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Debt | 9 Months Ended
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Jun. 26, 2016
Debt [Abstract] |
Debt Disclosure [Text Block] |
| DEBT
On March 31, 2014, we completed a comprehensive refinancing of our debt (the"2014 Refinancing"), which included the following:
• | $400,000,000 aggregate principal amount of 9.5% Senior Secured Notes (the “Notes”), pursuant to an Indenture dated as of March 31, 2014 (the “Indenture”).
• | $250,000,000 first lien term loan (the "1 st Lien Term Loan") and $40,000,000 revolving facility (the "Revolving Facility") under a First Lien Credit Agreement dated as of March 31, 2014 (together the “1 st Lien Credit Facility”).
• | $150,000,000 second lien term loan under a Second Lien Loan Agreement dated as of March 31, 2014 (the “2 nd Lien Term Loan”).
Notes The Notes are senior secured obligations of the Company and mature on March 15, 2022. At June 26, 2016, the principal balance of the Notes totaled $385,000,000. Interest The Notes require payment of interest semiannually on March 15 and September 15 of each year, at a fixed annual rate of 9.5%. Redemption We may redeem some, or all, of the principal amount of the Notes at any time on or after March 15, 2018, as follows:
Period Beginning | Percentage of Principal Amount
March 15, 2018 | 104.75
March 15, 2019 | 102.38
March 15, 2020 | 100.00
We may redeem up to 35% of the Notes prior to March 15, 2017 at 109.5% of the principal amount using the proceeds of certain future equity offerings. If we sell certain of our assets or experience specific kinds of changes of control, we must, subject to certain exceptions, offer to purchase the Notes at 101% of the principal amount. Any redemption of the Notes must also satisfy any accrued and unpaid interest thereon. We may repurchase Notes in the open market at any time. In the 39 weeks ended June 26, 2016, we purchased $15,000,000 principal amount of Notes in privately negotiated transactions. The transactions resulted in a gain on extinguishment of debt totaling $1,250,000, which is recorded in Other, net non-operating income (expense) in our Consolidated Statements of Income and Comprehensive Income. Covenants and Other Matters The Indenture and the 1 st Lien Credit Facility contains restrictive covenants as discussed more fully below. However, certain of these covenants will cease to apply if the Notes are rated investment grade by either Moody’s Investors Service, Inc. or Standard & Poor’s Ratings Group and there is no default or event of default under the Indenture. 1 st Lien Credit Facility The 1 st Lien Credit Facility consists of the $250,000,000 1 st Lien Term Loan that matures in March 2019 and the $40,000,000 Revolving Facility that matures in December 2018. The 1 st Lien Credit Facility documents the primary terms of the 1 st Lien Term Loan and the Revolving Facility. The Revolving Facility may be used for working capital and general corporate purposes (including letters of credit). At June 26, 2016, after consideration of letters of credit, we have approximately $33,068,000 available for future use under the Revolving Facility. Interest Interest on the 1 st Lien Term Loan, which has a principal balance of $119,546,000 at June 26, 2016, accrues, at our option, at either (A) LIBOR plus 6.25% (with a LIBOR floor of 1.0%) or (B) 5.25% plus the higher of (i) the prime rate at the time, (ii) the federal funds rate plus 0.5%, or (iii) one month LIBOR plus 1.0% (with a floor of 2.0%). Interest is payable quarterly. The 1 st Lien Term Loan was funded with an original issue discount of 2.0%, or $5,000,000, which is being amortized as debt financing and administration costs over the life of the 1 st Lien Term Loan. Interest on the Revolving Facility, which has a principal balance of zero at June 26, 2016, accrues, at our option, at either (A) LIBOR plus 5.5%, or (B) 4.5% plus the higher of (i) the prime rate at the time, (ii) the federal funds rate plus 0.5%, or (iii) one month LIBOR plus 1.0%. Principal Payments Quarterly principal payments of $6,250,000 are required under the 1 st Lien Term Loan, with additional payments required to be made based on 90% of excess cash flow of Lee Legacy ("Lee Legacy Excess Cash Flow"), as defined, or from proceeds of asset sales, which are not reinvested, as defined, from our subsidiaries other than Pulitzer Inc. ("Pulitzer") and its subsidiaries (collectively, the "Pulitzer Subsidiaries"). For excess cash flow calculation purposes Lee Legacy constitutes the business of the Company, including MNI, but excluding Pulitzer and TNI. We may voluntarily prepay principal amounts outstanding or reduce commitments under the 1 st Lien Credit Facility at any time without premium or penalty, upon proper notice and subject to certain limitations as to minimum amounts of prepayments. Quarterly, the Company is required to prepare a Lee Legacy Excess Cash Flow calculation, which is generally determined as the cash earnings of our subsidiaries other than the Pulitzer Subsidiaries and is adjusted for changes in working capital, capital spending, pension contributions, debt principal payments and income tax payments or refunds. Any excess cash flow as calculated is required to be paid to the 1 st Lien lenders 45 days after the end of the quarter. Lee Legacy excess cash flow for the 13 weeks ended June 26, 2016 totaled $5,992,000 and will be paid in the 13 weeks ending September 25, 2016. 2016 payments made, or required to be made for the remainder of the year, under the 1 st Lien Term Loan are summarized as follows:
| 13 Weeks Ended |  | 13 Weeks Ending |
(Thousands of Dollars) | December 27 2015 |  | March 27 2016 |  | June 26 2016 |  | September 25 2016 |
Mandatory | 6,250 |  | 6,250 |  | 6,250 |  | 6,250 |
Voluntary | 5,000 |  | 27,000 |  | 3,000 |  | — |
Excess cash flow payment | — |  | 1,135 |  | 6,441 |  | 5,992 |
| 11,250 |  | 34,385 |  | 15,691 |  | 12,242 |
In January 2016, we used $20,000,000 of the proceeds received from an insurance settlement to reduce outstanding debt under our 1 st Lien Term Loan. The majority of the remaining proceeds was used to repurchase Notes at a substantial discount. Covenants and Other Matters The 1 st Lien Credit Facility requires that we comply with certain affirmative and negative covenants customary for financing of this nature, including a maximum total leverage ratio, which is only applicable to the Revolving Facility. The 1 st Lien Credit Facility restricts us from paying dividends on our Common Stock. This restriction no longer applies if Lee Legacy leverage is below 3.25x before and after such payments. Further, the 1 st Lien Credit Facility restricts or limits, among other things, subject to certain exceptions, the ability of the Company and its subsidiaries to: (i) incur indebtedness, (ii) enter into mergers, acquisitions and asset sales, (iii) incur or create liens and (iv) enter into transactions with certain affiliates. The 1 st Lien Credit Facility contains various representations and warranties and may be terminated upon occurrence of certain events of default. The 1 st Lien Credit Facility also contains cross-default provisions tied to the terms of each of the Indenture and 2 nd Lien Term Loan. 2 nd Lien Term Loan The 2 nd Lien Term Loan, which has a balance of $135,736,000 at June 26, 2016, bears interest at a fixed annual rate of 12.0%, payable quarterly, and matures in December 2022. Principal Payments There are no scheduled mandatory amortization payments required under the 2 nd Lien Term Loan. Quarterly, we are required to prepare a calculation of excess cash flow of the Pulitzer Subsidiaries ("Pulitzer Excess Cash Flow"). Pulitzer Excess Cash Flow is generally determined as the cash earnings of the Pulitzer Subsidiaries adjusted for changes in working capital, capital spending, pension contributions, debt principal payments and income tax payments. Pulitzer Excess Cash Flow also includes a deduction for interest costs incurred under the 2 nd Lien Term Loan. Changes to settlement of certain intercompany costs between the Company and Pulitzer have been affected, with the net result being a reduction in the excess cash flows of Pulitzer from historically reported levels. Under the 2 nd Lien Term Loan, subject to certain other conditions, Pulitzer Excess Cash Flow must be used, (a) prior to March 31, 2017, to make an offer to the 2 nd Lien Lenders to prepay amounts under the 2 nd Lien Term Loan at par (which offer the 2 nd Lien Lenders may accept or reject; if rejected we may use the Pulitzer Excess Cash Flow to prepay amounts under the 1 st Lien Credit Facility or repurchase Notes in the open market), and (b) after March 31, 2017, to pay such amounts under the 2 nd Lien Term Loan at par. Pulitzer Excess Cash Flow payments are required to be paid 45 days after the end of the quarter. For the last four quarters, Pulitzer Excess Cash Flow and the related payments on the 2 nd Lien Term Loan are as follows:
For the Period Ending (Thousands of Dollars) | Pulitzer Excess Cash Flow | Payment Amount (not rejected) |
September 27, 2015 | 5,143 | 3,326 |
December 27, 2015 | 2,864 | 1,867 |
March 27, 2016 | 2,730 | 525 |
June 26, 2016 | 1,583 | * |
* The June 26, 2016 Pulitzer Excess Cash Flow payment amount will be determined and made in the 13 weeks ending September 25, 2016. Subject to certain other conditions in the 2 nd Lien Term Loan, the balance of the 2 nd Lien Term Loan will be repaid at par from proceeds from asset sales by the Pulitzer Subsidiaries that are not reinvested. For the 39 weeks ended June 26, 2016, we repaid $3,545,952 on the 2 nd Lien Term loan, at par, with net proceeds from the sale of Pulitzer assets. In 2015, we repaid $5,000,000 of the 2 nd Lien Term Loan, at par, due to the sale of real estate at one of our Pulitzer properties. Voluntary payments under the 2 nd Lien Term Loan are subject to call premiums as follows:
Period Beginning | Percentage of Principal Amount
March 31, 2014 | 112
March 31, 2017 | 106
March 31, 2018 | 103
March 31, 2019 | 100
Covenants and Other Matters The 2 nd Lien Term Loan requires that we comply with certain affirmative and negative covenants customary for financing of this nature, including the negative covenants under the 1 st Lien Credit Facility discussed above. The 2 nd Lien Term Loan contains various representations and warranties and may be terminated upon occurrence of certain events of default. The 2 nd Lien Term Loan also contains cross-default provisions tied to the terms of the Indenture and 1 st Lien Credit Facility. In connection with the 2 nd Lien Term Loan, we entered into a Warrant Agreement dated as of March 31, 2014 (the “Warrant Agreement”). Under the Warrant Agreement, certain affiliates or designees of the 2 nd Lien Lenders received on March 31, 2014 their pro rata share of warrants to purchase, in cash, an initial aggregate of 6,000,000 shares of Common Stock, subject to adjustment pursuant to anti-dilution provisions (the “Warrants”). The Warrants represent, when fully exercised, approximately 10.1% of shares of Common Stock outstanding at March 30, 2014 on a fully diluted basis. The exercise price of the Warrants is $4.19 per share. The Warrant Agreement contains a cash settlement provision in the event of a change of control prior to March 31, 2018 as well as other provisions requiring the Warrants to be measured at fair value and included in other liabilities in our Consolidated Balance Sheets. We remeasure the fair value of the liability each reporting period, with changes reported in other, net non-operating income (expense). The initial fair value of the Warrants was $16,930,000. See Note 9. In connection with the issuance of the Warrants, we entered into a Registration Rights Agreement dated as of March 31, 2014 (the “Registration Rights Agreement”). The Registration Rights Agreement requires, among other matters, that we use our commercially reasonable efforts to maintain the effectiveness for certain specified periods of a shelf registration statement related to the shares of Common Stock to be issued upon exercise of the Warrants. Security The Notes and the 1 st Lien Credit Facility are fully and unconditionally guaranteed on a joint and several first-priority basis by each of the Company's material domestic subsidiaries, excluding MNI, the Pulitzer Subsidiaries and TNI (the "Lee Legacy Assignors"), pursuant to a first lien guarantee and collateral agreement dated as of March 31, 2014 (the "1 st Lien Guarantee and Collateral Agreement"). The Notes, the 1 st Lien Credit Facility and the subsidiary guarantees are secured, subject to certain exceptions, priorities and limitations, by perfected security interests in all property and assets, including certain real estate, of the Lee Legacy Assignors, other than the capital stock of MNI and any property and assets of MNI (the “Lee Legacy Collateral”), on a first-priority basis, equally and ratably with all of the Lee Legacy Assignors' existing and future obligations. The Lee Legacy Collateral includes, among other things, equipment, inventory, accounts receivables, depository accounts, intellectual property and certain of their other tangible and intangible assets. Also, the Notes and the 1 st Lien Credit Facility are secured, subject to certain exceptions, priorities and limitations in the various agreements, by first-priority security interests in the capital stock of, and other equity interests owned by, the Lee Legacy Assignors (excluding the capital stock of MNI). The Notes and 1 st Lien Credit Facility are subject to a Pari Passu Intercreditor Agreement dated March 31, 2014. The Notes, the 1 st Lien Credit Facility and the subsidiary guarantees are also secured, subject to permitted liens, by a second-priority security interest in the property and assets of the Pulitzer Subsidiaries that become subsidiary guarantors (the "Pulitzer Assignors") other than assets of or used in the operations or business of TNI (collectively, the “Pulitzer Collateral”). In June 2015 the Pulitzer Assignors became a party to the 1 st Lien Guarantee and Collateral Agreement on a second lien basis. Also, the Notes and the 1 st Lien Credit Facility are secured, subject to certain exceptions, priorities, and limitations in the various agreements, by second-priority security interests in the capital stock of, and other equity interests in, the Pulitzer Assignors and Star Publishing’s interest in TNI. The 2 nd Lien Term Loan is fully and unconditionally guaranteed on a joint and several first-priority basis by the Pulitzer Assignors, pursuant to a Second Lien Guarantee and Collateral Agreement dated as of March 31, 2014 (the “2 nd Lien Guarantee and Collateral Agreement”) among the Pulitzer Assignors and the 2 nd Lien collateral agent. Under the 2 nd Lien Guarantee and Collateral Agreement, the Pulitzer Assignors have granted (i) first-priority security interests, subject to certain priorities and limitations in the various agreements, in the Pulitzer Collateral and (ii) have granted first-priority lien mortgages or deeds of trust covering certain real estate, as collateral for the payment and performance of their obligations under the 2 nd Lien Term Loan. Also, under the 2 nd Lien Guarantee and Collateral Agreement, the Lee Legacy Assignors have granted (i) second-priority security interests, subject to certain priorities and limitations in the various agreements, in the Lee Legacy Collateral, and (ii) have granted second-priority lien mortgages or deeds of trust covering certain real estate, as collateral for the payment and performance of their obligations under the 2 nd Lien Term Loan. Assets of, or used in the operations or business of, MNI are excluded. The rights of each of the collateral agents with respect to the Lee Legacy Collateral and the Pulitzer Collateral are subject to customary intercreditor and intercompany agreements. Other In connection with the 2014 Refinancing, we capitalized $37,819,000 of debt financing costs. Amortization of debt financing costs totaled $1,132,000 and $4,211,000 in the 13 weeks and 39 weeks ended June 26, 2016. Amortization of such costs is estimated to total $4,888,000 in 2016, $4,217,000 in 2017, $4,299,000 in 2018, $4,090,000 in 2019 and $4,072,000 in 2020. At June 26, 2016 we have $27,598,000 of unamortized debt financing costs recorded in other long term assets in our Consolidated Balance Sheets. Debt is summarized as follows:
|  |  | Interest Rates (%)
(Thousands of Dollars) | June 26 2016 |  | September 27 2015 |  | June 26 2016
Revolving Facility | — |  | — |  | 5.65
1 st Lien Term Loan | 119,546 |  | 180,872 |  | 7.25
Notes | 385,000 |  | 400,000 |  | 9.50
2 nd Lien Term Loan | 135,736 |  | 145,000 |  | 12.00
| 640,282 |  | 725,872 |  |
Less current maturities of long-term debt | 30,992 |  | 25,000 |  |
Total long-term debt | 609,290 |  | 700,872 |  |
At June 26, 2016, our weighted average cost of debt, excluding amortization of debt financing costs, is 9.6%. Aggregate minimum required maturities of debt excluding amounts required to be paid from excess cash flow requirements at June 26, 2016 total $12,242,000 for the remainder of 2016, $25,000,000 in 2017, $25,000,000 in 2018, $57,304,000 in 2019, $0 in 2020 and $520,736,000 thereafter. Liquidity At June 26, 2016, after consideration of letters of credit, we have approximately $33,068,000 available for future use under our Revolving Facility. Including cash, our liquidity at June 26, 2016 totals $54,940,000. 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 existing cash and our cash flows, which will allow us to maintain an adequate level of liquidity. The Warrants, if and when exercised, would provide additional liquidity in an amount up to $25,140,000 subject to a reduction for any amounts the Company may elect to use to repay our 1 st Lien Term Loan and/or the Notes. The 2014 Refinancing significantly improved our debt maturity profile. Final maturities of our debt have been extended to dates from December 2018 through December 2022. As a result, we believe refinancing risk has been substantially reduced for the next several years. There are numerous potential consequences under the Notes, 1 st Lien Credit Facility and 2 nd Lien Term Loan, if an event of default, as defined, occurs and is not remedied. Many of those consequences are beyond our control. The occurrence of one or more events of default would give rise to the right of the applicable lender(s) to exercise their remedies under the Notes, 1 st Lien Credit Facility and 2 nd Lien Term Loan, 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 repay, refinance or amend our debt agreements as they become due. The Notes, 1 st Lien Credit Facility and 2 nd Lien Term Loan have only limited affirmative covenants with which we are required to maintain compliance. We are in compliance with our debt covenants at June 26, 2016.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.19,20,22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 + Details
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