GlobeNewswire Inc | Dec 10, 2020 07:00AM EST

December 10, 2020

Revenue trends improved 7.8 percentage points compared to third quarterSubscription revenue totaled 46.5% of total operating revenue2020 Debt reduction totaled $37.7 million since March refinancingImplemented $84 million in Cost Synergies in 2020

DAVENPORT, Iowa, Dec. 10, 2020 (GLOBE NEWSWIRE) -- Lee Enterprises, Incorporated (NYSE: LEE), a leading provider of high quality, trusted, local news, information and a major digital and subscription platform in 77 markets, today reported fourth quarter and year-to-date financial results(1) for the period ended September 27, 2020.

Financial Highlights(2):

Fourth Quarter Fiscal Year Fiscal Year 2020 2020 2020(in Thousands) Actual Actual Pro forma

Income (loss) attributable to Lee (1,784 ) (3,106 ) 17,632Enterprises, IncorporatedAdjusted EBITDA (3) 25,374 97,171 122,334

?We made significant progress toward our digital transformation and are pleasedwith the operating results in the fourth quarter. Digital services revenuethrough TownNews and subscription revenue make up nearly half of our totaloperating revenue and these revenue streams performed well in the fourthquarter. Digital-only subscriptions increased 67.3% over prior year quarter andnow total 244,000, with revenue from digital-only subscribers up 71.4%.TownNews revenue grew 7.0% in the quarter, marking more than 10 years ofconsecutive quarter-over-quarter revenue growth. We expect these sticky revenuestreams to continue strong performance in 2021,? said Kevin Mowbray, Presidentand Chief Executive Officer.

?Also key to our performance was our keen focus on supporting our localadvertisers through this disruption. Our stimulus programs and full servicedigital marketing agency, Amplified, helped to drive strong performance inadvertising revenue. Though down quarter-over-quarter on a pro forma basis, ouradvertising revenue trend improved 13 percentage points in the fourth quartercompared to the quarter over quarter trends in the third quarter. Our totalrevenue trend on a pro forma basis also improved in the fourth quarter and,though down 16.9% in the fourth quarter, was 7.8 percentage points better thanthird quarter trend,? said Mowbray.

"We continue to see improvement in our core advertising trends in the firstquarter with significant wins in political advertising. We remain committed toproviding high quality, trusted local news that?s vital to our local marketscovering critical issues that our large, local audiences depend on more thanever,? Mowbray added.

?Our significant acquisition of BH Media Group(4) in March 2020, combined witha global pandemic, provided an opportunity to accelerate our transformation. Wehave made significant progress on our business transformation and haveimplemented $84 million of cost reductions to date, ahead of our acquisitiontargets. Our strategy heading into 2021 is clear, and we are laser-focused ontransforming the way we present local news and information, transforming ouraudience model to a robust subscription model and diversifying the service andproducts we offer our top local accounts and SMBs. We are optimistic that wewill emerge from the pandemic a stronger, leaner organization focused onexecuting our digital transformation,? Mowbray said.

Tim Millage, Vice President, Chief Financial Officer and Treasurer, said ?As areminder, we executed a transformational refinancing(5) in 2020 that loweredour cost of debt and extended our maturities until 2045. The financing has nofixed mandatory principal payments and does not contain financial performancecovenants. The principal amount of debt outstanding as of the end of the yeartotaled $538.3 million, or down $37.7 million from the refinancing in March,?Millage added.

Fourth Quarter Highlights(1):

-- Total digital revenue, including digital advertising, digital subscription revenue and digital services, was $47.9 million and represented 25% of our operating revenue. -- Revenue at TownNews increased 7.0% in the fourth quarter and revenue over the last twelve months totaled $25.0 million. -- Subscription revenue totaled $89.3 million, or 46.5% of the Company's total operating revenue. Digital-only subscribers increased 13.5% and now total 244,000. -- On a GAAP basis, total operating revenues were $191.8 million in the fourth quarter, compared to $123.7 million in the prior year quarter. On a pro forma basis, total operating revenue was down 16.9% in the quarter. -- Operating expenses totaled $185.0 million and Cash Costs (3) on a pro forma basis were down 14.7%. -- Net loss totaled $1.3 million and Adjusted EBITDA totaled $25.4 million.

Fiscal Year 2020 Financial Highlights(1):

-- Closed the compelling and transformative transaction with Berkshire Hathaway to acquire 31 local daily news publications, nearly doubling our audience size and refinancing all long-term debt on attractive terms. -- Total revenue was $618.0 million in the fiscal year compared to $509.9 million in the prior year. On a pro forma basis, total operating revenue totaled $821.8 million in the fiscal year. -- Total digital revenue was $164.3 million and increased 13.5% in fiscal year 2020 due to revenue increases, in advertising, subscription and digital services. -- Net loss totaled $1.3 million and Adjusted EBITDA on a pro forma basis totaled $122.3 million. -- Debt totaled $538.3 million at the end of 2020, a $37.7 million reduction since the refinancing in March.

DEBT AND FREE CASH FLOW

On March 16, 2020, the Company closed on the comprehensive refinancing of all of its outstanding debt. The $576 million in financing has a fixed annual interest rate of 9.0%, mandatory payments based on the Company's Excess Cash Flow (4), no financial performance covenants and a 25-year maturity.

As of the 52 weeks ended September 27, 2020:

-- Principal amount of debt outstanding totaled $538.3 million. -- Cash on the balance sheet totaled $33.7 million. -- Excess Cash Flow for the fourth quarter totaled $13.7 million and was used to repay debt in the first quarter of 2021. -- Capital expenditures totaled $8.7 million. -- Pension contributions totaled $6.2 million in the quarter.

CONFERENCE CALL INFORMATION

As previously announced, we will hold an earnings conference call and audio webcast today at 9 a.m. Central Time. The live webcast will be accessible at www.lee.net and will be available for replay two hours later. Several analysts have been invited to ask questions on the call. Questions from other participants may be submitted by participating in the webcast. The call also may be monitored on a listen-only conference line by dialing (toll free) 800-309-1256 and entering a conference passcode of 473583 at least five minutes before the scheduled start. Participants on the listen-only line will not have the opportunity to ask questions.

ABOUT LEE

Lee Enterprises is a leading provider of local news and information, and a major platform for advertising, with daily newspapers, rapidly growing digital products and over 350 weekly and specialty publications serving 77 markets in 26 states. Year to date, Lee's newspapers have average daily circulation of 1.2 million, and our legacy websites, including acquisitions, reach more than 43 million digital unique visitors. Lee's markets include St. Louis, MO Buffalo, NY Omaha, NE Richmond, VA Lincoln, NE Madison, WI Davenport, IA and Tucson, AZ. Lee Common Stock is traded on the New York Stock Exchange under the symbol LEE. For more information about Lee, please visit www.lee.net.

FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. This release contains information that may be deemed forward-looking that is based largely on our current expectations, and is subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those anticipated. Among such risks, trends and other uncertainties, which in some instances are beyond our control, are:

-- Revenues may continue to diminish or declines in revenue could accelerate as a results 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 BH Media or Buffalo for unknown legal and other matters that may arise -- 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. Statements regarding our plans, strategies, prospects and expectations regarding our business and industry, including statements regarding the impacts that COVID-19 pandemic and our responses thereto may have on our future operations, are forward-looking statements. They reflect our expectations, are not guarantees of performance and speak only as of the date the statement is made. Readers are cautioned not to place undue reliance on such forward-looking statements, which are made as of the date of this release. We do not undertake to publicly update or revise our forward-looking statements, except as required by law.

Contact: IR@lee.net(563) 383-2100

CONSOLIDATEDSTATEMENTSOFOPERATIONS(UNAUDITED)

13 Weeks 13 Weeks 52 Weeks 52 Weeks Ended Ended Ended Ended(Thousands of September September September September Dollars, Except 27 29 Percent 27 29 PercentPer Share 2020 2019 Change 2020 2019 ChangeData) Advertising andmarketing 85,229 61,282 39.1 289,655 265,933 8.9 servicesSubscription 89,284 48,726 83.2 265,939 186,691 42.4 Other 17,253 13,657 26.3 62,410 57,230 9.1 Total operating 191,766 123,665 55.1 618,004 509,854 21.2 revenueOperating expenses:Compensation 78,693 42,672 84.4 243,023 182,869 32.9 Newsprint and 7,614 4,843 57.2 24,243 22,237 9.0 inkOther operating 80,637 47,793 68.7 259,382 193,709 33.9 expensesCash costs 166,944 95,308 75.2 526,648 398,815 32.1 Total operatingrevenue less 24,822 28,357 (12.5 ) 91,356 111,039 (17.7 )cash costsDepreciationand 10,937 7,069 54.7 36,133 29,332 23.2 amortizationAssets loss(gain) onsales, (250 ) 2,676 NM (5,403 ) 2,464 NM impairments andother, netRestructuring 7,329 6,022 21.7 13,751 11,635 18.2 costs and otherOperating 184,960 111,075 66.5 571,129 442,246 29.1 expensesEquity inearnings of (370 ) 1,823 NM 3,403 7,121 (52.2 )associatedcompaniesOperating 6,436 14,413 (55.3 ) 50,278 74,729 (32.7 )incomeNon-operating income (expense):Interest (12,366 ) (11,232 ) 10.1 (47,743 ) (47,488 ) 0.5 expenseDebt financingand (101 ) (1,160 ) (91.3 ) (11,966 ) (7,214 ) 65.9 administrativecostsOther, net 8,965 1,082 NM 12,274 3,813 NM Non-operating (3,502 ) (11,310 ) (69.0 ) (47,435 ) (50,889 ) (6.8 )expenses, netIncome before 2,934 3,103 (5.4 ) 2,843 23,840 (88.1 )income taxesIncome taxexpense 4,195 1,758 NM 4,104 7,931 (48.3 )(benefit)Net income (1,261 ) 1,345 NM (1,261 ) 15,909 NM Net incomeattributable to (523 ) (526 ) (0.6 ) (1,845 ) (1,641 ) 12.4 non-controllinginterestsIncomeattributable toLee (1,784 ) 819 NM (3,106 ) 14,268 NM Enterprises,Incorporated Earnings per common share:Basic (0.03 ) 0.01 NM (0.05 ) 0.26 NM Diluted (0.03 ) 0.01 NM (0.05 ) 0.25 NM

RECONCILIATIONOFNON-GAAPFINANCIALMEASURES(UNAUDITED)

The table below reconciles the non-GAAP financial performance measure of Adjusted EBITDA to net income, its most directly comparable GAAP measure:

13 Weeks 13 Weeks 52 Weeks 52 Weeks Ended Ended Ended Ended(Thousands of Dollars) September September September September 27 29 27 29 2020 2019 2020 2019 Net Income (1,261 ) 1,345 (1,261 ) 15,909 Adjusted to excludeIncome tax expense 4,195 1,758 4,104 7,931 (benefit)Non-operating expenses 3,502 11,310 47,435 50,889 (income), netEquity in earnings of TNI 370 (1,823 ) (3,403 ) (7,121 )and MNILoss (gain) on sale of (250 ) 2,676 (5,403 ) 2,464 assets and other, netDepreciation and 10,937 7,069 36,133 29,332 amortizationRestructuring costs and 7,329 6,022 13,751 11,635 otherStock compensation 252 428 1,051 1,638 Add:Ownership share of TNI and 300 2,325 4,764 8,811 MNI EBITDA (50%) (6)Adjusted EBITDA 25,374 31,110 97,171 121,488

NOTES

(1) This earnings release is a preliminary report of results for the periods included. The reader should refer to the Company's most recent reports on Form 10-Q and on Form 10-K for definitive information.

(2) Due to the material acquisition, our basis of presentation includes (i) our actual GAAP results, which reflect a full quarter of Lee Legacy(4), BHMG(4) and Buffalo(4) and year to date period of Legacy Lee and 28 weeks of results of BHMG and Buffalo, (ii) pro forma results, which reflect the consolidated operations, adjusted as if Lee had owned BHMG and Buffalo for the entire period presented, and (iii) Adjusted EBITDA(3), which is our non-GAAP measure of operating results, calculated based on actual results (with 28 weeks included in the 52 weeks ended September 27, 2020) and on a pro forma basis (assuming BHMG and Buffalo were owned for the entire period).

(3) The following are non-GAAP (Generally Accepted Accounting Principles) financial measures for which reconciliations to relevant GAAP measures are included in tables accompanying this release:

-- AdjustedEBITDA is a non-GAAP financial performance measure that enhances financial statement 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 nonoperating 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. -- CashCosts represent a non-GAAP financial performance measure of operating expenses which are measured on an accrual basis and settled in cash. This measure is useful to investors in understanding the components of the Companys cash-settled operating costs. 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 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 paid in cash.

(4) On March 16, 2020 (the Closing Date), the Company closed the acquisition of the newspaper assets of BH Media Group ("BH Media") and the stock of The Buffalo News, Inc. ("Buffalo"). Legacy Lee refers to the operating assets and results of operations of the Company prior to the Closing Date, and is synonymous with same store results.

(5) The Company's debt is the $576 million term loan under a credit agreement with BH Finance LLC dated January 29, 2020 (the "Credit Agreement"). Excess Cash Flow is defined under the Credit Agreement as any cash greater than $20,000,000 on the balance sheet in accordance with GAAP at the end of each fiscal quarter, beginning with the quarter ending June 28, 2020.

(6) TNI refers to TNI Partners publishing operations in Tucson, AZ. MNI refers to Madison Newspapers, Inc. publishing operations in Madison, WI.