SYS-CON MEDIA Authors: Yeshim Deniz, Doug Masi, Mat Mathews, PR.com Newswire, David Smith

News Feed Item

Lee Enterprises Reports Earnings for Second Fiscal Quarter

Lee Enterprises, Incorporated (NYSE: LEE), a major provider of local news, information and advertising in 50 markets, today reported preliminary(1) earnings of 3 cents per diluted common share for its second fiscal quarter ended March 30, 2014, compared with a loss of 12 cents a year ago. Excluding unusual matters, adjusted earnings per diluted common share(2) totaled 5 cents, compared with a loss of 5 cents a year ago.

Mary Junck, chairman and chief executive officer, said: "We continued 2014 with another good quarter. The market for digital advertising continues to expand, with digital advertising revenue growing at a double digit clip. Our business transformation initiatives continue to create efficiencies, driving cash costs(2) down almost 6% in the quarter and creating an increase in operating cash flow(2) over the prior year. We are now in a position to improve our full year guidance, once again, as we expect our cash costs to be down 3.0-3.5% in 2014."

She added: "With the refinancing announcement a few weeks ago, pushing our maturities out to 2022, we can continue to focus on driving operating results through our many revenue and business transformation initiatives. One of our key initiatives is our full-access subscription model, with our first two markets having launched in April. We are optimistic about the results and will continue the roll out of full-access subscriptions to more than half of our markets by the end of the year."

SECOND QUARTER OPERATING RESULTS(3)

Operating revenue for the 13 weeks ended March 30, 2014 totaled $154.1 million, a decrease of 4.1% compared with a year ago. Combined print and digital advertising and marketing services revenue decreased 4.3% to $102.7 million, an improvement from recent trends, with retail advertising down 2.4%, classified down 10.7% and national up 9.9%. Retail preprint advertising decreased 1.3%. Combined print and digital classified employment revenue decreased 6.9%, while automotive decreased 17.0%, real estate decreased 6.8% and other classified decreased 10.5%. Digital advertising and marketing services revenue on a stand-alone basis increased 10.2% to $17.4 million and now totals 16.9% of total advertising and marketing services revenue. Print advertising and marketing services revenue on a stand-alone basis decreased 6.8%. Subscription revenue decreased 4.3%.

Total digital revenue, including advertising, marketing services, subscriptions and digital businesses, totaled $20.5 million in the quarter, up 13.1% compared with the quarter a year ago. Mobile advertising revenue increased 9.8%, to $1.5 million.

Digital audiences continued to grow. Mobile, tablet, desktop and app page views increased 16.2% to 235.9 million, and monthly unique visitors increased 30.8% to 30.3 million for the month of March 2014. Increases from branded editions resulted in a 9.9% increase in Sunday circulation during the quarter. Daily circulation decreased 5.0%.

Cash costs decreased 5.7% for the 13 weeks ended March 30, 2014. Compensation decreased 8.0%, with the average number of full-time equivalent employees down 6.0%. Newsprint and ink expense decreased 12.9%, primarily a result of a reduction in newsprint volume of 13.5%. Other operating expenses decreased 1.0%.

For the full year, 2014 cash costs are now expected to decrease 3.0-3.5%, excluding the impact of a subscription-related expense reclassification as a result of moving to fee-for-service delivery contracts at several of our newspapers. This reclassification will increase both revenue and operating expenses, with no impact on operating cash flow or operating income. A table later in this release details the impact of the reclassification on revenue and cash costs.

Operating cash flow increased 2.4% from a year ago to $32.7 million. Operating cash flow margin(2) was 21.2%, compared to 19.9% a year ago. Including equity in earnings of associated companies, depreciation and amortization, as well as unusual matters in both years, operating income increased 27.1% to $23.7 million in the current year quarter, compared with $18.7 million a year ago. Operating income margin increased to 15.4% up from 11.6% a year ago.

Non-operating expenses, primarily interest expense and debt financing costs, decreased 10.9%, due to a 10.4% reduction in interest expense. Lower debt balances and the refinancing of the Pulitzer Notes in May 2013 contributed to the interest expense reduction. Income attributable to Lee Enterprises, Incorporated for the quarter totaled $1.5 million, compared with a loss of $6.0 million a year ago.

ADJUSTED EARNINGS AND EPS FOR THE QUARTER

The following table summarizes the impact from unusual matters on income (loss) attributable to Lee Enterprises, Incorporated and earnings per diluted common share. Per share amounts may not add due to rounding.

 
13 Weeks Ended
 

 

 

March 30

 

 

March 31

   

 

 

2014

 

 

 

2013

(Thousands of Dollars, Except Per Share Data)

  Amount   Per Share   Amount   Per Share
 

Income (loss) attributable to Lee Enterprises, Incorporated, as reported

1,486 0.03 (5,995 ) (0.12 )
Adjustments:
Debt financing and reorganization costs 99 42
Amortization of debt present value adjustment 1,196 1,358
Other, net   414           560      
1,709 1,960
Income tax effect of adjustments, net   (567 )         (689 )    
1,142 0.02 1,271 0.02
Unusual matters related to discontinued operations           2,181   0.04  
Income (loss) attributable to Lee Enterprises, Incorporated, as adjusted   2,628     0.05     (2,543 ) (0.05 )
 

YEAR-TO-DATE OPERATING RESULTS(3)

Operating revenue for the 26 weeks ended March 30, 2014 totaled $331.5 million, a decrease of 4.0% compared with the 26 weeks ended March 31, 2013. Combined print and digital advertising and marketing services revenue decreased 4.7% to $225.1 million, with retail advertising down 3.0%, classified down 10.0% and national increased 2.0%. Combined print and digital classified employment revenue decreased 6.6%, while automotive decreased 14.8%, real estate decreased 5.9% and other classified decreased 10.3%. Digital advertising and marketing services revenue on a stand-alone basis increased 10.0% to $36.0 million. Print advertising and marketing services revenue on a stand-alone basis decreased 7.1%. Subscription revenue decreased 2.6%.

Total digital revenue, including advertising, marketing services, subscriptions and digital businesses, totaled $42.1 million in the quarter, up 12.9% compared with a year ago. Mobile advertising revenue increased 22.9%, to $3.3 million.

Increases from branded editions resulted in a 9.4% increase in Sunday circulation during the 26 weeks ended March 30, 2014, as audited by the Alliance for Audited Media. Audited daily circulation decreased 3.1% over the same six month period.

Cash costs for the 26 weeks ended March 30, 2014 decreased 4.7% compared to the same period a year ago. Compensation decreased 6.9%, with the average number of full-time equivalent employees down 5.9%. Newsprint and ink expense decreased 13.1%, a result of a reduction in newsprint volume of 11.7%. Other operating expenses increased 0.4%.

Operating cash flow decreased 1.7% from a year ago to $82.0 million. Operating cash flow margin increased to 24.7% from 24.2% a year ago. Including equity in earnings of associated companies, depreciation and amortization, as well as unusual matters in both years, operating income increased 9.9% to $63.9 million in the 26 weeks ended March 30, 2014, compared with $58.2 million a year ago.

Non-operating expenses increased 4.5%, as a $6.9 million gain on sale of an investment in the prior year was partially offset by a 10.8% decrease in interest expense in the current year due to lower debt balances and the refinancing of the Pulitzer Notes in May 2013. Income attributable to Lee Enterprises, Incorporated totaled $13.4 million, compared to $8.6 million a year ago.

ADJUSTED EARNINGS AND EPS FOR THE YEAR TO DATE

The following table summarizes the impact from unusual matters on income (loss) attributable to Lee Enterprises, Incorporated and earnings (loss) per diluted common share. Per share amounts may not add due to rounding.

 
26 Weeks Ended
 

 

 

March 30

 

 

 

March 31

   

 

 

2014

 

 

 

2013

(Thousands of Dollars, Except Per Share Data)   Amount   Per Share   Amount   Per Share
 
Income attributable to Lee Enterprises, Incorporated, as reported 13,378 0.25 8,575 0.17
Adjustments:
Gain on sale of investment, net (6,909 )
Debt financing and reorganization costs 203 89
Amortization of debt present value adjustment 2,394 2,716
Other, net   577           1,626        
3,174 (2,478 )
Income tax effect of adjustments, net   (1,079 )         865        
2,095 0.04 (1,613 ) (0.03 )
Unusual matters related to discontinued operations           1,014     0.02  
Income attributable to Lee Enterprises, Incorporated, as adjusted   15,473     0.29     7,976     0.15  
 

Certain results, excluding the impact of the subscription-related expense reclassification, are as follows:

   
13 Weeks Ended 26 Weeks Ended
  March 30   March 31   Percent     March 30   March 31   Percent

(Thousands of Dollars)

  2014   2013   Change     2014   2013   Change
 
Subscription revenue, as reported 42,098 43,970 (4.3 ) 87,648 90,026 (2.6 )
Adjustment for subscription-related expense reclassification   (400 )       NM       (400 )       NM  
Subscription revenue, as adjusted   41,698     43,970     (5.2 )     87,248     90,026     (3.1 )
 
Total operating revenue, as reported 154,093 160,603 (4.1 ) 331,478 345,258 (4.0 )
Adjustment for subscription-related expense reclassification   (400 )       NM       (400 )       NM  
Total operating revenue, as adjusted   153,693     160,603     (4.3 )     331,078     345,258     (4.1 )
 
Total cash costs, as reported 121,416 128,692 (5.7 ) 249,483 261,836 (4.7 )
Adjustment for subscription-related expense reclassification   (400 )       NM       (400 )       NM  
Total cash costs, as adjusted   121,016     128,692     (6.0 )     249,083     261,836     (4.9 )
 

DEBT AND FREE CASH FLOW(2)

Debt was reduced $20.0 million in the quarter and $80.0 million in the last twelve months. The principal amount of debt totaled $813.0 million at March 30, 2014.

As previously announced, on March 31, 2014, subsequent to the end of the quarter, we completed a comprehensive refinancing of our long-term debt, which includes the following:

  • $400 million aggregate principal amount of 9.5% senior secured notes due 2022;
  • $250 million first lien term loan due 2019 and $40 million revolving facility (which was undrawn at closing); and
  • $150 million second lien term loan due 2022.

The new facilities enabled the Company to repay in full $768 million outstanding under, and terminate, the previous 1st lien agreement and 2nd lien agreement. We also used the proceeds of the refinancing to pay fees and expenses totaling approximately $32 million related to the refinancing. The Company's Pulitzer Notes debt, which totaled $45 million at March 30, 2014, was not refinanced.

On a pro forma basis for the refinancing, the principal amount of debt at March 30, 2014 totaled $845 million. Since the refinancing, $15.25 million of debt has been repaid, and the remaining amount stands at $829.75 million.

Free cash flow increased to $12.7 million for the quarter, compared with $10.4 million a year ago, and totaled $85.0 million in the last twelve months. Liquidity at the end of the quarter totaled $44.8 million, compared to required debt principal payments of $27.4 million in the next twelve months, as adjusted for the refinancing.

CONFERENCE CALL INFORMATION

As previously announced, we will hold an earnings conference call and audio webcast later today at 9 a.m. Central Daylight Time. The live webcast will be accessible at lee.net and will be available for replay two hours later. The call also may be monitored on a listen-only conference line by dialing (toll free) 877-407-3980 and entering a conference passcode of 13581947 at least five minutes before the scheduled start.

ABOUT LEE

Lee Enterprises is a leading provider of local news and information, and a major platform for advertising, in its markets, with 46 daily newspapers and a joint interest in four others, rapidly growing digital products and nearly 300 specialty publications in 22 states. Lee's newspapers have circulation of 1.2 million daily and 1.5 million Sunday, reaching nearly four million readers in print alone. Lee's websites and mobile and tablet products attracted 30.3 million unique visitors in March 2014. Lee's markets include St. Louis, MO; Lincoln, NE; Madison, WI; Davenport, IA; Billings, MT; Bloomington, IL; and Tucson, AZ. Lee Common Stock is traded on the New York Stock Exchange under the symbol LEE. For more information about Lee, please visit lee.net.

FORWARD-LOOKING STATEMENTS — The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This news 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, comply with or obtain amendments or waivers of the financial covenants contained in our credit facilities, if necessary, to refinance our debt as it comes due, or that the warrants issued in our refinancing will not be exercised. Other risks and uncertainties include the impact and duration of continuing adverse conditions in certain aspects of the economy affecting our business, changes in advertising demand, potential changes in newsprint and other commodity prices, energy costs, interest rates, labor costs, legislative and regulatory rulings, difficulties in achieving planned expense reductions, maintaining employee and customer relationships, increased capital costs, maintaining 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”, “believe”, “expect”, “anticipate”, “intend”, “plan”, “project”, “estimate”, “consider” 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 Current Report on Form 8-K. We do not undertake to publicly update or revise our forward-looking statements.

 

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 
    13 Weeks Ended   26 Weeks Ended

 

(Thousands of Dollars and Shares, Except Per

  March 30   March 31   Percent   March 30   March 31   Percent

Share Data)

  2014   2013   Change   2014   2013   Change
 
Advertising and marketing services
Retail 64,821 66,387 (2.4 ) 147,111 151,719 (3.0 )
Classified:
Employment 8,060 8,657 (6.9 ) 15,269 16,341 (6.6 )
Automotive 6,889 8,304 (17.0 ) 15,017 17,622 (14.8 )
Real estate 4,125 4,425 (6.8 ) 8,544 9,077 (5.9 )
All other   10,303     11,512     (10.5 )   20,756     23,142     (10.3 )
Total classified 29,377 32,898 (10.7 ) 59,586 66,182 (10.0 )
National 6,094 5,544 9.9 13,611 13,339 2.0
Niche publications and other   2,427     2,553     (5.0 )   4,802     5,041     (4.7 )
Total advertising and marketing services revenue   102,719     107,382     (4.3 )   225,110     236,281     (4.7 )
Subscription 42,098 43,970 (4.3 ) 87,648 90,026 (2.6 )
Commercial printing 2,992 3,121 (4.1 ) 6,023 6,423 (6.2 )
Digital services and other   6,284     6,130     2.5     12,697     12,528     1.3  
Total operating revenue   154,093     160,603     (4.1 )   331,478     345,258     (4.0 )
Operating expenses:
Compensation 59,071 64,209 (8.0 ) 121,212 130,165 (6.9 )
Newsprint and ink 9,334 10,712 (12.9 ) 19,895 22,886 (13.1 )
Other operating expenses 52,712 53,259 (1.0 ) 107,870 107,470 0.4
Workforce adjustments   299     512     (41.6 )   506     1,315     (61.5 )
    121,416     128,692     (5.7 )   249,483     261,836     (4.7 )
Operating cash flow 32,677 31,911 2.4 81,995 83,422 (1.7 )
Depreciation 5,135 5,294 (3.0 ) 10,411 10,796 (3.6 )
Amortization 6,916 9,539 (27.5 ) 13,809 19,093 (27.7 )
Loss (gain) on sale of assets, net (1,501 ) 150 NM (1,635 ) 135 NM
Equity in earnings of associated companies   1,593     1,733     (8.1 )   4,512     4,778     (5.6 )
Operating income   23,720     18,661     27.1     63,922     58,176     9.9  
 
 

CONSOLIDATED STATEMENTS OF OPERATIONS, continued

                                     
    13 Weeks Ended   26 Weeks Ended

(Thousands of Dollars and Shares, Except Per

  March 30   March 31   Percent   March 30   March 31   Percent

Share Data)

  2014   2013   Change   2014   2013   Change
 
Non-operating income (expense):
Financial income 101 5 NM 221 85 NM
Interest expense (20,552 ) (22,933 ) (10.4 ) (41,379 ) (46,399 ) (10.8 )
Debt financing costs (99 ) (42 ) NM (203 ) (89 ) NM
Other, net   27     (61 )   NM     121     6,946     (98.3 )
    (20,523 )   (23,031 )   (10.9 )   (41,240 )   (39,457 )   4.5  
Income (loss) before income taxes 3,197 (4,370 ) NM 22,682 18,719 21.2
Income tax expense (benefit)   1,492     (808 )   NM     8,875     8,640     2.7  
Income (loss) from continuing operations 1,705 (3,562 ) NM 13,807 10,079 37.0
Discontinued operations, net of income taxes       (2,293 )   NM         (1,247 )   NM  
Net income (loss) 1,705 (5,855 ) NM 13,807 8,832 56.3
Net income attributable to non-controlling interests   (219 )   (140 )   56.4     (429 )   (257 )   66.9  
Income (loss) attributable to Lee Enterprises, Incorporated   1,486     (5,995 )   NM     13,378     8,575     56.0  
 
Income (loss) from continuing operations attributable to Lee Enterprises, Incorporated   1,486     (3,702 )   NM     13,378     9,822     36.2  
 
Earnings (loss) per common share:
Basic:
Continuing operations 0.03 (0.07 ) NM 0.26 0.19 36.8
Discontinued operations       (0.04 )   NM         (0.02 )   NM  
    0.03     (0.12 )   NM     0.26     0.17     52.9  
 
Diluted:
Continuing operations 0.03 (0.07 ) NM 0.25 0.19 31.6
Discontinued operations       (0.04 )   NM         (0.02 )   NM  
    0.03     (0.12 )   NM     0.25     0.17     47.1  
 
Average common shares:
Basic 52,223 51,796 52,151 51,795
Diluted   53,798     51,796           53,541     51,866        
 
 

SELECTED CONSOLIDATED FINANCIAL INFORMATION

(UNAUDITED)

 
      52 Weeks
    13 Weeks Ended   26 Weeks Ended   Ended
March 30   March 31 March 30   March 31 March 30

(Thousands of Dollars)

  2014   2013   2014   2013   2014
 
Advertising and marketing services 102,719 107,382 225,110 236,281 449,369
Subscription 42,098 43,970 87,648 90,026 174,733
Other   9,276     9,251     18,720     18,951     36,859  
Total operating revenue   154,093     160,603     331,478     345,258     660,961  
Compensation 59,071 64,209 121,212 130,165 245,880
Newsprint and ink 9,334 10,712 19,895 22,886 40,490
Other operating expenses 52,712 53,259 107,870 107,470 213,421
Depreciation and amortization 12,051 14,833 24,220 29,889 49,880
Loss (gain) on sale of assets, net (1,501 ) 150 (1,635 ) 135 (1,683 )
Impairment of goodwill and other assets 171,094
Workforce adjustments   299     512     506     1,315     1,870  
Total operating expenses 131,966 143,675 272,068 291,860 720,952
Equity in earnings of associated companies   1,593     1,733     4,512     4,778     8,420  
Operating income 23,720 18,661 63,922 58,176 (51,571 )
Adjusted to exclude:
Depreciation and amortization 12,051 14,833 24,220 29,889 49,880
Loss (gain) on sale of assets, net (1,501 ) 150 (1,635 ) 135 (1,683 )
Impairment of intangible and other assets 171,094
Equity in earnings of associated companies   (1,593 )   (1,733 )   (4,512 )   (4,778 )   (8,420 )
Operating cash flow 32,677 31,911 81,995 83,422 159,300
Add:
Ownership share of TNI and MNI EBITDA (50%) 2,031 2,332 5,952 6,541 11,189
Adjusted to exclude:
Stock compensation   420     364     684     732     1,213  
Adjusted EBITDA(2) 35,128 34,607 88,631 90,695 171,702
Adjusted to exclude:
Ownership share of TNI and MNI EBITDA (50%) (2,031 ) (2,332 ) (5,952 ) (6,541 ) (11,189 )
Add:
Distributions from TNI and MNI 2,494 2,715 5,309 4,785 11,922
Capital expenditures (2,600 ) (2,626 ) (4,895 ) (4,699 ) (9,936 )
Pension contributions (705 ) (275 ) (705 ) (275 ) (6,446 )
Cash income tax refunds (payments)   (103 )   (93 )   (117 )   (333 )   9,342  
Unlevered free cash flow (2) 32,183 31,996 82,271 83,632 165,395
Add:
Financial income 101 5 221 85 436
Interest expense settled in cash (19,356 ) (21,521 ) (38,984 ) (43,367 ) (79,629 )
Debt financing costs paid   (266 )   (100 )   (268 )   (100 )   (1,239 )
Free cash flow   12,662     10,380     43,240     40,250     84,963  
 

SELECTED LEE LEGACY(2) ONLY FINANCIAL INFORMATION

(UNAUDITED)

 
      52 Weeks
    13 Weeks Ended   26 Weeks Ended   Ended
March 30   March 31 March 30   March 31 March 30

(Thousands of Dollars)

  2014   2013   2014   2013   2014
 
Advertising and marketing services 72,055 74,625 155,263 161,976 310,448
Subscription 26,873 27,309 55,720 55,936 110,174
Other   8,266     7,734     16,386     15,673     31,738  
Total operating revenue   107,194     109,668     227,369     233,585     452,360  
Compensation 44,123 46,440 89,948 93,956 181,464
Newsprint and ink 6,733 7,364 14,070 15,768 28,497
Other operating expenses 28,633 28,453 57,754 57,864 112,658
Depreciation and amortization 8,103 6,770 16,311 13,732 29,892
Loss (gain) on sale of assets, net (1,512 ) 156 (1,652 ) 150 (1,691 )
Impairment of goodwill and other assets 523
Workforce adjustments   122     331     171     613     1,103  
Total operating expenses 86,202 89,514 176,602 182,083 352,446
Equity in earnings of associated companies   313     510     1,443     1,782     3,171  
Operating income 21,305 20,664 52,210 53,284 103,085
Adjusted to exclude:
Depreciation and amortization 8,103 6,770 16,311 13,732 29,892
Loss (gain) on sale of assets, net (1,512 ) 156 (1,652 ) 150 (1,691 )
Impairment of intangible and other assets 523
Equity in earnings of associated companies   (313 )   (510 )   (1,443 )   (1,782 )   (3,171 )
Operating cash flow 27,583 27,080 65,426 65,384 128,638
Add:
Ownership share of MNI EBITDA (50%) 646 928 2,673 3,183 5,471
Adjusted to exclude:
Stock compensation   420     364     684     732     1,213  
Adjusted EBITDA 28,649 28,372 68,783 69,299 135,322
Adjusted to exclude:
Ownership share of MNI EBITDA (50%) (646 ) (928 ) (2,673 ) (3,183 ) (5,471 )
Add:
Distributions from MNI 1,250 900 2,750 2,150 5,850
Capital expenditures (2,082 ) (2,116 ) (4,245 ) (3,442 ) (8,516 )
Cash income tax refunds (payments) (103 ) (93 ) (117 ) (333 ) (149 )
Intercompany charges not settled in cash (2,099 ) (2,146 ) (4,198 ) (4,292 ) (8,302 )
Other       (2,000 )       (2,000 )    
Unlevered free cash flow 24,969 21,989 60,300 58,199 118,734
Add:
Financial income 101 5 221 85 436
Interest expense settled in cash (18,206 ) (18,797 ) (36,561 ) (37,837 ) (73,365 )
Debt financing costs paid   (266 )   (100 )   (268 )   (100 )   (308 )
Free cash flow   6,598     3,097     23,692     20,347     45,497  
 

SELECTED PULITZER(2) ONLY FINANCIAL INFORMATION

(UNAUDITED)

 
      52 Weeks
    13 Weeks Ended   26 Weeks Ended   Ended
March 30   March 31 March 30   March 31 March 30
(Thousands of Dollars)   2014   2013   2014   2013   2014
 
Advertising and marketing services 30,664 32,757 69,847 74,305 138,921
Subscription 15,225 16,661 31,928 34,090 64,559
Other   1,010     1,517     2,334     3,278     5,121  
Total operating revenue   46,899     50,935     104,109     111,673     208,601  
Compensation 14,948 17,769 31,264 36,209 64,416
Newsprint and ink 2,601 3,348 5,825 7,118 11,993
Other operating expenses 24,079 24,806 50,116 49,606 100,763
Depreciation and amortization 3,948 8,063 7,909 16,157 19,988
Loss (gain) on sale of assets, net 11 (6 ) 17 (15 ) 8
Impairment of goodwill and other assets 170,571
Workforce adjustments   177     181     335     702     767  
Total operating expenses 45,764 54,161 95,466 109,777 368,506
Equity in earnings of associated companies   1,280     1,223     3,069     2,996     5,249  
Operating income 2,415 (2,003 ) 11,712 4,892 (154,656 )
Adjusted to exclude:
Depreciation and amortization 3,948 8,063 7,909 16,157 19,988
Loss (gain) on sale of assets, net 11 (6 ) 17 (15 ) 8
Impairment of intangible and other assets 170,571
Equity in earnings of associated companies   (1,280 )   (1,223 )   (3,069 )   (2,996 )   (5,249 )
Operating cash flow 5,094 4,831 16,569 18,038 30,662
Add:
Ownership share of TNI EBITDA (50%)   1,385     1,404     3,279     3,358     5,718  
Adjusted EBITDA 6,479 6,235 19,848 21,396 36,380
Adjusted to exclude:
Ownership share of TNI EBITDA (50%) (1,385 ) (1,404 ) (3,279 ) (3,358 ) (5,718 )
Add:
Distributions from TNI 1,244 1,815 2,559 2,635 6,072
Capital expenditures (518 ) (510 ) (650 ) (1,257 ) (1,420 )
Pension contributions (705 ) (275 ) (705 ) (275 ) (6,446 )
Cash income tax refunds (payments) 9,491
Intercompany charges not settled in cash 2,099 2,146 4,198 4,292 8,302
Other       2,000         2,000      
Unlevered free cash flow 7,214 10,007 21,971 25,433 46,661
Add:
Interest expense settled in cash (1,150 ) (2,724 ) (2,423 ) (5,530 ) (6,264 )
Debt financing costs paid                   (931 )
Free cash flow   6,064     7,283     19,548     19,903     39,466  
     

REVENUE BY REGION

             
   

 

 

13 Weeks Ended

 

 

 

26 Weeks Ended

  March 30 March 31 Percent   March 30 March 31 Percent

(Thousands of Dollars)

  2014   2013 Change   2014   2013   Change
 
Midwest 94,702 99,875 (5.2 ) 206,647 216,610 (4.6 )
Mountain West 30,419 31,561 (3.6 ) 65,103 67,669 (3.8 )
West 10,144 10,470 (3.1 ) 21,806 22,777 (4.3 )
East/Other   18,828   18,697   0.7     37,922   38,202   (0.7 )
Total   154,093   160,603   (4.1 )   331,478   345,258   (4.0 )
 

SELECTED BALANCE SHEET INFORMATION

             

March 30

March 31

(Thousands of Dollars)

               

2014

 

2013

     
 

Cash

14,878

22,446

Debt (Principal Amount)

               

813,000

 

893,000

     
 

SELECTED STATISTICAL INFORMATION

 

 

       

 

       

13 Weeks Ended

       

26 Weeks Ended

March 30

March 31

Percent

March 30

March 31

Percent

   

2014

 

2013

       

2014

 

 2013

 

Change

 

Capital expenditures (Thousands of Dollars)

2,600

2,626

(1.0

)

4,895

4,699

4.2

Newsprint volume (Tonnes)

13,981

16,161

(13.5

)

29,911

33,873

(11.7

)

Average full-time equivalent employees

4,486

4,770

(6.0

)

4,551

4,838

(5.9

)

Shares outstanding at end of period (Thousands of Shares)

               

53,596

 

52,296

 

2.5

 
 

NOTES

(1)   This earnings release is a preliminary report of results for the periods included. The reader should refer to the Company's Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K for definitive information.
 
(2) The following are non-GAAP (Generally Accepted Accounting Principles) financial measures for which reconciliations to relevant GAAP measures are included in tables accompanying this release:

Adjusted EBITDA is defined as operating income (loss), plus depreciation, amortization, impairment charges, stock compensation and 50% of EBITDA from associated companies, minus equity in earnings of associated companies and curtailment gains.

Adjusted Income (Loss) and Adjusted Earnings (Loss) Per Common Share are defined as income (loss) attributable to Lee Enterprises, Incorporated and earnings (loss) per common share adjusted to exclude both unusual matters and those of a substantially non-recurring nature.

Cash Costs are defined as compensation, newsprint and ink, other operating expenses and certain unusual matters, such as workforce adjustment costs. Depreciation, amortization, impairment charges, other non-cash operating expenses and other unusual matters are excluded.

Operating Cash Flow is defined as operating income (loss) plus depreciation, amortization and impairment charges, minus equity in earnings of associated companies and curtailment gains. Operating Cash Flow margin is defined as operating cash flow divided by operating revenue. The terms operating cash flow and EBITDA are used interchangeably.

Unlevered Free Cash Flow is defined as operating income (loss), plus depreciation, amortization, impairment charges, stock compensation, distributions from associated companies and cash income tax refunds, minus equity in earnings of associated companies, curtailment gains, cash income taxes, pension contributions and capital expenditures. Changes in working capital, asset sales, minority interest and discontinued operations are excluded. Free Cash Flow also includes financial income, interest expense and debt financing and reorganization costs.
 
We also present selected information for Lee Legacy and Pulitzer Inc. ("Pulitzer"). Lee Legacy constitutes the business of the Company excluding Pulitzer, a wholly-owned subsidiary of the Company.
 
No non-GAAP financial measure should be considered as a substitute for any related GAAP financial measure. However, the Company believes the use of non-GAAP financial measures provides meaningful supplemental information with which to evaluate its financial performance, or assist in forecasting and analyzing future periods. The Company also believes such non-GAAP financial measures are alternative indicators of performance used by investors, lenders, rating agencies and financial analysts to estimate the value of a publishing business and its ability to meet debt service requirements.
 
(3) Certain amounts as previously reported have been reclassified to conform with the current period presentation. The prior periods have been adjusted for comparative purposes, and the reclassifications have no impact on earnings.
 
Results of North County Times operations and The Garden Island operations have been reclassified as discontinued operations for all periods presented.

More Stories By Business Wire

Copyright © 2009 Business Wire. All rights reserved. Republication or redistribution of Business Wire content is expressly prohibited without the prior written consent of Business Wire. Business Wire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.