LEE ENTERPRISES, Inc 10-Q

Item 1. Financial Statements LEE ENTERPRISES, INCORPORATED CONSOLIDATED BALANCE SHEETS (Unaudited) (Thousands of Dollars) June 23, 2024 September 24, 2023 ASSETS Current assets: Cash and cash equivalents 13,425 14,548 Accounts receivable, net 61,222 69,104 Inventories 5,965 7,504 Prepaid and other current assets 21,298 15,373 Total current assets 101,910 106,529 Investments: Associated companies 27,948 27,819 Other 5,565 5,572 Total investments 33,513 33,391 Property and equipment: Land and improvements 11,524 12,366 Buildings and improvements 76,967 83,140 Equipment 205,472 213,714 Construction in process 4,694 2,453 298,657 311,673 Less accumulated depreciation 241,754 250,439 Property and equipment, net 56,903 61,234 Operating lease right-of-use assets 36,326 40,822 Goodwill 328,243 329,504 Other intangible assets, net 73,900 94,988 Pension plan assets, net 11,206 10,843 Medical plan assets, net 22,754 21,565 Other 12,700 12,741 Total assets 677,455 711,617 The accompanying Notes are an integral part of the Consolidated Financial Statements. 2 Table of Contents (Unaudited) (Thousands of Dollars and Shares, Except Per Share Data) June 23, 2024 September 24, 2023 LIABILITIES AND EQUITY Current liabilities: Current portion of lease liabilities 8,052 7,755 Current maturities of long-term debt 2,586 — Accounts payable 31,356 36,290 Compensation and other accrued liabilities 32,442 29,448 Unearned revenue 36,027 40,843 Total current liabilities 110,463 114,336 Long-term debt, net of current maturities 450,140 455,741 Operating lease liabilities 31,437 36,580 Pension obligations 510 586 Postretirement and postemployment benefit obligations 7,488 8,618 Deferred income taxes 40,749 41,351 Income taxes payable 6,405 5,809 Withdrawal liabilities and other 23,771 24,890 Total liabilities 670,963 687,911 Equity: Stockholders' equity: Serial convertible preferred stock, no par value; authorized 500 shares; none issued — — Common Stock, $ 0.01 par value; authorized 12,000 shares; issued and outstanding: 62 61 June 23, 2024; 6,191 shares; $ 0.01 par value September 24, 2023; 6,064 shares; $ 0.01 par value Class B Common Stock, $ 2 par value; authorized 3,000 shares; none issued — — Additional paid-in capital 261,925 260,832 Accumulated deficit ( 282,253 ) ( 266,496 ) Accumulated other comprehensive income 24,234 26,843 Total stockholders' equity 3,968 21,240 Non-controlling interests 2,524 2,466 Total equity 6,492 23,706 Total liabilities and equity 677,455 711,617 The accompanying Notes are an integral part of the Consolidated Financial Statements. 3 Table of Contents LEE ENTERPRISES, INCORPORATED CONSOLIDATED STATEMENTS OF (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME (Unaudited) Three months ended Nine months ended (Thousands of Dollars, Except Per Common Share Data) June 23, 2024 June 25, 2023 June 23, 2024 June 25, 2023 Operating revenue: Advertising and marketing services 68,844 79,120 203,865 246,406 Subscription 68,306 77,557 208,872 235,838 Other 13,428 14,633 40,069 44,885 Total operating revenue 150,578 171,310 452,806 527,129 Operating expenses: Compensation 59,278 63,582 175,757 207,859 Newsprint and ink 4,096 6,346 13,101 20,244 Other operating expenses 74,177 80,010 221,247 249,353 Depreciation and amortization 6,850 7,478 21,438 23,097 Assets (gain) loss on sales, impairments and other, net ( 1,421 ) ( 900 ) 4,727 ( 4,255 ) Restructuring costs and other 3,795 3,780 12,199 8,120 Total operating expenses 146,775 160,296 448,469 504,418 Equity in earnings of associated companies 1,122 1,194 3,869 3,534 Operating income 4,925 12,208 8,206 26,245 Non-operating (expense) income: Interest expense ( 10,082 ) ( 10,235 ) ( 30,427 ) ( 31,144 ) Pension and OPEB related benefit and other, net 617 555 1,096 2,255 Curtailment/Settlement gains — — 3,593 — Total non-operating expense, net ( 9,465 ) ( 9,680 ) ( 25,738 ) ( 28,889 ) (Loss) income before income taxes ( 4,540 ) 2,528 ( 17,532 ) ( 2,644 ) Income tax (benefit) expense ( 849 ) 394 ( 3,438 ) ( 1,237 ) Net (loss) income ( 3,691 ) 2,134 ( 14,094 ) ( 1,407 ) Net income attributable to non-controlling interests ( 575 ) ( 631 ) ( 1,663 ) ( 1,876 ) (Loss) income attributable to Lee Enterprises, Incorporated ( 4,266 ) 1,503 ( 15,757 ) ( 3,283 ) Other comprehensive loss, net of income taxes ( 147 ) ( 140 ) ( 2,609 ) ( 420 ) Comprehensive (loss) income attributable to Lee Enterprises, Incorporated ( 4,413 ) 1,363 ( 18,366 ) ( 3,703 ) (Loss) earnings per common share: Basic: ( 0.73 ) 0.26 ( 2.68 ) ( 0.56 ) Diluted: ( 0.73 ) 0.25 ( 2.68 ) ( 0.56 ) The accompanying Notes are an integral part of the Consolidated Financial Statements. 4 Table of Contents CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) (Thousands of Dollars) Accumulated Deficit Common Stock Additional paid-in capital Accumulated Other Comprehensive Income Total September 25, 2023 ( 266,496 ) 61 260,832 26,843 21,240 Shares redeemed — — ( 96 ) — ( 96 ) Income attributable to Lee Enterprises, Incorporated 688 — — — 688 Stock compensation — — 214 — 214 Other comprehensive loss — — — ( 2,286 ) ( 2,286 ) Deferred income taxes, net — — — ( 28 ) ( 28 ) December 24, 2023 ( 265,808 ) 61 260,950 24,529 19,732 Loss attributable to Lee Enterprises, Incorporated ( 12,179 ) — — — ( 12,179 ) Stock compensation — — 501 — 501 Other comprehensive loss — — — ( 192 ) ( 192 ) Deferred income taxes, net — — — 44 44 March 24, 2024 ( 277,987 ) 61 261,451 24,381 7,906 Shares issued — 1 — — 1 Loss attributable to Lee Enterprises, Incorporated ( 4,266 ) — — — ( 4,266 ) Stock compensation — — 474 — 474 Other comprehensive loss — — — ( 191 ) ( 191 ) Deferred income taxes, net — — — 44 44 June 23, 2024 ( 282,253 ) 62 261,925 24,234 3,968 5 Table of Contents (Thousands of Dollars) Accumulated Deficit Common Stock Additional paid-in capital Accumulated Other Comprehensive Income Total September 26, 2022 ( 261,229 ) 60 259,521 16,653 15,005 Shares redeemed — — ( 383 ) — ( 383 ) Income attributable to Lee Enterprises, Incorporated 1,099 — — — 1,099 Stock compensation — — 349 — 349 Other comprehensive loss — — — ( 200 ) ( 200 ) Deferred income taxes, net — — — 60 60 December 25, 2022 ( 260,130 ) 60 259,487 16,513 15,930 Shares redeemed — — ( 97 ) — ( 97 ) Loss attributable to Lee Enterprises, Incorporated ( 5,885 ) — — — ( 5,885 ) Stock compensation — — 574 — 574 Other comprehensive loss — — — ( 200 ) ( 200 ) Deferred income taxes, net — — — 60 60 March 26, 2023 ( 266,015 ) 60 259,964 16,373 10,382 Shares issued — 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 The accompanying Notes are an integral part of the Consolidated Financial Statements. 6 Table of Contents LEE ENTERPRISES, INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine months ended (Thousands of Dollars) June 23, 2024 June 25, 2023 Cash provided by (required for) operating activities: Net loss ( 14,094 ) ( 1,407 ) Adjustments to reconcile net loss to net cash provided by (required for) operating activities: Depreciation and amortization 21,438 23,097 Bad debt expense 9,511 4,904 Curtailment/Settlement gain ( 3,593 ) — Stock compensation expense 1,189 1,384 Assets loss (gain) on sales, impairments and other, net 4,727 ( 4,255 ) Earnings, net of distributions, deemed returns on investment of TNI and MNI ( 163 ) ( 234 ) Gain on sale of investment — ( 1,736 ) Deferred income taxes ( 542 ) ( 460 ) Return of letters of credit collateral 894 778 Other, net ( 1,602 ) ( 1,705 ) Changes in operating assets and liabilities: Increase in receivables ( 1,946 ) ( 4,780 ) Decrease (increase) in inventories and other 1,069 ( 348 ) Decrease in accounts payable and other accrued liabilities ( 12,786 ) ( 14,435 ) Decrease in pension and other postretirement and postemployment benefit obligations ( 1,835 ) ( 186 ) Change in income taxes payable 596 358 Other ( 1,485 ) ( 2,693 ) Net cash provided by (required for) operating activities 1,378 ( 1,718 ) Cash provided by investing activities: Purchases of property and equipment ( 6,552 ) ( 3,791 ) Proceeds from sales of assets 7,087 7,231 Other, net ( 21 ) 1,873 Net cash provided by investing activities 514 5,313 Cash required for financing activities: Principal payments on long-term debt ( 3,015 ) ( 2,560 ) Common stock transactions, net — ( 265 ) Net cash required for financing activities ( 3,015 ) ( 2,825 ) Net (decrease) increase in cash and cash equivalents ( 1,123 ) 770 Cash and cash equivalents: Beginning of period 14,548 16,185 End of period 13,425 16,955 The accompanying Notes are an integral part of the Consolidated Financial Statements. 7 Table of Contents LEE ENTERPRISES, INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1 BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 June 23, 2024, 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 2023 Annual Report on Form 10-K. The Company's fiscal year ends on the last Sunday in September. Fiscal year 2024 ends September 29, 2024, and fiscal year 2023 ended September 24, 2023. Fiscal year 2024 includes 53 weeks of operations and 2023 included 52 weeks of operations. Because of seasonal and other factors, the results of operations for the three and nine months ended June 23, 2024, 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. (“BLOX Digital" formerly "TownNews”). Our 50 % interest in TNI Partners ("TNI") and our 50 % interest in Madison Newspapers, Inc. ("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. In 2024, certain prior period amounts within the consolidated financial statements have been adjusted to conform with current period presentation. These matters did not change operating revenues, net income (loss), accumulated deficit, and earnings per share in all periods presented. 2 REVENUE The following table presents our revenue disaggregated by source: Three months Ended Nine months Ended (Thousands of Dollars) June 23, 2024 June 25, 2023 June 23, 2024 June 25, 2023 Operating revenue: Print advertising revenue 18,941 29,216 62,118 102,503 Digital advertising and marketing services revenue 49,903 49,904 141,747 143,903 Advertising and marketing services revenue 68,844 79,120 203,865 246,406 Print subscription revenue 47,605 61,842 148,443 193,799 Digital subscription revenue 20,701 15,715 60,429 42,039 Subscription revenue 68,306 77,557 208,872 235,838 Print other revenue 8,278 9,773 24,839 30,542 Digital other revenue 5,150 4,860 15,230 14,343 Other revenue 13,428 14,633 40,069 44,885 Total operating revenue 150,578 171,310 452,806 527,129 8 Table of Contents Recognition principles: 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. Contract Liabilities: The Company’s primary source of contract liabilities is unearned revenue 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. Revenue recognized in the three and nine months ended June 23, 2024, that was included in the contract liability as of September 24, 2023, was $ 2.8 million and $ 37.3 million, respectively. Revenue recognized in the three and nine months ended June 25, 2023, that was included in the contract liability as of September 25, 2022, was $ 4.3 million and $ 45.5 million, respectively. Accounts receivable, excluding allowance for credit losses was $ 67.0 million and $ 74.4 million as of June 23, 2024, and September 24, 2023 , respectively. Allowance for credit losses was $ 5.8 million and $ 5.3 million as of June 23, 2024, and September 24, 2023 , respectively. Valuation and qualifying account information related to the allowance for credit losses related to continuing operations is as follows: (Thousands of Dollars) June 23, 2024 September 24, 2023 Balance, beginning of year 5,260 5,237 Additions charged to expense 9,511 6,942 Deductions from reserves ( 8,994 ) ( 6,919 ) Balance, end of year 5,777 5,260 Sales commissions are expensed as incurred as the associated contractual periods are one year or less. These costs are recorded within compensation. Most of our contracts have original expected lengths of one year or less and revenue is earned at a rate and amount that corresponds directly with the value to the customer. 3 INVESTMENTS IN ASSOCIATED COMPANIES TNI Partners In Tucson, Arizona, TNI, acting as agent for our subsidiary, Star Publishing Company (“Star Publishing”), and Gannett Co., Inc.'s subsidiary Citizen Publishing Company (“Citizen”), is responsible for printing, delivery, advertising, and subscription activities of the Arizona Daily Star as well as the related digital platforms and specialty publications. TNI collects all receipts and income and pays substantially all operating expenses incident to the partnership's operations and publication of the newspaper and other media. Income or loss of TNI (before income taxes) is allocated equally to Star Publishing and Citizen. 9 Table of Contents Summarized results of TNI are as follows: Three months ended Nine months ended (Thousands of Dollars) June 23, 2024 June 25, 2023 June 23, 2024 June 25, 2023 Operating revenue 6,667 7,244 21,018 23,954 Operating expenses 5,076 5,677 15,207 19,041 Operating income 1,591 1,567 5,811 4,913 Net income 1,544 1,581 5,764 5,247 Equity in earnings of TNI 772 791 2,882 2,624 TNI makes periodic distributions of its earnings and for the three months ended June 23, 2024, and June 25, 2023, we received $ 0.6 million and $ 0.4 million in distributions, respectively. In the nine months ended June 23, 2024 and June 25, 2023, we received $ 2.7 million and $ 2.8 million in distributions, respectively. Madison Newspapers, Inc. We have a 50 % ownership interest in MNI, which publishes daily and Sunday newspapers, and other publications in Madison, Wisconsin, and other Wisconsin locations, and operates their related digital platforms. Net income or loss of MNI (after income taxes) is allocated equally to us and The Capital Times Company (“TCT”). MNI conducts its business under the trade name Capital Newspapers. Summarized results of MNI are as follows: Three months ended Nine months ended (Thousands of Dollars) June 23, 2024 June 25, 2023 June 23, 2024 June 25, 2023 Operating revenue 10,136 10,963 30,560 33,470 Operating expenses, excluding restructuring costs, depreciation and amortization 7,829 8,470 23,275 26,496 Restructuring costs 4 10 113 137 Depreciation and amortization 121 129 361 402 Operating income 2,182 2,354 6,811 6,435 Net income 699 807 1,973 1,821 Equity in earnings of MNI 350 404 987 911 MNI makes periodic distributions of its earnings and in the three months ended June 23, 2024 and June 25, 2023, we received $ 0.4 million and $ 0.2 million in distributions, respectively. In the nine months ended June 23, 2024 and June 25, 2023, we received distributions of $ 1.0 million and $ 0.5 million, respectively. 10 Table of Contents 4 GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill and identified intangible assets consist of the following: (Thousands of Dollars) June 23, 2024 September 24, 2023 Goodwill, beginning of period 329,504 329,504 Allocated to sold operations ( 1,261 ) — Goodwill, end of period 328,243 329,504 Non-amortized intangible assets: Mastheads 11,096 18,675 Amortizable intangible assets: Customer and newspaper subscriber lists 262,242 306,766 Less accumulated amortization ( 199,438 ) ( 230,453 ) 62,804 76,313 Total intangibles, net 402,143 424,492 The weighted average amortization period for amortizable assets is approximately eleven years . During the nine months ended June 23, 2024, the Company sold certain non-core operations. Goodwill was allocated to these operations, which totaled $ 1.3 million. The Company reviews property, plant and equipment, goodwill and non-amortized intangible assets, which include only newspaper mastheads, for impairment annually on the first day of the fourth quarter, or more frequently if events or changes in circumstances indicate that an asset may be impaired in accordance with Accounting Standards Codification ("ASC") 350, Intangibles - Goodwill and Other and ASC 360, Property, Plant and Equipment. All of the Company’s goodwill is attributed to the single reporting unit. There was no impairment related to goodwill in 2023. Impairment losses related to mastheads totaled $ 7.7 million were recorded in the fourth quarter of 2023. During the second quarter of 2024, the Company identified the continuing decline of revenues as a triggering event. Consequently, non-cash charges of $ 7.6 million were recorded to reduce the carrying value of mastheads, which are non-amortized intangible assets. No impairment related to goodwill or property, plant and equipment was identified during this period. The fair value of these mastheads were determined using the relief from royalty method and includes Level 3 inputs, which are fair values estimated using significant unobservable inputs. The key assumptions used in the fair value estimates under the relief from royalty method are revenue and market growth, royalty rates for newspaper mastheads, estimated tax rates, and appropriate risk-adjusted weighted cost of capital. The royalty rates utilized range from 0 % to 1.0 %. The weighted average cost of capital utilized is 12.5 %. Such charges are recorded in assets (gain) loss on sales, impairments and other, net in the Consolidated Statements of (loss) Income and Comprehensive (loss) Income. During the third quarter of 2024, the Company disposed $ 42.9 million of gross cost and accumulated amortization related to fully amortized customer and newspaper subscriber lists. 5 DEBT The Company has debt consisting of a single 25 -year term loan with BH Finance LLC, with an aggregate principal balance of $ 452.7 million at a 9 % annual fixed rate and maturing on March 16, 2045 (referred to herein as “Credit Agreement” and “Term Loan”). On June 23, 2024, the fair value was $ 382.2 million, representing a Level 2 fair value measurement, which are fair values estimated using significant other observable inputs for similar instruments. During the three and nine months ended June 23, 2024, we made $ 0.9 million and $ 3.0 million of principal debt payments, respectively, as a result of non-core asset sales. Future payments are contingent on the Company's ability to generate future excess cash flow, as defined in the Credit 11 Table of Contents Agreement. As of June 23, 2024, $ 2.6 million was recognized as current maturities of long-term debt in the Consolidated Balance Sheets due to non-core asset monetization. 6 PENSION, POSTRETIREMENT AND POSTEMPLOYMENT DEFINED BENEFIT PLANS We have one defined benefit pension plan that covers certain employees, including plans established under collective bargaining agreements. Additionally, we provide retiree medical and life insurance benefits under postretirement plans at several of our operating locations. Through June 23, 2024, our liability and related expense for benefits under the plans are recorded over the service period of employees based upon annual actuarial calculations. During the nine months ended June 23, 2024, the Company offered a voluntary lump sum payment of future benefits to terminated vested participants in the defined benefit pension plan. The offer was accepted by 522 participants, representing a $ 22.6 million settlement of related pension plan liability. The Company recognized a non-cash settlement gain of $ 2.4 million, which is reflected within "Curtailment/Settlement gains" on the Consolidated Statements of Income (Loss) and Comprehensive Income (Loss). Pension plan assets and liabilities were reduced by $ 22.6 million. During the nine months ended June 23, 2024, the Company completed the outsourcing of certain printing operations, which ceased postretirement medical benefits for a group of employees. The Company recognized a non-cash curtailment gain of $ 1.2 million which is reflected within "Curtailment/Settlement gains" on the Consolidated Statements of Income (Loss) and Comprehensive Income (Loss). The net periodic pension and postretirement cost (benefit) components for our plans are as follows: PENSION PLANS Three months ended Nine months ended (Thousands of Dollars) June 23, 2024 June 25, 2023 June 23, 2024 June 25, 2023 Service cost for benefits earned during the period 1 5 3 15 Interest cost on projected benefit obligation 2,253 2,592 7,021 7,776 Expected return on plan assets ( 2,310 ) ( 2,548 ) ( 7,073 ) ( 7,644 ) Amortization of net (gain) loss ( 1 ) 2 ( 4 ) 6 Amortization of prior service benefit 212 213 636 639 Settlement gain — — ( 2,409 ) — Net periodic pension (benefit) cost 155 264 ( 1,826 ) 792 POSTRETIREMENT MEDICAL PLANS Three months ended Nine months ended (Thousands of Dollars) June 23, 2024 June 25, 2023 June 23, 2024 June 25, 2023 Service cost for benefits earned during the period 13 17 38 51 Interest cost on projected benefit obligation 149 149 447 447 Expected return on plan assets ( 320 ) ( 295 ) ( 959 ) ( 885 ) Amortization of net gain ( 308 ) ( 254 ) ( 925 ) ( 762 ) Amortization of prior service benefit ( 94 ) ( 162 ) ( 282 ) ( 486 ) Curtailment gain — — ( 1,184 ) — Net periodic postretirement benefit ( 560 ) ( 545 ) ( 2,865 ) ( 1,635 ) In the nine months ended June 23, 2024 and June 25, 2023, we made no contributions to our pension plans. W e have no required contributions to our pension plans for 2024. 12 Table of Contents Multiemployer Pension Plans In prior periods, the Company effectuated withdrawals from several multiemployer plans. As of June 23, 2024 and September 24, 2023, we had $ 24.0 million and $ 25.1 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 $ 0.8 million related to loss before taxes of $ 4.5 million for the three months ended June 23, 2024, and an income tax benefit of $ 3.4 million related to loss before income taxes of $ 17.5 million for the nine months ended June 23, 2024. 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. The effective income tax rate for the three and nine months ended June 23, 2024, was 18.7 % and 19.6 %, respectively. The effective income tax rate for the three and nine months ended June 25, 2023, were 15.6 % and 46.8 %, respectively. The primary differences between these rates and the U.S. 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 30 state and local jurisdictions. We do not currently have any federal or material state income tax examinations in progress. Our income tax returns have generally been audited or closed to audit through 2016. 8 ( LOSS) EARNINGS PER COMMON SHARE The following table sets forth the computation of basic and diluted (loss) earnings per common share: Three months ended Nine months ended (Thousands of Dollars and Shares, Except Per Share Data) June 23, 2024 June 25, 2023 June 23, 2024 June 25, 2023 (Loss) income attributable to Lee Enterprises, Incorporated: ( 4,266 ) 1,503 ( 15,757 ) ( 3,283 ) Weighted average common shares 6,080 6,051 6,080 6,045 Less weighted average restricted Common Stock ( 215 ) ( 173 ) ( 195 ) ( 172 ) Basic average common shares 5,865 5,878 5,885 5,873 Dilutive restricted Common Stock — 30 — — Diluted average common shares 5,865 5,908 5,885 5,873 (Loss) earnings per common share: Basic ( 0.73 ) 0.26 ( 2.68 ) ( 0.56 ) Diluted ( 0.73 ) 0.25 ( 2.68 ) ( 0.56 ) For the three months ended June 23, 2024 no shares were considered in the computation of diluted earnings per common share because the Company recorded net losses. For the three months ended June 25, 2023, 136,853 shares were not considered in calculating diluted (losses) earnings per common share because their inclusion would result in an anti-dilutive effect on per share amounts. For the nine months ended June 23, 2024 and June 25, 2023, 22,520 and no shares, respectively, were considered in the computation of diluted (losses) earnings per common share because the Company recorded net losses. Rights Agreement 13 Table of Contents On March 28, 2024, our Board of Directors adopted a stockholder rights plan (the “Rights Agreement”). Pursuant to the Rights Agreement, on March 28, 2024, our Board of Directors declared a dividend of one preferred share purchase right (a “Right”), payable on April 8, 2024, for each share of our Common Stock outstanding to the stockholders of record on that date. Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series C Participating Convertible Preferred Stock, without par value (the “Preferred Shares”), of the Company at a price of $ 90.00 per one one-thousandth of a Preferred Share represented by a Right, subject to adjustment. The Rights will initially trade with our Common Stock and will generally become exercisable only if any person or group, other than certain exempt persons, acquires beneficial ownership of 15 % or more of our Common Stock outstanding. In the event the Rights become exercisable, each holder of a Right, other than the triggering person(s), will be entitled to purchase additional shares of our Common Stock at a 50 % discount or the Company may exchange each Right held by such holders for one share of our Common Stock. The Rights Agreement will continue in effect until March 27, 2025, or unless earlier redeemed or terminated by the Company, as provided in the Rights Agreement. The Rights have no voting or dividend privileges, and, unless and until they become exercisable, have no dilutive effect on the earnings of the Company. The Rights Agreement applies equally to all current and future stockholders and is not intended to deter offers or preclude our Board of Directors from considering acquisition proposals that are fair and otherwise in the best interest of our stockholders. However, the overall effect of the Rights Agreement may render it more difficult or discourage a merger, tender offer, or other business combination involving us that is not supported by our Board of Directors. 9 COMMITMENTS AND CONTINGENT LIABILITIES 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. 14 Table of Contents