News Column

LEE ENTERPRISES, INC - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations

February 7, 2014

The following discussion includes comments and analysis relating to our results of operations and financial condition as of and for the 13 weeks ended December 29, 2013. This discussion should be read in conjunction with the Consolidated Financial Statements and related Notes thereto, included herein, and our 2013 Annual Report on Form 10-K.

NON-GAAP FINANCIAL MEASURES

No non-GAAP financial measure should be considered as a substitute for any related GAAP financial measure. However, we believe the use of non-GAAP financial measures provides meaningful supplemental information with which to evaluate its financial performance, or assist in forecasting and analyzing future periods. 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.

The non-GAAP financial measures utilized by us are defined as follows:

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

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

Operating Cash Flow is defined as operating income (loss) plus depreciation, amortization and impairment charges, minus equity in earnings of associated companies. Operating Cash Flow Margin is defined as operating cash flow divided by operating revenue.

Unlevered Free Cash Flow is defined as operating income (loss), plus depreciation, amortization, impairment charges, stock compensation, distributions from associated companies and cash income tax refunds, minus equity in earnings of associated companies, curtailment gains, cash income taxes, pension contributions and capital expenditures. Changes in working capital, asset sales, minority interest and discontinued operations are excluded. Free Cash Flow also includes financial income, interest expense and debt financing and reorganization costs.

21



--------------------------------------------------------------------------------

The table below reconciles operating cash flow, operating cash flow margin, adjusted EBITDA, unlevered free cash flow and free cash flow to operating income (loss), the most directly comparable measures under GAAP.

13 Weeks Ended 52 Weeks Ended December 29 December 30 December 29 (Thousands of Dollars) 2013 2012 2013 Operating income (loss) 40,202 39,517 (56,634 ) Equity in earnings of associated companies (2,919 ) (3,045 ) (8,559 ) Depreciation and amortization 12,034 15,041 52,630 Impairment of intangible and other assets - - 171,094 Operating cash flow 49,317 51,513 158,531 Ownership share of TNI EBITDA (50%) 1,894 1,954 5,737 Ownership share of MNI EBITDA (50%) 2,027 2,255 5,753 Stock compensation 264 368 1,157 Adjusted EBITDA 53,502 56,090 171,178 Ownership share of associated companies EBITDA (50%) (3,921 ) (4,209 ) (11,490 ) Distributions from associated companies 2,815 2,070 12,143 Capital expenditures (2,295 ) (2,068 ) (9,967 ) Pension contributions - - (6,016 ) Cash income tax refunds (paid) (14 ) (240 ) 9,352 Unlevered free cash flow 50,087 51,643 165,200 Financial income 120 80 340 Interest expense settled in cash (19,628 ) (21,846 ) (81,794 ) Debt financing and reorganization costs paid (2 ) - (1,073 ) Free cash flow 30,577 29,877 82,673



Reconciliations of adjusted net income and adjusted earnings per common share to income attributable to Lee Enterprises, Incorporated and earnings per common share, respectively, the most directly comparable measures under GAAP, are set forth in Item 2, included herein, under the caption "Overall Results".

CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of results of operations and financial condition are based upon our Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of these financial statements 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. 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.

Our critical accounting policies include the following:

•Goodwill and other intangible assets; •Pension, postretirement and postemployment benefit plans; •Income taxes; •Revenue recognition; and •Uninsured risks.



Additional information regarding these critical accounting policies can be found under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2013 Annual Report on Form 10-K and the Notes to Consolidated Financial Statements, included herein.

22



--------------------------------------------------------------------------------

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In 2013, the FASB issued an amendment to an existing accounting standard, which requires an entity to provide information about the amounts reclassified out of Accumulated Other Comprehensive Income ("AOCI") by component. In addition, an entity is required to present, either on the face of the financial statements or in the notes, significant amounts reclassified out of AOCI by the respective line items of net income, but only if the amount reclassified is required to be reclassified in its entirety in the same reporting period. For amounts that are not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional details about those amounts. This guidance does not change the current requirements for reporting net income or other comprehensive income in the financial statements and is effective beginning in 2014. The adoption of this standard did not have a material impact on our Consolidated Financial Statements.

EXECUTIVE OVERVIEW

We are a leading provider of local news and information, and a major platform for advertising, in the markets we serve, which are located primarily in the Midwest, Mountain West and West regions of the United States. With the exception of St. Louis, Missouri, our 50 daily newspaper markets, across 22 states, are principally midsize or small. Through our print and digital platforms, we reach an overwhelming majority of adults in our markets.

Our platforms include:

• 50 daily and 38 Sunday newspapers with subscribers totaling 1.2 million and 1.6 million, respectively, for the 13 weeks ended December 29, 2013, read by nearly four million people in print; • Websites, mobile and tablet products in all of our markets that complement our newspapers and attracted 25.6 million unique visitors in December 2013, with 209.7 million page views; and



• Nearly 300 weekly newspapers and classified and niche publications.

Our markets have established retail bases, and most are regional shopping hubs. We are located in four state capitals. Six of our top ten markets by revenue include major universities, and seven are home to major corporate headquarters. Based on data from the Bureau of Labor of Statistics as of December 2013, the unemployment rate in seven of our top ten markets by revenue was lower than the national average. Among all Lee markets, seven ranked among the top 25 markets nationwide with the lowest unemployment rates. We believe that all of these factors have had a positive impact on advertising revenue.

We do not face significant competition from other local daily newspapers in most of our markets, although there is significant competition for audience in those markets from other media. In our top ten markets by revenue, only two have significant local daily print competition.

ECONOMIC CONDITIONS

According to the National Bureau of Economic Research, the United States economy was in a recession from December 2007 until June 2009. It is widely believed that certain elements of the economy, such as housing, auto sales and employment, were in decline before December 2007, and some elements have still not recovered to pre-recession levels in either nominal or real (inflation adjusted) terms. Revenue, operating results and cash flows were significantly impacted by the recession and its aftermath. The duration and depth of an economic recession, and pace of economic recovery, in markets in which we operate may influence our future results.

IMPAIRMENT OF GOODWILL AND OTHER ASSETS

Due primarily to our stockholders' deficit in 2013 and to the difference between our stock price and the per share carrying value of our net assets in 2011, we analyzed the carrying value of our net assets in 2013 and 2011. Continued deterioration in our revenue and the weak economic environment were also factors in the timing of the analyses.

In 2013, we concluded the fair value of our business was in excess of the carrying value of our net assets. As a result no goodwill impairment was recorded. However, we determined that the cash flows from nonamortized and amortizable intangible assets were not sufficient to recover their carrying values. As a result, we recorded non-cash charges to reduce the carrying values of such assets.

23



--------------------------------------------------------------------------------

Table of Contents

In 2011, we concluded the fair value of our business did not exceed the carrying value of our net assets. As a result, we recorded pretax, non-cash charges to reduce the carrying values of goodwill, nonamortized and amortizable intangible assets. Additional pretax, non-cash charges were recorded to reduce the carrying value of TNI.

We also recorded pretax, non-cash charges to reduce the carrying value of property and equipment in 2013, 2012 and 2011. We recorded deferred income tax benefits related to these charges.

DEBT AND LIQUIDITY

We have a substantial amount of debt, as discussed more fully (and certain capitalized terms used below defined) in Note 1 and Note 5 of the Notes to Consolidated Financial Statements, included herein. In February 2009, we completed a comprehensive restructuring of our then-existing credit agreement and a refinancing of our Pulitzer Notes debt, substantially enhancing our liquidity and operating flexibility. Since February 2009, we have satisfied all interest payments and substantially all principal payments due under our debt facilities with our cash flows.

Substantially all of our debt was scheduled to mature in April 2012. We used a voluntary, prepackaged petition under the U. S. Bankruptcy Code to accomplish a comprehensive refinancing that extended the maturity to December 2015 for most of our debt, with the remainder maturing in April 2017. Interest expense has increased as a result of the refinancing and mandatory principal payments were reduced. In May 2013, we again refinanced the remaining balance of the Pulitzer Notes. Our ability to make payments on our indebtedness will depend on our ability to generate future cash flows. This ability, to a certain extent, is subject to general economic, financial, competitive, business, legislative, regulatory and other factors that are beyond our control.

At December 29, 2013, after consideration of letters of credit, we have approximately $29,942,000 available for future use under our revolving credit facility. Including cash, our liquidity at December 29, 2013 totals $42,598,000. 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.

At December 29, 2013, the principal amount of our outstanding debt totals $833,000,000. For the last twelve months ending December 29, 2013 , the principal amount of our debt, net of cash, is 4.8 times our Adjusted EBITDA, compared to a ratio of 5.5 at December 30, 2012.

As discussed more fully in Note 5 to the Consolidated Financial Statements, included herein, we recently reached an agreement to refinance the 2nd Lien Agreement with a new $200,000,000 facility maturing in December 2022.

There are numerous potential consequences under the 1st Lien Agreement, 2nd Lien Agreement, and the New Pulitzer Notes, 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 the 1st Lien Lenders, 2nd Lien Lenders and/or Berkshire, to exercise their remedies under the 1st Lien Agreement, 2nd Lien Agreement, and the New Pulitzer Notes, respectively, 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 refinance or amend our debt agreements as they become due, or earlier if available liquidity is consumed. We are in compliance with our debt covenants at December 29, 2013.

EQUITY CAPITAL

As of July 1, 2011, our Common Stock traded at an average 30-day closing market price of less than $1 per share. Under the NYSE listing standards, if our Common Stock fails to maintain an adequate per share price and total market capitalization of less than $50,000,000, our Common Stock could be removed from the NYSE and traded in the over the counter market. In July 2011, the NYSE first notified us that our Common Stock did not meet the NYSE continued listing standards due to the failure to maintain an adequate share price. Under the NYSE rules, our Common Stock was allowed to continue to be listed during a cure period. In February 2012, after completing our debt refinancing, the NYSE notified us that we were again in compliance with the minimum closing price standard. In January 2013, the NYSE notified us that we had returned to full compliance with all continued listing standards.

24



--------------------------------------------------------------------------------

13 WEEKS ENDED DECEMBER 29, 2013

Operating results, as reported in the Consolidated Financial Statements, are summarized below. Certain prior period amounts have been reclassified to conform with the current year presentation.

13 Weeks Ended December 29 December 30 Percent (Thousands of Dollars, Except Per Share Data) 2013 2012 Change Advertising and marketing services revenue: Retail 80,103 83,207 (3.7 ) Classified: Employment 7,209 7,683 (6.2 ) Automotive 8,129 9,318 (12.8 ) Real estate 4,419 4,652 (5.0 ) All other 10,453 11,633 (10.1 ) Total classified 30,210 33,286 (9.2 ) National 7,517 7,794 (3.6 ) Niche publications and other 4,561 4,612 (1.1 ) Total advertising and marketing services revenue 122,391 128,899 (5.0 ) Subscription 45,550 46,056 (1.1 ) Commercial printing 3,032 3,302 (8.2 ) Digital services and other 6,412 6,399 0.2 Total operating revenue 177,385 184,656 (3.9 ) Operating expenses: Compensation 62,142 65,955 (5.8 ) Newsprint and ink 10,562 12,174 (13.2 ) Other operating expenses 55,157 54,211 1.7 Workforce adjustments 207 803 (74.2 ) 128,068 133,143 (3.8 ) Operating cash flow 49,317 51,513 (4.3 ) Depreciation and amortization 12,034 15,041 (20.0 ) Equity in earnings of associated companies 2,919 3,045 (4.1 ) Operating income 40,202 39,517 1.7 Non-operating expense, net (20,717 ) (16,426 ) 26.1 Income from continuing operations before income taxes 19,485 23,091 (15.6 ) Income tax expense 7,383 9,439 (21.8 ) Income from continuing operations 12,102 13,652 (11.4 ) Discontinued operations, net of income taxes - 1,046 NM Net income 12,102 14,698 (17.7 ) Net income attributable to non-controlling interests (210 ) (118 ) 78.0 Income attributable to Lee Enterprises, Incorporated 11,892 14,580 (18.4 ) Other comprehensive loss, net of income taxes (441 ) (93 ) NM Comprehensive income attributable to Lee Enterprises, Incorporated 11,451 14,487 (21.0 ) Income from continuing operations attributable to Lee Enterprises, Incorporated 11,892 13,534 (12.1 ) Income per common share: Basic 0.23 0.28 (17.9 ) Diluted 0.22 0.28 (21.4 )



References to the "2014 Quarter" refer to the 13 weeks ended December 29, 2013. Similarly, references to the "2013 Quarter" refer to the 13 weeks ended December 30, 2012.

Total operating revenue decreased $7,271,000, or 3.9%, in the 2014 Quarter, compared to the 2013 Quarter.

25



--------------------------------------------------------------------------------

Advertising and Marketing Services Revenue



In the 2014 Quarter, advertising and marketing services revenue decreased $6,508,000, or 5.0%, compared to the 2013 Quarter. Retail advertising decreased 3.7%. Retail preprint insertion revenue increased 0.2%. Digital retail advertising on a stand-alone basis increased 4.7%, partially offsetting print declines.

Classified revenue decreased 9.2% in the 2014 Quarter. Employment revenue decreased 6.2% while automotive advertising decreased 12.8%, real estate decreased 5.0% and other classified decreased 10.1%. Digital classified revenue on a stand-alone basis increased 2.4%, partially offsetting print declines.

National advertising decreased $277,000, or 3.6%. Digital national advertising on a stand-alone basis increased 175.5%. Advertising in niche publications and other decreased 1.1%.

On a stand-alone basis, digital advertising and marketing services revenue increased 9.8% in the 2014 Quarter, representing 15.2% of total advertising and marketing services revenue. Total digital revenue for the 2014 Quarter, including advertising, subscription and all other digital business, totaled $21.6 million, an increase of 12.7% from a year ago. Print advertising and marketing services revenue on a stand-alone basis decreased 7.3%.

Subscription and Other Revenue



Subscription revenue decreased $506,000, or 1.1%, in the 2014 Quarter due to decreases in print subscribers, which were partially offset by price increases and increases in digital subscribers.

Our unaudited, average daily circulation, including TNI, MNI and digital subscribers, decreased 4.3% and Sunday circulation increased 10.6% in the 2014 Quarter compared to the 2013 Quarter due to increases in branded editions.

Our mobile, tablet, desktop and app sites, including TNI and MNI, attracted 25.6 million unique visitors in the month of December 2013, an increase of 19.9% from a year ago, with 209.7 million page views. Research in our larger markets indicates we are maintaining our share of audience through the combination of digital audience growth and strong newspaper readership.

Commercial printing revenue decreased $270,000, or 8.2%, in the 2014 Quarter. Digital services and other revenue increased $13,000, or 0.2%, in the 2014 Quarter.

Operating Expenses



Operating expenses other than depreciation, amortization and unusual matters decreased $4,479,000, or 3.4%, in the 2014 Quarter.

Compensation expense decreased $3,813,000, or 5.8%, in the 2014 Quarter, driven by a decline in average full-time equivalent employees of 5.9%.

Newsprint and ink costs decreased $1,612,000, or 13.2%, in the 2014 Quarter, primarily as a result of a reduction in newsprint volume of 10.1%. See Item 3, "Commodities", included herein, for further discussion and analysis of the impact of newsprint on our business.

Other operating expenses, which are comprised of all operating costs not considered to be compensation, newsprint, depreciation, amortization, or unusual matters, increased $946,000, or 1.7%, in the 2014 Quarter due primarily to new products and the impact of outsourcing, which generally reduces compensation costs but increases other operating expenses.

Reductions in staffing resulted in workforce adjustment costs totaling $207,000 and $803,000 in the 2014 Quarter and 2013 Quarter, respectively.

For the full year, 2014 cash costs are expected to decrease 0.5-1.5%, excluding the impact of circulation-related expense reclassification as a result of moving to fee-for-service delivery contracts at several newspapers. The reclassification will increase both revenue and operating expenses beginning in the June 2014 quarter, with no impact on operating cash flow or operating income.

26



--------------------------------------------------------------------------------

Operating Cash Flow and Results of Operations



As a result of the factors noted above, operating cash flow decreased 4.3%, to $49,317,000, in the 2014 Quarter compared to $51,513,000 in the 2013 Quarter. Operating cash flow margin decreased to 27.8% from 27.9% a year ago, reflecting a smaller percentage decrease in operating expenses than the decrease in operating revenue.

Depreciation expense decreased $346,000, or 6.3%, in the 2014 Quarter. Amortization expense decreased $2,661,000, or 27.9%, in the 2014 Quarter due to the impairments recorded in 2013.

Equity in earnings in associated companies decreased $126,000 in the 2014 Quarter.

The factors noted above resulted in operating income of $40,202,000 in the 2014 Quarter compared to $39,517,000 in the 2013 Quarter. Operating income margin increased to 22.7% from 21.4% a year ago.

Nonoperating Income and Expense



Interest expense decreased $2,639,000, or 11.2%, to $20,827,000 in the 2014 Quarter due to lower debt balances and refinancing of the Pulitzer Notes. Our weighted average cost of debt was 9.2% at the end of the 2014 Quarter. Interest expense in the 2014 Quarter includes $1,198,000 of non-cash amortization of a present value adjustment of debt compared to $1,358,000 in the 2013 Quarter.

Absent a significant increase in LIBOR, we expect interest expense to continue to decline due to lower debt balances, which decreased $14,500,000 in the 2014 Quarter and $83,900,000 in the last twelve months, and the lower interest rate on the New Pulitzer Notes.

In December 2012, we recognized a gain of $7,093,000 from a distribution related to the partial sale of assets in a private equity investment. This gain is classified as other, net in the Consolidated Statements of Operations and Comprehensive Income.

Overall Results



We recognized income tax expense of 37.9% of income from continuing operations before income taxes in the 2014 Quarter and 40.9% in the 2013 Quarter. See Note 7 of the Notes to Consolidated Financial Statements, included herein, for a reconciliation of the expected federal income tax rate to the actual tax rates.

27



--------------------------------------------------------------------------------

As a result of the factors noted above, income attributable to Lee Enterprises, Incorporated (which includes discontinued operations) totaled $11,892,000 in the 2014 Quarter compared to $14,580,000 in the 2013 Quarter. We recorded earnings per diluted common share of $0.22 in the 2014 Quarter and $0.28 in the 2013 Quarter. Excluding unusual matters, as detailed in the table below, diluted earnings per common share, as adjusted, were $0.24 in the 2014 Quarter, compared to $0.20 in the 2013 Quarter. Per share amounts may not add due to rounding.

13 Weeks Ended December 29 December 30 2013 2012 (Thousands of Dollars, Except Per Share Data) Amount Per Share Amount Per Share Income attributable to Lee Enterprises, Incorporated, as reported 11,892 0.22 14,580 0.28



Adjustments:

Gain on sale of investment, net - (6,909 ) Debt financing and reorganization costs 104 47 Amortization of debt present value adjustment 1,198 1,358 Other, net 163 1,066 1,465 (4,438 ) Income tax effect of adjustments, net (512 ) 1,553 953 0.02 (2,885 ) (0.06 ) Unusual matters related to discontinued operations - - (1,167 ) (0.02 ) Income attributable to Lee Enterprises, Incorporated, as adjusted 12,845 0.24 10,528 0.20 DISCONTINUED OPERATIONS



In March 2013, we sold The Garden Island newspaper and digital operations in Lihue, HI for $2,000,000 in cash, plus an adjustment for working capital. The transaction resulted in a loss of $2,170,000, after income taxes, and was recorded in discontinued operations in the Consolidated Statements of Operations and Comprehensive Income (Loss) in the 13 weeks ended March 31, 2013. Operating results of The Garden Island have been classified as discontinued operations for all periods presented.

In October 2012, we sold the North County Times in Escondido, CA for $11,950,000 in cash, plus an adjustment for working capital. The transaction resulted in a gain of $1,167,000, after income taxes, and was recorded in discontinued operations in the Consolidated Statements of Operations and Comprehensive Income (Loss) in the 13 weeks ended December 30, 2012. Operating results of the North County Times have been classified as discontinued operations for all periods presented.

LIQUIDITY AND CAPITAL RESOURCES

Operating Activities



Cash provided by operating activities of continuing operations was $11,993,000 in the 2014 Quarter and $18,581,000 in the 2013 Quarter. We recorded net income of $12,102,000 in the 2014 Quarter and $14,698,000 in the 2013 Quarter. Changes in depreciation and amortization, deferred income taxes, and operating assets and liabilities accounted for the bulk of the change in cash provided by operating activities of continuing operations in the 2014 Quarter.

Investing Activities



Cash required for investing activities of continuing operations totaled $2,637,000 in the 2014 Quarter compared to cash provided by investing activities of $4,079,000 in the 2013 Quarter. Capital spending totaled $2,295,000 in the 2014 Quarter and $2,068,000 in the 2013 Quarter. We received $132,000 from sales of assets in the 2014 Quarter compared to $7,215,000 in the 2013 Quarter.

28



--------------------------------------------------------------------------------

We anticipate that funds necessary for capital expenditures, which are expected to total up to $12,000,000 in 2014, and other requirements, will be available from internally generated funds or availability under our revolving credit facility.

Financing Activities



Cash required for financing activities of continuing operations totaled $14,263,000 in the 2014 Quarter and $28,994,000 in the 2013 Quarter. Debt reduction accounted for the majority of the usage of funds in both the 2014 Quarter and 2013 Quarter.

The Plan requires us to suspend stockholder dividends and share repurchases through December 2015.

As discussed more fully in Note 1 and Note 5 of the Notes to Consolidated Financial Statements, included herein, in January 2012, in conjunction with the effectiveness of the Plan, we refinanced all of our debt. The Plan refinanced our then-existing credit agreement and extended the April 2012 maturity in a structure of first and second lien debt with the existing lenders. We also amended the Pulitzer Notes, and extended the April 2012 maturity with the existing Noteholders. In May 2013, we again refinanced the remaining balance of the Pulitzer Notes.

Debt is summarized as follows:

Interest Rates (%) December 29 September 29 December 29 (Thousands of Dollars) 2013 2013 2013 Revolving credit facility - - 6.75 1st Lien Agreement 603,000 609,500 7.50 2nd Lien Agreement 175,000 175,000 15.00 New Pulitzer Notes 55,000 63,000 9.00 Unamortized present value adjustment (11,745 ) (12,942 ) 821,255 834,558 Less current maturities of debt 13,925 19,150



Current amount of present value adjustment (4,779 ) (4,779 ) Total long-term debt

812,109 820,187



At December 29, 2013, our weighted average cost of debt was 9.2%.

Aggregate maturities of debt total $9,750,000 for the remainder of 2014 and are estimated to total $19,900,000 in 2015, $586,150,000 in 2016 and $217,200,000 in 2017.

Liquidity



At December 29, 2013, after consideration of letters of credit, we have approximately $29,942,000 available for future use under our revolving credit facility. Including cash, our liquidity at December 29, 2013 totals $42,598,000. 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.

At December 29, 2013, the principal amount of our outstanding debt totals $833,000,000. For the last twelve months ending December 29, 2013 , the principal amount of our debt, net of cash, is 4.8 times our Adjusted EBITDA, compared to a ratio of 5.5 at December 30, 2012.

We expect to refinance amounts outstanding under our debt agreements on or before their respective maturity dates with other loans, debt securities or equity securities, in privately negotiated transactions (including exchanges), or public offerings. The timing of such refinancing will depend on many factors, including market conditions, our liquidity requirements, our debt maturity profile, and contractual restrictions. We continuously monitor the credit and equity markets for refinancing opportunities, and have ongoing relationships with experts in debt and equity financing to assist us. As discussed more fully in Note 5 to the Consolidated Financial Statements, included herein, we recently reached an agreement to refinance the 2nd Lien Agreement with new $200,000,000 facility maturing in December 2022.

29



--------------------------------------------------------------------------------

There are numerous potential consequences under the 1st Lien Agreement, 2nd Lien Agreement, and the New Pulitzer Notes, 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 the 1st Lien Lenders, 2nd Lien Lenders and/or Berkshire, to exercise their remedies under the 1st Lien Agreement, 2nd Lien Agreement, and the New Pulitzer Notes, respectively, 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 refinance or amend our debt agreements as they become due, or earlier if available liquidity is consumed. We are in compliance with our debt covenants at December 29, 2013.

In 2014, we filed a Form S-3 shelf registration statement ("Shelf") with the SEC, which has not been declared effective. The Shelf will give us the flexibility to issue and publicly distribute various types of securities, including preferred stock, common stock, secured or unsecured debt securities, purchase contracts and units consisting of any combination of such securities, from time to time, in one or more offerings, up to an aggregate amount of $750,000,000. In July 2011, the SEC announced changes to the issuer eligibility rules which will require us to have a public float of at least $75,000,000 in order to use the Shelf. Subject to maintenance of the minimum level of equity market float and the conditions of our existing debt agreements, the Shelf may enable us to sell securities quickly and efficiently when market conditions are favorable or financing needs arise. Under our existing debt agreements, net proceeds from the sale of any securities must be used generally to reduce debt.

CHANGES IN LAWS AND REGULATIONS

Energy Costs



Energy costs have become more volatile, and may increase in the future as a result of carbon emissions and other regulations being considered by the United States Environmental Protection Agency.

Health Care



The Affordable Care Act was enacted into law in 2010. As a result, in 2010 we wrote off $2,012,000 of deferred income tax assets due to the loss of future tax deductions for providing retiree prescription drug benefits.

We expect the Affordable Care Act will be supported by a substantial number of underlying regulations, many of which have not been issued and recently, certain provisions applicable to employers were delayed. Accordingly, a complete determination of the impact of the Affordable Care Act cannot be made at this time. However, we expect our future health care costs to increase more rapidly based on analysis published by the United States Department of Health and Human Services, input from independent advisors and our understanding of various provisions of the Affordable Care Act that differ from our previous medical plans, such as:

•Certain preventive services provided without charge to employees; •Automatic enrollment of new employees; •Higher maximum age for dependent coverage; •Elimination of lifetime benefit caps; and •Free choice vouchers for certain lower income employees.



Administrative costs are also likely to increase as a result of new compliance reporting and mandatory fees per participant. New costs being imposed on other medical care businesses, such as health insurers, pharmaceutical companies and medical device manufacturers, may be passed on to us in the form of higher costs. We may be able to mitigate certain of these future cost increases through changes in plan design.

We do not expect the Affordable Care Act will have a significant impact on our postretirement medical benefit obligation liability.

Pension Plans



In July 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

30



--------------------------------------------------------------------------------

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.

Pension liabilities, net of plan assets, totaled $30.6 million as of September 29, 2013, a $38.1 million improvement from September 30, 2012, due to strong asset returns and an increase in discount rates used to measure the liabilities. Contributions to pension plans are expected to total $1.4 million in 2014, a 77% reduction from 2013.

Income Taxes



Certain states in which we operate are considering changes to their corporate income tax rates. Until such changes are enacted, the impact of such changes cannot be determined.

INFLATION

Price increases (or decreases) for our products 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.


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Edgar Glimpses


Story Tools