Lee Enterprises Incorporated

08/07/2026 | Press release | Distributed by Public on 08/07/2026 12:01

Quarterly Report for Quarter Ending June 28, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion includes comments and analysis relating to our results of operations and financial condition as of and for the three and nine months ended June 28, 2026. This discussion should be read in conjunction with the Consolidated Financial Statements and related Notes thereto, included herein, and our 2025 Annual Report on Form 10-K. Share and dollar amounts are presented on an actual basis unless otherwise noted.
EXECUTIVE OVERVIEW
QUARTERLY RESULTS OF OPERATIONS
For the three months ended June 28, 2026, our total operating revenue was $126.0 million, down 10.8% from the three months ended June 29, 2025. Total Digital Revenue was $71.6 million and represented 56.8% of our total operating revenue. Total Print Revenue was $54.4 million, a 14.2% decrease to the three months ended June 29, 2025. Our digital-only subscription revenue totaled $21.8 million in the quarter, a 7.0% decline year-over-year driven by lasting impact from last year's Cyber Incident and accelerated churn following inflationary surcharges implemented in the prior fiscal year. Another key piece of our digital business, Amplified Digital® agency revenue totaled $27.1 million in the quarter.
Total operating expenses were $118.3 million, a 13.9% decrease in the three months ended June 28, 2026, compared to the three months ended June 29, 2025. The decrease reflects continued disciplined cost management and the absence of prior-year Cyber Incident response costs (see Note 12). Cash Costs of $109.4 million, a non-GAAP financial measure used to summarize certain operating expenses (see reconciliation of non-GAAP financial measures below), were down 14.5% in the three months ended June 28, 2026, reflecting continued disciplined cost management.
Net income totaled $5.2 million compared to a net loss of $1.7 million in the prior-year period. Adjusted EBITDA (a non-GAAP financial measure) totaled $18.4 million, a 23.0% increase over the prior-year period. The improvements reflect the cost actions described above and the non-recurrence of prior-year Cyber Incident costs.
Cash on the balance sheet totaled $59.4 million including the net proceeds from the February 5, 2026 Private Placement. Debt, net of cash on the balance sheet, totaled $395.3 million. As discussed above, with the execution of the Private Placement, the applicable margin on our 25-year term loan was reduced from 9.00% to 5.00% for a period of five years. Together, the Private Placement proceeds, the reduction in our applicable interest rate margin, and continued cost discipline have strengthened our liquidity and financial flexibility as we execute our digital-first growth strategy.
RECENT DEVELOPMENTS
AGREEMENT WITH HOFFMANN MEDIA GROUP ("HMG")
On May 14, 2026, we entered into a five-year management agreement with HMG, effective June 1, 2026, under which we manage certain HMG-owned newspaper publications and related digital properties. HMG is owned by David Hoffmann, our Chairman and majority shareholder.
Under the agreement, we receive a fixed management fee of $135,000 per fiscal quarter, a variable fee based on the EBITDA of certain acquired publications, and reimbursement of shared service costs at cost. HMG retains ownership of the publications and all related revenues and remains responsible for working capital and operating obligations.
PRIVATE PLACEMENT FINANCING AND RELATED AGREEMENTS
Private Placement Agreement
During the three months ended March 29, 2026, we issued an aggregate of 16,000,000 shares of Common Stock, consisting of 15,384,615 shares of Common Stock to certain investors and 615,385 shares of Common Stock to service providers as reimbursement for certain expenses incurred by certain investors, at a price of
$3.25 per share through the Private Placement. The aggregate gross proceeds from the Private Placement were $50.0 million, before deducting offering expenses. Further, in connection with the closing, we amended our Certificate of Incorporation, increasing the number of authorized shares from 12,000,000 to 40,000,000.
Registration Rights Agreement and Amendment
At the closing of the Private Placement on February 5, 2026, we entered into a registration rights agreement pursuant to which we will agree to provide certain customary registration rights, including the registration of the Shares for resale. We filed a registration statement on Form S-3 with the Securities and Exchange Commission covering the resale by the investors of their shares on March 6, 2026.
On February 4, 2026, in connection with the closing of the Private Placement, the Board of Directors amended the termination date of the Rights Agreement to February 4, 2026, causing each Right to expire and to be extinguished and for the Rights Agreement to be terminated. See Note 3 of the unaudited condensed consolidated financial statements for additional discussion.
Credit Agreement Amendment
Concurrently with the execution of the Private Placement agreement, we entered into the Second Amendment to Credit Agreement. The amendments became operative concurrently with the closing. The amendments include among other things, a reduction of the applicable margin on our 25-year term loan from 9.00% to 5.00% for a period of five years following the closing and amending the definition of "Excess Cash Flow" such that any cash-on-hand balance above $64.0 million held by us would be deemed Excess Cash Flow for a period of five years. These amendments were treated as modifications to the existing Credit Agreement.
PRESIDENT AND CHIEF EXECUTIVE OFFICER TRANSITION
Also, concurrently with the closing of the Private Placement on February 5, 2026, Kevin Mowbray, our previous President and Chief Executive Officer, entered into an agreement to voluntarily retire from his positions at the Company and its subsidiaries and affiliates. Nathan Bekke, our previous Chief Operating Officer, assumed the role of President and Interim Chief Executive Officer. On April 23, 2026, the Board of Directors appointed Mr. Bekke as President and Chief Executive Officer of the Company.
VICE PRESIDENT, CHIEF FINANCIAL OFFICER TRANSITION
On November 17, 2025, Timothy R. Millage resigned from his position as Vice President, Chief Financial Officer, effective February 3, 2026. Josh Rinehults was appointed Vice President, Interim Chief Financial Officer and Treasurer, effective February 3, 2026. On April 23, 2026, the Board appointed Mr. Rinehults as Vice President, Chief Financial Officer and Treasurer.
STRATEGY
We are a leading digital-first subscription and marketing services company committed to delivering high-quality, trusted, and deeply local news and information. Our mission is to strengthen and enrich the communities we serve by providing compelling local content, superior subscriber experiences, and innovative, data-driven advertising and marketing solutions. Through a premium, high-margin portfolio of digital products and marketing services - including owned-and-operated platforms, branded content, over-the-top advertising, AI-powered solutions, and targeted print - we enable more than 15,000 local advertisers to meaningfully engage customers, strengthen their brands, and accelerate growth.
Our core strategy is to expand audiences and deepen engagement by delivering robust, hyper-local content that informs and connects our communities. We are committed to creating, collecting, and distributing trusted local news and information across platforms designed to meet audiences wherever they are - print, web, mobile, social, and emerging channels. At the same time, we are investing in world-class digital products that elevate the subscriber experience through personalization, seamless access, and continuous innovation.
RESULTS OF OPERATIONS
Three Months Ended
Operating results are summarized below.
(Thousands of Dollars, Except Per Common Share Data) June 28, 2026 June 29, 2025 Percent
Change
Operating revenue:
Print advertising revenue 14,478 17,474 (17.1) %
Digital advertising and marketing revenue 44,846 49,097 (8.7) %
Advertising and marketing services revenue 59,324 66,571 (10.9) %
Print subscription revenue 32,918 38,076 (13.5) %
Digital subscription revenue 21,829 23,482 (7.0) %
Subscription revenue 54,747 61,558 (11.1) %
Print other revenue 6,967 7,837 (11.1) %
Digital other revenue 4,932 5,328 (7.4) %
Other revenue 11,899 13,165 (9.6) %
Total operating revenue 125,970 141,294 (10.8) %
Operating expenses:
Compensation 44,810 47,436 (5.5) %
Newsprint and ink 2,521 3,268 (22.9) %
Other operating expenses 62,076 77,252 (19.6) %
Insurance proceeds (560) - ***
Depreciation and amortization 3,527 3,783 (6.8) %
Gain on asset sales, impairments and other, net (73) (1,562) (95.3) %
Restructuring costs and other 5,959 7,141 (16.6) %
Total operating expenses 118,260 137,318 (13.9) %
Equity in earnings of associated companies 922 686 34.4 %
Operating income (loss) 8,632 4,662 85.2 %
Non-operating income (expense):
Interest expense (5,558) (10,132) (45.1) %
Pension and other post employment benefits ("OPEB") related and other, net 1,169 1,050 11.3 %
Settlement gain 2,330 - ***
Total non-operating expense, net (2,059) (9,082) (77.3) %
Income (loss) before income taxes 6,573 (4,420) ***
Income tax expense (benefit) 1,400 (2,744) ***
Net income (loss) 5,173 (1,676) ***
Earnings (loss) per common share:
Basic 0.21 (0.31) ***
Diluted 0.21 (0.31) ***
*** Indicates an absolute value percentage change greater than 100.
Quarterly Results of Operations
Operating Revenue
Total operating revenue was $126.0 million in the three months ended June 28, 2026, down $15.3 million, or 10.8%, compared to the three months ended June 29, 2025.
Advertising and marketing services revenue totaled $59.3 million, down 10.9% in the three months ended June 28, 2026, compared to the prior-year period. Print advertising revenues were $14.5 million, down 17.1% in the three months ended June 28, 2026 compared to the prior-year period related to continued secular declines in demand for print advertising related to the decline in print subscribers by 19.3% to 221,000 compared to the prior-year period of 274,000. Digital advertising and marketing services revenue totaled $44.8 million, down 8.7% in the three months ended June 28, 2026 compared to the prior-year period. Digital advertising and marketing services represented 75.6% of the total advertising and marketing services revenue for the three months ended June 28, 2026, compared to 73.8% in the prior-year period.
Subscription revenue totaled $54.7 million, down 11.1% in the three months ended June 28, 2026 compared to the prior-year period. Declines in volumes, consistent with historical and industry trends, were partially offset by strategic rate increases. Digital-only subscribers decreased 12.8% to 584,000 at June 28, 2026 compared to 670,000 at June 29, 2025. Digital-only subscription revenue declined 7.0% compared to the prior-year period driven by lasting impact from last year's Cyber Incident and accelerated churn following inflationary surcharges implemented in the prior fiscal year.
Other revenue, which consists of digital services from BLOX Digital of $4.9 million, commercial printing revenue of $3.6 million and third party delivery and other of $3.4 million, decreased $1.3 million, or 9.6%, in the three months ended June 28, 2026 compared to the prior-year period. Digital services revenue decreased 7.4% in the three months ended June 28, 2026 compared to the prior-year period. Commercial printing revenue decreased 14.4% in the three months ended June 28, 2026 compared to the prior-year period, primarily driven by lower print volumes from our partners.
Total digital revenue including digital advertising revenue, digital subscription revenue and digital services revenue totaled $71.6 million, a decrease of 8.1%, in the three months ended June 28, 2026 compared to the prior-year period, and represented 56.8% of our total operating revenue in the three months ended June 28, 2026.
Operating Expenses
Total operating expenses were $118.3 million, a 13.9% decrease in the three months ended June 28, 2026, compared to the three months ended June 29, 2025. The decrease reflects continued disciplined cost management and the absence of prior-year Cyber Incident response costs. Cash Costs of $109.4 million, a non-GAAP financial measure used to summarize certain operating expenses (see reconciliation of non-GAAP financial measures below), were down 14.5% in the three months ended June 28, 2026, reflecting continued disciplined cost management.
Compensation expense decreased $2.6 million, or 5.5%, in the three months ended June 28, 2026 compared to the prior-year period. The decrease reflects continued headcount reductions as we execute our digital transformation strategy.
Newsprint and ink costs decreased $0.7 million, or 22.9%, in the three months ended June 28, 2026 compared to the prior-year period. The decrease is attributable to lower print volumes, consistent with continued secular declines in demand for print.
Other operating expenses decreased $15.2 million, or 19.6%, in the three months ended June 28, 2026 compared to the prior-year period. Other operating expenses include all operating costs not considered to be compensation, newsprint, insurance proceeds, depreciation and amortization, or restructuring costs and (gain) loss on asset sales, impairments, and other, net. The largest components are costs associated with printing and distribution of our printed products, digital cost of goods sold and facility expenses.
Insurance proceeds were a net gain of $0.6 million in the three months ended June 28, 2026 which represent business interruption insurance recoveries recognized in the current quarter related to the prior-year Cyber Incident. See further information in Note 12.
Restructuring costs and other decreased $1.2 million, or 16.6% in the three months ended June 28, 2026, compared to the prior-year period due primarily to higher expenses related to the Cyber incident included in the prior year.
Depreciation and amortization expense decreased $0.3 million, or 6.8%, in the three months ended June 28, 2026. This decrease is attributable to assets being fully depreciated or amortized.
Gain on asset sales, impairments and other, net, was $0.1 million in the three months ended June 28, 2026 compared to $1.6 million in the prior-year period, a decrease of $1.5 million driven by fewer property sales in the current year quarter.
Operating income was $8.6 million, an increase of $4.0 million from $4.7 million in the prior-year period, primarily reflecting lower compensation and other operating expenses.
Non-operating Income and Expense
Non-operating expense decreased by $7.0 million, or 77.3% in the three months ended June 28, 2026 compared to the prior-year period. The decrease is primarily driven by a settlement gain in our Postretirement benefit plans as we irrevocably transferred certain postretirement life insurance obligations to a third-party insurer described in Note 9 and a decrease in interest expense related to the rate reduction on our debt described in Note 8.
Income Tax Expense/Benefit
We recorded an income tax expense of $1.4 million in the three months ended June 28, 2026 compared to an income tax benefit of $2.7 million in the prior-year period. The increase in income tax expense for the current period is mainly due to a higher valuation allowance related to additional interest expense carryforwards that are not expected to be fully realized.
Net income (loss) and Net income (loss) Per Share
Net income was $5.2 million and diluted income per share was $0.21 for the three months ended June 28, 2026 compared to net loss of $1.7 million and diluted losses per share of $0.31 for the prior-year period. The improvement reflects the cost reduction actions, the interest rate reduction, the non-recurrence of prior-year Cyber Incident costs discussed above and a settlement gain in our Postretirement benefit plans.
Nine Months Ended
Operating results are summarized below.
(Thousands of Dollars, Except Per Common Share Data) June 28, 2026 June 29, 2025 Percent Change
Operating revenue:
Print advertising revenue 45,943 53,867 (14.7) %
Digital advertising and marketing revenue 128,334 139,766 (8.2) %
Advertising and marketing services revenue 174,277 193,633 (10.0) %
Print subscription revenue 100,816 122,587 (17.8) %
Digital subscription revenue 66,814 68,836 (2.9) %
Subscription revenue 167,630 191,423 (12.4) %
Print other revenue 21,545 22,938 (6.1) %
Digital other revenue 14,544 15,241 (4.6) %
Other revenue 36,089 38,179 (5.5) %
Total operating revenue 377,996 423,235 (10.7) %
Operating expenses:
Compensation 140,989 164,349 (14.2) %
Newsprint and ink 8,005 9,996 (19.9) %
Other operating expenses 193,640 223,387 (13.3) %
Insurance proceeds (6,401) - ***
Depreciation and amortization 10,621 15,218 (30.2) %
Gain on asset sales, impairments and other, net (976) (2,365) (58.7) %
Restructuring costs and other 12,746 18,806 (32.2) %
Total operating expenses 358,624 429,391 (16.5) %
Equity in earnings of associated companies 3,010 2,963 1.6 %
Operating income (loss) 22,382 (3,193) ***
Non-operating income (expense):
Interest expense (23,435) (30,365) (22.8) %
Pension and other post employment benefits ("OPEB") related and other, net 2,840 2,362 20.2 %
Settlement gain 2,330 - ***
Total non-operating expense, net (18,265) (28,003) (34.8) %
Income (loss) before income taxes 4,117 (31,196) ***
Income tax expense (benefit) 5,779 (1,281) ***
Net loss (1,662) (29,915) (94.4) %
Loss per common share:
Basic (0.22) (5.16) (95.7) %
Diluted (0.22) (5.16) (95.7) %
*** Indicates an absolute value percentage change greater than 100.
Operating Revenue
Total operating revenue was $378.0 million, down $45.2 million, or 10.7% in the nine months ended June 28, 2026 compared to the nine months ended June 29, 2025.
Advertising and marketing services revenue totaled $174.3 million, down 10.0% in the nine months ended June 28, 2026 compared to the prior-year period. Print advertising revenues were $45.9 million, down 14.7% in the nine months ended June 28, 2026 compared to the prior-year period driven by continued secular declines and elimination of unprofitable print products. Digital advertising and marketing services totaled $128.3 million, down 8.2% in the nine months ended June 28, 2026 compared to the prior-year period. Digital advertising and marketing services represented 73.6% of the nine months ended June 28, 2026 total advertising and marketing services revenue, compared to 72.2% in the prior-year period.
Subscription revenue totaled $167.6 million, down 12.4% in the nine months ended June 28, 2026 compared to the prior-year period. Declines in volumes, consistent with historical and industry trends, were partially offset by strategic rate increases. Digital-only subscribers decreased 12.8% to 584,000 as of June 28, 2026. Digital-only subscription revenue declined 2.9% compared to the prior-year period.
Other revenue, which consists of digital services from BLOX Digital of $14.5 million, commercial printing revenue of $11.1 million and third party delivery and other of $10.4 million, decreased $2.1 million, or 5.5%, in the nine months ended June 28, 2026 compared to the prior-year period. Digital services revenue decreased by 4.6% in the nine months ended June 28, 2026 compared to the prior-year period. Commercial printing revenue decreased 7.7% in the nine months ended June 28, 2026 compared to the prior-year period, primarily driven by lower print volumes from our partners.
Total digital revenue including digital advertising revenue, digital subscription revenue and digital services revenue totaled $209.7 million, a decrease of 6.3% in the nine months ended June 28, 2026 over the prior-year period, and represented 55.5% of our total operating revenue in the nine months ended June 28, 2026.
Operating Expenses
Total operating expenses were $358.6 million, a 16.5% decrease in the nine months ended June 28, 2026, compared to the nine months ended June 29, 2025. The decrease reflects continued disciplined cost management, the absence of prior-year Cyber Incident response costs, and $6.4 million of business interruption insurance recoveries recognized in the current period (see Note 12). Cash Costs of $342.6 million, a non-GAAP financial measure used to summarize certain operating expenses (see reconciliation of non-GAAP financial measures below), were down 13.9% in the nine months ended June 28, 2026, reflecting continued disciplined cost management.
Compensation expense decreased $23.4 million, or 14.2% in the nine months ended June 28, 2026 compared to the prior-year period from reductions in full time employees due to continued business transformation efforts.
Newsprint and ink costs decreased $2.0 million, or 19.9% in the nine months ended June 28, 2026, compared to the prior-year period. The decrease is attributable to declines in newsprint volumes.
Other operating expenses decreased $29.7 million, or 13.3%, in the nine months ended June 28, 2026 compared to the prior-year period. Other operating expenses include all operating costs not considered to be compensation, newsprint, insurance proceeds, depreciation and amortization, or restructuring costs and (gain) loss on asset sales, impairments, and other, net. The largest components are costs associated with printing and distribution of our printed products, digital cost of goods sold and facility expenses.
Insurance proceeds were a net gain of $6.4 million in the nine months ended June 28, 2026 which represent business interruption insurance recoveries related to the prior-year Cyber Incident (see Note 12).
Restructuring costs and other decreased $6.1 million, or 32.2% in the nine months ended June 28, 2026, compared to the nine months ended June 29, 2025. The prior year period included $3.1 million of expenses related to the Cyber Incident and costs associated with the shutdown of one of our production facilities.
Depreciation and amortization expense decreased $4.6 million, or 30.2%, in the nine months ended June 28, 2026 compared to the prior-year period. The decrease in both is attributable to assets being fully depreciated or amortized.
Gain on asset sales, impairments and other, net, was $1.0 million in the nine months ended June 28, 2026 compared to a net gain of $2.4 million in the prior-year period. Current year gains on sales were primarily related to the sale of properties.
The factors noted above resulted in an operating income of $22.4 million in the nine months ended June 28, 2026 compared to an operating loss of $3.2 million in the prior-year period primarily due to lower compensation and other operating expenses together with $6.4 million of business-interruption recoveries recognized in the period.
Non-operating Income and Expense
Non-operating expense decreased by $9.7 million, or 34.8% compared to the nine months ended June 29, 2025. The decrease is primarily driven by a settlement gain in our Postretirement benefit plans as we irrevocably transferred certain postretirement life insurance obligations to a third-party insurer described in Note 9 and a decrease in interest expense related to the rate reduction on our debt described in Note 8.
Income Tax Expense
We recorded an income tax expense of $5.8 million in the nine months ended June 28, 2026 compared to $1.3 million benefit in the nine months ended June 29, 2025. The increase in income tax expense for the current period is mainly due to a higher valuation allowance related to additional interest expense carryforwards that are not expected to be fully realized.
Net loss and Net loss Per Share
Net loss was $1.7 million and diluted loss per share was $0.22 for the nine months ended June 28, 2026 compared to net loss of $29.9 million and diluted losses per share of $5.16 for the prior-year period. The improvement reflects the cost reduction actions, the interest rate reduction, the non-recurrence of prior-year Cyber Incident costs discussed above and a settlement gain in our Postretirement benefit plans.
NON-GAAP FINANCIAL MEASURES
We use non-GAAP financial performance measures to supplement the financial information presented on a GAAP basis. These non-GAAP financial measures should not be considered in isolation or as a substitute for the relevant GAAP measures and should be read in conjunction with information presented on a GAAP basis.
In this report, we present Adjusted EBITDA and Cash Costs which are non-GAAP financial performance measures that exclude from our reported GAAP results the impact of certain items consisting primarily of restructuring charges and non-cash charges. We believe such expenses, charges and gains are not indicative of normal, on-going operations, and their inclusion in results makes for more difficult comparisons between years and with peer group companies. In the future, however, we are likely to incur expenses, charges and gains similar to the items for which the applicable GAAP financial measures have been adjusted and to report non-GAAP financial measures excluding such items. Accordingly, exclusion of those or similar items in our non-GAAP presentations should not be interpreted as implying the items are non-recurring, infrequent, or unusual.
We define our non-GAAP measures, which may not be comparable to similarly titled measures reported by other companies, as follows:
Adjusted EBITDA is a non-GAAP financial performance measure that enhances financial statement users' overall understanding of our operating performance. 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 our future operating performance 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 our leverage ratio, which is a key financial ratio monitored and used by us and our investors. Adjusted EBITDA is defined as net income (loss), plus non-operating expenses, net, income tax expense (benefit), depreciation and amortization, (gain) loss on asset 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.
Cash Costs 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 our cash-settled operating costs. Generally, we provide forward-looking guidance of Cash Costs, which can be used by financial statement users to assess our ability to manage and control its operating cost structure. Cash Costs are defined as compensation, newsprint and ink and other operating expenses and exclude restructuring costs and other, which are typically settled in cash.
Adjusted EBITDA and Cash Costs are reconciled to net income (loss) and operating expenses, below, the closest comparable numbers under GAAP.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
The table below reconciles the non-GAAP financial performance measure of Adjusted EBITDA to net income (loss), the most directly comparable GAAP measure:
Three months ended Nine months ended
(Thousands of Dollars) June 28, 2026 June 29, 2025 June 28, 2026 June 29, 2025
Net income (loss) 5,173 (1,676) (1,662) (29,915)
Adjusted to exclude
Income tax expense (benefit) 1,400 (2,744) 5,779 (1,281)
Non-operating expenses, net 2,059 9,082 18,265 28,003
Equity in earnings of TNI and MNI (922) (686) (3,010) (2,963)
Depreciation and amortization 3,527 3,783 10,621 15,218
Restructuring costs and other 5,959 7,141 12,746 18,806
Gain on asset sales, impairments and other, net (73) (1,562) (976) (2,365)
Stock compensation 181 540 722 1,328
Add:
Ownership share of TNI and MNI EBITDA (50%) 1,071 1,066 3,296 3,488
Adjusted EBITDA 18,375 14,944 45,781 30,319
The table below reconciles the non-GAAP financial performance measure of Cash Costs to Operating expenses, the most directly comparable GAAP measure:
Three months ended Nine months ended
(Thousands of Dollars) June 28, 2026 June 29, 2025 June 28, 2026 June 29, 2025
Operating expenses 118,260 137,318 358,624 429,391
Adjustments
Depreciation and amortization 3,527 3,783 10,621 15,218
Gain on asset sales, impairments and other, net (73) (1,562) (976) (2,365)
Restructuring costs and other 5,959 7,141 12,746 18,806
Insurance proceeds (560) - (6,401) -
Cash Costs 109,407 127,956 342,634 397,732
LIQUIDITY AND CAPITAL RESOURCES
A summary of our cash flows is included in the narrative below.
Operating Activities
Cash provided by operating activities totaled $6.1 million in the nine months ended June 28, 2026 compared to $0.8 million in the nine months ended June 29, 2025. The improvement was primarily driven by an increase in operating results of $8.2 million (defined as net loss adjusted for non-working capital items) offset primarily by a decrease in working capital of $2.8 million. The decrease in working capital is primarily related to higher payments related to the Private Placement expenses offset by improved accounts receivable driven by lower revenue in the period.
Investing Activities
Cash used in investing activities totaled $1.3 million in the nine months ended June 28, 2026 compared to cash provided by investing activities of $5.1 million in the nine months ended June 29, 2025. The nine months ended June 29, 2025 included $8.7 million in proceeds from the sale of assets as we divested non-core real estate compared to only $1.1 million in asset sale proceeds in the current period.
Financing Activities
Cash provided by financing activities was $44.6 million for the nine months ended June 28, 2026 from net Private Placement proceeds described in Note 3.
Additional Information on Liquidity
PRIVATE PLACEMENT FINANCING AND RELATED AGREEMENTS
As discussed in Note 3, we issued an aggregate of 16,000,000 shares of our Common Stock in a Private Placement at a price of $3.25 per share, consisting of 15,384,615 shares issued to certain investors and 615,385 shares issued to service providers as reimbursement for certain expenses incurred by such investors. The aggregate gross proceeds from the Private Placement were $50.0 million, before deducting offering expenses. Additionally, concurrently with the execution of the Private Placement, we entered into the Second Amendment to Credit Agreement. The amendments include, among other items, a reduction of the applicable margin on our 25-year term loan from 9.00% to 5.00% for a period of five years following the closing and amending the definition of "Excess Cash Flow" such that any cash on hand balance held by us above $64.0 million will be deemed Excess Cash Flow for a five year period following the closing.
As of June 28, 2026, our liquidity, consisting of cash on hand, was $59.4 million. For the nine months ended June 28, 2026, net cash provided by operating activities was $6.1 million, up from $0.8 million in the nine months ended June 29, 2025. This increase is primarily attributable to the improved operating results compared to the prior-year period.
The current operating environment, expenditures related to our business transformation initiatives, and the impacts of the Cyber Incident have adversely affected our net cash flows and placed pressure on our liquidity. However, we believe that cash generated from operating activities, along with the proceeds from the Private Placement financing will be sufficient to fund our operations and meet our obligations for at least the next 12 months from the date of this filing.
CHANGES IN LAWS AND REGULATIONS
Wage Laws
The United States and various state and local governments are considering increasing their respective minimum wage rates. Most of our employees are paid more than the current United States or state minimum wage rates. However, until changes to such rates are enacted, the impact of the changes cannot be determined.
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