Lee Enterprises to Include Non-Cash Charges in March 2008 Financial Statements

Business Wire, March 28, 2008

DAVENPORT, Iowa -- Lee Enterprises, Incorporated (NYSE: LEE), has initiated its periodic process of performing impairment testing of goodwill and other intangible assets, and expects to record a significant non-cash impairment charge to earnings in its financial statements for the quarter ending March 30, 2008. This accounting result is consistent with the manner in which other publishing companies and those in other industries are responding to current equity market valuation issues.

The company also will record the current value of its future liability related to unwinding of the 5 percent minority share in its St. Louis partnership, which will also result in a reduction of earnings per common share for the quarter ending March 30, 2008.

IMPAIRMENT

The non-cash impairment charge, which the company estimates could be $500 million to $700 million after income taxes, will substantially reduce the book value of goodwill and potentially that of other intangible assets, including certain newspaper mastheads. The charge will have no effect on cash flows, but will reduce reported earnings per common share, resulting in a loss for the quarter ending March 30, 2008, and full year ending September 28, 2008. The testing is being performed in accordance with generally accepted accounting principles, which, among other factors, requires consideration of differences between current book value and the fair value of all of the company's assets, including current market capitalization. Because of the complex nature of the calculations involved, the final amount of the charge cannot be accurately determined at this time and will not be finalized for several months. As a result, the company will record an estimate of the charge in its financial statements for the quarter ending March 30, 2008, which will be adjusted upon the conclusion of the valuation process. The continuing difference between the company's stock price and its book value is the primary reason the charge is being recorded at this time.

"We believe the current stock price understates the value of our company, as well as the future of our industry," said Mary Junck, Lee chairman and chief executive officer. "Although accounting rules require us to reflect these charges in our financial statements, we remain positive about the future of our business and prospects for continued growth when the current economic downturn subsides. Our own projections of the future cash flows of Lee are far superior to the expectations reflected in our stock price today."

She added, "A truer assessment of our value and future is this: Our audiences continue to grow, both in print and online. On average, we reach more than 70 percent of all the adults in our markets, with strength across all age groups. No competitor comes close to delivering such a massive audience, and no competitor can match our strong local news, information and advertising."

PD LLC LIABILITY

In 2000, Pulitzer Inc. (Pulitzer), which is now a wholly owned subsidiary of Lee Enterprises, and The Herald Company, Inc. (Herald Inc.) completed the transfer of their respective interests in the assets and operations of the St. Louis Post-Dispatch and certain related businesses to a new joint venture known as St. Louis Post-Dispatch LLC (PD LLC). Under the terms of the operating agreement governing PD LLC, Pulitzer and another subsidiary hold a 95% interest in the results of operations of PD LLC, and The Herald Publishing Company, LLC (Herald), as successor to Herald Inc., holds a 5% interest. Herald's 5% interest has been reported as minority interest in Lee's Consolidated Statements of Income and Comprehensive Income at historical cost, plus accumulated earnings since the acquisition of Pulitzer. At September 30, 2007, this liability totaled approximately $7.2 million.

On May 1, 2010, Herald will have a one-time right to require PD LLC to redeem Herald's interest in PD LLC, together with Herald's interest in a related entity (the 2010 Redemption). The May 1, 2010, redemption price for Herald's interest will be determined pursuant to a formula. Based on this formula, the present value of the 2010 Redemption at September 30, 2007, is approximately $68.3 million. Lee has concluded the remaining amount of this potential liability should be recorded in its Consolidated Balance Sheet as of March 30, 2008, with the offset primarily to goodwill in the amount of $55.6 million, with the remainder recorded as a reduction to retained earnings. The company has been disclosing this obligation since its acquisition of Pulitzer in 2005.

Recording of the liability for the 2010 Redemption at the present time will also result in a reduction of earnings per common share for the quarter ending March 30, 2008, of approximately $0.17, which accounts primarily for the time value of the increase in the liability since the date of acquisition of Pulitzer in 2005. The company estimates the ongoing impact on earnings per share of up to 8 to 10 cents per year through April 2010. There is no impact on net income based on application of current accounting standards. Under such standards, if the 2010 Redemption does not occur, the liability and earnings per common share impact discussed above will be reversed in May 2010.