News Release Details

DAVENPORT, Iowa--(BUSINESS WIRE)--May 7, 2015-- Lee Enterprises, Incorporated (NYSE: LEE), a major provider of local news, information and advertising in 50 markets, today reported preliminary⁽¹⁾ earnings of 3 cents per diluted common share for its second fiscal quarter ended March 29, 2015, the same earnings as a year ago. Excluding unusual matters, adjusted earnings per diluted common share⁽²⁾ totaled 2 cents, compared with earnings of 5 cents a year ago.

Mary Junck, chairman and chief executive officer, said: “We’re seeing positive results from our many sales initiatives as our operating revenue trend for the quarter improved to up 0.9% as reported and down 1.8% on a comparable basis. March especially was the bright spot, posting nearly flat revenue - our best month since April 2013. Total digital revenue increased 33.9% from the same quarter a year ago."

"Our full access subscription model is now in 43 markets, allowing subscribers to consume local news, information and advertising using all of our print and digital platforms.

“We’re focused on providing easy and effective ways for small and mid-sized local advertisers to reach more customers, and through our digital agency, we can tailor programs for larger local businesses with more specific goals. Advertisers are reaching massive audiences through our print and digital products."

She added: "For the first six months of our fiscal year, cash costs⁽²⁾, on a comparable basis, decreased 1.2%. Our keen focus on business transformation allows us to improve our full-year guidance, and we now expect comparable cash costs to decrease up to 2.75% in 2015. At the same time, we remain committed to providing exceptional journalism, as evidenced by the Pulitzer Prize for Breaking News Photography recently awarded to the St. Louis Post-Dispatch. Their recent work is outstanding, and the Post-Dispatch staff is extremely deserving of this recognition."

She also noted the following financial highlights for the quarter:

• Digital advertising revenue increased 8.3% and mobile advertising revenue, which is included in digital advertising, increased 37.9%;
• Subscription revenue, excluding the subscription-related expense reclassification discussed more fully below, increased 4.7%, and we expect full year 2015 subscription revenue, excluding the impact of the reclassification, to increase 2.5-3.0%; and
• Debt was reduced $20.3 million in the quarter and, when including $32 million borrowed to pay 2014 refinancing costs, debt was reduced $80.8 million in the last twelve months.

SECOND QUARTER OPERATING RESULTS

Operating revenue for the 13 weeks ended March 29, 2015 totaled $155.5 million, an increase of 0.9% compared with a year ago. Excluding the impact of a subscription-related expense reclassification as a result of moving to fee-for-service delivery contracts at several of our newspapers, operating revenue decreased 1.8%. This reclassification increases both print subscription revenue and other operating expenses, with no impact on operating cash flow⁽²⁾ or operating income. Certain delivery expenses were previously reported as a reduction of revenue. Tables later in this release detail the impact of the reclassification on revenue and cash costs.

Combined print and digital advertising and marketing services revenue decreased 4.9% to $97.7 million, with retail advertising down 5.1%, classified down 4.8% and national down 11.8%. Retail preprint advertising decreased 5.6%. Combined print and digital classified employment revenue decreased 5.1%, while automotive decreased 9.6%, real estate decreased 10.1% and other classified increased 0.7%. Digital advertising and marketing services revenue on a stand-alone basis increased 8.3% to $18.8 million. Print advertising and marketing services revenue on a stand-alone basis decreased 7.6%.

Subscription revenue increased 14.7%. Excluding the impact of the subscription-related expense reclassification, subscription revenue increased 4.7%. Our average daily newspaper circulation, including TNI and MNI and digital subscribers, totaled 1.0 million in the 13 weeks ended March 29, 2015. Sunday circulation totaled 1.4 million. Amounts are not comparable to the prior year period due to changes in measurements by the Alliance for Audited Media.

Total digital revenue, including advertising, marketing services, subscriptions and digital businesses, totaled $27.4 million in the quarter, up 33.9%.

Cash costs increased 3.3% for the 13 weeks ended March 29, 2015. Compensation increased 3.7%, driven by increases in employee medical and pension costs, as well as compensation increases, which were partially offset by a decline in the average number of full-time equivalent employees of 3.9%. Newsprint and ink expense decreased 17.9%, primarily the result of lower newsprint prices and a reduction in newsprint volume of 10.9%. Other operating expenses increased 5.9%. Excluding the impact of the subscription-related expense reclassification, cash costs decreased 0.2%. We expect our full year cash costs, excluding the impact of the subscription-related expense reclassification, to decrease between 2.25%-2.75% in 2015. To achieve this level of cost reduction, cash costs for the remainder of the fiscal year will need to decrease by 3.3%-4.3%, which significantly exceeds the decrease of 1.2% for the 26 weeks ended March 29, 2015. This acceleration of cost reduction in the latter half of 2015 may also have a favorable impact on the following year.

Operating cash flow decreased 7.7% from a year ago to $30.2 million. Operating cash flow margin⁽²⁾ decreased to 19.4%, compared to 21.2% a year ago. Including equity in earnings of associated companies, depreciation and amortization, as well as unusual matters in both years, operating income totaled $20.2 million in the current year quarter, compared with $23.7 million a year ago. Operating income margin was 13.0% in the current year quarter. The subscription-related expense reclassification reduced operating cash flow margin and operating income margin by 0.6% and 0.4%, respectively.

Non-operating expenses decreased 14.8% for the 13 weeks ended March 29, 2015. Interest expense decreased 10.5% due to lower debt balances and non-cash interest expense of $1.2 million in the prior year quarter. We recognized $1.5 million of amortization of debt refinancing costs in the current year quarter compared to $0.1 million in the prior year quarter. We recognized $2.1 million of non-operating income in the current year quarter due to the change in fair value of stock warrants issued in connection with our refinancing in 2014. Income attributable to Lee Enterprises, Incorporated for the quarter totaled $1.8 million, compared with $1.5 million a year ago.

ADJUSTED EARNINGS AND EPS FOR THE QUARTER

The following table summarizes the impact from unusual matters on income attributable to Lee Enterprises, Incorporated and earnings per diluted common share. Per share amounts may not add due to rounding.

								13 Weeks Ended
		March 29 2015						March 30 2014
(Thousands of Dollars, Except Per Share Data)		Amount			Per Share			Amount			Per Share
Income attributable to Lee Enterprises, Incorporated, as reported		1,800			0.03			1,486			0.03
Adjustments:
Debt financing costs		1,493						99
Amortization of debt present value adjustment		—						1,196
Warrants fair value adjustment		(2,081	)					—
Other, net		436						414
		(152	)					1,709
Income tax effect of adjustments, net		(666	)					(567	)
		(818	)		(0.02	)		1,142			0.02
Income attributable to Lee Enterprises, Incorporated, as adjusted		982			0.02			2,628			0.05

SUBSCRIPTION EXPENSE RECLASSIFICATION

Certain results, excluding the impact of the subscription-related expense reclassification, are as follows:

		13 Weeks Ended
(Thousands of Dollars)		March 29 2015			March 30 2014			Percent Change
Subscription revenue, as reported		48,111			41,952			14.7
Adjustment for subscription-related expense reclassification		(4,605	)		(400	)		NM
Subscription revenue, as adjusted		43,506			41,552			4.7
Total operating revenue, as reported		155,529			154,093			0.9
Adjustment for subscription-related expense reclassification		(4,605	)		(400	)		NM
Total operating revenue, as adjusted		150,924			153,693			(1.8	)
Other cash costs, as reported		55,839			52,712			5.9
Adjustment for subscription-related expense reclassification		(4,605	)		(400	)		NM
Other cash costs, as adjusted		51,234			52,312			(2.1	)
Total cash costs, as reported		125,376			121,416			3.3
Adjustment for subscription-related expense reclassification		(4,605	)		(400	)		NM
Total cash costs, as adjusted		120,771			121,016			(0.2	)

Approximately $4,272,000, or 92.8% of the reclassification impacts revenue and cash costs of our Lee Legacy operations, and approximately $333,000, or 7.2% impacts Pulitzer.

FULL ACCESS SUBSCRIPTION INITIATIVE

As previously reported, we launched our full access subscription initiative in our first markets a year ago. As of today, 43 markets have been launched and we are on track to launch substantially all of our remaining markets before June 2015. In most of our markets, more than 30% of our subscribers have activated their ability to access our comprehensive digital content. We expect subscription revenue for 2015, excluding the impact of the subscription-related expense reclassification, to increase 2.5-3.0%.

YEAR-TO-DATE OPERATING RESULTS⁽³⁾

Operating revenue for the 26 weeks ended March 29, 2015, totaled $331.7 million, an increase of 0.1% compared with the 26 weeks ended March 30, 2014. Excluding the impact of the subscription-related expense reclassification, operating revenue decreased 2.7%.

Combined print and digital advertising and marketing services revenue decreased 5.3% to $213.1 million, retail advertising decreased 6.0%, classified decreased 4.1% and national decreased 8.0%. Retail preprint advertising decreased 7.1%. Combined print and digital classified employment revenue decreased 1.3%, while automotive decreased 9.7%, real estate decreased 8.9% and other classified decreased 0.1%. Digital advertising and marketing services revenue on a stand-alone basis increased 7.7% to $38.8 million and now totals 18.2% of total advertising and marketing services revenue. Mobile advertising revenue increased 34.9%. Print advertising and marketing services revenue on a stand-alone basis decreased 7.8%.

Subscription revenue increased 12.7%. Excluding the impact of the subscription-related expense reclassification, subscription revenue increased 2.4%. Our average daily newspaper circulation, including TNI and MNI and digital subscribers, totaled 1.0 million in the 26 weeks ended March 29, 2015. Sunday circulation totaled 1.5 million.

Total digital revenue totaled $54.6 million year to date, up 29.7% compared with a year ago.

Cash costs for the 26 weeks ended March 29, 2015 increased 2.4% compared to the same period a year ago. Compensation increased 1.6%, with the average number of full-time equivalent employees down 3.7%. Newsprint and ink expense decreased 17.0%, primarily the result of lower newsprint prices and a reduction in newsprint volume of 12.1%. Other operating expenses increased 6.6%. Excluding the impact of the subscription-related expense reclassification, cash costs decreased 1.2%.

Operating cash flow decreased 7.2% from a year ago to $76.1 million. Operating cash flow margin decreased to 23.0% from 24.7% a year ago. Including equity in earnings of associated companies, depreciation and amortization, as well as unusual matters in both years, operating income decreased to $57.7 million in the 26 weeks ended March 29, 2015, compared with $63.9 million a year ago. Operating income margin was 17.4% in the 26 weeks ended March 29, 2015. The subscription-related expense reclassification reduced operating cash flow margin and operating income margin by 0.7% and 0.5%, respectively.

Non-operating expenses decreased 6.7% in the 26 weeks ended March 29, 2015 compared to the same period a year ago. Interest expense decreased 10.1% due to lower debt balances in the current year and non-cash interest expense of $2.4 million in the prior year period. We charged $2.6 million of debt financing costs to expense in the current year period compared to $0.2 million in the prior year period. We recognized $0.8 million of non-operating income in the current year period from the change in fair value of stock warrants. Income attributable to Lee Enterprises, Incorporated for the year totaled $11.6 million, compared to income of $13.4 million a year ago.

ADJUSTED EARNINGS AND EPS FOR THE YEAR TO DATE

The following table summarizes the impact from unusual matters on income attributable to Lee Enterprises, Incorporated and earnings per diluted common share. Per share amounts may not add due to rounding.

								26 Weeks Ended
		March 29 2015						March 30 2014
(Thousands of Dollars, Except Per Share Data)		Amount			Per Share			Amount			Per Share
Income attributable to Lee Enterprises, Incorporated, as reported		11,553			0.21			13,378			0.25
Adjustments:
Debt financing costs		2,595						203
Amortization of debt present value adjustment		—						2,394
Warrants fair value adjustment		(779	)					—
Other, net		382						577
		2,198						3,174
Income tax effect of adjustments, net		(1,031	)					(1,079	)
		1,167			0.02			2,095			0.04
Income attributable to Lee Enterprises, Incorporated, as adjusted		12,720			0.24			15,473			0.29

SUBSCRIPTION EXPENSE RECLASSIFICATION

Certain results, excluding the impact of the subscription-related expense reclassification, are as follows:

		26 Weeks Ended
(Thousands of Dollars)		March 29 2015			March 30 2014			Percent Change
Subscription revenue, as reported		98,509			87,405			12.7
Adjustment for subscription-related expense reclassification		(9,412	)		(400	)		NM
Subscription revenue, as adjusted		89,097			87,005			2.4
Total operating revenue, as reported		331,683			331,478			0.1
Adjustment for subscription-related expense reclassification		(9,412	)		(400	)		NM
Total operating revenue, as adjusted		322,271			331,078			(2.7	)
Other cash costs, as reported		115,021			107,870			6.6
Adjustment for subscription-related expense reclassification		(9,412	)		(400	)		NM
Other cash costs, as adjusted		105,609			107,470			(1.7	)
Total cash costs, as reported		255,552			249,483			2.4
Adjustment for subscription-related expense reclassification		(9,412	)		(400	)		NM
Total cash costs, as adjusted		246,140			249,083			(1.2	)

Approximately $8,716,000, or 92.6% of the reclassification impacts revenue and cash costs of our Lee Legacy operations, and approximately $696,000, or 7.4% impacts Pulitzer.

DEBT AND FREE CASH FLOW⁽²⁾

Debt was reduced $20.3 million in the quarter and $40.5 million for the fiscal year to date. As of March 29, 2015 the principal amount of debt was $764.3 million. Including $32.0 million borrowed to pay 2014 refinancing costs that has since been repaid, debt has been reduced $80.8 million in the last twelve months ended March 29, 2015.

Unlevered free cash flow⁽²⁾ totaled $31.4 million in the current year quarter compared to $32.2 million in the same quarter a year ago. Unlevered free cash flow totaled $77.2 million for the fiscal year to date compared to $82.3 million a year ago and $154.2 million over the last twelve months. Liquidity at March 29, 2015 totaled $44.0 million compared to $27.4 million of required debt principal payments over the next twelve months.

CONFERENCE CALL INFORMATION

As previously announced, we will hold an earnings conference call and audio webcast later today at 9 a.m. Central Daylight Time. The live webcast will be accessible at www.lee.net and will be available for replay two hours later. Several analysts have been invited to ask questions on the call. Questions from other participants may be submitted by participating in the webcast. The call also may be monitored on a listen-only conference line by dialing (toll free) 888-554-1422 and entering a conference passcode of 598707 at least five minutes before the scheduled start. Participants on the listen-only line will not have the opportunity to ask questions.

ABOUT LEE

Lee Enterprises is a leading provider of local news and information, and a major platform for advertising, in its markets, with 46 daily newspapers and a joint interest in four others, rapidly growing digital products and nearly 300 specialty publications in 22 states. Lee's newspapers have circulation of 1.0 million daily and 1.5 million Sunday, reaching over three million readers in print alone. Lee's markets include St. Louis, MO; Lincoln, NE; Madison, WI; Davenport, IA; Billings, MT; Bloomington, IL; and Tucson, AZ. Lee Common Stock is traded on the New York Stock Exchange under the symbol LEE. For more information about Lee, please visit www.lee.net.

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

• Our ability to generate cash flows and maintain liquidity sufficient to service our debt;
• Our ability to comply with the financial covenants in our credit facilities;
• Our ability to refinance our debt as it comes due;
• That the warrants issued in our refinancing will not be exercised;
• The impact and duration of adverse conditions in certain aspects of the economy affecting our business;
• Changes in advertising demand;
• Potential changes in newsprint, other commodities and energy costs;
• Interest rates;
• Labor costs;
• Legislative and regulatory rulings;
• Our ability to achieve planned expense reductions;
• Our ability to maintain employee and customer relationships;
• Our ability to manage increased capital costs;
• Our ability to maintain our listing status on the NYSE;
• Competition; and
• Other risks detailed from time to time in our publicly filed documents.

Any statements that are not statements of historical fact (including statements containing the words “may”, “will”, “would”, “could”, “believes”, “expects”, “anticipates”, “intends”, “plans”, “projects”, “considers” and similar expressions) generally should be considered forward-looking statements. Readers are cautioned not to place undue reliance on such forward-looking statements, which are made as of the date of this release. We do not undertake to publicly update or revise our forward-looking statements, except as required by law.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

		13 Weeks Ended									26 Weeks Ended
(Thousands of Dollars, Except Per Share Data)		March 29 2015			March 30 2014			Percent Change			March 29 2015			March 30 2014			Percent Change
Advertising and marketing services:
Retail		61,520			64,806			(5.1	)		138,332			147,084			(6.0	)
Classified:
Employment		7,646			8,060			(5.1	)		15,070			15,269			(1.3	)
Automotive		6,242			6,904			(9.6	)		13,580			15,043			(9.7	)
Real estate		3,708			4,125			(10.1	)		7,782			8,544			(8.9	)
All other		10,377			10,304			0.7			20,739			20,757			(0.1	)
Total classified		27,973			29,393			(4.8	)		57,171			59,613			(4.1	)
National		5,375			6,094			(11.8	)		12,526			13,611			(8.0	)
Niche publications and other		2,797			2,427			15.2			5,113			4,802			6.5
Total advertising and marketing services revenue		97,665			102,720			(4.9	)		213,142			225,110			(5.3	)
Subscription		48,111			41,952			14.7			98,509			87,405			12.7
Commercial printing		2,774			2,992			(7.3	)		5,591			6,023			(7.2	)
Digital services and other		6,979			6,429			8.6			14,441			12,940			11.6
Total operating revenue		155,529			154,093			0.9			331,683			331,478			0.1
Operating expenses:
Compensation		61,236			59,071			3.7			123,173			121,212			1.6
Newsprint and ink		7,661			9,334			(17.9	)		16,507			19,895			(17.0	)
Other operating expenses		55,839			52,712			5.9			115,021			107,870			6.6
Workforce adjustments		640			299			NM			851			506			68.2
Cash costs		125,376			121,416			3.3			255,552			249,483			2.4
Operating cash flow		30,153			32,677			(7.7	)		76,131			81,995			(7.2	)
Depreciation		4,686			5,275			(11.2	)		9,301			10,407			(10.6	)
Amortization		6,880			6,916			(0.5	)		13,760			13,809			(0.4	)
Loss (gain) on sales of assets, net		5			(1,641	)		NM			(252	)		(1,631	)		(84.5	)
Equity in earnings of associated companies		1,653			1,593			3.8			4,410			4,512			(2.3	)
Operating income		20,235			23,720			(14.7	)		57,732			63,922			(9.7	)
Non-operating income (expense):
Financial income		102			101			1.0			180			221			(18.6	)
Interest expense		(18,403	)		(20,552	)		(10.5	)		(37,193	)		(41,379	)		(10.1	)
Debt financing costs		(1,493	)		(99	)		NM			(2,595	)		(203	)		NM
Other, net		2,318			27			NM			1,140			121			NM
		(17,476	)		(20,523	)		(14.8	)		(38,468	)		(41,240	)		(6.7	)
Income before income taxes		2,759			3,197			(13.7	)		19,264			22,682			(15.1	)
Income tax expense		717			1,492			(51.9	)		7,215			8,875			(18.7	)
Net income		2,042			1,705			19.8			12,049			13,807			(12.7	)
Net income attributable to non-controlling interests		(242	)		(219	)		10.5			(496	)		(429	)		15.6
Income attributable to Lee Enterprises, Incorporated		1,800			1,486			21.1			11,553			13,378			(13.6	)
Earnings per common share:
Basic		0.03			0.03			—			0.22			0.26			(15.4	)
Diluted		0.03			0.03			—			0.21			0.25			(16.0	)

SELECTED CONSOLIDATED FINANCIAL INFORMATION

(UNAUDITED)

		13 Weeks Ended						26 Weeks Ended						52 Weeks Ended
(Thousands of Dollars)		March 29 2015			March 30 2014			March 29 2015			March 30 2014			March 29 2015
Advertising and marketing services		97,665			102,720			213,142			225,110			430,034
Subscription		48,111			41,952			98,509			87,405			187,931
Other		9,753			9,421			20,032			18,963			38,937
Total operating revenue		155,529			154,093			331,683			331,478			656,902
Compensation		61,236			59,071			123,173			121,212			245,015
Newsprint and ink		7,661			9,334			16,507			19,895			34,606
Other operating expenses		55,839			52,712			115,021			107,870			226,480
Depreciation and amortization		11,566			12,191			23,061			24,216			49,293
Loss (gain) on sales of assets, net		5			(1,641	)		(252	)		(1,631	)		217
Impairment of goodwill and other assets		—			—			—			—			868
Workforce adjustments		640			299			851			506			1,610
Total operating expenses		136,947			131,966			278,361			272,068			558,089
Equity in earnings of TNI and MNI		1,653			1,593			4,410			4,512			8,195
Operating income		20,235			23,720			57,732			63,922			107,008
Adjusted to exclude:
Depreciation and amortization		11,566			12,191			23,061			24,216			49,293
Loss (gain) on sales of assets, net		5			(1,641	)		(252	)		(1,631	)		217
Impairment of intangible and other assets		—			—			—			—			868
Equity in earnings of TNI and MNI		(1,653	)		(1,593	)		(4,410	)		(4,512	)		(8,195	)
Operating cash flow		30,153			32,677			76,131			81,995			149,191
Add:
Ownership share of TNI and MNI EBITDA (50%)		2,212			2,031			5,969			5,952			11,252
Adjusted to exclude:
Stock compensation		640			420			1,083			684			1,880
Adjusted EBITDA(2)		33,005			35,128			83,183			88,631			162,323
Adjusted to exclude:
Ownership share of TNI and MNI EBITDA (50%)		(2,212	)		(2,031	)		(5,969	)		(5,952	)		(11,252	)
Add (deduct):
Distributions from TNI and MNI		3,128			2,494			6,072			5,309			10,760
Capital expenditures, net of insurance proceeds		(2,128	)		(2,600	)		(5,675	)		(4,895	)		(12,604	)
Pension contributions		(435	)		(705	)		(435	)		(705	)		(1,252	)
Cash income tax refunds (payments)		68			(103	)		64			(117	)		6,203
Unlevered free cash flow		31,426			32,183			77,240			82,271			154,178
Add (deduct):
Financial income		102			101			180			221			344
Interest expense to be settled in cash		(18,404	)		(19,356	)		(37,193	)		(38,984	)		(75,539	)
Debt financing costs paid		(65	)		(266	)		(82	)		(268	)		(31,401	)
Free cash flow		13,059			12,662			40,145			43,240			47,582

SELECTED LEE LEGACY⁽²⁾ ONLY FINANCIAL INFORMATION

(UNAUDITED)

		13 Weeks Ended						26 Weeks Ended						52 Weeks Ended
(Thousands of Dollars)		March 29 2015			March 30 2014			March 29 2015			March 30 2014			March 29 2015
Advertising and marketing services		69,018			72,055			149,073			155,263			300,629
Subscription		32,513			26,727			66,058			55,477			124,574
Other		8,593			8,412			17,374			16,629			33,952
Total operating revenue		110,124			107,194			232,505			227,369			459,155
Compensation		46,273			44,123			92,519			89,948			183,212
Newsprint and ink		5,727			6,733			12,250			14,070			25,263
Other operating expenses		31,919			28,633			65,497			57,754			126,716
Depreciation and amortization		7,884			8,226			15,834			16,309			32,198
Loss (gain) on sales of assets, net		4			(1,635	)		(75	)		(1,650	)		213
Impairment of goodwill and other assets		—			—			—			—			868
Workforce adjustments		241			122			313			171			693
Total operating expenses		92,048			86,202			186,338			176,602			369,163
Equity in earnings of MNI		444			313			1,556			1,443			3,498
Operating income		18,520			21,305			47,723			52,210			93,490
Adjusted to exclude:
Depreciation and amortization		7,884			8,226			15,834			16,309			32,198
Loss (gain) on sales of assets, net		4			(1,635	)		(75	)		(1,650	)		213
Impairment of intangible and other assets		—			—			—			—			868
Equity in earnings of MNI		(444	)		(313	)		(1,556	)		(1,443	)		(3,498	)
Operating cash flow		25,964			27,583			61,926			65,426			123,271
Add:
Ownership share of MNI EBITDA (50%)		898			646			2,906			2,673			6,137
Adjusted to exclude:
Stock compensation		640			420			1,083			684			1,880
Adjusted EBITDA		27,502			28,649			65,915			68,783			131,288
Adjusted to exclude:
Ownership share of MNI EBITDA (50%)		(898	)		(646	)		(2,906	)		(2,673	)		(6,137	)
Add (deduct):
Distributions from MNI		1,250			1,250			3,000			2,750			5,000
Capital expenditures, net of insurance proceeds		(1,438	)		(2,082	)		(3,518	)		(4,245	)		(8,961	)
Pension contributions		—			—			—			—			(87	)
Cash income tax refunds (payments)		157			(103	)		153			(117	)		4
Intercompany charges not settled in cash		(2,318	)		(2,099	)		(4,636	)		(4,198	)		(10,116	)
Other		—			—			—			—			(2,000	)
Unlevered free cash flow		24,255			24,969			58,008			60,300			108,991
Add (deduct):
Financial income		102			101			180			221			344
Interest expense to be settled in cash		(18,086	)		(18,206	)		(36,415	)		(36,561	)		(73,345	)
Debt financing costs paid		(65	)		(266	)		(82	)		(268	)		(31,393	)
Free cash flow		6,206			6,598			21,691			23,692			4,597

SELECTED PULITZER⁽²⁾ ONLY FINANCIAL INFORMATION

(UNAUDITED)

		13 Weeks Ended						26 Weeks Ended						52 Weeks Ended
(Thousands of Dollars)		March 29 2015			March 30 2014			March 29 2015			March 30 2014			March 29 2015
Advertising and marketing services		28,647			30,665			64,069			69,847			129,405
Subscription		15,598			15,225			32,451			31,928			63,357
Other		1,160			1,009			2,658			2,334			4,985
Total operating revenue		45,405			46,899			99,178			104,109			197,747
Compensation		14,963			14,948			30,654			31,264			61,803
Newsprint and ink		1,934			2,601			4,257			5,825			9,343
Other operating expenses		23,920			24,079			49,524			50,116			99,764
Depreciation and amortization		3,682			3,965			7,227			7,907			17,095
Loss (gain) on sales of assets, net		1			(6	)		(177	)		19			4
Workforce adjustments		399			177			538			335			917
Total operating expenses		44,899			45,764			92,023			95,466			188,926
Equity in earnings of TNI		1,209			1,280			2,854			3,069			4,697
Operating income		1,715			2,415			10,009			11,712			13,518
Adjusted to exclude:
Depreciation and amortization		3,682			3,965			7,227			7,907			17,095
Loss (gain) on sales of assets, net		1			(6	)		(177	)		19			4
Equity in earnings of TNI		(1,209	)		(1,280	)		(2,854	)		(3,069	)		(4,697	)
Operating cash flow		4,189			5,094			14,205			16,569			25,920
Add:
Ownership share of TNI EBITDA (50%)		1,314			1,385			3,063			3,279			5,115
Adjusted EBITDA		5,503			6,479			17,268			19,848			31,035
Adjusted to exclude:
Ownership share of TNI EBITDA (50%)		(1,314	)		(1,385	)		(3,063	)		(3,279	)		(5,115	)
Add (deduct):
Distributions from TNI		1,878			1,244			3,072			2,559			5,760
Capital expenditures, net of insurance proceeds		(690	)		(518	)		(2,157	)		(650	)		(3,643	)
Pension contributions		(435	)		(705	)		(435	)		(705	)		(1,165	)
Cash income tax refunds (payments)		(89	)		—			(89	)		—			6,199
Intercompany charges not settled in cash		2,318			2,099			4,636			4,198			10,116
Other		—			—			—			—			2,000
Unlevered free cash flow		7,171			7,214			19,232			21,971			45,187
Deduct:
Interest expense to be settled in cash		(318	)		(1,150	)		(778	)		(2,423	)		(2,194	)
Debt financing costs paid		—			—			—			—			(8	)
Free cash flow		6,853			6,064			18,454			19,548			42,985

REVENUE BY REGION

		13 Weeks Ended									26 Weeks Ended
(Thousands of Dollars)		March 29 2015			March 30 2014			Percent Change			March 29 2015			March 30 2014			Percent Change
Midwest		94,995			94,702			0.3			204,261			206,647			(1.2	)
Mountain West		31,017			30,419			2.0			66,757			65,103			2.5
West		10,520			10,144			3.7			22,484			21,806			3.1
East/Other		18,997			18,828			0.9			38,181			37,922			0.7
Total		155,529			154,093			0.9			331,683			331,478			0.1

SELECTED BALANCE SHEET INFORMATION

(Thousands of Dollars)		March 29 2015			September 28 2014
Cash		11,350			16,704
Debt (Principal Amount):
Revolving Facility		—			5,000
1st Lien Term Loan		205,250			226,750
Notes		400,000			400,000
2nd Lien Term Loan		150,000			150,000
Pulitzer Notes		9,000			23,000
		764,250			804,750

SELECTED STATISTICAL INFORMATION

		13 Weeks Ended									26 Weeks Ended
		March 29 2015			March 30 2014			Percent Change			March 29 2015			March 30 2014			Percent Change
Capital expenditures, net of insurance proceeds (Thousands of Dollars)		2,128			2,600			(18.2	)		5,675			4,895			15.9
Newsprint volume (Tonnes)		12,462			13,981			(10.9	)		26,279			29,911			(12.1	)
Average full-time equivalent employees		4,312			4,486			(3.9	)		4,384			4,551			(3.7	)
Average common shares - basic (Thousands of Shares)		52,494			52,223			0.5			52,482			52,151			0.6
Average common shares - diluted (Thousands of Shares)		53,875			53,798			0.1			53,916			53,541			0.7
Shares outstanding at end of period (Thousands of Shares)											54,528			53,596			1.7

NOTES

(1)		This earnings release is a preliminary report of results for the periods included. The reader should refer to the Company's most recent reports on Form 10-Q and on Form 10-K for definitive information.
(2)		The following are non-GAAP (Generally Accepted Accounting Principles) financial measures for which reconciliations to relevant GAAP measures are included in tables accompanying this release:
		•	Adjusted EBITDA is defined as operating income (loss), plus depreciation, amortization, impairment charges, stock compensation and 50% of EBITDA from TNI and MNI, minus equity in earnings of TNI and MNI 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.
		•	Cash Costs are defined as compensation, newsprint and ink, other operating expenses and certain unusual matters, such as workforce adjustment costs. Depreciation, amortization, impairment charges, other non-cash operating expenses and other unusual matters are excluded.
		•	Operating Cash Flow is defined as operating income (loss) plus depreciation, amortization and impairment charges, minus equity in earnings of TNI and MNI and curtailment gains. Operating Cash Flow Margin is defined as operating cash flow divided by operating revenue. The terms operating cash flow and EBITDA are used interchangeably.
		•	Unlevered Free Cash Flow is defined as operating income (loss), plus depreciation, amortization, impairment charges, stock compensation, distributions from TNI and MNI and cash income tax refunds, minus equity in earnings of TNI and MNI, 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.
		We also present selected information for Lee Legacy and Pulitzer Inc. ("Pulitzer"). Lee Legacy constitutes the business of the Company excluding Pulitzer, a wholly-owned subsidiary of the Company.
		No non-GAAP financial measure should be considered as a substitute for any related GAAP financial measure. However, the Company believes 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. The Company also believes 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.
(3)		Certain amounts as previously reported have been reclassified to conform with the current period presentation. The prior periods have been adjusted for comparative purposes, and the reclassifications have no impact on earnings.

Source: Lee Enterprises, Incorporated

Lee Enterprises, Incorporated
Charles Arms, 563-383-2100
Director of Communications
IR@lee.net