UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended
MarchOR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-6227
LEE ENTERPRISES, INCORPORATED
(Exact name of Registrant as specified in its Charter)
Delaware | 42-0823980 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
4600 E. 53rd Street, Suite 600, Davenport, Iowa 52801
(Address of principal executive offices)
(563) 383-2100
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common Stock, par value $.01 per share | LEE | New York Stock Exchange |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). files.
Yes [X] No [ ]
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “ large“large accelerated filer"filer”, "accelerated filer"“accelerated filer”, "small“smaller reporting company”company,” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | [ ] | Accelerated filer | [X] | |
Non-accelerated filer | [ ] | |||
Smaller reporting company | [ | |||
Emerging growth company | [ ] |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
As of April 30, 2019 57,722,693May 31, 2020, 58,122,260 shares of Common Stock of the Registrant were outstanding.
| Table Of Contents | PAGE | |||||
PART I | ||||||
Item 1. | ||||||
Consolidated Balance Sheets - March | ||||||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 18 | ||||
Item 3. | 26 | |||||
Item 4. | 26 | |||||
PART II | 27 | |||||
Item 1. | 27 | |||||
| Item | ||||||
| Item | ||||||
Item | ||||||
References to “we”, “our”, “us” and the like throughout this document refer to Lee Enterprises, Incorporated (the "Company"“Company”). Reference
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This report 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:
| • | Revenues may continue to diminish or declines in revenue could accelerate as a result of the COVID-19 pandemic; | |
| • | Revenues may continue to be diminished longer than anticipated as a result of the COVID-19 pandemic; | |
| • | The COVID-19 pandemic may result in material long-term changes to the publishing industry which may result in permanent revenue reductions for the Company and other risks and uncertainties; | |
• | We may experience increased costs, inefficiencies and other disruptions as a result of the COVID-19 pandemic; | |
• | We may be required to indemnify the previous owners of the BH Media Newspaper Business or the Buffalo News for unknown legal and other matters that may arise; | |
• | Our ability to generate cash flows and maintain liquidity sufficient to service our debt; | |
| • | Our ability to manage declining print revenue and circulation subscribers; | |
• | That the warrants issued in our 2014 refinancing will not be exercised; | |
• | The impact and duration of adverse conditions in certain aspects of the economy affecting our business; | |
• | Changes in advertising and subscription demand; | |
• | Changes in technology that impact our ability to deliver digital advertising; | |
• | Potential changes in newsprint, other commodities and energy costs; | |
• | Interest rates; | |
• | Labor costs; | |
• | Significant cyber security breaches or failure of our information technology systems; | |
• | Our ability to achieve planned expense reductions and realize the expected benefit of our acquisitions; | |
• | Our ability to maintain employee and customer relationships; | |
• | Our ability to manage increased capital costs; | |
• | Our ability to maintain our listing status on the NYSE; | |
• | Competition; and | |
• | Other risks detailed from time to time in our publicly filed documents. |
Any statements that are not statements of historical fact (including statements containing the words “may”, “will”, “would”, “could”, “believes”, “expects”, “anticipates”, “intends”, “plans”, “projects”, “considers” and similar expressions) generally should be considered forward-looking statements. Readers are cautioned not to place undue reliance on such forward-looking statements, which are made as of the date of this report. We do not undertake to publicly update or revise our forward-looking statements, except as required by law.
EXPLANATORY NOTE
The Company relied on the SEC’s Order under Section 36 of the Securities and Exchange Act of 1934 Modifying Exemptions from the Reporting and Proxy Delivery Requirements for Public Companies dated March 25, 2020 (Release No. 34-88465) (“Order”) to delay the filing of its Quarterly Report on Form 10-Q for the period ended March 29, 2020, due to circumstances related to COVID-19. The original due date for filing of the Company’s Quarterly Report was May 8, 2020. On May 8, 2020, the Company filed a current report with the SEC which stated that it expected to file its Quarterly Report on Form 10-Q on or before June 22, 2020, 45 days from the original filing deadline of May 8, 2020, in compliance with the provisions of the Order.
The Company required additional time to finalize the Form 10-Q because its operations and business have experienced significant disruptions due to the unprecedented conditions surrounding the ongoing COVID-19 pandemic along with the various measures that Federal, state, and local jurisdictions have taken in response to the crisis. In response to these measures, the Company has implemented widespread work-from-home arrangements for all of the Company’s employees who are not engaged in newspaper production and distribution. The Company is experiencing disruptions in its normal processes and with interactions between its accounting personnel, legal advisors and others required to assess the impacts of the COVID-19 pandemic on the Company and complete its accounting procedures in order to finalize the Quarterly Report on Form 10-Q. The Company and its advisors have experienced delays and inefficiencies in the completion of the related Acquisition business combination accounting. In addition, the Company required additional time to assess the valuation of certain assets and determine if an impairment existed which should be reflected in the accompanying Consolidated Financial Statements and apply the applicable sections of the Coronavirus Aid, Relief, and Economic Security Act, enacted into law on March 27, 2020, (“CARES Act”), which had an impact on the complexity and timing of the Company’s first quarter tax provision.
PART I FINANCIAL INFORMATION CONSOLIDATED BALANCE SHEETS (Thousands of Dollars) 2020 2019 ASSETS Current assets: Total current assets Investments: Total investments Property and equipment: Property and equipment, net Total assets The accompanying Notes are an integral part of the Consolidated Financial Statements. (Thousands of Dollars and Shares, Except Per Share Data) 2020 2019 LIABILITIES AND EQUITY Current liabilities: Total current liabilities Total liabilities Equity (deficit): Stockholders' equity (deficit): Serial convertible preferred stock, no par value; authorized 500 shares; none issued March 29, 2020; 58,136 shares; $0.01 par value September 29, 2019; 57,646 shares; $0.01 par value Total stockholders' deficit Total deficit Total liabilities and deficit The accompanying Notes are an integral part of the Consolidated Financial Statements. LEE ENTERPRISES, INCORPORATED CONSOLIDATED STATEMENTS OF (Unaudited) 13 Weeks Ended 26 Weeks Ended March 29, March 31, March 29, March 31, (Thousands of Dollars, Except Per Common Share Data) 2020 2019 2020 2019 Operating revenue: Advertising and marketing services Subscription Other Total operating revenue Operating expenses: Compensation Newsprint and ink Other operating expenses Depreciation and amortization Assets (gain) loss on sales, impairments and other, net Restructuring costs and other Total operating expenses Equity in earnings of associated companies Operating income Non-operating income (expense): Interest expense Debt financing and administrative costs Other, net Total non-operating expense, net Income (loss) before income taxes Income tax (benefit) expense Net income (loss) Net income attributable to non-controlling interests Income (loss) attributable to Lee Enterprises, Incorporated Other comprehensive income (loss), net of income taxes Comprehensive income (loss) attributable to Lee Enterprises, Incorporated Earnings per common share: Basic: Diluted: The accompanying Notes are an integral part of the Consolidated Financial Statements. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (Unaudited) (Thousands of Dollars) Accumulated Deficit Common Stock Additional paid-in capital Accumulated Other Comprehensive Loss Total September 30, 2019 Shares issued (redeemed) Income attributable to Lee Enterprises, Incorporated Stock compensation Other comprehensive loss Deferred income taxes, net December 29, 2019 Loss attributable to Lee Enterprises, Incorporated Stock compensation Other comprehensive loss March 29, 2020 (Thousands of Dollars) Accumulated Deficit Common Stock Additional paid-in capital Accumulated Other Comprehensive Loss Total October 1, 2018 Shares issued (redeemed) Income attributable to Lee Enterprises, Incorporated Stock compensation Other comprehensive income Deferred income taxes, net December 30, 2018 Shares issued (redeemed) Income attributable to Lee Enterprises, Incorporated Stock compensation Other comprehensive loss Deferred income taxes, net March 31, 2019 The accompanying Notes are an integral part of the Consolidated Financial Statements. LEE ENTERPRISES, INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) 26 Weeks Ended March 29, March 31, (Thousands of Dollars) 2020 2019 Cash provided by (required for) operating activities: Net income 728 8,392 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 13,995 14,916 Stock compensation expense 571 810 Assets (gain) loss on sales, impairments and other, net (5,299) (17) Distributions greater than earnings of MNI 85 303 Deferred income taxes (8,427) 190 Debt financing and administrative costs 11,866 1,858 Pension contributions — (650) Payments to collateralize letters of credit (5,476) — Other, net (388) (488) Changes in operating assets and liabilities: Decrease in receivables and contract assets 6,043 660 Decrease in inventories and other 1,610 2,039 Decrease in accounts payable and other accrued liabilities (8,134) (3,051) Decrease in pension and other postretirement and postemployment benefit obligations (1,237) (663) Change in income taxes payable 6,918 545 Other, including warrants (2,157) 2,989 Net cash provided by operating activities 10,698 27,833 Cash required for investing activities: Purchases of property and equipment (5,809) (2,459) Proceeds from sales of assets 17,637 770 Acquisitions, net of cash acquired (130,985) (5,708) Distributions less than earnings of TNI (325) (143) Other, net (229) 2 Net cash required for investing activities (119,711) (7,538) Cash required for financing activities: Proceeds from long term debt 576,000 — Payments on long-term debt (443,627) (8,404) Debt financing and administrative costs paid (609) (259) Common stock transactions, net (572) (347) Net cash provided by (required for) financing activities 131,192 (9,010) Net increase (decrease) in cash and cash equivalents 22,179 11,285 Cash and cash equivalents: Beginning of period 8,645 5,380 End of period 30,824 16,665 The accompanying Notes are an integral part of the Consolidated Financial Statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1 BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited, interim, Consolidated Financial Statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for quarterly reports. The Consolidated Financial Statements include the accounts of the March 16, 2020 Transactions, as defined and further described below, for approximately two weeks in the 13 weeks ended March 29, 2020. All significant intercompany accounts and transactions have been eliminated. In the opinion of management, these financial statements contain all adjustments (consisting of only normal recurring items) necessary to present fairly the financial position of Lee Enterprises, Incorporated and its subsidiaries (the “Company”) as of Because of seasonal and other factors, the results of operations for the 13 References to “we”, “our”, “us” and the like throughout the Consolidated Financial Statements refer to the Company. References to The Consolidated Financial Statements include our accounts and those of our subsidiaries, all of which are wholly-owned, except for our 82.5% interest in INN Partners, L.C. Investments in TNI and MNI are accounted for using the equity method and are reported at cost, plus our share of undistributed earnings since acquisition less, for TNI, amortization of intangible assets. COVID-19 Pandemic With the outbreak of COVID-19 and the declaration of a pandemic by the World Health Organization on March 11, 2020, governments implemented a combination of shelter-in-place orders and other recommendations severely limiting or restricting economic activity in our local markets. Certain aspects of our operations have experienced lower revenue and profitability over the last several years and these trends are expected to continue in the future; however, the pandemic and government restrictions caused significant and immediate declines in demand for certain of our products and services, particularly in advertising revenue. The Company currently expects that the COVID-19 pandemic will have a significant negative near term impact on the Company’s business and operations. The long-term impact of the COVID-19 pandemic will depend on the length, severity and recurrence of the pandemic, the availability of antiviral medications and vaccinations, the duration and extent of government actions designed to combat the pandemic, as well as changes in consumer behavior, all of which are highly uncertain. As a result, the Company has implemented, and continues to implement, measures to solidify our relationship with our local advertisers, reduce our cost structure and preserve liquidity. The Company believes these initiatives will allow us to meet our commitments; however, they may not be sufficient to fully offset the negative impact of the COVID-19 pandemic on the Company’s business and results of operations. Purchase Agreement with Berkshire Hathaway On The Between July 2, 2018 and March 16, 2020, the Company managed the BHMG newspaper business pursuant to a Management Agreement between BHMG and the Company dated June 26, 2018 (“Management Agreement”). In connection with the Transactions, the Management Agreement terminated on March 16, 2020. As part of the settlement of the preexisting relationship, the Company received $5,425,000 at closing. This amount represents $1,245,000 in fixed fees pro-rated under the contract and $4,180,000 in variable fees based upon the pro-rated annual target. The In connection with the Transactions, the Company also entered into a 10-year term lease with BHMG as described in The preparation of the Consolidated Financial Statements in conformity with We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Business Combinations The Company accounts for acquisitions in accordance with the provisions of Accounting Standards Codification 805 “Business Combinations” (“ASC 805”), which provides guidance for recognition and Recently Issued Accounting Standards - Standards Adopted in In February 2016, the FASB issued a new standard for the accounting treatment of We elected the package of practical expedients which permits the Company to not reassess under the new standard the prior conclusions about lease identification, lease classification, or initial direct costs. In addition, we did reassess whether existing land easements which were previously not accounted for as leases are Recently Issued Accounting Standards - Standards Not Yet Adopted In 2 REVENUE The following table presents our 13 Weeks Ended 26 Weeks Ended March 29, March 31, March 29, March 31, (Thousands of Dollars) 2020 2019 2020 2019 Advertising and marketing services revenue Subscription revenue TownNews and other digital services revenue Other revenue Total operating revenue Recognition principles: Arrangements with multiple performance obligations: Contract Assets and Liabilities: Contract asset balances relate to our Management Agreement Practical 3 INVESTMENTS IN ASSOCIATED COMPANIES TNI Partners In Tucson, Arizona, TNI, acting as agent for our subsidiary, Star Publishing Company (“Star Publishing”), and Citizen Publishing Company (“Citizen”), a subsidiary of Gannett Co. Inc., is responsible for printing, delivery, advertising, and subscription activities of the Income or loss of TNI (before income taxes) is allocated equally to Star Publishing and Citizen. Summarized results of TNI are as follows: 13 Weeks Ended 26 Weeks Ended March 29, March 31, March 29, March 31, (Thousands of Dollars) 2020 2019 2020 2019 Operating revenue Operating expenses Operating income Company's 50% share of operating income Less amortization of intangible assets Equity in earnings of TNI TNI makes weekly distributions of its earnings and for the 13 weeks ended March 29, 2020 and March 31, 2019 We have a Summarized results of MNI are as follows: 13 Weeks Ended 26 Weeks Ended March 29, March 31, March 29, March 31, (Thousands of Dollars) 2020 2019 2020 2019 Operating revenue Operating expenses, excluding restructuring costs, depreciation and amortization Restructuring costs Depreciation and amortization Operating income Net income Equity in earnings of MNI MNI makes quarterly distributions of its earnings and in the 13 weeks ended March 29, 2020 and March 31, 2019 4 GOODWILL AND OTHER INTANGIBLE ASSETS Changes in the carrying amount of goodwill are as follows: (Thousands of Dollars) 2020 Goodwill, gross amount Accumulated impairment losses Goodwill, end of period Identified intangible assets consist of the following: March 29, September 29, (Thousands of Dollars) 2020 2019 Non-amortized intangible assets: Mastheads 42,722 21,883 Amortizable intangible assets: Customer and newspaper subscriber lists 790,586 697,145 Less accumulated amortization 620,443 611,786 170,143 85,359 Non-compete and consulting agreements 28,675 28,675 Less accumulated amortization 28,562 28,524 113 151 Other intangible assets, net 212,978 107,393 The Company recognized $38,780,000 of Annual amortization of intangible assets for the five years ending As of March 29, 2020, the weighted average amortization periods for amortizable intangible assets are 5.4 years for advertiser relationships, 4.9 years for customer relationships, 8.7 years for subscriber relationships. The weighted average amortization period in total for all amortizable intangible assets is 6.4 years. The Company recognized $63,559,000 of Goodwill as part of the Transactions. The value of the acquired Goodwill is primarily related to an assembled workforce and expected synergies from combining operations. For tax purposes, the amount of Goodwill that is expected to be deductible is $28,118,000. Refer to Note 8 for more information regarding preliminary purchase accounting for the Transactions. DEBT On March • To redeem the 9.5% senior secured notes (“Notes”) There was no gain or loss recognized upon extinguishment of the As a result of the 2020 Refinancing, the Indenture, First Lien Credit Debt is summarized as follows: (Thousands of Dollars) 2020 2019 Rates (%) Revolving Facility Notes 2nd Lien Term Loan Unamortized debt issue costs Less current maturities of long-term debt Total long-term debt As part of our refinancing, we incurred approximately $417,000 in debt financing costs, which are reflected in Debt financing and administrative costs. On March 16, 2020, we recognized $9,583,000 in Debt financing and administrative costs related to previously unamortized debt issuance costs related to extinguished debt. Our weighted average cost of debt At March 29, 2020, there are no required debt Interest Interest on the Principal Payments Voluntary payments under the Credit Agreement are not subject to call premiums and are payable at par. Excluding the Excess Cash Flow payments described below, there are no scheduled mandatory principal payments required under the Credit Agreement. The Company is required to make mandatory pre-payments of the • The Company must prepay the Term Loan in an aggregate amount equal to 100% of During the 13 and 26 weeks ended March 29, 2020, payments on the Term Loan totaled $0. The Company may, upon notice to BH Finance, at any time or The The Security The Term Loan Also, the Term Loan Liquidity Pursuant to the terms of the Including cash, our liquidity at March 29, 2020 totals $30,824,000. This liquidity amount excludes any future cash flows. We expect all interest and There are numerous potential consequences under the Term Loan if an event of default, as defined, occurs and is not remedied. Many of those consequences are beyond our control. The occurrence of one or more events of default would give rise to the right of BH Finance to exercise their remedies under the credit agreement including, without limitation, the right to accelerate all outstanding debt and take actions authorized in such circumstances under applicable collateral security documents. Our ability to operate as a going concern is dependent on our ability to remain in compliance with debt covenants and to repay, refinance or amend our debt agreements as they become due. The New Debt has only limited affirmative covenants with which we are required to maintain compliance and there are no leverage or financial performance covenants. We are in compliance with our debt covenants at March 29, 2020. Warrants In connection with the 2 The Warrant Agreement contains provisions requiring the Warrants to be measured at fair value and included in warrants and other liabilities in our Consolidated Balance Sheets. We re-measure the fair value of the liability each reporting period, with changes reported in other, net non-operating income (expense). The initial fair value of the Warrants was In connection with the issuance of the Warrants, we entered into a Registration Rights Agreement dated as of March 31, 2014 (the “Registration Rights Agreement”). The Registration Rights Agreement requires, among other matters, that we use our commercially reasonable efforts to maintain the effectiveness for certain specified periods of a shelf registration statement related to the shares of Common Stock to be issued upon exercise of the Warrants. 6 LEASES Effective September 30, 2019, the In connection with the Total lease expense consists of the following: 13 Weeks Ended 26 Weeks Ended (Thousands of Dollars) March 29, 2020 March 29, 2020 Operating lease costs Variable lease costs Short-term lease costs Total Operating Lease Expense Supplemental cash flow information related to our operating leases was as follows: (Thousands of Dollars) March 29, 2020 March 29, 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash outflow from operating leases As a result of the adoption of ASC 842, on September 30, 2019, As of March 29, 2020, maturities of 26 Weeks Ended 2020 (six months remaining) 2021 2022 2023 2024 Thereafter Total lease payments Less: interest Present value of lease liabilities As of the Our lease contracts are discounted using the incremental borrowing rate for the Company. We determined the incremental borrowing rate based on a senior secured collateral adjusted yield curve for the Company. This yield curve reflects the estimated rate that would have been paid by the Company to 26 Weeks Ended March 29, 2020 Weighted average remaining lease term (years) Weighted Average discount rate 7 PENSION, POSTRETIREMENT AND POSTEMPLOYMENT DEFINED BENEFIT PLANS We have several noncontributory defined benefit pension plans that together cover selected employees. Benefits under the plans were generally based on salary and years of service. 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. In addition, St. Louis Post-Dispatch LLC, provides postemployment disability benefits to certain employee groups prior to retirement. 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. As part of the Transactions, the Company assumed several non-contributory defined benefit pension plans that together cover selected employees. Benefits under the plans are generally based on salary and years of service. The liability and related expense for benefits under the plans are recorded over the service period of employees based upon annual actuarial calculations. Plan funding strategies are influenced by government regulations. Plan assets consist primarily of domestic corporate equity securities, government and corporate bonds, money markets and deposits with insurance companies. The amount of net pension obligations for those plans as of March 16, 2020, the initial measurement date, was $43,503,000. The total pension benefit recognized for the period between March 16, 2020 and March 29, 2020 was $86,000. Additionally, as part of the Transactions, the Company assumed certain unfunded postemployment benefit plans which provide coverage to retirees for portions of premiums associated with medical, dental, life, and vision insurance benefits in eight collective bargaining units. The amount of premiums paid in five bargaining units are capped at specific dollar amounts per month. The amount of premiums paid in three bargaining units are uncapped. The plan groups consist of capped retirees, uncapped retirees, capped active employees, and uncapped active employees. New participants in the uncapped plans are eligible for Medicare supplemental medical insurance. The total postemployment benefit obligation recognized for these plans as of March 16, 2020, the initial measurement date, was $36,800,000. The total postemployment benefit cost recognized for the period between March 16, 2020 and March 29, 2020 was $79,000. We use a fiscal year end measurement date for all of our pension and postretirement medical plan obligations. The net periodic pension and postretirement cost (benefit) components for our PENSION PLANS 13 Weeks Ended 26 Weeks Ended March 29, March 31, March 29, March 31, (Thousands of Dollars) 2020 2019 2020 2019 Service cost for benefits earned during the period Interest cost on projected benefit obligation Expected return on plan assets Amortization of net loss Amortization of prior service benefit Pension benefit POSTRETIREMENT MEDICAL PLANS 13 Weeks Ended 26 Weeks Ended March 29, March 31, March 29, March 31, (Thousands of Dollars) 2020 2019 2020 2019 Interest cost on projected benefit obligation Expected return on plan assets Amortization of net gain Amortization of prior service benefit Postretirement medical benefit In the 26 weeks ended March The following table summarizes the preliminary determination of fair values of the assets and liabilities for the Transactions. We expect to finalize our For the Pro Forma Information The following table sets forth unaudited pro forma results of This pro forma financial information is based on historical results of operations, adjusted for the The only material, nonrecurring adjustments made relate to the write-off of previously unamortized debt-issuance costs as of October 1, 2018 which resulted in the 9 INCOME TAXES We recorded an income tax The primary differences between these rates and the U.S. federal statutory rate of 21% are due to the effect of state taxes, non-deductible expenses, adjustments to reserves for uncertain tax positions, including any related interest, The CARES Act was enacted on March 27, 2020. The Company anticipates that it will realize benefits under the CARES Act related to payroll taxes, including deferrals of certain employer payroll tax payments in 2020 to the end of 2021 and 2022. We file a consolidated federal tax return, as well as combined and separate tax returns in approximately 27 state and local jurisdictions. We do not currently have any federal At September 10 EARNINGS PER COMMON SHARE The following table sets forth the computation of basic and diluted earnings per common share: 13 Weeks Ended 26 Weeks Ended March 29, March 31, March 29, March 31, (Thousands of Dollars and Shares, Except Per Share Data) 2020 2019 2020 2019 Income attributable to Lee Enterprises, Incorporated: Weighted average common shares Less weighted average restricted Common Stock Basic average common shares Dilutive stock options and restricted Common Stock Diluted average common shares Earnings per common share: Basic Diluted For the 13 and 26 weeks ended March 11 STOCK OWNERSHIP PLANS A summary of stock option activity during the 26 weeks ended March (Thousands of Dollars and Shares, Except Per Share Data) Shares Outstanding, September 29, 2019 Exercised Cancelled Outstanding, March 29, 2020 Exercisable, March 29, 2020 Restricted Common Stock The table below summarizes restricted Common Stock activity during the 26 weeks ended March (Thousands of Shares, Except Per Share Data) Shares Outstanding, September 29, 2019 Vested Granted Cancelled Outstanding, March 29, 2020 Total unrecognized compensation expense for unvested restricted Common Stock at March 12 FAIR VALUE MEASUREMENTS We utilize FASB ASC Topic 820, Fair Value Measurements and Disclosures, to measure and report fair value. FASB ASC Topic 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FASB ASC Topic 820 establishes a three-level hierarchy of fair value measurements based on whether the inputs to those measurements are observable or unobservable, which consists of the following levels: Level 1 - Quoted prices for identical instruments in active markets. Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets. Level 3 - Valuations derived from valuation techniques in which one or more significant inputs are unobservable. The following methods and assumptions are used to estimate the fair value of each class of financial instruments for which it is practicable to estimate value. The carrying amounts of cash equivalents, accounts receivable and accounts payable approximate fair value because of the short maturity of those instruments. Investments totaling Our fixed rate debt consists of As discussed more fully in Note 5, we recorded a liability for the Warrants issued in connection with the Warrant Agreement. The liability was initially measured at its fair value and we 13 COMMITMENTS AND CONTINGENT LIABILITIES Income Taxes Commitments exclude unrecognized tax benefits to be recorded in accordance with FASB ASC Topic 740, We file income tax returns with the Internal Revenue Service We have various income tax examinations ongoing and at various stages of completion, but generally our income tax returns have been audited or closed to audit through Legal Proceedings We are involved in a variety of legal actions that arise in the normal course of business. Insurance coverage mitigates potential loss for certain of these matters. While we are unable to predict the ultimate outcome of these legal actions, it is our opinion that the disposition of these matters will not have a material adverse effect on our Consolidated Financial Statements, taken as a whole. We effectuated a total withdrawal from CWA/ITU plan in 2019. As a result, we are subject to The following discussion includes comments and analysis relating to our results of operations and financial condition as of and for the 13 NON-GAAP FINANCIAL MEASURES We use non-GAAP financial In this report, we present Adjusted EBITDA, cash costs, and total operating revenue less cash costs which are non-GAAP financial performance measures that exclude from our reported GAAP results the impact of certain items consisting primarily of restructuring charges and non-cash charges. We believe such expenses, charges and gains are not indicative of normal, ongoing operations, and their inclusion in results makes for more difficult comparisons between years and with peer group companies. In the future, however, we are likely to incur expenses, charges and gains similar to the items for which the applicable GAAP financial We define our non-GAAP measures, which may not be comparable to similarly titled measures reported by other companies, as follows: Adjusted EBITDA Cash Costs Total Operating Revenue Less Cash Costs The subtotals of operating expenses representing cash costs and RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) The table below reconciles the non-GAAP financial performance measure of 13 Weeks Ended 26 Weeks Ended March 29, March 31, March 29, March 31, (Thousands of Dollars) 2020 2019 2020 2019 Net Income (4,990) (2,327) 728 8,392 Adjusted to exclude Income tax expense (2,331) 156 (460) 4,670 Non-operating expenses, net 21,108 14,738 31,825 27,224 Equity in earnings of TNI and MNI (1,362) (1,717) (2,931) (3,846) Loss (gain) on sale of assets and other, net (6,113) 83 (5,299) (17) Depreciation and amortization 7,276 7,386 13,995 14,916 Restructuring costs and other 1,925 2,759 3,557 2,820 Stock compensation 269 426 571 888 Add: Ownership share of TNI and MNI EBITDA (50%) 1,591 2,080 3,509 4,681 Adjusted EBITDA 17,373 23,584 45,495 59,728 IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In We elected the package of CRITICAL ACCOUNTING POLICIES Our critical accounting policies include the following: Accounting for business combinations requires us to make significant estimates and assumptions, especially at the acquisition date, with respect to tangible and intangible assets Additional information regarding EXECUTIVE OVERVIEW Lee Enterprises, Incorporated is a leading provider of high quality, trusted, local news and information, and a major platform for advertising in the markets we serve. On March 16, 2020, we completed the acquisition of BHMG and The Buffalo News, nearly doubling the size of our operations. Currently, we operate We reach • Our web and mobile sites are the number one digital source of local news in most of our markets, reaching more than 43 million unique visitors, excluding the acquisitions, in the month of March 2020 with 342 million page views and 107 million visits. Our products include daily newspapers, websites and mobile applications, mobile news and advertising, video products, a digital marketing agency, digital services including web hosting and content management, niche publications and community newspapers. Our local media operations range from large daily newspapers and We also operate TownNews, through our 82.5% owned subsidiary INN Partners, L.C. Purchase Agreement with Berkshire Hathaway On March 16, 2020, the BHMG includes 30 daily newspapers and digital operations, in In connection with the Transactions, the Management Agreement terminated on March 16, 2020. As part of the settlement of the preexisting relationship, the Company received $5,425,000 at closing. This amount represented $1,245,000 in fixed fees pro-rated under the contract and $4,180,000 in variable fees based upon the pro-rated annual target. The Company In connection with the Transactions, the Company entered into a lease agreement between BH Media, IMPAIRMENT OF GOODWILL AND OTHER ASSETS We have significant amounts of goodwill and identified intangible assets. Since 2007 we have recorded impairment charges totaling almost $1.3 billion to reduce the value of certain of these assets. Future decreases in our market value, or significant differences in revenue, expenses or cash flows from estimates used to determine fair value, could result in additional impairment charges in the future. CERTAIN MATTERS AFFECTING CURRENT AND The following items affect period-over-period comparisons from 2020 to 2019 and will continue to affect period-over-period comparisons for future results: Acquisitions and Divestitures Impacts of COVID-19 With the outbreak of COVID-19 and the declaration of a pandemic by the World Health Organization on March 11, 2020, governments implemented a combination of shelter-in-place orders and other recommendations severely limiting or restricting economic activity in our local markets. Certain aspects of our operations have experienced lower revenue and profitability over the last several years and these trends are expected to continue in the future; however, the pandemic and government restrictions caused significant and immediate declines in demand for certain our products and services, and ultimately in advertising revenue. The Company currently expects that the COVID-19 pandemic will have a As a result, the Company has implemented, and continues to implement, measures to solidify our We have evaluated the current environment as of March 13 WEEKS ENDED Operating results, as reported in the Consolidated Financial Statements, are summarized below. (Thousands of Dollars, Except Per Share Data) Advertising and marketing services revenue Subscription Other Total operating revenue Operating expenses: Compensation Newsprint and ink Other operating expenses Cash costs Total operating revenue less cash costs Depreciation and amortization Assets loss (gain) on sales, impairments and other, net Restructuring costs and other Operating expenses Equity in earnings of associated companies Operating income Non-operating income (expense): Interest expense Debt financing and administrative cost Non-operating expenses, net Net income attributable to non-controlling interests Other comprehensive income (loss), net of income taxes Earnings per common share: References to the Operating Revenue Total operating revenue was $121,367,000 in the Advertising and marketing services revenue totaled $60,945,000 in the 2020 Quarter, down 3.2% compared to the prior year. Print advertising revenues were $36,248,000 in the 2020 Quarter, down 6.7% compared to the prior year, with $5,388,000 attributable to acquired print advertising revenue. Digital advertising and marketing services Subscription revenue totaled $ Other revenue, which primarily consists of digital services revenue from TownNews, commercial printing revenue and until March 16, 2020, revenue from the Management Agreement, decreased $715,000, or 4.9%, in the 2020 Quarter compared to the 2019 Quarter. Other revenue in the 2020 Quarter included $1,307,000 of acquired other revenue, primarily from commercial printing. The decline in other revenue is primarily related to the reduction of Management Agreement revenue due to the Transactions. Digital services revenue totaled $5,211,000 in the 2020 Quarter, a Commercial printing revenue totaled $2,322,000 in the 2020 Quarter, a 19.9% increase compared to the 2019 Quarter, due to Management Agreement revenue totaled $1,836,000 in the Total digital Equity in earnings of TNI and MNI Operating Expenses Total operating expenses were $ Compensation expense increased $906,000 in the Newsprint and ink costs Other operating expenses Restructuring costs and other totaled $1,925,000 and $2,759,000 in Depreciation expense decreased Assets loss (gain) on sales, impairments and other, was a net gain of The factors noted above resulted in operating income of Non-operating Income and Expense Interest expense decreased We recognized Other non-operating income and expense consists of benefits associated with our pension and other postretirement plans and the fair value adjustment of our Warrants. Income Tax Expense (Benefit) We recorded an income tax benefit of $2,331,000, or 31.8% of pretax loss in the 2020 Quarter. In the 2019 Quarter, we recognized an income tax expense of $156,000, or 7.2% of pretax loss. Net Income and Earnings Per Share Net loss was $4,990,000 and diluted loss per share was $0.09 for the 2020 Quarter compared to net loss of $2,327,000 and diluted loss per share of $0.05 for 2019 Quarter. The change reflects the various items discussed above. Operating results, as reported in the Consolidated Financial Statements, are summarized below. March 29, March 31, Percent (Thousands of Dollars, Except Per Share Data) 2020 2019 Change Total advertising and marketing services revenue Subscription Other Total operating revenue Operating expenses: Compensation Newsprint and ink Other operating expenses Cash costs Total operating revenue less cash costs Depreciation and amortization Assets loss (gain) on sales, impairments and other Restructuring costs and other Operating expenses Equity in earnings of associated companies Operating income Non-operating income (expense): Interest expense Debt financing and administrative cost Other, net Non-operating expenses, net Income before income taxes Net income Net income attributable to non-controlling interests Other comprehensive income (loss), net of income taxes Comprehensive income attributable to Lee Enterprises, Incorporated Earnings per common share: References to the “2020 Period” refer to the 26 weeks ended March 29, 2020. Similarly, references to the “2019 Period” refer to the 26 weeks ended March 31, 2019. Operating Revenue Total operating revenue was $243,710,000 in the 2020 Period, down $15,195,000, or 5.9%, compared to the prior year, which included $14,648,000 in revenue from acquisitions. Advertising and marketing services revenue totaled $126,672,000 in the 2020 Period, down 8.8% compared to the prior year. Print advertising revenues were $76,035,000 in the 2020 Period, down 14.9% compared to the prior year, with $5,387,000 attributable to acquired print advertising revenue. Digital advertising and marketing services totaled $50,637,000 in the 2020 Period, up 2.2% compared to the prior year, with $1,389,000 attributable to acquired digital advertising and marketing services revenue. Digital advertising and marketing services represented 40.0% of the 2020 Period total advertising and marketing services revenue. Decreases in revenue are attributed to reduced demand for print advertising, consistent with general industry trends adversely affecting the publishing industry, negative impacts from the COVID-19 pandemic and incremental advertising revenue in the 2019 Period from certain political campaigns. Subscription revenue totaled $88,138,000 in the 2020 Period, down 3.5% compared to the 2019 period. The decrease is attributable to lower paid print circulation units, consistent with industry trends and timing of price increases, partially offset by $6,564,000 of acquired subscription revenue and an increase in digital only subscribers. As of March 29, 2020, we now have nearly 200,000 digital-only subscribers. Other revenue, which primarily consists of digital services revenue from TownNews, commercial printing revenue and until March 16, 2020, revenue from the Management Agreement, totaled $28,900,000, a 0.8% increase compared to the 2019 Period. Other revenue in the 2020 Period includes $1,307,000 of acquired other revenue, primarily from commercial printing. Digital services revenue totaled $10,429,000 in the 2020 Period, a 10.7% increase compared to the 2019 Period. On a stand-alone basis, revenue at TownNews totaled $12,330,000, an increase of 14.4%, and totaled $22,627,000 over the last twelve months. Investments in video and streaming technology expanded product offerings that helped gain market share in publishing and broadcast, and increased revenue. Commercial printing revenue totaled $3,991,000 in the 2020 Period, a 9.6% decrease compared to the 2019 Period, due to declines in volume from our partners, consistent with general industry trends. Management Agreement revenue totaled $5,814,000 in the 2020 Period compared to $6,450,000 in the 2019 Period. Total digital revenue including digital advertising revenue, digital subscription revenue and digital services revenue totaled $73,909,000 in the 2020 Period, an increase of 3.3% over the 2019 Period. Total digital revenue represented 30.3% of our total operating revenue in the 2020 Period. Equity in earnings of TNI and MNI decreased $915,000 in the 2020 Period. Operating Expenses Total operating expenses were $214,548,000, a 3.6% decrease compared to the 2019 Period, which included $13,351,000 in operating expenses from acquisitions. Operating expenses include compensation expense, newsprint and ink, other operating expenses, depreciation, amortization, restructuring and other expenses, assets loss (gain) on sales, and impairments. Cash Costs were $202,295,000, a 1.2% decrease compared to the 2019 Period, which included $12,760,000 of acquired Cash Costs. Compensation expense decreased $2,890,000 in the 2020 Period, or 3.0%, compared to the 2019 Period. The decrease was attributable to a 12.2% reduction in FTEs on a same property basis, partially offset by $6,578,000 of acquired compensation expense. Newsprint and ink costs decreased $3,107,000 in the 2020 Period, or 25.5%, compared to the 2019 Period. The decrease is attributable to declines in newsprint volumes and prices, partially offset by $826,000 of acquired newsprint and ink expenses. See Item 3, “Commodities” included herein, for further discussion and analysis of the impact of newsprint on our business. Other operating expenses increased $3,546,000 in the 2020 Period, or 3.6%, compared to the 2019 Period. Other operating expenses include all operating costs not considered to be compensation, newsprint, depreciation and amortization, or restructuring costs and other. The largest components are costs associated with printing and distribution of our printed products, digital cost of goods sold and facility expenses. The increase is attributable to $5,357,000 of acquired other operating expenses and increases in digital investments, partially offset by lower delivery and other print-related costs due to lower volumes of our print editions. Restructuring costs and other totaled $3,557,000 and $2,820,000 in the 2020 Period and 2019 Period, respectively. Restructuring costs in 2020 and 2019 are predominately severance. Depreciation decreased $1,055,000, or 16.6%, and amortization increased $134,000, or 1.6%, in the 2020 Period. Assets loss (gain) on sales, impairments and other, was a net gain of $5,299,000 in the 2020 Period compared to a net gain of $17,000 in the 2019 Period. The net gain in the 2020 was related to the disposition of non-core assets, including real estate. The factors noted above resulted in operating income of $32,093,000 in the 2020 Period compared to $40,286,000 in the 2019 Period. Non-operating Income and Expense Interest expense decreased $2,155,000, or 8.8%, to $22,242,000 in the 2020 Period. Our weighted average cost of debt, excluding amortization of debt financing costs, was 9.0% at the end of the 2020 Period and 10.0% at the end of the 2019 Period. The reduction of the weighted average cost of debt is due to the 2020 Refinancing. We recognized $11,865,000 of debt financing and administrative costs in the 2020 Period compared to $1,858,000 in the 2019 Period. The increase in the 2020 Period is primarily driven by expensing previously unamortized financing costs of $9,583,000 and $470,000 of expenses incurred as a result of the 2020 Refinancing. Other non-operating income and expense consists of benefits associated with our pension and other postretirement plans and the fair value adjustment of our Warrants. We recorded $1,088,000 of periodic pension and other postretirement benefits in the 2020 Period and $1,420,000 in the 2019 Period. We recorded non-operating income of $1,037,000 in 2020 Period and $2,672,000 in the 2019 Period, related to the changes in the value of the Warrants. Income Tax We recorded an income tax The Company expects to realize a tax benefit attributable to the Net Income and Earnings Per Share Net income LIQUIDITY AND CAPITAL RESOURCES Operating Activities Cash provided by operating activities was Investing Activities Cash required for investing activities totaled Financing Activities Cash Term Loan In March Debt is summarized as follows: March 29, September 29, Interest (Thousands of Dollars) 2020 2019 Rates (%) Term Loan 576,000 — 9.0 Revolving Facility — — — Notes — 363,420 9.5 2nd Lien Term Loan — 80,207 12.0 576,000 443,627 Unamortized debt issue costs — (11,282) Less current maturities of long-term debt — 2,954 Total long-term debt 576,000 429,391 Excluding payments required from the Company’s future excess cash flow (as defined in the Credit Agreement), the only required principal The Credit Agreement contains certain customary representations and In connection with the Term Loan, In connection with closing of the Additional Information on Liquidity We continue to evaluate the As part of the Company’s effort to While we currently forecast sufficient near-term liquidity, the ultimate impact of the COVID-19 pandemic could have a material impact on the Company's liquidity and its ability to CHANGES IN LAWS AND REGULATIONS Pension Plans In 2012, the Surface Transportation Extension Act of 2012 (“STEA”) was signed into law. STEA provides for changes in the determination of discount rates that result in a near-term reduction in minimum funding requirements for our defined benefit pension plans. STEA will also result in an increase in future premiums to be paid to the Pension Benefit Guarantee Corporation In 2014, the Highway and Transportation Funding Act In March 2020, the Wage Laws The United States and various state and local governments are considering increasing their respective minimum wage rates. Most of our employees earn an amount in excess of the current United States or state minimum wage rates. However, until changes to such rates are enacted, the impact of the changes cannot be determined. INFLATION Price increases (or decreases) for our products or services are implemented when deemed appropriate by us. We continuously evaluate price increases, productivity improvements, sourcing efficiencies and other cost reductions to mitigate the impact of inflation. We are exposed to market risk stemming from changes in interest rates and commodity prices. Changes in these factors could cause fluctuations in earnings and cash flows. In the normal course of business, exposure to certain of these market risks is managed as described below. INTEREST RATES ON DEBT Our debt structure, which is entirely fixed rate, eliminates the potential impact of an increase in interest rates. At March COMMODITIES Newsprint prices Our long-term supply strategy is to align the Company with those cost-effective suppliers most likely to continue producing and supplying newsprint to the North American market and geographically aligned with our print locations. Where possible the Company will align supply with the lowest cost material, but may be restricted due to shipping expenses and paper production availability. A $10 per tonne price increase for SENSITIVITY TO CHANGES IN VALUE Our fixed rate debt consists of EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES Under the supervision and with the participation of our senior management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”). Based on this evaluation, our chief executive officer and chief financial officer concluded that as of the Evaluation Date, CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING On March 16, 2020, we concluded the Transactions. The internal controls related to the acquired businesses have not been considered in our assessment over internal control over financial reporting. Other than the Transactions, there have been no changes in our internal control over financial reporting that occurred during the PART II OTHER INFORMATION We are involved in a variety of legal actions that arise in the normal course of business. Insurance coverage mitigates potential loss for certain of these matters. While we are unable to predict the ultimate outcome of these legal actions, it is our opinion that the disposition of these matters will not have a material adverse effect on our Consolidated Financial Statements, taken as a whole. Item 1.A Risk Factors Except as otherwise described herein, there have been no material changes in the risk factors previously disclosed in “Part I, Item 1A. Risk Factors” of our 2019 Form 10-K. In addition, the Company may, from time to time, evaluate and pursue other opportunities for growth, including through strategic investments, joint ventures, and other acquisitions. These strategic initiatives involve various inherent risks, including, without limitation, general business risk, integration and synergy risk, market acceptance risk and risks associated with the potential distraction of management. Such transactions and initiatives may not ultimately create value for us or our stockholders and may harm our reputation and materially adversely affect our business, financial condition and results of operations. On February 21, 2020, the Company filed a Form 8-K Current Report disclosing the shareholder approval of the merger of the Company's amended and restated 1996 Stock Plan for Non-Employee Directors into and the amendment of the Company’s amended and restated 1990 Long-Term Incentive Plan (as amended and restated, the “2020 Plan”). This disclosure provides additional information pursuant to item 5.02(e) which is required for material amendments to compensatory arrangements of certain officers. This disclosure incorporates, by reference, the Company's 2020 Proxy Statement, which includes the 2020 Plan as an appendix to the filing. Item 6. Exhibits Exhibits marked with an asterisk (*) are incorporated by reference to documents previously filed by us with the SEC, as indicated. Exhibits marked with a plus (+) are management contracts or compensatory plan contracts or arrangements filed pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K. All other documents listed are filed with this Quarterly Report on Form 10-Q. Number Description SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LEE ENTERPRISES, INCORPORATED /s/ Timothy R. Millage June 22, 2020 Timothy R. Millage Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) (Unaudited) March 29, September 29, Cash and cash equivalents 30,824 8,645 Accounts receivable and contract assets, net 73,346 42,536 Inventories 8,530 3,769 Prepaids and other 16,902 5,353 129,602 60,303 Associated companies 28,982 28,742 Other 10,847 10,684 39,829 39,426 Land and improvements 19,106 16,979 Buildings and improvements 127,857 148,514 Equipment 253,617 237,289 Construction in process 7,994 1,980 408,574 404,762 Less accumulated depreciation 293,947 322,723 114,627 82,039 Operating lease right-of-use assets 72,677 — Goodwill 313,868 250,309 Other intangible assets, net 212,978 107,393 Medical plan assets, net 14,743 14,338 Other 7,412 1,394 905,736 555,202 (Unaudited)(Thousands of Dollars) March 31
2019September 30
2018 ASSETS Current assets: Cash and cash equivalents 16,665 5,380 Accounts receivable and contract assets, net 43,677 43,711 Inventories 4,068 5,684 Other 4,240 4,567 Total current assets 68,650 59,342 Investments: Associated companies 29,056 29,216 Other 10,827 10,958 Total investments 39,883 40,174 Property and equipment: Land and improvements 17,224 17,432 Buildings and improvements 149,802 150,376 Equipment 270,960 276,332 Construction in process 2,255 1,710 440,241 445,850 Less accumulated depreciation 352,304 353,522 Property and equipment, net 87,937 92,328 Goodwill 250,162 246,176 Other intangible assets, net 115,005 119,819 Medical plan assets, net 16,277 16,157 Other 1,520 1,415 Total assets 579,434 575,411 (Thousands of Dollars and Shares, Except Per Share Data) March 31
2019September 30
2018 LIABILITIES AND EQUITY Current liabilities: Current maturities of long-term debt 7,318 7,027 Accounts payable 13,661 12,747 Compensation and other accrued liabilities 17,198 19,641 Accrued interest 2,224 2,031 Unearned revenue 25,325 23,895 Total current liabilities 65,726 65,341 Long-term debt, net of current maturities 453,608 460,777 Pension obligations 25,332 26,745 Postretirement and postemployment benefit obligations 2,608 2,580 Deferred income taxes 39,216 39,108 Income taxes payable 7,112 6,559 Warrants and other 13,751 10,561 Total liabilities 607,353 611,671 Equity (deficit): Stockholders' equity (deficit): Serial convertible preferred stock, no par value; authorized 500 shares; none issued — — Common Stock, $0.01 par value; authorized 120,000 shares; issued and outstanding: 577 572 March 31, 2019: 57,730 shares; September 30, 2018: 57,141 shares Class B Common Stock, $2 par value; authorized 30,000 shares; none issued — — Additional paid-in capital 254,185 253,511 Accumulated deficit (272,008 ) (279,691 ) Accumulated other comprehensive loss (11,990 ) (11,746 ) Total stockholders' deficit (29,236 ) (37,354 ) Non-controlling interests 1,317 1,094 Total deficit (27,919 ) (36,260 ) Total liabilities and deficit 579,434 575,411 (Unaudited) March 29, September 29, Current portion of lease liabilities 8,299 — Current maturities of long-term debt — 2,954 Accounts payable 19,374 16,750 Compensation and other accrued liabilities 43,469 17,711 Accrued interest 2,016 1,903 Unearned revenue 58,563 21,720 131,721 61,038 Long-term debt, net of current maturities 576,000 429,391 Operating lease liabilities 63,608 — Pension obligations 88,930 47,037 Postretirement and postemployment benefit obligations 39,390 2,550 Deferred income taxes 9,875 29,806 Income taxes payable 17,078 8,742 Warrants and other 14,995 13,469 941,597 592,033 — — Common Stock, $0.01 par value; authorized 120,000 shares; issued and outstanding: 581 577 Class B Common Stock, $2 par value; authorized 30,000 shares; none issued — — Additional paid-in capital 255,712 255,476 Accumulated deficit (265,470 ) (265,423 ) Accumulated other comprehensive loss (28,481 ) (29,114 ) (37,658 ) (38,484 ) Non-controlling interests 1,797 1,653 (35,861 ) (36,831 ) 905,736 555,202 LEEOPERATIONSINCOME AND COMPREHENSIVE INCOME (LOSS) 60,945 62,934 126,672 138,897 46,443 45,076 88,138 91,345 13,979 14,694 28,900 28,663 121,367 122,704 243,710 258,905 48,691 47,785 91,934 94,824 4,321 5,825 9,057 12,164 52,842 48,016 101,304 97,758 7,276 7,386 13,995 14,916 (6,113 ) 83 (5,299 ) (17 ) 1,925 2,759 3,557 2,820 108,942 111,854 214,548 222,465 1,362 1,717 2,931 3,846 13,787 12,567 32,093 40,286 (11,127 ) (12,140 ) (22,242 ) (24,397 ) (10,670 ) (962 ) (11,865 ) (1,858 ) 689 (1,636 ) 2,282 (969 ) (21,108 ) (14,738 ) (31,825 ) (27,224 ) (7,321 ) (2,171 ) 268 13,062 (2,331 ) 156 (460 ) 4,670 (4,990 ) (2,327 ) 728 8,392 (377 ) (351 ) (774 ) (709 ) (5,367 ) (2,678 ) (46 ) 7,683 316 (122 ) 633 (244 ) (5,051 ) (2,800 ) 587 7,439 (0.09 ) (0.05 ) (0.00 ) 0.14 (0.09 ) (0.05 ) (0.00 ) 0.14 (Unaudited) 13 Weeks Ended 26 Weeks Ended (Thousands of Dollars, Except Per Common Share Data) March 31
2019March 25
2018March 31
2019March 25
2018 Operating revenue: Advertising and marketing services 62,934 71,553 138,897 156,213 Subscription 45,076 45,972 91,345 94,241 Other 14,694 10,280 28,663 21,136 Total operating revenue 122,704 127,805 258,905 271,590 Operating expenses: Compensation 47,785 49,363 94,824 100,980 Newsprint and ink 5,825 5,640 12,164 11,478 Other operating expenses 48,016 49,315 97,758 99,671 Depreciation and amortization 7,386 8,016 14,916 16,068 Assets loss (gain) on sales, impairments and other, net 83 (1,300 ) (17 ) (1,297 ) Restructuring costs and other 2,759 1,816 2,820 2,284 Total operating expenses 111,854 112,850 222,465 229,184 Equity in earnings of associated companies 1,717 1,608 3,846 3,991 Operating income 12,567 16,563 40,286 46,397 Non-operating income (expense): Interest expense (12,140 ) (13,274 ) (24,397 ) (26,924 ) Debt financing and administrative costs (962 ) (1,217 ) (1,858 ) (2,313 ) Other, net (1,636 ) 1,388 (969 ) 1,937 Total non-operating expense, net (14,738 ) (13,103 ) (27,224 ) (27,300 ) Income (loss) before income taxes (2,171 ) 3,460 13,062 19,097 Income tax expense (benefit) 156 927 4,670 (18,763 ) Net income (loss) (2,327 ) 2,533 8,392 37,860 Net income attributable to non-controlling interests (351 ) (294 ) (709 ) (618 ) Income (loss) attributable to Lee Enterprises, Incorporated (2,678 ) 2,239 7,683 37,242 Other comprehensive loss, net of income taxes (122 ) (36 ) (244 ) (9 ) Comprehensive income (loss) attributable to Lee Enterprises, Incorporated (2,800 ) 2,203 7,439 37,233 Earnings per common share: Basic: (0.05 ) 0.04 0.14 0.68 Diluted: (0.05 ) 0.04 0.14 0.67 CONSOLIDATED (265,423 ) 577 255,476 (29,114 ) (38,484 ) — 4 (379 ) — (375 ) 5,320 — — — 5,320 — — 545 — 545 — — — 452 452 — — — (135 ) (135 ) (260,103 ) 581 255,642 (28,797 ) (32,677 ) Shares issued (redeemed) — — (199 ) — (199 ) (5,367 ) — — — (5,367 ) — — 269 — 269 — — — 451 451 Deferred income taxes, net — — — (135 ) (135 ) (265,470 ) 581 255,712 (28,481 ) (37,658 ) (Unaudited) (279,691 ) 572 253,511 (11,746 ) (37,354 ) — 5 (453 ) — (448 ) 10,361 — — — 10,361 — — 385 — 385 — — — (163 ) (163 ) — — — 41 41 (269,330 ) 577 253,443 (11,868 ) (27,178 ) — — 317 — 317 (2,678 ) — — — (2,678 ) — — 425 — 425 — — — (163 ) (163 ) — — — 41 41 (272,008 ) 577 254,185 (11,990 ) (29,236 ) (Thousands of Dollars) Accumulated Deficit Common Stock Additional paid-in capital AOCL Total October 1, 2018 (279,691 ) 572 253,511 (11,746 ) (37,354 ) Shares issued (redeemed) — 5 (453 ) — (448 ) Income attributable to Lee Enterprises, Incorporated 10,361 — — — 10,361 Stock compensation — — 385 — 385 Other comprehensive income — — — (163 ) (163 ) Deferred income taxes, net — — — 41 41 December 30, 2018 (269,330 ) 577 253,443 (11,868) (27,178) Shares issued (redeemed) — — 317 — 317 Income attributable to Lee Enterprises, Incorporated (2,678 ) — — — (2,678 ) Stock compensation — — 425 — 425 Other comprehensive income — — — (163 ) (163 ) Deferred income taxes, net — — — 41 41 March 31,2019 (272,008 ) 577 254,185 (11,990 ) (29,236 ) (Thousands of Dollars) Accumulated Deficit Common Stock Additional paid-in capital AOCL Total September 25, 2017 (328,524 ) 567 251,790 (16,068 ) (92,235 ) Shares issued (redeemed) — 4 (465 ) — (461 ) Income attributable to Lee Enterprises, Incorporated 35,003 — — — 35,003 Stock compensation — — 519 — 519 Other comprehensive income — — — 36 36 Deferred income taxes, net — — — (9 ) (9 ) December 24, 2017 (293,521 ) 571 251,844 (16,041 ) (57,147 ) Shares issued (redeemed) — (1 ) 19 — 18 Income attributable to Lee Enterprises, Incorporated 2,239 — — — 2,239 Stock compensation — — 439 — 439 Other comprehensive income — — — (71 ) (71 ) Deferred income taxes, net — — — 35 35 March 25, 2018 (291,282 ) 570 252,302 (16,077 ) (54,487 ) LEE (Unaudited) 26 Weeks Ended (Thousands of Dollars) March 31
2019March 25
2018 Cash provided by (required for) operating activities: Net income 8,392 37,860 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 14,916 16,068 Curtailment gains — (2,031 ) Stock compensation expense 810 1,016 Distributions greater than earnings of MNI 303 672 Deferred income taxes 190 (19,557 ) Debt financing and administrative costs 1,858 2,313 Pension contributions (650 ) — Other, net (505 ) 169 Changes in operating assets and liabilities: Decrease in receivables and contract assets 660 4,758 Decrease (increase) in inventories and other 2,039 (468 ) Decrease in accounts payable and other accrued liabilities (3,051 ) (4,367 ) Decrease in pension and other postretirement and postemployment benefit obligations (663 ) (1,575 ) Change in income taxes payable 545 510 Other, including warrants 2,989 (253 ) Net cash provided by operating activities 27,833 35,115 Cash provided by (required for) investing activities: Purchases of property and equipment (2,459 ) (2,452 ) Proceeds from sales of assets 770 1,989 Acquisitions (5,708 ) (250 ) Distributions greater (less) than earnings of TNI (143 ) 535 Other, net 2 (745 ) Net cash required for investing activities (7,538 ) (923 ) Cash required for financing activities: Payments on long-term debt (8,404 ) (32,064 ) Debt financing costs paid (259 ) (5 ) Common stock transactions, net (347 ) (443 ) Net cash required for financing activities (9,010 ) (32,512 ) Net increase in cash and cash equivalents 11,285 1,680 Cash and cash equivalents: Beginning of period 5,380 10,621 End of period 16,665 12,301 (Unaudited)131, 201929, 2020 and our results of operations and cash flows for the periods presented. The Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company's 20182019 Annual Report on Form 10-K. weeks and 26 weeks ended 31, 201929, 2020 are not necessarily indicative of the results to be expected for the full year.“2019”“2020”, “2018”“2019” and the like refer to the fiscal years ended the last Sunday in September.("TownNews.com"(“TownNews.com”), June 26, 2018, we entered into an agreementMarch 16, 2020, the Company completed the Asset and Stock Purchase Agreement dated as of January 29, 2020 with Berkshire Hathaway Inc., a Delaware corporation (“Berkshire”) and BH Media Group, Inc. (", a Delaware corporation (“BHMG”) (“Purchase Agreement”). As part of the Purchase Agreement, the Company purchased certain assets and assumed certain liabilities of BHMG’s newspapers and related community publications business (“BH Media"Media Newspaper Business”), excluding real estate and fixtures such as production equipment and all of the issued and outstanding capital stock of The Buffalo News, Inc., a Delaware corporation (“Buffalo News”) to manage Berkshire Hathaway's newspaperfor a combined purchase price of $140,000,000 (collectively, the “Transactions”). BHMG includes 30 daily newspapers and digital operations, in 30 markets (the "Management Agreement"). The Company operates BH Media consistentaddition to 49 paid weekly newspapers with how it manages its own newspaperwebsites and 32 other print products. Buffalo News is a provider of local print and digital operations. Among other decisions, Berkshire Hathaway is responsiblenews to the Buffalo, NY area. The rationale for approvingthe acquisition was primarily the attractive nature of the various publications, businesses, and digital platforms as well as the revenue growth and operating and capital budgets. expense synergy opportunities.ManagementTransactions were funded pursuant to a Credit Agreement extends for a termdated as of five years and may be extended thereafter for successive one-year terms on such terms as may be mutually agreed to byJanuary 29, 2020 between the Company and BH Finance LLC, a Delaware limited liability company affiliated with Berkshire Hathaway.(“Credit Agreement”), as described further in Note 5. Our Consolidated Financial Statements show the combined results of the Company for the period of March 16, 2020 through and as of March 29, 2020.Company is paid a fixed annual feeamount we received settled our existing contract assets balance, which totaled $3,589,000 as of $5 million, payable quarterlyDecember 29, 2019, and the remaining amount was reflected in arrears, and aOther Revenue for the 13 weeks ended March 29, 2020. The amount of variable feefees was estimated based on theexpected BHMG financial performance through March 16, 2020. Actual financial performance through March 16, 2020 did not vary materially from the estimated amount. As such, the Company did not recognize a gain or loss as a result of BH Media. The variable fees are payable annuallythe settlement of this preexisting relationship.arrears.Note 6.Generally Accepted Accounting Principles ("GAAP"U.S. generally accepted accounting principles (“GAAP”) requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We evaluate these estimates and judgments on an ongoing basis.New accounting pronouncementsBetween 20142017,measurement of identifiable assets and goodwill acquired, liabilities assumed, and any noncontrolling interest in the FASB issued several new standards related to revenue recognition ("acquiree at fair value. In a business combination, the New Revenue Standard"). The New Revenue Standard supersedes existing revenue recognition requirementsassets acquired, liabilities assumed and is effectivenon-controlling interest in fiscal years beginning after December 15, 2017. The New Revenue Standard provides a five-step model in determining when and how revenue is recognized and requires revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. The New Revenue Standard also requires newdisclosures about the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.We adopted the New Revenue Standard on October 1, 2018, using the modified retrospective method applied to those contracts which were not completedacquiree are recorded as of that date. We completed our assessment and did not identifyany significant changes to our revenue recognition policies. We identified similar performance obligations under the New Revenue Standarddate of acquisition at their respective fair values with limited exceptions. Any excess of the purchase price (consideration transferred) over the estimated fair values of net assets acquired is recorded as compared with the deliverables and separate units of accounting previously identified under existing guidance. As a result, the timing and amount of our revenue recognition were not impacted and we did not make any adjustments under the modified retrospective adoption method.We have also assessed the new accounting principles related to the deferral and amortization of contract acquisitiongoodwill. Transaction costs and due to the short-term nature of such costs, we will utilize the practical expedient to continue to expense these costsare expensed as incurred.See Note 2 for more information on our revenues and the application The operating results of the New Revenue Standard.In August 2016, the FASB issued a new standard to conform the presentationacquired business are reflected in the statement of cash flows for certain transactions, including cash distributionsCompany’s Consolidated Financial Statements from equity method investments, among others. There was no change to the Consolidated Statement of Cash Flows as a resultdate of the adoption of this standard for the quarter ended December 30, 2018. Specifically, distributions received from equity method investees continue to be presented on the Consolidated Statement of Cash Flows utilizing the cumulative earnings approach.In March 2017, the FASB issued a new standard to improve the presentation of pension and postretirement benefit expense. The new standard requires that the service cost component of pension and postretirement benefits expense is recognized as compensation expense, while the remaining components of the expense (benefit) are presented as non-operating incomeacquisition.other, net. This new standard was adopted for the quarter ended December 30, 2018 and has been retrospectively applied to the Statement of Operations for all comparative periods presented. We recorded benefits of $711,000 and $1,422,000 in other, net in non-operating income (expense) for the 13 and the 26 weeks ended March 31, 2019, respectively. We reclassified benefits of $708,000 and $1,416,000 from compensation to other, net in non-operating income (expense) for the 13 weeks and the 26 weeks ended March 25, 2018, respectively.In February 2018, FASB issued new guidance to allow a reclassification from accumulated other comprehensive income (“AOCI”) to retained earnings for stranded tax effects resulting from what is commonly referred to as the Tax Cuts and Jobs Act (the "2017 Tax Act"). In the first quarter of fiscal year 2018, we remeasured our deferred taxes related to unrealized gains on our investment balances using the reduced tax rate. As required by GAAP, we recognized the net tax benefit in the provision for income taxes in our consolidated operations statements, and we reclassified a $3,067,000 net tax benefit from AOCI to retained earnings in our consolidated balance sheets. Adoption of the standard had no impact to our consolidated operations statements or cash flows statements.leases.leases, known as Accounting Standards Codification 842 (“ASC 842”). The new standard is based on the principle that entities should recognize assets and liabilities arising from leases. The new standard does not significantly change the lessees’ recognition, measurement and presentation of expenses and cash flows from the previous accounting standard. Leases are classified as finance or operating. The new standard's primary change is the requirement for entities to recognize a lease liability for payments and a right of useright-of-use (“ROU”) asset representing the right to use the leased asset during the term on most operating lease arrangements. LesseesWe adopted the standard effective September 30, 2019, the first day of fiscal year 2020.permittedor contain leases under the new guidance. We have elected to make ancombine non-lease and lease components when accounting for leases. The Company has made a policy election to exclude short-term leases, those with an original term of less than twelve months, from recognition and measurement under ASC 842. As such, we have not recognize therecognized an ROU asset andor lease liability for leases with a term of twelve months or less. In addition, thethese leases. Additional information and disclosures required by this new standard expands the disclosure requirements of lease arrangements. Lessees have the option to use a modified retrospective transition approach, which includes a number of practical expedients. We are currentlycontained in the process of evaluating the impact of this guidance on our Consolidated Financial Statements.July 2018,June 2016, the FASB issued a new standard which providesto replace the incurred loss impairment methodology under then current GAAP with a methodology that reflects expected credit losses and requires consideration of a wider array of reasonable and supportable information to inform and develop credit loss estimates. We will be required to use a forward-looking expected credit loss model for an optional transition method that allows issuers to initially apply theboth accounts receivables and other financial instruments. The new lease standard to all leases that exist as of the adoption date, with the cumulative effect of initially applying the new lease standard recognized as anwill be adopted beginning September 28, 2020 using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the adoption date. We intendeffective date to adoptalign our credit loss methodology with the optional transition approach in fiscal year 2020. To date we have made progress in our assessment of the new lease standard. We are currently compiling an inventory of leases,provisionsimpact of the updated guidance and assessing the impactthis standard on our Consolidated Financial Statements.2On October 1, 2018, we adopted the new revenue recognition accounting pronouncement, using the modified retrospective method applied to those contracts which were not completed as of the adoption date. Results for reporting periods beginning after October 1, 2018 are presented under the new guidance while prior period amounts are not adjusted and continue to be reported in accordance with legacy accounting under the old guidance. We did not record any adjustments to beginning retained earnings at October 1, 2018 as a result of adopting the new guidance.revenuesrevenue disaggregated by source: 60,945 62,934 126,672 138,897 46,443 45,076 88,138 91,345 5,211 4,744 10,429 9,421 8,768 9,950 18,471 19,242 121,367 122,704 243,710 258,905 13 Weeks Ended 26 Weeks Ended (Thousands of Dollars) March 31
2019March 25
2018March 31
2019March 25
2018 Advertising and marketing services revenues 62,934 71,553 138,897 156,213 Subscription Revenues 45,076 45,972 91,345 94,241 TownNews and other digital services revenues 4,744 3,815 9,421 7,476 Other revenues 9,950 6,465 19,242 13,660 Total operating revenue 122,704 127,805 258,905 271,590 Revenues are Revenue is recognized when a performance obligation is satisfied by the transfer of control of the contracted goods or services to our customers, in an amount that reflects the consideration we expect to receive in exchange for those goods or services.Advertising and marketing services revenues:Advertising and marketing services revenues include amounts charged to customers for retail or classified advertising space purchased in our newspapers, retail or classified advertisements placed on our digital platforms, and other print advertising products such as preprint inserts and direct mail. Advertising and marketing services revenues also include amounts charged to customers for digital marketing services which include: Audience extension, Search Engine Optimization ("SEO"), Search Engine Marketing ("SEM"), web and mobile production, social media services and reputation monitoring and management. The following define the timing of revenue recognition for each general revenue category:Print advertising revenues are recognized at the point in time the associated publication has been delivered.Digital advertising revenues are recognized at the point in time that impressions are delivered.Digital marketing services revenues are recognized over the period of time which the service is performed.Advertising and marketing services contract transaction prices consist of fixed consideration. We recognize revenue when control of the related performance obligation transfers to the customer.Payments for advertising revenues are due upon completion of our performance obligations at previously agreed upon rates. In instances where the timing of revenue recognition differs from the timing of invoicing, such timing differences are not large. As a result, we have determined that our contracts do not include a significant financing component.Subscription revenues: Subscription revenues include revenues for content delivered to consumers via print and digital products purchased by readers or distributors. Single copy revenues are also included in subscription revenues. Subscription revenues from single-copy and home delivery subscriptions are recognized at the point in time the publications are delivered. Digital subscription revenues are recognized over time as performance obligations are met via on-demand availability of online content made available to customers throughout thecontract term. Payments for subscription revenues are typically collected in advance, are for contract periods of one year or less and result in an unearned revenue liability that is reduced when revenue is recognized.Other revenues: Other revenues are primarily comprised of digital services, Management Agreement revenues, commercial printing and delivery of third party products. Digital services revenues, which are primarily delivered through TownNews, are primarily comprised of contractual agreements to provide webhosting and content management services. As such, digital services revenues are recognized over the contract period. Prices for digital services are agreed upon in advance of the contract beginning and are typically billed in arrears on a monthly basis, with the exception of implementation fees which are recognized as deferred revenue and amortized over the contract period. Management Agreement revenues, consisting of fees collected from our Management Agreement, are recognized based on BH Media's financial progress toward contractual performance goals related to certain financial benchmarks. BH Media provides historical and projected financial reports, which serve as the basis for our revenue recognition. Fixed Management Agreement revenues are recognized over time and paid quarterly and variable fees are paid annually. Variable fees are recognized when the fees are deemed earned and it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Commercial printing and delivery revenues are recognized when the product is delivered to the customer.RevenuesRevenue from sales agreements that contain multiple performance obligations are allocated to each obligation based on the relative standalone selling price. We determine standalone selling prices based on observable prices charged to customers. is from subscriptions paid in advance of the service provided. The Company expects to recognize the revenue related to unsatisfied performance obligations over the next twelve months in accordance with the terms of the subscriptions and other contracts with customers. The unearned revenue balances described herein are the Company's only contract liability. Unearned revenues were $25,325,000revenue was $58,563,000 as of March 31, 201929, 2020 and $23,895,000$21,720,000 as of September 30, 2018. Revenues29, 2019. Revenue recognized in the 13 weeks and the 26 weeks ended March 31, 201929, 2020 that werewas included in the contract liability as of September 30, 2018 were $4,784,00029, 2019 was $4,460,000 and $20,511,000, respectively.revenuesrevenue and were $3,461,000$0 as of March 31, 201929, 2020 and $0$1,107,000 as of September 30, 201829, 2019 and consisted solely of the variable portionconsideration earned under the Management Agreement. In conjunction with the execution of the contract. ThesePurchase Agreement, the previously recorded contract asset balances are included in accounts receivable and contract assets, net. There are no other contract assets recorded.balance was collected on March 16, 2020. Accounts receivable, excluding allowance for doubtful accounts and contract assets, was $45,689,000$81,007,000 and $48,517,000$47,863,000 as of March 31,29, 2020 and September 29, 2019 and September 30, 2018,, respectively. Allowance for doubtful accounts was $5,473,000$7,661,000 and $4,806,000$6,434,000 as of March 31,29, 2020 and September 29, 2019 and September 30, 2018,, respectively.expedients and exemptions:3 INVESTMENTS IN ASSOCIATED COMPANIESTNI Partners 10,185 11,480 20,381 23,644 7,766 8,832 15,931 17,928 2,419 2,648 4,450 5,716 1,210 1,323 2,225 2,858 105 105 210 209 1,105 1,218 2,015 2,649 13 Weeks Ended 26 Weeks Ended (Thousands of Dollars) March 31
2019March 25
2018March 31
2019March 25
2018 Operating revenue 11,480 11,851 23,644 25,081 Operating expenses 8,832 9,354 17,928 19,338 Operating income 2,648 2,497 5,716 5,743 Company's 50% share of operating income 1,323 1,248 2,858 2,872 Less amortization of intangible assets 105 104 209 209 Equity in earnings of TNI 1,218 1,144 2,649 2,663 and March 25, 2018, we received $1,957,000$953,000 and $1,631,000$1,957,000 in distributions, respectively. In the 26 weeks ended March 31, 201929, 2020 and March 25, 201831, 2019, we received $2,506,000$1,691,000 and $3,198,000$2,506,000 in distributions, respectively. 12,325 13,092 26,250 27,918 11,561 11,579 23,681 24,272 — 38 — 68 197 280 341 559 567 1,195 2,228 3,019 514 996 1,830 2,394 257 499 915 1,197 13 Weeks Ended 26 Weeks Ended (Thousands of Dollars) March 31
2019March 25
2018March 31
2019March 25
2018 Operating revenue 13,092 13,838 27,918 29,903 Operating expenses, excluding restructuring costs, depreciation and amortization 11,579 12,016 24,272 24,948 Restructuring costs 38 146 68 210 Depreciation and amortization 280 280 559 558 Operating income 1,195 1,396 3,019 4,187 Net income 996 928 2,394 2,656 Equity in earnings of MNI 499 464 1,197 1,328 and March 25, 2018, we received dividends of $750,000$1,000,000 and $1,250,000,$750,000, respectively. In the 26 weeks ended March 31, 201929, 2020 and March 25, 201831, 2019, we received dividends of $1,500,000$1,000,000 and $2,000,000,$1,500,000 respectively.4 26 Weeks Ended (Thousands of Dollars)March 312019 March 29, 1,535,1551,539,038 ( 1,288,9791,288,729) Goodwill, beginning of period 246,176250,309 Goodwill acquired in business combinations 3,98663,559 250,162313,868 (Thousands of Dollars) March 31
2019September 30
2018 Nonamortized intangible assets: Mastheads 21,883 21,883 Amortizable intangible assets: Customer and newspaper subscriber lists 696,632 692,886 Less accumulated amortization 603,510 594,950 93,122 97,936 Other intangible assets, net 115,005 119,819 In January 2019, we purchased the businessesKenosha Newsadvertiser relationships, $36,060,000 of subscriber relationships, $17,130,000 of commercial print relationships and Lake Geneva Regional News. In February 2019, TownNews purchased the content management system ("CMS") business from GTxcel. Both transactions were funded with cash on the balance sheet. As$21,680,000 of indefinite-lived masthead assets as part of initial estimates,$3,986,000 was recorded in goodwill and $3,650,000 was recorded in other intangible assets, net. The $3,650,000 of other intangible assets, net relate to acquired customer lists, which will be amortized over a 10 year period. These initial estimates will be reviewed in subsequent quarters as more information becomes available.March 2020December 2021 to March 2024December 2025 is estimated to be $16,192,000, $15,929,000, $13,289,000, $12,384,000$26,965,000, $24,382,000, $23,393,000, $22,614,000 and $11,704,000,$20,355,000, respectively. The weighted average amortization period for those amortizable assets acquired as part of the Transactions is 9.2 years.5 31, 2014, we16, 2020 in connection with the closing of the Transactions, the Company completed a comprehensive refinancing of ourits debt (the "2014 Refinancing"“2020 Refinancing”). The 2020 Refinancing consists of a 25-year term loan with BH Finance LLC (“BH Finance”), which included the following:$400,000,000an affiliate of Berkshire, in an aggregate principal amount of 9.5% Senior Secured Notes (the “Notes”), pursuant$576,000,000 at a 9% annual rate (referred to an Indenture datedherein as “Credit Agreement” and “Term Loan”). The proceeds of March 31, 2014 (the “Indenture”).$250,000,000 first lien term loan (the "1st Lien Term Loan"and $40,000,000 revolving facility (the "Revolving Facility") under a First Lien Credit Agreementpursuant to an indenture dated as of March 31, 2014 (together the “1st Lien Credit Facility”(the “Indenture”).; • $150,000,000To repay the 12.0% second lien term loan underpursuant to a Second Lien Term Loan Agreement dated as of March 31, 2014, as amended (the “2nd Lien Term Loan”).In November 2018, we repaid, in full, the remaining balance1stIndenture and the 2nd Lien Term Loan.In December 2018, we amended our 1stFacility to amendAgreement dated as of March 31, 2014 (the “1st Lien Credit Facility”) and extend our Revolving Facility (the "Amendment").2nd Lien Loan Agreement were terminated, and BH Finance is the Company’s sole lender. The Amendment, among other changes, extendsCredit Agreement documents the maturityprimary terms of the revolving loan commitments of the 1st Lien Lenders for twelve months and reduces the revolver loan commitments from $40,000,000 to $27,200,000 with a further 15% reduction to the revolving loan commitments of the 1st Lien Term Lenders effective as of July 31, 2019. March 29, September 29, Interest Term Loan 576,000 — 9.0 — — — — 363,420 9.5 — 80,207 12.0 576,000 443,627 — (11,282 ) — 2,954 576,000 429,391 (Thousands of Dollars) March 31
2019September 30
2018March 31
2019 Revolving Facility — — 6.1 — 6,303 8.5 Notes 385,000 385,000 9.5 91,455 93,556 12.0 476,455 484,859 Unamortized debt issue costs (15,529 ) (17,055 ) Current maturities of long-term debt 7,318 7,027 Total long-term debt 453,608 460,777 excluding amortization ofat March 29, 2020 is 9.0%.financing costs at March 31, 2019, is 10.0%.At March 31, 2019, aggregate minimum required maturities of debt excluding amounts requiredpayments. Future payments are contingent on the Company’s ability to be paid fromgenerate future excess cash flow, computations total $7,318,000 foras defined in the remainder of 2019, $0 in 2020, $0 in 2021, $385,000,000 in 2022 and $84,137,000 in 2023.NotesThe Notes are senior secured obligations ofCredit Agreement.Company and mature on March 15, 2022.At March 31, 2019, the principal balance of the Notes totaled $385,000,000.InterestThe Notes require payment ofTerm Loan bears interest semiannually on March 15 and September 15 of each year, at a fixed annual rate of 9.5%. RedemptionWe may redeem some, or all,9.0%, payable monthly, and matures in March 2045.principal amount of the Notes at any timeTerm Loan as follows:Period BeginningPercentagePrincipal Amountany Net Cash Proceeds received by the Company or any subsidiary from a sale, transfer, license, lease or other disposition of any property of the Company or any subsidiary in excess of $500,000 in any ninety (90) day period. March 15, 2019102.38March 15,• Beginning on June 28, 2020, the Company is required to prepay the Term Loan with excess cash flow, defined as cash on the balance sheet in excess of $20,000,000 (“Excess Cash Flow”). Excess Cash Flow is used to prepay the Term Loan, at par, and is due within 50-days of quarter end. 100.00• If there is a Change of Control (as defined in the Credit Agreement), BH Finance has the option to require the Company to prepay the Term Loan in cash equal to 105% of the unpaid principal balance, plus accrued and unpaid interest. If we sell certain of our assetsexperience specific kinds of changes of control, we must, subjectfrom time to certain exceptions, offer to purchasetime, voluntarily prepay the NotesTerm Loan in whole or in part, at 101%par, provided that any voluntary prepayment of the Term Loan shall be accompanied by payment of all accrued interest on the amount of principal amount. Any redemptionprepaid to the date of the Notes must also satisfy any accrued and unpaid interest thereon.prepayment.IndentureCredit Agreement contains certain customary representations and the 1st Lien Credit Facility contain restrictive covenants as discussed more fully below. However, certain of these covenants will cease to apply if the Notes are rated investment grade by either Moody’s Investors Service, Inc. or Standard & Poor’s Ratings Group and there is no default or event of default under the Indenture.1st Lien Credit FacilityThe 1st Lien Term Loan was paid in full in November 2018 and has no outstanding balance as of March 31, 2019.The 1st Lien Credit Facility consists of the $27,000,000 Revolving Facility that matures on December 28, 2019. The 1st Lien Credit Facility documents the primary terms of the 1st Lien Term Loan and the Revolving Facility.The Revolving Facility may be used for working capital and general corporate purposes (including letters of credit). At March 31, 2019, after consideration of letters of credit, we have approximately $21,435,000 available for future use under the Revolving Facility.InterestInterest on the Revolving Facility, which is undrawn at March 31, 2019, accrues, at our option, at either (A) LIBOR plus 5.5%, or (B) 4.5% plus the higher of (i) the prime rate at the time, (ii) the federal funds rate plus 0.5%, or (iii) one month LIBOR plus 1.0%.Covenants and Other MattersThe 1st Lien Credit Facility requires that we comply withwarranties, certain affirmative and negative covenants customary for financingand certain conditions, including restrictions on incurring additional indebtedness, creating certain liens, making certain investments or acquisitions, issuing dividends, repurchasing shares of this nature, including a maximum total leverage ratio. 1st Lien Credit FacilityAgreement restricts us from paying dividends on our Common Stock. This restriction no longer applies if Lee Legacy Leverage is below 3.25x before and after such payments. Lee Legacy Leverage as defined is 4.28x at March 31, 2019.does not apply to dividends issued with the Company’s Equity Interests or from the proceeds of a sale of the Company’s Equity Interests. Further, the 1st Lien Credit FacilityAgreement restricts or limits, among other things, subject to certain exceptions, the ability of the Company and its subsidiaries to: (i) incur additional indebtedness, (ii) make certain investments, (iii) enter into mergers, acquisitions and asset sales, (iii)(iv) incur or create liens and (iv)(v) enter into transactions with certain affiliates. The 1st Lien Credit FacilityAgreement contains various representationsrepresentation and warranties by the Company and may be terminated upon the occurrence of certain events of default.default, including non-payment. The 1st Lien Credit FacilityAgreement also contains cross-default provisions tied to other agreements with BH Finance entered into by the terms of each ofCompany and its subsidiaries in connection with the Indenture and 2nd Lien Term Loan.2nd Lien2020 Refinancing. 2nd Lien Term Loan which has a balance of $91,455,000 at March 31, 2019, bears interest at a fixed annual rate of 12.0%, payable quarterly, and matures in December 2022.Principal PaymentsExcluding excess cash flow payments, therethe subsidiary guarantees are no scheduled mandatory amortization payments required under the 2nd Lien Term Loan.Quarterly, we are required to prepare a calculation of excess cash flow of the Pulitzer Subsidiaries ("Pulitzer Excess Cash Flow"). Pulitzer Excess Cash Flow is generally determined as the cash earnings of the Pulitzer Subsidiaries including adjustments for changes in working capital, capital spending, pension contributions, debt principal payments and income tax payments. Pulitzer Excess Cash Flow also includes a deduction for interest costs incurred under the 2nd Lien Term Loan.Pulitzer Excess Cash Flow is used to prepay the 2nd Lien Term Loan, at par, and is required to be paid 45 days after the end of the quarter.Payments will also be made on the 2nd Lien Term Loan, at par, with proceeds from asset sales by the Pulitzer Subsidiaries that are not reinvestedsecured, subject to certain other conditions.Duringexceptions, priorities and limitations, by perfected security interests in substantially all property and assets, including certain real estate, of the 13Company and 26 weeks ended March 31, 2019, payments on the 2nd LienSubsidiary Guarantors.totaled $1,377,000and$2,101,000, respectively. For the 13 weeks ended March 31, 2019, Pulitzer Excess Cash Flow totaled $7,318,000, which will be used to make a payment on the 2nd Lien Term Loan in May 2019, at par.Beginning March 31, 2019, voluntary payments under the 2nd Lien Term Loan are no longeris secured, subject to call premiumscertain exceptions, priorities and are payable at par. The Indenture includes certain restrictions on voluntary payments onlimitations in the 2nd Lien Term Loan.Covenantsvarious agreements, by first-priority security interests in the capital stock of, and Other MattersThe 2nd Lien Term Loan requires that we comply with certain affirmativeother equity interests owned by, the Company and negative covenants customary for financingthe Subsidiary Guarantors (excluding the capital stock of this nature, including the negative covenants under the 1st Lien Credit Facility discussed above. The 2nd Lien Term Loan contains various representationsMNI and warranties and may be terminated uponoccurrence of certain events of default. The 2nd Lien Term Loan also contains cross-default provisions tiedTNI).IndentureCredit Agreement, our new debt does not include a revolver. As part of the Credit Agreement, by June 30, 2020 we are required to cash collateralize all letters of credit which were previously collateralized by a revolving credit facility.1st Lien Credit Facility.$16,930,000.$16,930,000. See Note 10.SecurityThe Notes and1st Lien Credit Facility are fully and unconditionally guaranteed on a joint and several first-priority basis by eachfirst day of fiscal year 2020, we adopted ASC 842 using the modified retrospective method as of the Company's material domestic subsidiaries, excluding MNI,adoption date. As a result of electing the Pulitzer Subsidiaries and TNI (the "Lee Legacy Assignors"), pursuantmodified retrospective approach, we have not restated prior year financial statements to a first lien guarantee and collateral agreement dated as of March 31, 2014 (the "1st Lien Guarantee and Collateral Agreement").The Notes,conform to the 1st Lien Credit Facility and the subsidiary guarantees are secured, subject to certain exceptions, priorities and limitations, by perfected security interests in all property and assets, including certainnew guidance. Our operating lease portfolio primarily includes real estate, of the Lee Legacy Assignors, other than the capital stock of MNIoffice equipment, and any property and assets of MNI (the “Lee Legacy Collateral”), on a first-priority basis, equally and ratably with all of the Lee Legacy Assignors' existing and future obligations. The Lee Legacy Collateral includes, among other things, equipment, inventory, accounts receivables, depository accounts, intellectual property and certain of their other tangible and intangible assets.Also, the Notes and the 1st Lien Credit Facility are secured, subject to certain exceptions, priorities and limitations in the various agreements, by first-priority security interests in the capital stock of, and other equity interests owned by, the Lee Legacy Assignors (excluding the capital stock of MNI). The Notes and 1st Lien Credit Facility are subject to a Pari Passu Intercreditor Agreement dated March 31, 2014.The Notes, the 1st Lien Credit Facility and the subsidiary guarantees are also secured, subject to permitted liens, by a second-priority security interest in the property and assets of the Pulitzer Subsidiaries that become subsidiary guarantors (the "Pulitzer Assignors") other than assets of or used in the operations or business of TNI (collectively, the “Pulitzer Collateral”). In June 2015 the Pulitzer Assignors became a party to the 1st Lien Guarantee and Collateral Agreement on a second lien basis.Also, the Notes and the 1st Lien Credit Facility are secured, subject to certain exceptions, priorities, and limitations in the various agreements, by second-priority security interests in the capital stock of, and other equity interests in, the Pulitzer Assignors and Star Publishing’s interest in TNI.The 2nd Lien Term Loan is fully and unconditionally guaranteed on a joint and several first-priority basis by the Pulitzer Assignors, pursuant to a Second Lien Guarantee and Collateral Agreement dated as of March 31, 2014 (the “2nd Lien Guarantee and Collateral Agreement”) among the Pulitzer Assignors and the 2nd Lien collateral agent.Under the 2nd Lien Guarantee and Collateral Agreement, the Pulitzer Assignors have granted (i) first-priority security interests, subject to certain priorities and limitations in the various agreements, in the Pulitzer Collateral and (ii) have granted first-priority lien mortgages or deeds of trust covering certain real estate, as collateral for the payment and performance of their obligations under the 2nd Lien Term Loan.Also, under the 2nd Lien Guarantee and Collateral Agreement, the Lee Legacy Assignors have granted (i) second-priority security interests, subject to certain priorities and limitations in the various agreements, in the Lee Legacy Collateral, and (ii) have granted second-priority lien mortgages or deeds of trust covering certain real estate, as collateral for the payment and performance of their obligations under the 2nd Lien Term Loan. Assets of, or used in the operations or business of, MNI are excluded.The rights of each of the collateral agents with respect to the Lee Legacy Collateral and the Pulitzer Collateral are subject to customary intercreditor and intercompany agreements.Other2014 Refinancing, we capitalized $37,819,000Transactions, the Company entered into a lease agreement between BH Media, as Landlord, and the Company, as Tenant, providing for the leasing of debt financing costs. Amortization of debt financing costs totaled $1,525,00068 properties and related fixtures (including production equipment) used in the 26 weeks endedBH Media Newspaper Business (“BH Lease”). The Lease was signed and commenced on March 31, 2019. Amortization16, 2020. The BH Media Lease requires the Company to pay annual rent of such$8,000,000, payable in equal monthly payments, as well as all operating costs is estimatedrelating to total $1,933,000 for the remainder of 2019, $3,989,000 in 2020, $4,154,000 in 2021, $4,332,000 in 2022,properties (including maintenance, repairs, property taxes and $1,121,000 in 2023. At March 31, 2019, we have $15,529,000 of unamortized debt financing costs recorded as a reduction of Long-term debt in our Consolidated Balance Sheets.LiquidityAt March 31, 2019, after consideration of letters of credit, we have approximately $21,435,000 available for future use under our Revolving Facility, which expires on December 28, 2019. Including cash, our liquidity at March 31, 2019 totals $38,100,000. This liquidity amount excludes any future cash flows. We expect all interest and principalinsurance). Rent payments due in the next twelve months will be satisfied by existing cash and our cash flows, which will allow us to maintain an adequate level of liquidity. The Warrants, if and when exercised, would provide additional liquidity in an amount up to $25,140,000 subject to a reductionRent Credit (as defined in the Lease) equal to 8.00% of the net consideration for any amountsleased real estate sold by BH Media during the term of the Lease. In connection with the BH Lease, the Company may elect to use to repay our 1st Lien Term Loan and/or the Notes.Excluding our Revolving Facility, which is undrawnrecognized $56,226,000 and $56,226,000 in ROU assets and lease liabilities, respectively, as of March 16, 2020. 1,742 2,711 295 575 266 319 2,303 3,605 13 Weeks Ended 26 Weeks Ended 2,375 3,266 finalwe recorded operating lease right-of-use assets of $10,709,000, current portion of lease liabilities of $2,281,000, and long-term operating lease liabilities of $8,353,000 in a non-cash operating activity. our debt range from March 2022 through December 2022.There are numerous potential consequences under the Notes, 1st Lien Credit Facility and 2nd Lien Term Loan, if an event of default,lease liabilities were as defined, occurs and is not remedied. Many of those consequences are beyond our control. The occurrence of one or more events of default would give rise to the rightfollows: (Thousands of Dollars) March 29, 2020 7,048 13,681 11,413 10,698 10,218 50,643 103,701 (31,794 ) 71,907 applicable lender(s)year ended September 29, 2019, minimum lease payments during the five years ending September 2024 and thereafter were $3,403,000, $2,290,000, $2,238,000, $1,637,000, $1,367,000 and $4,991,000, respectively.exercise their remedies underborrow on a collateralized basis over a similar term of the Notes, 1st Lien Credit Facility5 year lease in a similar economic environment. This rate was reassessed as part of the Transactions and 2nd Lien Term Loan, respectively, including, without limitation,was utilized to re-measure the rightassumed lease liabilities as well as the BH Lease as of March 16, 2020. We will assess this rate annually to acceleratedetermine whether it needs to be updated. The weighted average revolving lease terms and discount rates for all outstanding debt and take actions authorized in such circumstances under applicable collateral security documents.Our ability to operateof our operating leases were as a going concern is dependent on our ability to remain in compliance with debt covenants and to repay, refinance or amend our debt agreements as they become due. The Notes, 1st Lien Credit Facility and 2nd Lien Term Loan have only limited affirmative covenants with which we are required to maintain compliance. We are in compliance with our debt covenants at March 31, 2019.69.08 8.27 % EffectiveWith the exception of defined benefit plans acquired in the Transactions, effective in 2012, substantially all benefits are frozen and only a small amount of additional benefits are being accrued. Our liability and related expense for benefits under the plans are recorded over the service period of employees based upon annual actuarial calculations. Plan funding strategies are influenced by government regulations. Plan assets consist primarily of domestic and foreign corporate equity securities, government and corporate bonds, hedge fund investments and cash.In addition, wepostretirement plans are as follows: 103 9 111 18 1,420 1,641 2,651 3,282 (2,321 ) (2,018 ) (4,272 ) (4,036 ) 792 284 1584 568 (2 ) (25 ) (4 ) (50 ) (8 ) (109 ) 70 (218 ) Service cost for benefits earned during the period 36 — 36 — 110 103 177 206 (265 ) (270 ) (530 ) (540 ) (186 ) (244 ) (372 ) (488 ) (161 ) (181 ) (322 ) (362 ) (466 ) (592 ) (1,011 ) (1,184 ) PENSION PLANS 13 Weeks Ended 26 Weeks Ended (Thousands of Dollars) March 31
2019March 25
2018March 31
2019March 25
2018 Service cost for benefits earned during the period 9 12 18 24 Interest cost on projected benefit obligation 1,641 1,438 3,282 2,876 Expected return on plan assets (2,018 ) (1,983 ) (4,036 ) (3,966 ) Amortization of net loss 284 506 568 1,012 Amortization of prior service benefit (25 ) (34 ) (50 ) (68 ) Pension benefit (109 ) (61 ) (218 ) (122 ) POSTRETIREMENT MEDICAL PLANS 13 Weeks Ended 26 Weeks Ended (Thousands of Dollars) March 31
2019March 25
2018March 31
2019March 25
2018 Interest cost on projected benefit obligation 103 90 206 181 Expected return on plan assets (270 ) (270 ) (540 ) (540 ) Amortization of net gain (244 ) (246 ) (488 ) (492 ) Amortization of prior service benefit (181 ) (196 ) (362 ) (392 ) Curtailment gains — (2,031 ) — (2,031 ) Postretirement medical benefit (592 ) (2,653 ) (1,184 ) (3,274 ) At the beginning of fiscal year 2019, we adopted the new accounting standard to improve the presentation of pension and postretirement benefit expenses. As a result, the service cost for benefits earned during the period continue to be included as compensation in the Consolidated Statement of Income and Comprehensive income, while the other components of the pension benefit are recorded as non-operating income in other, net. Prior period amounts have been reclassified to conform to current period presentation.31, 201929, 2020 we contributed $650,000did not contribute to our pension plans. Based on our forecast at March 31, 2019,29, 2020, we do not expectexpected to make contributions of $6,720,000 to our pension trust during the remainder of fiscal 2019.2020. However, the CARES Act allows the Company to defer pension contributions until January 1, 2021. As a result, we do not expect to make pension contributions for the remainder of fiscal 2020.8 ACQUISITIONS In March 2017, we notified certain participantsThe allocation of the purchase price is preliminary pending the finalization of the fair value of the acquired net assets and liabilities assumed, deferred income taxes, assumed income and non-income based tax liabilities and goodwill. These amounts are subject to adjustment as additional information is obtained within the measurement period (not to exceed 12 months from the acquisition date). As part of the Transactions, the Company also entered into the Credit Agreement and the BH Lease, as described above. The Company concluded that these agreements were not separate from the Transactions and evaluated these agreements for off-market terms and no such terms were identified. As such, the consideration for the acquisitions was limited to cash consideration, as shown below. The accounting for the Credit Agreement and the BH Lease are described in oneNotes 5 and 6.(in Thousands) $ 22,293 52,559 12,167 42,952 7,445 38,780 36,060 17,130 21,680 63,559 314,625 (73,451 ) Operating lease liabilities (6,625 ) Other liabilities assumed (2,246 ) (43,503 ) (36,800 ) (162,625 ) 152,000 Less: acquired cash (22,293 ) Total consideration less acquired cash $ 129,707 post employment medical plansdetermination of changes to their planfair values and in December 2017liabilities by the plan was terminated. These changes resulted in a non-cash curtailment gainend of $2,031,000 infiscal year 2020.second quarter13 weeks ended March 25, 2018. Curtailment gains are recorded in loss (gain) on sales of assets29, 2020, the revenue and other, net income included in the Consolidated StatementsIncome Statement related to the acquirees was $14,648,000 and $1,013,000, respectively.Operations and Comprehensive income.Inoperations assuming the second quarterTransactions, along with the credit arrangements necessary to finance the Transactions, occurred on October 1, 2018, the first day of 2019, we incurred an estimated partial liabilityfiscal year 2019.Unaudited 13 Weeks Ended 26 Weeks Ended March 29, March 31, March 29, March 31, 2020 2019 2020 2019 $ 207,329 230,323 442,025 494,072 $ 4,053 (3,992 ) 20,608 4,483 $ 0.07 (0.07 ) 0.36 0.08 CWA/ITU multi-employer plan,allocation of the purchase price and other acquisition accounting adjustments. This pro forma information is not necessarily indicative of what our results would have been had we operated the businesses since the beginning of the periods presented. The pro forma adjustments reflect the income statement effects of depreciation expense and amortization of intangibles related to the fair value adjustments of the assets acquired, acquisition-related costs, incremental interest expense related to the financing of the Transactions and 2020 Refinancing, the Lease agreement entered into as part of the Transactions, the elimination of certain intercompany activity and the related tax effects of the adjustments.amount of $500,000, which is included in restructuring costs and other.• $10,670,000 increase to net income for the 13 weeks ended March 29, 2020. 7• $962,000 increase to net income for the 13 weeks ended March 29, 2019. • $11,866,000 increase to net income for the 26 weeks ended March 29, 2020. • $15,614,000 decrease to net income for the 26 weeks ended March 29, 2019. expense benefitof $156,000$2,331,000 related to a loss before taxes of $2,171,000$7,321,000 for the 13 weeks ended March 29, 2020, and an income tax benefit of $460,000 related to income before taxes of $268,000 for the 26 weeks ended March 29, 2020. For the 13 weeks ended March 31, 2019 and, we recorded an income tax expensesexpense of $4,670,000$156,000 related to incomea loss before taxes of $13,062,000$2,171,000 and an income tax expense of $4,670,000 related to income of $13,062,000 for the 26 weeks ended March 31, 2019. Including the transactional impact of revaluing tax assets and liabilities, we recorded income tax expense of $927,000 related to income of $3,460,000 for the 13 weeks ended March 25, 2018 and, including the transactional impact of revaluing tax assets and liabilities, we recorded income tax benefit of $18,763,000 related to income of $19,097,000 for the 26 weeks ended March 25, 2018.31, 201929, 2020 was 31.8% and negative 7.2% and a 35.8%171.6%, respectively. The effective income tax rate for the 13 and 26 weeks ended March 25, 201831, 2019 was 26.8% expensenegative 7.2% and negative 98.3%.and mark-to-market adjustments to value the Warrants.ortax examinations in progress. California is the only state with an income tax examinationsexamination currently in progress. Our income tax returns have generally been audited or closed to audit through 2012. See Note 1112 for a discussion of our tax audits.25, 2018,29, 2019, we had approximately $63,048,000 of state net operating loss tax benefits. The Company consumed its federal net operating losses in the year ended September 30, 2018.8 (5,367 ) (2,678 ) (46 ) 7,683 58,136 57,703 57,931 57,501 (1,572 ) (2,095 ) (1,515 ) (2,097 ) 56,564 55,608 56,416 55,404 382 — 585 1,287 56,946 55,608 57,001 56,691 (0.09 ) (0.05 ) (0.00 ) 0.14 (0.09 ) (0.05 ) (0.00 ) 0.14 13 Weeks Ended 26 Weeks Ended (Thousands of Dollars and Shares, Except Per Share Data) March 31
2019March 25
2018March 31
2019March 25
2018 (Loss) Income attributable to Lee Enterprises, Incorporated: (2,678 ) 2,239 7,683 37,242 Weighted average common shares 57,703 57,070 57,501 56,924 Less weighted average restricted Common Stock (2,095 ) (2,378 ) (2,097 ) (2,416 ) Basic average common shares 55,608 54,692 55,404 54,508 Dilutive stock options and restricted Common Stock — 1,169 1,287 1,309 Diluted average common shares 55,608 55,861 56,691 55,817 Earnings per common share: Basic (0.05 ) 0.04 0.14 0.68 Diluted (0.05 ) 0.04 0.14 0.67 31, 2019,29, 2020, 6,954,3006,000,000and6,000,000, weighted average6,393,966 shares, respectively, were not considered in the computation of diluted earnings per common share because the exercise prices of the related stock options and Warrants were in excess of the fair market value of our Common Stock. For the 13 and 26 weeks ended March 25, 2018,31, 20196,500,900, 6,000,000and6,706,603, weighted average6,000,000 shares, respectively, were not considered in the computation of diluted earnings per common share because the exercise prices of the related stock options and Warrants were in excess of the fair market value of our Common Stock.931, 201929, 2020 follows: Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value 809 1.82 — — — — 809 1.82 1.4 — 809 1.82 1.4 — (Thousands of Dollars and Shares, Except Per Share Data) Shares Outstanding, September 30, 2018 1,100 1.88 Exercised (48 ) 2.36 Cancelled (32 ) 2.04 Outstanding, March 31, 2019 1,020 1.86 2.1 1,471 Exercisable, March 31, 2019 1,020 1.86 2.1 1,471 31, 2019:29, 2020: Weighted Average Grant Date Fair Value 1,477 2.49 (601 ) 1.94 720 1.62 (24 ) 2.49 1,572 2.15 (Thousands of Shares, Except Per Share Data) Shares Outstanding, September 30, 2018 2,059 2.31 Vested (728 ) 1.53 Granted 788 2.18 Cancelled (24 ) 2.01 Outstanding, March 31, 2019 2,095 2.53 31, 201929, 2020 is $2,602,633,$1,764,000, which will be recognized over a weighted average period of 1.71.8 years.10$6,068,000,$6,068,000, including our 17% ownership of the nonvotingnon-voting common stock of TCT and a private equity investment, are carried at cost. As of March 31, 2019,29, 2020, based on the most recent data available, the approximate fair value of the private equity$10,203,256$9,613,000which is a level 3 fair value measurement. Fair value of the remaining investments approximates book value.$385,000,000$576,000,000 principal amount of the Notes and $91,455,000 principal amount under the 2nd Lien Term Loan. At March 31, 2019, based on private market price quotations, the fair values were $392,311,150 and $91,455,213 for the Notes and 2nd Lien Term Loan respectively. These representrecorded at carrying value, which approximates fair value. This represents a level 23 fair value measurements.remeasurere-measure the liability to fair value each reporting period, with changes reported in other non-operating income (expense). The initial fair value of the Warrants was $16,930,000.$16,930,000. The fair value of Warrants at March 29, 2020 andDecember 29, 2019 are $158,000 and December 2018 are $4,479,000, 1,726,000,$178,000, respectively. Fair value is determined using the Black-Scholes option pricing model. These represent level 2 fair value measurements.117.("IRS"(“IRS”) and various state tax jurisdictions. From time to time, we are subject to routine audits by those agencies and those audits may result in proposed adjustments. We have considered the alternative interpretations that may be assumed by the various taxing agencies, believe our positions taken regarding our filings are valid, and that adequate tax liabilities have been recorded to resolve such matters. However, the actual outcome cannot be determined with certainty and the difference could be material, either positively or negatively, to the Consolidated Statements of Operations and Comprehensive Income (Loss) in the periods in which such matters are ultimately determined. We do not believe the final resolution of such matters will be material to our consolidated financial position or cash flows.2009.The Company contributesthree multiemployer pension plans. In June 2017, a union contract covering certain of our employees under aclaim from the multiemployer pension plan expired resulting infor a partial withdrawal from oneliability. The amount and timing of such liability will be dependent on actions taken, or not taken, by the Company and the pension plan, as well as the future investment performance, the funding status of the multiemployer plans. In 2017,plan and the Company recorded an estimateeffect (if any) of the partialTransactions on the prior withdrawal liability. We have accrued a liability of $3,255,000 related to this withdrawal, as of March 29, 2020. The withdrawal liability totaling $2,600,000. Once the multiemployer pension plan's administrators finalize the partial withdrawal liability, itdetermined to be due under this plan will be paid in equal installmentsfunded over a twenty year period.period of 20 years.In the second quarter of 2019, we recorded an estimated partial liability for the CWA/ITU multi-employer plan, in the amount of $500,000, which is included in restructuring costs and other.Itemem 2. Management's Discussion and Analysis of Financial Condition and Results of Operations weeks and 26 weeks 31, 201929, 2020. This discussion should be read in conjunction with the Consolidated Financial Statements and related Notes thereto, included herein, and our 20182019 Annual Report on Form 10-K.Nomeasureperformance measures to supplement the financial information presented on a GAAP basis. These non-GAAP financial measures should not be considered in isolation or as a substitute for any relatedthe relevant GAAP measures and should be read in conjunction with information presented on a GAAP basis.measure. However, we believe the use ofmeasures have been adjusted and to report non-GAAP financial measures provides meaningful supplemental information with which to evaluateexcluding such items. Accordingly, exclusion of those or similar items in our financial performance,non-GAAP presentations should not be interpreted as implying the items are non-recurring, infrequent, or assist in forecasting and analyzing future periods. We also believe 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.users'users overall understanding of the operating performance of the Company. The measure isolates unusual, infrequent or non-cash transactions from the operating performance of the business. This allows users to easily compare operating performance among various fiscal periods and how management measures the performance of the business. This measure also provides users with a benchmark that can be used when forecasting future operating performance of the Company that excludes unusual, nonrecurring or one time transactions. Adjusted EBITDA is also a component of the calculation used by stockholders and analysts to determine the value of our business when using the market approach, which applies a market multiple to financial metrics. It is also a measure used to calculate the leverage ratio of the Company, which is a key financial ratio monitored and used by the Company and its investors. Adjusted EBITDA is defined as net income (loss), plus non-operating expenses, income tax expense, (benefit), depreciation and amortization, assets loss (gain) on sales, impairments and other, restructuring costs and other, stock compensation and our 50% share of EBITDA from TNI and MNI, minus equity in earnings of TNI and MNI and curtailment gains.Occasionally,Generally, the Company provides forward-looking guidance of Cash Costs, which can be used by financial statement users to assess the Company's ability to manage and control its operating cost structure. Cash Costs are defined as the sum of compensation, newsprint and ink and other operating expenses. Depreciation and amortization, assets loss (gain) on sales, impairments and other, other non-cash operating expenses and other expenses are excluded. Cash Costs also exclude restructuring costs and other, which are typically paidsettled in cash.A table reconciling adjusted EBITDA to net income, the most directly comparable measure under GAAP, is set forth below under the caption "Reconciliation of Non-GAAP Financial Measures". Reconciliations of adjusted income (loss) and adjusted earnings (loss) per diluted common share to income (loss) attributable to Lee Enterprises, Incorporated and earnings (loss) per diluted common share, respectively, the most directly comparable measures under GAAP, are set forth in Item 2, included herein, under the caption “Net Income and Earnings Per Share”.the reconciliation of total operating revenue less cash costs to operating income can be found in tables in Item 2, includedincluded herein, under the captions “13 Weeks Ended March 31, 2019" and “26 Weeks Ended March 31, 2019"caption “Continuing Operations”.adjustedAdjusted EBITDA to net income, the most directly comparable GAAP measure: 13 Weeks Ended 26 Weeks Ended 53 Weeks Ended (Thousands of Dollars) March 31
2019March 25
2018March 31
2019March 25
2018March 31 2019 Net Income (loss) (2,327 ) 2,533 8,392 37,860 17,579 Adjusted to exclude Income tax expense (benefit) 156 927 4,670 (18,763 ) 7,205 Non-operating expenses, net 14,738 13,103 27,224 27,300 54,797 Equity in earnings of TNI and MNI (1,717 ) (1,608 ) (3,846 ) (3,991 ) (9,104 ) Loss (gain) on sale of assets and other, net 83 (1,300 ) (17 ) (1,297 ) 7,709 Depreciation and amortization 7,386 8,016 14,916 16,068 30,614 Restructuring costs and other 2,759 1,816 2,820 2,284 6,086 Stock compensation 426 497 888 1,016 1,731 Add: Ownership share of TNI and MNI EBITDA (50%) 2,080 2,086 4,681 5,245 9,320 Adjusted EBITDA 23,584 26,070 59,728 65,722 125,937 August 2018, the Financial Accounting Standards Board (“FASB”) issued a new standard which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The modifications remove disclosures, clarify the specific requirements of disclosures and add disclosure requirements identified as relevant. We are currently in the process of evaluating the impact of this guidance on our Consolidated Financial Statements.In August 2018,February 2016, the FASB issued a new standard which modifiesfor the disclosure requirementsaccounting treatment of leases, known as Accounting Standards Codification 842 (“ASC 842”). The new standard is based on fair value measurements.the principle that entities should recognize assets and liabilities arising from leases. The amendmentsnew standard's primary change is the requirement for entities to recognize a lease liability for payments and a right-of-use (“ROU”) asset representing the right to use the leased asset during the term on changes in unrealized gains and losses,most operating lease arrangements. We adopted the range and weighted averagestandard effective September 30, 2019, the first day of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year 2020.adoption. All other amendments should be applied retrospectivelypractical expedients which permits the Company to all periods presented upon their effective date.not reassess under the new standard the prior conclusions about lease identification, lease classification, or initial direct costs. In addition, we did reassess whether existing land easements which were previously not accounted for as leases are or contain leases under the new guidance. We have elected to combine non-lease and lease components when accounting for leases. The Company has made a policy election to exclude short-term leases, those with an original term of less than twelve months, from recognition and measurement under ASC 842. As such, we have not recognized an ROU asset or lease liability for these leases. Additional information and disclosures required by this new standard are currentlycontained in the process of evaluating the impact of this guidance on our Consolidated Financial Statements.•• Intangible assets, other than goodwill; • Pension, postretirement and postemployment benefit plans; • Income taxes; and • Business combinations other than goodwill;•Pension, postretirementacquired and postemployment benefit plans;•Income taxes;• future expected cash flows from subscription, advertising and commercial print relationships and related assumptions about future revenue growth and customer retention; • discount rates; and • royalty rates used to value acquired mastheads. theseour accounting for business combinations can be found in Note 1. Additional information regarding all other critical accounting policies can be found under the caption “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our 20182019 Annual Report on Form 10-K. We5077 principally mid-sized local media operations and manage 30 additional local media operations through an agreement with BH Media Group, Inc. (the "Management Agreement").79%72.5% of all adults in our larger markets through a combination of our print and digital content offerings.Our web and mobile sites are the number one digital source of local news in most of our markets, reaching more than 30.2 million unique visitors each month with a monthly average of 298.2 million page views. Page views per session, one metric we use to monitor engagement, increased 14.3% in 2019.Our printed newspapers reach more than 0.7 million households daily and more than 1.0 million on Sunday, with estimated readership totaling three million. Digital only subscribers totaled approximately 65,000, a 55.5% increase over the prior year.• Our printed newspapers, including the acquisitions, reach approximately 1.2 million households daily and approximately 1.6 million on Sunday, with estimated readership totaling three million. Digital only subscribers totaled approximately 200,000, with a 91.7% increase over the prior year at Legacy Lee. thetheir associated digital products, such as the St. Louis Post-Dispatch, to non-daily newspapers with news websites and digital platforms serving smaller communities.("TownNews"(“TownNews”). TownNews provides state-of-the-art web hosting, content management services and video management services to nearly 2,000 other media organizations including broadcast.We entered intoManagementCompany completed the Asset and Stock Purchase Agreement dated as of January 29, 2020 with Berkshire Hathaway Inc., a Delaware corporation (“Berkshire”) and BH Media Group, Inc., a Delaware corporation (“BHMG”) (“Purchase Agreement”). As part of the Purchase Agreement, the Company purchased certain assets and assumed certain liabilities of BHMG’s newspapers and related community publications business (“BH Media Newspaper Business”), excluding real estate and fixtures such as production equipment, and all of the issued and outstanding capital stock of The Buffalo News, Inc., a Delaware corporation (“Buffalo News”), for a combined purchase price of $140,000,000 (collectively, the “Transactions”). The Transactions were financed pursuant to managea credit agreement dated as of January 29, 2020 between the Company and BH Finance LLC, a Delaware limited liability company affiliated with Berkshire Hathaway's newspaper(“Credit Agreement”). Our Consolidated Financial Statements show the combined results of the Company for the period of March 16, 2020 through and as of March 29, 2020.30 markets.addition to 49 paid weekly newspapers with websites and 32 other print products. Buffalo News is a provider of local print and digital news to the Buffalo, NY area. Between July 2, 2018 and March 16, 2020, the Company managed the BH Media Newspaper Business pursuant to a Management Agreement between BHMG and the Company dated June 26, 2018 (“Management Agreement”).operatesdid not recognize a gain or loss as a result of the settlement of this preexisting relationship.consistent with how it manages its own newspaperas Landlord, and digital operations. Among other decisions, Berkshire Hathaway is responsible for approving operating and capital budgets. The Management Agreement extends for a term of five years and may be extended thereafter for successive one-year terms on such terms as may be mutually agreed to by the Company, as Tenant, providing for the leasing of 68 properties and Berkshire Hathaway.related fixtures (including production equipment) used in the BH Media Newspaper Business (“BH Lease”). The Management Agreement provides forBH Lease was signed and commenced on March 16, 2020. The BH Lease requires the Company to be paid a fixedpay annual feerent of $5$8 million, payable quarterly in arrears,equal monthly payments, as well as all operating costs relating to the properties (including maintenance, repairs, property taxes and insurance). Rent payments will be subject to a variable fee based onRent Credit (as defined in the financial performanceBH Lease) equal to 8.00% of the net consideration for any leased real estate sold by BH Media. The variable fees are payable annually in arrears.DEBTLIQUIDITYWeFUTURE OPERATING RESULTS• In March 2020, we completed the acquisition of BHMG and The Buffalo News for a purchase price of $140,000,000. The acquisition was funded by the Term Loan, as part of a broader comprehensive refinancing of all of our then outstanding debt, as well as cash on the balance sheet. • During 2020 prior to the acquisition of BHMG and The Buffalo News, we disposed of substantially all of the assets of certain of our smaller properties, including four daily newspapers and related print and digital publications, for an aggregate sales price of $3,950,000. substantial amount of debt, as discussed more fullysignificant negative impact, in Note 5the near term, on the Company’s business and operations. The long-term impact of the Notes to Consolidated Financial Statements, included herein. Since February 2009, we have satisfied all interest payments and substantially all principal payments due under our debt facilities with our cash flows and asset sales.As of March 31, 2019, our debt consists of the following:$400,000,000 aggregate principal amount of 9.5% Senior Secured Notes (the “Notes”), pursuant to an Indenture dated as of March 31, 2014 (the “Indenture”), of which $385,000,000 is outstanding at March 31, 2019;•$250,000,000 first lien term loan (the "1st Lien Term Loan") and $40,000,000 revolving facility (the "Revolving Facility") under a First Lien Credit Agreement dated as of March 31, 2014 (together, the “1st Lien Credit Facility”), of which $0 is outstanding at March 31, 2019; and•$150,000,000 second lien term loan under a Second Lien Loan Agreement dated as of March 31, 2014 (the “ 2nd Lien Term Loan”), of which $91,455,000 is outstanding at March 31, 2019.In November 2018, we repaid, in full, the remaining balance of the 1st Lien Term Loan.In December 2018 we amended our 1st Lien Credit Facility to amend and extend our Revolving Facility (the "Amendment"). The Amendment, among other changes, extends the maturity of the revolving loan commitments of the 1st Lien Lenders for twelve months, reduces the revolver loan commitments from $40,000,000 to $27,200,000 with a further 15% reduction to the revolving loan commitments of the 1st Lien Term Lenders effective as of July 31, 2019.Our ability to make payments on our indebtednessCOVID-19 pandemic will depend on the length, severity and recurrence of the pandemic, the availability of antiviral medications and vaccinations, the duration and extent of government actions designed to combat the pandemic, as well as changes in consumer behavior, all of which are highly uncertain.ability to generate future cash flows from operations. Cash generated from future asset sales could serve as an additional source of repayment. This ability, to a certain extent, is subject to general economic, financial, competitive, business, legislative, regulatoryrelationship with our local advertisers, reduce our cost structure and other factors that are beyond our control.At March 31, 2019, after consideration of letters of credit, we have approximately $21,435,000 available for future use under our Revolving Facility, which expires December 28, 2019. Including cash, our liquidity at March 31, 2019 totals $38,100,000. This liquidity amount excludes any future cash flows. Our adjusted EBITDA has been strong for the last seven years and totaled $125,937,000 for the trailing twelve months ended March 31, 2019, but there can be no assurance that such performance will continue. We expect all interest and principal payments due in the next twelve months will be satisfied by our cash flows from operations and certain asset sales, whichpreserve liquidity. The Company believes these initiatives will allow us to maintain an adequate levelmeet our commitments; however, they may not be sufficient to fully offset the negative impact of liquidity.At March 31, 2019, the principal amountCOVID-19 pandemic on the Company’s business and results of our outstanding debt totaled $476,455,000. The March 31, 2019 principal amount of our debt, net of cash, is 3.65 times our trailing twelve months adjusted EBITDA.Excluding our Revolving Facility, which is undrawnoperations.31, 2019, final maturities29, 2020 and have concluded that there is no event or circumstance that has occurred to trigger an impairment assessment of our debt range from March 2022 through December 2022. Our Revolving Facility expires December 28, 2019.There are numerous potential consequences underlong-lived or indefinite-lived assets. We will continue to monitor the Notes, 1st Lien Credit Facility and 2nd Lien Term Loan, ifenvironment to determine whether the impacts to the Company represent an event or change in circumstances that may trigger a need to reassess for useful life revision or impairment.Our ability to operate as a going concern is dependent on our ability to remain in compliance with debt covenants and to repay, refinance or amend our debt agreements as they become due, if necessary. The Notes, 1st Lien Credit Facility and 2nd Lien Term Loan have only limited affirmative covenants with which we are required to maintain compliance. We are in compliance with our debt covenants at March 31, 2019. MARCH 31, 2019 (Thousands of Dollars, Except Per Share Data) March 31
2019March 25
2018Percent Change Advertising and marketing services revenue 62,934 71,553 (12.0 ) Subscription 45,076 45,972 (1.9 ) Other 14,694 10,280 42.9 Total operating revenue 122,704 127,805 (4.0 ) Operating expenses: Compensation 47,785 49,363 (3.2 ) Newsprint and ink 5,825 5,640 3.3 Other operating expenses 48,016 49,315 (2.6 ) Cash costs 101,626 104,318 (2.6 ) Total operating revenue less cash costs 21,078 23,487 (10.3 ) Depreciation and amortization 7,386 8,016 (7.9 ) Assets loss (gain) on sales, impairments and other, net 83 (1,300 ) NM Restructuring costs and other 2,759 1,816 51.9 Operating expenses 111,854 112,850 (0.9 ) Equity in earnings of associated companies 1,717 1,608 6.8 Operating income 12,567 16,563 (24.1 ) Non-operating income (expense): Interest expense (12,140 ) (13,274 ) (8.5 ) Debt financing and administrative cost (962 ) (1,217 ) (21.0 ) Other, net (1,636 ) 1,388 NM Non-operating expenses, net (14,738 ) (13,103 ) 12.5 Income (loss) before income taxes (2,171 ) 3,460 NM Income tax expense 156 927 (83.2 ) Net income (loss) (2,327 ) 2,533 NM Net income attributable to non-controlling interests (351 ) (294 ) 19.4 Income (loss) attributable to Lee Enterprises, Incorporated (2,678 ) 2,239 NM Other comprehensive loss, net of income taxes (122 ) (36 ) NM Comprehensive income (loss) attributable to Lee Enterprises, Incorporated (2,800 ) 2,203 NM Earnings per common share: Basic (0.05 ) 0.04 NM Diluted (0.05 ) 0.04 NM March 29, March 31, Percent 2020 2019 Change 60,945 62,934 (3.2 ) 46,443 45,076 3.0 13,979 14,694 (4.9 ) 121,367 122,704 (1.1 ) 48,691 47,785 1.9 4,321 5,825 (25.8 ) 52,842 48,016 10.1 105,854 101,626 4.2 15,513 21,078 (26.4 ) 7,276 7,386 (1.5 ) (6,113 ) 83 NM 1,925 2,759 (30.2 ) 108,942 111,854 (2.6 ) 1,362 1,717 (20.7 ) 13,787 12,567 9.7 (11,127 ) (12,140 ) (8.3 ) (10,670 ) (962 ) NM Other, net 689 (1,636 ) NM (21,108 ) (14,738 ) 43.2 Income (loss) before income taxes (7,321 ) (2,171 ) NM Income tax (benefit) expense (2,331 ) 156 NM Net income (4,990 ) (2,327 ) NM (377 ) (351 ) 7.4 Income attributable to Lee Enterprises, Incorporated (5,367 ) (2,678 ) NM 316 (122 ) NM Comprehensive income attributable to Lee Enterprises, Incorporated (5,051 ) (2,800 ) 80.4 Basic (0.09 ) (0.05 ) 97.0 Diluted (0.09 ) (0.05 ) 95.7 "2019 Quarter"“2020 Quarter” refer to the 13 weeks ended 31, 201929, 2020. Similarly, references to the "2018 Quarter"“2019 Quarter” refer to the 13 weeks ended March 25, 201831, 2019.In20192020 Quarter, down $1,337,000, or 1.1%, which included $14,648,000 in revenue from the Transactions.revenue decreased $8,619,000, or 12.0%totaled $24,697,000 in the 2020 Quarter, up 2.6% compared to the 2018 Quarter. The decrease in advertisingprior year, with $1,389,000 attributable to acquired digital advertising and marketing services revenue. Digital advertising and marketing services represented 40.5% of the 2020 Quarter total advertising and marketing services revenue. Decreases in revenue is dueare attributed to softness inreduced demand for print advertising, demand resulting in reduced advertising volume primarilyconsistent with general industry trends adversely affecting the publishing industry, and negative impacts from large retail, big box stores and classifieds.Digital advertising increased 5.3% to the COVID-19 pandemic.24,068,00020192020 Quarter, and represents 38.2% of total advertising revenue. Digital retail advertising, which represents 61.8% of total digital advertising, increased 4.9%, partially offsetting print declines.Subscription revenue decreased $896,000, or 1.9%, in the 2019 Quarter. Strategic pricing programs and premium content helped offset lower paid circulation units. Our average daily newspaper circulation, including TNI, MNI and digital subscribers, totaled 0.7 million in the 2019 Quarter. Sunday circulation totaled 1.0 million. Digital only subscribers totaled approximately 65,000, a 55.5% increase over the prior year.Other revenue, which consists of digital services, Management Agreement revenues, commercial printing, revenue from delivery of third party products and the sale of books, increased 42.9% inup 3.0% compared to the 2019 Quarter. The increase wasis attributed to $6,564,000 of acquired subscription revenue and an increase in digital-only subscribers partially offset by lower print circulation units, consistent with industry trends and timing of price increases. As of March 29, 2020, we now have nearly 200,000 digital only subscribers.30.3%9.8% increase in revenue at TownNews. Management fee revenue from BH Media Group was $3,850,000.Excluding intercompany activity,compared to the 2019 Quarter. On a stand-alone basis, revenue at TownNews totaled $6,149,000, an increase of 11.1%. Investments in video and streaming technology expanded product offerings that helped gain market share in publishing and broadcast, and increased 30.3%revenue.a growing broadcast customer base, gaining print market share and$846,000 of acquired commercial printing revenue offset by declines in volume from our partners, consistent with general industry trends.impact of the GTxcel acquisition. On a stand alone basis, revenue at TownNews totaled $20,881,000 over the last twelve months.In the 20192020 Quarter our mobile, tablet, desktop and app sites, including TNI and MNI, attracted a monthly average of 30.2 million unique visitors with 298.2 million page views, a 13.5% increase in page views compared to the 2018 Quarter. Increased audience engagement is driving a higher number pages viewed per user session$3,850,000 in the 2019 Quarter. Research in our larger markets indicates we are maintaining our share of audience in our markets through the combination of strongaudience growthrevenue including digital advertising revenue, digital subscription revenue and print newspaper readership.Operating ExpensesOperating expenses for the 2019 Quarter decreased 0.9%. Cash costs decreased 2.6% compared to the prior year quarter.Compensation expense decreased $1,578,000 , or 3.2% driven by an 8.7% decline in average full-time equivalent employees partially offset by unfavorable claims experience from our self insured medical plan and compensation increases. Outsourcing certain functions and continued business transformation affected the number of full-time equivalents in the 2019 Quarter.Newsprint and ink costs increased $185,000, or 3.3%, due to significant increases in newsprint prices partially offset by a10.4% reduction in newsprint volume from unit declines. See Item 3, “Commodities”, included herein, for further discussion and analysis2020 Quarter, an increase of the impact of newsprint prices on our business.Other operating expenses for the 2019 Quarter decreased$1,299,000, or 2.6%. Other operating expenses include all operating costs not considered to be compensation, newsprint, depreciation and amortization, or restructuring costs and other. The largest components of these costs include delivery, postage, outsourced printing, digital cost of goods sold and facility expenses. Cost reductions were primarily related to lower delivery and other print-related costs offset in part by higher costs associated with growing digital revenue and outsourcing.We expect cash costs on a same property basis to be down 4-5% in fiscal year 2019.Depreciation expense decreased $526,000, or 14.3%, and amortization expense decreased $104,000, or 2.4%, in the 2019 Quarter.Assets loss (gain) on sales, impairments and other, was a net loss of $83,000 in the 2019 Quarter compared to a net gain of $1,300,000 in the 2018 Quarter. The net gain in the 2018 Quarter includes curtailment gains of $2,031,000.Restructuring costs and other totaled $2,759,000 and $1,816,000 in4.9% over the 2019 Quarter, and 2018 Quarter, respectively. The majority of restructuring costs relate to severance. In the 2019 Quarter, we recorded an estimated withdrawal liability of $500,000 related to onerepresented 30.3% of our multi-employer plans, which is included in restructuring costs and other.Results of OperationsThe factors noted above resulted intotal operating income of $12,567,000revenue in the 2019 Quarter compared to $16,563,000 in the 20182020 Quarter.increased $109,000decreased $355,000 in the 20192020 Quarter.Nonoperating Income and ExpenseInterest expense decreased 1,134,000108,942,000, or 8.5%,a 2.6% decrease compared to$12,140,000 in the 2019 Quarter, duewhich included $13,351,000 in operating expenses from Transactions. Operating expenses include compensation expense, newsprint and ink, other operating expenses, depreciation, amortization, restructuring and other expenses, assets loss (gain) on sales, and impairments. Cash costs were $105,854,000, a 4.2% increase compared to lower debt balances. Our weighted average cost of debt, excluding amortization of debt financing costs, was 10.0% at the end of the 2019 Quarter.We recognized $962,000 of debt financing and administrative costs in the 2019 Quarter, compared to $1,217,000which included $12,760,000 of acquired Cash Costs.2018 Quarter. The majority of the costs represent amortization of refinancing costs paid in 2014.Other non-operating income and expense consists of benefits associated with our pension and other postretirement plans and the fair value adjustment of our Warrants.We recorded $711,000 of other periodic pension benefits in the 20192020 Quarter, and $708,000 in the 2018 Quarter.Due to the fluctuation in the price of our Common Stock, we recorded non-operating expense of $2,753,000 in the 2019 Quarter and non-operating income of $555,000 in the 2018 Quarter, related to the changes in the value of the Warrants.Overall ResultsWe recorded an income tax expense of $156,000, or 7.2% of pretax income in the 2019 Quarter. For the 13 weeks ended March 25,2018, we recognized an income tax expense of $927,000, or 26.8% of pretax income.NET INCOME AND EARNINGS PER SHAREThe following table summarizes the impact from the fair value adjustments of our Warrants on income attributable to Lee Enterprises, Incorporated and earnings per diluted common share. Per share amounts may not add due to rounding. 13 Weeks Ended March 31
2019 March 25
2018 (Thousands of Dollars, Except Per Share Data) Amount Per Share Amount Per Share Income (loss) attributable to Lee Enterprises, Incorporated, as reported (2,678 ) (0.05 ) 2,239 0.04 Adjustments: Warrants fair value adjustment 2,753 0.05 (555 ) (0.01 ) Income attributable to Lee Enterprises, Incorporated, as adjusted 75 — 1,684 0.03 26 WEEKS ENDED MARCH 31, 2019Operating results, as reported in the Consolidated Financial Statements, are summarized below. (Thousands of Dollars, Except Per Share Data) March 31
2019March 25
2018Percent Change Total advertising and marketing services revenue 138,897 156,213 (11.1 ) Subscription 91,345 94,241 (3.1 ) Other 28,663 21,136 35.6 Total operating revenue 258,905 271,590 (4.7 ) Operating expenses: Compensation 94,824 100,980 (6.1 ) Newsprint and ink 12,164 11,478 6.0 Other operating expenses 97,758 99,671 (1.9 ) Cash costs 204,746 212,129 (3.5 ) Total operating revenue less cash costs 54,159 59,461 (8.9 ) Depreciation and amortization 14,916 16,068 (7.2 ) Assets loss (gain) on sales, impairments and other (17 ) (1,297 ) NM Restructuring costs and other 2,820 2,284 23.5 Equity in earnings of associated companies 3,846 3,991 (3.6 ) Operating income 40,286 46,397 (13.2 ) Non-operating income (expense): Interest expense (24,397 ) (26,924 ) (9.4 ) Debt financing and administrative cost (1,858 ) (2,313 ) (19.7 ) Other, net (969 ) 1,937 NM Non-operating expenses, net (27,224 ) (27,300 ) (0.3 ) Income before income taxes 13,062 19,097 (31.6 ) Income tax expense (benefit) 4,670 (18,763 ) NM Net income 8,392 37,860 (77.8 ) Net income attributable to non-controlling interests (709 ) (618 ) 14.7 Income attributable to Lee Enterprises, Incorporated 7,683 37,242 (79.4 ) Other comprehensive (loss), net of income taxes (244 ) (9 ) NM Comprehensive income attributable to Lee Enterprises, Incorporated 7,439 37,233 (80.0 ) Earnings per common share: Basic 0.14 0.68 (79.4 ) Diluted 0.14 0.67 (79.1 ) References to the "2019 Period" refer to the 26 weeks ended March 31, 2019. Similarly, references to the "2018 Period" refer to the 26 weeks ended March 25, 2018.Operating RevenueIn the 2019 Period, advertising and marketing services revenue decreased $17,316,000, or 11.1%, compared to the 2018 Period. The decrease in advertising and marketing services revenue is due to softness in print advertising demand resulting in reduced advertising volume primarily from large retail, big box stores and classifieds.Digital advertising increased 6.7% to $49,563,000 in the 2019 Period and represents 35.7% of total advertising and marketing services revenue. Digital retail advertising, which represents 62.6% of total digital advertising, increased 7.7%, partially offsetting print declines.Subscription revenue decreased $2,896,000, or 3.1%, in the 2019 Period. Strategic pricing programs and premium content helped offset lower paid circulation units. Our average daily newspaper circulation, including TNI, MNI and digital subscribers, totaled 0.7 million in the 2019 Period. Sunday circulation totaled 1.0 million.Other revenue, which consists of digital services, Management Agreement revenues, commercial printing, revenue from delivery of third party products and the sale of books, increased 35.6% in the 2019 Period. TheQuarter. This increase was dueattributable to a 28.0% increase in revenue at TownNews. We earned $6,450,000 in management fee revenue from BH Media Group.Excluding intercompany activity, revenue at TownNews increased 28.0% in the 2019 Period, due to growing broadcast customer base, gaining print market share and the impact$6,578,000 of the GTxcel acquisition. On a stand alone basis, revenue at TownNews totaled $20,881,000 over the last twelve months.In the 2019 Period, our mobile, tablet, desktop and app sites, including TNI and MNI, attracted a monthly average of 29.6 million unique visitors with 293.6 million page views, a 15.3% increase in page views compared to the 2018 Period. Increased audience engagement is driving a higher number pages viewed per user session in the 2019 Period. Research in our larger markets indicates we are maintaining our share of audience in our markets through the combination of strong digital audience growth and print newspaper readership.Operating ExpensesOperating expenses for the 2019 Period decreased 2.9%. Cash cost decreased 3.5% compared to the prior year Period.Compensationacquired compensation expense, decreased $6,156,000, or 6.1%, drivenpartially offset by a decline of 11.4%14.6% reduction in average full time equivalent employees.increased $686,000,decreased $1,504,000 in the 2020 Quarter, or 6.0%25.8%, duecompared to significant increasesthe 2019 Quarter. The decrease is attributable to declines in newsprint volumes and prices, partially offset by a 10.6% reduction in$826,000 of acquired newsprint volume from unit declines.and ink expenses. See Item 3, “Commodities”, included herein, for further discussion and analysis of the impact of newsprint on our business.forincreased $4,826,000 in the 2020 Quarter, or 10.1%, compared to the 2019 Period decreased $1,913,000, or 1.9%.Quarter. Other operating expenses include all operating costs not considered to be compensation, newsprint, depreciation and amortization, or restructuring costs and other. The largest components are costs associated with printing and distribution of these costs include delivery, postage, outsourced printing,our printed products, digital cost of goods sold and facility expenses. Cost reductions were primarily relatedThe increase is attributable to $5,357,000 of acquired other operating expenses and increases in digital investments, partially offset by lower delivery and other print-related costs offsetdue to lower volumes of our print editions.part by higherthe 2020 Quarter and 2019 Quarter, respectively. Restructuring costs associated with growing digital revenuein 2020 and outsourcing.$1,086,000,$458,000, or 14.6%14.5%, and amortization expense decreased $66,000,increased $347,000, or 0.8%8.2%, in the 2019 Period.$17,000$6,113,000 in the 2019 Period2020 Quarter compared to a net gainexpense of $1,297,000$83,000 in the 2018 Period.2019 Quarter. The net gain in the 2018 Period includes curtailment gains2020 Quarter was due to the disposition of $2,031,000.Restructuring costs totaled $2,820,000 and $2,284,000 in the 2019 Period and 2018 Period, respectively. The majority of restructuring costs relate to severance and a partial withdrawal liability related to one of our multi employer pension plans.Results of Operations40,286,00013,787,000 in the 2019 Period2020 Quarter compared to $46,397,00012,567,000 in the 2018 Period.Equity in earnings in associated companies decreased $145,000 in the 2019 Period.Nonoperating Quarter.$2,527,000,$1,013,000, or 9.4%8.3%, to $24,397,000$11,127,000 in the 2020 Quarter. Our weighted average cost of debt, excluding amortization of debt financing costs, was 9.0% at the end of the 2020 Quarter and 10.0% at the end of the 2019 Period Quarter. The reduction of the weighted average cost of debt is due to lower debt balances.$1,858,000$10,670,000 of debt financing and administrative costsexpense in the 2019 Period2020 Quarter compared to $2,313,000$962,000 in the 2018 Period.2019 Quarter. The majorityincrease in the 2020 Quarter is primarily driven by expensing previously unamortized financing costs of $9,583,000 and $470,000 of costs which were expensed as incurred as a result of the costs represent amortization of refinancing costs paid in 2014.$1,423,000$613,000 of other periodic pension and other postretirement benefits in the 2019 Period2020 Quarter and $1,416,000$710,000 in the 2018 Period.Due to the fluctuation in the price of our Common Stock, we2019 Quarter. We recorded non-operating expense of $2,672,000 in 2019 Period and non-operating income of $124,000$20,000 in the 20182020 Quarter and non-operating expenses of $2,753,000 in the 2019 Quarter, related to the changes in the value of the Warrants. 126,672 138,897 (8.8 ) 88,138 91,345 (3.5 ) 28,900 28,663 0.8 243,710 258,905 (5.9 ) 91,934 94,824 (3.0 ) 9,057 12,164 (25.5 ) 101,304 97,758 3.6 202,295 204,746 (1.2 ) 41,415 54,159 (23.5 ) 13,995 14,916 (6.2 ) (5,299 ) (17 ) NM 3,557 2,820 26.1 214,548 222,465 (3.6 ) 2,931 3,846 (23.8 ) 32,093 40,286 (20.3 ) (22,242 ) (24,397 ) (8.8 ) (11,865 ) (1,858 ) NM 2,282 (969 ) NM (31,825 ) (27,224 ) 16.9 268 13,062 (97.9 ) Income tax (benefit) expense (460 ) 4,670 NM 728 8,392 (91.3 ) (774 ) (709 ) 9.2 Income attributable to Lee Enterprises, Incorporated (46 ) 7,683 NM 633 (244 ) NM 587 7,439 (92.1 ) Basic 0.00 0.14 NM Diluted 0.00 0.14 NM Overall ResultsOn December 22, 2017, the 2017Act was signed into law. Among other provisions, the 2017 Tax Act reduced the federal statutory corporate income tax rate from 35% to 21%. The reduction of the corporate tax rate caused us to re-measure our deferred tax assets and liabilities to the lower federal base rate of 21% in the 2018 Quarter. We reported a discrete adjustment from revaluing our deferred tax assets and liabilities resulting in a net decrease in income tax expense of $24,872,000 in the 2018 Quarter.expensebenefit of $4,670,000,$460,000, or 35.8%,171.6% of pretax income in the 2020 Period. In the 2019 Period. For the 26 weeks ended March 25, 2018 ,Quarter, we recognized a $18,763,000an income tax benefit. Excludingexpense of $4,670,000, or 35.8% of pretax income.transitional impactCARES Act legislation, which was enacted on March 27, 2020. The CARES Act permits the Company to defer certain employer payroll tax payments in 2020 to the end of 2021 and 2022. The Company intends to use this deferral, and is anticipating additional guidance from the 2017 Tax Act,Treasury and the effectiveInternal Revenue Service to determine whether additional tax benefits are available from this legislation.tax ratewas $728,000 and diluted earnings per share was $0.00 for the 26 weeks ended March 25, 2018 was 32.0%.NET INCOME AND EARNINGS PER SHAREThe following table summarizes the impact from the 2017 Tax Act as well as the warrant fair value adjustments on2020 Period compared to net income attributable to Lee Enterprises, Incorporatedof $8,392,000 million and earningsincome per diluted common share. Per share amounts may not add due to rounding. 26 Weeks Ended March 31
2019 March 25
2018 (Thousands of Dollars, Except Per Share Data) Amount Per Share Amount Per Share Income attributable to Lee Enterprises, Incorporated, as reported 7,683 0.14 37,242 0.67 Adjustments: Warrants fair value adjustment 2,672 0.05 (124 ) — Income tax effect of 2017 Tax Act — (24,872 ) (0.45 ) Income attributable to Lee Enterprises, Incorporated, as adjusted 10,355 0.18 12,246 0.22 $27,833,000$10,698,000 in the 20192020 Period compared to 35,115,000$27,833,000 in the 20182019 Period. Net income for the 20192020 Period totaled $8,392,000$728,000 compared to $37,860,000$8,392,000 in the 20182019 Period. The decrease in cash provided by operating activities in the 20192020 Period is mainly attributed to year over yearyear-over-year changes in operating income.$7,538,000$119,711,000 in the 2020 Period compared to $7,538,000 in the 2019 Period. Acquisition spending totaled $5,708,000 in the 2019 Period. We spent $130,985,000 on acquisitions, net of cash, in the 2020 Quarter, primarily related to the acquisition of BHMG and the Buffalo News. Capital spending totaled $5,809,000 in the 2020Period compared to $923,000$2,459,000 in the 2018 Period. Capital spending2019 Quarter. Cash proceeds from asset sales totaled $2,459,000$17,637,000 in the 20192020 Period compared to $2,452,000 in the 2018 Period. We spent 5,708,000 on acquisitions$770,000 in the 2019 Period.We anticipate that funds necessary for capital expenditures, which are expected to total up to $11,000,000 in 2019, and other requirements, will be available from internally generated funds or available under our Revolving Facility.required forprovided by financing activities totaled $9,010,000$131,192,000 in the 2019 Period and $32,512,0002020 period compared to cash required for financing activities of $9,010,000 in the 20182019 Period. Proceeds from the 2020 Refinancing totaled $576,000,000 in the 2020 Period. Debt reduction accounted for the majority of the remaining usage of funds in both the 20192020 Period and the 20182019 Period.LiquidityAt 31, 2019after considerationthe Company completed a comprehensive refinancing of lettersits debt, which consists of credit, we have approximately $21,435,000 available for future use under our Revolving Facility. Including cash and availability under our Revolving Facility, our liquidity at March 31, 2019 totals $38,100,000. This liquidity amount excludes any future cash flows. We expect all interest and principal payments due in the next twelve months will be satisfied by our cash flows, which will allow us to maintain an adequate level of liquidity. The Warrants, if and when exercised, would provide additional liquiditya 25-year term loan with BH Finance in an amount up to $25,140,000.Our Revolving Facility expires December 28, 2019.At March 31, 2019, theaggregate principal amount of our outstanding debt totals $476,455,000.$576,000,000. The Term Loan, which matures March 31, 201916, 2045, bears interest at an annual rate of 9.0%. amountpayments include payments from net cash proceeds from asset sales (as defined in the Credit Agreement) and payments upon certain instances of debt, net of cash, is 3.65 times our trailing 12 months adjusted EBITDA.numerous potential consequencesno other scheduled mandatory principal payments required under the Notes, 1st Lien Credit FacilityAgreement.2nd Lienwarranties, certain affirmative and negative covenants and certain conditions, including restrictions on incurring additional indebtedness, creating certain liens, making certain investments or acquisitions, issuing dividends, repurchasing shares of stock of the Company and certain other capital transactions. Certain existing and future direct and indirect material domestic subsidiaries of the Company are guarantors of the Company’s obligations under the Credit Agreement. There are no financial performance covenants under our Credit Agreement.if an eventthe Company incurred $470,000 of default, as defined, occursfees and is not remedied. Many of those consequences are beyond our control. The occurrence of one or more events of default would give rise toexpenses that were expensed in the right13 weeks ended March 29, 2020.applicable lender(s)transactions, we no longer have access to exercise their remedies undera Revolving Facility.Notes, 1st Lien Credit Facilityeffects of the COVID-19 pandemic on our results of operations and 2nd Lien Term Loan, respectively,cash flows. To combat the negative impacts, we have taken significant and immediate action to manage cash flow by implementing various initiatives including without limitation,reductions in force, compensation reductions, furloughs, and reductions in capital investments. We are also working with our large vendors to evaluate the rightamount and timing of significant expenses.accelerate all outstanding debtpreserve liquidity, we plan to defer remittance of our FICA taxes, and take actions authorized in such circumstances under applicable collateral security documents.Ourdefer required pension contributions, as allowed by the CARES Act.operate as a going concern is dependent on our ability to remain in compliance with debt covenants and repay, refinance or amend our debt agreements as they become due, if available liquidity is consumed. The Notes, 1st Lien Credit Facility and 2nd Lien Term Loan have only limited affirmative covenants with which we are required to maintain compliance. We are in compliance with our debt covenants at March 31, 2019.meet its ongoing obligations.In February 2017 our filing("PBGC"(“PBGC”).("HATFA"(“HATFA”) was signed into law. HATFA generally extends the relief offered under STEA and further increases premiums to be paid to the PBGC.Income TaxesOn December 22, 2017,2017 TaxCARES Act was signedenacted into law. Among other provisions, the 2017 TaxCARES Act reducesallows the federal statutory corporate income tax rate from 35%Company to 21%. The reduction of the corporate tax rate caused us to re-measure our deferred tax assets and liabilities to the lower federal base rate of 21%. We reported a discrete adjustment from revaluing our deferred tax assets and liabilities which resulted in a provisional net decrease in income tax expense of $24,872,000 for the 26 weeks ended March 25, 2018.The Securities Exchange Commission has issued rules that allow for a measurement period of up to one year after the enactment date of the 2017 Tax Act to finalize the recording of the related transitional impact. Apart from any future changes in interpretations, legislative action or changes in accounting standards, we finalized and recorded the resulting adjustments as of September 30, 2018.Itemem 3. Quantitative and Qualitative Disclosures About Market Risk31, 2019,29, 2020, we had no floating debt outstanding. We have no interest rate hedging in place.began showing signs of weaknessdecreased during the March 20192020 Quarter as a result of increased supply versus declining domestic and export demand.3027.7 pound newsprint would result in an annualized reduction in income before taxes of approximately $331,000$536,000 annualized based on anticipated consumption in 2019,2020, excluding consumption of TNI and MNI and the impact of LIFO accounting.$385,000,000$576,000,000 principal amount of the Notes and $91,455,000 principal amount under the 2nd Lien Term Loan recorded at carrying value, which are subject to fixed interest rates. At March 31, 2019, based on an average of private market price quotations, theapproximates fair values were $392,311,150 and $91,455,213 for the Notes and 2nd Lien Term Loan, respectively.Itemem 4. Controls and Procedures that our disclosure controls and procedures were effective such that the information relating to the Company, including our consolidated subsidiaries, required to be disclosed in our SEC reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.There2613 weeks ended 31, 201929, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.Itemem 1. Legal Proceedings 31.1 Attached 31.2 Attached 3232.1 Attached 32.2 Section 1350 Certification of Chief Financial Officer Attached 10.1 +* Lee Enterprises, Incorporated 2020 Long-Term Incentive Plan (Effective February 19, 2020) (Appendix B to Schedule 14A Definitive Proxy Statement filed on January 13, 2020) SIGNATURES May 10, 2019 33