Lee Enterprises 8K reports third quarter earnings | LEE 7 Aug 15

Exhibit 99.1 - News Release – Third fiscal quarter ended June 28, 2015.

201 N. Harrison St.

Davenport, IA 52801

www.lee.net

NEWS RELEASE

Lee Enterprises reports third quarter earnings

DAVENPORT, Iowa (August 6, 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 third fiscal quarter ended June 28, 2015, compared to a loss of 19 cents a year ago. Excluding unusual matters, adjusted earnings per diluted common share⁽²⁾ totaled 9 cents, compared with earnings of 11 cents a year ago.

“We continue to see strong growth in digital advertising, digital services and subscription revenue,” Mary Junck, chairman and chief executive officer said. “Total digital revenue increased 28.6% in the quarter,” she said. “We also had significant growth in digital services — up 19.7% in the quarter — largely fueled by TownNews.com, a Lee Enterprises subsidiary that provides digital services including web hosting and content management for web, print and mobile products to Lee Enterprises properties as well as 1,500 other newspapers. Digital advertising revenue increased 6.5% for the quarter driven by strong growth in retail," Junck added.

“We are using substantially all of our free cash flow⁽²⁾ to reduce debt,” Junck said. "In the third fiscal quarter, we repaid $19.3 million in debt including the milestone of paying off the Pulitzer Notes almost two years early. The repayment of the Pulitzer Notes not only reduces our debt but also simplifies our capital structure and should result in a more rapid paydown of our debt under the 1^st Lien Term Loan⁽³⁾."

She added: "In the third quarter, we reduced cash costs⁽²⁾ on a comparable basis after excluding unusual matters, 3.9%, or $4.8 million. Our keen focus on cost control allows us to improve our guidance, and we now expect fourth quarter cash costs to decrease between 5.5%-6.0%.

“Lee also has an active real estate monetization program with more than $15 million of real estate assets listed for sale, including the headquarters of the St. Louis Post-Dispatch."

Junck also noted the following financial highlights for the quarter:


•	Digital advertising revenue increased 6.5% and represents 20.7% of our total advertising revenue. Digital retail advertising increased 12.0%.


•	Mobile advertising revenue, which is included in digital advertising, increased 23.2%.


•	Subscription revenue, excluding the subscription-related expense reclassification discussed more fully below, increased 3.4%, and we expect full year 2015 subscription revenue, excluding the impact of the reclassification, to increase 2.5-3.0%.


•	Debt was reduced $70.0 million in the last twelve months.

THIRD QUARTER OPERATING RESULTS

Operating revenue for the 13 weeks ended June 28, 2015 totaled $157.5 million, a decrease of 3.4% compared with a year ago. However, the month-over-month revenue trend improved in both May and June of 2015.

Excluding the impact of a subscription-related expense reclassification as a result of moving to fee-for-service delivery contracts at most of our newspapers, operating revenue decreased 5.1%. The delivery expense 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.

Advertising and marketing services revenue combined decreased 8.9% to $100.5 million, with retail advertising down 8.3%, classified down 11.9% and national down 12.5%. Combined print and digital classified employment revenue decreased 14.5%, while automotive decreased 14.5%, real estate decreased 16.0% and other classified decreased 6.6%. Digital advertising and marketing services revenue on a stand-alone basis increased 6.5% to $20.8 million.

Subscription revenue increased 9.4%. Excluding the impact of the subscription-related expense reclassification, subscription revenue increased 3.4%. Average daily newspaper circulation, including TNI⁽³⁾ and MNI⁽³⁾ and digital subscribers, totaled 1.0 million in the 13 weeks ended June 28, 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 $30.1 million in the quarter, up 28.6%, and represents 19.1% of total operating revenue.

Cash costs decreased 1.2% for the 13 weeks ended June 28, 2015. Excluding the impact of the subscription-related expense reclassification and unusual matters, cash costs decreased 3.9% for the 13 weeks ended June 28, 2015. Compensation decreased 3.1%, primarily as a result of reduced staffing levels. Newsprint and ink expense decreased 19.5%, primarily the result of lower newsprint prices and a reduction in newsprint volume of 13.4%. Other operating expenses increased 2.9%. Excluding the subscription-related expense reclassification, other operating expense decreased 2.1%.

We expect our fourth quarter cash costs, excluding the impact of the subscription-related expense reclassification and unusual matters, to decrease between 5.5%-6.0%, a further improvement from the decrease of 2.2% for the 39 weeks ended June 28, 2015. These additional cost reductions in the second half of fiscal year 2015 are expected to have a favorable impact on the fiscal year 2016 cash costs.

Operating cash flowdecreased 10.4% from a year ago to $35.2 million. Excluding unusual matters, operating cash flow decreased 8.7%. Operating cash flow margin⁽²⁾ decreased to 22.4%, compared to 24.1% a year ago. The subscription-related expense reclassification reduced operating cash flow margin by 0.7%. Including equity in earnings of associated companies, depreciation and amortization, as well as unusual matters in both years, operating income totaled $24.8 million in the current year quarter, compared with $28.6 million a year ago.

Non-operating expenses decreased 52.2% for the 13 weeks ended June 28, 2015 due to the debt refinancing costs paid in the same quarter of the prior year. Interest expense decreased 7.8%, or $1.5 million, due to lower debt balances. We recognized $1.4 million of debt refinancing costs in the current year quarter compared to $21.7 million in the prior year quarter. We recognized $1.1 million of non-operating expense 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 $1.9 million, compared with a loss of $9.7 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
	June 28 2015			June 29 2014
(Thousands of Dollars, Except Per Share Data)	Amount		Per Share	Amount		Per Share

Income (loss) attributable to Lee Enterprises, Incorporated, as reported	1,882		0.03	(9,746	)	(0.19	)
Adjustments:
Impairment of intangible and other assets	—			336
Debt financing costs	1,445			21,732
Warrants fair value adjustment	1,091			(579	)
Litigation settlement	—			2,300
Workforce adjustments and other, net	1,188			426
	3,724			24,215
Income tax effect of adjustments, net	(866	)		(8,675	)
	2,858		0.05	15,540		0.30
Income attributable to Lee Enterprises, Incorporated, as adjusted	4,740		0.09	5,794		0.11

SUBSCRIPTION EXPENSE RECLASSIFICATION

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



	13 Weeks Ended
(Thousands of Dollars)	June 28 2015		June 29 2014		Percent Change

Subscription revenue, as reported	47,394		43,339		9.4
Adjustment for subscription-related expense reclassification	(4,512	)	(1,864	)	NM
Subscription revenue, as adjusted	42,882		41,475		3.4

Total operating revenue, as reported	157,546		163,125		(3.4	)
Adjustment for subscription-related expense reclassification	(4,512	)	(1,864	)	NM
Total operating revenue, as adjusted	153,034		161,261		(5.1	)

Other cash costs, as reported	55,405		53,840		2.9
Adjustment for subscription-related expense reclassification	(4,512	)	(1,864	)	NM
Other cash costs, as adjusted	50,893		51,976		(2.1	)

Total cash cost excluding unusual matters	121,268		123,394		(1.7	)
Adjustment for subscription-related expense reclassification	(4,512	)	(1,864	)	NM
Total cash cost excluding unusual matters, as adjusted	116,756		121,530		(3.9	)

Total cash costs, as reported	122,325		123,813		(1.2	)
Adjustment for subscription-related expense reclassification	(4,512	)	(1,864	)	NM
Total cash costs, as adjusted	117,813		121,949		(3.4	)

Approximately $4,166,000, or 92.3% of the reclassification impacts revenue and cash costs of our Lee Legacy⁽²⁾ operations, and approximately $346,000, or 7.7% impacts Pulitzer⁽²⁾.

FULL ACCESS SUBSCRIPTION INITIATIVE

As previously reported, we launched our full access subscription initiative in our first markets more than a year ago and as of today substantially all of our markets have launched a full access subscription model. 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⁽⁴⁾

Operating revenue for the 39 weeks ended June 28, 2015, totaled $489.2 million, a decrease of 1.1% compared with the 39 weeks ended June 29, 2014. Excluding the impact of the subscription-related expense reclassification, operating revenue decreased 3.5%.

Advertising and marketing services revenue combined decreased 6.5% to $313.6 million, retail advertising decreased 6.7%, classified decreased 6.9% and national decreased 9.2%. Combined print and digital classified employment revenue decreased 6.3%, while automotive decreased 11.3%, real estate decreased 11.4% and other classified decreased 2.5%. Digital advertising and marketing services revenue on a stand-alone basis increased 7.3% to $59.5 million. Mobile advertising revenue increased 30.7%.

Subscription revenue increased 11.6%. Excluding the impact of the subscription-related expense reclassification, subscription revenue increased 2.7%. Our average daily newspaper circulation, including TNI and MNI and digital subscribers, totaled 1.0 million in the 39 weeks ended June 28, 2015. Sunday circulation totaled 1.4 million.

Total digital revenue was $84.7 million year to date, up 29.3% compared with a year ago.

Cash costs for the 39 weeks ended June 28, 2015 increased 1.2% compared to the same period a year ago. Excluding the impact of the subscription-related expense reclassification and unusual matters, cash costs decreased 2.2%. Compensation increased slightly, due to an increase in employee medical and pension costs as well as salary increases, partially offset by a decrease in the average number of full-time equivalent employees of 4.5%. Newsprint and ink expense decreased 17.8%, primarily the result of lower newsprint prices and a reduction in newsprint volume of 12.6%. Other operating expenses increased 5.4% and excluding the impact of the subscription-related expenses reclassification other operating expense decreased 1.8%, or $2.9 million.

Operating cash flow decreased 8.2% from a year ago to $111.4 million. Operating cash flow margin decreased to 22.8% from 24.5% a year ago. The subscription-related expense reclassification reduced operating cash flow margin by 0.7%. Including equity in earnings of associated companies, depreciation and amortization, as well as unusual matters in both years, operating income decreased to $82.6 million in the 39 weeks ended June 28, 2015, compared with $92.5 million a year ago.

Non-operating expenses decreased 29.9% in the 39 weeks ended June 28, 2015 compared to the same period a year ago. Cash interest expense decreased 5.7%, or $3.3 million, due to lower debt balances in the current year. We recognized non-cash interest expense of $2.4 million in the prior year to date period. We recognized $4.0 million of debt financing costs in the current year period compared to $21.9 million in the prior year period. Income attributable to Lee Enterprises, Incorporated for the year totaled $13.4 million, compared to income of $3.6 million a year ago.

ADJUSTED EARNINGS AND EPS FOR THE YEAR TO DATE



				39 Weeks Ended
	June 28 2015			June 29 2014
(Thousands of Dollars, Except Per Share Data)	Amount		Per Share	Amount		Per Share

Income attributable to Lee Enterprises, Incorporated, as reported	13,435		0.25	3,632		0.07
Adjustments:
Impairment of intangible and other assets	—			336
Debt financing costs	4,040			21,935
Amortization of debt present value adjustment	—			2,394
Warrants fair value adjustment	312			(579	)
Litigation settlement	—			2,300
Workforce adjustments and other, net	1,570			1,003
	5,922			27,389
Income tax effect of adjustments, net	(1,897	)		(9,754	)
	4,025		0.07	17,635		0.33
Income attributable to Lee Enterprises, Incorporated, as adjusted	17,460		0.32	21,267		0.40

SUBSCRIPTION EXPENSE RECLASSIFICATION

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



	39 Weeks Ended
(Thousands of Dollars)	June 28 2015		June 29 2014		Percent Change

Subscription revenue, as reported	145,904		130,744		11.6
Adjustment for subscription-related expense reclassification	(13,924	)	(2,265	)	NM
Subscription revenue, as adjusted	131,980		128,479		2.7

Total operating revenue, as reported	489,229		494,603		(1.1	)
Adjustment for subscription-related expense reclassification	(13,924	)	(2,265	)	NM
Total operating revenue, as adjusted	475,305		492,338		(3.5	)

Other cash costs, as reported	170,426		161,708		5.4
Adjustment for subscription-related expense reclassification	(13,924	)	(2,265	)	NM
Other cash costs, as adjusted	156,502		159,443		(1.8	)

Total cash costs excluding unusual matters	375,969		372,371		1.0
Adjustment for subscription-related expense reclassification	(13,924	)	(2,265	)	NM
Total cash cost excluding unusual matters, as adjusted	362,045		370,106		(2.2	)

Total cash costs, as reported	377,877		373,296		1.2
Adjustment for subscription-related expense reclassification	(13,924	)	(2,265	)	NM
Total cash costs, as adjusted	363,953		371,031		(1.9	)

Approximately $12,883,000, or 92.5% of the reclassification impacts revenue and cash costs of our Lee Legacy operations, and approximately $1,041,000, or 7.5% impacts Pulitzer.

DEBT AND FREE CASH FLOW

Debt was reduced $19.3 million in the quarter, $59.8 million fiscal year to date and $70.0 million in the last twelve months ended June 28, 2015. As of June 28, 2015 the principal amount of debt was $745.0 million.

Unlevered free cash flow⁽²⁾ totaled $34.7 million in the current year quarter compared to $44.8 million in the same quarter a year ago. Unlevered free cash flow totaled $111.9 million for the fiscal year to date compared to $127.0 million a year ago and $144.1 million over the last twelve months. Tax refunds of $6.1 million in the 13 weeks ended June 29, 2014 increased our free cash flow in the prior year periods. At June 28, 2015, liquidity, including cash and availability under our Revolving Facility, totaled $51.8 million compared to $32.9 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) 888-481-2848 and entering a conference passcode of 899517 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 1.4 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.

Contact:

Charles Arms

Director of Communications

IR@lee.net

(563) 383-2100

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)



	13 Weeks Ended						39 Weeks Ended
(Thousands of Dollars, Except Per Share Data)	June 28 2015		June 29 2014		Percent Change		June 28 2015		June 29 2014		Percent Change

Advertising and marketing services:
Retail	63,754		69,507		(8.3	)	202,086		216,591		(6.7	)
Classified:
Employment	7,929		9,277		(14.5	)	23,000		24,546		(6.3	)
Automotive	6,213		7,266		(14.5	)	19,793		22,309		(11.3	)
Real estate	3,837		4,569		(16.0	)	11,619		13,113		(11.4	)
All other	11,143		11,926		(6.6	)	31,881		32,683		(2.5	)
Total classified	29,122		33,038		(11.9	)	86,293		92,651		(6.9	)
National	4,608		5,268		(12.5	)	17,134		18,879		(9.2	)
Niche publications and other	3,006		2,471		21.7		8,119		7,273		11.6
Total advertising and marketing services revenue	100,490		110,284		(8.9	)	313,632		335,394		(6.5	)
Subscription	47,394		43,339		9.4		145,904		130,744		11.6
Commercial printing	3,239		3,147		2.9		8,830		9,170		(3.7	)
Digital services	3,070		2,565		19.7		9,267		7,257		27.7
Other	3,353		3,790		(11.5	)	11,596		12,038		(3.7	)
Total operating revenue	157,546		163,125		(3.4	)	489,229		494,603		(1.1	)
Operating expenses:
Compensation	58,442		60,330		(3.1	)	181,615		181,543		—
Newsprint and ink	7,421		9,224		(19.5	)	23,928		29,120		(17.8	)
Other operating expenses	55,405		53,840		2.9		170,426		161,708		5.4
Workforce adjustments	1,057		419		NM		1,908		925		NM
Cash costs	122,325		123,813		(1.2	)	377,877		373,296		1.2
Operating cash flow	35,221		39,312		(10.4	)	111,352		121,307		(8.2	)
Depreciation	4,559		5,293		(13.9	)	13,860		15,700		(11.7	)
Amortization	6,836		6,901		(0.9	)	20,597		20,710		(0.5	)
Loss (gain) on sales of assets, net	686		9		NM		434		(1,622	)	NM
Impairment of intangible and other assets	—		336		NM		—		336		NM
Equity in earnings of associated companies	1,705		1,836		(7.1	)	6,114		6,348		(3.7	)
Operating income	24,845		28,609		(13.2	)	82,575		92,531		(10.8	)
Non-operating income (expense):
Financial income	79		85		(7.1	)	258		306		(15.7	)
Interest expense	(18,121	)	(19,654	)	(7.8	)	(55,314	)	(61,033	)	(9.4	)
Debt financing costs	(1,445	)	(21,732	)	(93.4	)	(4,040	)	(21,935	)	(81.6	)
Other, net	(1,082	)	(1,701	)	(36.4	)	58		(1,579	)	NM
	(20,569	)	(43,002	)	(52.2	)	(59,038	)	(84,241	)	(29.9	)
Income (loss) before income taxes	4,276		(14,393	)	NM		23,537		8,290		NM
Income tax expense (benefit)	2,141		(4,882	)	NM		9,353		3,995		NM
Net income (loss)	2,135		(9,511	)	NM		14,184		4,295		NM
Net income attributable to non-controlling interests	(253	)	(235	)	7.7		(749	)	(663	)	13.0
Income (loss) attributable to Lee Enterprises, Incorporated	1,882		(9,746	)	NM		13,435		3,632		NM

Earnings (loss) per common share:
Basic	0.04		(0.19	)	NM		0.26		0.07		NM
Diluted	0.03		(0.19	)	NM		0.25		0.07		NM

SELECTED CONSOLIDATED FINANCIAL INFORMATION

(UNAUDITED)



	13 Weeks Ended				39 Weeks Ended				52 Weeks Ended
(Thousands of Dollars)	June 28 2015		June 29 2014		June 28 2015		June 29 2014		June 28 2015

Advertising and marketing services	100,490		110,284		313,632		335,394		420,240
Subscription	47,394		43,339		145,904		130,744		191,986
Other	9,662		9,502		29,693		28,465		39,097
Total operating revenue	157,546		163,125		489,229		494,603		651,323
Compensation	58,442		60,330		181,615		181,543		243,126
Newsprint and ink	7,421		9,224		23,928		29,120		32,802
Other operating expenses	55,405		53,840		170,426		161,708		228,047
Depreciation and amortization	11,395		12,194		34,457		36,410		48,492
Loss (gain) on sales of assets, net	686		9		434		(1,622	)	894
Impairment of goodwill and other assets	—		336		—		336		532
Workforce adjustments	1,057		419		1,908		925		2,249
Total operating expenses	134,406		136,352		412,768		408,420		556,142
Equity in earnings of TNI and MNI	1,705		1,836		6,114		6,348		8,063
Operating income	24,845		28,609		82,575		92,531		103,244
Adjusted to exclude:
Depreciation and amortization	11,395		12,194		34,457		36,410		48,492
Loss (gain) on sales of assets, net	686		9		434		(1,622	)	894
Impairment of intangible and other assets	—		336		—		336		532
Equity in earnings of TNI and MNI	(1,705	)	(1,836	)	(6,114	)	(6,348	)	(8,063	)
Operating cash flow	35,221		39,312		111,352		121,307		145,099
Add:
Ownership share of TNI and MNI EBITDA (50%)	2,464		2,587		8,432		8,540		11,129
Adjusted to exclude:
Stock compensation	562		397		1,645		1,081		2,045
Adjusted EBITDA⁽²⁾	38,247		42,296		121,429		130,928		158,273
Adjusted to exclude:
Ownership share of TNI and MNI EBITDA (50%)	(2,464	)	(2,587	)	(8,432	)	(8,540	)	(11,129	)
Add (deduct):
Distributions from TNI and MNI	2,041		2,346		8,113		7,654		10,455
Capital expenditures, net of insurance proceeds	(2,011	)	(3,309	)	(7,686	)	(8,204	)	(11,306	)
Pension contributions	(1,130	)	(17	)	(1,565	)	(722	)	(2,365	)
Cash income tax refunds (payments)	(1	)	6,051		63		5,933		152
Unlevered free cash flow	34,682		44,780		111,922		127,049		144,080
Add (deduct):
Financial income	79		85		258		306		337
Interest expense to be settled in cash	(18,121	)	(19,654	)	(55,314	)	(58,639	)	(74,005	)
Debt financing costs paid	(395	)	(31,008	)	(477	)	(31,276	)	(788	)
Free cash flow	16,245		(5,797	)	56,389		37,440		69,624

SELECTED LEE LEGACY⁽²⁾ ONLY FINANCIAL INFORMATION

(UNAUDITED)



	13 Weeks Ended				39 Weeks Ended				52 Weeks Ended
(Thousands of Dollars)	June 28 2015		June 29 2014		June 28 2015		June 29 2014		June 28 2015

Advertising and marketing services	69,973		76,148		219,046		231,411		294,454
Subscription	31,876		28,022		97,935		83,499		128,428
Other	8,391		8,330		25,764		24,959		34,012
Total operating revenue	110,240		112,500		342,745		339,869		456,894
Compensation	44,187		45,086		136,706		135,035		182,312
Newsprint and ink	5,387		6,550		17,637		20,623		24,098
Other operating expenses	31,660		28,954		97,157		86,706		129,424
Depreciation and amortization	7,839		8,322		23,850		24,633		31,712
Loss (gain) on sales of assets, net	(73	)	8		(324	)	(1,643	)	133
Impairment of goodwill and other assets	—		336		—		336		532
Workforce adjustments	442		265		755		436		871
Total operating expenses	89,442		89,521		275,781		266,126		369,082
Equity in earnings of MNI	746		790		2,301		2,232		3,453
Operating income	21,544		23,769		69,265		75,975		91,265
Adjusted to exclude:
Depreciation and amortization	7,839		8,322		23,850		24,633		31,712
Loss (gain) on sales of assets, net	(73	)	8		(324	)	(1,643	)	133
Impairment of intangible and other assets	—		336		—		336		532
Equity in earnings of MNI	(746	)	(790	)	(2,301	)	(2,232	)	(3,453	)
Operating cash flow	28,564		31,645		90,490		97,069		120,189
Add:
Ownership share of MNI EBITDA (50%)	1,401		1,436		4,306		4,110		6,101
Adjusted to exclude:
Stock compensation	562		397		1,645		1,081		2,045
Adjusted EBITDA	30,527		33,478		96,441		102,260		128,335
Adjusted to exclude:
Ownership share of MNI EBITDA (50%)	(1,401	)	(1,436	)	(4,306	)	(4,110	)	(6,101	)
Add (deduct):
Distributions from MNI	1,000		1,000		4,000		3,750		5,000
Capital expenditures, net of insurance proceeds	(1,556	)	(2,900	)	(5,074	)	(7,145	)	(7,617	)
Pension contributions	—		(17	)	—		(17	)	(70	)
Cash income tax refunds (payments)	(1	)	(199	)	152		(317	)	203
Intercompany charges not settled in cash	(2,317	)	(2,099	)	(6,953	)	(6,297	)	(10,334	)
Other	(2,000	)	(2,000	)	(2,000	)	(2,000	)	(2,000	)
Unlevered free cash flow	24,252		25,827		82,260		86,124		107,416
Add (deduct):
Financial income	79		85		258		306		337
Interest expense to be settled in cash	(18,000	)	(18,834	)	(54,415	)	(55,397	)	(72,509	)
Debt financing costs paid	(296	)	(31,000	)	(378	)	(31,268	)	(689	)
Free cash flow	6,035		(23,922	)	27,725		(235	)	34,555

SELECTED PULITZER⁽²⁾ ONLY FINANCIAL INFORMATION

(UNAUDITED)



	13 Weeks Ended				39 Weeks Ended				52 Weeks Ended
(Thousands of Dollars)	June 28 2015		June 29 2014		June 28 2015		June 29 2014		June 28 2015

Advertising and marketing services	30,517		34,136		94,586		103,983		125,786
Subscription	15,518		15,317		47,969		47,245		63,558
Other	1,271		1,172		3,929		3,506		5,085
Total operating revenue	47,306		50,625		146,484		154,734		194,429
Compensation	14,255		15,244		44,909		46,508		60,814
Newsprint and ink	2,034		2,674		6,291		8,497		8,704
Other operating expenses	23,745		24,886		73,269		75,002		98,623
Depreciation and amortization	3,556		3,872		10,607		11,777		16,780
Loss (gain) on sales of assets, net	759		1		758		21		761
Workforce adjustments	615		154		1,153		489		1,378
Total operating expenses	44,964		46,831		136,987		142,294		187,060
Equity in earnings of TNI	959		1,046		3,813		4,116		4,610
Operating income	3,301		4,840		13,310		16,556		11,979
Adjusted to exclude:
Depreciation and amortization	3,556		3,872		10,607		11,777		16,780
Loss (gain) on sales of assets, net	759		1		758		21		761
Equity in earnings of TNI	(959	)	(1,046	)	(3,813	)	(4,116	)	(4,610	)
Operating cash flow	6,657		7,667		20,862		24,238		24,910
Add:
Ownership share of TNI EBITDA (50%)	1,063		1,151		4,126		4,430		5,028
Adjusted EBITDA	7,720		8,818		24,988		28,668		29,938
Adjusted to exclude:
Ownership share of TNI EBITDA (50%)	(1,063	)	(1,151	)	(4,126	)	(4,430	)	(5,028	)
Add (deduct):
Distributions from TNI	1,041		1,346		4,113		3,904		5,455
Capital expenditures, net of insurance proceeds	(455	)	(409	)	(2,612	)	(1,059	)	(3,689	)
Pension contributions	(1,130	)	—		(1,565	)	(705	)	(2,295	)
Cash income tax refunds (payments)	—		6,250		(89	)	6,250		(51	)
Intercompany charges not settled in cash	2,317		2,099		6,953		6,297		10,334
Other	2,000		2,000		2,000		2,000		2,000
Unlevered free cash flow	10,430		18,953		29,662		40,925		36,664
Deduct:
Interest expense to be settled in cash	(121	)	(820	)	(899	)	(3,242	)	(1,496	)
Debt financing costs paid	(99	)	(8	)	(99	)	(8	)	(99	)
Free cash flow	10,210		18,125		28,664		37,675		35,069

REVENUE BY REGION



	13 Weeks Ended				39 Weeks Ended
(Thousands of Dollars)	June 28 2015	June 29 2014	Percent Change		June 28 2015	June 29 2014	Percent Change

Midwest	98,512	102,194	(3.6	)	302,773	308,841	(2.0	)
Mountain West	31,779	33,455	(5.0	)	98,536	98,558	—
West	10,995	11,070	(0.7	)	33,478	32,875	1.8
East/Other	16,260	16,406	(0.9	)	54,442	54,329	0.2
Total	157,546	163,125	(3.4	)	489,229	494,603	(1.1	)

SELECTED BALANCE SHEET INFORMATION



(Thousands of Dollars)	June 28 2015	September 28 2014
Cash	18,904	16,704
Debt (Principal Amount):
Revolving Facility	—	5,000
1st Lien Term Loan	195,000	226,750
Notes	400,000	400,000
2nd Lien Term Loan	150,000	150,000
Pulitzer Notes	—	23,000
	745,000	804,750

SELECTED STATISTICAL INFORMATION



	13 Weeks Ended				39 Weeks Ended
	June 28 2015	June 29 2014	Percent Change		June 28 2015	June 29 2014	Percent Change

Capital expenditures, net of insurance proceeds (Thousands of Dollars)	2,011	3,309	(39.2	)	7,686	8,204	(6.3	)
Newsprint volume (Tonnes)	12,471	14,405	(13.4	)	38,749	44,317	(12.6	)
Average full-time equivalent employees	4,237	4,514	(6.1	)	4,335	4,539	(4.5	)
Average common shares - basic (Thousands of Shares)	52,597	52,344	0.5		52,521	52,216	0.6
Average common shares - diluted (Thousands of Shares)	54,056	52,344	3.3		53,957	53,655	0.6
Shares outstanding at end of period (Thousands of Shares)					54,749	53,694	2.0

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:
	ž	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.
	ž	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.
	ž	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.
	ž	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.
	ž	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)	The 1^st Lien Term Loan is the $250 million first lien term loan and $40 million revolving facility under a First Lien Credit Agreement dated as of March 31, 2014. TNI refers to TNI Partners publishing operations in Tucson, AZ. MNI refers to Madison Newspapers, Inc. publishing operations in Madison, WI.

(4)	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.

Lee Enterprises (LEE) 8-KLee Enterprises reports third quarter earnings