10-K 1 a10k20159-27x15.htm 10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Fiscal Year Ended September 27, 2015
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-6227
LEE ENTERPRISES, INCORPORATED
(Exact name of Registrant as specified in its Charter)

Delaware | 42-0823980
(State of incorporation) | (I.R.S. Employer 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

Title of Each Class | Name of Each Exchange On Which Registered
Securities registered pursuant to Section 12(b) of the Act: |
Common Stock - $0.01 par value | New York Stock Exchange
Preferred Share Purchase Rights | New York Stock Exchange

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
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 such shorter period that the Registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (S 229.405 of this Chapter) is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See the definition of “large accelerated filer", "accelerated filer" and "smaller reporting company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer [ ] Accelerated filer [X] Non-accelerated filer (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 Act). Yes [ ] No [X]
Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [X] No [ ]
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the Registrant's most recently completed second fiscal quarter. Based on the closing price of the Registrant's Common Stock on the New York Stock Exchange on March 31, 2015, such aggregate market value is approximately $156,747,000. For purposes of the foregoing calculation only, as required, the Registrant has included in the shares owned by affiliates the beneficial ownership of Common Stock of officers and directors of the Registrant and members of their families, and such inclusion shall not be construed as an admission that any such person is an affiliate for any purpose.
Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of November 30, 2015. Common Stock, $0.01 par value, 54,649,374 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Lee Enterprises, Incorporated Definitive Proxy Statement to be filed in January 2016 are incorporated by reference in Part III of this Form 10-K.

TABLE OF CONTENTS | PAGE
Forward-Looking Statements | 1
Part I |
| Item 1 | Business | 1
| Item 1A | Risk Factors | 12
| Item 1B | Unresolved Staff Comments | 17
| Item 2 | Properties | 17
| Item 3 | Legal Proceedings | 18
| Item 4 | Mine Safety Disclosures | 18
Part II |
| Item 5 | Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 19
| Item 6 | Selected Financial Data | 21
| Item 7 | Management's Discussion and Analysis of Financial Condition and Results of Operation s | 22
| Item 7A | Quantitative and Qualitative Disclosures about Market Risk | 43
| Item 8 | Financial Statements and Supplementary Data | 43
| Item 9 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 44
| Item 9A | Controls and Procedures | 44
| Item 9B | Other Information | 46
Part III |
| Item 10 | Directors, Executive Officers and Corporate Governance | 46
| Item 11 | Executive Compensation | 46
| Item 12 | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 46
| Item 13 | Certain Relationships and Related Transactions, and Director Independence | 46
| Item 14 | Principal Accounting Fees and Services | 46
Part IV |
| Item 15 | Exhibits and Financial Statement Schedules | 47
Signatures | 48
Consolidated Financial Statements | 49
Exhibit Index | 90

References to “we”, “our”, “us” and the like throughout this document refer to Lee Enterprises, Incorporated and subsidiaries (the "Company"). Reference s to "2015", "2014", "2013" a nd the like refer to the fiscal years ended the last Sunday in September.
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;
•Our ability to comply with the financial covenants in our credit facilities;
•Our ability to refinance our debt as it comes due;
•That the warrants issued in our refinancing will not be exercised;
•The impact and duration of adverse conditions in certain aspects of the economy affecting our business;
•Changes in advertising and subscription demand;
•Changes in technology that impact our ability to deliver digital advertising;
•Potential changes in newsprint, other commodities and energy costs;
•Interest rates;
•Labor costs;
•Legislative and regulatory rulings;
•Our ability to achieve planned expense reductions;
•Our ability to maintain employee and customer relationships;
•Our ability to manage increased capital costs;
•Our ability to maintain our listing status on the NYSE;
•Competition; and
•Other risks detailed from time to time in our publicly filed documents.
Any statements that are not statements of historical fact (including statements containing the words “may”, “will”, “would”, “could”, “believes”, “expects”, “anticipates”, “intends”, “plans”, “projects”, “considers” and similar expressions) generally should be considered forward-looking statements. Readers are cautioned not to place undue reliance on such forward-looking statements, which are made as of the date of this report. We do not undertake to publicly update or revise our forward-looking statements, except as required by law.
PART I
ITEM 1. BUSINESS
Lee Enterprises, Incorporated is a leading provider of local news and information, and a major platform for advertising, in the markets we serve, which are located primarily in the Midwest, Mountain West and West regions of the United States. With the exception of St. Louis, Missouri, our 50 daily newspaper markets (including TNI Partners ("TNI") and Madison Newspapers ("MNI")), across 22 states, are principally midsize or small. Through our paid and unpaid print and digital platforms, we reach an overwhelming majority of adults in our markets.
Our products include:

• | 50 daily and 38 Sunday newspapers with print and digital subscribers totaling 0.9 million and 1.3 million, respectively, for the year ended September 27, 2015, read by more than three million people in print.

• | Nearly 300 weekly newspapers and classified and niche publications.

Our markets have established retail bases, and most are regional shopping hubs. We are located in four state capitals. Six of our top ten markets by revenue include major universities, and seven are home to major corporate headquarters. Based on data from the Bureau of Labor of Statistics as of September 2015, the unemployment rate in seven of our top ten markets by revenue was lower than the national average. We believe that all of these factors have had a positive impact on advertising revenue. Community newspapers and their associated digital media are a valuable source of local news and information to readers and an effective means for local advertisers to reach their customers.
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We believe our audiences across these communities tend to be loyal readers that actively seek our content and serve as an attractive target for our advertisers.
We do not face significant competition from other local daily newspapers in most of our markets, although there is significant competition for audience in those markets from other media. In our top ten markets by revenue, only two have significant local daily print competition.
Lee Enterprises, Incorporated was founded in 1890, incorporated in 1950, and listed on the New York Stock Exchange ("NYSE") in 1978. We have acquired and divested a number of businesses since inception. The acquisition of Pulitzer Inc., the most significant recent transaction, is discussed more fully below.
On December 12, 2011, the Company and certain of its subsidiaries filed voluntary, prepackaged petitions in the U.S. Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") for relief under Chapter 11 of the U.S. Bankruptcy Code (the "U.S. Bankruptcy Code") (collectively, the "Chapter 11 Proceedings"). Our interests in TNI and MNI were not included in the filings.
On January 23, 2012, the Bankruptcy Court approved our Second Amended Joint Prepackaged Plan of Reorganization (the "Plan") under the U.S. Bankruptcy Code and on January 30, 2012 (the "Effective Date"), the Company emerged from the Chapter 11 Proceedings. On the Effective Date, the Plan became effective and the transactions contemplated by the Plan were consummated. Implementation of the Plan resulted primarily in refinancing of our debt and extending the maturity. The Chapter 11 Proceedings did not adversely affect employees, vendors, contractors, customers or any aspect of Company operations. Stockholders retained their interest in the Company, subject to modest dilution.
In May 2013, we refinanced $94 million of our debt, extending its maturity to April 2017. In 2014, we completed a comprehensive refinancing of our remaining debt (the "2014 Refinancing"). Final maturities of our then outstanding debt have been extended to dates from April 2017 through December 2022. As a result, refinancing risk has been substantially reduced for the next several years.
Prior to 2015, we experienced significant net losses i n all but one year since 2007 du e primarily to non-cash charges for impairment of intangible and other assets in 2013, 2011, 2009 and 2008 and reorganization costs in 2012. Our ability to operate as a going concern is dependent on our ability to remain in compliance with debt covenants and to repay, 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 September 27, 2015. The information included herein should be evaluated in that context. See Item 1A, “Risk Factors”, and Notes 4 and 5 of the Notes to Consolidated Financial Statements, included herein, for additional information.
STRATEGIC INITIATIVES
We are focused on several strategic initiatives:
Comprehensive Local News That Drives Frequency And Engagement
We drive frequency and engagement with our products by delivering valuable, intensely local, original news and information that, in many cases, we believe our audiences cannot otherwise readily obtain. Our large and talented news and editorial staff provide constant, real-time local news with significant breadth, depth and reliability. Our full access platforms provide our subscribers with in-depth and breaking news and information through continuous updates to our stories digitally on websites, mobile devices and tablets.
We believe the strength of our local brands is the result of the quality and size of our news gathering staff, which allow us to provide the most comprehensive coverage of local news in our markets. In most of our markets, we are the leading source of print and digital news and information. As the digital consumption of news has expanded, we have moved quickly to develop applications that address audience demands and digital advertising demands for mobile and tablet advertising platforms. As new digital technologies emerge, we expect to move rapidly to make our content available through them and monitize the audience.
We are focused on continually improving the functionality and the look and feel of all our news platforms, providing greater depth of coverage and reader engagement. We are arming our journalists with new tools to give them real-time information about audience engagement on our digital platforms, helping inform their decisions on both presentation and coverage.
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We believe our journalists are at the forefront for information about the local community. We are engaging our readers by providing information that we believe stirs public awareness, advances ideas, inspires vision, creates debate and provokes action. Through our news leadership we strive to contribute to community betterment, promote education, foster commerce and help improve the quality of life in our markets.
Accelerate And Expand Digital Revenue Growth
Our digital businesses have experienced rapid growth since 2010. D igital advertising grew 6.9% in 2015 and reached 21.6% of total advertising and marketing services revenue in the 13 weeks ended September 27, 2015. Total digital revenue in 2015 increased 27.8% over the prior year, and we expect total digital revenue, which represented 19.9% of total operating revenue in the 13 weeks ended September 27, 2015, to continue to grow. We are growing revenue by offering an expansive array of digital products, including video, digital couponing, behavioral targeting, audience retargeting, banner ads and social networking.
We provide digital marketing services to small and midsized businesses ("SMBs"), including search engine marketing ("SEM"), social media, audience extension, business profiles and website hosting and design. Lee Local offers small business solutions including search engine optimization (“SEO”), local online marketing, social media marketing, video advertising and web site design. Lee Local seeks to help small businesses maximize the return on marketing dollars by increasing audiences, expanding brands, and enhancing their web presence. We believe that these innovative solutions will continue to drive meaningful new opportunities for us to grow our digital marketing revenue.
Amplified Digital, a full-service advertising agency, provides advertisers with consultation and management of a comprehensive suite of print and digital products including: SEO, SEM, web and mobile production, social media services and reputation monitoring and management. Amplified Digital also designs and supports digital marketing campaigns beyond our owned and operated products and platforms for extended audience targeting.
INN Partners, L.C. ("TownNews"), of which we own 82.5%, provides digital infrastructure and digital publishing services for nearly 1,600 daily and weekly newspapers, along with universities, television stations and niche publications, as well as for us. We believe TownNews represents a powerful opportunity for us to drive additional digital revenue. In 2015, digital services revenue, which is primarily TownNews, increased to almost $13 million, or 23.0% over 2014.
We are also a member of the Local Media Consortium (the “Consortium”). The Consortium partners with companies like Google, Yahoo! and other technology companies and service providers to increase the potential share of new revenue and audience-building programs available to consortium members, as well as the quality of information and advertising services available from, Consortium members. The Consortium currently includes more than 1,600 local newspapers and hundreds of local broadcast outlets in the United States.
Our sales force is larger than any local competitor, and we believe they are the most highly trained and proficient sales force in our markets. We also continue to expand our array of digital products to address advertisers evolving needs, while seeking to increase our share of advertising and marketing services spending from existing customers and react to competition.
In 2015, no single advertiser accounted for more than 1.9% of advertising revenue and our top 10 advertisers represented 8.7% of advertising revenue.
Grow Audience Revenue And Engagement
Based on audience research conducted by a third party on our behalf for the period January to June 2015, we reached 76% of all adults over the course of a seven-day period in 11 selected markets, which include most of our largest strategic business units. Half of the adults in these markets read our newspapers in print, with 19% being both newspaper readers and visitors to our newspaper digital platforms. Another 13% were exclusive digital users. The remaining 13% primarily used our newspapers to obtain advertising and other information.
Furthermore, our audiences strength spans across all age groups. Among the 18-29 age group, 40% read our printed newspapers, while 33% accessed our publications by web, mobile or tablet. Another 20% primarily used our newspapers to obtain advertising and other information.
As media access and delivery vehicles continue to evolve, it is clear that our audiences are evolving and increasingly moving from one delivery platform to another throughout the day and accessing our content in print, on desktops and
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laptops, and on mobile devices. We seek to grow our audience and engagement on whatever platform they choose by, among other things, continually improving content and presentation to maximize the unique and evolving capabilities of each platform. Our digital audiences are massive. Unique visitors to our digital sites totaled 24.9 million in September 2015, while page views totaled 221.4 million in September 2015.
To serve our readers across all delivery platforms in 2014, we began to phase in a new subscription model, which is now in place in substantially all of our markets. This model, known as full access, provides subscribers complete access to our print and digital products available in their market for a single subscription rate.
Business Transformation And Manage Costs
We are transforming our business model and reducing our costs to maintain our margins and cash flows. We have regionalized many staff functions; consolidated and/or selectively outsourced printing and ad production; discontinued unprofitable publications; reduced newsprint volume significantly; and continually seek to improve the efficiencies of our operation and reduce costs. We have reduced personnel while protecting our strengths in news, sales and digital products. In 2015, we reduced cash costs(1) on a comparable basis 3.1%. We continue our focus on cost efficiencies while investing in revenue drivers. We believe that our operating cash flow margin(1) of almost 23% in 2015 remains among the highest in the industry.
Generate Strong Free Cash Flow With A Commitment To Reduce Our Debt
Throughout the last economic downturn and subsequent recovery, and during a time of unprecedented transition for our industry, we have posted strong free cash flow. Our operating cash flow margins(1) have improved nearly back to pre-recession levels, with modest capital expenditures and pension contributions, and we continue to make significant debt reductions each year. Since 2009, we have dedicated substantially all of our free cash flow(1) to debt repayment, and we intend to continue to use our free cash flow to reduce debt.
The principal amount of debt was reduced by $78.9 million in 2015 and totaled $725.9 million as of September 27, 2015. Since 2005, we have reduced debt by $962 million. We expect to continue to significantly reduce our debt in 2016. As a result of our debt reductions, cash interest expense was reduced by $4.9 million in 2015 compared to 2014, providing additional free cash flow available for debt service.
(1) See "Non-GAAP Financial Measures: in Item 7, included herein, for additional information.
PULITZER
In 2005, we acquired Pulitzer Inc. (“Pulitzer”). Pulitzer published 14 daily newspapers and more than 100 weekly newspapers and specialty publications. Pulitzer also owned a 50% interest in TNI, as discussed more fully below. The acquisition of Pulitzer increased our paid circulation by more than 50% and revenue by more than 60% at that time. The acquisition was financed primarily with debt.
Pulitzer newspaper operations include St. Louis, Missouri, where its subsidiary, St. Louis Post-Dispatch LLC (“PD LLC”), publishes the St. Louis Post-Dispatch, the only major daily newspaper serving the greater St. Louis metropolitan area, a variety of specialty publications, and supports its related digital products. St. Louis newspaper operations also include the Suburban Journals of Greater St. Louis, a group of weekly newspapers and niche publications that focus on separate communities within the metropolitan area.
Pulitzer and its subsidiaries and affiliates currently publish 11 daily newspapers and support the related digital products, as well as publish approximately 75 weekly newspapers, shoppers and niche publications that serve markets in the Midwest, Southwest and West.
TNI Partners
As a result of the acquisition of Pulitzer, we own a 50% interest in TNI, the Tucson, Arizona newspaper partnership. TNI, acting as agent for our subsidiary, Star Publishing Company (“Star Publishing”) and Citizen Publishing Company (“Citizen”), the owner of the remaining 50%, a subsidiary of Gannett Co., Inc., (“Gannett”). TNI is responsible for printing, delivery, advertising and subscription activities of the Arizona Daily Star and, until May 2009, the Tucson Citizen, as well as their related digital products and specialty publications. In May 2009, Citizen d iscontinued print publication of the Tucson Citizen and in 2014 stopped publishing its digital product.
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TNI collects all receipts and income and pays substantially all operating expenses incident to the partnership's operations and publication of the newspaper and other media. Under the amended and restated operating agreement between Star Publishing and Citizen, the Arizona Daily Star remains the separate property of Star Publishing. Results of TNI are accounted for using the equity method. Income or loss of TNI (before income taxes) is allocated equally to Star Publishing and Citizen. TNI makes monthly distributions to Star Publishing and Citizen of all available cash.
Until the May 2009 discontinuation of print publication of the Tucson Citizen, TNI was subject to the provisions of the Newspaper Preservation Act of 1970, which permits joint operating agreements between newspapers under certain circumstances without violation of the Federal antitrust laws. Agency agreements generally allow newspapers operating in the same market to share certain printing and other facilities and to pool certain revenue and expenses in order to decrease aggregate expenses and thereby allow the continuing operation of multiple newspapers in the same market.
The TNI agency agreement (“Agency Agreement”), which remains in effect, has governed the operation since 1940. Both the Company and Citizen incur certain administrative costs and capital expenditures that are reported by their individual companies. The Agency Agreement expires in 2040, but contains an option, which may be exercised by either party, to renew the agreement for successive periods of 25 years each. Star Publishing and Citizen also have a reciprocal right of first refusal to acquire the 50% interest in TNI owned by Citizen and Star Publishing, respectively, under certain circumstances.
MADISON NEWSPAPERS
We own 50% of the capital stock of MNI and 17% of the non-voting common stock of The Capital Times Company (“TCT”). TCT owns the remaining 50% of the capital stock of MNI. MNI publishes daily and Sunday newspapers, and other publications in Madison, Wisconsin, and other Wisconsin locations, and supports their related digital products. MNI conducts business under the trade name Capital Newspapers. We have a contract to furnish the editorial and news content for the Wisconsin State Journal, which is published by MNI, and periodically provide other services to MNI. Results of MNI are accounted for using the equity method. Net income or loss of MNI (after income taxes) is allocated equally to the Company and TCT. MNI makes quarter dividend payments to the Company.
ADVERTISING AND MARKETING SERVICES
Approximately 64% of our 2015 reve nue was derived from advertising and marketing services.
The following broadly define major categories of advertising and marketing services revenue:
Retail advertising is print or digital revenue earned from sales of display advertising space in the publication, or for preprinted advertising inserted in the publication, to local accounts or regional and national businesses with local retail operations.
Classified advertising, which includes employment, automotive, real estate for sale or rent, legal, obituaries and other categories, is revenue earned from sales of advertising space in these categories or from publications consisting primarily of such advertising. Classified publications offer advertisers a cost-effective local advertising vehicle and are particularly effective in larger markets with higher media fragmentation.
National advertising is revenue earned from print or digital display advertising space, or for preprinted advertising inserted in the publication for national accounts that do not have a local retailer representing the account in the market.
Digital advertising consists of display, banner, behavioral targeting, search, rich media, directories, classified or other advertising on websites or mobile devices associated and integrated with our print publications, other digital applications, or on third party affiliated websites, such as Yahoo! Inc. (“Yahoo!”). Digital advertising is reported in combination with print advertising in the retail, classified and national categories.
Niche publications are specialty publications, such as lifestyle, business, health or home improvement publications that contain significant amounts of advertising.
Marketing services includes a robust suite of custom digital marketing services that include: SEO, SEM, web and mobile production, social media services and reputation monitoring and management. Our services
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also include media buying in audience extension networks (outside of those owned and operated by us) such as Centro Ad Lift, Google Ad Exchange and Facebook.
The advertising environment is influenced by the state of the overall economy, including retail sales, unemployment rates, inflation, energy prices and consumer interest rates. Our enterprises are primarily located in midsize and small markets. Historically these markets have been more stable than major metropolitan markets during downturns in advertising spending but may not experience increases in such spending as significant as those in major metropolitan markets in periods of economic improvement.
Several of our businesses operate in geographic groups of publications, or “clusters,” which provide operational efficiencies, extend sales penetration and provide broader audiences for advertisers. Operational efficiencies are obtained through consolidation of sales forces, back office operations such as finance, human resources, management and/or production of the publications. A table under the caption “Daily Newspapers and Markets” in Item 1, included herein, identifies those groups of our newspapers operating in clusters.
Our newspapers, classified and specialty publications, and digital products compete with newspapers having national or regional circulation, magazines, radio, network, cable and satellite television, other advertising media such as outdoor, mobile, and movie theater promotions, other classified and specialty publications, direct mail, directories, as well as national, regional and local advertising websites and content providers. Competition for advertising is based on audience size and composition, subscription levels, readership demographics, distribution and display mechanisms, price and advertiser results. In addition, several of our daily and Sunday newspapers compete with other local daily or weekly newspapers. We believe we capture a substantial share of the total advertising dollars spent in each of our markets.
The number of competitors in any given market varies. However, all of the forms of competition noted above exist to some degree in our markets, including those listed in the table under the caption “Daily Newspapers and Markets” in Item 1, included herein.
SUBSCRIPTION
Approximately 30% of our 2015 revenue was derived from subscriptions to our printed and digital products.
Subscription revenue is derived from the delivery of our leading local news, information and advertising content in print and digitally, via mobile devices and tablets. In 2014, we began the rollout of our full access subscription model that provides subscribers access to both the print and digital editions of our newspapers for one price. Digital only options are also available to subscribers.
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AUDIENCES
Based on independent research, we estimate that, in an average week, our newspapers and digital products reach approximately 76% of adults in our larger markets. We also measure use of our daily newspapers for advertising, sports scores and entertainment listings ("print users").
Audience reach is summarized as follows:

| All Adults |
(Percent, Past Seven Days) | 2015 |  | 2014 |  | 2013 |  | 2012 |  | 2011 |
Print only | 31.3 |  | 33.1 |  | 36.9 |  | 37.8 |  | 43.4 |
Print and digital | 19.3 |  | 20.0 |  | 17.8 |  | 19.6 |  | 16.4 |
Digital only | 12.5 |  | 12.1 |  | 10.5 |  | 9.4 |  | 7.9 |
Total readership | 63.1 |  | 65.2 |  | 65.2 |  | 66.8 |  | 67.7 |
Print users | 12.8 |  | 13.0 |  | 13.9 |  | 14.7 |  | 14.5 |
Total reach | 75.9 |  | 78.2 |  | 79.1 |  | 81.5 |  | 82.2 |
Total print reach | 63.4 |  | 66.1 |  | 68.6 |  | 72.1 |  | 74.3 |
Total digital reach | 31.8 |  | 32.1 |  | 28.3 |  | 29.0 |  | 24.3 |

| Age 18-29 |
(Percent, Past Seven Days) | 2015 |  | 2014 |  | 2013 |  | 2012 |  | 2011 |
Print only | 19.5 |  | 20.3 |  | 30.7 |  | 29.4 |  | 33.0 |
Print and digital | 20.2 |  | 18.3 |  | 15.6 |  | 20.5 |  | 13.7 |
Digital only | 12.7 |  | 15.3 |  | 10.5 |  | 10.7 |  | 11.6 |
Total readership | 52.4 |  | 53.9 |  | 56.8 |  | 60.6 |  | 58.3 |
Print users | 19.5 |  | 19.5 |  | 22.0 |  | 23.7 |  | 21.1 |
Total reach | 71.9 |  | 73.4 |  | 78.8 |  | 84.3 |  | 79.4 |
Total print reach | 59.2 |  | 58.1 |  | 68.3 |  | 73.6 |  | 67.8 |
Total digital reach | 32.9 |  | 33.6 |  | 26.1 |  | 31.2 |  | 25.3 |

Source: | Lee Enterprises Audience Report, Thoroughbred Research. January-June 2011-2015.
Markets: | 11 largest markets in 2011-2015.
Margin of Error: | Total sample +/- 1.1%, Total digital sample +/- 1.3%

After advertising, subscriptions and single copy sales are our largest source of revenue. For the 13 weeks end ed September 2015, our daily circulation units, which include TNI and MNI, as measured by the Alliance for Audited Media ("AAM") were 0.9 million and Sunday circulation units were 1.3 million.
Growth in audiences can, over time, also positively impact advertising revenue. Our strategies to improve audiences include continuous improvement of content and promotional efforts to expand our audience. Content can include focus on local news, features, scope of coverage, accuracy, presentation, writing style, tone and type style. Promotional efforts include advertising, contests and other initiatives to increase awareness of our products. Customer service can also influence subscriptions. The introduction in 2010, and continued improvement since, of new mobile and tablet applications has positively impacted our digital audiences.
We have historically experienced higher retention of customers using credit cards or bank account withdrawals, ("easy pay"). Accordingly we focus on our enterprises on increasing the number of easy pay subscribers. Other initiatives vary from location to location and are determined principally by our centralized consumer sales and marketing group in collaboration with local management. Competition for subscriptions is generally based on the content, journalistic quality and price of the publication.
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Audience competition exists in all markets, from unpaid print and digital products, but is most significant in markets with competing local daily newspapers. These markets tend to be near major metropolitan areas, where the size of the population may be sufficient to support more than one daily newspaper.
Our subscription sales channels continue to evolve through an emphasis on targeted direct mail and email to acquire new subscribers and retain current subscribers.
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DAILY NEWSPAPERS AND MARKETS
The Company, TNI and MNI publish the following daily newspapers and maintain the following primary digital sites:

|  |  | Average Units (1) |  |
Newspaper | Primary Website | Location | Daily (2) |  |  | Sunday |  |
St. Louis Post-Dispatch (3) | stltoday.com | St. Louis, MO | 124,712 |  |  | 405,843 |  |
Capital Newspapers (4) |  |  |  |  |  |
Wisconsin State Journal | madison.com | Madison, WI | 67,965 |  |  | 88,367 |  |
Daily Citizen | wiscnews.com/bdc | Beaver Dam, WI | 6,564 |  |  | — |  |
Portage Daily Register | wiscnews.com/pdr | Portage, WI | 3,350 |  |  | — |  |
Baraboo News Republic | wiscnews.com/bnr | Baraboo, WI | 2,903 |  |  | — |  |
The Times | nwitimes.com | Munster, Valparaiso, and Crown Point, IN | 66,523 |  |  | 77,082 |  |
Arizona Daily Star (5) (3) | azstarnet.com | Tucson, AZ | 57,735 |  |  | 102,595 |  |
Lincoln Group |  |  |  |  |  |
Lincoln Journal Star | journalstar.com | Lincoln, NE | 47,831 |  |  | 55,637 |  |
Columbus Telegram | columbustelegram.com | Columbus, NE | 5,829 |  |  | 6,984 |  |
Fremont Tribune | fremonttribune.com | Fremont, NE | 5,430 |  |  | — |  |
Beatrice Daily Sun | beatricedailysun.com | Beatrice, NE | 3,989 |  |  | — |  |
Billings Gazette | billingsgazette.com | Billings, MT | 31,826 |  |  | 35,798 |  |
Central Illinois Newspaper Group |  |  |  |  |  |
The Pantagraph (3) | pantagraph.com | Bloomington, IL | 29,920 |  |  | 32,577 |  |
Herald & Review | herald-review.com | Decatur, IL | 21,869 |  |  | 26,776 |  |
Journal Gazette & Times-Courier | jg-tc.com | Mattoon/Charleston, IL | 9,660 |  |  | — |  |
Quad-Cities Group |  |  |  |  |  |
Quad-City Times | qctimes.com | Davenport, IA | 36,144 |  |  | 46,339 |  |
Muscatine Journal | muscatinejournal.com | Muscatine, IA | 5,980 |  |  | — |  |
The Courier | wcfcourier.com | Waterloo and Cedar Falls, IA | 35,179 |  |  | 34,826 |  |
Sioux City Journal | siouxcityjournal.com | Sioux City, IA | 23,486 |  |  | 26,221 |  |
The Post-Star | poststar.com | Glens Falls, NY | 21,608 |  |  | 26,101 |  |
The Bismarck Tribune | bismarcktribune.com | Bismarck, ND | 20,762 |  |  | 23,790 |  |
River Valley Newspaper Group |  |  |  |  |  |
La Crosse Tribune | lacrossetribune.com | La Crosse, WI | 20,347 |  |  | 28,904 |  |
Winona Daily News | winonadailynews.com | Winona, MN | 7,274 |  |  | 8,445 |  |
The Chippewa Herald | chippewa.com | Chippewa Falls, WI | 4,049 |  |  | 3,946 |  |
Missoula Group |  |  |  |  |  |
Missoulian | missoulian.com | Missoula, MT | 19,404 |  |  | 23,350 |  |
Ravalli Republic | ravallinews.com | Hamilton, MT | 2,775 |  | (6) | 2,680 |  | (6)
The Journal Times | journaltimes.com | Racine, WI | 19,343 |  |  | 22,154 |  |
Rapid City Journal | rapidcityjournal.com | Rapid City, SD | 18,644 |  |  | 22,728 |  |
Casper Star-Tribune | trib.com | Casper, WY | 17,053 |  |  | 19,013 |  |
The Daily News | tdn.com | Longview, WA | 16,572 |  |  | 14,135 |  |
Magic Valley Group |  |  |  |  |  |
The Times-News | magicvalley.com | Twin Falls, ID | 18,912 |  |  | 16,289 |  |
Elko Daily Free Press | elkodaily.com | Elko, NV | 4,344 |  | (6) | — |  |
The Southern Illinoisan | thesouthern.com | Carbondale, IL | 16,336 |  |  | 24,440 |  |
The Daily Herald (3) | heraldextra.com | Provo, UT | 17,530 |  |  | 32,125 |  |

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| Average Units (1) |  |
Newspaper | Primary Website | Location | Daily (2) |  |  | Sunday |  |
Helena/Butte Group |  |  |  |  |  |
Independent Record | helenair.com | Helena, MT | 12,016 |  |  | 12,428 |  |
The Montana Standard | mtstandard.com | Butte, MT | 9,995 |  |  | 10,146 |  |
The Sentinel | cumberlink.com | Carlisle, PA | 11,566 |  |  | 9,107 |  |
Globe Gazette | globegazette.com | Mason City, IA | 11,444 |  |  | 14,381 |  |
Mid-Valley News Group |  |  |  |  |  |
Albany Democrat-Herald | democratherald.com | Albany, OR | 10,514 |  |  | 10,835 |  |
Corvallis Gazette-Times | gazettetimes.com | Corvallis, OR | 8,176 |  |  | 8,217 |  |
Napa Valley Register (3) | napavalleyregister.com | Napa, CA | 10,000 |  |  | 10,441 |  |
Central Coast Newspapers |  |  |  |  |  |
Santa Maria Times (3) | santamariatimes.com | Santa Maria, CA | 10,780 |  |  | 14,504 |  |
The Lompoc Record (3) | lompocrecord.com | Lompoc, CA | 2,687 |  |  | 2,665 |  |
The Times and Democrat | thetandd.com | Orangeburg, SC | 7,948 |  |  | 8,749 |  |
Arizona Daily Sun (3) | azdailysun.com | Flagstaff, AZ | 8,443 |  |  | 8,827 |  |
The World (3) | theworldlink.com | Coos Bay, OR | 6,082 |  |  | — |  |
The Sentinel (3) | hanfordsentinel.com | Hanford, CA | 6,209 |  |  | — |  |
The Citizen | auburnpub.com | Auburn, NY | 6,403 |  |  | 7,994 |  |
The Ledger Independent | maysville-online.com | Maysville, KY | 4,864 |  |  | — |  |
Daily Journal (3) | dailyjournalonline.com | Park Hills, MO | 4,731 |  |  | — |  |
|  |  | 943,706 |  |  | 1,325,439 |  |

(1) | Source: AAM: September 2015 Quarterly Data Report, u nless otherwise noted.
(2) | Not all newspapers are published Monday through Saturday
(3) | Owned by Pulitzer, Inc.
(4) | Owned by MNI.
(5) | Owned by Star Publishing and published through TNI.
(6) | Source: Company statistics.

NEWSPRINT
The basic raw material of newspapers, and our other print publications, is newsprint. We purchase newsprint from U.S. and Canadian producers. We believe we will continue to receive a supply of newsprint adequate for our needs and consider our relationships with newsprint producers to be good. Newsprint purchase prices can be volatile and fluctuate based upon factors that include foreign currency exchange rates and both foreign and domestic production capacity and consumption. Price fluctuations can have a significant effect on our results of operations. We have not entered into derivative contracts for newsprint. For the quantitative impacts of these fluctuations, see Item 7A, “Quantitative and Qualitative Disclosures about Market Risk”, included herein.
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EXECUTIVE TEAM
The following table lists our current executive team members:

Name | Age | Service With The Company | Named To Current Position | Current Position
Mary E. Junck | 68 | June 1999 | January 2002 | Chairman, President and Chief Executive Officer
Nathan E. Bekke | 46 | January 1992 | February 2015 | Vice President - Consumer Sales and Marketing
Paul M. Farrell | 60 | October 2013 | October 2015 | Vice President - Sales and Marketing
Suzanna M. Frank | 45 | December 2003 | March 2008 | Vice President - Audience
Astrid J. Garcia | 65 | December 2006 | December 2013 | Vice President - Human Resources
James A. Green | 49 | March 2013 | March 2013 | Vice President - Digital
Michael R. Gulledge | 55 | October 1982 | October 2015 | Vice President - Advertising Sales Leadership
John M. Humenik | 52 | December 1998 | February 2015 | Vice President - News
Ronald A. Mayo | 54 | May 2015 | June 2015 | Vice President - Chief Financial Officer and Treasurer
Kevin D. Mowbray | 53 | September 1986 | April 2015 | Executive Vice President and Chief Operating Officer
Gregory P. Schermer | 61 | February 1989 | October 2012 | Vice President - Strategy
Michele Fennelly White | 53 | June 1994 | June 2011 | Vice President - Information Technology and Chief Information Officer

Mary E. Junck was elected Chairman, President and Chief Executive Officer in 2002. She was elected to the Board of Directors of the Company in 1999.
Nathan E. Bekke was appointed Vice President - Consumer Sales and Marketing in February 2015. From 2003 to February 2015, he served as Publisher of the Casper Star-Tribune.
Paul M. Farrell was appointed Vice President - Sales in October 2015. From October 2013 to October 2015, he served as Vice President - Digital Sales. From September 2012 to October 2013, he served as Publisher of the Connecticut Media Group of Hearst Media Services. From May 2007 to August 2012, he served as Vice President - Sales and Marketing of the Company.
Suzanna M. Frank was appointed Vice President - Audience in March 2008. From 2003 to March 2008 she served as Director of Research and Marketing of the Company.
Astrid J. Garcia was appointed Vice President - Human Resources in December 2013. From 2006 to November 2013 she served as Vice President of Human Resources, Labor Relations and Operations of the St. Louis Post-Dispatch.
James A. Green was appointed Vice President - Digital in March 2013. From June 2011 to March 2013, he served as Executive Vice President and General Manager of Travidia, Inc., a developer of newspaper digital shopping media and marketing programs. From 2004 to June 2011 he served as Chief Marketing Officer of Travidia, Inc.
Michael R. Gulledge was elected Vice President - Sales and Marketing in September 2012 and named Publisher of the Billings Gazette in 2000. From 2005 to September 2012 he served as a Vice President - Publishing.
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John M. Humenik was appointed Vice President - News in February 2015. He is also president and publisher of the Wisconsin State Journal and president of Madison Newspapers Inc., a role he has held since 2013. He was publisher and editor of the Arizona Daily Star from 2005 to 2010 and additionally served president of Tucson Newspapers Inc until 2013.
Ronald A. Mayo was elected Vice President, Chief Financial Officer and Treasurer in June 2015. Prior to joining the Company, he was Chief Financial Officer of Halifax Media Group from July 2014 to January 2015 and previously served MediaNews Group, Inc, most recently as Vice President and Chief Financial Officer.
Kevin D. Mowbray was elected Executive Vice President and Chief Operating Officer in April 2015. From May 2013 to April 2015 he served as Vice President and Chief Operating Officer. From 2004 to May 2013 he served as a Vice President - Publishing and was Publisher of the St. Louis Post-Dispatch from 2006 until May 2013.
Gregory P. Schermer was elected Vice President - Strategy in October 2012. From 1997 to October 2012 he served as Vice-President - Interactive Media. He was elected to the Board of Directors of the Company in 1999.
Michele Fennelly White was appointed Vice President - Information Technology and Chief Information Officer in June 2011. From 1999 to June 2011, she served as Director of Technical Support.
Ms. Junck and Messrs. Farrell, Green, Gulledge, Mayo, Mowbray and Schermer have been designated by the Board of Directors as executive officers for United States Securities and Exchange Commission ("SEC") reporting purposes.
EMPLOYEES
At September 27, 2015, we had approximately 4,500 employees, including approximately 1,200 part-time employees, exclusive of TNI and MNI. Full-time equivalent employees in 2015 totaled approximately 4,200. We consider our relationships with our employees to be good.
Bargaining units represent 385, or 69%, of the total employees of the St. Louis Post-Dispatch, which has six contracts with bargaining units with expiration dates through September 2018.
Approximately 37 employees in three additional locations are represented by collective bargaining units.
CORPORATE GOVERNANCE AND PUBLIC INFORMATION
We have a long, substantial history of sound corporate governance practices. Our Board of Directors has a lead independent director, and has had one for many years. Currently, eight of ten members of our Board of Directors are independent, as are all members of the Board's Audit, Executive Compensation and Nominating and Corporate Governance committees. The Audit Committee approves all services to be provided by our independent registered public accounting firm and its affiliates.
At www.lee.net, one may access a wide variety of information, including news releases, SEC filings, financial statistics, annual reports, investor presentations, governance documents, newspaper profiles and digital links. We make available via our website all filings made by the Company under the Securities Exchange Act of 1934 (the "Exchange Act"), including Forms 10-K, 10-Q and 8-K, and related amendments, as soon as reasonably practicable after they are filed with, or furnished to, the SEC. All such filings are available free of charge. The content of any website referred to in this Annual Report is not incorporated by reference unless expressly noted.
ITEM 1A. RISK FACTORS
Risk exists that our past results may not be indicative of future results. A discussion of our risk factors follows. See also, “Forward-Looking Statements”, included herein. In addition, a number of other factors (those identified elsewhere in this document) may cause actual results to differ materially from expectations.
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DEBT AND LIQUIDITY
We May Have Insufficient Earnings Or Liquidity To Meet Our Future Debt Obligations
We have a substantial amount of debt, as discussed more fully (and certain capitalized terms used below defined) in Item 7,"Liquidity" and Note 5 of the Notes to Consolidated Financial Statements, included herein. Since February 2009, we have satisfied all interest payments and substantially all principal payments due under our debt facilities with our cash flows and asset sales.
As of September 27, 2015, our debt consists of the following:

• | $400,000,000 aggregate principal amount of 9.5% Senior Secured Notes (the “Notes”), pursuant to an Indenture dated as of March 31, 2014 (the “Indenture”);

• | $250,000,000 first lien term loan (the "1st Lien Term Loan") and $40,000,000 revolving facility (the "Revolving Facility") under a First Lien Credit Agreement dated as of March 31, 2014 (together, the “1 st Lien Credit Facility”), of which $180,872,000 is outstanding at September 27, 2015; and

• | $150,000,000 second lien term loan under a Second Lien Loan Agreement dated as of March 31, 2014 (the “ 2 nd Lien Term Loan”), of which $145,000,000 is outstanding at September 27, 2015.

Our ability to make payments on our indebtedness will depend on our ability to generate future cash flows from operations. Cash generated from future asset sales could serve as an additional source of repayment. This ability, to a certain extent, is subject to general economic, financial, competitive, business, legislative, regulatory and other factors that are beyond our control.
At September 27, 2015, after consideration of letters of credit, we have approximately $32,935,000 available for future use under our Revolving Facility. Including cash, our liquidity at September 27, 2015 totals $44,069,000. This liquidity amount excludes any future cash flows. Our unlevered free cash flow(1) has been strong for the last seven years and has exceeded $149,000,000 in each year from 2011 through 2015, but there can be no assurance that such cash flows will continue. We expect all interest and principal payments due in the next twelve months will be satisfied by our continuing cash flows and certain asset sales, which will allow us to maintain an adequate level of liquidity.
At September 27, 2015, the principal amount of our outstanding debt totals $725,872,000. At September 27, 2015, our debt, net of cash, is 4.4 times our 2015 adjusted EBITDA(1), compared to a ratio of 4.7 times at September 28, 2014.
Final maturities of our debt are March 2019 through December 2022. As a result, refinancing risk has been substantially reduced for the next several years.
There are numerous potential consequences under the Notes, 1 st Lien Credit Facility, 2 nd Lien Term Loan, if an event of default, as defined, occurs and is not remedied. Many of those consequences are beyond our control. The occurrence of one or more events of default would give rise to the right of the applicable lenders to exercise their remedies under the Notes, 1 st Lien Credit Facility, 2 nd Lien Term Loan, respectively, including, without limitation, the right to accelerate all outstanding debt and take actions authorized in such circumstances under applicable collateral security documents.
(1) See "Non-GAAP Financial Measures: in Item 7, included herein, for additional information.
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, if necessary. The Notes, 1st Lien Credit Facility and 2nd Lien Term Loan have only limited affirmative covenants with which we are required to maintain compliance. We are in compliance with our debt covenants at September 27, 2015.
ECONOMIC CONDITIONS
General Economic Conditions May Continue To Impact Our Revenue And Operating Results
According to the National Bureau of Economic Research, the United States economy was in a recession from December 2007 until June 2009. Our r evenue, operating results and cash flows were significantly impacted by the recession and
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its aftermath. The duration and depth of an economic recession, and pace of economic recovery, in markets in which we operate, may influence our future results.
OPERATING REVENUE
Our Revenue May Not Return To Historical Levels
A significant portion of our revenue is derived from advertising. The demand for advertising is sensitive to the overall level of economic activity, both locally and nationally. Newspaper publishing is both capital and labor intensive and, as a result, newspapers may not be able to quickly reduce cost. Accordingly, changes in advertising and circulation revenue could have a disproportionate effect on our results of operations.
Operating revenue in most categories has decreased since 2007 and may decrease in the future. Such decreases may not be offset by growth in advertising in other categories, such as digital revenue which has been rising since 2010. Historically, newspaper publishing has been viewed as a cost-effective method of delivering various forms of advertising. There can be no guarantee that this historical perception will guide future decisions on the part of advertisers. Web sites and applications for mobile devices distributing news and other content continue to gain popularity. As a result, audience attention and advertising spending are shifting and may continue to shift from traditional media to digital media. As media audiences fragment, we expect that advertisers will allocate greater portions of their future budgets to digital media, which can offer more measurable returns than traditional print media through pay for performance and keyword-targeted advertising. If our efforts to adapt to evolving technological developments in the media industry are unsuccessful, or if we fail to correctly anticipate shifts in audience demand and digital media trends, we may be unable to provide the services, media and content that audiences and potential audiences in our markets prefer and we may be unable to provide the returns on ad spending that our advertisers seek. This increased competition has had, and may continue to have, an adverse effect on our business and financial results. The digital media industry experiences additional competitive challenges because barriers to entry can be low and geographic location is less relevant.
Technological developments also pose other challenges that could adversely affect our revenue and competitive position. New delivery platforms may lead to pricing restrictions and the loss of a direct relationship with consumers. We may also be adversely affected if the use of technology developed to block the display of advertising on websites and other digital platforms proliferates.
The rates we charge for advertising are, in part, related to the size of the audience of our publications and digital products. There is significant competition for readers and viewers from other media. Our business may be adversely affected to the extent individuals decide to obtain news, entertainment, classified listings and local shopping information from digital or other media, to the exclusion of our outlets for such information.
Retail Advertising
Many advertisers, including major retail store chains, automobile manufacturers and dealers, banks and telecommunications companies, have experienced significant merger and acquisition activity over the last several years, and some have gone out of business, effectively reducing the number of brand names under which the merged entities operate. Changes in the economy and consumer shopping habits such as the increasing use of online shopping, drive advertising spending and retailers approach to advertising and marketing their goods and services.
Classified Advertising
Classified advertising is the category that has been most significantly impacted by changing advertising trends and the increase in digital/classified advertising competitors. All categories of classified advertising have generally declined since 2007.
See "Advertising and Marketing Services” in Item 1, included herein, for additional information on the risks associated with advertising revenue.
Subscription Revenue
Advertising and subscription revenue is affected by readership of our print publications and digital products. Although our aggregate print and digital audience is relatively stable, subscription sales have nonetheless been declining for
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many years, reflecting general trends in the newspaper industry, including consumer migration toward digital platforms and other media for news and information. The possibility exists that future subscription price increases may be difficult to accomplish or maintain as a result of future declines in subscription sales, and that price decreases may be necessary to retain or grow subscription volume. We are maintaining our share of audience through digital audience growth and strong print newspaper readership.
In addition, as audience attention increasingly focuses on digital media, print circulation of our newspapers may be adversely affected, which may decrease subscription revenue and exacerbate declines in print advertising. We face increasing competition from other digital sources for subscription revenue. This competition has intensified as a result of the continued development of digital media technologies. To maintain our subscription base, we may be required to incur additional costs that we may not be able to recover through subscription and advertising revenue. We may not be able to achieve a profitable balance between subscription levels and advertising revenue. In addition, if we are not successful in growing our digital businesses, including digital subscription revenue, to offset declines in revenue from our print products, our business, financial condition and prospects will be adversely affected.
In 2011, we began introducing charges for access to digital content using a metered model in certain of our markets and ended free, unlimited access to those newspapers’ websites. In 2014, we began the transition of our subscriptions to full access, including the printed edition, desktop, mobile and tablet. Our ability to build a subscriber base on our digital platforms through these packages depends on market acceptance, consumer habits, pricing, an adequate digital infrastructure, terms of delivery platforms and other factors. In addition, the metered model and/or the price increases may result in fewer page views or unique visitors to our digital platforms if viewers are unwilling to pay to gain access to our digital content. Stagnation, or a decline in traffic levels, may adversely affect our advertiser base and advertising rates and result in a decline in digital revenue.
See "Audiences” in Item 1, included herein, for additional information on the risks associated with subscription revenue.
If We Are Not Successful In Growing Our Digital Business, Our Business, Financial Condition, Results Of Operations And Prospects Could Be Adversely Affected
Our future performance depends to a significant degree upon the development and management of our digital business. The growth of our digital business over the long term depends on various factors, including, among other things, the ability to:

• | Continue to increase digital audiences;

• | Attract advertisers to our digital platforms;

• | Maintain or increase the advertising rates on our digital platforms;

• |

• | Exploit new and existing technologies to distinguish our products and services from those of competitors and develop new content, products and services;

• | Invest funds and resources in digital opportunities; and

• | Partner with, or use services from, providers that can assist us in effectively growing our digital business.

In addition, we expect that our digital business will continue to increase as a percentage of our total revenue. In 2015, total digital revenue (including revenue from digital subscriptions) comprised 18.0% of total revenue, as compared to 13.8% in 2014. As our digital business becomes a greater portion of our overall business, we will face a number of increased risks from managing our digital operations, including, but not limited, to the following:

• | Continuing training of our sales force to more effectively sell advertising in the digital advertising arena versus our historical print advertising business;

• | Attracting and retaining employees with skill sets and the knowledge base needed to successfully operate our digital business; and

15

• | Managing the transition to a digital business from a historically print-focused business.

OPERATING EXPENSES
We May Not Be Able To Reduce Future Expenses To Offset Potential Revenue Declines
We reduced cash costs of our continuing operations (compensation, newsprint and ink, other operating expenses and workforce adjustments) significantly since 2011. Such expense reductions are not expected to significantly impact our ability to deliver advertising, news or other content to our customers. As a result of the significantly reduced cost structure to date, future cost reductions may not be as significant.
Newsprint comprises a significant amount of our operating costs. See “Newsprint” in Item 1, and “Commodities” in Item 7A, included herein, for additional information on the risks associated with changes in newsprint costs.
In addition, technological developments and changes we need to make to our business, may require significant capital investments. We may be limited in our ability to invest funds and resources in digital products, services or opportunities, and we may incur costs of research and development in building and maintaining the necessary and continually evolving technology infrastructure. As a result, our digital business could suffer if we are unable to make the investments.
We May Incur Additional Non-Cash Impairment Charges
We have significant amounts of goodwill and identified intangible assets. Since 2007 we have recorded impairment charges totaling almost $1.3 billion to reduce the value of certain of these assets. Should general economic, market or business conditions decline, and have a negative impact on our stock price or projected future cash flows, we may be required to record additional impairment charges in the future. Such charges would not impact our cash flows or debt covenant compliance. See “Critical Accounting Policies” in Item 7, included herein, for additional information on the risks associated with such assets.
Sustained Increases In Funding Requirements Of Our Pension and Postretirement Obligations
May Reduce The Cash Available For Our Business
Pension liabilities, net of plan assets, totaled $52.5 million at September 27, 2015. Contributions to pension plans are expected to total $5.8 million in 2016. At September 27, 2015 the assets of our postretirement plans exceeded plan liabilities by $13.4 million.
Our pension and postretirement plans invest in a variety of equity and debt securities. Future volatility and disruption in the securities markets could cause declines in the values of our pension assets. In addition, a decrease in the discount rates used to determine the liability for obligations could result in increased future contributions. If either occurs, we may need to make additional cash contributions above what is currently estimated, which could reduce the cash available for our business. Moreover, under the Pension Protection Act of 2006 (the "PPA"), future losses of asset value may necessitate accelerated funding of pension plans in the future to meet minimum federal statutory requirements. Legislation passed in 2012, 2014 and 2015 temporarily reduced funding requirements for our pension plans, but those payments will eventually need to be restored unless discount rates and/or plan assets increase.
We used new mortality assumptions to value our pension and postretirement liabilities at September 28, 2014, which increased such liabilities, in total, by approximately $18.5 million, with a corresponding decrease in accumulated other comprehensive income in our Consolidated Balance Sheet as of that date.
We Expect To Be Subject To Withdrawal Liability In Connection With One Multiemployer Pension Plan And May Be Subject To Additional Withdrawal Liabilities In Connection With Other Multiemployer Pension Plans, Which May Reduce The Cash Available For Our Business
Pursuant to our collective bargaining obligations, we contribute to three multiemployer pension plans on behalf of certain of our employees. Based on the most recent communications from the plans’ administrators, two of these plans are currently in “critical” status, as that term is used in relation to such plans under the PPA. For plans that are in critical status, benefit reductions may apply and/or we could be required to make additional contributions.
One of our enterprise's bargaining units withdrew from representation, and as a result we will be subject to a future claim from the multiemployer pension plan for a withdrawal liability. The amount of such liability, if any, will be dependent
16

on actions taken, or not taken, by the Company and the pension plan, as well as the future investment performance and funding status of the pension plan. The withdrawal liability is expected to be funded over a 20 year period.
If, we were to withdraw from one of these plans or trigger a partial withdrawal due to declines in contribution base units, and the plan had unfunded vested benefits at the time of our withdrawal or partial withdrawal, we could incur a significant plan withdrawal liability, which could reduce the cash available for our business.
EQUITY CAPITAL
A Decrease In Our Stock Price May Limit The Ability To Trade Our Stock
Or For The Company To Raise Equity Capital
Under the NYSE listing standards, if our common stock fails to maintain an adequate per share price and our total market capitalization falls below $50.0 million, our common stock could be removed from the NYSE and traded in the over the counter market. In July 2011, the NYSE notified us that our common stock did not meet the NYSE continued listing standards due to the failure to maintain an adequate share price. Under the NYSE rules, our common stock was allowed to continue to be listed during a cure period. In February 2012, after completing our debt refinancing, the NYSE notified us that we were again in compliance with the minimum closing price standard. In January 2013, the NYSE notified us that we had returned to full compliance with all continued listing standards. However, there can be no assurance that we will continue to be able to meet these listing standards, and the removal of our common stock from the NYSE could adversely affect our ability to raise equity capital.
OTHER
Cybersecurity Risks Could Harm Our Ability To Operate Effectively
In the 13-weeks ended September 27, 2015, 19.9% of our revenue was obtained from digital sources, including advertising, subscriptions and one of our businesses, TownNews.com, that provides digital infrastructure and digital publishing services for us and other companies.
We use computers and digital technology in substantially all aspects of our business operations. Such uses give rise to cybersecurity risks, including the misappropriation of personally identifiable information that we store and manage and disabling or taking over of our websites. We have preventive systems and processes in place to protect against the risk of cyber incidents. However, the techniques used to obtain unauthorized access and to disable systems and websites change frequently and may be difficult to detect for long periods of time. There can be no assurance that we, or the security systems we implement, will protect against all of these rapidly changing risks. Prolonged system outages or a cyber incident that goes undetected could reduce our print and/or digital revenue, increase our operating costs, disrupt our operations, harm our reputation, lead to legal exposure to customers and/or subject us to liability under laws and regulations that protect personal data. We maintain insurance coverage against certain of such risks, but cannot guarantee that such coverage will be applicable or sufficient with respect to any given incident.
We May Not Be Able To Protect Our Intellectual Property Rights, Which May Adversely Affect Our Business
Our business depends on our intellectual property, including our valuable brands and content. We believe our proprietary trademarks and other intellectual property rights are important to our continued success and our competitive position.
Unauthorized parties may attempt to copy or otherwise obtain and use our content or infringe upon, dilute, reproduce, misappropriate or otherwise violate our intellectual property. There can be no assurance that the steps we have taken to protect our proprietary rights will be successful in any given case.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our executive offices are located in leased facilities at 201 North Harrison Street, Suite 600, Davenport, Iowa. The initial lease term expires in 2019.
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All of our principal printing facilities are owned, except Madison, Wisconsin (which is owned by MNI), Tucson (which is jointly owned by Star Publishing and Citizen), St. Louis (as described below) and leased land for the Helena, Montana plant. All facilities are well maintained, in good condition, suitable for existing office and publishing operations, as applicable, and adequately equipped. With the exception of St. Louis, none of our facilities is individually significant to our business.
Information related to St. Louis facilities at September 27, 2015 i s as follows:

(Square Feet) | Owned |  | Leased |
PD LLC | 726,000 |  | 6,000 |
Suburban Journals | 9,000 |  | 4,000 |

Nearly 42% of our daily newspapers, as well as many of our nearly 300 other publications, are printed at other Company facilities, or such printing is outsourced, to enhance operating efficiency. We are continuing to evaluate additional insourcing and outsourcing opportunities in order to more effectively manage our operating and capital costs.
Our newspapers and other publications have formal or informal backup arrangements for printing in the event of a disruption in production capability.
ITEM 3. LEGAL PROCEEDINGS
We are involved in a variety of other legal actions that arise in the normal course of business. Insurance coverage mitigates potential loss for certain of these other matters. While we are unable to predict the ultimate outcome of these other 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.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY,
RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our Common Stock is listed on the NYSE. In March 2011, in accordance with sunset provisions established in 1986, we effected conversion of all outstanding shares of Class B Common Stock to Common Stock. The table below includes the high and low prices of Common Stock for each calendar quarter during the past three years and the closing price at the end of each quarter.

| Quarter Ended |
(Dollars) | December |  |  | March |  |  | June |  |  | September |
2015 |  |  |  |  |  |  |
High | 3.93 |  |  | 3.73 |  |  | 3.55 |  |  | 3.40 |
Low | 3.07 |  |  | 2.74 |  |  | 2.78 |  |  | 1.36 |
Closing | 3.68 |  |  | 3.17 |  |  | 3.33 |  |  | 2.08 |
2014 |  |  |  |  |  |  |
High | 3.92 |  |  | 5.42 |  |  | 4.78 |  |  | 4.72 |
Low | 2.60 |  |  | 3.30 |  |  | 3.81 |  |  | 3.24 |
Closing | 3.47 |  |  | 4.47 |  |  | 4.45 |  |  | 3.38 |
2013 |  |  |  |  |  |  |
High | 1.75 |  |  | 1.48 |  |  | 2.18 |  |  | 3.20 |
Low | 1.10 |  |  | 1.15 |  |  | 1.21 |  |  | 2.03 |
Closing | 1.14 |  |  | 1.27 |  |  | 2.04 |  |  | 2.70 |

Under the NYSE listing standards, if our Common Stock fails to maintain an adequate per share price and total market capitalization of less than $50,000,000, our Common Stock could be removed from the NYSE and traded in the over the counter market. In July 2011, the NYSE notified us that our Common Stock did not meet the NYSE continued listing standards due to the failure to maintain an adequate share price. Under the NYSE rules, our Common Stock was allowed to continue to be listed during a cure period. In February 2012, after completing our debt refinancing, the NYSE notified us that we were again in compliance with the minimum closing price standard. In January 2013, the NYSE notified us that we had returned to full compliance with all continued listing standards.
A t September 27, 2015, w e had 6,444 holders of record of our Common Stock.
Our debt agreements generally limit our ability to pay dividends and repurchase Common Stock unless in each case no default has occurred and we have satisfied certain financial measurements. See Note 5 of the Notes to Consolidated Financial Statements, included herein.
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PERFORMANCE PRESENTATION
The following graph compares the percentage change in the cumulative total return of the Company, the Standard & Poor's ("S&P") 500 Stock Index, and a peer group index, in each case for the five years en ded September 30, 2015 (with September 30, 2010 as the measurement point). Total return is measured by dividing (a) the sum of (i) the cumulative amount of dividends declared for the measurement period, assuming dividend reinvestment and (ii) the difference between the issuer's share price at the end and the beginning of the measurement period, by (b) the share price at the beginning of the measurement period.
Copyright©: 2015 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.
The value of $100 invested on September 30, 2010 i n stock of the Company, the Old Peer Group Index, New Peer Group Index and in the S&P 500 Stock Index, including reinvestment of dividends, is summarized in the table below.

| September 30 |
(Dollars) | 2010 |  |  | 2011 |  |  | 2012 |  |  | 2013 |  |  | 2014 |  |  | 2015 |
Lee Enterprises, Incorporated | 100.00 |  |  | 29.10 |  |  | 55.22 |  |  | 98.51 |  |  | 126.12 |  |  | 77.61 |
Old Peer Group Index | 100.00 |  |  | 71.47 |  |  | 114.97 |  |  | 161.90 |  |  | 153.06 |  |  | 167.52 |
New Peer Group Index | 100.00 |  |  | 67.23 |  |  | 110.16 |  |  | 145.34 |  |  | 140.23 |  |  | 133.23 |
S&P 500 Stock Index | 100.00 |  |  | 101.14 |  |  | 131.69 |  |  | 157.17 |  |  | 188.18 |  |  | 187.02 |

The S&P 500 Stock Index includes 500 U.S. companies in the industrial, transportation, utilities and financial sectors and is weighted by market capitalization. The New Peer Group Index is comprised of three U.S. publicly traded companies with significant newspaper publishing operations (excluding the Company) and is weighted by market capitalization. The New Peer Group Index includes A.H. Belo Corp., The McClatchy Company and The New York Times Company, all of which were included in the Old Peer Group Index. The E.W. Scripps Company which is included in the Old Peer Group Index, has been excluded from the New Peer Group Index due to the spin-off of its newspaper publishing business in 2015.
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ITEM 6. SELECTED FINANCIAL DATA
Selected financial data is as follows:

(Thousands of Dollars and Shares, Except Per Common Share Data) | 2015 |  |  | 2014 |  |  | 2013 |  |  | 2012 |  |  | 2011 |
OPERATING RESULTS (1) (2) |  |  |  |  |  |  |  |  |  |  |  |  |
Operating revenue | 648,543 |  |  | 660,877 |  |  | 677,774 |  |  | 709,580 |  |  | 726,032 |
Operating expenses, excluding depreciation, amortization, and impairment of intangible and other assets | 501,760 |  |  | 505,822 |  |  | 517,047 |  |  | 546,863 |  |  | 563,540 |
Depreciation and amortization | 45,563 |  |  | 48,511 |  |  | 55,527 |  |  | 65,191 |  |  | 69,244 |
Loss (gain) on sales of assets, net | 106 |  |  | (1,338 | ) |  | 110 |  |  | (52 | ) |  | 252 |
Impairment of intangible and other assets (3) | — |  |  | 2,980 |  |  | 171,094 |  |  | 1,388 |  |  | 204,289 |
Curtailment gains | — |  |  | — |  |  | — |  |  | — |  |  | 16,137 |
Equity in earnings of associated companies | 8,254 |  |  | 8,297 |  |  | 8,685 |  |  | 7,231 |  |  | 6,151 |
Reduction in investment in TNI (3) | — |  |  | — |  |  | — |  |  | — |  |  | 11,900 |
Operating income (loss) | 109,368 |  |  | 113,199 |  |  | (57,319 | ) |  | 103,421 |  |  | (100,905 | )
Financial income | 337 |  |  | 385 |  |  | 300 |  |  | 236 |  |  | 296 |
Interest expense | (72,409 | ) |  | (79,724 | ) |  | (89,447 | ) |  | (83,078 | ) |  | (52,696 | )
Debt financing and administration costs | (5,433 | ) |  | (22,927 | ) |  | (646 | ) |  | (2,823 | ) |  | (12,612 | )
Income (loss) from continuing operations | 24,318 |  |  | 7,671 |  |  | (76,478 | ) |  | (13,381 | ) |  | (145,156 | )
Discontinued operations, net of income taxes | — |  |  | — |  |  | (1,246 | ) |  | (2,918 | ) |  | (1,525 | )
Net income (loss) | 24,318 |  |  | 7,671 |  |  | (77,724 | ) |  | (16,299 | ) |  | (146,681 | )
Income (loss) attributable to Lee Enterprises, Incorporated | 23,316 |  |  | 6,795 |  |  | (78,317 | ) |  | (16,698 | ) |  | (146,868 | )
Income (loss) from continuing operations attributable to Lee Enterprises, Incorporated | 23,316 |  |  | 6,795 |  |  | (77,071 | ) |  | (13,780 | ) |  | (145,343 | )
EARNINGS (LOSS) PER COMMON SHARE |  |  |  |  |  |
Basic: |  |  |  |  |  |  |  |  |
Continuing operations | 0.44 |  |  | 0.13 |  |  | (1.49 | ) |  | (0.28 | ) |  | (3.24 | )
Discontinued operations | — |  |  | — |  |  | (0.02 | ) |  | (0.06 | ) |  | (0.03 | )
| 0.44 |  |  | 0.13 |  |  | (1.51 | ) |  | (0.34 | ) |  | (3.27 | )
Diluted: |  |  |  |  |  |  |  |  |
Continuing operations | 0.43 |  |  | 0.13 |  |  | (1.49 | ) |  | (0.28 | ) |  | (3.24 | )
Discontinued operations | — |  |  | — |  |  | (0.02 | ) |  | (0.06 | ) |  | (0.03 | )
| 0.43 |  |  | 0.13 |  |  | (1.51 | ) |  | (0.34 | ) |  | (3.27 | )
Weighted average common shares: |  |  |  |  |  |  |  |  |
Basic | 52,640 |  |  | 52,273 |  |  | 51,833 |  |  | 49,261 |  |  | 44,847 |
Diluted | 53,931 |  |  | 53,736 |  |  | 51,833 |  |  | 49,261 |  |  | 44,847 |
BALANCE SHEET INFORMATION (End of Year) |  |  |  |  |  |
Total assets | 763,484 |  |  | 811,275 |  |  | 827,705 |  |  | 1,061,136 |  |  | 1,158,248 |
Debt, including current maturities (4) | 725,872 |  |  | 804,750 |  |  | 847,500 |  |  | 945,850 |  |  | 994,550 |
Debt, net of cash and restricted cash (4) | 714,738 |  |  | 787,605 |  |  | 829,938 |  |  | 931,930 |  |  | 966,023 |
Stockholders' deficit | (159,393 | ) |  | (178,253 | ) |  | (170,350 | ) |  | (114,633 | ) |  | (101,346 | )

(1 | ) | In 2015, we reclassified certain costs as operating expenses that were previously recorded as reductions to revenue. As a result of the reclassification, both revenue and expenses in total increased by $4,180,000, $3,034,000, $2,659,000 and $2,811,000 in 2014, 2013, 2012 and 2011, respectively, compared to their previously reported amounts. The reclassification was necessary to correct an error in the accounting treatment of these costs and is deemed immaterial to the previously issued consolidated financial statements.

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(2 | ) | 2012 includes 53 weeks of business operations. All other years include 52 weeks.

(3 | ) | The Company recorded pretax, non-cash impairment charges to reduce the carrying value of assets as follows:

(Thousands of Dollars) | 2015 |  |  | 2014 |  |  | 2013 |  |  | 2012 |  |  | 2011 |
Continuing operations: |  |  |  |  |  |  |  |  |
Goodwill | — |  |  | — |  |  | — |  |  | — |  |  | 186,281 |
Non-amortized intangible assets | — |  |  | 1,936 |  |  | 1,567 |  |  | — |  |  | 13,109 |
Amortizable intangible assets | — |  |  | — |  |  | 169,041 |  |  | — |  |  | 4,199 |
Property and equipment | — |  |  | 1,044 |  |  | 486 |  |  | 1,388 |  |  | 700 |
| — |  |  | 2,980 |  |  | 171,094 |  |  | 1,388 |  |  | 204,289 |
Reduction in investment in TNI | — |  |  | — |  |  | — |  |  | — |  |  | 11,900 |
| — |  |  | 2,980 |  |  | 171,094 |  |  | 1,388 |  |  | 216,189 |
Discontinued operations | — |  |  | — |  |  | — |  |  | 3,606 |  |  | 850 |

(4 | ) | Principal amount of debt, excluding fair value adjustments. See Note 5 of the Notes to Consolidated Financial Statements, included herein. |

ITEM 7. 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 each of the three years ended, September 27, 2015. T his discussion should be read in conjunction with the Consolidated Financial Statements and related Notes thereto, included herein.
NON-GAAP FINANCIAL MEASURES
No non-GAAP financial measure should be considered as a substitute for any related GAAP financial measure. 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 and its ability to meet debt service requirements.
The non-GAAP financial measures we use are defined as follows:
Adjusted EBITDA is defined as as operating income (loss), plus depreciation, amortization, loss (gain) on sale of assets, impairment charges, workforce adjustment costs, stock compensation and our 50% share of EBITDA from TNI and MNI, minus equity in earnings of TNI and MNI and curtailment gains.
Adjusted Income (Loss) and Adjusted Earnings (Loss) Per Common Share are defined as income (loss) attributable to Lee Enterprises, Incorporated and earnings (loss) per common share adjusted to exclude both unusual matters and those of a substantially non-recurring nature.
Cash Costs are defined as compensation, newsprint and ink, other operating expenses and certain unusual matters, such as workforce adjustment costs. Depreciation, amortization, impairment charges, other non-cash operating expenses and other unusual matters are excluded.
EBITDA is defined as operating income (loss), plus depreciation, amortization, loss (gain) on sale of assets, impairment charges and our 50% share of EBITDA from TNI and MNI, minus equity in earnings of TNI and MNI and curtailment gains.
Operating Cash Flow is defined as operating income (loss) plus depreciation, amortization, loss (gain) on sale of assets and impairment charges, minus equity in earnings of TNI and MNI and curtailment gains. Operating cash flow margin is defined as operating cash flow divided by operating revenue.
Unlevered Free Cash Flow is defined as operating income (loss), plus depreciation, amortization, loss (gain) on sale of assets, impairment charges, stock compensation, distributions from TNI and MNI
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and cash income tax refunds, minus equity in earnings of TNI and MNI, curtailment gains, cash income taxes, pension contributions and capital expenditures. Changes in working capital, asset sales, minority interest and discontinued operations are excluded. Free Cash Flow also includes financial income, interest expense and debt financing and reorganization costs.
Tables reconciling operating cash flow, operating cash flow margin, EBITDA, Adjusted EBITDA, unlevered free cash flow and free cash flow to operating income (loss), the most directly comparable measure under GAAP, are set forth in Item 7, included herein, under the caption "Selected Consolidated Financial Information".
Reconciliations of adjusted income (loss) and adjusted earnings (loss) 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 in Item 7, included herein, under the caption “Overall Results”.
The subtotals of operating expenses representing cash costs can be found in tables in Item 7, included herein, under the captions “2015 vs. 2014” and “2014 vs. 2013”.
We also present selected information for Lee Legacy and Pulitzer. Lee Legacy constitutes the business of the Company, including MNI, but excluding Pulitzer and TNI. See "Selected Lee Legacy Financial Information, and "Selected Pulitzer Financial Information" in Item 7, included herein.
CRITICAL ACCOUNTING POLICIES
Our discussion and analysis of financial condition and results of operations 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. We evaluate our estimates on an on-going basis.
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. Additional information follows with regard to certain of the most critical of our accounting policies.
Goodwill and Other Intangible Assets
In assessing the recoverability of goodwill and other non-amortized intangible assets, we annually assess qualitative factors affecting our business to determine if the probability of a goodwill impairment is more likely than not. Our assessment includes reviewing internal and external factors affecting our business, such as cash flow projections, stock price and other industry or market considerations. This assessment is made on the first day of our fourth fiscal quarter of each year.
We analyze goodwill and other non-amortized intangible assets for impairment 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.
Should we determine that a goodwill impairment is more likely than not, 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. Fair value is allocated to our assets and liabilities to determine an implied goodwill fair value. A non-cash impairment charge will generally be recognized when the book value of goodwill exceeds its implied fair value.
Should we determine that a non-amortized intangible asset impairment is more likely than not, we make a determination of the individual asset's fair value. Fair value is determined using the relief from royalty method, which estimates fair value based upon appropriate royalties of future revenue discounted to their present value. The impairment amount, if any, is calculated based on the excess of the carrying amount over the fair value of such asset.
We review our amortizable intangible assets for impairment when indicators of impairment are present. We assess
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recoverability of these assets by comparing the estimated undiscounted cash flows associated with the 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 asset groups.
The required valuation methodology and underlying financial information that are used to determine fair value require significant judgments to be made by us and represent a Level 3 fair value measurement. 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 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.
In 2014, we performed a qualitative analysis to test our goodwill for impairment and concluded that the likelihood of an impairment was less than 50%. In 2015 and 2013, we performed additional quantitative analysis of the carrying value of our goodwill and concluded the implied fair value of goodwill was in excess of its carrying value. As a result no goodwill impairment was recorded.
In 2014 and 2013, due to continuing revenue declines, we recorded non-cash charges to reduce the carrying value of non-amortized intangible assets. In 2013 we determined that the cash flows from amortizable intangible assets were not sufficient to recover their carrying values. As a result, we recorded non-cash charges to reduce the carrying values of such assets to fair value. We also recorded pretax, non-cash charges to reduce the carrying value of property and equipment in 2014 and 2013. We recorded deferred income tax benefits related to these charges.
A summary of impairment charges is included in the table below:

(Thousands of Dollars) |  | 2015 |  |  | 2014 |  |  | 2013 |
Continuing operations: |  |  |  |  |  |
Non-amortized intangible assets |  | — |  |  | 1,936 |  |  | 1,567 |
Amortizable intangible assets |  | — |  |  | — |  |  | 169,041 |
Property and equipment |  | — |  |  | 1,044 |  |  | 486 |
|  | — |  |  | 2,980 |  |  | 171,094 |

Future decreases in our market value, or significant differences in revenue, expenses or cash flows from estimates used to determine fair value, could result in additional impairment charges in the future.
Pension, Postretirement and Postemployment Benefit Plans
We evaluate our liability for pension, postretirement and postemployment benefit plans based upon computations made by consulting actuaries, incorporating estimates and actuarial assumptions of future plan service costs, future interest costs on projected benefit obligations, rates of compensation increases, when applicable, employee turnover rates, anticipated mortality rates, expected investment returns on plan assets, asset allocation assumptions of plan assets, and other factors. If we used different estimates and assumptions regarding these plans, the funded status of the plans could vary significantly, resulting in recognition of different amounts of expense over future periods.
Increases in market interest rates, which may impact plan assumptions, generally result in lower service costs for current employees, higher interest expense and lower liabilities. Actual returns on plan assets that are lower than the plan assumptions will generally result in decreases in a plan's funded status and may necessitate additional contributions.
We used new mortality assumptions to value our pension and postretirement liabilities at September 28, 2014, which increased such liabilities, in total, by approximately $18.5 million, with a corresponding decrease in accumulated other comprehensive income in our Consolidated Balance Sheet as of that date.
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Income Taxes
Deferred income taxes are provided using the asset and liability method, whereby deferred income tax assets are recognized for deductible temporary differences and loss carryforwards and deferred income tax liabilities are recognized for taxable temporary differences. Temporary differences are the difference between the reported amounts of assets and liabilities and their tax basis. We currently have recorded valuation allowances that we will maintain until, in our opinion, it is more likely than not that some portion or all of the deferred tax assets will be realized. Deferred income tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Our income tax expense recorded in the future may be increased or decreased to the extent our valuation allowances change. An increase in the valuation allowance could result in additional income tax expense, while a decrease in the valuation allowance could result in a reduction to income tax expense, in such period and could have a significant impact on our future earnings.
We recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. We record interest and penalties related to unrecognized tax benefits as a component of income tax expense. Changes in accounting for uncertain tax positions can result in additional variability in our effective income tax rate.
Our current and deferred income tax provisions are calculated based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed during the subsequent year. These estimates are reviewed and adjusted, if needed, throughout the year. Adjustments between our estimates and the actual results of filed returns are recorded when identified.
We file income tax returns with the Internal Revenue Service (“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.
Revenue Recognition
Advertising revenue is recorded when advertisements are placed in the publication or on the related digital platform. Subscription revenue is recorded over the print or digital subscription term as the product is delivered or made available or as newspapers are individually sold. Other revenue is recognized when the related product or service has been delivered. Unearned revenue arises in the ordinary course of business from advance subscription payments for print or digital products or advance payments for advertising.
Uninsured Risks
We are self-insured for health care, workers compensation and certain long-term disability costs of our employees, subject to stop loss insurance, which limits exposure to large claims. We accrue our estimated health care costs in the period in which such costs are incurred, including an estimate of incurred but not reported claims. Other risks are insured and carry deductible losses of varying amounts.
Our accrued reserves for health care and workers compensation claims are based upon estimates of the remaining liability for retained losses made by consulting actuaries. The amount of workers compensation reserve has been determined based upon historical patterns of incurred and paid loss development factors from the insurance industry.
An increasing frequency of large claims, deterioration in overall claim experience or changes in federal or state laws affecting our liability for such claims could increase the volatility of expenses for such self-insured risks.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In November 2015, the Financial Accounting Standards Board ("FASB") issued an amendment to Accounting Standards Codification Standard 740: Income Taxes related to the classification of net deferred tax assets and liabilities. Deferred tax liabilities and assets are classified as current or noncurrent based on the classification of the related asset or liability
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for financial reporting. To simplify the presentation of deferred income taxes, the amendment requires that deferred income tax liabilities and assets be classified as noncurrent in our Consolidated Balance Sheets. The adoption of the new standard is required in 2018. The adoption of this standard will serve to reclassify certain amounts within our Consolidated Balance Sheets.
In April 2015, the FASB issued a new standard for the presentation of debt issuance costs. The new standard will streamline the balance sheet presentation of debt related valuations. Debt issuance costs are currently recognized as deferred charges and presented as an asset while debt discounts and premiums are treated as adjustments to the related debt. Under the new standard, debt issuance costs will be recognized as reductions to the related debt. The adoption of the new standard is required in 2017. The adoption of this standard will serve to reclassify certain amounts within our Consolidated Balance Sheets.
In August 2014, the FASB issued a new going concern standard. The new standard changes the period that companies use to evaluate their ability to meet obligations to a look-forward period of one year from the financial statement issuance date, from one year from the balance sheet date. The new standard also changes disclosure requirements. The adoption of the new standard is required in 2017. We do not expect the adoption of this standard to have a material impact on our Consolidated Financial Statements, taken as a whole.
In May 2014, the FASB issued new accounting requirements for the recognition of revenue from contracts with customers. The new requirements also include additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The adoption of these requirements is required in 2019, but may be deferred one year. We have not yet determined the potential impact on our Consolidated Financial Statements.
RECLASSIFICATION
In 2015, we reclassified certain costs as operating expenses that were previously recorded as reductions to revenue. As a result of the reclassification, both revenue and expenses in total increased by $4,180,000 and $3,034,000 in 2014 and 2013, respectively, compared to their previously reported amounts. The reclassification was necessary to correct an error in the accounting treatment of these costs and is deemed immaterial to the previously issued consolidated financial statements.
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CONTINUING OPERATIONS
2015 vs. 2014
Operating results, as reported in the Consolidated Financial Statements, are summarized below:

(Thousands of Dollars and Shares, Except Per Share Data) | 2015 |  |  | 2014 |  |  | Percent Change |
Advertising and marketing services revenue: |  |  |  |  |
Retail | 264,334 |  |  | 283,366 |  |  | (6.7 | )
Classified | 114,225 |  |  | 124,955 |  |  | (8.6 | )
National | 22,422 |  |  | 24,867 |  |  | (9.8 | )
Niche publications and other | 11,118 |  |  | 10,059 |  |  | 10.5 |
Total advertising and marketing services revenue | 412,099 |  |  | 443,247 |  |  | (7.0 | )
Subscription | 194,474 |  |  | 176,826 |  |  | 10.0 |
Digital services | 12,522 |  |  | 10,181 |  |  | 23.0 |
Commercial printing | 11,875 |  |  | 12,050 |  |  | (1.5 | )
Other | 17,573 |  |  | 18,573 |  |  | (5.4 | )
Total operating revenue | 648,543 |  |  | 660,877 |  |  | (1.9 | )
Compensation | 239,028 |  |  | 243,054 |  |  | (1.7 | )
Newsprint and ink | 30,263 |  |  | 37,994 |  |  | (20.3 | )
Other operating expenses | 229,165 |  |  | 223,509 |  |  | 2.5 |
Workforce adjustments | 3,304 |  |  | 1,265 |  |  | NM |
Cash costs | 501,760 |  |  | 505,822 |  |  | (0.8 | )
Operating cash flow | 146,783 |  |  | 155,055 |  |  | (5.3 | )
Depreciation | 18,418 |  |  | 20,920 |  |  | (12.0 | )
Amortization | 27,145 |  |  | 27,591 |  |  | (1.6 | )
Loss (gain) on sales of assets, net | 106 |  |  | (1,338 | ) |  | NM |
Impairment of intangible and other assets | — |  |  | 2,980 |  |  | NM |
Equity in earnings of associated companies | 8,254 |  |  | 8,297 |  |  | (0.5 | )
Operating income | 109,368 |  |  | 113,199 |  |  | (3.4 | )
Non-operating expense, net | (71,456 | ) |  | (99,238 | ) |  | (28.0 | )
Income from continuing operations before income taxes | 37,912 |  |  | 13,961 |  |  | NM |
Income tax expense | 13,594 |  |  | 6,290 |  |  | NM |
Net income | 24,318 |  |  | 7,671 |  |  | NM |
Net income attributable to non-controlling interests | (1,002 | ) |  | (876 | ) |  | 14.4 |
Income attributable to Lee Enterprises, Incorporated | 23,316 |  |  | 6,795 |  |  | NM |
Other comprehensive loss, net | (6,445 | ) |  | (17,497 | ) |  | NM |
Comprehensive income (loss) attributable to Lee Enterprises, Incorporated | 16,871 |  |  | (10,702 | ) |  | NM |
Earnings per common share: |  |  |  |  |
Basic | 0.44 |  |  | 0.13 |  |  | NM |
Diluted | 0.43 |  |  | 0.13 |  |  | NM |

Total operating revenue decreased $12,334,000, or 1.9% in 2015 compared to the prior year. Excluding the impact of the subscription-related expense reclassification as a result of moving to fee-for-service delivery contracts at several of our newspapers, operating revenue for 2015 decreased 3.7%. This reclassification increases both print subscription revenue and other operating expenses, with no impact on operating cash flow or operating income. Certain delivery expenses were previously reported as a reduction of revenue. A table below under the heading Operating Expenses details the impact of the reclassification on revenue and cash costs. Unless otherwise noted, the comparisons below are presented on an as reported basis.
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Advertising and Marketing Services Revenue
In 2015 advertising and marketing services revenue decreased $31,148,000, or 7.0% compared to 2014. Retail advertising decreased 6.7%. The decrease in advertising and marketing services revenue is due to reduced advertising volume primarily from major retailers and big box stores. Digital retail advertising on a stand-alone basis, which is the largest digital advertising category, increa sed 7.5%, par tially offsetting print declines.
Classified revenue decreased $10,730,000, or 8.6% in 2015 as we continue to experience a reduction in print advertising in automotive, employment and real estate in most of our markets. Digital classified revenue on a stand-alone basis increased 3.4%, partially offsetting print declines.
National advertising decreased $2,445,000, or 9.8%. Digital national advertising on a stand-alone basis increased 16.9% due to improved management of available ad positions offered on the national advertising exchanges and improved pricing. Advertising in niche publications and other increased $1,059,000, or 10.5%.
Digital advertising and marketing services revenue increased 6.9%, to $81,735,000 in 2015, representing 19.8% of total advertising and marketing services re venue. Total digital revenue for 2015, including advertising and marketing services, subscriptions and all other digital business, totaled $116,865,000, an increase of 27.8% from a year ago, representing 18.0% of total operating revenue. Print advertising, including preprints and print marketing services revenue decreased 9.9%.
Subscription and Other Revenue
Subscription revenue increased $17,648,000, or 10.0% in 2015. Excluding the impact of the subscription-related expense reclassification, subscription revenue increased 3.6% or $6,055,000. The increase in subscription revenue in the current year period is primarily due to the effect of our full access subscription model, price increases and the addition of premium content days with higher single day pricing, in part offset by a decline in print units.
Our average daily newspaper circulation, including TNI, MNI and digital subscribers, totaled 0.9 million in the September 2015 quarter. Sunday circulation totaled 1.3 million.
Digital services revenue increased $2,341,000, or 23.0% in 2015, largely due to TownNews, which generates the vast majority of its revenue from content management services but is expanding into digital ad agency services for web, mobile and social products at our properties as well as 1,600 other newspapers, and media operations. Revenue at TownNews, which includes both advertising and digital services revenue, totaled $11,354,000 in 2015, a 9.6% increase over 2014. Other revenue decreased $1,000,000, or 5.4%.
Our mobile, tablet, desktop and app sites, including TNI and MNI, attracted 24.9 million unique visitors in the month of September 2015, with 221.4 million page views. Research in our larger markets indicates we are maintaining our share of audience through the combination of digital audience growth and strong print newspaper readership.
Operating Expenses
Cash costs decreased $4,062,000, or 0.8% in 2015. Excluding the impact of the subscription-related expense reclassification, cash costs decreased 3.1%. Also excluding workforce adjustments and the subscription-related expense reclassification, cash costs decreased 3.6% in 2015 or $17,694,000. In the 13 weeks ended September 27, 2015, cash costs excluding workforce adjustments and the subscription-related expense reclassification decreased 7.8% compared to the same quarter a year-ago, significantly exceeding previously announced guidance of being down 5.5-6.0%.
Compensation expense decreased $4,026,000, or 1.7% in 2015, driven by a decline in average full-time equivalent employees of 4.9%, partially offset by company-wide compensation increases in January 2015 and higher pension costs.
Newsprint and ink costs decreased $7,731,000, or 20.3% in 2015, primarily as a result of lower newsprint prices and a reduction in newsprint volume of 12.3%. See Item 7A, “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,
28

depreciation, amortization, or unusual matters, increased $5,656,000, or 2.5% in 2015, due to the subscription-related expense reclassification. E xcluding the impact of the subscription-related expenses reclassification, other operating expenses decreased 2.7%.
Reductions in staffing resulted in workforce adjustment costs totaling $3,304,000 and $1,265,000 in 2015 and 2014, respectively.
In 2016, we expect to reduce cash costs excluding workforce adjustments, as compared to the prior year, between 3.5% to 4.0%.
Certain results, excluding the impact of the subscription-related expense reclassification, are as follows:

(Thousands of Dollars) | 2015 |  | 2014 |  | Percent Change |
Subscription revenue, as reported | 194,474 |  | 176,826 |  | 10.0 |
Adjustment for subscription-related expense reclassification | (18,300 | ) | (6,707 | ) | NM |
Subscription revenue, as adjusted | 176,174 |  | 170,119 |  | 3.6 |
Total operating revenue, as reported | 648,543 |  | 660,877 |  | (1.9 | )
Adjustment for subscription-related expense reclassification | (18,300 | ) | (6,707 | ) | NM |
Total operating revenue, as adjusted | 630,243 |  | 654,170 |  | (3.7 | )
Other cash costs, as reported | 229,165 |  | 223,509 |  | 2.5 |
Adjustment for subscription-related expense reclassification | (18,300 | ) | (6,707 | ) | NM |
Other cash costs, as adjusted | 210,865 |  | 216,802 |  | (2.7 | )
Total cash costs excluding workforce adjustments | 498,456 |  | 504,557 |  | (1.2 | )
Adjustment for subscription-related expense reclassification | (18,300 | ) | (6,707 | ) | NM |
Total cash cost excluding workforce adjustments, as adjusted | 480,156 |  | 497,850 |  | (3.6 | )
Total cash costs, as reported | 501,760 |  | 505,822 |  | (0.8 | )
Adjustment for subscription-related expense reclassification | (18,300 | ) | (6,707 | ) | NM |
Total cash costs, as adjusted | 483,460 |  | 499,115 |  | (3.1 | )

Approximately $16,918,000, or 92.4%, of the reclassification impacts revenue and cash costs of our Lee Legacy operations, and approximately $1,382,000, or 7.6%, impacts Pulitzer. The subscription-related expense reclassification described above also increased revenue and cash costs of MNI by $5,791,000 in 2015. Such amounts for MNI are not included in the table above.
Operating Cash Flow and Results of Operations
As a result of the factors noted above, operating cash flow decreased 5.3%, to $146,783,000 in 2015 compared to $155,055,000 in 2014. Operating cash flow margin decreased to 22.6% from 23.5% a year ago. The reduction of operating cash flow margin exclusively related to the subscription-related expense reclassification was 0.7% in 2015.
Depreciation expense decreased $2,502,000, or 12.0% in 2015 and amortization expense decreased $446,000, or 1.6% in 2015.
In 2014, we recorded a $1,936,000 non-cash charge to reduce the carrying values of certain non-amortized intangible assets to fair value. We also recorded $1,044,000 pre-tax, non-cash charges to reduce the carrying value of property and equipment in 2014. Sales of operating assets resulted in a net loss of $106,000 in 2015 compared to a net gain of $1,338,000 in 2014.
Equity in earnings in associated companies decreased $43,000 in 2015.
The factors noted above resulted in operating income of $109,368,000 in 2015 compared to $113,199,000 in 2014.
29

Non-operating Income and Expenses
Interest expense decreased $7,315,000, or 9.2%, to $72,409,000 in 2015 due to lower debt balances and $2,394,000 of non-cash interest expense in 2014.
We recognized $5,433,000 of debt financing and administrative costs in 2015 compared to $22,927,000 in 2014. The decrease is due to the costs charged to expense at the closing of the 2014 Refinancing. Also in 2014, we recorded a $2,300,000 loss related to a litigation settlement.
As more fully discussed in Note 5 of the Notes to Consolidated Financial Statements, included herein (and certain capitalized terms used below defined), in connection with the 2014 Refinancing, we issued Warrants, which are recorded at fair value and are included in other liabilities in our Consolidated Balance Sheets. We remeasure the related liability to fair value each reporting period with the changes classified as other, net in the Consolidated Statements of Operations and Comprehensive Income (Loss). Due to the decrease in the price of our Common Stock, we recorded non-operating income related to the decrease in the value of the Warrants of $6,568,000 and $6,122,000, in 2015 and 2014, respectively.
Overall Results
We recognized income tax expense at 35.9% of income before income taxes in 2015 and 45.1% in 2014. See Note 11 of the Notes to the Consolidated Financial Statements, included herein, for a reconciliation of the expected federal income tax rate to the actual tax rates.
As a result of the factors noted above, income attributable to Lee Enterprises, Incorporated totaled $23,316,000 in 2015 compared to $6,795,000 in 2014. We recorded earnings per diluted common share of $0.43 in 2015 and $0.13 in 2014. Excluding unusual matters, as detailed in the table below, diluted earnings per common share, as adjusted, were $0.43 in 2015, compared to $0.41 in 2014. Per share amounts may not add due to rounding.

| 2015 |  | 2014 |
(Thousands of Dollars, Except Per Share Data) | Amount |  | Per Share |  | Amount |  | Per Share |
Income attributable to Lee Enterprises, Incorporated, as reported | 23,316 |  | 0.43 |  | 6,795 |  | 0.13 |
Adjustments: |  |  |  |
Impairment of intangible and other assets | — |  |  | 2,980 |  |
Debt financing and administrative costs | 5,433 |  |  | 22,927 |  |
Amortization of debt present value adjustment | — |  |  | 2,394 |  |
Warrants fair value adjustment | (6,568 | ) |  | (6,122 | ) |
Litigation settlement | — |  |  | 2,300 |  |
Other, including workforce adjustments | 4,037 |  |  | 2,319 |  |
| 2,902 |  |  | 26,798 |  |
Income tax effect of adjustments, net | (3,217 | ) |  | (11,487 | ) |
| (315 | ) | (0.01 | ) | 15,311 |  | 0.28 |
Income attributable to Lee Enterprises, Incorporated, as adjusted | 23,001 |  | 0.43 |  | 22,106 |  | 0.41 |

30

2014 vs. 2013
Operating results, as reported in the Consolidated Financial Statements, are summarized below:

(Thousands of Dollars and Shares, Except Per Share Data) | 2014 |  |  | 2013 |  |  | Percent Change |
Operating revenue: |  |  |  |  |
Retail | 283,366 |  |  | 292,946 |  |  | (3.3 | )
Classified | 124,955 |  |  | 134,043 |  |  | (6.8 | )
National | 24,867 |  |  | 23,999 |  |  | 3.6 |
Niche publications and other | 10,059 |  |  | 10,081 |  |  | (0.2 | )
Total advertising and marketing services revenue | 443,247 |  |  | 461,069 |  |  | (3.9 | )
Subscription | 176,826 |  |  | 177,056 |  |  | (0.1 | )
Digital services | 10,181 |  |  | 7,526 |  |  | 35.3 |
Commercial printing | 12,050 |  |  | 12,625 |  |  | (4.6 | )
Other | 18,573 |  |  | 19,498 |  |  | (4.7 | )
Total operating revenue | 660,877 |  |  | 677,774 |  |  | (2.5 | )
Compensation | 243,054 |  |  | 254,831 |  |  | (4.6 | )
Newsprint and ink | 37,994 |  |  | 43,481 |  |  | (12.6 | )
Other operating expenses | 223,509 |  |  | 216,055 |  |  | 3.5 |
Workforce adjustments | 1,265 |  |  | 2,680 |  |  | (52.8 | )
Cash costs | 505,822 |  |  | 517,047 |  |  | (2.2 | )
Operating cash flow | 155,055 |  |  | 160,727 |  |  | (3.5 | )
Depreciation | 20,920 |  |  | 21,302 |  |  | (1.8 | )
Amortization | 27,591 |  |  | 34,225 |  |  | (19.4 | )
Loss (gain) on sales of assets, net | (1,338 | ) |  | 110 |  |  | NM |
Impairment of intangible and other assets | 2,980 |  |  | 171,094 |  |  | (98.3 | )
Equity in earnings of associated companies | 8,297 |  |  | 8,685 |  |  | (4.5 | )
Operating income (loss) | 113,199 |  |  | (57,319 | ) |  | NM |
Non-operating expense, net | (99,238 | ) |  | (81,904 | ) |  | 21.2 |
Income (loss) from continuing operations before reorganization costs and income taxes | 13,961 |  |  | (139,223 | ) |  | NM |
Income tax expense (benefit) | 6,290 |  |  | (62,745 | ) |  | NM |
Income (loss) from continuing operations | 7,671 |  |  | (76,478 | ) |  | NM |
Discontinued operations, net of income taxes | — |  |  | (1,246 | ) |  | NM |
Net income (loss) | 7,671 |  |  | (77,724 | ) |  | NM |
Net income attributable to non-controlling interests | (876 | ) |  | (593 | ) |  | 47.7 |
Income (loss) attributable to Lee Enterprises, Incorporated | 6,795 |  |  | (78,317 | ) |  | NM |
Other comprehensive income (loss), net | (17,497 | ) |  | 21,101 |  |  | NM |
Comprehensive loss attributable to Lee Enterprises, Incorporated | (10,702 | ) |  | (57,216 | ) |  | (81.3 | )
Income (loss) from continuing operations attributable to Lee Enterprises, Incorporated | 6,795 |  |  | (77,071 | ) |  | NM |
Earnings (loss) per common share: |  |  |  |  |
Basic | 0.13 |  |  | (1.51 | ) |  | NM |
Diluted | 0.13 |  |  | (1.51 | ) |  | NM |

Total revenue decreased approximately 2.5% in 2014 compared to prior year on a reported basis. Excluding the impact of the subscription-related expense reclassification, operating revenue decreased 3.5%. Unless otherwise noted, the comparisons below are presented on a reported basis.
31

Advertising and Marketing Services Revenue
2014 advertising and marketing services revenue decreased $17,822,000, or 3.9%, compared to 2013. Retail advertising decreased 3.3%. Digital retail advertising on a stand-alone basis increased 9.0%, par tially offsetting print declines.
Classified revenue decreased 6.8% in 2014. Digital classified revenue on a stand-alone basis increased 8.9%, partially offsetting print declines.
National advertising increased $868,000, or 3.6% in 2014. Digital national advertising on a stand-alone basis increased 96.2%. Advertising in niche publications and other decreased 0.2%.
Digital advertising and marketing services revenue increased 13.0%, to $76,425,000, in 2014, representing 17.2% of total advertising and marketing services revenue. Total digital revenue for 2014, including advertising and marketing services, subscriptions and all other digital business, totaled $91,444,000, an increase of 17.9% from 2013. Print advertising and marketing services revenue on a stand-alone basis decreased 6.8%.
Subscription and Other Revenue
2014 subscription revenue decreased $230,000, or 0.1%, compared to 2013. Excluding the subscription-related expense reclassification, subscription revenue decreased 3.9% in 2014. The decreases are primarily due to decreases in print subscribers, partially offset by price increases and increases in digital subscribers.
Our average daily newspaper circulation units, including TNI and MNI and digital subscribers, totaled 1.1 million for the six months ended September 2014, as measured by the AAM. Sunday circulation totaled 1.4 million.
Digital services revenue increased $2,655,000, or 35.3%, largely fueled by TownNews. Commercial printing revenue decreased $575,000, or 4.6%, in 2014. Other revenue decreased $925,000, or 4.7%, in 2014.
Operating Expenses
Cash costs decreased $11,225,000 or 2.2%, in 2014 compared to 2013. Excluding the impact of the subscription-related expense reclassification, cash costs decreased 3.5%.
Compensation expense decreased $11,777,000, or 4.6% , in 2014, driven by a decline in average full time equivalent employees of 4.8%.
Newsprint and ink costs decreased $5,487,000, or 12.6%, in 2014 primarily as a result of a reduction in newsprint volume of 11.5%. See“Commodities” in Item 7A, 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, increased $7,454,000, or 3.5%, in 2014, due to subscription-related expense reclassification. Excluding the subscription-related expense reclassification, other operating expenses increased 0.3% in 2014.
Reductions in staffing resulted in workforce adjustment costs, primarily severance, totaling $1,265,000 and $2,680,000 in 2014 and 2013, respectively.
32

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

(Thousands of Dollars) | 2014 |  | 2013 |  | Percent Change |
Subscription revenue, as reported | 176,826 |  | 177,056 |  | (0.1 | )
Adjustment for subscription-related expense reclassification | (6,707 | ) | — |  | NM |
Subscription revenue, as adjusted | 170,119 |  | 177,056 |  | (3.9 | )
Total operating revenue, as reported | 660,877 |  | 677,774 |  | (2.5 | )
Adjustment for subscription-related expense reclassification | (6,707 | ) | — |  | NM |
Total operating revenue, as adjusted | 654,170 |  | 677,774 |  | (3.5 | )
Other cash costs, as reported | 223,509 |  | 216,055 |  | 3.5 |
Adjustment for subscription-related expense reclassification | (6,707 | ) | — |  | NM |
Other cash costs, as adjusted | 216,802 |  | 216,055 |  | 0.3 |
Total cash costs excluding workforce adjustments | 504,557 |  | 514,367 |  | (1.9 | )
Adjustment for subscription-related expense reclassification | (6,707 | ) | — |  | NM |
Total cash cost excluding workforce adjustments, as adjusted | 497,850 |  | 514,367 |  | (3.2 | )
Total cash costs, as reported | 505,822 |  | 517,047 |  | (2.2 | )
Adjustment for subscription-related expense reclassification | (6,707 | ) | — |  | NM |
Total cash costs, as adjusted | 499,115 |  | 517,047 |  | (3.5 | )

Approximately $6,246,000, or 93.1%, of the reclassification impacts revenue and cash costs of our Lee Legacy operations, and approximately $461,000, or 6.9%, impacts Pulitzer. The subscription-related expense reclassification also increased both revenue and cash costs of MNI by $4,500,000 in 2014 and is not included in the table above.
Operating Cash Flow and Results of Operations
As a result of the factors noted above, operating cash flow decreased 3.5%, to $155,055,000, in 2014 compared to $160,727,000 in 2013. Operating cash flow margin decreased to 23.5% in 2014 from 23.7% in 2013.
Depreciation expense decreased $382,000, or 1.8%, in 2014 and amortization expense decreased $6,634,000, or 19.4%, in 2014 due to full amortization of certain assets and impairment charges in prior year.
In 2014 and 2013, due to continuing revenue declines, we recorded non-cash charges to reduce the carrying value of non-amortized intangible assets.
In 2013, we determined that the cash flows from certain amortizable intangible assets were not sufficient to recover their carrying values. As a result, we recorded a non-cash charge to reduce the carrying values of such assets to fair value. We also recorded non-cash charges to reduce the carrying value of non-amortized intangible assets and property and equipment in 2014 and 2013. We recorded deferred income tax benefits related to these charges.
A summary of impairment charges is included in the table below:

(Thousands of Dollars) | 2014 |  | 2013 |
Continuing operations: |  |
Non-amortized intangible assets | 1,936 |  | 1,567 |
Amortizable intangible assets | — |  | 169,041 |
Property and equipment | 1,044 |  | 486 |
| 2,980 |  | 171,094 |

Equity in earnings in associated companies increased $388,000 in 2014.
33

The factors noted above resulted in operating income of $113,199,000 in 2014, compared to operating loss of $57,319,000 in 2013.
Non-operating Income and Expense
Interest expense decreased $9,723,000, or 10.9%, to $79,724,000 in 2014 due primarily to lower debt balances and the refinancing of the Pulitzer Notes in May 2013. Interest expense in 2014 also includes $2,394,000 of non-cash amortization of a present value adjustment of debt compared to $5,117,000 in 2013.
We charged $22,927,000 of debt financing and administrative cost to expense and also recorded a $2,300,000 loss related to a litigation settlement in 2014. The litigation settlement is classified as other, net in the Consolidated Statements of Operations and Comprehensive Income (Loss).
Due to the decrease in the price of our Common Stock since March 31, 2014, we recorded non-operating income of $6,122,000 related to the decrease in the value of the Warrants in 2014.
In 2013, we recognized a gain of $7,093,000 from a distribution related to the partial sale of assets in a private equity investment. This gain is classified as other, net in the Consolidated Statements of Operations and Comprehensive Income (Loss).
Overall Results
We recognized income tax expenses of 45.1% of income from continuing operations before income taxes in 2014 and income tax benefit of 45.1% of loss from continuing operations before income taxes in 2013. See Note 11 of the Notes to Consolidated Financial Statements, included herein, for a reconciliation of the expected federal income tax rate to the actual tax rates.
As a result of the factors noted above, income attributable to Lee Enterprises, Incorporated (which includes discontinued operations) totaled $6,795,000 in 2014 compared to a loss of $78,317,000 in 2013. We recorded earnings per diluted common share of $0.13 in 2014 and a loss per diluted common share of $1.51 in 2013. Excluding unusual matters, as detailed in the table below, diluted earnings per common share, as adjusted, were $0.41 in 2014, compared to $0.47 in 2013. Per share amounts may not add due to rounding.

| 2014 |  |  | 2013 |
(Thousands of Dollars, Except Per Share Data) | Amount |  |  | Per Share |  |  | Amount |  |  | Per Share |
Income (loss) attributable to Lee Enterprises, Incorporated, as reported | 6,795 |  |  | 0.13 |  |  | (78,317 | ) |  | (1.51 | )
Adjustments: |  |  |  |  |  |  |
Impairment of intangible and other assets | 2,980 |  |  |  |  | 171,094 |  |  |
Debt financing and administrative costs | 22,927 |  |  |  |  | 646 |  |  |
Amortization of debt present value adjustment | 2,394 |  |  |  |  | 5,434 |  |  |
Warrants fair value adjustments | (6,122 | ) |  |  |  | — |  |  |
Investment gain, net | — |  |  |  |  | (6,909 | ) |  |
Litigation settlement | 2,300 |  |  |  |  | — |  |  |
Other, including workforce adjustments | 2,319 |  |  |  |  | 2,394 |  |  |
| 26,798 |  |  |  |  | 172,659 |  |  |
Income tax effect of adjustments, net | (11,487 | ) |  |  |  | (70,991 | ) |  |
| 15,311 |  |  | 0.28 |  |  | 101,668 |  |  | 1.96 |
Unusual matters related to discontinued operations | — |  |  | — |  |  | 1,014 |  |  | 0.02 |
Income attributable to Lee Enterprises, Incorporated, as adjusted | 22,106 |  |  | 0.41 |  |  | 24,365 |  |  | 0.47 |

34

LIQUIDITY AND CAPITAL RESOURCES
Operating Activities
Cash provided by operating activities of continuing operations was $74,476,000, $82,075,000 and $90,067,000 in 2015, 2014 and 2013, respectively. We recorded net income of $24,318,000 in 2015 and $7,671,000 in 2014 and a net loss of $77,724,000 in 2013. Non-cash debt financing and administration costs charged to expense totaled $5,433,000, $22,927,000, and $594,000 in 2015, 2014 and 2013, respectively. Depreciation and amortization decreased as discussed more fully under "Results of Operations". We also recognized non-cash impairment of intangible and other assets totaling $2,980,000 and $171,094,000 in 2014 and 2013, respectively. The loss from continuing operations in 2013 was caused primarily by non-cash charges for impairment of intangible and other assets, net of the related deferred income tax benefit. Changes in deferred income taxes, operating assets and liabilities and income taxes accounted for the bulk of the remainder of the changes in cash provided by operating activities of continuing operations in all years.
Pension liabilities, net of plan assets, totaled $52.5 million as of September 27, 2015. Contributions to pension plans are expected to total $5.8 million in 2016.
Investing Activities
Cash required for investing activities for continuing operations totaled $208,000, $9,284,000 and $1,296,000 in 2015, 2014 and 2013, respectively. Capital spending totaled $9,707,000 in 2015, $13,661,000 in 2014 and $9,740,000 in 2013. We received proceeds of $8,871,000, $4,485,000 and $7,802,000 from insurance and sales of assets in 2015, 2014 and 2013, respectively.
We anticipate that funds necessary for capital expenditures, which are expected to total up to $10,000,000 in 2016, and other requirements, will be available from internally generated funds, or available under our Revolving Facility.
Financing Activities
Cash required for financing activities for continued operations totaled $79,838,000 in 2015, $73,649,000 in 2014 and $99,318,000 in 2013. We paid $733,000, $31,587,000 and $1,071,000 of debt financing and administrative costs in 2015, 2014 and 2013, respectively. The increase in such costs in 2014 was due to the 2014 Refinancing. Debt reduction accounted for the majority of the remaining usage of funds in all years.
Debt is summarized as follows:

|  |  | Interest Rates (%)
(Thousands of Dollars) | September 27 2015 |  | September 28 2014 |  | September 27 2015
Revolving Facility | — |  | 5,000 |  | 5.65
1st Lien Term Loan | 180,872 |  | 226,750 |  | 7.25
Notes | 400,000 |  | 400,000 |  | 9.50
2 nd Lien Term Loan | 145,000 |  | 150,000 |  | 12.00
New Pulitzer Notes | — |  | 23,000 |  | 9.00
| 725,872 |  | 804,750 |  |
Less current maturities of long-term debt | 25,000 |  | 31,400 |  |
Total long-term debt | 700,872 |  | 773,350 |  |

At September 27, 2015, our weighted average cost of debt, excluding amortization of debt financing costs, is 9.4%.
Aggregate maturities of debt total $25,000,000 in 2016, $25,000,000 in 2017 $25,000,000 in 2018, $105,872,000 in 2019, $0 in 2020 and $545,000,000 thereafter. In addition to mandatory paydowns, the first lien and 2 nd lien term loans require excess cash flow payments based on calculations defined in the credit agreements. See Note 5.
35

Liquidity
At September 27, 2015, after consideration of letters of credit, we have approximately $32,935,000 available for future use under our Revolving Facility. Including cash, our liquidity at September 27, 2015 totals $44,069,000. This liquidity amount excludes any future cash flows. We expect all interest and principal payments due in the next twelve months will be satisfied by our cash flows, which will allow us to maintain an adequate level of liquidity. The Warrants, if and when exercised, would provide additional liquidity in an amount up to $25,140,000.
At September 27, 2015, the principal amount of our outstanding debt totals $725,872,000. For the last twelve months ending September 27, 2015, the principal amount of our debt, net of cash, is 4.4 times our adjusted EBITDA, compared to a ratio of 4.7 times at September 28, 2014.
The 2014 Refinancing significantly extended our debt maturity profile with final maturity of the majority of our debt in 2022. As a result, refinancing risk has been substantially reduced for the next several years.
There are numerous potential consequences under the Notes, 1 st Lien Credit Facility, 2 nd Lien Term Loan, if an event of default, as defined, occurs and is not remedied. Many of those consequences are beyond our control. The occurrence of one or more events of default would give rise to the right of the applicable lender(s) to exercise their remedies under the Notes, 1 st Lien Credit Facility, 2 nd Lien Term Loan, respectively, including, without limitation, the right to accelerate all outstanding debt and take actions authorized in such circumstances under applicable collateral security documents.
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. The Notes, 1 st Lien Credit Facility and 2 nd Lien Term Loan have only limited affirmative covenants with which we are required to maintain compliance. We are in compliance with our debt covenants at September 27, 2015.
In 2014, we filed a Form S-3 shelf registration statement ("Shelf") with the SEC, which has been declared effective. The Shelf gives us the flexibility to issue and publicly distribute various types of securities, including preferred stock, common stock, warrants, secured or unsecured debt securities, purchase contracts and units consisting of any combination of such securities, from time to time, in one or more offerings, up to an aggregate amount of $750,000,000. SEC issuer eligibility rules require us to have a public float of at least $75,000,000 in order to use the Shelf. Subject to maintenance of the minimum level of equity market float and the conditions of our existing debt agreements, the Shelf may enable us to sell securities quickly and efficiently when market conditions are favorable or financing needs arise. Under our existing debt agreements, net proceeds from the sale of any securities may be used generally to reduce debt.
Other Matters
Cash and cash equivalents decreased $5,570,000 and $858,000 in 2015 and 2014, respectively, and increased $3,642,000 in 2013.
SEASONALITY
Our largest source of publishing revenue, retail advertising, is seasonal and tends to fluctuate with retail sales in markets served. Historically, retail advertising is higher in the December and June quarters. Advertising and marketing services revenue is lowest in the March quarter.
Quarterly results of operations are summarized in Note 18 of the Notes to Consolidated Financial Statements, included herein.
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.
36

CHANGES IN LAWS AND REGULATIONS
Energy Costs
Energy costs can be volatile, and may increase in the future as a result of carbon emissions and other regulations being developed by the United States Environmental Protection Agency.
Health Care Costs
The Affordable Care Act was enacted into law in 2010.
We expect the Affordable Care Act will continue to evolve. More recently, certain provisions applicable to employers were delayed. We expect our future health care costs to increase based on analysis published 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 previous medical plans, such as:
•Certain preventive services provided without charge to employees;
•Automatic enrollment of new employees;
•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 and mandatory fees per participant. 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.
Pension Plans
In 2012, the Surface Transportation Extension Act of 2012 (“STEA”) was signed into law. STEA provides for changes in the determination of discount rates that resulted in a near-term reduction in minimum funding requirements for our defined benefit pension plans. STEA will also result in an increase in future premiums to be paid to the Pension Benefit Guarantee Corporation ("PBGC").
in 2014, the Highway and Transportation Funding Act ("HATFA") was signed into law. HATFA generally extends the relief offered under STEA and further increases premiums to be paid to the PBGC.
In October 2014, the Society of Actuaries released new mortality tables. The new tables generally result in increases in life expectancy. We used the new mortality tables to value our pension and postretirement liabilities at September 28, 2014, which increased such liabilities, in total, by approximately $18,515,000, with a corresponding decrease in accumulated other comprehensive income in our Consolidated Balance Sheet as of that date.
Income Taxes
Certain states in which we operate are considering changes to their corporate income tax rates. Until such changes are enacted, the impact of such changes cannot be determined.
37

CONTRACTUAL OBLIGATIONS
The following table summarizes our significant contractual obligations at September 27, 2015:

(Thousands of Dollars) | Payments (or Commitments) Due (Years) |
Nature of Obligation | Total |  |  | Less Than 1 |  |  | 1-3 |  |  | 3-5 |  |  | More Than 5 |
Debt (Principal Amount) (1) | 725,872 |  |  | 25,000 |  |  | 50,000 |  |  | 105,872 |  |  | 545,000 |
Interest expense (2)(3) | 397,955 |  |  | 67,777 |  |  | 130,683 |  |  | 114,695 |  |  | 84,800 |
Operating lease obligations | 13,793 |  |  | 2,804 |  |  | 4,790 |  |  | 1,854 |  |  | 4,345 |
Capital expenditure commitments | 1,156 |  |  | 1,156 |  |  | — |  |  | — |  |  | — |
| 1,138,776 |  |  | 96,737 |  |  | 185,473 |  |  | 222,421 |  |  | 634,145 |

(1) | Maturities of long-term debt are limited to mandatory payments and, accordingly, exclude excess cash flow, asset sale and other payments under the 1st Lien Credit Facility, Notes and the 2nd Lien Term Loan. While excess cash flow payments are based on actual performance, we expect to make substantial voluntary and excess cash flow payments on the debt currently outstanding, in the next five years. See Note 5 of the Notes to Consolidated Financial Statements, included herein.
(2) | Interest expense includes an estimate of interest expense for the Notes, 1st Lien Credit Facility, and 2nd Lien Term Loan until their maturities in March 2022, March 2019, and December 2022, respectively. Interest expense under the Notes is estimated using the 9.5% contractual rate applied to the outstanding balance as reduced by future contractual maturities of such debt. Interest expense under the 1st Lien Term Loan is estimated based on the 30 day minimum LIBOR level of 1.0% as increased by our applicable margin of 6.25% applied to the outstanding balance, as reduced by future contractual maturities of such debt. Interest expense under the Revolving Facility is estimated based on the current 30 day LIBOR level as increased by our applicable margin of 5.5% applied to the outstanding balance, as reduced by future contractual maturities of such debt. Interest expense under the 2nd Lien Term Loan is estimated using the 12.0% contractual rate applied to the outstanding balance during each period. Changes in interest rates in excess of the minimum LIBOR level, use of borrowing rates not based on LIBOR, use of interest rate hedging instruments, and/or principal payments in excess of contractual maturities or based on other requirements of the Notes, 1st Lien Credit Facility or 2nd Lien Term Loan could significantly change this estimate. See Note 5 of the Notes to Consolidated Financial Statements, included herein.
(3) | Interest expense excludes non-cash present value adjustments and amortization of debt financing costs previously paid. See Note 5 of the Notes to Consolidated Financial Statements, included herein.

The table above excludes future cash requirements for pension, postretirement and postemployment obligations. The periods in which these obligations will be settled in cash are not readily determinable and are subject to numerous future events and assumptions. We estimate cash requirements for these obligations in 2016 will total approximately $5,782,000. See Notes 6 and 7 of the Notes to Consolidated Financial Statements, included herein.
Commitments exclude unrecognized tax benefits to be recorded in accordance with FASB ASC Topic 740, Income Taxes. We are unable to reasonably estimate the ultimate amount or timing of cash settlements with the respective taxing authorities for such matters. A substantial amount of our deferred income tax liabilities will not result in future cash payments. See Note 11 of the Notes to Consolidated Financial Statements, included herein.
38

SELECTED CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)

(Thousands of Dollars) | 2015 |  | 2014 |  | 2013 |
Advertising and marketing services | 412,099 |  | 443,247 |  | 461,069 |
Subscription | 194,474 |  | 176,826 |  | 177,056 |
Other | 41,970 |  | 40,804 |  | 39,649 |
Total operating revenue | 648,543 |  | 660,877 |  | 677,774 |
Compensation | 239,028 |  | 243,054 |  | 254,831 |
Newsprint and ink | 30,263 |  | 37,994 |  | 43,481 |
Other operating expenses | 229,165 |  | 223,509 |  | 216,055 |
Depreciation and amortization | 45,563 |  | 48,511 |  | 55,527 |
Loss (gain) on sales of assets, net | 106 |  | (1,338 | ) | 110 |
Impairment of intangible and other assets | — |  | 2,980 |  | 171,094 |
Workforce adjustments | 3,304 |  | 1,265 |  | 2,680 |
Total operating expenses | 547,429 |  | 555,975 |  | 743,778 |
Equity in earnings of TNI and MNI | 8,254 |  | 8,297 |  | 8,685 |
Operating income (loss) | 109,368 |  | 113,199 |  | (57,319 | )
Adjusted to exclude: |  |  |
Depreciation and amortization | 45,563 |  | 48,511 |  | 55,527 |
Loss (gain) on sales of assets, net | 106 |  | (1,338 | ) | 110 |
Impairment of intangible and other assets | — |  | 2,980 |  | 171,094 |
Equity in earnings of TNI and MNI | (8,254 | ) | (8,297 | ) | (8,685 | )
Operating cash flow | 146,783 |  | 155,055 |  | 160,727 |
Add: |  |  |
Ownership share of TNI and MNI EBITDA (50%) | 11,246 |  | 11,236 |  | 11,761 |
EBITDA | 158,029 |  | 166,291 |  | 172,488 |
Adjusted to exclude: |  |  |
Workforce adjustments | 3,304 |  | 1,265 |  | 2,680 |
Stock compensation | 1,971 |  | 1,481 |  | 1,261 |
Adjusted EBITDA | 163,304 |  | 169,037 |  | 176,429 |
Adjusted to exclude: |  |  |
Ownership share of TNI and MNI EBITDA (50%) | (11,246 | ) | (11,236 | ) | (11,761 | )
Add (deduct): |  |  |
Distributions from TNI and MNI | 10,975 |  | 9,996 |  | 11,398 |
Capital expenditures, net of insurance proceeds | (9,707 | ) | (11,824 | ) | (9,740 | )
Pension contributions | (3,577 | ) | (1,522 | ) | (6,016 | )
Cash income tax refunds (payments) | (485 | ) | 6,022 |  | 9,126 |
Unlevered free cash flow | 149,264 |  | 160,473 |  | 169,436 |
Add (deduct): |  |  |
Financial income | 337 |  | 385 |  | 300 |
Interest expense to be settled in cash | (72,409 | ) | (77,330 | ) | (84,012 | )
Debt financing and administration costs paid | (733 | ) | (31,587 | ) | (1,071 | )
Free cash flow | 76,459 |  | 51,941 |  | 84,653 |

39

The following table reconciles operating cash flow margin to operating income margin. Margin is defined as percent of total revenue:

|  | 2015 |  |  | 2014 |  |  | 2013 |
(Thousands of Dollars) | Amount |  | Margin |  | Amount |  | Margin |  | Amount |  | Margin |
Operating income (loss) | 109,368 |  | 16.9 |  | 113,199 |  | 17.1 |  | (57,319 | ) | (8.5 | )
Adjusted to exclude: |  |  |  |  |  |
Depreciation and amortization | 45,563 |  | 7.0 |  | 48,511 |  | 7.3 |  | 55,527 |  | 8.2 |
Loss (gain) on sales of assets, net | 106 |  | — |  | (1,338 | ) | (0.2 | ) | 110 |  | — |
Impairment of intangible and other assets | — |  | — |  | 2,980 |  | 0.5 |  | 171,094 |  | 25.2 |
Equity in earnings of TNI and MNI | (8,254 | ) | (1.3 | ) | (8,297 | ) | (1.3 | ) | (8,685 | ) | (1.3 | )
Operating cash flow | 146,783 |  | 22.6 |  | 155,055 |  | 23.5 |  | 160,727 |  | 23.7 |

40

SELECTED LEE LEGACY ONLY FINANCIAL INFORMATION
(UNAUDITED)

(Thousands of Dollars) | 2015 |  | 2014 |  | 2013 |
Advertising and marketing services | 287,417 |  | 307,254 |  | 317,445 |
Subscription | 131,352 |  | 113,992 |  | 110,335 |
Other | 35,328 |  | 34,353 |  | 32,031 |
Total operating revenue | 454,097 |  | 455,599 |  | 459,811 |
Compensation | 180,035 |  | 180,641 |  | 185,470 |
Newsprint and ink | 22,307 |  | 27,084 |  | 30,195 |
Other operating expenses | 130,530 |  | 120,552 |  | 114,004 |
Depreciation and amortization | 31,534 |  | 33,163 |  | 27,291 |
Loss (gain) on sales of assets, net | (285 | ) | (1,362 | ) | 134 |
Impairment of intangible and other assets | — |  | 378 |  | 523 |
Workforce adjustments | 983 |  | 551 |  | 1,546 |
Total operating expenses | 365,104 |  | 361,007 |  | 359,163 |
Equity in earnings of MNI | 3,416 |  | 3,384 |  | 3,509 |
Operating income | 92,409 |  | 97,976 |  | 104,157 |
Adjusted to exclude: |  |  |
Depreciation and amortization | 31,534 |  | 33,163 |  | 27,291 |
Loss (gain) on sales of assets, net | (285 | ) | (1,362 | ) | 134 |
Impairment of intangible and other assets | — |  | 378 |  | 523 |
Equity in earnings of MNI | (3,416 | ) | (3,384 | ) | (3,509 | )
Operating cash flow | 120,242 |  | 126,771 |  | 128,596 |
Add: |  |  |
Ownership share of MNI EBITDA (50%) | 5,989 |  | 5,905 |  | 5,964 |
EBITDA | 126,231 |  | 132,676 |  | 134,560 |
Adjusted to exclude: |  |  |
Workforce adjustments | 983 |  | 551 |  | 1,546 |
Stock compensation | 1,971 |  | 1,481 |  | 1,261 |
Adjusted EBITDA | 129,185 |  | 134,708 |  | 137,367 |
Adjusted to exclude: |  |  |
Ownership share of MNI EBITDA (50%) | (5,989 | ) | (5,905 | ) | (5,964 | )
Add (deduct): |  |  |
Distributions from MNI | 5,500 |  | 4,750 |  | 5,250 |
Capital expenditures, net of insurance proceeds | (6,747 | ) | (9,688 | ) | (7,713 | )
Pension contributions | — |  | (87 | ) | — |
Cash income tax payments | (396 | ) | (266 | ) | (365 | )
Intercompany charges not settled in cash | (6,953 | ) | (9,678 | ) | (8,396 | )
Other | (2,000 | ) | (2,000 | ) | (2,000 | )
Unlevered free cash flow | 112,600 |  | 111,834 |  | 118,179 |

41

SELECTED PULITZER ONLY FINANCIAL INFORMATION
(UNAUDITED)

| 2015 |  | 2014 |  | 2013 |
(Thousands of Dollars) | Amount |  | Amount |  | Amount |
Advertising and marketing services | 124,682 |  | 135,993 |  | 143,624 |
Subscription | 63,122 |  | 62,834 |  | 66,721 |
Other | 6,642 |  | 6,451 |  | 7,618 |
Total operating revenue | 194,446 |  | 205,278 |  | 217,963 |
Compensation | 58,993 |  | 62,413 |  | 69,361 |
Newsprint and ink | 7,956 |  | 10,910 |  | 13,286 |
Other operating expenses | 98,635 |  | 102,957 |  | 102,051 |
Depreciation and amortization | 14,029 |  | 15,348 |  | 28,236 |
Loss (gain) on sales of assets, net | 391 |  | 24 |  | (24 | )
Impairment of intangible and other assets | — |  | 2,602 |  | 170,571 |
Workforce adjustments | 2,321 |  | 714 |  | 1,134 |
Total operating expenses | 182,325 |  | 194,968 |  | 384,615 |
Equity in earnings of TNI | 4,838 |  | 4,913 |  | 5,176 |
Operating income (loss) | 16,959 |  | 15,223 |  | (161,476 | )
Adjusted to exclude: |  |  |
Depreciation and amortization | 14,029 |  | 15,348 |  | 28,236 |
Loss (gain) on sales of assets, net | 391 |  | 24 |  | (24 | )
Impairment of intangible and other assets | — |  | 2,602 |  | 170,571 |
Equity in earnings of TNI | (4,838 | ) | (4,913 | ) | (5,176 | )
Operating cash flow | 26,541 |  | 28,284 |  | 32,131 |
Add: |  |  |
Ownership share of TNI EBITDA (50%) | 5,257 |  | 5,331 |  | 5,797 |
EBITDA | 31,798 |  | 33,615 |  | 37,928 |
Adjusted to exclude: |  |  |
Workforce adjustments | 2,321 |  | 714 |  | 1,134 |
Adjusted EBITDA | 34,119 |  | 34,329 |  | 39,062 |
Adjusted to exclude: |  |  |
Ownership share of TNI EBITDA (50%) | (5,257 | ) | (5,331 | ) | (5,797 | )
Add (deduct): |  |  |
Distributions from TNI | 5,475 |  | 5,246 |  | 6,148 |
Capital expenditures, net of insurance proceeds | (2,960 | ) | (2,136 | ) | (2,027 | )
Pension contributions | (3,577 | ) | (1,435 | ) | (6,016 | )
Cash income tax refunds (payments) | (89 | ) | 6,288 |  | 9,491 |
Intercompany charges not settled in cash | 6,953 |  | 9,678 |  | 8,396 |
Other | 2,000 |  | 2,000 |  | 2,000 |
Unlevered free cash flow | 36,664 |  | 48,639 |  | 51,257 |

42

ITEM 7A. 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 ON DEBT
Our debt structure, which is predominantly fixed rate, significantly reduces the potential impact of an increase in interest rates. At September 27, 2015, 24.9% of the principal amount of our debt is subject to floating interest rates. Our primary exposure is to LIBOR. A 100 basis point increase to LIBOR would, if in excess of LIBOR minimums discussed more fully below, decrease income before income taxes on an annualized basis by approximately $1,808,720 based on $180,872,000 of floating rate debt outstanding at September 27, 2015.
Our debt under the 1 st Lien Term Loan is subject to minimum interest rate levels of 1.0%. Based on the difference between interest rates in October 2015 and our 1.0% minimum rate, LIBOR would need to increase approximately 47 basis points for six month borrowing up to approximately 81 basis points for one month borrowing before our borrowing cost would begin to be impacted by an increase in interest rates.
We regularly evaluate alternatives to hedge our interest rate risk, but have no hedging instruments in place.
COMMODITIES
Newsprint purchase prices declined throughout the fiscal year as North American newsprint producers faced significant domestic demand declines in addition to weak international shipment opportunities. The current price cycle is likely at the bottom as several suppliers implemented supply/demand balancing action plans including the permanent closures of two North American newsprint paper machines in last half of 2015. Suppliers have announced price increases effective January with an additional increase in February 2016.
Price change announcements are influenced primarily by the balance between supply capacity and demand, domestic and export, and the producer's ability to mitigate input cost pressures taking the U. S. dollar to Canadian dollar exchange rate into consideration. The extent to which a current price increase is successful or future price changes occur is subject to negotiations with each newsprint producer at the time newsprint is ordered.
Long term supply strategy takes potential capacity closures into consideration and aligns the Company with suppliers most likely to continue to supply the North American newsprint market and our print locations.
A $10 per tonne price increase for 30 pound newsprint would result in an annualized reduction in income before income taxes of approximately $532,000, based on anticipated consumption in 2016, excluding consumption of TNI and MNI and the impact of LIFO accounting. Such prices may also decrease. We manage significant newsprint inventories, which will temporarily mitigate the impact of future price changes.
SENSITIVITY TO CHANGES IN VALUE
At September 27, 2015, the fair value of floating rate debt, which consists primarily of our 1 st Lien Term Loan, is $175,446,000, based on an average of private market price quotations. Our fixed rate debt consists of $400,000,000 principal amount of the Notes and $145,000,000 principal amount under the 2 nd Lien Term Loan. At September 27, 2015, based on an average of private market price quotations, the fair values were $392,000,000 and $150,981,000 for the Notes and 2nd Lien Term Loan, respectively.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information with respect to this Item is included herein under the caption “Consolidated Financial Statements”.
43

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Information with respect to this Item is included in our Proxy Statement to be filed in January 2016, which is incorporated herein by reference, under the caption “Relationship with Independent Registered Public Accounting Firm”.
ITEM 9A. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Under the supervision and with the participation of our senior management, including 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 Exchange Act, as of September 27, 2015, the end of the period covered by this annual report (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 our consolidated subsidiaries, required to be disclosed in our 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.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) of the Exchange Act. Any internal control system, no matter how well designed, has inherent limitations and may not prevent or detect misstatements. Accordingly, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Under the supervision and with the participation of our senior management, including our chief executive officer and chief financial officer, we assessed the effectiveness of our internal control over financial reporting as of the Evaluation Date, using the criteria set forth in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has concluded that our internal control over financial reporting is effective as of the Evaluation Date.
Our independent registered public accounting firm, KPMG LLP, has issued a report on the Company's internal control over financial reporting. KPMG’s report on the audit of internal control over financial reporting appears in this Annual Report.
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 September 27, 2015 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
44

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Lee Enterprises, Incorporated:
We have audited Lee Enterprises, Incorporated and subsidiaries’ (the Company) internal control over financial reporting as of September 27, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Lee Enterprises, Incorporated and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of September 27, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Lee Enterprises, Incorporated and subsidiaries as of September 27, 2015 and September 28, 2014, and the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity (deficit), and cash flows for each of the 52-week periods ended September 27, 2015, September 28, 2014, and September 29, 2013, and our report dated December 11, 2015 expressed an unqualified opinion on those consolidated financial statements.
/s/ KPMG LLP
Chicago, Illinois
December 11, 2015
45

ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information with respect to this Item, except for certain information related to our executive officers included under the caption “Executive Team” in Part I of this Annual Report, is included in our Proxy Statement to be filed i n January 2016, which is incorporated herein by reference, under the captions “Proposal 1 - Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance”. Our executive officers are those elected officers whose names and certain information are set forth under the caption “Executive Team” in Part 1 of this Annual Report.
We have a Code of Business Conduct and Ethics ("Code") that applies to all of our employees, including our principal executive officer, and principal financial and accounting officer. The Code is monitored by the Audit Committee of our Board of Directors and is annually affirmed by our directors and executive officers. We maintain a corporate governance page on our website which includes the Code. The corporate governance page can be found at www.lee.net by clicking on “Governance” under the "About" tab. A copy of the Code will also be provided without charge to any stockholder who requests it. Any future amendment to, or waiver granted by us from, a provision of the Code will be posted on our website.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to this Item is included in our Proxy Statement to be filed i n January 2016, which is incorporated herein by reference, under the captions, “Compensation of Non-Employee Directors”, “Executive Compensation” and “Compensation Discussion and Analysis”; provided, however, that the subsection entitled “Executive Compensation - Executive Compensation Committee Report” shall not be deemed to be incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
Information with respect to this Item is included in our Proxy Statement to be filed i n January 2016, which is incorporated herein by reference, under the captions “Voting Securities and Principal Holders Thereof” and “Equity Compensation Plan Information”.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AND DIRECTOR INDEPENDENCE
Information with respect to this Item is included in our Proxy Statement to be fil ed in January 2016, which is incorporated herein by reference, under the caption “Directors' Meetings and Committees of the Board of Directors”.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Information with respect to this Item is included in our Proxy Statement to be filed in January 2016, which is incorporated herein by reference, under the caption “Relationship with Independent Registered Public Accounting Firm”.
46

PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this Annual Report:
FINANCIAL STATEMENTS
Consolidated Statements of Operations and Comprehensive Income (Loss) - Years ended September 27, 2015, September 28, 2014 and September 29, 2013
Consolidated Balance Sheets - September 27, 2015 and September 28, 2014
Consolidated Statements of Stockholders' Equity (Deficit) - Years ended September 27, 2015, September 28, 2014 and September 29, 2013
Consolidated Statements of Cash Flows - Years ended September 27, 2015, September 28, 2014 and September 29, 2013
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
FINANCIAL STATEMENT SCHEDULES
All schedules have been omitted as they are not required, not applicable, not deemed material or because the information is included in the Notes to Consolidated Financial Statements, included herein.
EXHIBITS
See Exhibit Index, included herein.
47

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized on the 11 th day of December 2015.
LEE ENTERPRISES, INCORPORATED

/s/ Mary E. Junck |  | /s/ Ronald A. Mayo
Mary E. Junck |  | Ronald A. Mayo
Chairman, President and Chief Executive Officer |  | Vice President, Chief Financial Officer and Treasurer
(Principal Executive Officer) |  | (Principal Financial and Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in their respective capacities on the 11 th day of December 2015.

Signature |  |
/s/ Richard R. Cole |  | Director
Richard R. Cole |  |
/s/ Nancy S. Donovan |  | Director
Nancy S. Donovan |  |
/s/ Leonard J. Elmore |  | Director
Leonard J. Elmore |  |
/s/ Mary E. Junck |  | Chairman, President and Chief Executive Officer, and Director
Mary E. Junck |  |
/s/ Brent Magid |  | Director
Brent Magid |  |
/s/ William E. Mayer |  | Director
William E. Mayer |  |
/s/ Herbert W. Moloney III |  | Director
Herbert W. Moloney III |  |
/s/ Andrew E. Newman |  | Director
Andrew E. Newman |  |
/s/ Gregory P. Schermer |  | Vice President - Strategy, and Director
Gregory P. Schermer |  |
/s/ Ronald A. Mayo |  | Vice President, Chief Financial Officer and Treasurer
Ronald A. Mayo |  |
/s/ Mark B. Vittert |  | Director
Mark B. Vittert |  |

48

CONSOLIDATED FINANCIAL STATEMENTS | PAGE
Consolidated Statements of Operations and Comprehensive Income (Loss) | 51
Consolidated Balance Sheets | 52
Consolidated Statements of Stockholders' Equity (Deficit) | 54
Consolidated Statements of Cash Flows | 55
Notes to Consolidated Financial Statements | 56
Report of Independent Registered Public Accounting Firm | 89

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50

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Thousands of Dollars, Except Per Common Share Data) | 2015 |  |  | 2014 |  |  | 2013 |
Operating revenue: |  |  |  |  |
Advertising and marketing services | 412,099 |  |  | 443,247 |  |  | 461,069 |
Subscription | 194,474 |  |  | 176,826 |  |  | 177,056 |
Other | 41,970 |  |  | 40,804 |  |  | 39,649 |
Total operating revenue | 648,543 |  |  | 660,877 |  |  | 677,774 |
Operating expenses: |  |  |  |  |
Compensation | 239,028 |  |  | 243,054 |  |  | 254,831 |
Newsprint and ink | 30,263 |  |  | 37,994 |  |  | 43,481 |
Other operating expenses | 229,165 |  |  | 223,509 |  |  | 216,055 |
Depreciation | 18,418 |  |  | 20,920 |  |  | 21,302 |
Amortization of intangible assets | 27,145 |  |  | 27,591 |  |  | 34,225 |
Impairment of intangible and other assets | — |  |  | 2,980 |  |  | 171,094 |
Loss (gain) on sales of assets, net | 106 |  |  | (1,338 | ) |  | 110 |
Workforce adjustments | 3,304 |  |  | 1,265 |  |  | 2,680 |
Total operating expenses | 547,429 |  |  | 555,975 |  |  | 743,778 |
Equity in earnings of associated companies | 8,254 |  |  | 8,297 |  |  | 8,685 |
Operating income (loss) | 109,368 |  |  | 113,199 |  |  | (57,319 | )
Non-operating income (expense): |  |  |  |  |
Financial income | 337 |  |  | 385 |  |  | 300 |
Interest expense | (72,409 | ) |  | (79,724 | ) |  | (89,447 | )
Debt financing and administrative costs | (5,433 | ) |  | (22,927 | ) |  | (646 | )
Other, net | 6,049 |  |  | 3,028 |  |  | 7,889 |
Total non-operating expense, net | (71,456 | ) |  | (99,238 | ) |  | (81,904 | )
Income (loss) before income taxes | 37,912 |  |  | 13,961 |  |  | (139,223 | )
Income tax expense (benefit) | 13,594 |  |  | 6,290 |  |  | (62,745 | )
Income (loss) from continuing operations | 24,318 |  |  | 7,671 |  |  | (76,478 | )
Discontinued operations, net of income taxes | — |  |  | — |  |  | (1,246 | )
Net income (loss) | 24,318 |  |  | 7,671 |  |  | (77,724 | )
Net income attributable to non-controlling interests | (1,002 | ) |  | (876 | ) |  | (593 | )
Income (loss) attributable to Lee Enterprises, Incorporated | 23,316 |  |  | 6,795 |  |  | (78,317 | )
Other comprehensive income (loss), net | (6,445 | ) |  | (17,497 | ) |  | 21,101 |
Comprehensive income (loss) | 16,871 |  |  | (10,702 | ) |  | (57,216 | )
Income (loss) from continuing operations attributable to Lee Enterprises, Incorporated | 23,316 |  |  | 6,795 |  |  | (77,071 | )
Earnings (loss) per common share: |  |  |  |  |
Basic: |  |  |  |  |
Continuing operations | 0.44 |  |  | 0.13 |  |  | (1.49 | )
Discontinued operations | — |  |  | — |  |  | (0.02 | )
| 0.44 |  |  | 0.13 |  |  | (1.51 | )
Diluted: |  |  |  |  |
Continuing operations | 0.43 |  |  | 0.13 |  |  | (1.49 | )
Discontinued operations | — |  |  | — |  |  | (0.02 | )
| 0.43 |  |  | 0.13 |  |  | (1.51 | )

The accompanying Notes are an integral part of the Consolidated Financial Statements.
51

CONSOLIDATED BALANCE SHEETS

(Thousands of Dollars) | September 27 2015 |  |  | September 28 2014 |
ASSETS |  |  |
Current assets: |  |  |
Cash and cash equivalents | 11,134 |  |  | 16,704 |
Accounts receivable, less allowance for doubtful accounts: |  |  |
2015 $4,194; 2014 $4,526 | 58,899 |  |  | 62,343 |
Income taxes receivable | 413 |  |  | 620 |
Inventories | 3,914 |  |  | 6,655 |
Deferred income taxes | 15,659 |  |  | 1,228 |
Other | 8,304 |  |  | 8,585 |
Total current assets | 98,323 |  |  | 96,135 |
Investments: |  |  |
Associated companies | 35,069 |  |  | 37,790 |
Other | 9,083 |  |  | 10,661 |
Total investments | 44,152 |  |  | 48,451 |
Property and equipment: |  |  |
Land and improvements | 22,257 |  |  | 23,645 |
Buildings and improvements | 179,731 |  |  | 180,570 |
Equipment | 290,127 |  |  | 292,209 |
Construction in process | 997 |  |  | 4,548 |
| 493,112 |  |  | 500,972 |
Less accumulated depreciation | 349,343 |  |  | 343,601 |
Property and equipment, net | 143,769 |  |  | 157,371 |
Goodwill | 243,729 |  |  | 243,729 |
Other intangible assets, net | 185,962 |  |  | 212,657 |
Postretirement assets, net | 13,421 |  |  | 14,136 |
Other | 34,128 |  |  | 38,796 |
Total assets | 763,484 |  |  | 811,275 |

The accompanying Notes are an integral part of the Consolidated Financial Statements.
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(Thousands of Dollars and Shares, Except Per Share Data) | September 27 2015 |  |  | September 28 2014 |
LIABILITIES AND STOCKHOLDERS' EQUITY |  |  |
Current liabilities: |  |  |
Current maturities of long-term debt | 25,000 |  |  | 31,400 |
Accounts payable | 20,113 |  |  | 27,245 |
Compensation and other accrued liabilities | 27,055 |  |  | 24,348 |
Accrued interest | 4,184 |  |  | 4,812 |
Unearned revenue | 28,929 |  |  | 30,903 |
Total current liabilities | 105,281 |  |  | 118,708 |
Long-term debt, net of current maturities | 700,872 |  |  | 773,350 |
Pension obligations | 52,522 |  |  | 50,170 |
Postretirement and postemployment benefit obligations | 11,060 |  |  | 10,359 |
Deferred income taxes | 37,796 |  |  | 14,766 |
Income taxes payable | 4,856 |  |  | 5,097 |
Other | 9,680 |  |  | 16,369 |
Total liabilities | 922,067 |  |  | 988,819 |
Equity (deficit): |  |  |
Stockholders' equity (deficit): |  |  |
Serial convertible preferred stock, no par value; authorized 500 shares; none issued | — |  |  | — |
Common Stock, authorized 120,000 shares; issued and outstanding: | 547 |  |  | 537 |
September 27, 2015; 54,679 shares; $0.01 par value |  |  |
September 28, 2014; 53,747 shares; $0.01 par value |  |  |
Class B Common Stock, $2 par value; authorized 30,000 shares; none issued | — |  |  | — |
Additional paid-in capital | 247,302 |  |  | 245,323 |
Accumulated deficit | (390,966 | ) |  | (414,282 | )
Accumulated other comprehensive loss | (16,276 | ) |  | (9,831 | )
Total stockholders' deficit | (159,393 | ) |  | (178,253 | )
Non-controlling interests | 810 |  |  | 709 |
Total deficit | (158,583 | ) |  | (177,544 | )
Total liabilities and deficit | 763,484 |  |  | 811,275 |

The accompanying Notes are an integral part of the Consolidated Financial Statements.
53

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

| Amount |  |  | Shares |
(Thousands of Dollars and Shares) | 2015 |  |  | 2014 |  |  | 2013 |  |  | 2015 |  |  | 2014 |  |  | 2013 |
Common Stock: |  |  |  |  |  |  |  |  |  |  |
Balance, beginning of year | 537 |  |  | 524 |  |  | 523 |  |  | 53,747 |  |  | 52,434 |  |  | 52,291 |
Shares issued | 10 |  |  | 13 |  |  | 1 |  |  | 932 |  |  | 1,313 |  |  | 143 |
Balance, end of year | 547 |  |  | 537 |  |  | 524 |  |  | 54,679 |  |  | 53,747 |  |  | 52,434 |
Additional paid-in capital: |  |  |  |  |  |  |  |  |  |  |
Balance, beginning of year | 245,323 |  |  | 242,537 |  |  | 241,039 |  |  |  |  |  |  |
Stock compensation | 1,971 |  |  | 1,481 |  |  | 1,261 |  |  |  |  |  |  |
Shares issued | 8 |  |  | 1,305 |  |  | 237 |  |  |  |  |  |  |
Balance, end of year | 247,302 |  |  | 245,323 |  |  | 242,537 |  |  |  |  |  |  |
Accumulated deficit: |  |  |  |  |  |  |  |  |  |  |
Balance, beginning of year | (414,282 | ) |  | (421,077 | ) |  | (342,760 | ) |  |  |  |  |  |
Net income (loss) | 24,318 |  |  | 7,671 |  |  | (77,724 | ) |  |  |  |  |  |
Net income attributable to non-controlling interests | (1,002 | ) |  | (876 | ) |  | (593 | ) |  |  |  |  |  |
Balance, end of year | (390,966 | ) |  | (414,282 | ) |  | (421,077 | ) |  |  |  |  |  |
Accumulated other comprehensive income (loss): |  |  |  |  |  |  |  |  |  |  |
Balance, beginning of year | (9,831 | ) |  | 7,666 |  |  | (13,435 | ) |  |  |  |  |  |
Change in pension and postretirement benefits | (10,973 | ) |  | (29,591 | ) |  | 35,764 |  |  |  |  |  |  |
Deferred income taxes, net | 4,528 |  |  | 12,094 |  |  | (14,663 | ) |  |  |  |  |  |
Balance, end of year | (16,276 | ) |  | (9,831 | ) |  | 7,666 |  |  |  |  |  |  |
Total stockholders' deficit | (159,393 | ) |  | (178,253 | ) |  | (170,350 | ) |  | 54,679 |  |  | 53,747 |  |  | 52,434 |

The accompanying Notes are an integral part of the Consolidated Financial Statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS

(Thousands of Dollars) | 2015 |  |  | 2014 |  |  | 2013 |
Cash provided by operating activities: |  |  |  |  |
Net income (loss) | 24,318 |  |  | 7,671 |  |  | (77,724 | )
Results of discontinued operations | — |  |  | — |  |  | (1,246 | )
Income (loss) from continuing operations | 24,318 |  |  | 7,671 |  |  | (76,478 | )
Adjustments to reconcile income (loss) from continuing operations to net cash provided by operating activities of continuing operations: |  |  |  |  |
Depreciation and amortization | 45,563 |  |  | 47,173 |  |  | 55,637 |
Impairment of intangible and other assets | — |  |  | 2,980 |  |  | 171,094 |
Distributions greater than earnings of MNI | 2,084 |  |  | 1,366 |  |  | 1,742 |
Stock compensation expense | 1,971 |  |  | 1,481 |  |  | 1,261 |
Amortization of debt fair value adjustment | — |  |  | 2,394 |  |  | 5,117 |
Debt financing and administrative costs expensed | 5,433 |  |  | 22,927 |  |  | 594 |
Gain on sales of investments | — |  |  | — |  |  | (7,093 | )
Deferred income tax expense (benefit) | 12,764 |  |  | 6,425 |  |  | (54,807 | )
Changes in operating assets and liabilities: |  |  |  |  |
Decrease in receivables | 3,444 |  |  | 872 |  |  | 4,710 |
Decrease in inventories and other | 3,122 |  |  | 217 |  |  | 904 |
Decrease in accounts payable, compensation and other accrued liabilities and unearned revenue | (9,587 | ) |  | (5,315 | ) |  | (2,280 | )
Decrease in pension, postretirement and postemployment benefit obligations | (7,204 | ) |  | (6,078 | ) |  | (9,602 | )
Change in income taxes receivable or payable | (34 | ) |  | 5,854 |  |  | 1,117 |
Other, net | (7,398 | ) |  | (5,892 | ) |  | (1,849 | )
Net cash provided by operating activities of continuing operations | 74,476 |  |  | 82,075 |  |  | 90,067 |
Cash provided by (required for) investing activities of continuing operations: |  |  |  |  |
Purchases of property and equipment | (9,707 | ) |  | (13,661 | ) |  | (9,740 | )
Decrease (increase) in restricted cash | 441 |  |  | (441 | ) |  | — |
Proceeds from insurance and sales of assets | 8,871 |  |  | 4,485 |  |  | 7,802 |
Distributions greater than earnings of TNI | 637 |  |  | 333 |  |  | 972 |
Other, net | (450 | ) |  | — |  |  | (330 | )
Net cash required for investing activities of continuing operations | (208 | ) |  | (9,284 | ) |  | (1,296 | )
Cash provided by (required for) financing activities of continuing operations: |  |  |  |  |
Proceeds from long-term debt | 5,000 |  |  | 805,000 |  |  | 94,000 |
Payments on long-term debt | (83,878 | ) |  | (847,750 | ) |  | (192,350 | )
Debt financing and administrative costs paid | (733 | ) |  | (31,587 | ) |  | (1,071 | )
Common stock transactions, net | (227 | ) |  | 688 |  |  | 103 |
Net cash required for financing activities of continuing operations | (79,838 | ) |  | (73,649 | ) |  | (99,318 | )
Net cash provided by (required for) discontinued operations: |  |  |  |  |
Operating activities | — |  |  | — |  |  | (552 | )
Investing activities | — |  |  | — |  |  | 14,741 |
Net increase (decrease) in cash and cash equivalents | (5,570 | ) |  | (858 | ) |  | 3,642 |
Cash and cash equivalents: |  |  |  |  |
Beginning of year | 16,704 |  |  | 17,562 |  |  | 13,920 |
End of year | 11,134 |  |  | 16,704 |  |  | 17,562 |

The accompanying Notes are an integral part of the Consolidated Financial Statements.
55

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
References to "we", "our", "us" and the like throughout the Consolidated Financial Statements refer to Lee Enterprises, Incorporated and subsidiaries (the "Company"). References to "2015", "2014", "2013" and the like refer to the fiscal years ended the last Sunday in September.
Lee Enterprises, Incorporated is a leading provider of local news and information and a major platform for advertising, in primarily midsize markets, with 46 daily newspapers and a joint interest in four others, rapidly growing digital products and nearly 300 weekly newspapers and specialty publications in 22 states. We currently operate in a single operating segment.
In May 2013, we refinanced a portion of our debt, extending the maturity to April 2017. On March 31, 2014, we refinanced all of our remaining debt, extending the related maturity dates to March 2019, March 2022 or December 2022. See Notes 5 and 9.
1 SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
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, 50% interest in MNI and 82.5% interest in TownNews. TNI and MNI are accounted for under the equity method.
In 2015, we reclassified certain costs as operating expenses that were previously recorded as reductions to revenue. As a result of the reclassification, both revenue and expenses in total increased by $4,180,000 and $3,034,000 in 2014 and 2013, respectively, compared to their previously reported amounts. Operating income and net income were not affected. The reclassification was necessary to correct an error in the accounting treatment of these costs and is deemed immaterial to the previously issued consolidated financial statements.
Fiscal Year
All of our enterprises use period accounting with the fiscal year ending on the last Sunday in September. 2015, 2014 and 2013 include 52 weeks of business operations for the Company and MNI. TNI has 52 weeks of operations in 2015 and 2014 and a 53rd week of business operations in 2013.
Subsequent Events
We have evaluated subsequent events through December 11, 2015. No events have occurred subsequent to September 27, 2015 that require disclosure or recognition in these financial statements, except as included herein.
Accounting Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") 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. We evaluate our estimates on an on-going basis. 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.
Principles of Consolidation
All significant intercompany transactions and balances have been eliminated.
Investments in TNI and MNI are accounted for using the equity method and are reported at cost, plus our share of undistributed earnings since acquisition less, for TNI, amortization of, and reductions in the value of, intangible assets.
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Cash and Cash Equivalents
We consider all highly liquid debt instruments purchased with an original maturity of three months or less at date of acquisition to be cash equivalents.
Outstanding checks in excess of funds on deposit are included in accounts payable and are classified as financing activities in the Consolidated Statements of Cash Flows.
Accounts Receivable
We evaluate our allowance for doubtful accounts receivable based on historical credit experience, payment trends and other economic factors. Delinquency is determined based on timing of payments in relation to billing dates. Accounts considered to be uncollectible are written off.
Inventories
Newsprint inventories are priced at the lower of cost or market, with cost being determined by the first-in, first-out or last-in, first-out methods. Newsprint inventories at September 27, 2015 and September 28, 2014 are less than replacement cost by $1,780,000 and $2,761,000, respectively.
The components of newsprint inventory by cost method are as follows:

(Thousands of Dollars) | September 27 2015 |  |  | September 28 2014 |
First-in, first-out | 786 |  |  | 2,297 |
Last-in, first-out | 1,547 |  |  | 2,404 |
| 2,333 |  |  | 4,701 |

Other inventories consisting of ink, plates and film are priced at the lower of cost or market, with cost being determined by the first-in, first-out method.
Other Investments
Other investments primarily consist of marketable securities held in trust under a deferred compensation arrangement and investments for which no established market exists. Marketable securities are classified as trading securities and carried at fair value with gains and losses reported in earnings. Non-marketable securities are carried at cost.
Property and Equipment
Property and equipment are carried at cost. Equipment, except for printing presses and preprint insertion equipment, is depreciated primarily by declining-balance methods. The straight-line method is used for all other assets. The estimated useful lives are as follows:

| Years
Buildings and improvements | 5 - 54
Printing presses and insertion equipment | 3 - 28
Other | 3 - 17

We capitalize interest as a component of the cost of constructing major facilities. At September 27, 2015 and September 28, 2014, capitalized interest is not significant.
We recognize the fair value of a liability for a legal obligation to perform an asset retirement activity when such activity is a condition of a future event and the fair value of the liability can be estimated.
57

Goodwill and Other Intangible Assets
Intangible assets include covenants not to compete, consulting agreements, customer lists, newspaper subscriber lists and mastheads. Intangible assets subject to amortization are being amortized using the straight-line method as follows:

| Years |
Customer lists | 15 - 23 |
Newspaper subscriber lists | 11 - 33 |
Non-compete and consulting agreements | 15 |

In assessing the recoverability of goodwill and other non-amortized intangible assets, we annually assess qualitative factors affecting our business to determine if the probability of a goodwill impairment is more likely than not. Our assessment includes reviewing internal and external factors affecting our business, such as cash flow projections, stock price and other industry or market considerations. This assessment is made on the first day of our fourth fiscal quarter of each year.
We analyze goodwill and other non-amortized intangible assets for impairment 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.
Should we determine that a goodwill impairment is more likely than not, 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. Fair value is allocated to our assets and liabilities to determine an implied goodwill fair value. A non-cash impairment charge will generally be recognized when the book value of goodwill exceeds its implied fair value.
Should we determine that a non-amortized intangible asset impairment is more likely than not, we make a determination of the individual asset's fair value. Fair value is determined using the relief from royalty method, which estimates fair value based upon appropriate royalties of future revenue discounted to their present value. The impairment amount, if any, is calculated based on the excess of the carrying amount over the fair value of such asset.
We review our amortizable intangible assets for impairment when indicators of impairment are present. We assess recoverability of these assets by comparing the estimated undiscounted cash flows associated with the 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 asset groups.
The required valuation methodology and underlying financial information that are used to determine fair value require significant judgments to be made by us and represent a Level 3 fair value measurement. 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 also periodically evaluate 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.
Future decreases in our market value, or significant differences in revenue, expenses or cash flows from estimates used to determine fair value, could result in impairment charges in the future. See Note 4.
Non-controlling Interest
Non-controlling interest in earnings of TownNews is recognized in the Consolidated Financial Statements.
58

Revenue Recognition
Advertising revenue is recorded when advertisements are placed in the publication or on the related digital platform. Subscription revenue is recorded over the print or digital subscription term or as newspapers are individually sold. Other revenue is recognized when the related product or service has been delivered. Unearned revenue arises in the ordinary course of business from advance subscription payments for print or digital products or advance payments for advertising.
Advertising Costs
A substantial amount of our advertising and promotion expense consists of advertising placed in our own publications and digital platforms, using available space. The incremental cost of such advertising is not significant and is not measured separately by us. External advertising costs are not significant and are expensed as incurred.
Pension, Postretirement and Postemployment Benefit Plans
We evaluate our liabilities for pension, postretirement and postemployment benefit plans based upon computations made by consulting actuaries, incorporating estimates and actuarial assumptions of future plan service costs, future interest costs on projected benefit obligations, rates of compensation increases, when applicable, employee turnover rates, anticipated mortality rates, expected investment returns on plan assets, asset allocation assumptions of plan assets and other factors. If we used different estimates and assumptions regarding these plans, the funded status of the plans could vary significantly, resulting in recognition of different amounts of expense over future periods.
We use a fiscal year end measurement date for all our pension and postretirement obligations in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 715, Retirement Plans.
Income Taxes
Deferred income taxes are provided using the asset and liability method, whereby deferred income tax assets are recognized for deductible temporary differences and loss carryforwards and deferred income tax liabilities are recognized for taxable temporary differences. Temporary differences are the difference between the reported amounts of assets and liabilities and their tax basis. Deferred income tax assets are reduced by a valuation allowance when, in our opinion, it is more likely than not some portion or all of the deferred income tax assets will not be realized. Deferred income tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
We recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. We record interest and penalties related to unrecognized tax benefits as a component of income tax expense.
Fair Value of Financial Instruments
We utilize FASB ASC Topic 820, Fair Value Measurements and Disclosures, to measure and report fair value. 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, which 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.
Level 3 - Valuations derived from valuation techniques in which one or more significant inputs are unobservable.
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Valuation methodologies used for pension and postretirement assets measured at fair value are as follows:
Cash and cash equivalents c onsist of short term deposits valued based on quoted prices in active markets. Such investments are classified as Level 1.
Treasury Inflation-Protected Securities ("TIPS") consist of low yield mutual funds and are valued by quoted market prices. Such investments are classified as Level 1.
Equity securities are valued based on the closing market price in an active market and are classified as Level 1. Certain investments in commingled funds are valued at the net asset value of units held at the end of the period based upon the value of the underlying investments as determined by quoted market prices. Such investments are classified as Level 2.
Debt securities consist of corporate bonds and government securities that are valued based upon quoted market prices. Such investments are classified as Level 1. Certain investments in commingled funds are valued at the net asset value of units held at the end of the period based upon the value of the underlying investments as determined by quoted market prices. Such investments are classified as Level 2.
Hedge funds consist of a long/short equity fund and a diversified fund of funds. These funds are valued at the net asset value of units held at the end of the period based upon the value of the underlying investments, which is determined using multiple approaches including by quoted market prices and by private market quotations. Such investments are classified as Level 2 and Level 3.
Stock Compensation and Warrants
We have several active stock-based compensation plans. We account for grants under those plans under the fair value expense recognition provisions of FASB ASC Topic 718, Compensation-Stock Compensation. We determine the fair value of stock options using the Black-Scholes option pricing formula. Key inputs to this formula include expected term, expected volatility and the risk-free interest rate.
The expected term represents the period that our stock-based awards are expected to be outstanding, and is determined based on historical experience of similar awards, giving consideration to contractual terms of the awards, vesting schedules and expectations of future employee behavior. The volatility factor is calculated using historical market data for our Common Stock. The time frame used is equal to the expected term. We base the risk-free interest rate on the yield to maturity at the time of the stock option grant on zero-coupon U.S. government bonds having a remaining term equal to the option's expected term. When estimating forfeitures, we consider voluntary termination behavior as well as actual option forfeitures.
We amortize as compensation expense the value of stock options and restricted Common Stock using the straight-line method over the vesting or restriction period, which is generally one to three years.
We also have 6,000,000 warrants outstanding to purchase shares of our Common Stock. Warrants are recorded at fair value determined using the Black-Scholes option pricing formula. See Notes 5, 9 and 12.
Uninsured Risks
We are self-insured for health care, workers compensation and certain long-term disability costs of our employees, subject to stop loss insurance, which limits our losses in the event of large claims. We accrue our estimated health care costs in the period in which such costs are incurred, including an estimate of incurred but not reported claims. Other risks are insured and carry deductible losses of varying amounts. Letters of credit and performance bonds totaling $5,490,000 at September 27, 2015 are outstanding in support of our insurance program.
Our accrued reserves for health care and workers compensation claims are based upon estimates of the remaining liability for retained losses made by consulting actuaries. The amount of workers compensation reserve has been determined based upon historical patterns of incurred and paid loss development factors from the insurance industry.
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Discontinued Operations
In accordance with the provisions of FASB ASC Topic 360, Property, Land and Equipment, the operations and related losses on businesses sold, or identified as held for sale, have been presented as discontinued operations in the Consolidated Statements of Operations and Comprehensive Income (Loss) for all years presented. Gains are recognized when realized.
2 DISCONTINUED OPERATIONS
In March 2013, we sold The Garden Island newspaper and digital operations in Lihue, HI for $2,000,000 in cash, plus an adjustment for working capital. The transaction resulted in a loss of $2,170,000, after income taxes, and was recorded in discontinued operations in the Consolidated Statements of Operations and Comprehensive Income (Loss) in the 13 weeks ended March 31, 2013. Operating results of The Garden Island have been classified as discontinued operations for all periods presented.
In October 2012, we sold the North County Times in Escondido, CA for $11,950,000 in cash, plus an adjustment for working capital. The transaction resulted in a gain of $1,168,000, after income taxes, and was recorded in discontinued operations in the Consolidated Statements of Operations and Comprehensive Income (Loss). Operating results of the North County Times have been classified as discontinued operations for all periods presented.
Results of discontinued operations consist of the following:

(Thousands of Dollars) | 2013 |
Operating revenue | 1,321 |
Costs and expenses | (1,697 | )
Gain on sale of the North County Times | 1,801 |
Loss on sale of The Garden Island | (3,340 | )
Loss from discontinued operations, before income taxes | (1,915 | )
Income tax benefit | (669 | )
Loss | (1,246 | )

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3 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 subscription activities of the Arizona Daily Star, as well as the related digital platforms 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 newspaper and other media.
Income or loss of TNI (before income taxes) is allocated equally to Star Publishing and Citizen.
Summarized financial information of TNI is as follows:

(Thousands of Dollars) | September 27 2015 |  |  | September 28 2014 |
ASSETS |  |  |
Cash and cash equivalents | 126 |  |  | 176 |
Accounts receivable, net | 4,563 |  |  | 4,749 |
Inventories | 899 |  |  | 1,582 |
Other current assets | 173 |  |  | 125 |
Investments and other assets | 33 |  |  | 78 |
Total assets | 5,794 |  |  | 6,710 |
LIABILITIES AND MEMBERS' EQUITY |  |  |
Accrued expenses and other current liabilities | 1,650 |  |  | 2,160 |
Unearned revenue | 3,137 |  |  | 3,036 |
Total liabilities | 4,787 |  |  | 5,196 |
Members' equity | 1,007 |  |  | 1,514 |
Total liabilities and members' equity | 5,794 |  |  | 6,710 |

Summarized results of TNI are as follows:

(Thousands of Dollars) | 2015 |  |  | 2014 |  |  | 2013 |
| 52 Weeks |  |  | 52 Weeks |  |  | 53 Weeks |
Operating revenue: |  |  |  |  |
Advertising and marketing services | 33,782 |  |  | 36,957 |  |  | 40,166 |
Subscription | 19,227 |  |  | 17,525 |  |  | 18,248 |
Other | 2,917 |  |  | 3,410 |  |  | 3,576 |
Total operating revenue | 55,926 |  |  | 57,892 |  |  | 61,990 |
Operating expenses: |  |  |  |  |
Compensation | 17,509 |  |  | 18,505 |  |  | 19,799 |
Newsprint and ink | 6,775 |  |  | 8,123 |  |  | 9,626 |
Other operating expenses | 21,129 |  |  | 20,672 |  |  | 20,971 |
Workforce adjustments | — |  |  | (71 | ) |  | — |
Net income | 10,513 |  |  | 10,663 |  |  | 11,594 |
Company's 50% share | 5,256 |  |  | 5,331 |  |  | 5,797 |
Less amortization of intangible assets | 418 |  |  | 418 |  |  | 621 |
Equity in earnings of TNI | 4,838 |  |  | 4,913 |  |  | 5,176 |

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Summarized cash flows of TNI are as follows:

(Thousands of Dollars) | 2015 |  |  | 2014 |  |  | 2013 |
| 52 Weeks |  |  | 52 Weeks |  |  | 53 Weeks |
Net income | 10,513 |  |  | 10,663 |  |  | 11,594 |
Cash provided by (required for) operating activities | (458 | ) |  | (442 | ) |  | 1,351 |
Cash required for financing activities (partner distributions) | (10,105 | ) |  | (10,276 | ) |  | (12,851 | )
Net increase (decrease) in cash and cash equivalents | (50 | ) |  | (55 | ) |  | 94 |
Cash and cash equivalents: |  |  |  |  |
Beginning of year | 176 |  |  | 231 |  |  | 137 |
End of year | 126 |  |  | 176 |  |  | 231 |

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 $(254,000), $(60,000),and $(488,000), in 2015, 2014 and 2013, respectively. Fees for editorial services provided to TNI by Star Publishing totaled $5,492,000, $5,908,000, and $6,041,000 in 2015, 2014 and 2013, respectively.
At September 27, 2015, the carrying value of the Company's 50% investment in TNI is $17,508,000. The difference between our carrying value and our 50% share of the members' equity of TNI relates principally to goodwill of $12,366,000 and other identified intangible assets of $4,972,000, certain of which are being amortized over their estimated useful lives through 2020. See Note 4.
Annual amortization of intangible assets is estimated to be $418,000 in 2016, 2017, 2018, 2019 and $314,000 in 2020.
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 digital 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.
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Summarized financial information of MNI is as follows:

(Thousands of Dollars) | September 27 2015 |  |  | September 28 2014 |
ASSETS |  |  |
Cash and cash equivalents | 9,406 |  |  | 12,245 |
Accounts receivable, net | 5,632 |  |  | 5,794 |
Other current assets | 3,217 |  |  | 2,656 |
Current assets | 18,255 |  |  | 20,695 |
Investments and other assets | 2,871 |  |  | 2,871 |
Property and equipment, net | 5,665 |  |  | 6,758 |
Goodwill and other intangible assets | 25,673 |  |  | 26,118 |
Total assets | 52,464 |  |  | 56,442 |
LIABILITIES AND STOCKHOLDERS' EQUITY |  |  |
Accrued expenses and other current liabilities | 3,120 |  |  | 3,502 |
Unearned revenue | 4,980 |  |  | 5,226 |
Deferred income taxes | 9,235 |  |  | 8,425 |
Total liabilities | 17,335 |  |  | 17,153 |
Stockholders' equity | 35,129 |  |  | 39,289 |
Total liabilities and stockholders' equity | 52,464 |  |  | 56,442 |

Summarized results of MNI are as follows:

(Thousands of Dollars) | 2015 |  |  | 2014 |  |  | 2013 |
Operating revenue: |  |  |  |  |
Advertising and marketing services | 41,443 |  |  | 44,357 |  |  | 46,373 |
Subscription | 24,372 |  |  | 21,578 |  |  | 17,421 |
Other | 1,449 |  |  | 1,543 |  |  | 1,674 |
Total operating revenue | 67,264 |  |  | 67,478 |  |  | 65,468 |
Operating expenses: |  |  |  |  |
Compensation | 21,106 |  |  | 21,750 |  |  | 23,282 |
Newsprint and ink | 4,409 |  |  | 5,166 |  |  | 5,871 |
Other operating expenses | 29,280 |  |  | 28,477 |  |  | 24,046 |
Workforce adjustments | 459 |  |  | 244 |  |  | 308 |
Depreciation and amortization | 1,630 |  |  | 1,626 |  |  | 1,530 |
Total operating expenses | 56,884 |  |  | 57,263 |  |  | 55,037 |
Operating income | 10,380 |  |  | 10,215 |  |  | 10,431 |
Non-operating income, net | 424 |  |  | 408 |  |  | 415 |
Income before income taxes | 10,804 |  |  | 10,623 |  |  | 10,846 |
Income tax expense | 3,972 |  |  | 3,855 |  |  | 3,895 |
Net income | 6,832 |  |  | 6,768 |  |  | 6,951 |
Equity in earnings of MNI | 3,416 |  |  | 3,384 |  |  | 3,509 |

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Summarized cash flows of MNI are as follows:

(Thousands of Dollars) | 2015 |  |  | 2014 |  |  | 2013 |
Net income | 6,832 |  |  | 6,768 |  |  | 6,951 |
Cash provided by operating activities | 8,593 |  |  | 9,448 |  |  | 8,643 |
Cash required for investing activities | (432 | ) |  | (255 | ) |  | (155 | )
Cash required for financing activities (dividends paid) | (11,000 | ) |  | (9,500 | ) |  | (11,500 | )
Net decrease in cash and cash equivalents | (2,839 | ) |  | (307 | ) |  | (3,012 | )
Cash and cash equivalents: |  |  |  |  |
Beginning of year | 12,245 |  |  | 12,552 |  |  | 15,564 |
End of year | 9,406 |  |  | 12,245 |  |  | 12,552 |

Fees for editorial services provided to MNI by us are included in other revenue in the Consolidated Statements of Operations and Comprehensive Income (Loss) and totaled $7,242,000, $7,050,000 and $7,346,000, in 2015, 2014 and 2013, respectively.
At September 27, 2015, the carrying value of the Company's 50% investment in MNI is $17,561,000.
4 GOODWILL AND OTHER INTANGIBLE ASSETS
Changes in the carrying amount of goodwill related to continuing operations are as follows:

(Thousands of Dollars) | 2015 |  |  | 2014 |
Goodwill, gross amount | 1,532,458 |  |  | 1,532,458 |
Accumulated impairment losses | (1,288,729 | ) |  | (1,288,729 | )
Goodwill, end of year | 243,729 |  |  | 243,729 |

Identified intangible assets related to continuing operations consist of the following:

(Thousands of Dollars) | September 27 2015 |  |  | September 28 2014 |
Non-amortized intangible assets: |  |  |
Mastheads | 25,102 |  |  | 25,102 |
Amortizable intangible assets: |  |  |
Customer and newspaper subscriber lists | 687,182 |  |  | 686,732 |
Less accumulated amortization | 526,322 |  |  | 499,178 |
| 160,860 |  |  | 187,554 |
Non-compete and consulting agreements | 28,524 |  |  | 28,524 |
Less accumulated amortization | 28,524 |  |  | 28,523 |
| — |  |  | 1 |
| 185,962 |  |  | 212,657 |

In 2014 we performed a qualitative analysis to test our goodwill for impairment and concluded that the likelihood of an impairment was less than 50%. In 2015 and 2013, we performed additional quantitative analysis of the carrying value of our goodwill and concluded the implied fair value of goodwill was in excess of its carrying value. As a result no goodwill impairment was recorded.
In 2014 and 2013, due to continuing revenue declines, we recorded non-cash charges to reduce the carrying value of non-amortized intangible assets. In 2013 we determined that the cash flows from amortizable intangible assets were not sufficient to recover their carrying values. As a result, we recorded non-cash charges to reduce the carrying values of such assets to fair value. We also recorded pretax, non-cash charges to reduce the carrying value of property and equipment in 2014 and 2013. We recorded deferred income tax benefits related to these charges.
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A summary of impairment charges is included in the table below:

(Thousands of Dollars) | 2015 |  |  | 2014 |  |  | 2013 |
Continuing operations: |  |  |  |  |
Non-amortized intangible assets | — |  |  | 1,936 |  |  | 1,567 |
Amortizable intangible assets | — |  |  | — |  |  | 169,041 |
Property and equipment | — |  |  | 1,044 |  |  | 486 |
| — |  |  | 2,980 |  |  | 171,094 |

Annual amortization of intangible assets for the years ending September 2016 to September 2020 is estimated to be $26,059,000, $25,030,000, $16,653,000, $15,972,000, and $15,249,000, respectively.
5 DEBT
On March 31, 2014, we completed a comprehensive refinancing of our debt (the “2014 Refinancing”), which includes the following:

• | $400,000,000 aggregate principal amount of 9.5% Senior Secured Notes (the “Notes”), pursuant to an Indenture dated as of March 31, 2014 (the “Indenture”).

• | $250,000,000 first lien term loan (the "1 st Lien Term Loan") and $40,000,000 revolving facility (the "Revolving Facility") under a First Lien Credit Agreement dated as of March 31, 2014 (together, the “1 st Lien Credit Facility”).

• | $150,000,000 second lien term loan under a Second Lien Loan Agreement dated as of March 31, 2014 (the “ 2 nd Lien Term Loan”).

The Notes, 1 st Lien Credit Facility and 2 nd Lien Term Loan enabled us to repay in full, including accrued interest, and terminate, on March 31, 2014: (i) the remaining principal balance of $593,000,000 under our previous 1 st lien agreement and (ii) the remaining principal balance of $175,000,000 under our previous 2 nd lien agreement. We also used the proceeds of the refinancing to pay fees and expenses totaling $30,931,000 related to the 2014 Refinancing.
In May 2013, we refinanced the $94,000,000 remaining balance of notes secured by Pulitzer and its subsidiaries (the “New Pulitzer Notes”). On June 25, 2015 (the "Pulitzer Debt Satisfaction Date"), we repaid the remaining balance of the New Pulitzer Notes triggering certain changes to the collateral of our remaining debt as discussed more fully below.
Notes
The Notes are senior secured obligations of the Company and mature on March 15, 2022.
Interest
The Notes require payment of interest semiannually on March 15 and September 15 of each year, at a fixed annual rate of 9.5%.
Redemption
We may redeem some, or all, of the principal amount of the Notes at any time on or after March 15, 2018 as follows:

Period Beginning | Percentage of Principal Amount |
March 15, 2018 | 104.75 |
March 15, 2019 | 102.38 |
March 15, 2020 | 100.00 |

We may redeem up to 35% of the Notes prior to March 15, 2017 at 109.5% of the principal amount using the proceeds of certain future equity offerings.
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If we sell certain of our assets or experience specific types of changes of control, we must, subject to certain exceptions, offer to purchase the Notes at 101% of the principal amount. Any redemption of the Notes must also satisfy any accrued and unpaid interest thereon.
Covenants and Other Matters
The Indenture and 1 st Lien Credit Facility contains restrictive covenants as discussed more fully below. However, certain of these covenants will cease to apply if the Notes are rated investment grade by either Moody’s Investors Service, Inc. or Standard & Poor’s Ratings Group and there is no default or event of default under the Indenture.
1 st Lien Credit Facility
The 1 st Lien Credit Facility consists of the $250,000,000 1 st Lien Term Loan that matures in March 2019 and the $40,000,000 Revolving Facility that matures in December 2018. The 1 st Lien Credit Facility documents the primary terms of the 1 st Lien Term Loan and the Revolving Facility. The Revolving Facility may be used for working capital and general corporate purposes (including letters of credit). At September 27, 2015, after consideration of letters of credit, we have approximately $32,935,000 available for future use under the Revolving Facility.
Interest
Interest on the 1 st Lien Term Loan, which has a principal balance of $180,872,000 at September 27, 2015, accrues, at our option, at either (A) LIBOR plus 6.25% (with a LIBOR floor of 1.0%) or (B) 5.25% plus the higher of (i) the prime rate at the time, (ii) the federal funds rate plus 0.5%, or (iii) one month LIBOR plus 1.0% (with a floor of 2.0%). Interest is payable quarterly.
The 1 st Lien Term Loan was funded with an original issue discount of 2.0%, or $5,000,000, which is being amortized as interest expense over the life of the 1 st Lien Term Loan.
Interest on the Revolving Facility, which has a principal balance of zero at September 27, 2015, accrues, at our option, at either (A) LIBOR plus 5.5%, or (B) 4.5% plus the higher of (i) the prime rate at the time, (ii) the federal funds rate plus 0.5%, or (iii) one month LIBOR plus 1.0%.
Principal Payments
Quarterly principal payments of $6,250,000 are required under the 1 st Lien Term Loan, with other payments made based on 90% of excess cash flow of Lee Legacy ("Lee Legacy Excess Cash Flow), as defined, or from proceeds of asset sales, as defined, from our subsidiaries other than the Pulitzer Subsidiaries. We may voluntarily prepay principal amounts outstanding or reduce commitments under the 1 st Lien Credit Facility at any time without premium or penalty, upon proper notice and subject to certain limitations as to minimum amounts of prepayments.
Following the Pulitzer Debt Satisfaction Date, the excess cash flow of Pulitzer, as defined ("Pulitzer Excess Cash Flow"), may be used to pay down the 1 st Lien Term Loan if not accepted by the 2nd Lien Term Loan lenders, as discussed more fully below under the heading "2 nd Lien Term Loan".
2015 payments made under the 1 st Lien Term Loan are summarized by quarter and fiscal year as follows:

(Thousands of Dollars) | December 28 2014 |  | March 29 2015 |  | June 28 2015 |  | September 27 2015 |  | 2015 |
Mandatory | 6,250 |  | 6,250 |  | 6,250 |  | 6,250 |  | 25,000 |
Voluntary | 5,000 |  | 4,000 |  | 4,000 |  | — |  | 13,000 |
Asset sales | — |  | — |  | — |  | — |  | — |
Excess cash flow | — |  | — |  | — |  | 7,878 |  | 7,878 |
| 11,250 |  | 10,250 |  | 10,250 |  | 14,128 |  | 45,878 |

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Covenants and Other Matters
The 1 st Lien Credit Facility requires that we comply with certain affirmative and negative covenants customary for financing of this nature, including a maximum total leverage ratio, which is only applicable to the Revolving Facility.
The 1 st Lien Credit Facility restricts us from paying dividends on our Common Stock. It also restricts us from repurchasing Common Stock in excess of $5 million per year. These restrictions no longer apply if Lee Legacy leverage is below 3.25x before and after such payments. Further, the 1 st Lien Credit Facility restricts or limits, among other things, subject to certain exceptions, the ability of the Company and its subsidiaries to: (i) incur indebtedness, (ii) enter into mergers, acquisitions and asset sales, (iii) incur or create liens and (iv) enter into transactions with certain affiliates. The 1 st Lien Credit Facility contains various representations and warranties and may be terminated upon occurrence of certain events of default. The 1 st Lien Credit Facility also contains cross-default provisions tied to the terms of each of the Indenture and 2 nd Lien Term Loan.
2 nd Lien Term Loan
The 2 nd Lien Term Loan, which has a balance of $145,000,000 at September 27, 2015, bears interest at a fixed annual rate of 12.0%, payable quarterly, and matures in December 2022.
Principal Payments
There are no scheduled mandatory amortization payments required under the 2 nd Lien Term Loan.
Under the 2 nd Lien Term Loan, subject to certain other conditions, Pulitzer Excess Cash Flow must be used, (a) prior to March 31, 2017, to make an offer to the 2 nd Lien Lenders to prepay amounts under the 2 nd Lien Term Loan at par (which offer the 2 nd Lien Lenders may accept or reject; if rejected, we may use the Pulitzer Excess Cash Flow to prepay amounts under the 1 st Lien Credit Facility or repurchase Notes in the open market), and (b) after March 31, 2017, to pay such amounts under the 2 nd Lien Term Loan at par. In November 2015, $3,326,000 of the September 2015 excess cash flow payment was not rejected and according to the 2 nd Lien Term Loan was prepaid at par.
Pulitzer Excess Cash Flow includes a deduction for interest costs incurred under the 2 nd Lien Term Loan after the Pulitzer Debt Satisfaction Date. In addition, other changes to settlement of certain intercompany costs between the Company and Pulitzer will be affected, with the net result being a reduction in the excess cash flows of Pulitzer from historically reported levels.
Subject to certain other conditions in the 2 nd Lien Term Loan, the balance of the 2 nd Lien Term Loan will be repaid at par from proceeds from asset sales by Pulitzer or the Pulitzer Subsidiaries that are not reinvested. For the 13 weeks ended September 27, 2015, we repaid $5,000,000 of the 2 nd Lien Term Loan, at par, due to the sale of real estate at one of our Pulitzer properties.
Subsequent to September 27, 2015 an additional $2,300,000 was repaid at par with net proceeds from the sale of Pulitzer assets.
Voluntary payments under the 2 nd Lien Term Loan are subject to call premiums as follows:

Period Beginning | Percentage of Principal Amount
March 31, 2014 | 112
March 31, 2017 | 106
March 31, 2018 | 103
March 31, 2019 | 100

Covenants and Other Matters
The 2 nd Lien Term Loan requires that we comply with certain affirmative and negative covenants customary for financing of this nature, including the negative covenants under the 1 st Lien Credit Facility discussed above. The 2 nd Lien Term Loan contains various representations and warranties and may be terminated upon occurrence of certain events of
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default. The 2 nd Lien Term Loan also contains cross-default provisions tied to the terms of the Indenture and 1 st Lien Credit Facility.
In connection with the 2 nd Lien Term Loan, we entered into a Warrant Agreement dated as of March 31, 2014 (the “Warrant Agreement”) between the Company and Wells Fargo Bank, National Association. Under the Warrant Agreement, certain affiliates or designees of the 2 nd Lien Lenders received on March 31, 2014 their pro rata share of warrants to purchase, in cash, an initial aggregate of 6,000,000 shares of Common Stock, subject to adjustment pursuant to anti-dilution provisions (the “Warrants”). The Warrants represent, when fully exercised, approximately 10.1% of shares of Common Stock outstanding at March 30, 2014 on a fully diluted basis. The exercise price of the Warrants is $4.19 per share.
The Warrant Agreement contains a cash settlement provision in the event of a change of control prior to March 31, 2018 as well as other provisions requiring the Warrants be measured at fair value and included in other liabilities in our Consolidated Balance Sheets. We remeasure the fair value of the liability each reporting period, with changes reported in other non-operating income (expense). The initial fair value of the Warrants was $16,930,000. See Notes 1, 9 and 12.
In connection with the issuance of the Warrants, we entered into a Registration Rights Agreement dated as of March 31, 2014 (the “Registration Rights Agreement”). The Registration Rights Agreement requires, among other matters, that we use our commercially reasonable efforts to maintain the effectiveness for certain specified periods a shelf registration statement related to the shares of Common Stock to be issued upon exercise of the Warrants.
Pulitzer Notes
In May 2013, we refinanced the $94,000,000 then outstanding balance of the Pulitzer Notes (the “New Pulitzer Notes”) with BH Finance LLC ("Berkshire") a subsidiary of Berkshire Hathaway Inc. The New Pulitzer Notes bore interest at 9%, payable quarterly.
On the Pulitzer Debt Satisfaction Date of June 25, 2015, we repaid the remaining balance of the New Pulitzer Notes in full.
Security
The Notes and the 1 st Lien Credit Facility are fully and unconditionally guaranteed on a first-priority basis by each of the Company's material domestic subsidiaries, excluding MNI, Pulitzer Inc. ("Pulitzer") and its subsidiaries (collectively, the "Pulitzer Subsidiaries") and TNI (the "Lee Legacy Assignors").
The Notes, the 1 st Lien Credit Facility and the subsidiary guarantees are secured, subject to certain exceptions, priorities and limitations, by perfected security interests in all property and assets, including certain real estate, of the Lee Legacy Assignors, other than the capital stock of MNI and any property and assets of MNI (the “Lee Legacy Collateral”), on a first-priority basis, equally and ratably with all of the Lee Legacy Assignors' existing and future obligations. The Lee Legacy Collateral includes, among other things, equipment, inventory, accounts receivables, depository accounts, intellectual property and certain of their other tangible and intangible assets.
Also, the Notes and the 1 st Lien Credit Facility are secured, subject to certain exceptions, priorities and limitations in the various agreements, by first-priority security interests in the capital stock of, and other equity interests owned by, the Lee Legacy Assignors (excluding the capital stock of MNI). The Notes and 1 st Lien Credit Facility are subject to a Pari Passu Intercreditor Agreement dated March 31, 2014.
Following the Pulitzer Debt Satisfaction Date, the Notes, the 1 st Lien Credit Facility and the subsidiary guarantees are also secured, subject to permitted liens, by a second-priority security interest in the property and assets of the Pulitzer Subsidiaries other than assets of or used in the operations or business of TNI (collectively, the “Pulitzer Collateral”) that become subsidiary guarantors (the "Pulitzer Assignors"). On the Pulitzer Debt Satisfaction Date, the Pulitzer Assignors became a party to the 1 st Lien Guarantee and Collateral Agreement on a second lien basis.
Also, the Notes and the 1 st Lien Credit Facility are secured, subject to certain exceptions, priorities, and limitations in the various agreements, by second-priority security interests in the capital stock of, and other equity interests in, the Pulitzer Assignors and Star Publishing’s interest in TNI.
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Following the Pulitzer Debt Satisfaction Date, the 2 nd Lien Term Loan is fully and unconditionally guaranteed on a joint and several first-priority basis by the Pulitzer Assignors, pursuant to a Second Lien Guarantee and Collateral Agreement dated as of March 31, 2014 (the “2 nd Lien Guarantee and Collateral Agreement”) among the Pulitzer Assignors and the 2 nd Lien collateral agent.
Under the 2 nd Lien Guarantee and Collateral Agreement, the Pulitzer Assignors have granted (i) first-priority security interests, subject to certain priorities and limitations in the various agreements, in the Pulitzer Collateral and (ii) have granted first-priority lien mortgages or deeds of trust covering certain real estate, as collateral for the payment and performance of their obligations under the 2 nd Lien Term Loan.
Also, under the 2 nd Lien Guarantee and Collateral Agreement, the Lee Legacy Assignors have granted (i) second-priority security interests, subject to certain priorities and limitations in the various agreements, in the Lee Legacy Collateral, and (ii) have granted second-priority lien mortgages or deeds of trust covering certain real estate, as collateral for the payment and performance of their obligations under the 2 nd Lien Term Loan. Assets of, or used in the operations or business of, MNI are excluded.
The rights of each of the collateral agents with respect to the Lee Legacy Collateral and the Pulitzer Collateral are subject to customary intercreditor and intercompany agreements.
Other
We incurred $30,931,000 of fees and expenses related to the 2014 Refinancing, including a $1,750,000 premium (1% of the principal amount) related to the redemption of the previous 2 nd lien agreement and $5,000,000 original issue discount on the 1 st Lien Term Loan. In addition, at the date of the 2014 Refinancing we had $10,549,000 of unamortized present value adjustments related to the previous 1 st lien agreement and previous 2 nd lien agreement. We also recognized original issue discount of $16,930,000 on the 2 nd Lien Term Loan related to the Warrants. Certain of the unamortized present value adjustments, the new fees and expenses and a portion of the value of the Warrants were charged to expense upon completion of the 2014 Refinancing while the remainder of such costs have been capitalized and are being amortized over the lives of the respective debt agreements. Debt financing costs are summarized as follows:

(Thousands of Dollars) |  |
Prepayment premium - previous 2 nd lien agreement |  | 1,750 |
Unamortized loan fees from previous credit agreements |  | 10,549 |
Fees paid in cash to arrangers, lenders, attorneys and others |  | 24,181 |
Original issue discount - 1 st Lien Term Loan |  | 5,000 |
Fair value of Warrants granted to 2nd Lien Lenders |  | 16,930 |
|  | 58,410 |
Charged to expense as a result of debt extinguishment |  | 20,591 |
Capitalized debt financing costs |  | 37,819 |

Amortization of debt financing costs totaled $4,693,000 and $2,145,000 in 2015 and 2014, respectively. Amortization of such costs is estimated to total $4,198,000 in 2016, $4,380,000 in 2017, $4,500,000 in 2018, $4,262,000 in 2019 and $4,200,000 in 2020. At September 27, 2015 we have $31,793,000 of unamortized debt financing costs included in other assets in our Consolidated Balance Sheets.
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Debt is summarized as follows:

|  |  | Interest Rates (%)
(Thousands of Dollars) | September 27 2015 |  | September 28 2014 |  | September 27 2015
Revolving Facility | — |  | 5,000 |  | 5.65
1st Lien Term Loan | 180,872 |  | 226,750 |  | 7.25
Notes | 400,000 |  | 400,000 |  | 9.50
2 nd Lien Term Loan | 145,000 |  | 150,000 |  | 12.00
New Pulitzer Notes | — |  | 23,000 |  | 9.00
| 725,872 |  | 804,750 |  |
Less current maturities of long-term debt | 25,000 |  | 31,400 |  |
Total long-term debt | 700,872 |  | 773,350 |  |

At September 27, 2015, our weighted average cost of debt, excluding amortization of debt financing costs, is 9.4%.
Aggregate minimum required maturities of debt excluding amounts required to be paid from excess cash flow requirements total $25,000,000 in 2016, $25,000,000 in 2017, $25,000,000 in 2018, $105,872,000 in 2019, $0 in 2020 and $545,000,000 thereafter.
Liquidity
At September 27, 2015, after consideration of letters of credit, we have approximately $32,935,000 available for future use under our Revolving Facility. Including cash, our liquidity at September 27, 2015 totals $44,069,000. This liquidity amount excludes any future cash flows. We expect all interest and principal payments due in the next twelve months will be satisfied by our cash flows, which will allow us to maintain an adequate level of liquidity. The Warrants, if and when exercised, would provide additional liquidity in an amount up to $25,140,000 subject to a reduction for any amounts the Company may elect to use to repay our 1 st Lien Term Loan and/or the Notes.
The 2014 Refinancing significantly improved our debt maturity profile. Final maturities of our debt have been extended to dates from December 2018 through December 2022. As a result, we believe refinancing risk has been substantially reduced for the next several years.
There are numerous potential consequences under the Notes, 1st Lien Credit Facility and 2nd Lien Term Loan, if an event of default, as defined, occurs and is not remedied. Many of those consequences are beyond our control. The occurrence of one or more events of default would give rise to the right of the applicable lender(s) to exercise their remedies under the Notes, 1st Lien Credit Facility and 2nd Lien Term Loan, respectively, including, without limitation, the right to accelerate all outstanding debt and take actions authorized in such circumstances under applicable collateral security documents.
Our ability to operate as a going concern is dependent on our ability to remain in compliance with debt covenants and to repay, refinance or amend our debt agreements as they become due. The Notes, 1st Lien Credit Facility and 2nd Lien Term Loan have only limited affirmative covenants with which we are required to maintain compliance. We are in compliance with our debt covenants at September 27, 2015.
6 PENSION PLANS
We have several non-contributory defined benefit pension plans that together cover selected employees. Benefits under the plans were generally based on salary and years of service. Effective in 2012, substantially all benefits are frozen and only a small amount of additional benefits are being accrued. Our liability and related expense for benefits under the plans are recorded over the service period of employees based upon annual actuarial calculations. Plan funding strategies are influenced by government regulations. Plan assets consist primarily of domestic and foreign corporate equity securities, government and corporate bonds, hedge fund investments and cash.
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The net periodic cost (benefit) components of our pension plans are as follows:

(Thousands of Dollars) | 2015 |  |  | 2014 |  |  | 2013 |
Service cost for benefits earned during the year | 232 |  |  | 156 |  |  | 216 |
Interest cost on projected benefit obligation | 8,122 |  |  | 7,996 |  |  | 7,529 |
Expected return on plan assets | (9,863 | ) |  | (9,932 | ) |  | (9,838 | )
Amortization of net loss | 1,682 |  |  | 423 |  |  | 2,287 |
Amortization of prior service benefit | (136 | ) |  | (136 | ) |  | (136 | )
Net periodic pension cost (benefit) | 37 |  |  | (1,493 | ) |  | 58 |

Net periodic pension benefit of $56,000 is allocated to TNI in 2015, 2014 and 2013.
Changes in benefit obligations and plan assets are as follows:

(Thousands of Dollars) | 2015 |  |  | 2014 |
Benefit obligation, beginning of year | 199,197 |  |  | 175,771 |
Service cost | 232 |  |  | 156 |
Interest cost | 8,122 |  |  | 7,996 |
Actuarial loss (gain) | (2,543 | ) |  | 26,526 |
Benefits paid | (11,257 | ) |  | (11,252 | )
Benefit obligation, end of year | 193,751 |  |  | 199,197 |
Fair value of plan assets, beginning of year: | 151,013 |  |  | 147,265 |
Actual return on plan assets | 1,817 |  |  | 15,074 |
Benefits paid | (11,257 | ) |  | (11,252 | )
Administrative expenses paid | (1,862 | ) |  | (1,509 | )
Employer contributions | 3,577 |  |  | 1,435 |
Fair value of plan assets, end of year | 143,288 |  |  | 151,013 |
Funded status - benefit obligation in excess of plan assets | 50,463 |  |  | 48,184 |

Disaggregated amounts recognized in the Consolidated Balance Sheets are as follows:

(Thousands of Dollars) | September 27 2015 |  |  | September 28 2014 |
Pension obligations | 50,463 |  |  | 48,184 |
Accumulated other comprehensive loss (before income taxes) | (47,515 | ) |  | (41,695 | )

Amounts recognized in accumulated other comprehensive income (loss) are as follows:

(Thousands of Dollars) | September 27 2015 |  |  | September 28 2014 |
Unrecognized net actuarial loss | (48,031 | ) |  | (42,348 | )
Unrecognized prior service benefit | 516 |  |  | 653 |
| (47,515 | ) |  | (41,695 | )

We expect to recognize $2,396,000 and $137,000 of unrecognized net actuarial loss and unrecognized prior service benefit, respectively, in net periodic pension cost in 2016.
The accumulated benefit obligation for the plans total $193,751,000 at September 27, 2015 and $199,197,000 at September 28, 2014. The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets are $193,751,000, $193,751,000 and $143,288,000, respectively, at September 27, 2015.
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Assumptions
Weighted-average assumptions used to determine benefit obligations are as follows:

(Percent) | September 27 2015 |  | September 28 2014
Discount rate | 4.2 |  | 4.2

Weighted-average assumptions used to determine net periodic benefit cost are as follows:

(Percent) | 2015 |  |  | 2014 |  |  | 2013 |
Discount rate | 4.2 |  |  | 4.7 |  |  | 3.85 |
Expected long-term return on plan assets | 6.8 |  |  | 7.0 |  |  | 7.5 |

For 2016, the expected long-term return on plan assets is 6.25%. The assumptions related to the expected long-term return on plan assets are developed through an analysis of historical market returns, current market conditions and composition of plan assets.
In October 2014, the Society of Actuaries released new mortality tables. The new tables generally result in increases in life expectancy. We used the new mortality tables to value our pension and postretirement liabilities at September 28, 2014, which increased such liabilities, in total, by approximately $18,515,000, with a corresponding decrease in accumulated other comprehensive income in our Consolidated Balance Sheet as of that date.
Plan Assets
The primary objective of our investment strategy is to satisfy our pension obligations at a reasonable cost. Assets are actively invested to balance real growth of capital through appreciation and reinvestment of dividend and interest income and safety of invested funds.
Our investment policy outlines the governance structure for decision making, sets investment objectives and restrictions and establishes criteria for selecting and evaluating investment managers. The use of derivatives is strictly prohibited, except on a case-by-case basis where the manager has a proven capability, and only to hedge quantifiable risks such as exposure to foreign currencies. An investment committee, consisting of certain of our executives and supported by independent consultants, is responsible for monitoring compliance with the investment policy. Assets are periodically redistributed to maintain the appropriate policy allocation.
The weighted-average asset allocation of our pension assets is as follows:

(Percent) | Policy Allocation |  | Actual Allocation
Asset Class | September 27 2015 |  | September 27 2015 | September 28 2014
Equity securities | 50 |  | 46 | 48
Debt securities | 35 |  | 37 | 20
TIPS | 5 |  | 4 | 4
Hedge fund investments | 10 |  | 11 | 10
Cash and cash equivalents | — |  | 2 | 18

Plan assets include no Company securities. Assets include cash and cash equivalents and receivables from time to time due to the need to reallocate assets within policy guidelines. At September 28, 2014, certain plan assets were in process of reallocation. In October 2014, plan assets were within the policy allocation.
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Fair Value Measurements
The fair value hierarchy of pension assets at September 27, 2015 is as follows:

(Thousands of Dollars) | Level 1 |  | Level 2 |  | Level 3 |
Cash and cash equivalents | 2,407 |  | — |  | — |
Domestic equity securities | 8,153 |  | 44,470 |  | — |
International equity securities | 6,286 |  | 7,389 |  | — |
TIPS | 6,450 |  | — |  | — |
Debt securities | 31,196 |  | 21,370 |  | — |
Hedge fund investments | — |  | 8,463 |  | 8,881 |

In 2015, in connection with the allocation to hedge funds and debt securities, certain of our plan assets were classified as Level 3. Following is a rollfoward of Level 3 plan assets in 2015:

(Thousands of Dollars) | Level 3 |
Balance, beginning of year | 8,351 |
Purchases, issuances, sales, settlements | — |
Unrealized gains | 530 |
Balance, end of year | 8,881 |

There were no purchases, sales or transfers of assets classified as Level 3 in 2015.
Cash Flows
Based on our forecast at September 27, 2015, we expect to make contributions totaling $5,782,000 to our pension trust in 2016.
We anticipate future benefit payments to be paid from the pension trust as follows:

(Thousands of Dollars) |
2015 | 11,880 |
2016 | 11,717 |
2017 | 11,750 |
2018 | 11,776 |
2019 | 11,760 |
2020-2024 | 58,883 |

Other Plans
We are obligated under an unfunded plan to provide fixed retirement payments to certain former employees. The plan is frozen and no additional benefits are being accrued. The accrued liability under the plan is $2,337,000 and $2,264,000 at September 27, 2015 and September 28, 2014, respectively, of which $279,000 is included in compensation and other accrued liabilities in the Consolidated Balance Sheet at September 27, 2015.
7 POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
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. 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. Plan assets may also be used to fund medical costs of certain active employees.
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The net periodic postretirement benefit cost (benefit) components for our postretirement plans are as follows:

(Thousands of Dollars) | 2015 |  |  | 2014 |  |  | 2013 |
Service cost for benefits earned during the year | 76 |  |  | 596 |  |  | 728 |
Interest cost on projected benefit obligation | 922 |  |  | 911 |  |  | 1,125 |
Expected return on plan assets | (1,445 | ) |  | (1,483 | ) |  | (1,474 | )
Amortization of net actuarial gain | (1,386 | ) |  | (1,819 | ) |  | (1,324 | )
Amortization of prior service benefit | (1,459 | ) |  | (1,459 | ) |  | (1,459 | )
Net periodic postretirement benefit | (3,292 | ) |  | (3,254 | ) |  | (2,404 | )

Changes in benefit obligations and plan assets are as follows:

(Thousands of Dollars) | 2015 |  |  | 2014 |
Benefit obligation, beginning of year | 25,506 |  |  | 23,432 |
Service cost | 76 |  |  | 596 |
Interest cost | 922 |  |  | 911 |
Actuarial loss (gain) | (1,149 | ) |  | 2,298 |
Benefits paid, net of premiums received | (1,541 | ) |  | (1,905 | )
Medicare Part D subsidies | (2 | ) |  | 174 |
Benefit obligation, end of year | 23,812 |  |  | 25,506 |
Fair value of plan assets, beginning of year | 32,881 |  |  | 33,920 |
Actual return on plan assets | (547 | ) |  | 1,167 |
Employer contributions | 745 |  |  | 597 |
Benefits paid, net of premiums and Medicare Part D subsidies received | (1,544 | ) |  | (1,731 | )
Benefits paid for active employees | (1,412 | ) |  | (1,072 | )
Fair value of plan assets at measurement date | 30,123 |  |  | 32,881 |
Funded status - benefit obligation less than plan assets | (6,311 | ) |  | (7,375 | )

The accumulated benefit obligation for plans with benefit obligations in excess of plan assets included in the table above was $7,109,000 at September 27, 2015. These plans are unfunded.
Disaggregated amounts recognized in the Consolidated Balance Sheets are as follows:

(Thousands of Dollars) | September 27 2015 |  |  | September 28 2014 |
Non-current assets | 13,420 |  |  | 14,136 |
Postretirement benefit obligations | 7,109 |  |  | 6,761 |
Accumulated other comprehensive income (before income tax benefit) | 22,551 |  |  | 27,250 |

Amounts recognized in accumulated other comprehensive income are as follows:

(Thousands of Dollars) | September 27 2015 |  |  | September 28 2014 |
Unrecognized net actuarial gain | 13,155 |  |  | 16,394 |
Unrecognized prior service benefit | 9,396 |  |  | 10,856 |
| 22,551 |  |  | 27,250 |

We expect to recognize $1,146,000 and $1,459,000 of unrecognized net actuarial gain and unrecognized prior service benefit, respectively, in net periodic postretirement benefit in 2016.
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Assumptions
Weighted-average assumptions used to determine post retirement benefit obligations are as follows:

(Percent) | September 27 2015 |  | September 28 2014
Discount rate | 3.7 |  | 3.7
Expected long-term return on plan assets | 4.5 |  | 4.5

The assumptions related to the expected long-term return on plan assets are developed through an analysis of historical market returns, current market conditions and composition of plan assets.
Weighted-average assumptions used to determine net periodic benefit cost are as follows:

(Percent) | 2015 |  |  | 2014 |  |  | 2013 |
Discount rate | 3.7 |  |  | 4.0 |  |  | 3.85 |
Expected long-term return on plan assets | 4.5 |  |  | 4.5 |  |  | 4.5 |

Assumed health care cost trend rates are as follows:

(Percent) | September 27 2015 |  | September 28 2014
Health care cost trend rates | 9.0 |  | 7.5
Rate to which the cost trend rate is assumed to decline (the “Ultimate Trend Rate”) | 4.5 |  | 5.0
Year in which the rate reaches the Ultimate Trend Rate | 2025 |  | 2018

Administrative costs related to indemnity plans are assumed to increase at the health care cost trend rates noted above.
Assumed health care cost trend rates have an effect on the amounts reported for the postretirement plans. A one percentage point change in assumed health care cost trend rates would have the following annualized effects on reported amounts for 2015:

| One Percentage Point |
(Thousands of Dollars) | Increase |  |  | Decrease |
Effect on net periodic postretirement benefit | 29 |  |  | (26 | )
Effect on postretirement benefit obligation | 831 |  |  | (748 | )

Plan Assets
The primary objective of our investment strategy is to satisfy our postretirement obligations at a reasonable cost. Assets are actively invested to balance real growth of capital through appreciation and reinvestment of dividend and interest income and safety of invested funds.
Our investment policy outlines the governance structure for decision making, sets investment objectives and restrictions, and establishes criteria for selecting and evaluating investment managers. The use of derivatives is strictly prohibited, except on a case-by-case basis where the manager has a proven capability, and only to hedge quantifiable risks such as exposure to foreign currencies. An investment committee, consisting of certain of our executives and supported by independent consultants, is responsible for monitoring compliance with the investment policy. Assets are periodically redistributed to maintain the appropriate policy allocation.
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The weighted-average asset allocation of our postretirement assets is as follows:

(Percent) | Policy Allocation |  | Actual Allocation
Asset Class | September 27 2015 |  | September 27 2015 | September 28 2014
Equity securities | 20 |  | 19 | 22
Debt securities | 70 |  | 68 | 74
Hedge fund investment | 10 |  | 10 |
Cash and cash equivalents | — |  | 3 | 4

Plan assets include no Company securities. Assets include cash and cash equivalents and receivables from time to time due to the need to reallocate assets within policy guidelines.
Fair Value Measurements
The fair value hierarchy of postretirement assets at September 27, 2015 is as follows:

(Thousands of Dollars) | Level 1 |  | Level 2 |  | Level 3 |
Cash and cash equivalents | 790 |  | — |  | — |
Domestic equity securities | 2,896 |  | 1,372 |  | — |
International equity securities | 645 |  | 857 |  | — |
Debt securities | 13,910 |  | 6,581 |  | — |
Hedge fund investment | — |  | 3,072 |  | — |

There were no purchases, sales or transfers of assets classified as Level 3 in 2015, 2014 or 2013.
Cash Flows
Based on our forecast at September 27, 2015, we do not expect to contribute to our postretirement plans in 2016.
The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Modernization Act”) introduced a prescription drug benefit under Medicare (“Medicare Part D”) and a federal subsidy to sponsors of retiree health care benefit plans (“Subsidy”) that provide a benefit at least actuarially equivalent (as that term is defined in the Modernization Act) to Medicare Part D. We concluded we qualify for the Subsidy under the Modernization Act since the prescription drug benefits provided under our postretirement health care plans generally require lower premiums from covered retirees and have lower deductibles than the benefits provided in Medicare Part D and, accordingly, are actuarially equivalent to or better than, the benefits provided under the Modernization Act.
We anticipate future benefit payments to be paid either with future contributions to the plan or directly from plan assets, as follows:

(Thousands of Dollars) | Gross Payments |  |  | Less Medicare Part D Subsidy |  |  | Net Payments |
2015 | 3,320 |  |  | (260 | ) |  | 3,060 |
2016 | 2,130 |  |  | (260 | ) |  | 1,870 |
2017 | 2,040 |  |  | (260 | ) |  | 1,780 |
2018 | 2,070 |  |  | (260 | ) |  | 1,810 |
2019 | 2,040 |  |  | (260 | ) |  | 1,780 |
2020-2024 | 9,180 |  |  | (1,140 | ) |  | 8,040 |

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Postemployment Plan
Our postemployment benefit obligation, representing certain disability benefits, is $3,951,000 at September 27, 2015 and $3,597,000 at September 28, 2014.
8 OTHER RETIREMENT PLANS
Substantially all of our employees are eligible to participate in a qualified defined contribution retirement plan. We also have a non-qualified plan for employees whose incomes exceed qualified plan limits.
Retirement and compensation plan costs, including costs related to stock based compensation and interest on deferred compensation costs, charged to continuing operations are $4,125,000 in 2015, $3,963,000 in 2014 and $3,739,000 in 2013.
Multiemployer Pension Plans
We contribute to three multiemployer defined benefit pension plans under the terms of collective-bargaining agreements ("CBAs"). The risks of participating in these multiemployer plans are different from our company-sponsored plans in the following aspects:

• | We do not manage the plan investments or any other aspect of plan administration;

• | Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers;

• | If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers; and

• | If we choose to stop participating in one or more multiemployer plans, we may be required to fund over time an amount based on the unfunded status of the plan at the time of withdrawal, referred to as "withdrawal liability".

Information related to these plans is outlined in the table below:

(Thousands of Dollars) | Zone Status September 30 | Funding Improvement Plan/Rehabilitation Plan Status | Contributions |  |  |
Pension Plan | 2015 | 2014 | Status | 2015 |  | 2014 |  | 2013 |  | Surcharge Imposed | Expiration Dates of CBAs
GCIU- Employer Retirement Fund 91-6024903/001 | Red | Red | Implemented | 145 |  | 265 |  | 246 |  | No | 1/13/2017
|  |  |  |  |  |  | 8/31/2017
CWA/ITU Negotiated Pension Plan 13-6212879/001 | Red | Red | Implemented | 122 |  | 133 |  | 143 |  | No | 5/12/2016
|  |  |  |  |  |  | 12/31/2015
|  |  |  |  |  |  | 4/1/2016
|  |  |  |  |  |  | 8/31/2017
District No. 9, International Association of Machinists and Aerospace Workers Pension Trust 43-0736847/001 | Green | Green | N/A | 34 |  | 37 |  | 40 |  | N/A | 2/29/2016

Multiemployer plans in red zone status are generally less well funded than plans in green zone status.
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One of our enterprise's bargaining units withdrew from representation, and as a result we are subject to a future claim from the multiemployer pension plan for a withdrawal liability. The amount and timing of such liability will be dependent on actions taken, or not taken, by the Company and the pension plan, as well as the future investment performance and funding status of the pension plan. Any withdrawal liability determined to be due under this plan will be funded over a period of 20 years.
9 COMMON STOCK, CLASS B COMMON STOCK AND PREFERRED SHARE PURCHASE RIGHTS
Common Stock
Under the Plan, the par value of our Common Stock was changed from $2.00 per share to $0.01 per share effective January 30, 2012. Holders of our previous 2 nd lien agreement shared in the issuance of 6,743,640 shares of our Common Stock, an amount equal to 13% of outstanding shares on a pro forma basis as of January 30, 2012.
In connection with the currently outstanding 2nd Lien Term Loan, we entered into the Warrant Agreement. Under the Warrant Agreement, certain affiliates or designees of the 2nd Lien Lenders received on March 31, 2014 their pro rata share of Warrants to purchase, in cash, 6,000,000 shares of Common Stock, subject to adjustment pursuant to anti-dilution provisions. The Warrants represent, when fully exercised, approximately 10.1% of shares of Common Stock outstanding at March 30, 2014 on a fully diluted basis. The exercise price of the Warrants is $4.19 per share.
The Warrant Agreement contains a cash settlement provision in the event of a change of control prior to March 31, 2018, as well as other provisions requiring the Warrants be measured at fair value and classified as other liabilities in our Consolidated Balance Sheets. We remeasure the liability to fair value each reporting period, with changes reported in other non-operating income (expense). The initial fair value of the Warrants was $16,930,000. At September 27, 2015, the fair value of the Warrants is $4,240,000.
In connection with the issuance of the Warrants, we entered into the Registration Rights Agreement. The Registration Rights Agreement requires, among other matters, that we use our commercially reasonable efforts to file and maintain the effectiveness for certain specified periods of a shelf registration statement covering the shares of Common Stock upon exercise of the Warrants.
Under the New York Stock Exchange ("NYSE") listing standards, if our Common Stock fails to maintain an adequate per share price and total market capitalization of less than $50,000,000, our Common Stock could be removed from the NYSE and traded in the over-the-counter market. In July 2011, the NYSE notified us that our Common Stock did not meet the NYSE continued listing standards due to the failure to maintain an adequate share price. Under the NYSE rules, our Common Stock was allowed to continue to be listed during a cure period. In February 2012, the NYSE notified us that we were again in compliance with the minimum closing price standard. In January 2013, the NYSE notified us that we had returned to full compliance with all continued listing standards.
Class B Common Stock
In 1986, one share of Class B Common Stock was issued as a dividend for each share of Common Stock held by stockholders of record at the time. The transfer of Class B Common Stock was restricted. As originally anticipated, the number of outstanding Class B shares decreased over time through trading and reached the sunset level of 5,600,000 shares in March 2011. In March 2011, in accordance with the sunset provisions established in 1986, we effected conversion of all outstanding shares of Class B Common Stock to Common Stock. As a result, all stockholders have one vote per share on all future matters. Class B shares formerly had ten votes per share.
Preferred Share Purchase Rights
In 1998, the Board of Directors adopted a Shareholder Rights Plan (the “Rights Plan”). Under the Rights Plan, the Board of Directors declared a dividend of one Preferred Share Purchase Right (“Right”) for each outstanding share of our Common Stock and Class B Common Stock (collectively “Common Shares”). Rights are attached to, and automatically trade with, our Common Shares. In 2008, the Board of Directors approved an amendment to the Rights Plan. The amendment increased the beneficial ownership threshold to 25% from 20% for stockholders purchasing Common Stock for passive investment only and decreased the threshold to 15% for all other investors. In addition, the amendment extended the expiration of the Rights Plan to May 31, 2018 from May 31, 2008.
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Rights become exercisable only in the event that any person or group of affiliated persons other than a passive investor becomes a holder of 15% or more of our outstanding Common Shares, or commences a tender or exchange offer which, if consummated, would result in that person or group of affiliated persons owning at least 15% of our outstanding Common Shares. Once the Rights become exercisable, they entitle all other stockholders to purchase, by payment of a $150 exercise price, one one-thousandth of a share of Series A Participating Preferred Stock, subject to adjustment, with a value of twice the exercise price. In addition, at any time after a 15% position is acquired and prior to the acquisition of a 50% position, the Board of Directors may require, in whole or in part, each outstanding Right (other than Rights held by the acquiring person or group of affiliated persons) to be exchanged for one share of Common Stock or one one-thousandth of a share of Series A Preferred Stock. The Rights may be redeemed at a price of $0.001 per Right at any time prior to their expiration.
10 STOCK OWNERSHIP PLANS
Total non-cash stock compensation expense is $1,971,000, $1,481,000 and $1,261,000, in 2015, 2014 and 2013, r espectively.
At September 27, 2015, we have reserved 5,492,191 shares of Common Stock for issuance to employees under an incentive and nonstatutory stock option and restricted stock plan approved by stockholders. At September 27, 2015, 3,621,136 shares are available for granting of non-qualified stock options or issuance of restricted Common Stock.
Stock Options
Options are granted at a price equal to the fair market value on the date of the grant and are exercisable, upon vesting, over a ten-year period.
A summary of stock option activity is as follows:

(Thousands of Shares) | 2015 |  |  | 2014 |  |  | 2013 |
Under option, beginning of year | 2,333 |  |  | 2,769 |  |  | 3,102 |
Granted | — |  |  | 15 |  |  | 51 |
Exercised | (289 | ) |  | (342 | ) |  | (62 | )
Canceled | (173 | ) |  | (109 | ) |  | (322 | )
Under option, end of year | 1,871 |  |  | 2,333 |  |  | 2,769 |
Exercisable, end of year | 1,840 |  |  | 1,786 |  |  | 1,791 |

Weighted average prices of stock options are as follows:

(Dollars) | 2015 |  |  | 2014 |  |  | 2013 |
Granted | — |  |  | 2.99 |  |  | 1.20 |
Exercised | 1.27 |  |  | 2.01 |  |  | 1.65 |
Cancelled | 5.02 |  |  | 10.98 |  |  | 5.18 |
Under option, end of year | 2.71 |  |  | 2.70 |  |  | 2.94 |

The following assumptions were used to estimate the fair value of 2014 and 2013 option awards:

|  |  | 2014 |  |  | 2013 |
Volatility (Percent) |  |  | 91 |  |  | 121 |
Risk-free interest rate (Percent) |  |  | 1.24 |  |  | 0.68 |
Expected term (Years) |  |  | 4.5 |  |  | 4.7 |
Estimated fair value (Dollars) |  |  | 2.02 |  |  | 0.98 |

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A summary of stock options outstanding at September 27, 2015 is as follows:

(Dollars) | Options Outstanding |  |  | Options Exercisable |
Range of Exercise Prices | Number Outstanding (Thousands) |  | Weighted Average Remaining Contractual Life (Years) |  | Weighted Average Exercise Price |  |  | Number Exercisable (Thousands) |  |  | Weighted Average Exercise Price |
1 - 5 | 1,813 |  | 5.7 |  | 1.79 |  |  | 1,782 |  |  | 1.79 |
25 - 50 | 58 |  | 0.9 |  | 31.64 |  |  | 58 |  |  | 31.64 |
| 1,871 |  | 5.5 |  | 2.71 |  |  | 1,840 |  |  | 2.72 |

Total unrecognized compensation expense for unvested stock options at September 27, 2015 is $15,000, which will be recognized over a weighted average period of 0.6 years.
The aggregate intrinsic value of stock options outstanding at September 27, 2015 is $834,000.
Restricted Common Stock
A summary of restricted Common Stock activity follows:

(Thousands of Shares) | 2015 |  |  | 2014 |  |  | 2013 |
Outstanding, beginning of year | 1,291 |  |  | 500 |  |  | 500 |
Granted | 786 |  |  | 817 |  |  | — |
Vested | (500 | ) |  | — |  |  | — |
Forfeited | (31 | ) |  | (26 | ) |  | — |
Outstanding, end of year | 1,546 |  |  | 1,291 |  |  | 500 |

Weighted average grant date fair values of restricted Common Stock are as follows:

(Dollars) | 2015 |  |  | 2014 |  |  | 2013 |
Outstanding, beginning of year | 2.72 |  |  | 1.31 |  |  | 1.31 |
Granted | 3.62 |  |  | 3.61 |  |  | — |
Vested | 1.31 |  |  | — |  |  | — |
Forfeited | 3.62 |  |  | 3.61 |  |  | — |
Outstanding, end of year | 3.62 |  |  | 2.72 |  |  | 1.31 |

Total unrecognized compensation expense for unvested restricted Common Stock at September 27, 2015 is $3,173,000, which will be recognized over a weighted average period of 1.7 years.
In December 2015, we issued 890,000 shares of restricted Common Stock to employees. The grant date fair value was $1.53 per share. All restrictions lapse in December 2018 with respect to these shares.
Stock Purchase Plans
We have 270,000 shares of Common Stock available for issuance pursuant to our Employee Stock Purchase Plan. We also have 8,700 shares of Common Stock available for issuance under our Supplemental Employee Stock Purchase Plan. There has been no activity under these plans in 2015, 2014 or 2013.
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11 INCOME TAXES
Income tax expense (benefit) consists of the following:

(Thousands of Dollars) | 2015 |  |  | 2014 |  |  | 2013 |
Current: |  |  |  |  |
Federal | 720 |  |  | 451 |  |  | (7,915 | )
State | (92 | ) |  | (571 | ) |  | (693 | )
Deferred | 12,966 |  |  | 6,410 |  |  | (54,806 | )
| 13,594 |  |  | 6,290 |  |  | (63,414 | )
Continuing operations | 13,594 |  |  | 6,290 |  |  | (62,745 | )
Discontinued operations | — |  |  | — |  |  | (669 | )
| 13,594 |  |  | 6,290 |  |  | (63,414 | )

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:

(Percent of Income (Loss) Before Income Taxes) | 2015 |  |  | 2014 |  |  | 2013 |
Computed “expected” income tax expense (benefit) | 35.0 |  |  | 35.0 |  |  | (35.0 | )
State income tax expense (benefit), net of federal tax impact | (7.1 | ) |  | 11.0 |  |  | (2.6 | )
Net income of associated companies taxed at dividend rates | (5.2 | ) |  | (9.3 | ) |  | (0.8 | )
Domestic production deduction | — |  |  | — |  |  | 0.4 |
Resolution of tax matters | 0.5 |  |  | 3.6 |  |  | 0.1 |
Non-deductible expenses | 2.8 |  |  | 7.9 |  |  | 0.4 |
Valuation allowance | 15.9 |  |  | (4.5 | ) |  | (2.1 | )
Warrant valuation | (6.1 | ) |  | (15.1 | ) |  | — |
CODI tax attribute reduction | — |  |  | 18.3 |  |  | (4.8 | )
Other | 0.1 |  |  | (1.8 | ) |  | (0.7 | )
| 35.9 |  |  | 45.1 |  |  | (45.1 | )

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Net deferred income tax liabilities consist of the following components:

(Thousands of Dollars) | September 27 2015 |  |  | September 28 2014 |
Deferred income tax liabilities: |  |  |
Property and equipment | (35,593 | ) |  | (40,549 | )
Identified intangible assets | (51,380 | ) |  | (54,819 | )
Long-term debt | (15,176 | ) |  | (13,440 | )
| (102,149 | ) |  | (108,808 | )
Deferred income tax assets: |  |  |  |
Investments | 17,521 |  |  | 20,765 |
Accrued compensation | 4,551 |  |  | 5,182 |
Allowance for doubtful accounts and losses on loans | 1,184 |  |  | 1,258 |
Pension and postretirement benefits | 5,719 |  |  | 5,210 |
Net operating loss carryforwards | 81,228 |  |  | 87,867 |
Accrued expenses | 572 |  |  | 809 |
Other | 1,720 |  |  | 618 |
| 112,495 |  |  | 121,709 |
Valuation allowance | (32,483 | ) |  | (26,439 | )
Net deferred income tax liabilities | (22,137 | ) |  | (13,538 | )

Net deferred income tax liabilities are classified as follows:

(Thousands of Dollars) | September 27 2015 |  |  | September 28 2014 |
Current assets | 15,659 |  |  | 1,228 |
Non-current liabilities | (37,796 | ) |  | (14,766 | )
Net deferred income tax liabilities | (22,137 | ) |  | (13,538 | )

A reconciliation of 2015 and 2014 changes in gross unrecognized tax benefits is as follows:

(Thousands of Dollars) | 2015 |  |  | 2014 |
Balance, beginning of year | 13,520 |  |  | 12,671 |
Decreases in tax positions for prior years | (1,861 | ) |  | (1,592 | )
Increases in tax positions for the current year | 1,098 |  |  | 3,580 |
Lapse in statute of limitations | (958 | ) |  | (1,139 | )
Balance, end of year | 11,799 |  |  | 13,520 |

Approximately $7,475,000 and $9,045,000 of the gross unrecognized tax benefit balances for 2015 and 2014, respectively, relate to state net operating losses which are netted against deferred taxes on our balance sheet. The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was $7,786,000 at September 27, 2015. We recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense. The amount of accrued interest related to unrecognized tax benefits was, net of tax, $330,000 at September 27, 2015 and $385,000 at September 28, 2014. There were no amounts provided for penalties at September 27, 2015 or September 28, 2014.
At September 27, 2015, we had approximately $1,072,922,000 of net operating loss ("NOL") carryforwards for state tax purposes that expire between 2016 and 2034. Such NOL carryforwards result in a deferred income tax asset of $34,263,000 at September 27, 2015, substantially all of which is offset by a valuation allowance. In the current period, $6,043,000 of additional valuation allowance was recorded related to the recoverability of certain deferred tax assets. $2,615,000 of this amount pertains to prior periods. Amounts related to prior periods were determined to be immaterial.
83

The valuation allowance not related to NOL carryforwards is $4,294,000 at September 27, 2015 and $1,337,000 at September 28, 2014.
A 2012 Federal NOL was carried back to 2010, resulting in a cash refund of $9,500,000, which was received in 2013. A Federal NOL based on 2013 results was carried back to 2011, resulting in a refund of $6,244,000. The refund was received in 2014.
In connection with the Chapter 11 Proceedings in 2012, we realized substantial cancellation of debt income (“CODI”) for income tax purposes. This income was not immediately taxable for Federal income tax purposes because the CODI resulted from our reorganization under the U.S. Bankruptcy Code. For U.S. income tax reporting purposes, we were required to reduce certain tax attributes, including any net operating loss carryforwards, capital losses, certain tax credit carryforwards, and the tax basis in certain assets and liabilities, including debt, in a total amount equal to the tax gain on the extinguishment of debt. The reduction in the basis of certain assets also resulted in reduced depreciation and amortization expense for income tax purposes beginning in 2013.
As a result of the reduction in the tax basis of debt noted above, we have been recognizing additional interest expense for income tax purposes, beginning in 2012. This additional interest expense was scheduled to be recognized through the maturity date of the debt ending in 2017. The 2014 Refinancing resulted in additional interest expense related to the CODI basis adjustment being deductible for income tax purposes in 2014. We reported a Federal NOL of approximately $165,489,000 for our 2014 year, a substantial portion of which is due to this additional interest expense. We expect to report taxable income in 2015 which will reduce the Federal NOL to $134,186,000, resulting in a deferred income tax asset balance of $46,965,100, which is not offset by a valuation allowance because sufficient tax planning strategies are available to us before expiration of the NOL in 2034.
12 FAIR VALUE OF FINANCIAL INSTRUMENTS
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. Investments totaling $6,359,000, including our 17% ownership of the non-voting common stock of TCT and a private equity investment, are carried at cost. As of September 27, 2015, the approximate fair value of our private equity investment is $7,200,000, which is a level 3 fair value measurement.
The fair value of floating rate debt, which consists of our 1 st Lien Term Loan, is $175,446,000, based on an average of private market price quotations. Our fixed rate debt consists of $400,000,000 principal amount of the Notes and, $145,000,000 principal amount under the 2 nd Lien Term Loan. At September 27, 2015, based on an average of private market price quotations, the fair values were $392,000,000 and $150,981,000 for the Notes and 2nd Lien Term Loan, respectively.
As discussed more fully in Notes 5 and 9, we recorded a liability for the Warrants issued in connection with the Warrant Agreement. The liability was initially measured at its fair value. We will remeasure the liability to fair value each reporting period, with changes reported in other non-operating income (expense). The initial fair value of the Warrants was $16,930,000. The fair value of the Warrants at September 27, 2015 and September 28, 2014 is $4,240,000 and $10,808,000, respectively. Income of $6,568,000 and $6,122,000 was recognized in other, net in the Consolidated Statements of Operations and Comprehensive Income (Loss) for 2015 and 2014, respectively.
The following assumptions were used to estimate the fair value of the Warrants in 2015 and 2014:

|  |  | 2015 |  |  | 2014 |
Volatility (Percent) |  |  | 61 |  |  | 55 |
Risk-free interest rate (Percent) |  |  | 1.75 |  |  | 2.34 |
Expected term (Years) |  |  | 6.5 |  |  | 7.5 |
Estimated fair value (Dollars) |  |  | 0.71 |  |  | 1.80 |

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In 2014 and 2013, we reduced the carrying value of equipment no longer in use by $1,044,000 and $486,000, respectively, based on estimates of the related fair value in the current market. Based on age, condition and marketability we estimated the equipment had no value.
13 EARNINGS (LOSS) PER COMMON SHARE
The following table sets forth the computation of basic and diluted earnings (loss) per common share:

(Thousands of Dollars and Shares, Except Per Common Share Data) | 2015 |  |  | 2014 |  |  | 2013 |
Income (loss) attributable to Lee Enterprises, Incorporated: |  |  |  |  |
Continuing operations | 23,316 |  |  | 6,795 |  |  | (77,071 | )
Discontinued operations | — |  |  | — |  |  | (1,246 | )
| 23,316 |  |  | 6,795 |  |  | (78,317 | )
Weighted average Common Stock | 54,430 |  |  | 53,438 |  |  | 52,333 |
Less non-vested restricted Common Stock | (1,790 | ) |  | (1,165 | ) |  | (500 | )
Basic average Common Stock | 52,640 |  |  | 52,273 |  |  | 51,833 |
Dilutive stock options and restricted Common Stock | 1,291 |  |  | 1,463 |  |  | — |
Diluted average Common Stock | 53,931 |  |  | 53,736 |  |  | 51,833 |
Earnings (loss) per common share: |  |  |  |  |
Basic: |  |  |  |  |
Continuing operations | 0.44 |  |  | 0.13 |  |  | (1.49 | )
Discontinued operations | — |  |  | — |  |  | (0.02 | )
| 0.44 |  |  | 0.13 |  |  | (1.51 | )
Diluted: |  |  |  |  |
Continuing operations | 0.43 |  |  | 0.13 |  |  | (1.49 | )
Discontinued operations | — |  |  | — |  |  | (0.02 | )
| 0.43 |  |  | 0.13 |  |  | (1.51 | )

For 2015, 2014 and 2013, we had 6,620,000, 3,121,000 and 1,700,000 weighted average shares, respectively, not considered in the computation of diluted earnings (loss) per common share because the exercise prices of the related stock options and Warrants were in excess of the fair market value of our Common Stock.
14 ALLOWANCE FOR DOUBTFUL ACCOUNTS
Valuation and qualifying account information related to the allowance for doubtful accounts receivable related to continuing operations is as follows:

(Thousands of Dollars) | 2015 |  |  | 2014 |  |  | 2013 |
Balance, beginning of year | 4,526 |  |  | 4,501 |  |  | 4,872 |
Additions charged to expense | 1,307 |  |  | 1,754 |  |  | 1,481 |
Deductions from reserves | (1,639 | ) |  | (1,729 | ) |  | (1,852 | )
Balance, end of year | 4,194 |  |  | 4,526 |  |  | 4,501 |

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15 OTHER INFORMATION
Compensation and other accrued liabilities consist of the following:

(Thousands of Dollars) | September 27 2015 |  |  | September 28 2014 |
Compensation | 12,454 |  |  | 11,187 |
Retirement plans | 3,459 |  |  | 3,952 |
Other | 11,142 |  |  | 9,209 |
| 27,055 |  |  | 24,348 |

Cash payments are as follows:

(Thousands of Dollars) | 2015 |  |  | 2014 |  |  | 2013 |
Interest | 72,937 |  |  | 81,363 |  |  | 84,479 |
Debt financing and reorganization costs | 733 |  |  | 31,587 |  |  | 1,071 |
Income tax (payments) refunds, net | (485 | ) |  | 6,022 |  |  | 9,126 |

Accumulated other comprehensive income (loss), net of deferred income taxes at September 27, 2015 and September 28, 2014, is related to pension and postretirement benefits.
16 COMMITMENTS AND CONTINGENT LIABILITIES
Operating Leases
We have operating lease commitments for certain of our office, production and distribution facilities. Management expects that in the normal course of business, existing leases will be renewed or replaced. Minimum lease payments during the five years ending September 2020 and thereafter are $2,804,000, $2,485,000, $2,305,000, $1,179,000, $675,000 and $4,345,000, respectively. Total operating lease expense is $3,415,000, $3,735,000 and $3,605,000, in 2015, 2014 and 2013, respectively.
Capital Expenditures
At September 27, 2015, we had construction and equipment purchase commitments totaling approximately $1,156,000.
Redemption of PD LLC Non-controlling Interest
In February 2009, in conjunction with the Notes Amendment, PD LLC redeemed the 5% interest in PD LLC and STL Distribution Services LLC ("DS LLC") owned by The Herald Publishing Company, LLC ("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”) was to be settled, 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. In 2011, we reduced the liability related to the Herald Value to $300,000 based on the current estimate of fair value.
In 2014, we issued 100,000 shares of Common Stock in full satisfaction of the Herald Value. Such shares had a fair value of $298,000 on the date of issuance.
The redemption of Herald's interest in PD LLC and DS LLC may 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.
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Income Taxes
Commitments exclude unrecognized tax benefits to be recorded in accordance with FASB ASC Topic 740, Income Taxes. We are unable to reasonably estimate the ultimate amount or timing of cash settlements with the respective taxing authorities for such matters. See Note 11.
We file income tax returns with the Internal Revenue Service ("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 our income tax returns have been audited or closed to audit through 2009.
Legal Proceedings
We are involved in a variety of other legal actions that arise in the normal course of business. Insurance coverage mitigates potential loss for certain of these other matters. While we are unable to predict the ultimate outcome of these other 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.
17 IMPACT OF RECENTLY ADOPTED ACCOUNTING STANDARDS
In July 2015, the Financial Accounting Standards Board issued a practical expedient that allows companies to measure defined benefit plan assets on a month-end date that is nearest to their fiscal year-end when the two do not coincide. In 2015, we elected to use the alternate measurement date, which did not have a material impact on our Consolidated Financial Statements taken as a whole.
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18 QUARTERLY FINANCIAL DATA (UNAUDITED)

| Quarter Ended |
(Thousands of Dollars, Except Per Common Share Data) | December |  |  | March |  |  | June |  |  | September |
2015 |  |  |  |  |  |  |
Operating revenue | 177,210 |  |  | 156,557 |  |  | 158,677 |  |  | 156,099 |
Net income | 10,007 |  |  | 2,042 |  |  | 2,135 |  |  | 10,134 |
Income attributable to Lee Enterprises, Incorporated | 9,753 |  |  | 1,800 |  |  | 1,882 |  |  | 9,881 |
Earnings per common share: |  |  |  |  |  |  |
Basic | 0.19 |  |  | 0.03 |  |  | 0.04 |  |  | 0.18 |
Diluted | 0.18 |  |  | 0.03 |  |  | 0.03 |  |  | 0.18 |
2014 |  |  |  |  |  |  |
Operating revenue | 178,379 |  |  | 155,118 |  |  | 164,207 |  |  | 163,173 |
Net income | 12,102 |  |  | 1,705 |  |  | (9,511 | ) |  | 3,375 |
Income attributable to Lee Enterprises, Incorporated | 11,893 |  |  | 1,486 |  |  | (9,746 | ) |  | 3,162 |
Earnings (loss) per common share: |  |  |  |  |  |  |
Basic | 0.23 |  |  | 0.03 |  |  | (0.19 | ) |  | 0.06 |
Diluted | 0.22 |  |  | 0.03 |  |  | (0.19 | ) |  | 0.06 |

In the fourth fiscal quarter of 2015, we reclassified certain costs as operating expenses that were previously recorded as reductions to revenue. The reclassification was necessary to correct an error in the accounting treatment of these costs and is deemed immaterial to the previously issued consolidated financial statements.
Results of operations for the September quarter of 2014 include non-cash impairment charges of $2,644,000.
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Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Lee Enterprises, Incorporated:
We have audited the accompanying consolidated balance sheets of Lee Enterprises, Incorporated and subsidiaries (the Company) as of September 27, 2015 and September 28, 2014, and the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity (deficit), and cash flows for each of the 52-week periods ended September 27, 2015, September 28, 2014, and September 29, 2013. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the consolidated balance sheets of Madison Newspapers, Inc., and Subsidiary (MNI), a 50% owned investee company, as of September 27, 2015 and September 28, 2014, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the 52-week periods ended September 27, 2015, September 28, 2014, and September 29, 2013. The Company’s investment in MNI at September 27, 2015 and September 28, 2014, was $17,561,000 and $19,644,000, respectively, and its equity in earnings of MNI was $3,416,000 for the 52-week period ended September 27, 2015, $3,384,000 for the 52-week period ended September 28, 2014, and $3,509,000 for the 52-week period ended September 29, 2013. The consolidated financial statements of MNI for the years ended September 27, 2015, September 28, 2014, and September 29, 2013 were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for MNI for the 52-week periods ended September 27, 2015, September 28, 2014, and September 29, 2013, is based solely on the report of the other auditors.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Lee Enterprises, Incorporated and subsidiaries as of September 27, 2015 and September 28, 2014, and the results of their operations and their cash flows for each of the 52-week periods ended September 27, 2015, September 28, 2014, and September 29, 2013, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Lee Enterprises, Incorporated and subsidiaries’ internal control over financial reporting as of September 27, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated December 11, 2015 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
/s/ KPMG LLP
Chicago, Illinois
December 11, 2015
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EXHIBIT INDEX
Exhibits marked with an asterisk (*) are incorporated by reference to documents previously filed by us with the SEC, as indicated. Exhibits marked with a plus (+) are management contracts or compensatory plan contracts or arrangements filed pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K. All other documents listed are filed with this Annual Report on Form 10-K.

Number | Description
3.1 * | Amended and Restated Certificate of Incorporation of Lee Enterprises, Incorporated effective as of January 30, 2012 (Exhibit 3.1 to Form 8-K filed on February 3, 2012)
3.2 * | Amended and Restated By-Laws of Lee Enterprises, Incorporated effective as of May 2, 2013 (Exhibit 3.1 to Form 8-K filed May 7, 2013)
4.1 * | The description of the Lee Enterprises, Incorporated’s (the “Company”) preferred stock purchase rights contained in its report on Form 8-K, filed on May 7, 1998, and related Rights Agreement, dated as of May 7, 1998 (“Rights Agreement”), between the Company and The First Chicago Trust Company of New York (“First Chicago”), as amended by Amendment No. 1 to the Rights Agreement dated January 1, 2008 between the Company and Wells Fargo Bank, N.A. (as successor rights agent to First Chicago) contained in the Company's report on Form 8-K filed on January 11, 2008 as Exhibit 4.2, and the related form of Certificate of Designation of the Preferred Stock as Exhibit A, the form of Rights Certificate as Exhibit B and the Summary of Rights as Exhibit C, included as Exhibit 1.1 to the Company's registration statement on Form 8-A filed on May 26, 1998 (File No. 1-6227), as supplemented by Form 8-A/A, Amendment No. 1, filed on January 11, 2008.
4.2 * | Indenture dated as of March 31, 2014 among Lee Enterprises, Incorporated, certain subsidiaries from time to time parties thereto, U.S. Bank National Association, as Trustee, and Deutsche Bank Trust Company Americas, as Collateral Agent (Exhibit 4.1 to Form 8-K filed on April 4, 2014)
4.3 * | Warrant Agreement dated as of March 31, 2014 between Lee Enterprises, Incorporated and Wells Fargo Bank, National Association (Exhibit 4.2 to Form 8-K filed on April 4, 2014)
4.4 * | Registration Rights Agreement dated as of March 31, 2014 among Lee Enterprises, Incorporated, Mudrick Capital Management, LP, Hawkeye Capital Management, LLC, Cohanzick Management, LLC, Aristeia Capital, L.L.C., CVC Credit Partners, LLC, Franklin Mutual Advisors, LLC and Wingspan Master Fund, LP (Exhibit 4.3 to Form 8-K filed on April 4, 2014)
10.1 * | Purchase Agreement dated March 21, 2014 among Lee Enterprises, Incorporated, certain subsidiaries party thereto from time to time, U.S. Bank National Association, as Trustee, and Deutsche Bank Trust Company Americas, as Collateral Agent, involving a $400,000,000 aggregate principal amount of 9.5% Senior Secured Notes, pursuant to an Indenture dated as of March 31, 2014 (Exhibit 10.1 to Form 8-K filed on March 27, 2014)
10.2 * | Joinder Agreement dated as of June 25, 2015, made by each Subsidiary Guarantor a party thereto in favor of U.S. Bank National Association, as Trustee and Deutsche Bank Trust Company Americas, as collateral agent (Exhibit 10.1 to Form 8-K filed on July 1, 2015)
10.3 * | First Lien Credit Agreement dated as of March 31, 2014 among Lee Enterprises, Incorporated, the Lenders from time to time parties thereto, JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent, and JPMorgan Securities LLC and Deutsche Bank Securities Inc., as Joint Lead Arrangers and as Joint Bookrunners (Exhibit 10.1 to Form 8-K filed on April 4, 2014)
10.4 * | Second Lien Loan Agreement dated as of March 31, 2014 among Lee Enterprises, Incorporated, the Lenders from time to time parties thereto, Wilmington Trust, National Association, as Administrative Agent and Collateral Agent, and JPMorgan Securities LLC and Deutsche Bank Securities Inc., as Joint Lead Arrangers and as Joint Bookrunners (Exhibit 10.2 to Form 8-K filed on April 4, 2014)
10.5 * | Security Agreement dated as of March 31, 2014 among Lee Enterprises, Incorporated, the Subsidiary Guarantors and Deutsche Bank Trust Company Americas, as Collateral Agent (Exhibit 10.3 to Form 8-K filed on April 4, 2014)
10.6 * | Pari Passu Intercreditor Agreement dated as of March 31, 2014 among Lee Enterprises, Incorporated, the other Grantors from time to time parties thereto, JPMorgan Chase Bank, N.A., U.S. Bank National Association and Deutsche Bank Trust Company Americas (Exhibit 10.4 to Form 8-K filed on April 4, 2014)

90

Number | Description
10.7 * | Joinder Agreement dated as of June 25, 2015, made by each Subsidiary Guarantor a party thereto in favor of JPMorgan Chase Bank, N.A., as collateral agent for the benefit of the Secured Creditors referred to in the First Lien Guarantee and Collateral Agreement dated as of March 31, 2014 referred to therein (Exhibit 10.2 to Form 8-K filed on July 1, 2015)
10.8 * | Pulitzer Pari Passu Intercreditor Agreement dated as of June 25, 2015 among Lee Enterprises, Incorporated, the other Grantors party thereto, JPMorgan Chase Bank, N.A., U.S. Bank National Association and Deutsche Bank Trust Company Americas (Exhibit 10.3 to Form 8-K filed on July 1, 2015)
10.9 * | Junior Intercreditor Agreement dated as of March 31, 2014 among Lee Enterprises, Incorporated, the other Grantors from time to time parties thereto, JPMorgan Chase Bank, N.A., U.S. Bank National Association, Deutsche Bank Trust Company Americas and Wilmington Trust, National Association (Exhibit 10.5 to Form 8-K filed on April 4, 2014)
10.10 * | Pulitzer Junior Intercreditor Agreement dated as of June 25, 2015 among Lee Enterprises, Incorporated, the other Grantors party hereto, JPMorgan Chase Bank, N.A., U.S. Bank National Association, Deutsche Bank Trust Company Americas and Wilmington Trust, National Association (Exhibit 10.4 to Form 8-K filed on July 1, 2015)
10.11 * | First Lien Guarantee and Collateral Agreement dated as of March 31, 2014 among Lee Enterprises, Incorporated, the Subsidiary Guarantors and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent (Exhibit 10.6 to Form 8-K filed on April 4, 2014)
10.12 * | Intercompany Subordination Agreement dated as of March 31, 2014 among Lee Enterprises, Incorporated, the Subsidiary Guarantors, Pulitzer, Pulitzer Subsidiaries and JPMorgan Chase Bank, N.A. (Exhibit 10.7 to Form 8-K filed on April 4, 2014)
10.13* | Second Lien Guarantee and Collateral Agreement dated as of March 31, 2014 among Lee Enterprises, Incorporated, the Subsidiary Guarantors, Pulitzer, Pulitzer Subsidiaries and Wilmington Trust, National Association, as Administrative Agent and Collateral Agent (Exhibit 10.8 to Form 8-K filed on April 4, 2014)
10.14 * | Second Amendment to Intercreditor Agreement dated as of March 31, 2014 among Lee Enterprises, Incorporated, The Bank of New York Mellon Trust Company, N.A., Wilmington Trust, National Association, Pulitzer and the Pulitzer Subsidiaries (Exhibit 10.9 to Form 8-K filed on April 4, 2014)
10.15 * | Intercompany Subordination Agreement dated as of March 31, 2014 among Lee Enterprises, Incorporated, the Subsidiary Guarantors, Pulitzer, Pulitzer Subsidiaries and Wilmington Trust, National Association (Exhibit 10.10 to Form 8-K filed on April 4, 2014)
10.16 * | Operating Agreement of St. Louis Post-Dispatch LLC, dated as of May 1, 2000, as amended by Amendment No. 1 to Operating Agreement of St. Louis Post-Dispatch LLC, dated as of June 1, 2001 (Exhibit 10.5 to Form 10-Q for the Fiscal Quarter Ended June 30, 2005)
10.17* | Amendment Number Two to Operating Agreement of St. Louis Post-Dispatch LLC, effective February 18, 2009, between Pulitzer Inc. and Pulitzer Technologies, Inc. (Exhibit 10.13 to Form 10-Q for the Fiscal Quarter Ended March 29, 2009)
10.18* | Amended and Restated Joint Operating Agreement, dated December 22, 1988, between Star Publishing Company and Citizen Publishing Company (Exhibit 10.2 to Form 10-Q for the Fiscal Quarter Ended June 30, 2005)
10.19* | Amended and Restated Partnership Agreement, dated as of November 30, 2009, between Star Publishing Company and Citizen Publishing Company (Exhibit 10.2 to Form 10-Q for the Fiscal Quarter Ended December 27, 2009)
10.20* | Amended and Restated Management Agreement, dated as of November 30, 2009, between Star Publishing Company and Citizen Publishing Company (Exhibit 10.1 to Form 10-Q for the Fiscal Quarter Ended December 27, 2009)
10.21* | License Agreement (Star), as amended and restated November 30, 2009, between Star Publishing Company and TNI Partners (Exhibit 10.3 to Form 10-Q for the Fiscal Quarter Ended December 27, 2009)
10.22* | License Agreement (Citizen), as amended and restated November 30, 2009, between Citizen Publishing Company and TNI Partners (Exhibit 10.4 to Form 10-Q for the Fiscal Quarter Ended December 27, 2009)
10.23 * | Lease Agreement between Ryan Companies US, Inc. and Lee Enterprises, Incorporated dated May 2003 (Exhibit 10.7 to Form 10-K for the Fiscal Year Ended September 30, 2003)

91

Number | Description
10.24 * | License Agreement, dated as of May 1, 2000, by and between Pulitzer Inc. and St. Louis Post-Dispatch LLC (Exhibit 10.7 to Form 10-Q for the Fiscal Quarter Ended June 30, 2005)
10.25* | Non-Confidentiality Agreement, dated as of May 1, 2000 (Exhibit 10.10 to Form 10-Q for the Fiscal Quarter Ended June 30, 2005)
10.26 +* | Form of Director Compensation Agreement of Lee Enterprises, Incorporated for non-employee director deferred compensation (Exhibit 10.7 to Form 10-K for the Fiscal Year Ended September 30, 2004)
10.27.1 +* | Amended and Restated Lee Enterprises, Incorporated 1990 Long-Term Incentive Plan (effective October 1, 1999, as amended effective December 7, 2015) (Exhibit 10.1 to Form 8-K filed on December 11, 2015)
10.27.2 +* | Forms of related Incentive Stock Option Agreement, Non-Qualified Stock Option Agreement and Restricted Stock Agreement related to Lee Enterprises, Incorporated 1990 Long-Term Incentive Plan (Effective October 1, 1999, as amended effective January 6, 2010) (Exhibit 10.33.2 to Annual Report on Form 10-K for the Fiscal Year Ended September 29, 2013)
10.28 +* | Amended and Restated Lee Enterprises, Incorporated 1996 Stock Plan for Non-Employee Directors Effective February 17, 2010 (Appendix A to Schedule 14A Definitive Proxy Statement for 2014)
10.29 +* | Lee Enterprises, Incorporated Supplementary Benefit Plan, Amended and Restated as of January 1, 2008 (Exhibit 10.25 to Form 10-K for the Fiscal Year Ended September 28, 2008)
10.30 +* | Lee Enterprises, Incorporated Outside Directors Deferral Plan, Amended and Restated as of January 1, 2008 (Exhibit 10.26 to Form 10-K for the Fiscal Year Ended September 28, 2008)
10.31 +* | Form of Amended and Restated Employment Agreement between Lee Enterprises, Incorporated and its Chairman, President and Chief Executive Officer; Form of Amended and Restated Employment Agreement between Lee Enterprises, Incorporated and its Executive Vice President and Chief Operating Officer; and Form of Employment Agreement between Lee Enterprises, Incorporated and Certain of its Senior Executive Officers(Exhibits 10.2, 10.3 and 10.4 to Form 8-K filed on December 11, 2015)
10.32 +* | Form of Indemnification Agreement for Lee Enterprises, Incorporated Directors and Executive Officers Group (Exhibit 10.2 to Form 10-Q for the Fiscal Quarter Ended March 30, 2008)
10.33 +* | Lee Enterprises, Incorporated Amended and Restated Incentive Compensation Program (Appendix B to Schedule 14A Definitive Proxy Statement for 2014)
21 | Subsidiaries and associated companies
23.1 | Consent of KPMG LLP, Independent Registered Public Accounting Firm
23.2 | Consent of Baker Tilly Virchow Krause LLP, Independent Registered Public Accounting Firm
23.3 | Report of Baker Tilly Virchow Krause LLP, Independent Registered Public Accounting Firm
24 | Power of Attorney
31.1 | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32 | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

92