XML 25 R14.htm IDEA: XBRL DOCUMENT

Note 8 - Acquisitions

9 Months Ended

Jun. 28, 2020

Business Combination Disclosure [Text Block]

8	ACQUISITIONS

On March 16, 2020, the Company completed the Asset and Stock Purchase Agreement dated as of January 29, 2020 with Berkshire Hathaway Inc., a Delaware corporation (“Berkshire”) and BH Media Group, Inc., a Delaware corporation (“BHMG”) (“Purchase Agreement”).

The allocation of the purchase price is preliminary pending the finalization of the fair value of the acquired net assets and liabilities assumed, deferred income taxes, assumed income and non-income based tax liabilities and goodwill. The valuation of property and equipment, intangibles, deferred income taxes, and residual goodwill is not complete. These amounts are subject to adjustment as additional information is obtained within the measurement period (not to exceed 12 months from the acquisition date). As part of the Transactions, the Company also entered into the Credit Agreement and the BH Lease, as described above. The Company concluded that these agreements were not separate from the Transactions and evaluated these agreements for off-market terms and no such terms were identified. As such, the consideration for the acquisitions was limited to cash consideration, as shown below. The accounting for the Credit Agreement and the BH Lease are described in Notes 5 and 6.

The following table summarizes the preliminary determination of fair values of the assets and liabilities for the Transactions.

(in Thousands)
Cash and cash equivalents	22,293
Current assets	52,559
Other assets	12,167
Property and equipment	42,952
Operating lease assets	7,445
Advertiser relationships	38,780
Subscriber relationships	36,060
Commercial print relationships	17,130
Mastheads	21,680
Goodwill	63,559
Total assets	314,625
Current liabilities assumed	(73,451	)
Operating lease liabilities	(6,625	)
Other liabilities assumed	(2,246	)
Pension obligations	(43,503	)
Postemployment benefit obligations	(36,800	)
Total liabilities	(162,625	)
Net assets	152,000
Less: acquired cash	(22,293	)
Total consideration less acquired cash	129,707

We expect to finalize our determination of fair values and liabilities by the end of fiscal year 2020.

For the 13 weeks ended June 28, 2020, the revenue and net income included in the Consolidated Income Statement related to the acquirees was $91,173,000 and $2,831,000, respectively. For the 39 weeks ended June 28, 2020, the revenue and net income in the Consolidated Income Statement related to the acquirees was $105,820,000 and $3,395,000, respectively. Acquired net income includes interest expense, net of taxes, of $2,363,000 and $2,726,000 for the 13 and 39 weeks ended June 28, 2020, respectively, which is associated with the cost of financing the acquisitions.

Pro Forma Information

The following table sets forth unaudited pro forma results of operations assuming the Transactions, along with the credit arrangements necessary to finance the Transactions, occurred on October 1, 2018, the first day of fiscal year 2019.

	Unaudited
	13 Weeks Ended			39 Weeks Ended
	June 28,		June 30,	June 28,	June 30,
(Thousands of Dollars, Except Per Share Data)	2020		2019	2020	2019
Total revenues	182,528		242,475	630,027	742,593
Income (loss) attributable to Lee Enterprises, Incorporated	(1,275	)	13,090	19,334	17,568
Earnings per share - diluted	(0.02	)	0.23	0.34	0.31

This pro forma financial information is based on historical results of operations, adjusted for the allocation of the purchase price and other acquisition accounting adjustments. This pro forma information is not necessarily indicative of what our results would have been had we operated the businesses since the beginning of the periods presented. The pro forma adjustments reflect the income statement effects of depreciation expense and amortization of intangibles related to the fair value adjustments of the assets acquired, acquisition-related costs, incremental interest expense related to the financing of the Transactions and 2020 Refinancing, the BH Lease entered into as part of the Transactions, the elimination of certain intercompany activity and the related tax effects of the adjustments.

The only material, nonrecurring adjustments made relate to the write-off of previously unamortized debt-issuance costs as of October 1, 2018 which resulted in the following after-tax changes to net income:

	•	$0 increase to net income for the 13 weeks ended June 28, 2020.

	•	$3,147,000 increase to net income for the 13 weeks ended June 28, 2019.

	•	$8,900,000 increase to net income for the 39 weeks ended June 28, 2020.

	•	$8,564,000 decrease to net income for the 39 weeks ended June 28, 2019.