement assets at September 24, 2023 is as follows:

(Thousands of Dollars)	NAV	Level 1	Level 2	Level 3
Cash and cash equivalents	—	93	—	—
Domestic equity securities	870	2,303	—	—
Emerging equity securities	—	535	—	—
International equity securities	—	814	600	—
Debt securities	—	17,615	—	—
Hedge fund investment	2,979	—	—	—

The fair value hierarchy of postretirement assets at September 25, 2022 is as follows:

(Thousands of Dollars)	NAV	Level 1	Level 2	Level 3
Cash and cash equivalents	—	26	—	—
Domestic equity securities	791	1,910	—	—
Emerging equity securities	—	456	—	—
International equity securities	—	573	480	—
Debt securities	—	17,248	—	—
Hedge fund investment	2,782	—	—	—

There were no purchases, sales or transfers of assets classified as Level 3 in 2023 or 2022. Postretirement assets that are excluded from the fair value hierarchy and are measured at net asset value or "NAV", include two investments:

• U.S. small cap value equity common/collective fund for which fund prices are not publicly available. The balance of this investment is $0.9 million and $0.8 million as of September 24, 2023 and September 25, 2022, respectively. We can redeem this fund on a monthly basis.

• Global equity long/short common/collective hedge fund-of-funds for which fund prices are established on a monthly basis. The balance of this investment is $3.0 million and $2.8 million as of September 24, 2023 and September 25, 2022, respectively. We can redeem up to 90% of our investment in this fund within 90-120 days of notice with the remaining distributed following completion of the audit of the Fund's financial statements for the year.

Cash Flows

Based on our forecast at September 24, 2023, we do not expect to contribute to our postretirement plans in 2024.

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Modernization Act”) introduced a prescription drug benefit under Medicare (“Medicare Part D”) and a federal subsidy to sponsors of retiree health care benefit plans (“Subsidy”) that provide a benefit at least actuarially equivalent (as that term is defined in the Modernization Act) to Medicare Part D. We concluded we qualify for the Subsidy under the Modernization Act since the prescription drug benefits provided under our postretirement health care plans generally require lower premiums from covered retirees and have lower deductibles than the benefits provided in Medicare Part D and, accordingly, are actuarially equivalent to or better than, the benefits provided under the Modernization Act.

We anticipate future benefit payments to be paid either with future contributions to the plan or directly from plan assets, as follows:

(Thousands of Dollars)	Gross Payments	Less Medicare Part D Subsidy	Net Payments
2024	906	—	906
2025	906	—	906
2026	916	—	916
2027	933	—	933
2028	912	—	912
2029-2033	4,395	—	4,395

Postemployment Plan

Our postemployment benefit obligation, which represents certain disability benefits, was $1.6 million at September 24, 2023 and $1.8 million at September 25, 2022.