Financial Data and Key Metrics Changes - Total operating revenue for Q1 2022 was $202 million, with total digital revenue increasing 17% year-over-year to $55 million [34][35] - Digital-only subscription revenue increased 26% to $8 million, with over 450,000 paid digital-only subscribers, representing a 57% year-over-year growth [35][10] - Total print revenue declined 11% year-over-year to $147 million due to secular declines and supply chain constraints [36] Business Line Data and Key Metrics Changes - Digital advertising and marketing services revenue increased 19% to $43 million, with a 30% increase when excluding political revenue [35] - Amplified Digital Agency revenue grew 69% year-over-year to $15 million, contributing to a total of $47 million over the last 12 months [35][30] - Subscription-based revenue reached $107 million, accounting for 53% of total operating revenue [12] Market Data and Key Metrics Changes - The company serves over 47 million unique visitors monthly, with 12 million loyal readers and 2.4 million highly engaged readers [24] - Video revenue increased by 98% in the quarter, indicating strong growth potential in leveraging trusted brands [20] Company Strategy and Development Direction - The company is focused on a Three Pillar Digital Growth Strategy aimed at expanding digital audiences, growing digital subscriptions, and diversifying offerings for local advertisers [14][18] - The goal is to achieve over $435 million in recurring sustainable digital revenue by 2026 [14] - Investments in talent and technology are being made to support the digital transformation and enhance user experience [40][41] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of regional local advertisers, with strong growth in digital advertising [56] - The company anticipates continued digital growth and expects to achieve 495,000 digital-only subscribers and $230 million in total digital revenue for fiscal 2022 [37] - Management highlighted the importance of managing costs while investing in digital growth, expecting a reduction in legacy costs of $20 million to $30 million in fiscal 2022 [39] Other Important Information - The principal amount of debt decreased to $463 million, down $20 million sequentially [43] - The company is targeting $20 million to $30 million in asset sales for fiscal 2022, with $14 million already closed in Q1 [44] Q&A Session Summary Question: What was the digital political advertising number in the prior year quarter? - The prior year had around $3 million of political revenue associated with various campaigns [52] Question: When do you cycle against the changes in the paywall with your digital sites? - Most changes were cycled in the middle of FY22, fairly late in the fiscal year in '21 [54] Question: Can you discuss the tone of the current market, particularly regarding Amplified and print advertising? - The recovery for regional local advertisers is strong, but print advertising recovery is slower due to supply chain issues [56] Question: How important is the auto category for the company? - The auto category is significant, but revenues have declined due to supply chain issues affecting advertising [57] Question: Clarification on the $14 million in closed real estate sales and fiscal 2022 guidance? - The fiscal year '22 guidance of $20 million to $30 million in closed sales includes the $14 million already closed [58] Question: Thoughts on selling or spinning off Amplified or TownNews? - Both Amplified and TownNews are crucial for the digital growth strategy, and their value is better leveraged within the company [63] Question: Status of warrants issued in 2014? - None of the warrants have been exercised as of now, and they are set to expire on March 31, 2022 [64]

| --- | --- | --- | --- | --- | --- | |---------------------------------------------------------------|-------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | | UPDATE ON LEE'S DIGITAL | | | | | | | TRANSFORMATION FIRST QUARTER FY2022 EARNINGS \| FEBRUARY 2022 | | | | | | | | | | | | | SAFE HARBOR The information provided in this presentation may include forward-looking statements relating to future events or the future financial performance of the Company. Because such statements ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Fiscal Year Ended September 26, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-6227 LEE ENTERPRISES, INCORPORATED (Exact name of Registrant as specified in its Charter) Delaware 42-0823980 (State of incorporation) (I.R.S. Employer Identific ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: For The Quarterly Period Ended June 27, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-6227 LEE ENTERPRISES, INCORPORATED (Exact name of Registrant as ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Quarterly Period Ended March 28, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-6227 LEE ENTERPRISES, INCORPORATED (Exact name of Registrant as specified in its Charter) Delaware 42-0823980 (State or other jurisdiction of incorporation or organization) (I ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Quarterly Period Ended December 27, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-6227 LEE ENTERPRISES, INCORPORATED (Exact name of Registrant as specified in its Charter) Delaware 42-0823980 (State or other jurisdiction of incorporation or organization) ...

Financial Data and Key Metrics Changes - Total operating revenue decreased by 10.8% on a pro forma basis compared to the previous fiscal year, with trends improving from declines of 16.9% and 24.7% in the third and fourth quarters of fiscal year 2020 respectively [9] - Adjusted EBITDA for the first quarter totaled $40 million, reflecting strong cost management [10][22] - Total cash costs were down 10.1% compared to the same quarter last year, with compensation down 5.9% and newsprint costs down 34% [20] Business Line Data and Key Metrics Changes - Digital revenue reached $62.5 million, accounting for 29.5% of total operating revenue, marking a 26% improvement year-over-year [10] - Digital-only subscriptions grew by 69% year-over-year, totaling 286,000 paid subscriptions, contributing to a 1.9% quarter-over-quarter growth in subscription revenue [11] - Advertising revenue trends improved significantly, with a 690 basis point improvement compared to the fourth quarter trends of fiscal 2020 [12][13] Market Data and Key Metrics Changes - Revenue from top local accounts and small-to-medium businesses (SMBs) comprised nearly 50% of total advertising revenue, indicating a strong focus on local market relationships [13] - TownNews revenue increased by 8.5%, with 45% of total revenue being recurring or subscription-based [16] Company Strategy and Development Direction - The company is focused on executing its post-dynamic strategy to drive new revenues, with significant progress in digital transformation and cost management [8][17] - Plans to triple digital-only subscriptions by 2025 and expand into new revenue streams such as video sales, e-commerce, and first-party data [28] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about revenue trends improving and emphasized the importance of local audience and advertising revenue [8] - The company has exceeded its cost synergy target of $100 million nine months ahead of schedule, achieving $103 million in cost synergies by the end of the first quarter [19] Other Important Information - The principal amount of debt at the end of the first quarter was $523.6 million, down $52.4 million since refinancing in March [22] - The company has $30 million in non-core real estate assets available for sale, which will be used to further reduce debt [25] Q&A Session Summary Question: Are there further opportunities for cost synergies in the second quarter? - Management confirmed their commitment to managing cost structures and driving efficiencies while investing in revenue growth, particularly in digital [27] Question: What are the company's expectations for digital revenue growth? - The company aims to triple digital-only subscriptions by 2025 and is focused on new revenue achievements in video sales, e-commerce, and first-party data [28] Question: What is the company's debt reduction target for fiscal year 2021? - Management did not provide specific guidance but indicated that all cash flow and excess cash flow will be used to repay debt [29]

Part I [Item 1. Business Overview](index=3&type=section&id=ITEM%201.%20BUSINESS) The company is a local news provider and digital marketing firm that expanded significantly through acquisitions in 2020 - Acquired BH Media Group and The Buffalo News on March 16, 2020, adding 31 local media operations and **nearly doubling audience size and total operating revenue**[10](index=10&type=chunk) - Primary revenue sources are print and digital advertising/marketing services, subscriptions, and digital services (mainly TownNews)[14](index=14&type=chunk) Revenue Composition (2020 vs. 2019) | Revenue Category | 2020 (% of Total) | 2019 (% of Total) | | :----------------- | :------------------ | :------------------ | | Advertising & Marketing Services | 47% | 52% | | Subscription | 43% | 37% | | Digital Services | 3.3% | 4% | | Other Revenue (excl. Digital Services) | 6.8% | 11.2% | - Strategic initiatives include transforming local news presentation with a heavy emphasis on video and audio, shifting to a robust digital subscription model, and diversifying advertiser services[31](index=31&type=chunk)[32](index=32&type=chunk)[35](index=35&type=chunk)[39](index=39&type=chunk) - Digital-only subscribers **increased 63.1% in 2020, reaching 244,000**, with a target of over 500,000 by 2025[29](index=29&type=chunk)[35](index=35&type=chunk)[38](index=38&type=chunk) - TownNews revenue **grew almost 10.7% in 2020, totaling $25.0 million**, and is positioned for continued growth through product development and market share gains[29](index=29&type=chunk)[41](index=41&type=chunk) Key Digital Audience Metrics (as of Sep 27, 2020) | Metric | Value | | :----------------------- | :-------------------- | | Unique Visitors (monthly) | >43 million | | Page Views (monthly) | 286 million | | Digital-only Subscribers | 244,000 (63.1% increase YoY) | | Print Households Reached (daily) | ~1.2 million | | Print Households Reached (Sunday) | >1.5 million | | Digital E-edition Users | >265,000 | Executive Team (as of Dec 11, 2020) | Name | Age | Current Position | | :---------------- | :-- | :--------------------------------------- | | Kevin D. Mowbray | 58 | President and Chief Executive Officer | | Joseph J. Battistoni | 37 | Vice President - Local Advertising | | Nathan E. Bekke | 51 | Vice President - Consumer Sales and Marketing and OVP | | Ray G. Farris | 64 | Vice President - Advertising and OVP | | Suzanna M. Frank | 50 | Vice President - Audience | | Astrid J. Garcia | 70 | Vice President - Human Resources and Legal | | James A. Green | 54 | Vice President - Digital | | John M. Humenik | 57 | Vice President - News | | Timothy R. Millage | 39 | Vice President - Chief Financial Officer and Treasurer | | Douglas L. Ranes | 70 | Vice President - Production Operations | | Michele Fennelly White | 58 | Vice President - Information Technology and Chief Information Officer | - As of September 27, 2020, the company had approximately **5,613 employees (5,224 full-time equivalent)**, with significant portions represented by bargaining units in key operations[57](index=57&type=chunk)[58](index=58&type=chunk) [Item 1A. Risk Factors](index=11&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces significant risks from declining advertising revenue, digital transformation challenges, and substantial debt - **COVID-19 pandemic caused significant and immediate declines** in demand for products/services and advertising revenue, with long-term impacts uncertain[61](index=61&type=chunk)[65](index=65&type=chunk)[98](index=98&type=chunk)[100](index=100&type=chunk) - Advertising revenues are vulnerable to weakness in the brick-and-mortar retail sector and general economic conditions[66](index=66&type=chunk)[67](index=67&type=chunk) - Failure to successfully respond to the shift from print to digital media could materially adversely affect operating revenue[74](index=74&type=chunk)[75](index=75&type=chunk) - Challenges in integrating the BH Media acquisition include cultural differences, retaining employees, consolidating infrastructure, and unforeseen expenses, potentially hindering the realization of anticipated synergies[79](index=79&type=chunk)[80](index=80&type=chunk) - The company has **substantial debt ($576 million Term Loan at 9% interest)**, requiring a significant portion of cash flow for interest payments and mandatory prepayments[78](index=78&type=chunk)[85](index=85&type=chunk) - Cybersecurity breaches or failures of IT systems could lead to significant remediation costs, lost revenues, reputational harm, and legal claims[90](index=90&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk) - **Pension liabilities, net of plan assets, increased to $71.5 million in 2020** (from $47.0 million in 2019), primarily due to the Buffalo News acquisition[104](index=104&type=chunk) [Item 1B. Unresolved Staff Comments](index=17&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) There are no unresolved staff comments - No unresolved staff comments[111](index=111&type=chunk) [Item 2. Properties](index=17&type=section&id=ITEM%202.%20PROPERTIES) The company owns most printing facilities but leases its executive offices, with over half of its newspapers printed externally - Executive offices are leased in Davenport, Iowa, with the lease expiring August 1, 2029[113](index=113&type=chunk) - Most principal printing facilities are owned, with some leased land and acquired properties from BH Media[114](index=114&type=chunk) - **Over 58% of daily newspapers** and other publications are printed at other company locations or outsourced to enhance operating efficiency and manage costs[115](index=115&type=chunk) [Item 3. Legal Proceedings](index=17&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The company is involved in routine legal actions that are not expected to materially impact its financial statements - Involved in various legal actions arising in the normal course of business[118](index=118&type=chunk) - Insurance coverage mitigates potential loss for certain matters[118](index=118&type=chunk) - Management believes the disposition of these matters will not have a material adverse effect on consolidated financial statements[118](index=118&type=chunk) [Item 4. Mine Safety Disclosures](index=17&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company - Not applicable[120](index=120&type=chunk) Part II [Item 5. Market for Common Equity and Stockholder Matters](index=17&type=section&id=ITEM%205.%20MARKET%20FOR%20THE%20REGISTRANT'S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's stock is listed on the NYSE, with performance lagging peers and dividends restricted by debt agreements - Common Stock is listed on the New York Stock Exchange (NYSE)[121](index=121&type=chunk) - The Credit Agreement restricts the payment of dividends on Common Stock[124](index=124&type=chunk) Common Stock Price (2018-2020 Quarterly High/Low/Closing) | Quarter Ended | High (2020) | Low (2020) | Closing (2020) | High (2019) | Low (2019) | Closing (2019) | High (2018) | Low (2018) | Closing (2018) | | :-------------- | :---------- | :--------- | :------------- | :---------- | :--------- | :------------- | :---------- | :--------- | :------------- | | December | $2.12 | $1.20 | $1.39 | $3.05 | $1.84 | $2.13 | $2.50 | $2.15 | $2.35 | | March | $3.09 | $0.85 | $1.13 | $3.68 | $2.02 | $3.30 | $2.70 | $1.95 | $1.95 | | June | $1.44 | $0.71 | $0.97 | $3.49 | $2.12 | $2.24 | $3.30 | $2.00 | $2.85 | | September | $1.06 | $0.76 | $0.82 | $2.33 | $1.77 | $2.01 | $3.30 | $2.60 | $2.65 | Cumulative Total Return ($100 Invested on Sep 27, 2015) | Entity | 2016 | 2017 | 2018 | 2019 | 2020 | | :-------------------------- | :----- | :----- | :----- | :----- | :----- | | Lee Enterprises, Incorporated | 180.29 | 105.77 | 127.40 | 98.08 | 40.33 | | Peer Group Index | 115.89 | 155.02 | 182.29 | 193.37 | 249.98 | | S&P 500 Stock Index | 115.43 | 136.91 | 161.43 | 168.30 | 193.80 | [Item 6. Selected Financial Data](index=19&type=section&id=ITEM%206.%20SELECTED%20FINANCIAL%20DATA) Financial data shows increased 2020 revenue from acquisitions but a net loss and higher debt levels Selected Financial Data (2016-2020) | Metric (Thousands of Dollars) | 2020 | 2019 | 2018 | 2017 | 2016 | | :------------------------------ | :----- | :----- | :----- | :----- | :----- | | Operating revenue | 618,004 | 509,854 | 543,955 | 566,943 | 614,364 | | Net income (loss) | (1,261) | 15,909 | 47,048 | 28,605 | 36,019 | | Income attributable to Lee Enterprises, Inc. | (3,106) | 14,268 | 45,766 | 27,481 | 34,961 | | Basic EPS | (0.05) | 0.26 | 0.84 | 0.51 | 0.66 | | Diluted EPS | (0.05) | 0.25 | 0.82 | 0.50 | 0.64 | | Adjusted EBITDA | 97,171 | 121,488 | 131,929 | 141,191 | 153,787 | | Total assets | 864,057 | 555,202 | 575,411 | 620,850 | 662,855 | | Debt, including current maturities | 538,290 | 443,627 | 484,859 | 548,385 | 617,167 | | Stockholders' deficit | (31,564) | (38,484) | (37,354) | (92,235) | (128,485) | [Item 7. Management's Discussion and Analysis](index=19&type=section&id=ITEM%207.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section analyzes financial results, highlighting impacts from acquisitions and COVID-19, and discusses liquidity and critical accounting policies [Non-GAAP Financial Measures](index=19&type=section&id=NON-GAAP%20FINANCIAL%20MEASURES) The company uses non-GAAP measures like Adjusted EBITDA to clarify operating performance by excluding non-recurring items - Uses non-GAAP measures (Adjusted EBITDA, Cash Costs, Margin) to supplement GAAP financial information[136](index=136&type=chunk)[137](index=137&type=chunk) - **Adjusted EBITDA** isolates unusual, infrequent, or non-cash transactions to facilitate comparison of operating performance[138](index=138&type=chunk) - **Cash Costs** represent accrual-based operating expenses settled in cash, excluding depreciation, amortization, asset losses/gains, and restructuring costs[139](index=139&type=chunk) Reconciliation of Adjusted EBITDA to Net Income (Thousands of Dollars) | Metric | 2020 | 2019 | 2018 | | :------------------------------------------ | :----- | :----- | :----- | | Net Income | (1,261) | 15,909 | 47,048 | | Income tax expense (benefit) | 4,104 | 7,931 | (16,228) | | Non-operating expenses, net | 47,435 | 50,889 | 54,873 | | Equity in earnings of TNI and MNI | (3,403) | (7,121) | (9,249) | | Assets (gain) loss on sales, impairments and other | (5,403) | 2,464 | 6,429 | | Depreciation and amortization | 36,133 | 29,332 | 31,766 | | Restructuring costs and other | 13,751 | 11,635 | 5,550 | | Stock compensation | 1,051 | 1,638 | 1,857 | | Ownership share of TNI and MNI EBITDA (50%) | 4,764 | 8,811 | 9,883 | | **Adjusted EBITDA** | **97,171** | **121,488** | **131,929** | [Critical Accounting Policies](index=21&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES) Critical policies involve significant estimates for intangible assets, pension plans, income taxes, and business combinations - Local mastheads are not amortized but are tested for impairment annually using a discounted cash flow model[145](index=145&type=chunk)[146](index=146&type=chunk) - Amortizable intangible assets (customer and advertiser relationships) are amortized over their useful lives and tested for recoverability[147](index=147&type=chunk) - Pension and postretirement plan obligations and expenses are based on actuarial assumptions, including discount rates and expected return on assets[152](index=152&type=chunk)[153](index=153&type=chunk) Sensitivity to 50 Basis Point Change in Actuarial Assumptions (2020) | Assumption Change | Effect on 2020 Pension Expense | Effect on Sep 27, 2020 Liability | | :------------------------------------------ | :----------------------------- | :-------------------------------- | | Pension discount rate | $0 | $24,734,000 | | Postretirement/postemployment discount rate | $0 | $3,800,000 | | Pension expected rate of return on assets | $1,142,000 | $0 | | Postretirement/postemployment expected rate of return on assets | $126,000 | $0 | - Income tax provisions, deferred tax assets/liabilities, and valuation allowances require significant management judgment[157](index=157&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk) - Business combinations require significant estimates for fair value allocation of acquired assets and assumed liabilities[162](index=162&type=chunk) [Impact of Recently Issued Accounting Standards](index=22&type=section&id=IMPACT%20OF%20RECENTLY%20ISSUED%20ACCOUNTING%20STANDARDS) The company is adopting new standards for expected credit losses and defined benefit pension plan disclosures - New standard on expected credit losses to be adopted September 28, 2020, using a modified retrospective approach[163](index=163&type=chunk) - New standard amending disclosure requirements for defined benefit pension plans to be adopted September 28, 2020[351](index=351&type=chunk)[352](index=352&type=chunk) [Certain Matters Affecting Current and Future Operating Results](index=22&type=section&id=CERTAIN%20MATTERS%20AFFECTING%20CURRENT%20AND%20FUTURE%20OPERATING%20RESULTS) The 2020 acquisition and COVID-19 pandemic significantly impacted results, prompting $100 million in cost reductions - Completed the acquisition of BH Media and Buffalo News for **$140 million** in March 2020, funded by a **$576 million Term Loan at 9%**[169](index=169&type=chunk) - Disposed of smaller properties (four daily newspapers) for $3.95 million in the 13 weeks ended March 2020[169](index=169&type=chunk) - COVID-19 pandemic caused significant and immediate declines in demand and advertising revenue[165](index=165&type=chunk)[166](index=166&type=chunk) - Expected to achieve **$100 million in cost reductions** from December 2019 through September 2021 by centralizing business functions[167](index=167&type=chunk) [Continuing Operations](index=23&type=section&id=CONTINUING%20OPERATIONS) Acquisitions drove a 21.2% revenue increase in 2020, but operating income declined 32.7% due to higher costs Operating Results (Thousands of Dollars) | Metric | 2020 | 2019 | % Change (2020 vs 2019) | 2018 | % Change (2019 vs 2018) | | :------------------------------------ | :----- | :----- | :---------------------- | :----- | :---------------------- | | Advertising and marketing services revenue | 289,655 | 265,933 | 8.9% | 303,446 | (12.4%) | | Subscription revenue | 265,939 | 186,691 | 42.4% | 195,108 | (4.3%) | | Other revenue | 62,410 | 57,230 | 9.1% | 45,401 | 26.1% | | **Total operating revenue** | **618,004** | **509,854** | **21.2%** | **543,955** | **(6.3%)** | | Compensation | 243,023 | 182,869 | 32.9% | 199,164 | (8.2%) | | Newsprint and ink | 24,243 | 22,237 | 9.0% | 24,949 | (10.9%) | | Other operating expenses | 259,382 | 193,709 | 33.9% | 199,653 | (3.0%) | | **Cash costs** | **526,648** | **398,815** | **32.1%** | **423,766** | **(5.9%)** | | Total operating revenue less cash costs | 91,356 | 111,039 | (17.7%) | 120,189 | (7.6%) | | Depreciation and amortization | 36,133 | 29,332 | 23.2% | 31,766 | (7.7%) | | Assets (gain) loss on sales, impairments and other | (5,403) | 2,464 | NM | 6,429 | (61.7%) | | Restructuring costs and other | 13,751 | 11,635 | 18.2% | 5,550 | NM | | **Operating expenses** | **571,129** | **442,246** | **29.1%** | **467,511** | **(5.4%)** | | Equity in earnings of associated companies | 3,403 | 7,121 | (52.2%) | 9,249 | (23.0%) | | **Operating income** | **50,278** | **74,729** | **(32.7%)** | **85,693** | **(12.8%)** | | Net (loss) income | (1,261) | 15,909 | NM | 47,048 | (66.2%) | | (Loss) income attributable to Lee Enterprises, Inc. | (3,106) | 14,268 | NM | 45,766 | (68.8%) | | Basic EPS | (0.05) | 0.26 | NM | 0.84 | (69.3%) | | Diluted EPS | (0.05) | 0.25 | NM | 0.82 | (69.5%) | [Operating Revenue](index=24&type=section&id=OPERATING%20REVENUE) Total operating revenue increased 21.2% in 2020, driven by acquisitions and strong growth in digital-only subscriptions Operating Revenue Comparison (Thousands of Dollars) | Revenue Category | 2020 | 2019 | % Change (2020 vs 2019) | | :-------------------------------- | :----- | :----- | :---------------------- | | Total operating revenue | 618,004 | 509,854 | 21.2% | | Advertising and marketing services | 289,655 | 265,933 | 8.9% | | Subscription | 265,939 | 186,691 | 42.4% | | Other | 62,410 | 57,230 | 9.1% | - Total operating revenue **increased by $108.2 million (21.2%)** in 2020, primarily due to $203.0 million from acquired revenue[172](index=172&type=chunk) - Advertising and marketing services revenue increased 8.9% in 2020, including $82.2 million from acquisitions, with digital advertising partially offsetting print declines[173](index=173&type=chunk) - Subscription revenue **increased 42.4%** in 2020, driven by $104.5 million from acquisitions and a **63.1% increase in digital-only subscribers** to 244,000[174](index=174&type=chunk) - TownNews stand-alone revenue grew 10.7% to $25.0 million in 2020, contributing to a 9.1% increase in other revenue[175](index=175&type=chunk)[176](index=176&type=chunk) - **Total digital revenue reached $164.3 million** in 2020, up 13.6% YoY, representing 26.6% of total operating revenue[177](index=177&type=chunk) - In 2019, total operating revenue decreased 6.3% due to print advertising softness, partially offset by digital revenue growth[179](index=179&type=chunk) - 2019 advertising and marketing services revenue declined 12.4%, with digital advertising comprising 37.6% of the total[180](index=180&type=chunk) - 2019 subscription revenue decreased 4.3%, offset by a **79.1% increase in digital-only subscribers** to 91,000[181](index=181&type=chunk)[182](index=182&type=chunk) [Operating Expenses](index=25&type=section&id=OPERATING%20EXPENSES) Operating expenses rose 29.1% in 2020, driven by acquisitions, with compensation being the largest component Operating Expenses Comparison (Thousands of Dollars) | Expense Category | 2020 | 2019 | % Change (2020 vs 2019) | | :----------------------- | :----- | :----- | :---------------------- | | Total operating expenses | 571,128 | 442,246 | 29.1% | | Cash costs | 526,647 | 398,815 | 32.1% | | Compensation | 243,023 | 182,869 | 32.9% | | Newsprint and ink | 24,243 | 22,237 | 9.0% | | Other operating expenses | 259,382 | 193,709 | 33.9% | | Restructuring costs and other | 13,751 | 11,635 | 18.2% | | Depreciation and amortization | 36,133 | 29,332 | 23.2% | - Total operating expenses **increased 29.1%** in 2020, including $193.8 million from acquisitions[187](index=187&type=chunk) - Compensation expense increased 32.9% in 2020, with $86.1 million from acquisitions, partially offset by business transformation and **$10 million in temporary COVID-19 related reductions**[188](index=188&type=chunk) - Newsprint and ink costs increased 9% in 2020 due to $10.6 million from acquisitions, offset by volume declines and outsourcing[189](index=189&type=chunk) - Other operating expenses increased 33.9% in 2020, including $79.9 million from acquisitions and digital investments[190](index=190&type=chunk) - Restructuring costs and other totaled $13.8 million in 2020, including **$4.4 million for multiemployer pension plan withdrawals** and severance[191](index=191&type=chunk) - Operating expenses decreased 5.4% in 2019 due to business transformation, outsourcing, and reductions in legacy print expenses[194](index=194&type=chunk) - 2019 compensation expense decreased 8.2% due to a **10.9% reduction in FTEs**[195](index=195&type=chunk) [Non-Operating Income and Expenses](index=26&type=section&id=NON-OPERATING%20INCOME%20AND%20EXPENSES) Net non-operating expenses decreased 6.8% in 2020, as gains on investments offset higher debt financing costs Non-Operating Income (Expense) (Thousands of Dollars) | Metric | 2020 | 2019 | % Change (2020 vs 2019) | | :-------------------------------- | :----- | :----- | :---------------------- | | Interest expense | (47,743) | (47,488) | 0.5% | | Debt financing and administrative cost | (11,966) | (7,214) | 65.9% | | Other, net | 12,274 | 3,813 | NM | | **Non-operating expenses, net** | **(47,435)** | **(50,889)** | **(6.8%)** | - Interest expense increased 0.5% to $47.7 million in 2020 due to additional debt, with a weighted average cost of debt of 9.0%[202](index=202&type=chunk) - Debt financing and administrative costs **increased 65.9% to $12.0 million** in 2020, mainly due to accelerated amortization of refinancing costs[202](index=202&type=chunk) - Other, net income included a **$7.6 million realized gain** on a private equity investment and $0.8 million from warrant fair value adjustments in 2020[204](index=204&type=chunk) - In 2019, interest expense decreased 10.1% due to lower debt balances[206](index=206&type=chunk)[207](index=207&type=chunk) [Income Tax Expenses](index=27&type=section&id=INCOME%20TAX%20EXPENSES) The company recorded a $4.1 million income tax expense in 2020, resulting in a 144.3% effective tax rate Income Tax Expense (Benefit) (Thousands of Dollars) | Metric | 2020 | 2019 | 2018 | | :-------------------------- | :----- | :----- | :----- | | Income tax expense (benefit) | 4,104 | 7,931 | (16,228) | - Recorded income tax expense of **$4.1 million in 2020 (144.3% of pretax income)** and $7.9 million in 2019 (33.3% of pretax income)[211](index=211&type=chunk) - Recorded an income tax benefit of $16.2 million in 2018, significantly impacted by a **$24.9 million discrete adjustment from the 2017 Tax Act**[210](index=210&type=chunk)[211](index=211&type=chunk) [Net Income and Earnings Per Share](index=27&type=section&id=NET%20INCOME%20AND%20EARNINGS%20PER%20SHARE) The company reported a net loss of $1.3 million in 2020, a significant decline from a $15.9 million net income in 2019 Net Income and EPS (Thousands of Dollars, Except Per Share Data) | Metric | 2020 | 2019 | 2018 | | :------------------------------------------ | :----- | :----- | :----- | | Net (loss) income | (1,261) | 15,909 | 47,048 | | Diluted earnings per common share | (0.05) | 0.25 | 0.82 | - **Net loss of $1.3 million in 2020**, down from net income of $15.9 million in 2019, mainly due to reduced operating income[212](index=212&type=chunk) - **Diluted loss per share was $0.05 in 2020**, compared to diluted earnings per share of $0.25 in 2019 and $0.82 in 2018[212](index=212&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Liquidity totaled $33.7 million at year-end, with operating cash flow decreasing and financing activities providing cash from refinancing Cash Flow Summary (Thousands of Dollars) | Cash Flow Category | 2020 | 2019 | 2018 | | :-------------------------------- | :----- | :----- | :----- | | Net cash provided by operating activities | 49,869 | 57,676 | 59,296 | | Net cash required for investing activities | (118,176) | (10,933) | (72) | | Net cash provided (required) for financing activities | 93,395 | (43,478) | (64,465) | | Net increase (decrease) in cash and cash equivalents | 25,088 | 3,265 | (5,241) | | Cash and cash equivalents, end of year | 33,733 | 8,645 | 5,380 | - Cash provided by operating activities **decreased to $49.9 million in 2020** due to a net loss[215](index=215&type=chunk) - Investing activities required $118.2 million in 2020, including **$131.0 million for acquisitions**[219](index=219&type=chunk) - Financing activities provided $93.4 million in 2020, primarily from the 2020 Refinancing[222](index=222&type=chunk) - **Liquidity (cash on balance sheet) totaled $33.7 million** at September 27, 2020[226](index=226&type=chunk) - The 2020 Refinancing extended debt maturity to 2045, with **outstanding debt of $538.3 million** at September 27, 2020[227](index=227&type=chunk)[228](index=228&type=chunk) - The company is in compliance with debt covenants as of September 27, 2020, with no leverage or financial performance covenants[30](index=30&type=chunk)[411](index=411&type=chunk) [Seasonality](index=28&type=section&id=SEASONALITY) Retail advertising revenue is seasonal, typically peaking in the December and June quarters - Retail advertising revenue is seasonal, typically highest in the December and June quarters and lowest in the March quarter[232](index=232&type=chunk) [Inflation](index=28&type=section&id=INFLATION) The company mitigates inflation through price increases, productivity improvements, and other cost reductions - Mitigates inflation impact through price increases, productivity improvements, sourcing efficiencies, and cost reductions[233](index=233&type=chunk) [Contractual Obligations](index=29&type=section&id=CONTRACTUAL%20OBLIGATIONS) Total contractual obligations are $1.84 billion, dominated by long-term debt principal and interest payments Contractual Obligations (Thousands of Dollars) as of Sep 27, 2020 | Nature of Obligation | Total | Less Than 1 Year | 1-3 Years | 3-5 Years | More Than 5 Years | | :----------------------- | :------ | :--------------- | :-------- | :-------- | :---------------- | | Debt (Principal Amount) | 538,290 | 13,733 | — | — | 524,557 | | Interest expense | 1,204,013 | 47,365 | 141,630 | 141,630 | 873,387 | | Operating lease obligations | 99,444 | 14,436 | 23,316 | 20,302 | 41,390 | | Capital expenditure commitments | 2,050 | 2,050 | — | — | — | | **Total** | **1,843,797** | **77,584** | **164,946** | **161,932** | **1,439,334** | - Debt principal payments are limited to mandatory payments from asset sales and excess cash flow[224](index=224&type=chunk)[234](index=234&type=chunk) - Excludes future cash requirements for pension, postretirement, and other obligations due to indeterminable timing and amounts[237](index=237&type=chunk)[238](index=238&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is exposed to market risks from commodity prices, while fixed-rate debt mitigates interest rate risk - Exposed to market risk from changes in interest rates and commodity prices[239](index=239&type=chunk) - Debt structure is **entirely fixed rate** as of September 27, 2020, with a fair value approximately equal to carrying value[240](index=240&type=chunk)[244](index=244&type=chunk) - Newsprint prices are volatile due to declining structural demand, COVID-19 impact, and production capacity changes[241](index=241&type=chunk) - A **$10 per tonne newsprint price increase** would result in an annualized reduction in income before taxes of approximately **$518,000**[243](index=243&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=30&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This item refers to the Consolidated Financial Statements and supplementary data included elsewhere in the report - Information is included under the caption 'Consolidated Financial Statements' within the report[247](index=247&type=chunk) [Item 9. Changes in and Disagreements with Accountants](index=30&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) This information is incorporated by reference from the company's upcoming Proxy Statement - Information is incorporated by reference from the Proxy Statement to be filed in January 2021[248](index=248&type=chunk) [Item 9A. Controls and Procedures](index=30&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and internal control over financial reporting were effective as of year-end - Disclosure controls and procedures were effective as of September 27, 2020[250](index=250&type=chunk) - Management concluded that internal control over financial reporting was effective as of September 27, 2020[252](index=252&type=chunk) - **Excluded BH Media Group and The Buffalo News' internal controls** from the assessment, representing 38.4% of total assets and 32.5% of total revenues[253](index=253&type=chunk)[258](index=258&type=chunk) - No other material changes in internal control over financial reporting occurred during the 52 weeks ended September 27, 2020[255](index=255&type=chunk) [Item 9B. Other Information](index=32&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) There is no other information to report under this item - None[265](index=265&type=chunk) Part III [Item 10. Directors, Executive Officers and Corporate Governance](index=32&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) This information is incorporated by reference from the company's upcoming Proxy Statement - Information is incorporated by reference from the Proxy Statement to be filed in January 2021[266](index=266&type=chunk) - The company has a Code of Business Conduct and Ethics applicable to all employees, monitored by the Audit Committee[267](index=267&type=chunk) [Item 11. Executive Compensation](index=32&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) This information is incorporated by reference from the company's upcoming Proxy Statement - Information is incorporated by reference from the Proxy Statement to be filed in January 2021, excluding the 'Executive Compensation - Executive Compensation Committee Report' subsection[269](index=269&type=chunk) [Item 12. Security Ownership and Related Stockholder Matters](index=32&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) This information is incorporated by reference from the company's upcoming Proxy Statement - Information is incorporated by reference from the Proxy Statement to be filed in January 2021[270](index=270&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=32&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) This information is incorporated by reference from the company's upcoming Proxy Statement - Information is incorporated by reference from the Proxy Statement to be filed in January 2021[271](index=271&type=chunk) [Item 14. Principal Accounting Fees and Services](index=32&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTING%20FEES%20AND%20SERVICES) This information is incorporated by reference from the company's upcoming Proxy Statement - Information is incorporated by reference from the Proxy Statement to be filed in January 2021[273](index=273&type=chunk) Part IV [Item 15. Exhibits and Financial Statement Schedules](index=32&type=section&id=ITEM%2015.%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists the financial statements, schedules, and exhibits filed as part of the Annual Report - Lists financial statements, financial statement schedules, and exhibits[275](index=275&type=chunk) - All schedules are omitted as not required, not applicable, or information is in the Notes to Consolidated Financial Statements[277](index=277&type=chunk) [Consolidated Financial Statements](index=33&type=section&id=CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section presents the company's audited consolidated financial statements and accompanying notes for the past three fiscal years - Includes Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for 2020, 2019, and 2018[276](index=276&type=chunk)[280](index=280&type=chunk) - Includes Consolidated Balance Sheets as of September 27, 2020, and September 29, 2019[276](index=276&type=chunk)[282](index=282&type=chunk) - Includes Consolidated Statements of Stockholders' Equity (Deficit) for 2020, 2019, and 2018[276](index=276&type=chunk)[286](index=286&type=chunk) - Includes Consolidated Statements of Cash Flows for 2020, 2019, and 2018[276](index=276&type=chunk)[287](index=287&type=chunk) - Includes Notes to Consolidated Financial Statements and the Report of Independent Registered Public Accounting Firm[276](index=276&type=chunk)[279](index=279&type=chunk) [1. Significant Accounting Policies](index=36&type=section&id=1.%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section details key accounting policies, including revenue recognition, intangible assets, pension plans, and lease accounting - Consolidated financial statements include wholly-owned subsidiaries and majority-owned TownNews, with equity method used for 50% interests[292](index=292&type=chunk) - Adopted ASC 606 Revenue from Contracts with Customers in 2019 using the modified retrospective method[295](index=295&type=chunk) - Revenue is recognized when performance obligations are satisfied, such as at the time of advertisement delivery or over the subscription period[319](index=319&type=chunk)[320](index=320&type=chunk)[322](index=322&type=chunk)[323](index=323&type=chunk)[325](index=325&type=chunk) - Goodwill and mastheads are tested for impairment annually; other intangibles are amortized over 10-33 years[306](index=306&type=chunk)[307](index=307&type=chunk)[309](index=309&type=chunk)[311](index=311&type=chunk) - Pension and postretirement benefit plans are accounted for based on actuarial computations with critical assumptions[331](index=331&type=chunk)[332](index=332&type=chunk) - Adopted ASC 842, Leases, effective September 30, 2019, recognizing **operating lease right-of-use assets of $10.7 million**[347](index=347&type=chunk)[350](index=350&type=chunk) [2. Acquisitions](index=47&type=section&id=2%20ACQUISITIONS) The company acquired BH Media Group and The Buffalo News for $140 million in March 2020, funded by a new Term Loan - Acquired BH Media Group's newspaper business and The Buffalo News on March 16, 2020, for **$140 million**[353](index=353&type=chunk) - Acquisition was funded by a 25-year, **$576 million Term Loan from BH Finance LLC at a 9% annual rate**[354](index=354&type=chunk) - Preliminary purchase price allocation included **$78.1 million in goodwill**, $28.0 million in advertiser relationships, and $28.2 million in subscriber relationships[359](index=359&type=chunk) - For the 52 weeks ended September 27, 2020, acquired businesses contributed **$200.8 million in revenue and $13.2 million in net income**[361](index=361&type=chunk) Pro Forma Results of Operations (Thousands of Dollars, Except Per Share Data) | Metric | Sep 27, 2020 (Unaudited) | Sep 29, 2019 (Unaudited) | | :-------------------------------- | :----------------------- | :----------------------- | | Total revenues | 821,793 | 973,143 | | Income attributable to Lee Enterprises, Inc. | 17,632 | 20,715 | | Earnings per share - diluted | 0.31 | 0.36 | [3. Revenue](index=49&type=section&id=3%20REVENUE) Total operating revenue was $618.0 million in 2020, with advertising and subscriptions as the primary sources Revenue Disaggregated by Source (Thousands of Dollars) | Revenue Source | 2020 | 2019 | 2018 | | :------------------------------ | :----- | :----- | :----- | | Advertising and marketing services revenue | 289,655 | 265,933 | 303,446 | | Subscription Revenue | 265,939 | 186,691 | 195,108 | | TownNews and other digital services revenue | 20,478 | 19,637 | 16,328 | | Other revenue | 41,932 | 37,593 | 29,073 | | **Total operating revenue** | **618,004** | **509,854** | **543,955** | - Revenue is recognized when performance obligations are satisfied by transferring control of goods or services[367](index=367&type=chunk) - Unearned revenue (contract liability) from subscriptions was **$60.3 million** as of September 27, 2020[369](index=369&type=chunk) - Contract asset balances related to the Management Agreement were collected on March 16, 2020[370](index=370&type=chunk) [4. Investments in Associated Companies](index=51&type=section&id=4%20INVESTMENTS%20IN%20ASSOCIATED%20COMPANIES) The company holds 50% ownership in two newspaper partnerships, accounted for using the equity method - Holds 50% interest in TNI Partners (Tucson, AZ) and Madison Newspapers, Inc. (MNI, Madison, WI)[292](index=292&type=chunk)[299](index=299&type=chunk)[373](index=373&type=chunk)[376](index=376&type=chunk) TNI Partners Summarized Results (Thousands of Dollars) | Metric | 2020 | 2019 | 2018 | | :-------------------------- | :----- | :----- | :----- | | Operating revenue | 37,101 | 43,532 | 47,165 | | Net income | 7,428 | 9,308 | 10,075 | | Company's 50% share | 3,714 | 4,654 | 5,038 | | Equity in earnings of TNI | 3,505 | 4,236 | 4,620 | MNI Summarized Results (Thousands of Dollars) | Metric | 2020 | 2019 | 2018 | | :-------------------------- | :----- | :----- | :----- | | Operating revenue | 48,056 | 56,790 | 59,670 | | Net income | (204) | 5,770 | 9,257 | | Equity in earnings of MNI | (102) | 2,885 | 4,629 | - TNI makes weekly distributions; the company received $3.2 million in 2020[374](index=374&type=chunk) - MNI makes quarterly distributions; the company received $1.3 million in 2020[378](index=378&type=chunk) [5. Goodwill and Other Intangible Assets](index=53&type=section&id=5%20GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS) Goodwill increased to $328.4 million in 2020 due to acquisitions, with total intangible assets at $182.7 million Goodwill Carrying Amount (Thousands of Dollars) | Metric | 2020 | 2019 | | :-------------------------------- | :----- | :----- | | Goodwill, beginning of year | 250,309 | 246,176 | | Goodwill acquired in business combinations | 78,136 | 4,133 | | **Goodwill, end of year** | **328,445** | **250,309** | Identified Intangible Assets (Thousands of Dollars) | Asset Type | Sep 27, 2020 | Sep 29, 2019 | | :-------------------------------- | :----------- | :----------- | | Non-amortized intangible assets: Mastheads | 40,459 | 21,883 | | Amortizable intangible assets, net | 142,147 | 85,359 | | Non-compete and consulting agreements, net | 74 | 151 | | **Total** | **182,680** | **107,393** | - Recorded **$0.97 million in pretax impairment charges** for non-amortized intangible assets in 2020[382](index=382&type=chunk)[384](index=384&type=chunk) - Annual amortization of intangible assets is estimated at **$22.6 million for 2021**[385](index=385&type=chunk) [6. Debt](index=55&type=section&id=6%20DEBT) The company completed a comprehensive refinancing in 2020, securing a $576 million Term Loan maturing in 25 years - Completed a comprehensive debt refinancing in March 2020, securing a 25-year, **$576 million Term Loan from BH Finance at a 9% annual rate**[387](index=387&type=chunk) - Proceeds from the Term Loan were used to refinance $431.5 million in existing debt and fund the $140 million BH Media acquisition[387](index=387&type=chunk) Debt Summary (Thousands of Dollars) | Debt Type | Sep 27, 2020 | Sep 29, 2019 | Interest Rate (2020) | | :---------------------- | :----------- | :----------- | :------------------- | | Term Loan | 538,290 | — | 9.00% | | Notes | — | 363,420 | — | | 2nd Lien Term Loan | — | 80,207 | — | | **Total Debt** | **538,290** | **443,627** | | | Less current maturities | 13,733 | 2,954 | | | **Total long-term debt** | **524,557** | **429,391** | | - Weighted average cost of debt at September 27, 2020, is 9.0%[389](index=389&type=chunk) - Mandatory prepayments are required from 100% of net cash proceeds from asset sales and 100% of excess cash flow[402](index=402&type=chunk) - The Credit Agreement restricts dividend payments on Common Stock and limits additional indebtedness, investments, and asset sales[398](index=398&type=chunk) - The company is in compliance with its debt covenants as of September 27, 2020[411](index=411&type=chunk) [7. Pension Plans](index=59&type=section&id=7%20PENSION%20PLANS) Pension plan obligations increased significantly due to an acquisition, resulting in a funded status deficit of $70.0 million - Acquisition of Buffalo News added four pension plans, significantly increasing the benefit obligation in 2020[413](index=413&type=chunk) Net Periodic Pension Cost (Benefit) (Thousands of Dollars) | Component | 2020 | 2019 | 2018 | | :-------------------------------- | :----- | :----- | :----- | | Service cost | 1,361 | 36 | 48 | | Interest cost | 7,577 | 6,563 | 5,754 | | Expected return on plan assets | (12,986) | (8,073) | (7,933) | | Amortization of net loss | 3,166 | 1,135 | 2,025 | | Amortization of prior service benefit | (6) | (100) | (136) | | **Net periodic pension cost (benefit)** | **(888)** | **(439)** | **(242)** | Pension Plan Funded Status (Thousands of Dollars) | Metric | 2020 | 2019 | | :-------------------------------- | :----- | :----- | | Benefit obligation, end of year | 401,381 | 192,369 | | Fair value of plan assets, end of year | 331,354 | 146,999 | | **Funded status** | **(70,027)** | **(45,370)** | - Weighted-average discount rate for benefit obligations was **2.8% in 2020**[417](index=417&type=chunk) - Expected long-term return on plan assets was **6.0% in 2020**[417](index=417&type=chunk) Pension Plan Asset Allocation (2020 vs. 2019) | Asset Class | Policy Allocation (2020) | Actual Allocation (2020) | Actual Allocation (2019) | | :---------------------- | :----------------------- | :----------------------- | :----------------------- | | Equity securities | 50% | 48% | 49% | | Debt securities | 35% | 33% | 34% | | TIPS | 5% | 5% | 5% | | Hedge fund investments | 10% | 10% | 10% | | Cash and cash equivalents | — | 4% | 2% | - Expected pension contributions for 2021 are **$3.19 million**[424](index=424&type=chunk) [8. Postretirement and Postemployment Benefits](index=64&type=section&id=8%20POSTRETIREMENT%20AND%20POSTEMPLOYMENT%20BENEFITS) Postretirement benefit obligations increased due to an acquisition, with a subsequent plan change creating a large curtailment gain Net Periodic Postretirement Benefit Cost (Benefit) (Thousands of Dollars) | Component | 2020 | 2019 | 2018 | | :-------------------------------- | :----- | :----- | :----- | | Service cost | 500 | — | — | | Interest cost | 869 | 412 | 365 | | Expected return on plan assets | (1,060) | (1,082) | (1,080) | | Amortization of net actuarial gain | (743) | (976) | (984) | | Amortization of prior service benefit | (647) | (723) | (785) | | Curtailment gains | — | — | (2,031) | | **Net periodic postretirement benefit** | **(1,081)** | **(2,369)** | **(4,515)** | Postretirement Plan Funded Status (Thousands of Dollars) | Metric | 2020 | 2019 | | :-------------------------------- | :----- | :----- | | Benefit obligation, end of year | 47,637 | 11,752 | | Fair value of plan assets at measurement date | 25,706 | 24,135 | | **Funded status** | **(21,931)** | **12,383** | - Weighted-average discount rate for postretirement benefit obligations was **2.7% in 2020**[430](index=430&type=chunk) - Expected long-term return on plan assets was **4.5% in 2020**[430](index=430&type=chunk) Postretirement Plan Asset Allocation (2020 vs. 2019) | Asset Class | Policy Allocation (2020) | Actual Allocation (2020) | Actual Allocation (2019) | | :---------------------- | :----------------------- | :----------------------- | :----------------------- | | Equity securities | 20% | 20% | 18% | | Debt securities | 70% | 70% | 68% | | Hedge fund investment | 10% | 10% | 14% | | Cash and cash equivalents | — | — | — | - Postemployment benefit obligation was **$2.37 million** at September 27, 2020[444](index=444&type=chunk) - Subsequent to year-end, the elimination of retiree medical benefits resulted in **non-cash curtailment gains of $23.8 million**[445](index=445&type=chunk) [9. Other Retirement Plans](index=69&type=section&id=9%20OTHER%20RETIREMENT%20PLANS) The company offers defined contribution plans and contributes to multiemployer pension plans, facing withdrawal liabilities - Offers a qualified defined contribution retirement plan and a non-qualified plan for employees[446](index=446&type=chunk) - Total retirement and compensation plan costs were **$4.1 million in 2020**[446](index=446&type=chunk) - Contributes to five multiemployer defined benefit pension plans under collective-bargaining agreements[447](index=447&type=chunk) - Recorded **$11.5 million in withdrawal liabilities** for effectuated withdrawals from multiemployer plans as of September 27, 2020[450](index=450&type=chunk) - Subsequent to year-end, an estimated withdrawal liability of **$12.3 million** will be recorded for the Buffalo subsidiary's multiemployer plan[452](index=452&type=chunk) [10. Common Stock and Class B Common Stock](index=71&type=section&id=10%20COMMON%20STOCK%20AND%20CLASS%20B%20COMMON%20STOCK) The company has one class of common stock and outstanding warrants to purchase 6 million shares - Common Stock par value changed from $2.00 to $0.01 per share effective January 30, 2012[453](index=453&type=chunk) - **6 million warrants outstanding** to purchase Common Stock at an exercise price of $4.19 per share, representing ~10.1% of fully diluted shares[454](index=454&type=chunk) - Warrants are measured at fair value, which was **$0.36 million** at September 27, 2020[455](index=455&type=chunk)[473](index=473&type=chunk) - Class B Common Stock was converted to Common Stock in March 2011, resulting in one vote per share for all stockholders[457](index=457&type=chunk) [11. Stock Ownership Plans](index=71&type=section&id=11%20STOCK%20OWNERSHIP%20PLANS) Total non-cash stock compensation expense was $1.04 million in 2020, with shares available under incentive plans - Total non-cash stock compensation expense was **$1.04 million in 2020**[458](index=458&type=chunk) - 4.23 million shares of Common Stock reserved for issuance under stock ownership plans, with **3.80 million available for granting**[458](index=458&type=chunk) Stock Option Activity (Thousands of Shares) | Metric | 2020 | 2019 | 2018 | | :---------------------- | :----- | :----- | :----- | | Outstanding, beginning of year | 809 | 1,100 | 1,271 | | Exercised | — | (93) | (131) | | Cancelled | (396) | (198) | (40) | | **Outstanding, end of year** | **413** | **809** | **1,100** | - 412,000 stock options outstanding and exercisable at September 27, 2020, with a weighted average exercise price of $1.14[461](index=461&type=chunk) Restricted Common Stock Activity (Thousands of Shares) | Metric | 2020 | 2019 | 2018 | | :-------------------------- | :----- | :----- | :----- | | Outstanding, beginning of year | 1,477 | 2,059 | 2,478 | | Granted | 720 | 788 | 587 | | Vested | (605) | (1,337) | (936) | | Forfeited | (42) | (33) | (70) | | **Outstanding, end of year** | **1,550** | **1,477** | **2,059** | - Total unrecognized compensation expense for unvested restricted Common Stock was **$1.24 million** at September 27, 2020[462](index=462&type=chunk) - Expected to issue 600,000 restricted Common Stock shares in December 2020[463](index=463&type=chunk) [12. Income Taxes](index=73&type=section&id=12%20INCOME%20TAXES) The company recorded a $4.1 million income tax expense in 2020, with an effective tax rate of 144.4% Income Tax Expense (Benefit) (Thousands of Dollars) | Component | 2020 | 2019 | 2018 | | :---------- | :----- | :----- | :----- | | Current | 8,768 | 9,934 | 1,150 | | Deferred | (4,665) | (2,003) | (17,378) | | **Total** | **4,104** | **7,931** | **(16,228)** | - Income tax expense of **$4.1 million in 2020**, with an effective tax rate of 144.4% on pretax income[465](index=465&type=chunk) Net Deferred Income Tax Liabilities (Thousands of Dollars) | Component | Sep 27, 2020 | Sep 29, 2019 | | :-------------------------------- | :----------- | :----------- | | Deferred income tax liabilities | (60,234) | (32,946) | | Deferred income tax assets | 76,701 | 43,053 | | Valuation allowance | (31,675) | (39,913) | | **Net deferred income tax liabilities** | **(15,208)** | **(29,806)** | - Gross unrecognized tax benefits increased to **$27.0 million in 2020**, with $12.5 million impacting the effective tax rate if recognized[467](index=467&type=chunk) - Has state net operating loss (NOL) carryforwards of approximately **$46.1 million**[469](index=469&type=chunk) [13. Fair Value of Financial Instruments](index=75&type=section&id=13%20FAIR%20VALUE%20OF%20FINANCIAL%20INSTRUMENTS) The fair value of most financial instruments approximates their carrying value, with warrants measured at fair value each period - Fair value of cash equivalents, accounts receivable, and accounts payable approximates carrying value[471](index=471&type=chunk) - Fixed-rate debt of **$538.3 million** had a fair value approximating its carrying value at September 27, 2020[472](index=472&type=chunk) - Fair value of warrants was **$0.36 million** at September 27, 2020, resulting in $0.83 million of non-operating income from fair value adjustments in 2020[473](index=473&type=chunk) Warrant Fair Value Estimation Assumptions | Assumption | 2020 | 2019 | 2018 | | :-------------------------- | :----- | :----- | :----- | | Volatility (Percent) | 84 | 48 | 31 | | Risk-free interest rate (Percent) | 0.12 | 1.58 | 2.91 | | Expected term (Years) | 1.5 | 2.5 | 3.5 | | Estimated fair value (Dollars) | 0.06 | 0.20 | 0.3 | [14. Earnings Per Common Share](index=76&type=section&id=14%20EARNINGS%20PER%20COMMON%20SHARE) The company reported a basic and diluted loss per common share of $0.05 in 2020 due to a net loss Earnings Per Common Share Computation (Thousands of Dollars and Shares, Except Per Share Data) | Metric | 2020 | 2019 | 2018 | | :------------------------------------------ | :----- | :----- | :----- | | Income attributable to Lee Enterprises, Inc. | (3,106) | 14,268 | 45,766 | | Basic average Common Stock | 56,569 | 55,565 | 54,702 | | Diluted average Common Stock | 56,936 | 56,884 | 55,948 | | Basic EPS | (0.05) | 0.26 | 0.84 | | Diluted EPS | (0.05) | 0.25 | 0.82 | - 6 million weighted average shares were not considered in diluted EPS computation for 2020 due to net losses[476](index=476&type=chunk) - 6.38 million and 7.21 million weighted average shares were excluded from diluted EPS in 2019 and 2018, respectively, due to anti-dilutive effects[476](index=476&type=chunk) [15. Allowance for Doubtful Accounts](index=76&type=section&id=15%20ALLOWANCE%20FOR%20DOUBTFUL%20ACCOUNTS) The allowance for doubtful accounts receivable increased to $13.4 million at year-end 2020 Allowance for Doubtful Accounts (Thousands of Dollars) | Metric | 2020 | 2019 | 2018 | | :-------------------------- | :----- | :----- | :----- | | Balance, beginning of year | 6,434 | 4,806 | 4,796 | | Additions charged to expense | 8,607 | 2,751 | 1,952 | | Deductions from reserves | (1,610) | (1,123) | (1,942) | | **Balance, end of year** | **13,431** | **6,434** | **4,806** | [16. Other Information](index=76&type=section&id=16%20OTHER%20INFORMATION) Compensation and other accrued liabilities totaled $44.3 million in 2020, a significant increase from 2019 Compensation and Other Accrued Liabilities (Thousands of Dollars) | Component | Sep 27, 2020 | Sep 29, 2019 | | :-------------------------- | :----------- | :----------- | | Compensation | 16,915 | 9,170 | | Retirement plans | 2,317 | 2,637 | | Other | 25,046 | 5,904 | | **Total** | **44,278** | **17,711** | Supplemental Cash Flow Information (Thousands of Dollars) | Cash Payment | 2020 | 2019 | 2018 | | :-------------------------- | :----- | :----- | :----- | | Interest | 49,518 | 47,555 | 52,180 | | Debt financing and reorganization costs | 707 | 1,773 | 437 | | Income tax payments, net | 446 | 8,439 | 464 | [17. Commitments and Contingent Liabilities](index=77&type=section&id=17%20COMMITMENTS%20AND%20CONTINGENT%20LIABILITIES) The company has capital expenditure commitments and faces contingent liabilities from legal and tax matters - Capital expenditure commitments totaled approximately **$2.05 million** at September 27, 2020[478](index=478&type=chunk) - Involved in routine income tax audits and legal actions, with outcomes not expected to materially affect financial statements[480](index=480&type=chunk)[482](index=482&type=chunk) - Subject to withdrawal liabilities from multiemployer pension plans, with an estimated **$4.4 million recognized in 2020**[483](index=483&type=chunk)[484](index=484&type=chunk) [18. Leases](index=77&type=section&id=18%20LEASES) The company has operating lease right-of-use assets and liabilities of $70.9 million on its balance sheet - Operating lease right-of-use assets totaled **$70.9 million** at September 27, 2020[486](index=486&type=chunk) - Total operating lease liabilities were **$70.9 million** at September 27, 2020[486](index=486&type=chunk) - Total operating lease expense for 2020 was **$12.5 million**[486](index=486&type=chunk) Maturities of Lease Liabilities (Thousands of Dollars) as of Sep 27, 2020 | Year | Amount | | :--------- | :------- | | 2021 | 14,438 | | 2022 | 12,103 | | 2023 | 11,213 | | 2024 | 10,538 | | 2025 | 9,763 | | Thereafter | 41,390 | | **Total lease payments** | **99,445** | | Less: interest | (28,494) | | **Present value of lease liabilities** | **70,951** | - Weighted average remaining lease term was 8.64 years, and the weighted average discount rate was 8.24% in 2020[490](index=490&type=chunk) [19. Quarterly Financial Data (Unaudited)](index=79&type=section&id=19%20QUARTERLY%20FINANCIAL%20DATA%20(UNAUDITED)) Quarterly data shows fluctuating revenue and a net loss in the last three quarters of 2020 Quarterly Financial Data (Thousands of Dollars, Except Per Share Data) | Metric | Dec 2020 | Mar 2020 | Jun 2020 | Sep 2020 | Dec 2019 | Mar 2019 | Jun 2019 | Sep 2019 | | :------------------------------------------ | :------- | :------- | :------- | :------- | :------- | :------- | :------- | :------- | | Operating revenue | 122,343 | 121,367 | 182,528 | 191,766 | 136,201 | 122,704 | 127,284 | 123,665 | | Net income (loss) | 5,717 | (4,990) | (727) | (1,261) | 10,719 | (2,327) | 6,172 | 1,345 | | Income (loss) attributable to Lee Enterprises, Inc. | 5,320 | (5,367) | (1,275) | (1,784) | 10,361 | (2,678) | 5,766 | 819 | | Basic EPS | 0.09 | (0.09) | (0.02) | (0.03) | 0.19 | (0.05) | 0.10 | 0.01 | | Diluted EPS | 0.09 | (0.09) | (0.02) | (0.03) | 0.18 | (0.05) | 0.10 | 0.01 | [Report of Independent Registered Public Accounting Firm](index=80&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) KPMG LLP issued unqualified opinions on the financial statements and the effectiveness of internal controls - KPMG LLP issued an **unqualified opinion** on the consolidated financial statements for the periods ended September 27, 2020, September 29, 2019, and September 30, 2018[494](index=494&type=chunk) - KPMG LLP issued an **unqualified opinion** on the effectiveness of the company's internal control over financial reporting as of September 27, 2020[495](index=495&type=chunk) - The audit of internal control over financial reporting **excluded the internal controls of BH Media Group and The Buffalo News**[495](index=495&type=chunk) - Noted the change in accounting principle for leases as of September 30, 2019, due to the adoption of ASU No. 2016-02[496](index=496&type=chunk) [Exhibit Index](index=80&type=section&id=Exhibit%20Index) This index lists all documents filed as exhibits to the Annual Report, including key agreements and plans - Lists various exhibits, including corporate governance documents, agreements related to the BH Media acquisition and refinancing, and compensation plans[499](index=499&type=chunk)[501](index=501&type=chunk)[502](index=502&type=chunk) - Many exhibits are incorporated by reference to documents previously filed with the SEC[499](index=499&type=chunk) [Signatures](index=82&type=section&id=SIGNATURES) The Annual Report was signed by executive officers and the Board of Directors on December 11, 2020 - Annual Report signed on December 11, 2020[502](index=502&type=chunk) - Signed by Kevin D. Mowbray (President and CEO) and Timothy R. Millage (VP, CFO, and Treasurer), and the Board of Directors[503](index=503&type=chunk)[505](index=505&type=chunk)

Lee Enterprises, Incorporated (NASDAQ:LEE) Q4 2020 Results Earnings Conference Call December 10, 2020 10:00 AM ET Company Participants Timothy Millage - VP, CFO & Treasurer Kevin Mowbray - President & CEO Nathan Bekke - Vice President, Consumer Sales and Marketing Conference Call Participants Operator Good day, everyone. And thank you for standing by. Welcome to the Lee Enterprises 2020 Fourth Quarter Webcast and Conference Call. The call is being recorded and will be available for replay beginning later th ...

Financial Data and Key Metrics Changes - Total operating revenue on a GAAP basis was $182.5 million in the quarter, exceeding the range of $177 million to $180 million provided last quarter [21] - On a pro forma basis, total revenue was down 25% compared to the prior year due to the significant negative effects from COVID-19 [21] - Adjusted EBITDA totaled $26.3 million in the third quarter, which was $2.8 million higher than the high end of the outlook [14][24] - Cash costs on a pro forma basis were down 22.1% in the quarter due to a combination of temporary and permanent cost reductions [22] Business Line Data and Key Metrics Changes - Subscription revenue was down 5% in the quarter on a pro forma basis, with single-copy sales down 26.9% due to COVID-19 impacts [10] - Excluding single-copy revenue, subscription revenue was down just 1.6% compared to the prior year on a pro forma basis, showing improvement from Q1 and Q2 trends [11] - Digital-only subscribers increased to 222,000, representing a 35.1% annualized increase over the March 2020 quarter [12] Market Data and Key Metrics Changes - Advertising demand has changed dramatically during COVID-19, with a significant negative impact on advertising revenue [12] - Trends in advertising revenue showed a slow and steady improvement, with June trends being 15 percentage points better than in April [13] Company Strategy and Development Direction - The company aims to transform the way it presents local news, focusing on improving digital presentations and creating new content channels [15][16] - The post-pandemic strategy includes diversifying and transforming services and products offered to advertisers [17] - The company is committed to remaining a leading provider of local news and information while focusing on digital audience growth [18] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the future despite significant negative impacts from COVID-19, emphasizing the importance of local news and robust digital products [18][19] - The company has secured financing that eliminates financing risk for 25 years, which contributes to a positive outlook [19] Other Important Information - The company executed a temporary compensation reduction for all employees, which reduced costs by $10 million in the quarter [23] - The company expects to achieve more than $100 million in cost synergies due to business transformation initiatives and acquisition integration [26] Q&A Session Summary Question: What is the difference between EBITDA and excess cash flow? Can debt reduction continue at this pace going forward? - Adjusted EBITDA is a non-GAAP financial performance measure used to monitor operating results, while excess cash flow is defined as cash on the balance sheet in excess of $20 million [31][32] Question: Did Lee buy back any stock in the past quarter or the past year? - The company did not buy back any stock in the past quarter or year due to restrictions under the current credit agreement [33] Question: Did Lee make any asset sales in the quarter? - The company is still focused on its real estate monetization program, which slowed down due to government shutdowns, but remains active with $34 million of real estate for sale [34] - After the quarter end, the company monetized part of its private equity investment, realizing $3.9 million of a $10 million investment [35]