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Item 1. Financial Statements

2023-08-04 compared with 2023-05-04 · 95 added, 78 removed, 283 unchanged (38% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

(Thousands of Dollars) March 26,

(Thousands of Dollars) June 25,

2023 September 25,

1 unchanged sentence

Cash and cash equivalents 16,955 16,185

Accounts receivable and contract assets, net 67,587 69,522

Accounts receivable, net 69,182 69,522

Inventories 7,933 8,265

20 unchanged sentences

The accompanying Notes are an integral part of the Consolidated Financial Statements.

(Thousands of Dollars and Shares, Except Per Share Data) March 26,

(Thousands of Dollars and Shares, Except Per Share Data) June 25,

2023 September 25,

2 unchanged sentences

Current portion of lease liabilities 7,971 7,859

Current maturities of long-term debt 2,013 —

Accounts payable 38,466 28,608

16 unchanged sentences

issued and outstanding:

March 26, 2023;

June 25, 2023;

6,072 shares;

15 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

Three months ended Six months ended

(Thousands of Dollars, Except Per Common Share Data) March 26,

2023 March 27,

2022 March 26,

2023 March 27,

Three months ended Nine months ended

(Thousands of Dollars, Except Per Common Share Data) June 25,

2023 June 26,

2022 June 25,

2023 June 26,

Operating revenue:

8 unchanged sentences

Depreciation and amortization 7,478 8,818 23,097 27,445

Assets gain on sales, impairments and other, net ( 792 ) ( 152 ) ( 3,355 ) ( 12,426 )

Assets (gain) loss on sales, impairments and other, net ( 900 ) 1,086 ( 4,255 ) ( 11,340 )

Restructuring costs and other 3,780 6,072 8,120 19,862

1 unchanged sentence

Equity in earnings of associated companies 1,194 1,050 3,534 4,211

Operating income (loss) 2,858 ( 3,228 ) 14,036 21,886

Operating income 12,208 6,439 26,245 28,325

Non-operating (expense) income:

2 unchanged sentences

Pension withdrawal cost — — — ( 2,335 )

Pension and OPEB related benefit (cost) and other, net 206 6,248 1,700 9,320

Pension and OPEB related benefit and other, net 555 4,205 2,255 13,525

Total non-operating expense, net ( 9,680 ) ( 6,087 ) ( 28,889 ) ( 19,261 )

(Loss) income before income taxes ( 7,437 ) ( 9,838 ) ( 5,173 ) 8,712

Income tax (benefit) expense ( 2,071 ) ( 3,144 ) ( 1,631 ) 2,207

Net (loss) income ( 5,366 ) ( 6,694 ) ( 3,542 ) 6,505

Income (loss) before income taxes 2,528 352 ( 2,644 ) 9,064

Income tax expense (benefit) 394 156 ( 1,237 ) 2,363

Net income (loss) 2,134 196 ( 1,407 ) 6,701

Net income attributable to non-controlling interests ( 631 ) ( 465 ) ( 1,876 ) ( 1,588 )

1 unchanged sentence

Other comprehensive loss, net of income taxes ( 140 ) ( 1,167 ) ( 420 ) ( 8,446 )

Comprehensive loss attributable to Lee Enterprises, Incorporated ( 6,025 ) ( 8,443 ) ( 5,066 ) ( 1,897 )

Earnings per common share:

Comprehensive income (loss) attributable to Lee Enterprises, Incorporated 1,363 ( 1,436 ) ( 3,703 ) ( 3,333 )

Earnings (loss) per common share:

0.26 ( 0.05 ) ( 0.56 ) 0.89

19 unchanged sentences

March 26, 2023 ( 266,015 ) 60 259,964 16,373 10,382

Shares issued (redeemed) — 1 — — 1

Income attributable to Lee Enterprises, Incorporated 1,503 — — — 1,503

Stock compensation — — 461 — 461

Other comprehensive loss — — — ( 200 ) ( 200 )

Deferred income taxes, net — — — 60 60

June 25, 2023 ( 264,512 ) 61 260,425 16,233 12,207

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

(Thousands of Dollars) Accumulated

15 unchanged sentences

March 27, 2022 ( 253,830 ) 60 258,523 34,908 39,661

Shares issued (redeemed) — — 371 — 371

Income attributable to Lee Enterprises, Incorporated ( 269 ) — — — ( 269 )

Stock compensation — — 327 — 327

Other comprehensive income — — — ( 1,667 ) ( 1,667 )

Deferred income taxes, net — — — 500 500

June 26, 2022 ( 254,099 ) 60 259,221 33,741 38,923

The accompanying Notes are an integral part of the Consolidated Financial Statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six months ended

(Thousands of Dollars) March 26,

2023 March 27,

Nine months ended

(Thousands of Dollars) June 25,

2023 June 26,

Cash provided by (required for) operating activities:

11 unchanged sentences

Changes in operating assets and liabilities:

Decrease (increase) in receivables and contract assets 1,720 ( 3,060 )

Decrease (increase) in receivables 124 ( 8,004 )

Decrease in inventories and other ( 348 ) ( 2,369 )

2 unchanged sentences

Change in income taxes payable 358 ( 2,986 )

Other ( 2,128 ) ( 3,650 )

Net cash provided by (required for) operating activities 647 ( 606 )

Other, net ( 2,693 ) 49

Net cash (required for) provided by operating activities ( 1,484 ) 716

Cash provided by investing activities:

19 unchanged sentences

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.

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 March 26, 2023, and our results of operations and cash flows for the periods presented.

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 June 25, 2023, 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 2022 Annual Report on Form 10-K.

2 unchanged sentences

Fiscal year 2023 and 2022 are 52-week years with 13 weeks in each quarter.

Because of seasonal and other factors, the results of operations for the three and six months ended March 26, 2023, are not necessarily indicative of the results to be expected for the full year.

Because of seasonal and other factors, the results of operations for the three and nine months ended June 25, 2023, are not necessarily indicative of the results to be expected for the full year.

The Consolidated Financial Statements include our accounts and those of our wholly owned subsidiaries, as well as our 82.5 % interest in INN Partners, L.C.

3 unchanged sentences

The following table presents our revenue disaggregated by source:

Three months ended Six months ended

(Thousands of Dollars) March 26,

2023 March 27,

2022 March 26,

2023 March 27,

Three months ended Nine months ended

(Thousands of Dollars) June 25,

2023 June 26,

2022 June 25,

2023 June 26,

Operating revenue:

18 unchanged sentences

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.

Revenue recognized in the six months ended March 26, 2023, that was included in the contract liability as of September 25, 2022, was $ 41.2 million.

Accounts receivable, excluding allowance for credit losses were $ 72.7 million and $ 74.8 million as of March 26, 2023, and September 25, 2022 , respectively.

Allowance for credit losses was $ 5.1 million and $ 5.2 million as of March 26, 2023, and September 25, 2022 , respectively.

Revenue recognized in the nine months ended June 25, 2023, that was included in the contract liability as of September 25, 2022, was $ 45.5 million.

Accounts receivable, excluding allowance for credit losses were $ 74.2 million and $ 74.8 million as of June 25, 2023, and September 25, 2022 , respectively.

Allowance for credit losses was $ 5.0 million and $ 5.2 million as of June 25, 2023, and September 25, 2022 , respectively.

Sales commissions are expensed as incurred as the associated contractual periods are one year or less.

7 unchanged sentences

Summarized results of TNI are as follows:

Three months ended Six months ended

(Thousands of Dollars) March 26,

2023 March 27,

2022 March 26,

2023 March 27,

Three months ended Nine months ended

(Thousands of Dollars) June 25,

2023 June 26,

2022 June 25,

2023 June 26,

Operating revenue 7,244 8,229 23,954 25,805

3 unchanged sentences

Equity in earnings of TNI 791 869 2,624 3,220

TNI makes periodic distributions of its earnings and for the three months ended March 26, 2023, and March 27, 2022, we received $ 1.4 million in distributions in both periods.

In the six months ended March 26, 2023 and March 27, 2022, we received $ 2.3 million in distributions in both periods.

TNI makes periodic distributions of its earnings and for the three months ended June 25, 2023, and June 26, 2022, we received $ 0.4 million and $ 0.7 million in distributions, respectively.

In the nine months ended June 25, 2023 and June 26, 2022, we received $ 2.8 million and $ 2.9 million in distributions, respectively.

Madison Newspapers, Inc.

3 unchanged sentences

Summarized results of MNI are as follows:

Three months ended Six months ended

(Thousands of Dollars) March 26,

2023 March 27,

2022 March 26,

2023 March 27,

Three months ended Nine months ended

(Thousands of Dollars) June 25,

2023 June 26,

2022 June 25,

2023 June 26,

Operating revenue 10,963 11,921 33,470 35,677

7 unchanged sentences

(1) Amounts were reclassed to align with current year presentation

MNI makes periodic distributions of its earnings and in the three months ended March 26, 2023 and March 27, 2022, we received $ 0.1 million and $ 0.5 million in distributions, respectively.

In the six months ended March 26, 2023 and March 27, 2022 we received distributions of $ 0.4 million and $ 0.8 million, respectively.

MNI makes periodic distributions of its earnings and in the three months ended June 25, 2023 and June 26, 2022, we received $ 0.2 million in distributions for both periods.

In the nine months ended June 25, 2023 and June 26, 2022 we received distributions of $ 0.5 million and $ 1.0 million, respectively.

4 GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and identified intangible assets consist of the following:

(Thousands of Dollars) March 26,

(Thousands of Dollars) June 25,

2023 September 25,

12 unchanged sentences

(referred to herein as “Credit Agreement” and “Term Loan”).

On March 26, 2023, the fair value is $ 462.4 million.

On June 25, 2023, the fair value is $ 462.4 million.

This represents a level 2 fair value measurement.

During the six months ended March 26, 2023, we made principal debt payments of $ 2.6 million.

During the nine months ended June 25, 2023, we made principal debt payments of $ 2.6 million.

Future payments are contingent on the Company's ability to generate future excess cash flow, as defined in the Credit Agreement.

As of March 26, 2023, there was no excess cash flow payment due.

Subsequent to June 25, 2023, the Company will make a $ 2.0 million payment related to net proceeds received from the sale of non-core assets as required by our Credit Agreement.

6 PENSION, POSTRETIREMENT AND POSTEMPLOYMENT DEFINED BENEFIT PLANS

1 unchanged sentence

Additionally, we provide retiree medical and life insurance benefits under postretirement plans at several of our operating locations.

Through March 26, 2023, our liability and related expense for benefits under the plans are recorded over the service period of employees based upon annual actuarial calculations.

Through June 25, 2023, our liability and related expense for benefits under the plans are recorded over the service period of employees based upon annual actuarial calculations.

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

PENSION PLANS Three months ended Six months ended

(Thousands of Dollars) March 26,

2023 March 27,

2022 March 26,

2023 March 27,

PENSION PLANS Three months ended Nine months ended

(Thousands of Dollars) June 25,

2023 June 26,

2022 June 25,

2023 June 26,

Service cost for benefits earned during the period 5 287 15 1,030

5 unchanged sentences

Pension cost (benefit) 264 ( 2,722 ) 792 ( 9,873 )

POSTRETIREMENT MEDICAL PLANS Three months ended Six months ended

(Thousands of Dollars) March 26,

2023 March 27,

2022 March 26,

2023 March 27,

POSTRETIREMENT MEDICAL PLANS Three months ended Nine months ended

(Thousands of Dollars) June 25,

2023 June 26,

2022 June 25,

2023 June 26,

Service cost for benefits earned during the period 17 27 51 81

4 unchanged sentences

Postretirement medical benefit ( 545 ) ( 562 ) ( 1,635 ) ( 1,686 )

In the six months ended March 26, 2023 and March 27, 2022, we made no contributions to our pension plans.

In the nine months ended June 25, 2023 and June 26, 2022, we made no contributions to our pension plans.

W e have no required contributions to our pension plans for 2023.

1 unchanged sentence

In prior periods, the Company effectuated withdrawals from several multiemployer plans.

As of March 26, 2023, and September 25, 2022, we had $ 23.4 million and $ 25.0 million of accrued withdrawal liabilities.

As of June 25, 2023, and September 25, 2022, we had $ 23.1 million and $ 25.0 million of accrued withdrawal liabilities.

The liabilities reflect the estimated value of payments to the fund, payable over 20 years.

7 INCOME TAXES

We recorded an income tax benefit of $ 2.1 million related to loss before taxes of $ 7.4 million for the three months ended March 26, 2023, and an income tax benefit of $ 1.6 million related to a loss before income taxes of $ 5.2 million for the six months ended March 26, 2023.

We recorded an income tax benefit of $ 3.1 million related to income before taxes of $ 9.8 million for the three months ended March 27, 2022 and income tax expense of $ 2.2 million related to income before income taxes of $ 8.7 million for the six months ended March 27, 2022.

The effective income tax rate for the three and six months ended March 26, 2023, were 27.8 % and 31.5 %, respectively.

The effective income tax rate for the three and six months ended March 27, 2022, were 32.0 % and 25.3 %, respectively.

We recorded an income tax expense of $ 0.4 million related to income before taxes of $ 2.5 million for the three months ended June 25, 2023, and an income tax benefit of $ 1.2 million related to a loss before income taxes of $ 2.6 million for the nine months ended June 25, 2023.

We recorded an income tax expense of $ 0.2 million related to income before taxes of $ 0.4 million for the three months ended June 26, 2022 and income tax expense of $ 2.4 million related to income before income taxes of $ 9.1 million for the nine months ended June 26, 2022.

The effective income tax rate for the three and nine months ended June 25, 2023, were 15.6 % and 46.8 %, respectively.

The effective income tax rate for the three and nine months ended June 26, 2022, were 44.3 % and 26.1 %, respectively.

The primary differences between these rates and the U.S.

federal statutory rate of 21% are because of state taxes, non-deductible expenses, adjustments to reserves for uncertain tax positions, including any related interest, and mark-to-market adjustments to value stock warrants.

federal statutory rate of 21% are because of state taxes, non-deductible expenses and adjustments to reserves for uncertain tax positions, including any related interest.

We file a consolidated federal tax return, as well as combined and separate tax returns in approximately 27 state and local jurisdictions.

3 unchanged sentences

The following table sets forth the computation of basic and diluted earnings per common share:

Three months ended Six months ended

(Thousands of Dollars and Shares, Except Per Share Data) March 26,

2023 March 27,

2022 March 26,

2023 March 27,

(Loss) income attributable to Lee Enterprises, Incorporated:

Three months ended Nine months ended

(Thousands of Dollars and Shares, Except Per Share Data) June 25,

2023 June 26,

2022 June 25,

2023 June 26,

Income (loss) attributable to Lee Enterprises, Incorporated:

1,503 ( 269 ) ( 3,283 ) 5,113

7 unchanged sentences

Diluted 0.25 ( 0.05 ) ( 0.56 ) 0.87

For the three months ended March 26, 2023 and March 27, 2022, 68,186 and 600,000 shares, respectively, were not considered in the computation of diluted earnings per common share because their inclusion would result in an anti-dilutive effect on per share amounts.

For the six months ended March 26, 2023 and March 27, 2022, 68,186 and 600,000 shares, respectively, were not considered in the computation of diluted earnings per common share because their inclusion would result in an anti-dilutive effect on per share amounts.

For the three months ended June 25, 2023, 136,853 shares were excluded in the computation of diluted earnings per common share because their inclusion would result in an anti-dilutive effect on per share amounts.

For the three months ended June 26, 2022, no shares were considered in the computation of diluted earnings per common share because the Company recorded net losses.

For the nine months ended June 25, 2023, no shares were considered in the computation of diluted earnings per common share because the Company recorded net losses.

For the nine months ended June 25, 2022, 74,804 shares were excluded in the computation of diluted earnings per common share because their inclusion would result in an anti-dilutive effect on per share amounts.

9 COMMITMENTS AND CONTINGENT LIABILITIES

2 unchanged sentences

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.

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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements