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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended March 28, 2010
 
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.R.S. Employer Identification No.)
201 N. Harrison Street, Suite 600, Davenport, Iowa 52801
(Address of principal executive offices)
(563) 383-2100
(Registrant's telephone number, including area code)
 
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X]     No [  ]
 
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).
Yes [  ]     No [  ]
 
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
 
 
Large accelerated filer
[  ]
Accelerated filer
[  ]
 
Non-accelerated filer
[X] (Do not check if a smaller reporting company)
Smaller reporting company
[  ]
 
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [  ]     No [X]
 
As of March 28, 2010, 39,147,245 shares of Common Stock and 5,724,407 shares of Class B Common Stock of the Registrant were outstanding.
 
 
 
 
Table Of Contents
 
PAGE
 
 
 
 
 
 
 
 
PART I
 
 
 
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
 
 
Item 3.
 
 
 
 
 
 
 
Item 4.
 
 
 
 
 
 
PART II
 
 
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
Item 2(c).
 
 
 
 
 
 
 
Item 4.
 
 
 
 
 
 
 
Item 6.
 
 
 
 
 
 
 
 
 
 
 
 
 

Table of Contents

References to “we”, “our”, “us” and the like throughout this document refer to Lee Enterprises, Incorporated (the "Company").
 
FORWARD-LOOKING STATEMENTS
 
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This report 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, and comply with or obtain amendments or waivers of the financial covenants contained in our credit facilities, if necessary.
 
Other risks and uncertainties include the impact and duration of continuing adverse economic conditions, changes in advertising demand, potential changes in newsprint and other commodity prices, energy costs, interest rates and the availability of credit due to instability in the credit markets, labor costs, legislative and regulatory rulings, difficulties in achieving planned expense reductions, maintaining employee and customer relationships, increased capital costs, 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 report. We do not undertake to publicly update or revise our forward-looking statements.
 
 

Table of Contents

PART I
FINANCIAL INFORMATION
 
Item 1.       Financial Statements
LEE ENTERPRISES, INCORPORATED
CONSOLIDATED BALANCE SHEETS
(Unaudited)  
 
(Thousands of Dollars, Except Per Share Data)
March 28
2010
September 27
2009
 
 
 
 
 
ASSETS
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
20,020
 
 
7,905
 
 
Accounts receivable, net
74,955
 
 
79,731
 
 
Income taxes receivable
—
 
 
5,625
 
 
Inventories
15,875
 
 
13,854
 
 
Deferred income taxes
3,638
 
 
3,638
 
 
Other
10,014
 
 
7,354
 
 
Total current assets
124,502
 
 
118,107
 
 
Investments:
 
 
 
 
Associated companies
58,405
 
 
58,073
 
 
Restricted cash and investments
9,373
 
 
9,324
 
 
Other
9,642
 
 
9,498
 
 
Total investments
77,420
 
 
76,895
 
 
Property and equipment:
 
 
 
 
Land and improvements
28,075
 
 
30,365
 
 
Buildings and improvements
193,363
 
 
195,573
 
 
Equipment
313,357
 
 
316,364
 
 
Construction in process
4,729
 
 
1,985
 
 
 
539,524
 
 
544,287
 
 
Less accumulated depreciation
294,592
 
 
281,318
 
 
Property and equipment, net
244,932
 
 
262,969
 
 
Goodwill
433,552
 
 
433,552
 
 
Other intangible assets, net
580,721
 
 
603,348
 
 
Other
17,462
 
 
20,741
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
1,478,589
 
 
1,515,612
 
 
 
The accompanying Notes are an integral part of the Consolidated Financial Statements.

2


Table of Contents

 
 
 
 
 
 
 
 
 
(Thousands of Dollars and Shares, Except Per Share Data)
March 28
2010
September 27
2009
 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
Current maturities of long-term debt
72,000
 
 
89,800
 
 
Accounts payable
24,154
 
 
31,377
 
 
Compensation and other accrued liabilities
38,435
 
 
42,755
 
 
Income taxes payable
658
 
 
—
 
 
Unearned revenue
38,930
 
 
37,001
 
 
Total current liabilities
174,177
 
 
200,933
 
 
Long-term debt, net of current maturities
1,063,179
 
 
1,079,993
 
 
Pension obligations
44,333
 
 
45,953
 
 
Postretirement and postemployment benefit obligations
7,733
 
 
40,687
 
 
Other retirement and compensation obligations
1,583
 
 
1,539
 
 
Deferred income taxes
112,377
 
 
93,766
 
 
Income taxes payable
13,620
 
 
12,839
 
 
Other
14,382
 
 
16,052
 
 
Total liabilities
1,431,384
 
 
1,491,762
 
 
Equity:
 
 
 
 
Stockholders' equity:
 
 
 
 
Serial convertible preferred stock, no par value; authorized 500 shares; none issued
—
 
 
—
 
 
Common Stock, $2 par value; authorized 120,000 shares; issued and outstanding:
78,294
 
 
78,278
 
 
March 28, 2010; 39,147 shares;
 
 
 
 
September 27,2009; 39,139 shares
 
 
 
 
Class B Common Stock, $2 par value; authorized 30,000 shares; issued and outstanding:
11,448
 
 
11,552
 
 
March 28, 2010; 5,724 shares;
 
 
 
 
September 27, 2009; 5,776 shares
 
 
 
 
Additional paid-in capital
138,778
 
 
137,713
 
 
Accumulated deficit
(194,402
)
 
(225,299
)
 
Accumulated other comprehensive income
12,813
 
 
21,354
 
 
Total stockholders' equity
46,931
 
 
23,598
 
 
Non-controlling interests
274
 
 
252
 
 
Total equity
47,205
 
 
23,850
 
 
Total liabilities and equity
1,478,589
 
 
1,515,612
 
 
 
The accompanying Notes are an integral part of the Consolidated Financial Statements.
 
 

3


Table of Contents

LEE ENTERPRISES, INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
 
13 Weeks Ended
26 Weeks Ended
(Thousands of Dollars, Except Per Common Share Data)
March 28
2010
March 29
2009
March 28
2010
March 29
2009
 
 
 
 
 
 
 
 
 
Operating revenue:
 
 
 
 
 
 
 
 
Advertising
130,563
 
 
141,529
 
 
284,965
 
 
326,112
 
 
Circulation
45,018
 
 
47,086
 
 
90,133
 
 
94,642
 
 
Other
10,163
 
 
10,229
 
 
20,484
 
 
21,645
 
 
Total operating revenue
185,744
 
 
198,844
 
 
395,582
 
 
442,399
 
 
Operating expenses:
 
 
 
 
 
 
 
 
Compensation
79,298
 
 
84,295
 
 
161,433
 
 
178,778
 
 
Newsprint and ink
13,061
 
 
20,664
 
 
25,754
 
 
45,818
 
 
Other operating expenses
59,793
 
 
62,871
 
 
121,270
 
 
132,821
 
 
Depreciation
7,172
 
 
8,408
 
 
14,535
 
 
16,704
 
 
Amortization of intangible assets
11,307
 
 
12,092
 
 
22,627
 
 
24,195
 
 
Impairment of goodwill and other assets
3,290
 
 
144,862
 
 
3,290
 
 
214,907
 
 
Workforce adjustments
290
 
 
2,351
 
 
687
 
 
3,189
 
 
Total operating expenses
174,211
 
 
335,543
 
 
349,596
 
 
616,412
 
 
Curtailment gains
13,882
 
 
—
 
 
45,012
 
 
—
 
 
Equity in earnings of associated companies
1,277
 
 
348
 
 
3,466
 
 
3,412
 
 
Reduction of investment in TNI
—
 
 
9,951
 
 
—
 
 
9,951
 
 
Operating income (loss)
26,692
 
 
(146,302
)
 
94,464
 
 
(180,552
)
 
Non-operating income (expense):
 
 
 
 
 
 
 
 
Financial income
146
 
 
549
 
 
199
 
 
1,820
 
 
Financial expense
(15,643
)
 
(17,031
)
 
(35,448
)
 
(35,116
)
 
Debt financing costs
(1,972
)
 
(12,927
)
 
(3,967
)
 
(14,850
)
 
Other, net
—
 
 
1,823
 
 
—
 
 
1,823
 
 
Total non-operating expense, net
(17,469
)
 
(27,586
)
 
(39,216
)
 
(46,323
)
 
Income (loss) from continuing operations before income taxes
9,223
 
 
(173,888
)
 
55,248
 
 
(226,875
)
 
Income tax expense (benefit)
6,241
 
 
(63,999
)
 
24,309
 
 
(69,523
)
 
Income (loss) from continuing operations
2,982
 
 
(109,889
)
 
30,939
 
 
(157,352
)
 
Discontinued operations, net
—
 
 
—
 
 
—
 
 
(5
)
 
Net income (loss)
2,982
 
 
(109,889
)
 
30,939
 
 
(157,357
)
 
Net income (loss) attributable to non-controlling interests
(9
)
 
(38
)
 
42
 
 
132
 
 
Decrease in redeemable non-controlling interest
—
 
 
58,094
 
 
—
 
 
57,055
 
 
Income (loss) attributable to Lee Enterprises, Incorporated
2,991
 
 
(51,757
)
 
30,897
 
 
(100,434
)
 
Other comprehensive income (loss), net
(9,335
)
 
12,822
 
 
(8,541
)
 
11,076
 
 
Comprehensive income (loss)
(6,344
)
 
(38,935
)
 
22,356
 
 
(89,358
)
 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations attributable to Lee Enterprises, Incorporated
2,991
 
 
(51,757
)
 
30,897
 
 
(100,429
)
 
 
 
 
 
 
 
 
 
 
Earnings (loss) per common share attributable to Lee Enterprises, Incorporated:
 
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
 
Continuing operations
0.07
 
 
(1.16
)
 
0.69
 
 
(2.26
)
 
Discontinued operations
—
 
 
—
 
 
—
 
 
—
 
 
 
0.07
 
 
(1.16
)
 
0.69
 
 
(2.26
)
 
 
 
 
 
 
 
 
 
 
Diluted:
 
 
 
 
 
 
 
 
Continuing operations
0.07
 
 
(1.16
)
 
0.69
 
 
(2.26
)
 
Discontinued operations
—
 
 
—
 
 
—
 
 
—
 
 
 
0.07
 
 
(1.16
)
 
0.69
 
 
(2.26
)
 
 
The accompanying Notes are an integral part of the Consolidated Financial Statements.

4


Table of Contents

LEE ENTERPRISES, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
26 Weeks Ended
(Thousands of Dollars)
March 28
2010
March 29
2009
 
 
 
 
 
Cash provided by operating activities:
 
 
 
 
Net income (loss)
30,939
 
 
(157,357
)
 
Results of discontinued operations
—
 
 
(5
)
 
Income (loss) from continuing operations
30,939
 
 
(157,352
)
 
Adjustments to reconcile income (loss) from continuing operations to net cash provided by operating activities of continuing operations:
 
 
 
 
Depreciation and amortization
37,162
 
 
40,899
 
 
Impairment of goodwill and other assets
3,290
 
 
214,907
 
 
Curtailment gains
(45,012
)
 
—
 
 
Reduction of investment in TNI
—
 
 
9,951
 
 
Accretion of debt fair value adjustment
(310
)
 
(3,459
)
 
Stock compensation expense
1,144
 
 
1,565
 
 
Distributions greater (less) than current earnings of associated companies
(648
)
 
907
 
 
Deferred income tax expense (benefit)
18,581
 
 
(67,034
)
 
Debt financing costs
3,937
 
 
14,850
 
 
Changes in operating assets and liabilities:
 
 
 
 
Decrease in receivables
10,401
 
 
18,561
 
 
Decrease (increase) in inventories and other
(388
)
 
8,422
 
 
Decrease in accounts payable, accrued expenses and unearned revenue
(9,562
)
 
(40,020
)
 
Decrease in pension, postretirement and post employment benefits
(406
)
 
(2,753
)
 
Change in income taxes receivable or payable
1,439
 
 
(8,092
)
 
Other, net
(48
)
 
2,291
 
 
Net cash provided by operating activities of continuing operations
50,519
 
 
33,643
 
 
Cash provided by (required for) investing activities of continuing operations:
 
 
 
 
Purchases of marketable securities
—
 
 
(47,777
)
 
Sales or maturities of marketable securities
—
 
 
166,109
 
 
Purchases of property and equipment
(4,806
)
 
(8,398
)
 
Decrease (increase) in restricted cash
(49
)
 
2,733
 
 
Proceeds from sales of assets
625
 
 
755
 
 
Other
296
 
 
1,044
 
 
Net cash provided by (required for) investing activities of continuing operations
(3,934
)
 
114,466
 
 
Cash provided by (required for) financing activities of continuing operations:
 
 
 
 
Proceeds from long-term debt
67,800
 
 
147,950
 
 
Payments on long-term debt
(102,104
)
 
(273,950
)
 
Debt financing costs paid
—
 
 
(22,840
)
 
Cash dividends paid
—
 
 
(8,539
)
 
Common stock transactions, net
(166
)
 
48
 
 
Net cash required for financing activities of continuing operations
(34,470
)
 
(157,331
)
 
Net cash required for discontinued operations
—
 
 
(5
)
 
Net increase (decrease) in cash and cash equivalents
12,115
 
 
(9,227
)
 
Cash and cash equivalents:
 
 
 
 
Beginning of period
7,905
 
 
23,459
 
 
End of period
20,020
 
 
14,232
 
 
 
The accompanying Notes are an integral part of the Consolidated Financial Statements.

5


Table of Contents

LEE ENTERPRISES, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
1
BASIS OF PRESENTATION
The Consolidated Financial Statements included herein are unaudited. In the opinion of management, these financial statements contain all adjustments (consisting of only normal recurring items) necessary to present fairly the financial position of Lee Enterprises, Incorporated and subsidiaries (the “Company”) as of March 28, 2010 and their results of operations and cash flows for the periods presented. The Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company's 2009 Annual Report on Form 10-K.
 
Because of seasonal and other factors, the results of operations for the 13 weeks and 26 weeks ended March 28, 2010 are not necessarily indicative of the results to be expected for the full year.
 
References to “we”, “our”, “us” and the like throughout this document refer to the Company. References to “2010”, “2009” and the like refer to the fiscal year ended the last Sunday in September.
 
The Consolidated Financial Statements include our accounts and those of our subsidiaries, all of which are wholly-owned, except for our 50% interest in TNI Partners (“TNI”), 50% interest in Madison Newspapers, Inc. (“MNI”), and 82.5% interest in INN Partners, L.C. (“INN”).
 
Accounting Standards Codification
 
In 2009, the Financial Accounting Standards Board (“FASB”) issued Statement 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (“ASC”), which became the source of accounting principles to be applied in the preparation of financial statements for nongovernmental entities. ASC was effective for us as of September 27, 2009. ASC did not have any impact on our Consolidated Financial Statements since it was not intended to change existing accounting principles generally accepted in the United States of America (“GAAP”), except as related to references for authoritative literature.
 
2
INVESTMENTS IN ASSOCIATED COMPANIES
 
 
TNI Partners 
 
In Tucson, Arizona, TNI, acting as agent for our subsidiary, Star Publishing Company (“Star Publishing”), and Citizen Publishing Company (“Citizen”), a subsidiary of Gannett Co. Inc., is responsible for printing, delivery, advertising, and circulation of the Arizona Daily Star and, until May 2009, the Tucson Citizen, as well as their related online operations and specialty publications. TNI collects all receipts and income and pays substantially all operating expenses incident to the partnership's operations and publication of the newspapers and other media.
 
Income or loss of TNI (before income taxes) is allocated equally to Star Publishing and Citizen.
 
In May 2009, Citizen discontinued print publication of the Tucson Citizen. The change resulted in workforce adjustments and other transitions costs of approximately $1,925,000 in 2009, of which $1,093,000 was incurred directly by TNI.

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Table of Contents

Summarized results of TNI are as follows:
 
 
13 Weeks Ended
26 Weeks Ended
 
(Thousands of Dollars)
March 28
2010
March 29
2009
March 28
2010
March 29
2009
 
 
 
 
 
 
 
 
 
 
 
Operating revenue
16,282
 
 
18,791
 
 
34,088
 
 
40,790
 
 
 
Operating expenses, excluding curtailment gain, workforce adjustments, depreciation and amortization
14,034
 
 
17,131
 
 
28,773
 
 
35,862
 
 
 
Curtailment gain
—
 
 
—
 
 
—
 
 
(1,332
)
 
 
Workforce adjustments
—
 
 
—
 
 
783
 
 
102
 
 
 
Operating income (loss)
2,248
 
 
1,660
 
 
4,532
 
 
6,158
 
 
 
 
 
 
 
 
 
 
 
 
 
Company's 50% share of operating income
1,124
 
 
830
 
 
2,266
 
 
3,079
 
 
 
Less amortization of intangible assets
304
 
 
379
 
 
548
 
 
759
 
 
 
Equity in earnings of TNI
820
 
 
451
 
 
1,718
 
 
2,320
 
 
 
Star Publishing's 50% share of TNI depreciation and certain general and administrative expenses associated with its share of the operation and administration of TNI are reported as operating expenses (benefit) in our Consolidated Statements of Operations and Comprehensive Income (Loss). These amounts totaled $3,000 and $538,000 in the 13 weeks ended March 28, 2010 and March 29, 2009, respectively, and $(132,000) and $1,129,000 in the 26 weeks ended March 28, 2010 and March 29, 2009, respectively.
 
Annual amortization of intangible assets is estimated to be $1,215,000 in each of the 52 week periods ending March 2011 through March 2013, $960,000 in the 52 week period ending March 2014 and $911,000 in the 52 week period ending March 2015.
 
Madison Newspapers, Inc. 
 
We have a 50% ownership interest in MNI, which publishes daily and Sunday newspapers, and other publications in Madison, Wisconsin, and other Wisconsin locations, and operates their related online sites. Net income or loss of MNI (after income taxes) is allocated equally to us and The Capital Times Company (“TCT”). MNI conducts its business under the trade name Capital Newspapers.
 
Summarized results of MNI are as follows:
 
 
13 Weeks Ended
26 Weeks Ended
 
(Thousands of Dollars)
March 28
2010
March 29
2009
March 28
2010
March 29
2009
 
 
 
 
 
 
 
 
 
 
 
Operating revenue
17,573
 
 
18,321
 
 
38,170
 
 
41,705
 
 
 
Operating expenses, excluding depreciation and amortization
15,565
 
 
17,727
 
 
31,388
 
 
36,698
 
 
 
Workforce adjustment and transition costs
16
 
 
319
 
 
16
 
 
294
 
 
 
Depreciation and amortization
576
 
 
828
 
 
1,152
 
 
1,652
 
 
 
Operating income (loss)
1,416
 
 
(553
)
 
5,614
 
 
3,061
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
914
 
 
(206
)
 
3,496
 
 
2,184
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity in earnings (loss) of MNI
457
 
 
(103
)
 
1,748
 
 
1,092
 
 
 

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3
GOODWILL AND OTHER INTANGIBLE ASSETS
There were no changes in the carrying value of goodwill in the 26 weeks ended March 28, 2010.
 
Identified intangible assets consist of the following:  
 
(Thousands of Dollars)
March 28
2010
September 27
2009
 
 
 
 
 
 
 
Nonamortized intangible assets:
 
 
 
 
 
Mastheads
44,754
 
 
44,754
 
 
 
Amortizable intangible assets:
 
 
 
 
 
Customer and newspaper subscriber lists
885,713
 
 
885,713
 
 
 
Less accumulated amortization
349,756
 
 
327,133
 
 
 
 
535,957
 
 
558,580
 
 
 
Noncompete and consulting agreements
28,658
 
 
28,658
 
 
 
Less accumulated amortization
28,648
 
 
28,644
 
 
 
 
10
 
 
14
 
 
 
 
580,721
 
 
603,348
 
 
 
In assessing the recoverability of goodwill and other nonamortized intangible assets, we make a determination of the fair value of our business. Fair value is determined using a combination of an income approach, which estimates fair value based upon future revenue, expenses and cash flows discounted to their present value, and a market approach, which estimates fair value using market multiples of various financial measures compared to a set of comparable public companies in the publishing industry. A non-cash impairment charge will generally be recognized when the carrying amount of the net assets of the business exceeds its estimated fair value.
 
The required valuation methodology and underlying financial information that are used to determine fair value require significant judgments to be made by us. These judgments include, but are not limited to, long term projections of future financial performance and the selection of appropriate discount rates used to determine the present value of future cash flows. Changes in such estimates or the application of alternative assumptions could produce significantly different results.
 
We analyze goodwill and other nonamortized intangible assets for impairment on an annual basis, or more frequently if impairment indicators are present. Such indicators of impairment include, but are not limited to, changes in business climate and operating or cash flow losses related to such assets.
 
We review our amortizable intangible assets for impairment when indicators of impairment are present. We assess recovery of these assets by comparing the estimated undiscounted cash flows associated with the asset or asset group with their carrying amount. The impairment amount, if any, is calculated based on the excess of the carrying amount over the fair value of those assets.
 
We also periodically evaluate our determination of the useful lives of amortizable intangible assets. Any resulting changes in the useful lives of such intangible assets will not impact our cash flows. However, a decrease in the useful lives of such intangible assets would increase future amortization expense and decrease future reported operating results and earnings per common share.
 
Due primarily to the continuing and (at the time) increasing difference between our stock price and the per share carrying value of our net assets, we analyzed the carrying value of our net assets as of December 28, 2008 and again as of March 29, 2009. Deterioration in our revenue and the overall recessionary operating environment for us and other publishing companies were also factors in the timing of the analyses.
 

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As a result, we recorded pretax, non-cash charges to reduce the carrying value of goodwill, nonamortized and amortizable intangible assets in the 13 weeks ended December 28, 2008 and March 29, 2009. Additional pretax, non-cash charges were recorded to reduce the carrying value of TNI. We also recorded pretax, non-cash charges to reduce the carrying value of property and equipment. We recorded deferred income tax benefits related to these charges.
 
Because of the timing of the determination of impairment and complexity of the calculations required, the amounts recorded in the 13 weeks ended March 29, 2009 were preliminary. The final analysis, which was completed in the 13 weeks ended June 28, 2009, resulted in additional charges.
 
2009 impairment charges and the related income tax benefit are summarized as follows: 
 
 
13 Weeks Ended
 
 
 
(Thousands of Dollars)
December 28
2008
March 29
2009
June 28
2009
September 27 2009
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill
67,781
 
 
107,115
 
 
18,575
 
 
—
 
 
193,471
 
 
 
Mastheads
—
 
 
17,884
 
 
(3,829
)
 
—
 
 
14,055
 
 
 
Customer and newspaper subscriber lists
—
 
 
18,928
 
 
14,920
 
 
—
 
 
33,848
 
 
 
Property and equipment
2,264
 
 
935
 
 
—
 
 
1,380
 
 
4,579
 
 
 
 
70,045
 
 
144,862
 
 
29,666
 
 
1,380
 
 
245,953
 
 
 
Reduction in investment in TNI
—
 
 
9,951
 
 
10,000
 
 
—
 
 
19,951
 
 
 
Income tax benefit
(14,261
)
 
(39,470
)
 
(11,720
)
 
(489
)
 
(65,940
)
 
 
 
55,784
 
 
115,343
 
 
27,946
 
 
891
 
 
199,964
 
 
 
Annual amortization of intangible assets for each of the 52 week periods ending March 2015 is estimated to be $45,060,000, $44,151,000, $40,262,000, $39,056,000 and $39,001,000, respectively.
 
4
DEBT
 
 
Credit Agreement
 
In 2006, we entered into an amended and restated credit agreement (“Credit Agreement”) with a syndicate of financial institutions (the “Lenders”). The Credit Agreement provided for aggregate borrowing of up to $1,435,000,000 and replaced a $1,550,000,000 credit agreement consummated in 2005. In February 2009, we completed a comprehensive restructuring of the Credit Agreement, which supplemented amendments consummated earlier in 2009 (together, the “2009 Amendments”).
 
Security
 
The Credit Agreement is fully and unconditionally guaranteed on a joint and several basis by substantially all of our existing and future, direct and indirect subsidiaries in which we hold a direct or indirect interest of more than 50% (the “Credit Parties”); provided however, that our wholly-owned subsidiary Pulitzer Inc. (“Pulitzer”) and its subsidiaries will not become Credit Parties for so long as their doing so would violate the terms of the Pulitzer Notes discussed more fully below. The Credit Agreement is secured by first priority security interests in the stock and other equity interests owned by the Credit Parties in their respective subsidiaries.
 
As a result of the 2009 Amendments, the Credit Parties pledged substantially all of their tangible and intangible assets, and granted mortgages covering certain real estate, as collateral for the payment and performance of their obligations under the Credit Agreement. Assets of Pulitzer and its subsidiaries, TNI, our ownership interest in, and assets of, MNI and certain employee benefit plan assets are excluded.
 

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Interest Payments
 
Debt under the A Term Loan, which has a balance of $666,606,000 at March 28, 2010, and the $375,000,000 revolving credit facility, which has a balance of $297,425,000 at March 28, 2010, bear interest, at our option, at either a base rate or an adjusted Eurodollar rate (“LIBOR”), plus an applicable margin. The base rate for the facility is the greater of (i) the prime lending rate of Deutsche Bank Trust Company Americas at such time; (ii) 0.5% in excess of the overnight federal funds rate at such time; or (iii) 30 day LIBOR plus 1.0%. The applicable margin is a percentage determined according to the following: for revolving loans and A Term Loans maintained as base rate loans: 1.625% to 3.5%, and maintained as Eurodollar loans: 2.625% to 4.5% depending, in each instance, upon our total leverage ratio at such time.
 
Minimum LIBOR levels of 1.25%, 2.0% and 2.5% for borrowings for one month, three month and six month periods, respectively, are also in effect. At March 28, 2010, all of our outstanding debt under the Credit Agreement is based on one month borrowing. At the March 28, 2010 leverage level, our debt under the Credit Agreement is priced at a LIBOR margin of 300 basis points.
 
Under the 2009 Amendments, contingent, non-cash payment-in-kind interest expense of 1.0% to 2.0% will be accrued in a quarterly period only in the event our total leverage ratio exceeds 7.5:1 at the end of the previous quarter. At March 28, 2010, this provision is not applicable. Such non-cash charges, if any, will be added to the principal amount of debt and will be reversed, in whole or in part, in the event our total leverage ratio is below 6.0:1 in September 2011 or we refinance the Credit Agreement in advance of its April 2012 maturity.
 
Principal Payments
 
We may voluntarily prepay principal amounts outstanding or reduce commitments under the Credit Agreement at any time, in whole or in part, without premium or penalty, upon proper notice and subject to certain limitations as to minimum amounts of prepayments. We are required to repay principal amounts, on a quarterly basis until maturity, under the A Term Loan. Total A Term Loan payments in the 13 weeks ended March 28, 2010 were $15,313,000. The 2009 Amendments reduce the amount and delay the timing of mandatory principal payments under the A Term Loan. Remaining payments in 2010 and 2011 total $30,000,000 and $65,000,000, respectively. Payments in 2012 prior to the April 2012 maturity total $70,000,000. The scheduled payment at maturity is $501,606,000, plus the balance of the revolving credit facility outstanding at that time.
 
In addition to the scheduled payments, we are required to make mandatory prepayments under the A Term Loan under certain other conditions. The Credit Agreement requires us to apply the net proceeds from asset sales to repayment of the A Term Loan. In the 13 weeks ended March 28, 2010, we made a $313,000 payment related to this provision.
 
The Credit Agreement also requires us to accelerate future payments under the A Term Loan in the amount of 75% of our annual excess cash flow, as defined. We had no excess cash flow in 2009. We had excess cash flow of approximately $62,000,000 in 2008 and, as a result, paid $46,325,000 originally due under the A Term Loan in March and June 2009. The acceleration of such payments due to future asset sales or excess cash flow does not change the due dates of other A Term Loan payments.
 
Covenants and Other Matters
 
The Credit Agreement contains customary affirmative and negative covenants for financing of its type. At March 28, 2010, we were in compliance with such covenants. These financial covenants include a maximum total leverage ratio, as defined. The total leverage ratio is based primarily on the sum of the principal amount of all our debt, which equals $1,134,031,000 at March 28, 2010, plus letters of credit and certain other factors, divided by a measure of trailing 12 month operating results, which includes several elements, including distributions from TNI and MNI and curtailment gains.
 
The 2009 Amendments amended our covenants to take into account economic conditions and the changes to amortization of debt noted above. Our total leverage ratio at March 28, 2010 was 5.1:1. Under the 2009 Amendments, our maximum total leverage ratio limit will decrease from 8.75:1 in March 2010, to 8.5:1 in June 2010, decrease to 7.75:1 in September 2010, decrease to 7.5:1 in December 2010, decrease to 7.25:1 in March 2011 and decrease to 7.0:1 in June 2011. Each change in the leverage ratio limit noted above is effective on the last day of the quarter.

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The Credit Agreement also includes a minimum interest expense coverage ratio, as defined, which is based on the same measure of trailing 12 month operating results noted above. Our interest expense coverage ratio at March 28, 2010 was 2.72:1. The minimum interest expense coverage ratio is 1.4:1 in March 2010 and will increase periodically thereafter until it reaches 2.25:1 in March 2012.
 
The 2009 Amendments require us to suspend stockholder dividends and share repurchases through April 2012. The 2009 Amendments also limit capital expenditures to $20,000,000 per year, with a provision for carryover of unused amounts from the prior year. Further, the 2009 Amendments modify other covenants, including restricting our ability to make additional investments and acquisitions without the consent of the Lenders, limiting additional debt beyond that permitted under the Credit Agreement, and limiting the amount of unrestricted cash and cash equivalents the Credit Parties may hold to a maximum of $10,000,000 for a five day period. Such covenants require that substantially all of our future cash flows are required to be directed toward debt reduction. Finally, the 2009 Amendments eliminated an unused incremental term loan facility.
 
Pulitzer Notes
 
In conjunction with its formation in 2000, St. Louis Post-Dispatch LLC ("PD LLC") borrowed $306,000,000 (the “Pulitzer Notes”) from a group of institutional lenders (the “Noteholders”). The aggregate principal amount of the Pulitzer Notes was payable in April 2009.
 
In February 2009, the Pulitzer Notes and the Guaranty Agreement described below were amended (the “Notes Amendment”). Under the Notes Amendment, PD LLC repaid $120,000,000 of the principal amount of the debt obligation using substantially all of its previously restricted cash, which totaled $129,810,000 at December 28, 2008. The remaining debt balance of $186,000,000, of which $170,000,000 remains outstanding at March 28, 2010, was refinanced by the Noteholders until April 2012.
 
The Pulitzer Notes are guaranteed by Pulitzer pursuant to a Guaranty Agreement dated May 1, 2000 (the “Guaranty Agreement”) with the Noteholders. The Notes Amendment provides that the obligations under the Pulitzer Notes are fully and unconditionally guaranteed on a joint and several basis by Pulitzer's existing and future subsidiaries (excluding Star Publishing and TNI). Also, as a result of the Notes Amendment, Pulitzer and each of its subsidiaries pledged substantially all of its tangible and intangible assets, and granted mortgages covering certain real estate, as collateral for the payment and performance of their obligations under the Pulitzer Notes. Assets and stock of Star Publishing, our ownership interest in TNI and certain employee benefit plan assets are excluded.
 
The Notes Amendment increased the rate paid on the outstanding principal balance to 9.05% until April 28, 2010. The interest rate will increase by 0.5% per year thereafter.
 
Pulitzer may voluntarily prepay principal amounts outstanding or reduce commitments under the Pulitzer Notes at any time, in whole or in part, without premium or penalty, upon proper notice and consent from the Noteholders and the Lenders, and subject to certain limitations as to minimum amounts of prepayments. The Notes Amendment provides for mandatory scheduled prepayments, including quarterly principal payments of $4,000,000 which began on June 29, 2009 and an additional principal payment from restricted cash, if any, of up to $4,500,000 in October 2010. In 2010, the $4,000,000 payments due December 28, 2009 and March 29, 2010 were made prior to the end of the previous fiscal quarters. In 2009, the $4,000,000 payments due on June 29, 2009 and September 30, 2009 were made prior to the end of the previous fiscal quarters.
 
The Notes Amendment establishes a reserve of restricted cash of up to $9,000,000 (reducing to $4,500,000 in October 2010) to facilitate the liquidity of the operations of Pulitzer. All other previously existing restricted cash requirements were eliminated. The Notes Amendment allocates a percentage of Pulitzer's quarterly excess cash flow (as defined) between Pulitzer and the Credit Parties and requires prepayments to the Noteholders under certain specified events. In May 2010, a principal prepayment of $1,000,000 was made under the Pulitzer Notes from excess cash flow of Pulitzer for the 13 weeks ended March 28, 2010. There was no excess cash flow in the 13 weeks ended December 27, 2009 or in 2009.
 

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The Pulitzer Notes contain certain covenants and conditions including the maintenance, by Pulitzer, of the maximum ratio of debt to EBITDA (limit of 4.0:1 at March 28, 2010), as defined in the Guaranty Agreement, minimum net worth and limitations on the incurrence of other debt. The Notes Amendment added a requirement to maintain minimum interest coverage (limit of 2.5:1 at March 28, 2010), as defined. The Notes Amendment amended the Pulitzer Notes and the Guaranty Agreement covenants to take into account economic conditions and the changes to amortization of debt noted above. At March 28, 2010, Pulitzer was in compliance with such covenants.
 
Further, the Notes Amendment added and amended other covenants including limitations or restrictions on additional debt, distributions, loans, advances, investments, acquisitions, dispositions and mergers. Such covenants require that substantially all future cash flows of Pulitzer are required to be directed first toward repayment of the Pulitzer Notes and that cash flows of Pulitzer are largely segregated from those of the Credit Parties.
 
The Credit Agreement contains a cross-default provision tied to the terms of the Pulitzer Notes and the Pulitzer Notes have limited cross-default provisions tied to the terms of the Credit Agreement.
 
The 2005 purchase price allocation of Pulitzer resulted in an increase in the value of the Pulitzer Notes in the amount of $31,512,000, which was recorded as debt in the Consolidated Balance Sheets. At March 28, 2010, the unaccreted balance totals $1,148,000. This amount is being accreted over the remaining life of the Pulitzer Notes, until April 2012, as a reduction in interest expense using the interest method. This accretion will not increase the principal amount due, or reduce the amount of interest to be paid, to the Noteholders.
 
Liquidity
 
We expect to utilize a portion of our capacity under our revolving credit facility to fund part of 2010 principal payments required under the Credit Agreement. At March 28, 2010, we had $297,425,000 outstanding under the revolving credit facility, and after consideration of the 2009 Amendments and letters of credit, have approximately $63,154,000 available for future use. Including cash and restricted cash, our liquidity at March 28, 2010 totals $92,547,000. This liquidity amount excludes any future cash flows. Remaining mandatory principal payments on debt in 2010 total $34,000,000. Since February 2009, we have satisfied all interest payments and substantially all principal payments due under our debt facilities with our cash flows. We expect all remaining interest payments and substantially all principal payments due in 2010 will be satisfied by our continuing cash flows.
 
Our ability to operate as a going concern is dependent on our ability to remain in compliance with debt covenants and to refinance or amend our debt agreements as they become due, or earlier if available liquidity is consumed. We are in compliance with our debt covenants at March 28, 2010.
 
There are numerous potential consequences under the Credit Agreement, and Guaranty Agreement and Note Agreement related to the Pulitzer Notes, if an event of default, as defined, occurs and is not remedied. Many of those consequences are beyond our control, and the control of Pulitzer, and PD LLC, respectively. The occurrence of one or more events of default would give rise to the right of the Lenders or the Noteholders, or both of them, to exercise their remedies under the Credit Agreement and the Note and Guaranty Agreements, respectively, including, without limitation, the right to accelerate all outstanding debt and take actions authorized in such circumstances under applicable collateral security documents.
 
The 2010 Redemption, as discussed more fully in Note 10, eliminated the potential requirement for a substantial cash outflow in April 2010. This event also substantially enhanced our liquidity.
 
Other
 
We paid fees to the Lenders and Noteholders for the 2009 Amendments and Notes Amendment which, along with the related legal and financial advisory expenses, totaled $26,061,000. $15,500,000 of the fees were capitalized and are being expensed over the remaining term of the Credit Agreement and Pulitzer Notes, until April 2012. At March 28, 2010, we have total unamortized financing costs of $15,687,000.
 

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Debt is summarized as follows: 
 
 
 
 
 
 
Interest Rates
 
(Thousands of Dollars)
March 28
2010
September 27
2009
March 28
2010
 
 
 
 
 
 
 
 
 
Credit Agreement:
 
 
 
 
 
 
 
A Term Loan
666,606
 
 
714,885
 
 
4.25
 
 
 
Revolving credit facility
297,425
 
 
275,450
 
 
4.25
 
 
 
Pulitzer Notes:
 
 
 
 
 
 
 
Principal amount
170,000
 
 
178,000
 
 
9.05
 
 
 
Unaccreted fair value adjustment
1,148
 
 
1,458
 
 
 
 
 
 
1,135,179
 
 
1,169,793
 
 
 
 
 
Less current maturities
72,000
 
 
89,800
 
 
 
 
 
 
1,063,179
 
 
1,079,993
 
 
 
 
 
At March 28, 2010, our weighted average cost of debt was 4.97%.
 
Aggregate maturities of debt in the 52 weeks ending March 2011, 2012 and 2013 are $72,000,000, $96,000,000, and $966,031,000, respectively. In addition, as discussed above, an additional principal payment from restricted cash of up to $4,500,000 may be required in October 2010 under the Pulitzer Notes.
 
5
PENSION, POSTRETIREMENT AND POSTEMPLOYMENT DEFINED BENEFIT PLANS
We have several noncontributory defined benefit pension plans that together cover certain St. Louis Post-Dispatch and selected other employees. Benefits under the plans are generally based on salary and years of service. Our liability and related expense for benefits under the plans are recorded over the service period of active employees based upon annual actuarial calculations. Plan funding strategies are influenced by tax regulations. Plan assets consist primarily of domestic and foreign corporate equity securities, government and corporate bonds, and cash.
 
In addition, we provide retiree medical and life insurance benefits under postretirement plans at several of our operating locations. The level and adjustment of participant contributions vary depending on the specific plan. In addition, PD LLC provides postemployment disability benefits to certain employee groups prior to retirement at the St. Louis Post-Dispatch. Our liability and related expense for benefits under the postretirement plans are recorded over the service period of active employees based upon annual actuarial calculations. We accrue postemployment disability benefits when it becomes probable that such benefits will be paid and when sufficient information exists to make reasonable estimates of the amounts to be paid.
 
We use a fiscal year end measurement date for all of our pension and postretirement medical plan obligations.
 

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The net periodic cost (benefit) components of our pension and postretirement medical plans are as follows:
 
Pension Plans
 
 
13 Weeks Ended
26 Weeks Ended
 
(Thousands of Dollars)
March 28
2010
March 29
2009
March 28
2010
March 29
2009
 
 
 
 
 
 
 
 
 
 
 
Service cost for benefits earned during the period
333
 
 
269
 
 
667
 
 
538
 
 
 
Interest cost on projected benefit obligation
2,227
 
 
2,388
 
 
4,454
 
 
4,776
 
 
 
Expected return on plan assets
(2,365
)
 
(2,917
)
 
(4,731
)
 
(5,834
)
 
 
Amortization of net (gain) loss
113
 
 
(295
)
 
226
 
 
(590
)
 
 
Amortization of prior service cost
(34
)
 
(34
)
 
(68
)
 
(68
)
 
 
 
274
 
 
(589
)
 
548
 
 
(1,178
)
 
 
 
 
 
Postretirement Medical Plans
 
 
13 Weeks Ended
26 Weeks Ended
 
(Thousands of Dollars)
March 28
2010
March 29
2009
March 28
2010
March 29
2009
 
 
 
 
 
 
 
 
 
 
 
Service cost for benefits earned during the period
137
 
 
178
 
 
327
 
 
527
 
 
 
Interest cost on projected benefit obligation
695
 
 
1,180
 
 
1,771
 
 
2,862
 
 
 
Expected return on plan assets
(584
)
 
(604
)
 
(1,131
)
 
(1,205
)
 
 
Amortization of net gain
(636
)
 
(622
)
 
(1,190
)
 
(1,136
)
 
 
Amortization of prior service cost
(567
)
 
(698
)
 
(1,199
)
 
(756
)
 
 
 
(955
)
 
(566
)
 
(1,422
)
 
292
 
 
 
 
Based on our forecast at March 28, 2010, we expect to contribute $2,600,000 to our postretirement medical plans in 2010.
 
2010 Changes to Plans
 
In December 2009, we notified certain participants in our postretirement medical plans of changes to be made to the plans, including increases in participant premium cost-sharing and elimination of coverage for certain participants. The changes resulted in non-cash curtailment gains of $31,130,000, will reduce 2010 net periodic postretirement medical cost by $1,460,000 beginning in the 13 weeks ending March 28, 2010, and reduced the benefit obligation liability at December 27, 2009 by $28,750,000.
 
In March 2010, members of the St. Louis Newspaper Guild voted to approve a new 5.5 year contract, effective April 1, 2010. The new contract eliminated postretirement medical coverage for active employees and defined pension benefits were frozen. The elimination of postretirement medical coverage resulted in non-cash curtailment gains of $11,878,000, which were recognized in the 13 weeks ended March 28, 2010 and reduced the benefit obligation liability at March 28, 2010 by $6,576,000. The freeze of defined pension benefits resulted in non-cash curtailment gains of $2,004,000, which were recognized in the 13 weeks ended March 28, 2010, will reduce 2010 net periodic pension expenses by $668,000 beginning in the 13 weeks ending June 27, 2010, and reduced the benefit obligation liability at March 28, 2010 by $2,004,000.
 
Increases in employee cost sharing discussed above were treated as negative plan amendments. Curtailment treatment was utilized in situations in which coverage was eliminated. Curtailment gains were calculated by revaluation of plan liabilities after consideration of other plan changes.
 
The Patient Protection and Affordable Care Act along with its companion reconciliation legislation (together the “Affordable Care Act”), were enacted into law in March 2010. We expect the Affordable Care Act will be supported by a substantial number of underlying regulations, many of which have not been issued. Accordingly, a complete determination of the impact of the Affordable Care Act cannot be made at this time. However, we do not expect the Affordable Care Act will have a significant impact on our postretirement medical benefit obligation liability.

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6
INCOME TAXES
The provision for income taxes includes deferred taxes and is based upon estimated annual effective tax rates in the tax jurisdictions in which we operate.
 
Income tax expense (benefit) related to continuing operations differs from the amounts computed by applying the U.S. federal income tax rate to income (loss) before income taxes. The reasons for these differences are as follows:
 
 
 
13 Weeks Ended
26 Weeks Ended
 
(Percent of Income (Loss) from Continuing Operations Before Income Taxes)
March 28 2010
March 29 2009
March 28 2010
March 29 2009
 
 
 
 
 
 
 
 
 
 
 
Computed “expected” income tax expense (benefit)
35.0
 
 
(35.0
)
 
35.0
 
 
(35.0
)
 
 
State income taxes, net of federal tax benefit
3.0
 
 
(3.0
)
 
3.0
 
 
(3.0
)
 
 
Curtailment gains
17.9
 
 
—
 
 
3.0
 
 
—
 
 
 
Affordable Care Act
21.8
 
 
—
 
 
3.6
 
 
—
 
 
 
Impairment of goodwill and other assets
—
 
 
10.2
 
 
—
 
 
12.8
 
 
 
Valuation allowance
—
 
 
(9.9
)
 
—
 
 
(7.1
)
 
 
Other
(10.0
)
 
0.9
 
 
(0.6
)
 
1.7
 
 
 
 
67.7
 
 
(36.8
)
 
44.0
 
 
(30.6
)
 
 
In March 2010, as a result of the Affordable Care Act enacted at that time, we wrote off $2,012,000 of deferred income tax assets due to the loss of future tax deductions for providing retiree prescription drug benefits.
 
We file income tax returns with the IRS and various state tax jurisdictions. From time to time, we are subject to routine audits by those agencies, and those audits may result in proposed adjustments. We have considered the alternative interpretations that may be assumed by the various taxing agencies, believe our positions taken regarding our filings are valid, and that adequate tax liabilities have been recorded to resolve such matters. However, the actual outcome cannot be determined with certainty and the difference could be material, either positively or negatively, to the Consolidated Statements of Operations and Comprehensive Income (Loss) in the periods in which such matters are ultimately determined. We do not believe the final resolution of such matters will be material to our consolidated financial position or cash flows.
 
We have various income tax examinations ongoing and at various stages of completion, but generally the income tax returns have been audited or closed to audit through 2005.
 

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7
EARNINGS (LOSS) PER COMMON SHARE
The following table sets forth the computation of basic and diluted earnings (loss) per common share. Per share amounts may not add due to rounding.  
 
 
13 Weeks Ended
26 Weeks Ended
 
(Thousands of Dollars and Shares, Except Per Share Data)
March 28
2010
March 29
2009
March 28
2010
March 29
2009
 
 
 
 
 
 
 
 
 
 
 
Income (loss) attributable to Lee Enterprises, Incorporated:
 
 
 
 
 
 
 
 
 
Continuing operations
2,991
 
 
(51,757
)
 
30,897
 
 
(100,429
)
 
 
Discontinued operations
—
 
 
—
 
 
—
 
 
(5
)
 
 
 
2,991
 
 
(51,757
)
 
30,897
 
 
(100,434
)
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares
44,873
 
 
44,922
 
 
44,883
 
 
44,984
 
 
 
Less non-vested restricted Common Stock
310
 
 
473
 
 
336
 
 
557
 
 
 
Basic average common shares
44,563
 
 
44,449
 
 
44,547
 
 
44,427
 
 
 
Plus dilutive stock options and restricted Common Stock
394
 
 
—
 
 
313
 
 
—
 
 
 
Diluted average common shares
44,957
 
 
44,449
 
 
44,860
 
 
44,427
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings (loss) per common share attributable to Lee Enterprises, Incorporated:
 
 
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
 
 
Continuing operations
0.07
 
 
(1.16
)
 
0.69
 
 
(2.26
)
 
 
Discontinued operations
—
 
 
—
 
 
—
 
 
—
 
 
 
 
0.07
 
 
(1.16
)
 
0.69
 
 
(2.26
)
 
 
 
 
 
 
 
 
 
 
 
 
Diluted:
 
 
 
 
 
 
 
 
 
Continuing operations
0.07
 
 
(1.16
)
 
0.69
 
 
(2.26
)
 
 
Discontinued operations
—
 
 
—
 
 
—
 
 
—
 
 
 
 
0.07
 
 
(1.16
)
 
0.69
 
 
(2.26
)
 
 
For the 13 weeks and 26 weeks ended March 28, 2010 and March 29, 2009, we have 198,000 and 231,000 weighted average shares, respectively, subject to issuance under our stock option plan that have no intrinsic value and are not considered in the computation of diluted earnings per common share.
 
8
STOCK OWNERSHIP PLANS
 
 
Stock Options
 
A summary of activity related to our stock option plan is as follows:
 
(Thousands of Dollars and Shares, Except Per Share Data)
Shares
Weighted
Average
Exercise Price
Weighted
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value
 
 
 
 
 
 
 
 
 
 
 
Outstanding, September 27, 2009
1,009
 
 
9.40
 
 
 
 
 
 
 
Cancelled
(38
)
 
27.28
 
 
 
 
 
 
 
Outstanding, March 28, 2010
971
 
 
8.69
 
 
8.5
 
 
1,020
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercisable, March 28, 2010
198
 
 
34.56
 
 
5.0
 
 
—
 
 
 
Total unrecognized compensation expense for unvested stock options as of March 28, 2010 is $915,000, which will be recognized over a weighted average period of 2.4 years.
 

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Restricted Common Stock
 
The following table summarizes restricted Common Stock activity during the 26 weeks ended March 28, 2010:  
 
(Thousands of Shares, Except Per Share Data)
Shares
Weighted
Average Grant Date
Fair Value
 
 
 
 
 
 
 
Outstanding, September 27, 2009
453
 
 
19.35
 
 
 
Vested
(143
)
 
28.92
 
 
 
Forfeited
(2
)
 
15.02
 
 
 
Outstanding, March 28, 2010
308
 
 
15.03
 
 
 
The fair value of restricted Common Stock vested during the 26 weeks ended March 28, 2010 totals $553,000.
 
Total unrecognized compensation expense for unvested restricted Common Stock as of March 28, 2010 is $1,072,000, which will be recognized over a weighted average period of less than one year.
 
9
FAIR VALUE MEASUREMENTS
We adopted FASB ASC Topic 820, Fair Value Measurements and Disclosures, in 2009. FASB ASC Topic 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FASB ASC Topic 820 establishes a three-level hierarchy of fair value measurements based on whether the inputs to those measurements are observable or unobservable and consists of the following levels:
 
  		•
    Level 1 - Quoted prices for identical instruments in active markets;
  • Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets; and
  • Level 3 - Valuations derived from valuation techniques in which one or more significant inputs are unobservable.
     
    The following table summarizes the financial instruments measured at fair value in the accompanying Consolidated Financial Statements as of March 28, 2010:  
     
    (Thousands of Dollars)
     
    Level 3
    Total
     
     
     
     
     
     
     
     
    Herald Value - liability (see Note 10)
     
    2,300
     
     
    2,300
     
     
     
    There were no realized or unrealized gains or losses, purchases, sales, or transfers related to the Herald liability in the 26 weeks ended March 28, 2010.
     
    In the 13 weeks ended March 28, 2010, we reduced the carrying value of equipment no longer in use by $3,290,000, based on estimates of the related fair value in the current market. In 2009, we reduced the carrying value of equipment no longer in use by $4,579,000, based on estimates of the related fair value in the current market. See Note 3. Based on age, condition and marketability we estimated the equipment had no value.
     
    The following methods and assumptions are used to estimate the fair value of each class of financial instruments for which it is practicable to estimate value. The carrying amounts of cash equivalents, accounts receivable, and accounts payable approximate fair value because of the short maturity of those instruments. Other investments, consisting of debt and equity securities in a deferred compensation trust, are carried at fair value based upon quoted market prices. Investments totaling $8,608,000, consisting primarily of our 17% ownership of the nonvoting common stock of TCT, are carried at cost. The fair value of floating rate debt cannot be determined as an active market for such debt does not exist. Our fixed rate debt consists of the $170,000,000 principal amount of Pulitzer Notes, as discussed more fully in Note 4, which is not traded on an active market and is held by a small group of Noteholders. Coupled with the volatility of substantially all domestic credit markets that exists, we are unable, as of March 28, 2010, to determine the fair value of such debt. The value, if determined, would likely be less than the carrying amount.
     

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    Table of Contents

    10
    COMMITMENTS AND CONTINGENT LIABILITIES
     
     
    Redemption of PD LLC Minority Interest
     
    In 2000, Pulitzer and The Herald Company Inc. (“Herald Inc.”) completed the transfer of their respective interests in the assets and operations of the St. Louis Post-Dispatch and certain related businesses to a new joint venture, known as PD LLC. Pulitzer is the managing member of PD LLC. Under the terms of the related Operating Agreement, Pulitzer and another subsidiary held a 95% interest in the results of operations of PD LLC and The Herald Publishing Company, LLC (“Herald”), as successor to Herald Inc., held a 5% interest. Until February 2009, Herald's 5% interest was reported as minority interest in the Consolidated Statements of Operations and Comprehensive Income (Loss) at historical cost, plus accumulated earnings since the acquisition of Pulitzer.
     
    Also, under the terms of the Operating Agreement, Herald Inc. received on May 1, 2000 a cash distribution of $306,000,000 from PD LLC. This distribution was financed by the Pulitzer Notes. Pulitzer's investment in PD LLC was treated as a purchase for accounting purposes and a leveraged partnership for income tax purposes.
     
    The Operating Agreement provided Herald a one-time right to require PD LLC to redeem Herald's interest in PD LLC, together with its interest, if any, in STL Distribution Services LLC ("DS LLC ") (the “2010 Redemption”). The 2010 Redemption price for Herald's interest was to be determined pursuant to a formula. We recorded the present value of the remaining amount of this potential liability in our Consolidated Balance Sheet in 2008, with the offset primarily to goodwill in the amount of $55,594,000, and the remainder recorded as a reduction of retained earnings. In 2009 and 2008, we accrued increases in the liability totaling $1,466,000 and $8,838,000, respectively, which increased loss available to common stockholders. The present value of the 2010 Redemption in February 2009 was approximately $73,602,000.
     
    In February 2009, in conjunction with the Notes Amendment, PD LLC redeemed the 5% interest in PD LLC and DS LLC owned by Herald pursuant to a Redemption Agreement and adopted conforming amendments to the Operating Agreement. As a result, the value of Herald's former interest (the “Herald Value”) will be settled, at a date determined by Herald between April 2013 and April 2015, based on a calculation of 10% of the fair market value of PD LLC and DS LLC at the time of settlement, less the balance, as adjusted, of the Pulitzer Notes or the equivalent successor debt, if any. We recorded a liability of $2,300,000 in 2009 as an estimate of the amount of the Herald Value to be disbursed. The determination of the amount of the Herald Value was based on an estimate of fair value using both market and income-based approaches. The actual amount of the Herald Value at the date of settlement will depend on such variables as future cash flows and indebtedness of PD LLC and DS LLC, market valuations of newspaper properties and the timing of the request for redemption.
     
    The Redemption Agreement also terminated Herald's right to exercise its rights under the 2010 Redemption. As a result, we reversed substantially all of our liability for the 2010 Redemption in 2009. The reversal reduced liabilities by $71,302,000 and increased comprehensive income by $58,521,000 and stockholders' equity by $68,824,000.
     
    The redemption of Herald's interest in PD LLC and DS LLC is expected to generate significant tax benefits to us as a consequence of the resulting increase in the tax basis of the assets owned by PD LLC and DS LLC and the related depreciation and amortization deductions. The increase in basis to be amortized for income tax purposes over a 15 year period beginning in February 2009 is approximately $258,000,000.
     
    Pursuant to an Indemnity Agreement dated May 1, 2000 (the “Indemnity Agreement”) between Herald Inc. and Pulitzer, Herald agreed to indemnify Pulitzer for any payments that Pulitzer may make under the Guaranty Agreement. The Indemnity Agreement and related obligations of Herald to indemnify Pulitzer were also terminated pursuant to the Redemption Agreement.
     
    Legal Proceedings
     
    We are involved in a variety of legal actions that arise in the normal course of business. Insurance coverage mitigates potential loss for certain of these matters. While we are unable to predict the ultimate outcome of these legal actions, it is our opinion that the disposition of these matters will not have a material adverse effect on our Consolidated Financial Statements, taken as a whole.
     

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    In 2008, a group of newspaper carriers filed suit against us in the United States District Court for the Southern District of California, claiming to be employees and not independent contractors of ours. The plaintiffs seek relief related to violation of various employment-based statutes, and request punitive damages and attorneys' fees. The suit is in the discovery stage and an initial decision by the judge regarding class certification is expected in 2010. At this time we are unable to predict whether the ultimate economic outcome, if any, could have a material effect on our Consolidated Financial Statements, taken as a whole. We deny the allegations of employee status, consistent with our past practices and industry practices, and intend to vigorously contest the action, which is not covered by insurance.
     
    11
    IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
    In 2010, we adopted FASB ASC 810, Consolidation.  FASB ASC 810 requires that noncontrolling interests be reported as a separate component of equity.  Net income (loss), including the portion attributable to our noncontrolling interests is included in net income (loss) in the Consolidated Statements of Operations and Comprehensive Income (Loss) and will continue to be used to determine earnings (loss) per common share.  FASB ASC 810 also requires certain prospective changes in accounting for noncontrolling interests, primarily related to increases and decreases in ownership and changes in control.  As required, the presentation and disclosure requirements were adopted through retrospective application, and prior period information has been reclassified accordingly.  The adoption did not have a material effect on our Consolidated Financial Statements.
     
    In December 2008, the FASB issued FSP 132(R)-1, Disclosures about Postretirement Benefit Plan Assets, codified in ASC 715, Compensation-Retirement Benefits.  FSP 132(R)-1 requires additional disclosures relating to investment strategies, major categories of plan assets, concentrations of risk within plan assets and valuation techniques used to measure the fair value of plan assets. FSP 132(R)-1 is effective September 26, 2010.  The adoption will not have a material effect on our Consolidated Financial Statements.
     

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    Item 2.       Management's Discussion and Analysis of Financial Condition and Results of Operations
     
    The following discussion includes comments and analysis relating to our results of operations and financial condition as of and for the 13 weeks and 26 weeks ended March 28, 2010. This discussion should be read in conjunction with the Consolidated Financial Statements and related Notes thereto, included herein, and our 2009 Annual Report on Form 10-K.
     
    NON-GAAP FINANCIAL MEASURES
     
    No non-GAAP financial measure should be considered as a substitute for any related financial measure under accounting principles generally accepted in the United States of America. However, we believe the use of non-GAAP financial measures provides meaningful supplemental information with which to evaluate our financial performance, or assist in forecasting and analyzing future periods. We also believe 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 or its ability to meet debt service requirements.
     
    Operating Cash Flow and Operating Cash Flow Margin
     
    Operating cash flow, which is defined as operating income before depreciation, amortization, impairment of goodwill and other assets, curtailment gains and equity in earnings of associated companies, and operating cash flow margin (operating cash flow divided by operating revenue) represent non-GAAP financial measures that are used in the analysis below. We believe these measures provide meaningful supplemental information because of their focus on results from operations excluding such non-cash factors.
     
    Reconciliations of operating cash flow and operating cash flow margin to operating income (loss) and operating income (loss) margin, the most directly comparable measures under GAAP, are included in the table below:  
     
    13 Weeks Ended
    (Thousands of Dollars)
    March 28
    2010
    Percent
    of
    Revenue
    March 29
    2009
    Percent
    of
    Revenue
     
     
     
     
     
     
     
     
     
    Operating cash flow
    33,302
     
     
    17.9
     
     
    28,663
     
     
    14.4
     
     
    Less depreciation and amortization
    18,479
     
     
    9.9
     
     
    20,500
     
     
    10.3
     
     
    Less impairment of goodwill and other assets
    3,290
     
     
        NM
     
    144,862
     
     
       NM
     
    Plus curtailment gains
    13,882
     
     
        NM
     
    —
     
     
       NM
     
    Plus equity in earnings of associated companies
    1,277
     
     
    0.7
     
     
    348
     
     
    0.2
     
     
    Less reduction of investment in TNI
    —
     
     
        NM
     
    9,951
     
     
       NM
     
    Operating income (loss)
    26,692
     
     
    14.4
     
     
    (146,302
    )
     
       NM
     
     
    26 Weeks Ended
    (Thousands of Dollars)
    March 28
    2010
    Percent
    of
    Revenue
    March 29
    2009
    Percent
    of
    Revenue
     
     
     
     
     
     
     
     
     
    Operating cash flow
    86,438
     
     
    21.9
     
     
    81,793
     
     
    18.5
     
     
    Less depreciation and amortization
    37,162
     
     
    9.4
     
     
    40,899
     
     
    9.2
     
     
    Less impairment of goodwill and other assets
    3,290
     
     
        NM
     
    214,907
     
     
       NM
     
    Plus curtailment gains
    45,012
     
     
        NM
     
    —
     
     
       NM
     
    Plus equity in earnings of associated companies
    3,466
     
     
    0.9
     
     
    3,412
     
     
    0.8
     
     
    Less reduction of investment in TNI
    —
     
     
        NM
     
    9,951
     
     
       NM
     
    Operating income (loss)
    94,464
     
     
    23.9
     
     
    (180,552
    )
     
       NM
     

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    Adjusted Net Income and Adjusted Earnings Per Common Share
     
    Adjusted net income and adjusted earnings per common share, which 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, are non-GAAP financial measures that are used in the analysis below. We believe these measures provide meaningful supplemental information by identifying matters that are not indicative of core business operating results or are of a substantially non-recurring nature.
     
    Reconciliations of adjusted net income and adjusted earnings per common share to income (loss) attributable to Lee Enterprises, Incorporated and earnings (loss) per common share, respectively, the most directly comparable measures under GAAP, are set forth below under the caption “Overall Results”.
     
    SAME PROPERTY COMPARISONS
     
    Certain information below, as noted, is presented on a same property basis, which is exclusive of acquisitions and divestitures, if any, consummated in the current or prior year. We believe such comparisons provide meaningful supplemental information for an understanding of changes in our revenue and operating expenses. Same property comparisons exclude TNI and MNI. We own 50% of TNI and also own 50% of the capital stock of MNI, both of which are reported using the equity method of accounting. Same property comparisons also exclude corporate office costs.
     
    CRITICAL ACCOUNTING POLICIES
     
    Our discussion and analysis of results of operations and financial condition are based upon our Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
     
    Our critical accounting policies include the following:
     
  		•
    Goodwill and other intangible assets;
  • Pension, postretirement and postemployment benefit plans;
  • Income taxes;
  • Revenue recognition; and
  • Uninsured risks.
     
    Additional information regarding these critical accounting policies can be found under the caption “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our 2009 Annual Report on Form 10-K and the Notes to Consolidated Financial Statements, included herein.
     
    IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
     
    In 2010, the Company adopted FASB ASC 810, Consolidation.  FASB ASC 810 requires that noncontrolling interests be reported as a separate component of stockholders' equity.  Net income (loss) including the portion attributable to our noncontrolling interests is included in net income (loss) in the Consolidated Statements of Operations and Comprehensive Income (Loss) and will continue to be used to determine earnings (loss) per common share.  FASB ASC 810 also requires certain prospective changes in accounting for noncontrolling interests primarily related to increases and decreases in ownership and changes in control.  As required, the presentation and disclosure requirements were adopted through retrospective application, and prior period information has been reclassified accordingly.  The adoption did not have a material effect on our Consolidated Financial Statements.
     
    In December 2008, the FASB issued FSP 132(R)-1, Disclosures about Postretirement Benefit Plan Assets, codified in ASC 715, Compensation-Retirement Benefits.  FSP 132(R)-1 requires additional disclosures relating to investment strategies, major categories of plan assets, concentrations of risk within plan assets and valuation techniques used to measure the fair value of plan assets. FSP 132(R)-1 is effective September 26, 2010.  The

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    adoption will not have a material effect on our Consolidated Financial Statements.
     
    EXECUTIVE OVERVIEW
     
    We are a premier provider of local news, information and advertising in primarily midsize markets, with 49 daily newspapers and a joint interest in four others, growing online sites and nearly 300 weekly newspapers and specialty publications in 23 states.
     
    We are focused on six key strategic priorities. They are to:
     
  		•
    Grow revenue creatively and rapidly;
  • Deliver strong local news and information;
  • Maximize local online strength;
  • Expand print and online audiences;
  • Nurture employee development and achievement; and
  • Exercise careful cost control.
     
    Certain aspects of these priorities are discussed below.
     
    Approximately 72% of our revenue is derived from advertising. Our strategies are to increase our share of local advertising through increased sales activities in our existing markets and, over time, to increase print and online audiences through internal expansion into existing and contiguous markets and enhancement of online offerings.
     
    ECONOMIC CONDITIONS
     
    According to the National Bureau of Economic Research, the United States economy entered a recession in the three months ended December 2007 and it is widely believed that certain elements of the economy, such as housing, were in decline before that time. 2009 and 2008 revenue, operating results and cash flows were significantly impacted by the recession. United States gross domestic product increased in the three months ended September 2009, December 2009 and March 2010, likely signaling the end of the current recession. Nonetheless, certain key economic indicators, such as unemployment and underemployment, most measures of housing activity and automobile sales remain at recessionary levels. The duration and depth of an economic recession in markets in which we operate may further reduce our future advertising and circulation revenue, operating results and cash flows.
     
    IMPAIRMENT OF GOODWILL AND OTHER ASSETS
     
    Due primarily to the continuing, and (at the time) increasing difference between our stock price and the per share carrying value of our net assets, we analyzed the carrying value of our net assets as of December 28, 2008 and again as of March 29, 2009. Deterioration in our revenue and the overall recessionary operating environment for the Company and other publishing companies were also factors in the timing of the analyses.
     
    As a result, in 2009 we recorded pretax, non-cash charges to reduce the carrying value of goodwill by $193,471,000. We also recorded pretax, non-cash charges of $14,055,000 and $33,848,000 to reduce the carrying value of nonamortized and amortizable intangible assets, respectively. $19,951,000 of additional pretax charges were recorded as a reduction in the carrying value of our investment in TNI. We also recorded additional, pretax non-cash charges of $4,579,000 to reduce the carrying value of property and equipment. We recorded $65,940,000 of deferred income tax benefit related to these charges.
     
    For similar reasons, in 2008 we recorded pretax, non-cash charges to reduce the carrying value of goodwill by $908,977,000. We also recorded pretax, non-cash charges of $13,027,000 and $143,785,000 to reduce the carrying value of nonamortized and amortizable intangible assets, respectively. $104,478,000 of additional pretax charges were recorded as a reduction in the carrying value of our investment in TNI. We also recorded additional, pretax non-cash charges of $5,019,000 to reduce the carrying value of property and equipment. We recorded $281,564,000 of deferred income tax benefit related to these charges.
     
    In the 13 weeks ended March 28, 2010, we reduced the carrying value of equipment no longer in use by $3,290,000.
     

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    Table of Contents

    DEBT AND LIQUIDITY
     
    As discussed more fully in Note 4 to the Consolidated Financial Statements, included herein, in February 2009, we completed a comprehensive restructuring of our Credit Agreement and a refinancing of our Pulitzer Notes debt, substantially enhancing our liquidity and operating flexibility until April 2012. Since February 2009, we have satisfied all interest payments and substantially all principal payments due under our debt facilities with our cash flows. We expect all remaining interest payments and substantially all principal payments due in 2010 will be satisfied by our continuing cash flows.
     
    Our ability to operate as a going concern is dependent on our ability to remain in compliance with debt covenants and to refinance or amend our debt agreements as they become due, or earlier if available liquidity is consumed. We are in compliance with our debt covenants at March 28, 2010.
     

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    13 WEEKS ENDED MARCH 28, 2010
     
    Operating results, as reported in the Consolidated Financial Statements, are summarized below:
     
    13 Weeks Ended
     
     
     
     
    (Thousands of Dollars, Except Per Share Data)
    March 28
    2010
    March 29
    2009
    Percent Change
     
     
     
     
     
     
     
    Advertising revenue:
     
     
     
     
     
     
    Retail
    73,536
     
     
    79,853
     
     
    (7.9
    )
     
    Classified:
     
     
     
     
     
     
    Daily newspapers:
     
     
     
     
     
     
    Employment
    5,110
     
     
    6,413
     
     
    (20.3
    )
     
    Automotive
    5,879
     
     
    7,461
     
     
    (21.2
    )
     
    Real estate
    5,764
     
     
    7,314
     
     
    (21.2
    )
     
    All other
    10,512
     
     
    9,946
     
     
    5.7
     
     
    Other publications
    6,649
     
     
    7,552
     
     
    (12.0
    )
     
    Total classified
    33,914
     
     
    38,686
     
     
    (12.3
    )
     
    Online
    11,314
     
     
    9,919
     
     
    14.1
     
     
    National
    8,734
     
     
    9,591
     
     
    (8.9
    )
     
    Niche publications
    3,065
     
     
    3,480
     
     
    (11.9
    )
     
    Total advertising revenue
    130,563
     
     
    141,529
     
     
    (7.7
    )
     
    Circulation
    45,018
     
     
    47,086
     
     
    (4.4
    )
     
    Commercial printing
    2,696
     
     
    3,042
     
     
    (11.4
    )
     
    Online services and other
    7,467
     
     
    7,187
     
     
    3.9
     
     
    Total operating revenue
    185,744
     
     
    198,844
     
     
    (6.6
    )
     
    Compensation
    79,298
     
     
    84,295
     
     
    (5.9
    )
     
    Newsprint and ink
    13,061
     
     
    20,664
     
     
    (36.8
    )
     
    Other operating expenses
    59,793
     
     
    62,871
     
     
    (4.9
    )
     
    Workforce adjustments
    290
     
     
    2,351
     
     
    (87.7
    )
     
     
    152,442
     
     
    170,181
     
     
    (10.4
    )
     
    Operating cash flow
    33,302
     
     
    28,663
     
     
    16.2
     
     
    Depreciation and amortization
    18,479
     
     
    20,500
     
     
    (9.9
    )
     
    Impairment of goodwill and other assets
    3,290
     
     
    144,862
     
     
    (97.7
    )
     
    Curtailment gains
    13,882
     
     
    —
     
     
       NM
     
    Equity in earnings of associated companies
    1,277
     
     
    348
     
     
       NM
     
    Reduction of investment in TNI
    —
     
     
    9,951
     
     
       NM
     
    Operating income (loss)
    26,692
     
     
    (146,302
    )
     
       NM
     
    Non-operating expense, net
    (17,469
    )
     
    (27,586
    )
     
    (36.7
    )
     
    Income (loss) before income taxes
    9,223
     
     
    (173,888
    )
     
       NM
     
    Income tax expense (benefit)
    6,241
     
     
    (63,999
    )
     
       NM
     
    Income (loss) from continuing operations
    2,982
     
     
    (109,889
    )
     
       NM
     
    Discontinued operations, net
    —
     
     
    —
     
     
    —
     
     
    Net income (loss)
    2,982
     
     
    (109,889
    )
     
       NM
     
    Net income (loss) attributable to non-controlling interests
    (9
    )
     
    (38
    )
     
    (76.3
    )
     
    Decrease in redeemable non-controlling interest
    —
     
     
    58,094
     
     
       NM
     
    Income (loss) attributable to Lee Enterprises, Incorporated
    2,991
     
     
    (51,757
    )
     
       NM
     
    Other comprehensive income (loss), net
    (9,335
    )
     
    12,822
     
     
       NM
     
    Comprehensive income (loss)
    (6,344
    )
     
    (38,935
    )
     
       NM
     
     
     
     
     
     
     
     
    Income (loss) from continuing operations attributable to Lee Enterprises, Incorporated
    2,991
     
     
    (51,757
    )
     
       NM
     
     
     
     
     
     
     
     
    Earnings (loss) per common share attributable to Lee Enterprises, Incorporated:
     
     
     
     
     
     
    Basic
    0.07
     
     
    (1.16
    )
     
       NM
     
    Diluted
    0.07
     
     
    (1.16
    )
     
       NM
     
     
    References to the 2010 Quarter refer to the 13 weeks ended March 28, 2010. Similarly, references to the 2009

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    Quarter refer to the 13 weeks ended March 29, 2009. Revenue, as reported, and same property revenue are the same as there were no acquisitions or divestitures in 2010 or 2009.
     
    For the 2010 Quarter, total operating revenue decreased $13,100,000, or 6.6%, compared to the 2009 Quarter. A small, but growing, number of our enterprises have begun to report positive year-over-year revenue. While still negative year-over-year, advertising revenue trends improved in each month of the 2010 Quarter from the 2009 Quarter.
     
    Advertising Revenue
     
    In the 2010 Quarter, advertising revenue decreased $10,966,000, or 7.7%. On a combined basis, print and online retail advertising decreased 6.4%. Print retail revenue decreased $6,317,000, or 7.9%, in the 2010 Quarter. A 3.1% decrease in daily newspaper retail advertising lineage contributed to the overall decrease. Average retail rates, excluding preprint insertions, decreased 8.9% in the 2010 Quarter. Retail preprint insertion revenue decreased 3.2%. Online retail advertising increased 21.2%, partially offsetting print declines.
     
    The table below combines print and online advertising revenue and reclassifies certain print revenue reported as retail to classified based on the primary business of the advertiser:
     
    13 Weeks Ended
    (Thousands of Dollars)
    March 28
    2010
    March 29
    2009
    Percent Change
     
     
     
     
     
     
     
    Retail
    77,249
     
     
    82,503
     
     
    (6.4
    )
     
     
     
     
     
     
     
     
    Classified:
     
     
     
     
     
     
    Employment
    8,458
     
     
    10,131
     
     
    (16.5
    )
     
    Automotive
    9,766
     
     
    11,083
     
     
    (11.9
    )
     
    Real estate
    7,752
     
     
    9,423
     
     
    (17.7
    )
     
    Other
    15,098
     
     
    15,109
     
     
    (0.1
    )
     
    Total classified revenue
    41,074
     
     
    45,746
     
     
    (10.2
    )
     
     
    On a combined basis, print and online classified revenue decreased 10.2%. Print classified advertising revenue decreased $4,772,000, or 12.3%, in the 2010 Quarter. Higher rate print employment advertising in our daily newspapers decreased 20.3%, reflecting high unemployment nationally. Print automotive advertising decreased 21.2% amid an industry-wide sales decline. Print real estate advertising decreased 21.2% in a weak housing market nationally, which also negatively impacted the home improvement, furniture and home electronics categories of retail revenue. Other daily newspaper print classified advertising increased 5.7%. Classified advertising rates decreased 8.4%. Online classified advertising increased 3.9%, partially offsetting print declines.
     
    Advertising lineage, as reported for our daily newspapers only, consists of the following:  
     
    13 Weeks Ended
    (Thousands of Inches)
    March 28
    2010
    March 29
    2009
    Percent Change
     
     
     
     
     
     
     
    Retail
    2,380
     
     
    2,457
     
     
    (3.1
    )
     
    National
    119
     
     
    111
     
     
    7.2
     
     
    Classified
    2,570
     
     
    2,696
     
     
    (4.7
    )
     
     
    5,069
     
     
    5,264
     
     
    (3.7
    )
     
     
    On a standalone basis, online advertising revenue increased 14.1% in the 2010 Quarter. Year-over-year total online advertising turned positive in the month of December 2009.
     
    National advertising decreased $857,000, or 8.9%, due to a 7.2% increase in lineage offset by a 17.0% decrease in average national rate. Advertising in niche publications decreased 11.9%.
     
    Despite declines in advertising revenue, our total advertising results have historically benchmarked favorably to industry averages reported by the Newspaper Association of America.

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    Circulation and Other Revenue
     
    Circulation revenue decreased $2,068,000, or 4.4%, in the 2010 Quarter. Our unaudited average daily newspaper circulation units, including TNI and MNI, decreased 4.5% and Sunday circulation decreased 5.9% for the 2010 Quarter, compared to the 2009 Quarter. Research in our larger markets indicates we are reaching an increasingly larger audience in these markets through the combination of stable newspaper readership and online growth.
     
    Commercial printing revenue decreased $346,000, or 11.4%, in the 2010 Quarter. Online services and other revenue increased $280,000, or 3.9%, in the 2010 Quarter.
     
    Operating Expenses
     
    Costs other than depreciation, amortization, impairment charges and other unusual matters decreased $15,678,000, or 9.3%, in the 2010 Quarter, and decreased $17,235,000, or 10.5%, on a same property basis.
     
    Compensation expense decreased $4,997,000, or 5.9%, in the 2010 Quarter, driven by a decline in average full time equivalent employees of 7.7%. Bonus programs and certain other employee benefits were also substantially reduced, beginning in 2009.
     
    Newsprint and ink costs decreased $7,603,000, or 36.8%, in the 2010 Quarter due to decreased usage from less advertising, reduced page sizes and some reduction of content, as well as lower average unit prices. Volume decreased 12.7%. See Item 3, “Commodities”, included herein, for further discussion and analysis of the impact of newsprint on our business.
     
    Other operating expenses, which are comprised of all operating costs not considered to be compensation, newsprint, depreciation, amortization, or unusual matters, decreased $3,078,000, or 4.9%, in the 2010 Quarter. Most categories of such costs declined.
     
    Reductions in staffing resulted in workforce adjustment costs totaling $290,000 and $2,351,000 in the 2010 Quarter and 2009 Quarter, respectively.
     
    We are engaged in various efforts to continue to reduce our operating expenses in 2010 and beyond. We expect operating expenses, excluding depreciation, amortization and unusual matters, to decline approximately 9.0% in 2010.
     
    Results of Operations
     
    As a result of the factors noted above, operating cash flow increased 16.2% in the 2010 Quarter compared to the 2009 Quarter. Operating cash flow margin increased to 17.9% from 14.4% in the 2009 Quarter reflecting a smaller percentage decrease in operating revenue than the decrease in operating expenses.
     
    Depreciation expense decreased $1,236,000, or 14.7%, in the 2010 Quarter due to lower levels of capital spending in 2009 and 2008. Amortization expense decreased $785,000, or 6.5%, in the 2010 Quarter due to impairment charges in 2009 and 2008, which reduced the balances of amortizable intangible assets.
     
    In the 13 weeks ended March 28, 2010, we reduced the carrying value of equipment no longer in use by $3,290,000.
     
    Due primarily to the continuing and (at the time) increasing difference between our stock price and the per share carrying value of our net assets, we analyzed the carrying value of our net assets as of December 28, 2008 and again as of March 29, 2009. Deterioration in our revenue and the overall recessionary operating environment for us and other publishing companies were also factors in the timing of the analyses.
     
    As a result, we recorded pretax, non-cash charges to reduce the carrying value of goodwill, nonamortized and amortizable intangible assets in the 13 weeks ended December 28, 2008 and March 29, 2009. Additional pretax, non-cash charges were recorded to reduce the carrying value of TNI. We also recorded pretax, non-cash charges to reduce the carrying value of property and equipment. We recorded deferred income tax benefits related to these charges.

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    Because of the timing of the determination of impairment and complexity of the calculations required, the amounts recorded in the 13 weeks ended March 29, 2009 were preliminary. The final analysis, which was completed in the 13 weeks ended June 28, 2009, resulted in additional pretax, non-cash charges.
     
    2009 impairment charges and the related income tax benefit are summarized as follows:
     
    13 Weeks Ended
     
     
    (Thousands of Dollars)
    December 28
    2008
    March 29
    2009
    June 28
    2009
    September 27 2009
    Total
     
     
     
     
     
     
     
     
     
     
     
    Goodwill
    67,781
     
     
    107,115
     
     
    18,575
     
     
    —
     
     
    193,471
     
     
    Mastheads
    —
     
     
    17,884
     
     
    (3,829
    )
     
    —
     
     
    14,055
     
     
    Customer and newspaper subscriber lists
    —
     
     
    18,928
     
     
    14,920
     
     
    —
     
     
    33,848
     
     
    Property and equipment
    2,264
     
     
    935
     
     
    —
     
     
    1,380
     
     
    4,579
     
     
     
    70,045
     
     
    144,862
     
     
    29,666
     
     
    1,380
     
     
    245,953
     
     
    Reduction in investment in TNI
    —
     
     
    9,951
     
     
    10,000
     
     
    —
     
     
    19,951
     
     
    Income tax benefit
    (14,261
    )
     
    (39,470
    )
     
    (11,720
    )
     
    (489
    )
     
    (65,940
    )
     
     
    55,784
     
     
    115,343
     
     
    27,946
     
     
    891
     
     
    199,964
     
     
     
    In December 2009, we notified certain participants in our postretirement medical plans of changes to be made to the plans, including increases in participant premium cost-sharing and elimination of coverage for certain participants. The changes resulted in non-cash curtailment gains of $31,130,000, will reduce 2010 net periodic postretirement medical cost by $1,460,000 beginning in the 13 weeks ending March 28, 2010, and reduced the benefit obligation liability at December 27, 2009 by $28,750,000.
     
    In March 2010, members of the St. Louis Newspaper Guild voted to approve a new 5.5 year contract, effective April 1, 2010. The new contract eliminated postretirement medical coverage for active employees and defined pension benefits were frozen. The elimination of postretirement medical coverage resulted in non-cash curtailment gains of $11,878,000, which were recognized in the 13 weeks ended March 28, 2010 and reduced the benefit obligation liability at March 28, 2010 by $6,576,000. The freeze of defined pension benefits resulted in non-cash curtailment gains of $2,004,000, which were recognized in the 13 weeks ended March 28, 2010, will reduce 2010 net periodic pension expenses by $668,000 beginning in the 13 weeks ending June 27, 2010, and reduced the benefit obligation liability at March 28, 2010 by $2,004,000.
     
    Increases in employee cost sharing discussed above were treated as negative plan amendments. Curtailment treatment was utilized in situations in which coverage was eliminated. Curtailment gains were calculated by revaluation of plan liabilities after consideration of other plan changes.
     
    Equity in earnings in associated companies increased $929,000 in the 2010 Quarter. Operations of these businesses were similarly impacted by economic conditions. In May 2009, Citizen discontinued print publication of the Tucson Citizen. The change resulted in workforce adjustment and transition costs of approximately $1,925,000, of which $1,093,000 was incurred directly by TNI.
     
    The factors noted above resulted in operating income of $26,692,000 in the 2010 Quarter and an operating loss of $146,302,000 in the 2009 Quarter.
     
    Nonoperating Income and Expense
     
    Financial expense decreased $1,388,000, or 8.1%, to $15,643,000 in the 2010 Quarter due to lower debt balances and lower interest rates. Our weighted average cost of debt was 4.97% at the end of the 2010 Quarter compared to 6.02% at the end of the 2009 Quarter.
     
    As more fully discussed in Note 4 of the Notes to Consolidated Financial Statements, included herein, amendments to our Credit Agreement consummated in 2009 increased financial expense in 2009 in relation to LIBOR. We are now subject to minimum LIBOR levels, which are currently in excess of actual LIBOR. The maximum rate has been

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    increased to the LIBOR minimum plus 450 basis points, and we could also be subject to additional non-cash payment-in-kind interest if leverage increases above specified levels. At the March 2010 leverage level, our debt under the Credit Agreement will be priced at the applicable LIBOR minimum plus 300 basis points and no payment-in-kind interest will be incurred. The interest rate on the Pulitzer Notes increased 1% to 9.05% in February 2009, until April 2010. The interest rate will increase by 0.5% per year thereafter.
     
    Overall Results
     
    We recognized income tax expense of 67.7% of income from continuing operations before income taxes in the 2010 Quarter and income tax benefit of 36.8% of loss from continuing operations before income taxes in the 2009 Quarter.
     
    In March 2010, as a result of the Affordable Care Act enacted at that time, we wrote off $2,012,000 of deferred income tax assets due to the loss of future tax deductions for providing retiree prescription drug benefits. Deferred income tax expense related to curtailment gains also increased the effective tax rate in the 2010 Quarter. The valuation allowance for deferred income tax assets decreased $17,182,000 in the 2009 Quarter.
     
    As more fully discussed in Note 10 to the Notes to Consolidated Financial Statements, included herein, the Operating Agreement provided Herald a one-time right to require PD LLC to redeem its interest in PD LLC, together with its interest, if any, in DS LLC (the 2010 Redemption). The 2010 Redemption price for Herald's interest was to be determined pursuant to a formula. We recorded the present value of the remaining amount of this potential liability in our Consolidated Balance Sheet in 2008. In 2009, we accrued increases in the liability totaling $1,466,000, which increased loss available to common stockholders. The present value of the 2010 Redemption in February 2009, was approximately $73,602,000.
     
    In February 2009, in conjunction with the Notes Amendment, PD LLC redeemed the 5% interest in PD LLC and DS LLC owned by Herald pursuant to a Redemption Agreement and adopted conforming amendments to the Operating Agreement. As a result, the value of Herald's former interest (the Herald Value) will be settled, at a date determined by Herald between April 2013 and April 2015, based on a calculation of 10% of the fair market value of PD LLC and DS LLC at the time of settlement, less the balance, as adjusted, of the Pulitzer Notes or the equivalent successor debt, if any. We recorded a liability of $2,300,000 in February 2009 as an estimate of the amount of the Herald Value to be disbursed. The determination of the amount of the Herald Value was based on an estimate of fair value using both market and income-based approaches. The actual amount of the Herald Value at the date of settlement will depend on such variables as future cash flows and indebtedness of PD LLC and DS LLC, market valuations of newspaper properties and the timing of the request for redemption.
     
    The Redemption Agreement also terminated Herald's right to exercise its rights under the 2010 Redemption. As a result, in February 2009 we reversed substantially all of our liability related to the 2010 Redemption. The reversal reduced liabilities by $71,302,000 and increased comprehensive income by $58,521,000 and stockholders' equity by $68,824,000.
     

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    As a result of the factors noted above, income attributable to Lee Enterprises, Incorporated totaled $2,991,000 in the 2010 Quarter compared to a loss of $51,757,000 in the 2009 Quarter. We recorded earnings per diluted common share of $0.07 in the 2010 Quarter and a loss per diluted common share of $1.16 in the 2009 Quarter. Excluding unusual matters, as detailed in the table below, diluted earnings per common share, as adjusted, were $0.04 in the 2010 Quarter, compared to a loss per common share, as adjusted, of $0.07 in the 2009 Quarter. Per share amounts may not add due to rounding.
     
    13 Weeks Ended
     
    March 28
    2010
    March 29
    2009
    (Thousands of Dollars, Except Per Share Data)
    Amount
    Per Share
    Amount
    Per Share
     
     
     
     
     
     
     
     
     
    Income (loss) attributable to Lee Enterprises, Incorporated, as reported
    2,991
     
     
    0.07
     
     
    (51,757
    )
     
    (1.16
    )
     
    Adjustments:
     
     
     
     
     
     
     
     
    Impairment of goodwill and other assets, including TNI
    3,290
     
     
     
     
    154,813
     
     
     
     
    Curtailment gains
    (13,882
    )
     
     
     
    —
     
     
     
     
    Debt financing costs
    1,972
     
     
     
     
    12,927
     
     
     
     
    Other, net
    306
     
     
     
     
    2,443
     
     
     
     
     
    (8,314
    )
     
     
     
    170,183
     
     
     
     
    Income tax effect of adjustments, net, and other unusual tax items
    5,223
     
     
     
     
    (63,261
    )
     
     
     
    Income tax adjustment related to Affordable Care Act
    2,012
     
     
     
     
    —
     
     
     
     
     
    (1,079
    )
     
    (0.02
    )
     
    106,922
     
     
    2.41
     
     
    Income attributable to Lee Enterprises, Incorporated, as adjusted
    1,912
     
     
    0.04
     
     
    55,165
     
     
    1.24
     
     
    Change in redeemable non-controlling interest liability
    —
     
     
    —
     
     
    (58,094
    )
     
    (1.31
    )
     
    Net income (loss) attributable to Lee Enterprises, Incorporated, as adjusted
    1,912
     
     
    0.04
     
     
    (2,929
    )
     
    (0.07
    )
     
     

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    26 WEEKS ENDED MARCH 28, 2010
     
    Operating results, as reported in the Consolidated Financial Statements, are summarized below:
     
    26 Weeks Ended
     
     
     
     
    (Thousands of Dollars, Except Per Share Data)
    March 28
    2010
    March 29
    2009
    Percent Change
     
     
     
     
     
     
     
    Advertising revenue:
     
     
     
     
     
     
    Retail
    168,315
     
     
    192,787
     
     
    (12.7
    )
     
    Classified:
     
     
     
     
     
     
    Daily newspapers:
     
     
     
     
     
     
    Employment
    9,899
     
     
    15,099
     
     
    (34.4
    )
     
    Automotive
    12,284
     
     
    16,104
     
     
    (23.7
    )
     
    Real estate
    12,135
     
     
    15,440
     
     
    (21.4
    )
     
    All other
    21,691
     
     
    19,992
     
     
    8.5
     
     
    Other publications
    13,248
     
     
    15,909
     
     
    (16.7
    )
     
    Total classified
    69,257
     
     
    82,544
     
     
    (16.1
    )
     
    Online
    21,963
     
     
    21,540
     
     
    2.0
     
     
    National
    19,379
     
     
    22,442
     
     
    (13.6
    )
     
    Niche publications
    6,051
     
     
    6,799
     
     
    (11.0
    )
     
    Total advertising revenue
    284,965
     
     
    326,112
     
     
    (12.6
    )
     
    Circulation
    90,133
     
     
    94,642
     
     
    (4.8
    )
     
    Commercial printing
    5,627
     
     
    6,511
     
     
    (13.6
    )
     
    Online services and other
    14,857
     
     
    15,134
     
     
    (1.8
    )
     
    Total operating revenue
    395,582
     
     
    442,399
     
     
    (10.6
    )
     
    Compensation
    161,433
     
     
    178,778
     
     
    (9.7
    )
     
    Newsprint and ink
    25,754
     
     
    45,818
     
     
    (43.8
    )
     
    Other operating expenses
    121,270
     
     
    132,821
     
     
    (8.7
    )
     
    Workforce adjustments
    687
     
     
    3,189
     
     
    (78.5
    )
     
     
    309,144
     
     
    360,606
     
     
    (14.3
    )
     
    Operating cash flow
    86,438
     
     
    81,793
     
     
    5.7
     
     
    Depreciation and amortization
    37,162
     
     
    40,899
     
     
    (9.1
    )
     
    Impairment of goodwill and other assets
    3,290
     
     
    214,907
     
     
    (98.5
    )
     
    Curtailment gains
    45,012
     
     
    —
     
     
       NM
     
    Equity in earnings of associated companies
    3,466
     
     
    3,412
     
     
    1.6
     
     
    Reduction of investment in TNI
    —
     
     
    9,951
     
     
       NM
     
    Operating income (loss)
    94,464
     
     
    (180,552
    )
     
       NM
     
    Non-operating expense, net
    (39,216
    )
     
    (46,323
    )
     
    (15.3
    )
     
    Income (loss) before income taxes
    55,248
     
     
    (226,875
    )
     
       NM
     
    Income tax expense (benefit)
    24,309
     
     
    (69,523
    )
     
       NM
     
    Income (loss) from continuing operations
    30,939
     
     
    (157,352
    )
     
       NM
     
    Discontinued operations, net
    —
     
     
    (5
    )
     
       NM
     
    Net income (loss)
    30,939
     
     
    (157,357
    )
     
       NM
     
    Net income (loss) attributable to non-controlling interests
    42
     
     
    132
     
     
    (68.2
    )
     
    Decrease in redeemable non-controlling interest
    —
     
     
    57,055
     
     
       NM
     
    Income (loss) attributable to Lee Enterprises, Incorporated
    30,897
     
     
    (100,434
    )
     
       NM
     
    Other comprehensive income, net
    (8,541
    )
     
    11,076
     
     
       NM
     
    Comprehensive income (loss)
    22,356
     
     
    (89,358
    )
     
       NM
     
     
     
     
     
     
     
     
    Income (loss) from continuing operations attributable to Lee Enterprises, Incorporated
    30,897
     
     
    (100,429
    )
     
       NM
     
     
     
     
     
     
     
     
    Earnings (loss) per common share attributable to Lee Enterprises, Incorporated:
     
     
     
     
     
     
    Basic
    0.69
     
     
    (2.26
    )
     
       NM
     
    Diluted
    0.69
     
     
    (2.26
    )
     
       NM
     
     
    References to the 2010 Period refer to the 26 weeks ended March 28, 2010. Similarly, references to the 2009

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    Period refer to the 26 weeks ended March 29, 2009. Revenue, as reported, and same property revenue are the same as there were no acquisitions or divestitures in 2010 or 2009.
     
    For the 2010 Period, total operating revenue decreased $46,817,000, or 10.6%, compared to the 2009 Period. A small, but growing, number of our enterprises have begun to report positive year-over-year revenue. While still negative year-over-year, advertising revenue trends improved in each month of the 2010 Period from the 2009 Period.
     
    Advertising Revenue
     
    In the 2010 Period, advertising revenue decreased $41,147,000, or 12.6%. On a combined basis, print and online retail advertising decreased 11.4%. Print retail revenue decreased $24,472,000, or 12.7%, in the 2010 Period. A 9.0% decrease in daily newspaper retail advertising lineage contributed to the overall decrease. Average retail rates, excluding preprint insertions, decreased 10.2% in the 2010 year to date period. Retail preprint insertion revenue decreased 6.8%. Online retail advertising increased 12.5%, partially offsetting print declines.
     
    The table below combines print and online advertising revenue and reclassifies certain print revenue reported as retail to classified based on the primary business of the advertiser:
     
    26 Weeks Ended
    (Thousands of Dollars)
    March 28
    2010
    March 29
    2009
    Percent Change
     
     
     
     
     
     
     
    Retail
    175,504
     
     
    198,126
     
     
    (11.4
    )
     
     
     
     
     
     
     
     
    Classified:
     
     
     
     
     
     
    Employment
    16,219
     
     
    23,411
     
     
    (30.7
    )
     
    Automotive
    19,996
     
     
    23,813
     
     
    (16.0
    )
     
    Real estate
    16,245
     
     
    20,174
     
     
    (19.5
    )
     
    Other
    30,846
     
     
    30,959
     
     
    (0.4
    )
     
    Total classified revenue
    83,306
     
     
    98,357
     
     
    (15.3
    )
     
     
    On a combined basis, print and online classified revenue decreased 15.3%. Print classified advertising revenue decreased $13,287,000, or 16.1%, in the 2010 Period. Higher rate print employment advertising in our daily newspapers decreased 34.4%, reflecting high unemployment nationally. Print automotive advertising decreased 23.7% amid an industry-wide sales decline. Print real estate advertising decreased 21.4% in a weak housing market nationally, which also negatively impacted the home improvement, furniture and home electronics categories of retail revenue. Other daily newspaper print classified advertising increased 8.5%. Classified advertising rates decreased 11.3%. Online classified advertising decreased 10.1%.
     
    Advertising lineage, as reported for our daily newspapers only, consists of the following:  
     
    26 Weeks Ended
    (Thousands of Inches)
    March 28
    2010
    March 29
    2009
    Percent Change
     
     
     
     
     
     
     
    Retail
    5,240
     
     
    5,760
     
     
    (9.0
    )
     
    National
    271
     
     
    259
     
     
    4.6
     
     
    Classified
    5,278
     
     
    5,665
     
     
    (6.8
    )
     
     
    10,789
     
     
    11,684
     
     
    (7.7
    )
     
     
    On a standalone basis, online advertising revenue increased 2.0% in the 2010 Period. Year-over-year total online advertising turned positive in the month of December 2009.
     
    National advertising decreased $3,063,000, or 13.6%, due to a 4.6% increase in lineage offset by a 22.6% decrease in average national rate. Advertising in niche publications decreased 11.0%.
     
    Despite declines in advertising revenue, our total advertising results have historically benchmarked favorably to industry averages reported by the Newspaper Association of America.

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    Circulation and Other Revenue
     
    Circulation revenue decreased $4,509,000, or 4.8%, in the 2010 Period. Our average daily newspaper circulation units, including TNI and MNI, measured by the Audit Bureau of Circulations, or other independent organizations, decreased 4.8% and Sunday circulation decreased 4.1% for the 2010 Period, compared to the 2009 Period. Research in our larger markets indicates we are reaching an increasingly larger audience in these markets through the combination of [stable] newspaper readership relative to our peers and online growth.
     
    Commercial printing revenue decreased $884,000, or 13.6%, in the 2010 Period. Online services and other revenue decreased $277,000, or 1.8%, in the 2010 Period.
     
    Operating Expenses
     
    Costs other than depreciation, amortization, impairment charges and other unusual matters decreased $48,960,000, or 13.7%, in the 2010 Period, and decreased $53,007,000, or 15.2%, on a same property basis.
     
    Compensation expense decreased $17,345,000, or 9.7%, in the 2010 Period, driven by a decline in average full time equivalent employees of 10.7%. Bonus programs and certain other employee benefits were also substantially reduced, beginning in 2009.
     
    Newsprint and ink costs decreased $20,064,000, or 43.8%, in the 2010 Period due to decreased usage from less advertising, reduced page sizes and some reduction of content, as well as lower average unit prices. Volume decreased 18.8%. See Item 3, “Commodities”, included herein, for further discussion and analysis of the impact of newsprint on our business.
     
    Other operating expenses, which are comprised of all operating costs not considered to be compensation, newsprint, depreciation, amortization, or unusual matters, decreased $11,551,000, or 8.7%, in the 2010 Period. Most categories of such costs declined.
     
    Reductions in staffing resulted in workforce adjustment costs totaling $687,000 and $3,189,000 in the 2010 Period and 2009 Period, respectively.
     
    We are engaged in various efforts to continue to reduce our operating expenses in 2010 and beyond. We expect operating expenses, excluding depreciation, amortization and unusual matters, to decline approximately 9.0% in 2010.
     
    Results of Operations
     
    As a result of the factors noted above, operating cash flow increased 5.7% in the 2010 Period compared to the 2009 year to date period. Operating cash flow margin increased to 21.9% from 18.5% in the 2009 Period reflecting a smaller percentage decrease in operating revenue than the decrease in operating expenses.
     
    Depreciation expense decreased $2,169,000, or 13.0%, in the 2010 Period due to lower levels of capital spending in 2009 and 2008. Amortization expense decreased $1,568,000, or 6.5%, in the 2010 Period due to impairment charges in 2009 and 2008, which reduced the balances of amortizable intangible assets.
     
    In the 13 weeks ended March 28, 2010, we reduced the carrying value of equipment no longer in use by $3,290,000.
     
    Due primarily to the continuing and (at the time) increasing difference between our stock price and the per share carrying value of our net assets, we analyzed the carrying value of our net assets as of December 28, 2008 and again as of March 29, 2009. Deterioration in our revenue and the overall recessionary operating environment for us and other publishing companies were also factors in the timing of the analyses.
     
    As a result, we recorded pretax, non-cash charges to reduce the carrying value of goodwill, nonamortized and amortizable intangible assets in the 13 weeks ended December 28, 2008 and March 29, 2009. Additional pretax, non-cash charges were recorded to reduce the carrying value of TNI. We also recorded pretax, non-cash charges to reduce the carrying value of property and equipment. We recorded deferred income tax benefits related to these

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    Table of Contents

    charges.
     
    Because of the timing of the determination of impairment and complexity of the calculations required, the amounts recorded in the 26 weeks ended March 29, 2009 were preliminary. The final analysis, which was completed in the 26 weeks ended June 28, 2009, resulted in additional pretax, non-cash charges.
     
    2009 impairment charges and the related income tax benefit are summarized as follows:
     
    13 Weeks Ended
     
     
    (Thousands of Dollars)
    December 28
    2008
    March 29
    2009
    June 28
    2009
    September 27 2009
    Total
     
     
     
     
     
     
     
     
     
     
     
    Goodwill
    67,781
     
     
    107,115
     
     
    18,575
     
     
    —
     
     
    193,471
     
     
    Mastheads
    —
     
     
    17,884
     
     
    (3,829
    )
     
    —
     
     
    14,055
     
     
    Customer and newspaper subscriber lists
    —
     
     
    18,928
     
     
    14,920
     
     
    —
     
     
    33,848
     
     
    Property and equipment
    2,264
     
     
    935
     
     
    —
     
     
    1,380
     
     
    4,579
     
     
     
    70,045
     
     
    144,862
     
     
    29,666
     
     
    1,380
     
     
    245,953
     
     
    Reduction in investment in TNI
    —
     
     
    9,951
     
     
    10,000
     
     
    —
     
     
    19,951
     
     
    Income tax benefit
    (14,261
    )
     
    (39,470
    )
     
    (11,720
    )
     
    (489
    )
     
    (65,940
    )
     
     
    55,784
     
     
    115,343
     
     
    27,946
     
     
    891
     
     
    199,964
     
     
     
    In December 2009, we notified certain participants in our postretirement medical plans of changes to be made to the plans, including increases in participant premium cost-sharing and elimination of coverage for certain participants. The changes resulted in non-cash curtailment gains of $31,130,000, will reduce 2010 net periodic postretirement medical cost by $1,460,000 beginning in the 13 weeks ending March 28, 2010, and reduced the benefit obligation liability at December 27, 2009 by $28,750,000.
     
    In March 2010, members of the St. Louis Newspaper Guild voted to approve a new 5.5 year contract, effective April 1, 2010. The new contract eliminated postretirement medical coverage for active employees and defined pension benefits were frozen. The elimination of postretirement medical coverage resulted in non-cash curtailment gains of $11,878,000, which were recognized in the 13 weeks ended March 28, 2010, and reduced the benefit obligation liability at March 28, 2010 by $6,576,000. The freeze of defined pension benefits resulted in non-cash curtailment gains of $2,004,000, which were recognized in the 13 weeks ended March 28, 2010, will reduce 2010 net periodic pension expenses by $668,000 beginning in the 13 weeks ending June 27, 2010, and reduced the benefit obligation liability at March 28, 2010 by $2,004,000.
     
    Increases in employee cost sharing discussed above were treated as negative plan amendments. Curtailment treatment was utilized in situations in which coverage was eliminated. Curtailment gains were calculated by revaluation of plan liabilities after consideration of other plan changes.
     
    Equity in earnings in associated companies increased $54,000, or 1.6%, in the 2010 Period. Operations of these businesses were similarly impacted by economic conditions. In May 2009, Citizen discontinued print publication of the Tucson Citizen. The change resulted in workforce adjustment and transition costs of approximately $1,925,000, of which $1,093,000 was incurred directly by TNI.
     
    The factors noted above resulted in operating income of  $94,464,000 in the 2010 Period and an operating loss of  $180,552,000 in the 2009 Period.
     
    Nonoperating Income and Expense
     
    Financial expense increased $332,000, or 0.9%, to $35,448,000 in the 2010 Period due primarily to termination of an interest rate swap. Our weighted average cost of debt was 4.97% at the end of the 2010 Period compared to 6.02% at the end of the 2009 Period.
     
    As more fully discussed in Note 4 of the Notes to Consolidated Financial Statements, included herein, amendments to our Credit Agreement consummated in 2009 increased financial expense in 2009 in relation to LIBOR. We are now subject to minimum LIBOR levels, which are currently in excess of actual LIBOR. The maximum rate has been

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    increased to the LIBOR minimum plus 450 basis points, and we could also be subject to additional non-cash payment-in-kind interest if leverage increases above specified levels. At the March 2010 leverage level, our debt under the Credit Agreement will be priced at the applicable LIBOR minimum plus 300 basis points and no payment-in-kind interest will be incurred. The interest rate on the Pulitzer Notes increased 1% to 9.05% in February 2009, until April 2010. The interest rate will increase by 0.5% per year thereafter.
     
    Overall Results
     
    We recognized income tax expense of 44.0% of income from continuing operations before income taxes in the 2010 Period and income tax benefit of 30.6% of loss from continuing operations before income taxes in the 2009 Period.
     
    In March 2010, as a result of the Affordable Care Act enacted at that time, we wrote off $2,012,000 of deferred income tax assets due to the loss of future tax deductions for providing retiree prescription drug benefits. Deferred income tax expense related to curtailment gains also increased the effective tax rate in the 2010 Quarter. The valuation allowance for deferred income tax assets decreased $16,030,000 in the 2009 Period.
     
    As more fully discussed in Note 10 to the Notes to Consolidated Financial Statements, included herein, the Operating Agreement provided Herald a one-time right to require PD LLC to redeem its interest in PD LLC, together with its interest, if any, in DS LLC (the 2010 Redemption). The 2010 Redemption price for Herald's interest was to be determined pursuant to a formula. We recorded the present value of the remaining amount of this potential liability in our Consolidated Balance Sheet in 2008. In 2009, we accrued increases in the liability totaling $1,466,000, which increased loss available to common stockholders. The present value of the 2010 Redemption in February 2009, was approximately $73,602,000.
     
    In February 2009, in conjunction with the Notes Amendment, PD LLC redeemed the 5% interest in PD LLC and DS LLC owned by Herald pursuant to a Redemption Agreement and adopted conforming amendments to the Operating Agreement. As a result, the value of Herald's former interest (the Herald Value) will be settled, at a date determined by Herald between April 2013 and April 2015, based on a calculation of 10% of the fair market value of PD LLC and DS LLC at the time of settlement, less the balance, as adjusted, of the Pulitzer Notes or the equivalent successor debt, if any. We recorded a liability of $2,300,000 in February 2009 as an estimate of the amount of the Herald Value to be disbursed. The determination of the amount of the Herald Value was based on an estimate of fair value using both market and income-based approaches. The actual amount of the Herald Value at the date of settlement will depend on such variables as future cash flows and indebtedness of PD LLC and DS LLC, market valuations of newspaper properties and the timing of the request for redemption.
     
    The Redemption Agreement also terminated Herald's right to exercise its rights under the 2010 Redemption. As a result, in February 2009 we reversed substantially all of our liability related to the 2010 Redemption. The reversal reduced liabilities by $71,302,000 and increased comprehensive income by $58,521,000 and stockholders' equity by $68,824,000.
     

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    As a result of the factors noted above, income attributable to Lee Enterprises, Incorporated totaled $30,897,000 in the 2010 Period compared to a loss of $100,434,000 in the 2009 Period. We recorded earnings per diluted common share of $0.69 in the 2010 Period and a loss per diluted common share of $2.26 in the 2009 Period. Excluding unusual matters, as detailed in the table below, diluted earnings per common share, as adjusted, were $0.30 in the 2010 Period, compared to $0.17 in the 2009 Period. Per share amounts may not add due to rounding.
     
    26 Weeks Ended
     
    March 28
    2010
    March 29
    2009
    (Thousands of Dollars, Except Per Share Data)
    Amount
    Per Share
    Amount
    Per Share
     
     
     
     
     
     
     
     
     
    Income (loss) attributable to Lee Enterprises, Incorporated, as reported
    30,897
     
     
    0.69
     
     
    (100,434
    )
     
    (2.26
    )
     
    Adjustments:
     
     
     
     
     
     
     
     
    Impairment of goodwill and other assets, including TNI
    3,290
     
     
     
     
    224,858
     
     
     
     
    Curtailment gains
    (45,012
    )
     
     
     
    —
     
     
     
     
    Debt financing costs
    3,967
     
     
     
     
    14,850
     
     
     
     
    Other, net
    1,095
     
     
     
     
    2,665
     
     
     
     
     
    (36,660
    )
     
     
     
    242,373
     
     
     
     
    Income tax effect of adjustments, net, and other unusual tax items
    17,013
     
     
     
     
    (77,131
    )
     
     
     
    Income tax adjustment related to Affordable Care Act
    2,012
     
     
     
     
    —
     
     
     
     
     
    (17,635
    )
     
    (0.40
    )
     
    165,242
     
     
    3.72
     
     
    Income attributable to Lee Enterprises, Incorporated, as adjusted
    13,262
     
     
    0.30
     
     
    64,808
     
     
    1.46
     
     
    Change in redeemable non-controlling interest liability
    —
     
     
    —
     
     
    (57,055
    )
     
    (1.28
    )
     
    Net income attributable to Lee Enterprises, Incorporated, as adjusted
    13,262
     
     
    0.30
     
     
    7,753
     
     
    0.17
     
     
     

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    LIQUIDITY AND CAPITAL RESOURCES
     
    Operating Activities
     
    Cash provided by operating activities of continuing operations was $50,519,000 in the 2010 Period and $33,643,000 in the 2009 Period. Operating income substantially improved in the 2010 Period. Depreciation and amortization decreased as discussed under “Results of Operations” above. In the 2010 Period, we also recognized non-cash curtailment gains totaling $45,012,000. Operating losses in the 2009 Period were caused primarily by non-cash charges for impairment of goodwill and other assets, net of the related deferred income tax benefit. The net change in all of the aforementioned factors accounted for the majority of the increase in cash provided between periods. Changes in deferred income taxes, operating assets and liabilities and the timing of income tax payments accounted for the bulk of the remainder of the change in cash provided in both periods.
     
    Investing Activities
     
    Cash required for investing activities totaled $3,934,000 in the 2010 Period and cash provided from investing activities totaled $114,466,000 in the 2009 Period. Capital spending totaled $4,806,000 in the 2010 Period and $8,398,000 in the 2009 Period and accounted for substantially all of the net usage of funds in the 2010 Period. We liquidated $120,000,000 of our restricted cash and investments in the 2009 Period in order to fund a $120,000,000 reduction in the balance of the Pulitzer Notes.
     
    We anticipate that funds necessary for capital expenditures, which are expected to total between $11,000,000 and $13,000,000 in 2010, and other requirements, will be available from internally generated funds, or availability under our existing Credit Agreement. The 2009 Amendments, as more fully discussed in Note 4 to the Consolidated Financial Statements, included herein, limit capital expenditures to $29,300,000 in 2010.
     
    Financing Activities
     
    Cash required for financing activities totaled $34,470,000 in the 2010 Period and $157,331,000 in the 2009 Period. Debt reduction accounted for the majority of the usage of funds in both periods. The final dividend declared in 2008 was paid in the 2009 Period, as were certain financing costs related to the 2009 Amendments.
     
    The 2009 Amendments require us to suspend stockholder dividends and share repurchases through April 2012.
     
    Liquidity
     
    We expect to utilize a portion of our capacity under our revolving credit facility to fund part of 2010 principal payments required under the Credit Agreement. At March 28, 2010, we had $297,425,000 outstanding under the revolving credit facility, and after consideration of the 2009 Amendments and letters of credit, have approximately $63,154,000 available for future use. Including cash and restricted cash, our liquidity at March 28, 2010 totals $92,547,000. This liquidity amount excludes any future cash flows. Remaining mandatory principal payments on debt in 2010 total $34,000,000. Since February 2009, we have satisfied all interest payments and substantially all principal payments due under our debt facilities with our cash flows. We expect all remaining interest payments and substantially all principal payments due in 2010 will be satisfied by our continuing cash flows.
     
    Our ability to operate as a going concern is dependent on our ability to remain in compliance with debt covenants and to refinance or amend our debt agreements as they become due, or earlier if available liquidity is consumed. We are in compliance with our debt covenants at March 28, 2010.
     
    There are numerous potential consequences under the Credit Agreement, and Guaranty Agreement and Note Agreement related to the Pulitzer Notes, if an event of default, as defined, occurs and is not remedied. Many of those consequences are beyond our control, and the control of Pulitzer, and PD LLC, respectively. The occurrence of one or more events of default would give rise to the right of the Lenders or the Noteholders, or both of them, to exercise their remedies under the Credit Agreement and the Note and Guaranty Agreements, respectively, including, without limitation, the right to accelerate all outstanding debt and take actions authorized in such circumstances under applicable collateral security documents.
     
    The 2010 Redemption, as discussed more fully in Note 10 to the Consolidated Financial Statements, included herein, eliminated the potential requirement for a substantial cash outflow in April 2010. This event also substantially

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    enhanced our liquidity.
     
    CHANGES IN LAWS AND REGULATIONS
     
    The Affordable Care Act was enacted into law in March 2010. As a result, in March 2010, we wrote off $2,012,000 of deferred income tax assets due to the loss of future tax deductions for providing retiree prescription drug benefits.
     
    We expect the Affordable Care Act will be supported by a substantial number of underlying regulations, many of which have not been issued. Accordingly, a complete determination of the impact of the Affordable Care Act cannot be made at this time. However, we expect our future health care costs to increase more rapidly based on analysis recently completed by the United States Department of Health and Human Services, input from independent advisors, and our understanding of various provisions of the Affordable Care Act that differ from our current medical plans, such as:
     
  		•
    Higher maximum age for dependent coverage;
  • Elimination of lifetime benefit caps; and,
  • Free choice vouchers for certain lower income employees.
     
    Administrative costs are also likely to increase as a result of new compliance reporting. New costs being imposed on other medical care businesses, such as health insurers, pharmaceutical companies and medical device manufacturers, may be passed on to us in the form of higher costs. We may be able to mitigate certain of these future cost increases through changes in plan design.
     
    We do not expect the Affordable Care Act will have a significant impact on our postretirement medical benefit obligation liability.
     
    INFLATION
     
    Price increases (or decreases) for our products are implemented when deemed appropriate by us. We continuously evaluate price increases, productivity improvements, sourcing efficiencies and other cost reductions to mitigate the impact of inflation.
     
    Energy costs have become more volatile, and may increase in the future as a result of carbon emissions legislation currently under consideration in the United States Congress or under regulations being developed by the United States Environmental Protection Agency.
     
     
    Item 3.       Quantitative and Qualitative Disclosures About Market Risk
     
    We are exposed to market risk stemming from changes in interest rates and commodity prices. Changes in these factors could cause fluctuations in earnings and cash flows. In the normal course of business, exposure to certain of these market risks is managed as described below.
     
    INTEREST RATES
     
    Restricted Cash and Investments
     
    Interest rate risk in our restricted cash and investments is managed by investing only in short-term securities. Only U.S. Government and related securities are permitted.
     
    Debt
     
    Our debt structure and interest rate risk are managed through the use of fixed and floating rate debt. Our primary exposure is to LIBOR. A 100 basis point increase or decrease to LIBOR would, in theory, decrease or increase, respectively, income from continuing operations before income taxes on an annualized basis by approximately $9,640,000, based on $964,031,000 of floating rate debt outstanding at March 28, 2010.
     
    Our debt under the Credit Agreement is subject to minimum interest rate levels of 1.25%, 2.0% and 2.5% for

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    borrowings for one month, three month and six month periods, respectively. At March 28, 2010, all of our outstanding debt under the Credit Agreement is based on one month borrowing. Based on the difference between interest rates at the end of April 2010 and our minimum rate for one month borrowing, 30 day LIBOR would need to increase approximately 100 basis points before our borrowing cost would begin to be impacted by an increase in interest rates.
     
    As of November 30, 2009, the full amount of the outstanding balance under the Credit Agreement became subject to floating interest rates, as all interest rate swaps and collars expired or were terminated at or prior to that date. We regularly evaluate alternatives to hedge the related interest rate risk.
     
    Certain of our interest-earning assets, including those in employee benefit plans, also function as a natural hedge against fluctuations in interest rates on debt.
     
    COMMODITIES
     
    Certain materials used by us are exposed to commodity price changes. We manage this risk through instruments such as purchase orders and non-cancelable supply contracts. We are a participant in a buying cooperative with other publishing companies, primarily for acquisition of newsprint. We are also involved in continuing programs to mitigate the impact of cost increases through identification of sourcing and operating efficiencies. Primary commodity price exposures are newsprint and, to a lesser extent, ink and energy costs.
     
    Significant declines in North American newsprint demand led to an approximate 45% price decline between December 2008 and August 2009. 2009 declines in newsprint demand were driven by the recessionary pressures on print advertising as well as noteworthy newsprint conservation programs, particularly newspaper page size reductions, initiated in 2008. The 2009 demand decline outpaced the North American newsprint suppliers' ability to reduce newsprint production, which led to excess inventories at both the producer and publisher levels. Most newsprint producers reported late summer 2009 transaction selling prices to be below cash operating costs. This operating loss position, along with the move of the largest North American newsprint producer, AbitibiBowater Inc., and White Birch Paper Holding Company to seek financial reorganization, has sparked several monthly price increase announcements, beginning in September 2009 and continuing through June 2010, certain of which have since been delayed or rescinded. Some North American newsprint producers have removed production capacity on a permanent basis in addition to idling excess capacity on an indefinite, but temporary basis, in an effort to balance capacity with current demand trends and support the announced price increases and their return to a positive cash flow position. The final extent of changes in price, if any, is subject to negotiation between newsprint producers and us.
     
    A $10 per tonne price increase for 30 pound newsprint would result in an annualized reduction in income before income taxes of approximately $981,000 based on anticipated consumption in 2010, excluding consumption of MNI and TNI and the impact of LIFO accounting. Such prices may also decrease. We substantially increased our supply of newsprint in 2009, which may help to mitigate the impact of future price increases.
     
    SENSITIVITY TO CHANGES IN VALUE
     
    Our fixed rate debt consists of the Pulitzer Notes, which are not traded on an active market and are held by a small group of Noteholders. Coupled with the volatility of substantially all domestic credit markets that exists we are unable, as of March 28, 2010, to measure the maximum potential impact on fair value of fixed rate debt from adverse changes in market interest rates under normal market conditions. The change in value, if determined, would likely be significant.
     
    Item 4.       Controls and Procedures
     
    EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
     
    Under the supervision of our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”). Based on this evaluation, our chief executive officer and chief financial officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective such that the information relating to the Company, including its consolidated subsidiaries,

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    required to be disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
     
    CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
     
    There have been no changes in our internal control over financial reporting that occurred during the 13 weeks ended March 28, 2010 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.
     
    PART II
    OTHER INFORMATION
     
    Item 1.        Legal Proceedings
     
    We are involved in a variety of legal actions that arise in the normal course of business. Insurance coverage mitigates potential loss for certain of these matters. While we are unable to predict the ultimate outcome of these legal actions, it is our opinion that the disposition of these matters will not have a material adverse effect on our Consolidated Financial Statements, taken as a whole.
     
    In 2008, a group of newspaper carriers filed suit against us in the United States District Court for the Southern District of California, claiming to be employees and not independent contractors of ours. The plaintiffs seek relief related to violation of various employment-based statutes, and request punitive damages and attorneys' fees. The suit is in the discovery stage and an initial decision by the judge regarding class certification is expected in 2010. At this time we are unable to predict whether the ultimate economic outcome, if any, could have a material effect on our Consolidated Financial Statements, taken as a whole. We deny the allegations of employee status, consistent with our past practices and industry practices and intend to vigorously contest the action, which is not covered by insurance.
     
    Item 2(c).    Issuer Purchases of Equity Securities
     
    During the 13 weeks ended March 28, 2010, we purchased shares of Common Stock, as noted in the table below, in transactions with participants in our 1990 Long-Term Incentive Plan. The transactions resulted from the withholding of shares to pay the exercise price for taxes related to the vesting of restricted Common Stock.  
    Month(s)
    Shares
    Purchased
    Average Price
    Per Share
     
     
     
    March
    347
    3.57
     
    Item 4.        Other Information
     
    The Annual Meeting of Stockholders of the Company was held on February 17, 2010. Mary E. Junck, Andrew E. Newman and Gordon D. Prichett were elected as directors for three-year terms expiring at the 2013 annual meeting.
     
    Votes were cast for nominees for director as follows:
     
     
    For
    Withheld
    Broker Non-Votes
    Mary E. Junck
    60,346,627
    2,533,953
    12,718,915
    Andrew E. Newman
    59,723,693
    3,156,887
    12,718,915
    Gordon D. Prichett
    61,376,463
    1,504,117
    12,718,915
     

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    The stockholders ratified the Audit Committee of the Board of Director's appointment of KPMG LLP to serve as the independent registered public accounting firm to audit our financial statements for 2010 and votes were cast as follows:  
     
    For
    Against
    Abstain
    Broker Non-Votes
    Ratify Selection of KPMG LLP
    74,186,592
    465,789
    947,114
    —
     
     
     
     
    The stockholders approved adoption of our Amended and Restated 1996 Stock Plan for Non-Employee Directors effective February 17, 2010, and votes were cast as follows: 
     
    For
    Against
    Abstain
    Broker Non-Votes
    Amend and Restate the 1996 Stock Plan for Non-Employee Directors
    53,512,955
    9,281,808
    83,817
    12,720,915
     
    The stockholders approved adoption of our Amended and Restated 1990 Long-Term Incentive Plan effective January 6, 2010, and votes were cast as follows: 
     
    For
    Against
    Abstain
    Broker Non-Votes
    Amend and Restate the 1990 Long-Term Incentive Plan
    53,638,319
    9,119,430
    122,831
    12,718,915
     
    Item 6.        Exhibits
      
    Number
     
    Description 
     
     
     
    10.1
     
    Amended and Restated Lee Enterprises, Incorporated 1996 Stock Plan for Non-Employee Directors, Effective February 17, 2010
    10.2
     
    Amended and Restated Lee Enterprises, Incorporated, 1990 Long-Term Incentive Plan, (Effective October 1, 1999, as amended effective January 6, 2010)
    31.1
     
    Rule 13a-14(a)/15d-14(a) certification
    31.2
     
    Rule 13a-14(a)/15d-14(a) certification
    32
     
    Section 1350 certification
     
    SIGNATURES
     
    Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
     
     
     
     
    LEE ENTERPRISES, INCORPORATED
     
     
     
     
     
    /s/ Carl G. Schmidt
     
    May 12, 2010
    Carl G. Schmidt
     
     
    Vice President, Chief Financial Officer and Treasurer
     
     
    (Principal Financial and Accounting Officer)
     
     

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