Form 10-K

10-K 1 d10k.htm FORM 10-K Form 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 30, 2005

[ ] 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 - $2.00 par value		New York Stock Exchange
Preferred Share Purchase Rights		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: Class B Common Stock - $2.00 par value

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§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 an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [X] No [ ]

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]

State the aggregate market value of voting stock held by nonaffiliates of the Registrant as of November 30, 2005. Common Stock and Class B Common Stock, $2.00 par value, $1,617,843,000.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of November 30, 2005. Common Stock, $2.00 par value, 38,731,280 shares and Class B Common Stock, $2.00 par value, 6,936,822 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Lee Enterprises, Incorporated Definitive Proxy Statement to be filed in January 2006 are incorporated by reference in Part III of this Form 10-K.


TABLE OF CONTENTS		PAGE

Forward-Looking Statements		1

Business		1

Properties		12

Legal Proceedings		12

Submission of Matters to a Vote of Security Holders		12

Market for the Registrant’s Common Stock and Related Stockholder Matters		13

Selected Financial Data		14

Management’s Discussion and Analysis of Financial Condition and Results of Operations		15

Quantitative and Qualitative Disclosures about Market Risk		25

Financial Statements and Supplementary Data		26

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		26

Controls and Procedures		26

Other Information		28

Directors and Executive Officers of the Registrant		28

Executive Compensation		29

Security Ownership of Certain Beneficial Owners and Management		29

Certain Relationships and Related Transactions		29

Principal Accounting Fees and Services		29

Exhibits, Financial Statement Schedules and Reports on Form 8-K		30

Signatures		31

Exhibit Index		32

Consolidated Financial Statements		35

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 the Company’s 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 are changes in advertising demand, newsprint prices, energy costs, interest rates, labor costs, legislative and regulatory rulings and other results of operations or financial conditions, difficulties in integration of acquired businesses or maintaining employee and customer relationships and increased capital and other costs. The words “may,” “will,” “would,” “could,” “believes,” “expects,” “anticipates,” “intends,” “plans,” “projects,” “considers” and similar expressions generally identify 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. The Company does not undertake to publicly update or revise its forward-looking statements.

PART I

References to 2005, 2004 and 2003 and the like mean the fiscal years ended September 30.

ITEM 1. BUSINESS

The Company directly, and through its ownership of associated companies, publishes 58 daily newspapers in 23 states and more than 300 weekly, classified and specialty publications, along with associated and integrated online services. The Company was founded in 1890, incorporated in 1950, and listed on the New York Stock Exchange in 1978. Before 2001, the Company also operated a number of network-affiliated and satellite television stations.

The Company is focused on six key strategic priorities. They are to:

Grow revenue creatively and rapidly;

Improve readership and circulation;

Emphasize strong local news;

Accelerate online growth;

Nurture employee development and achievement; and

Exercise careful cost controls.

Certain aspects of these priorities are discussed below.

HOWARD AND SIOUX CITY ACQUISITIONS

In April 2002, the Company acquired 15 daily newspapers and a 50% interest in the Sioux City, Iowa daily newspaper (SCN) by purchasing Howard Publications, Inc. (Howard). This acquisition was consistent with the strategy the Company announced in 2000 to buy daily newspapers with circulation of 30,000 or more. In July 2002, the Company acquired the remaining 50% of SCN. These acquisitions increased the Company’s circulation by more than 75% and increased its revenue by nearly 50%. In February 2004, two daily newspapers acquired in the Howard acquisition were exchanged for two daily newspapers in Burley, Idaho and Elko, Nevada.

A key reason for the acquisitions is that historically, Howard and SCN generated substantially less revenue per paid unit of circulation than the Company’s existing newspapers. The expectation was that faster revenue growth could be achieved by applying the Company’s successful selling strategies and tactics to Howard and SCN.

PULITZER ACQUISITION

In June 2005, the Company acquired Pulitzer Inc. (Pulitzer). Pulitzer publishes 14 daily newspapers and more than 100 weekly newspapers and specialty publications. Pulitzer also owns a 50% interest in TNI Partners, as described more fully below. The acquisition of Pulitzer increased the Company’s circulation by more than 50%, to almost 1.7 million daily and more than 1.9 million Sunday, and revenue, on an annualized basis, by more than 60%.

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. St. Louis newspaper operations also include the Suburban Journals, a group of 35 weekly papers and various niche publications that focus on providing local news and editorial content to the communities that they serve. In 2005, the Suburban Journals had average unduplicated circulation of approximately 0.7 million, resulting in the delivery of approximately 1.1 million copies per week.

Pulitzer and one of its subsidiaries hold a 95% interest in the results of operations of PD LLC, and The Herald Company, Inc. (Herald) holds a 5% interest.

Pulitzer’s wholly-owned subsidiary, Pulitzer Newspapers, Inc. (PNI), and its subsidiaries publish 12 daily newspapers, as well as more than 75 weekly newspapers, shoppers and niche publications, that serve markets in the Midwest, Southwest and West.

In 2005, the Company devoted substantial attention to the successful integration of Pulitzer into its business. The Company made significant and immediate changes to systems and other areas of operations. Additional changes in operations will occur in 2006. The Company also devoted resources and training to bring its successful selling strategies and tactics to Pulitzer. The Company believes the integration has been successful to date, with minimal disruption to the business and low turnover of key personnel.

LOGO

One measure of the success of the Company’s strategy to grow through acquisition is its enterprise value, which is defined as the market value of its equity securities, plus the principal amount of debt outstanding, less cash assets. The chart above depicts the Company’s enterprise value, which has increased 226%, to $3,532,000,000, over the last four years.

TNI Partners

As a result of the acquisition of Pulitzer, the Company owns a 50% interest in TNI Partners (TNI), the Tucson, Arizona newspaper partnership. TNI, acting as agent for the Company’s subsidiary, Star Publishing Company (Star Publishing), and the owner of the remaining 50%, Citizen Publishing Company (Citizen), a wholly-owned subsidiary of Gannett Co. Inc., is responsible for printing, delivery, advertising, and circulation of the Arizona Daily Star and the Tucson Citizen. TNI collects all receipts and income and pays all operating expenses incident to the partnership’s operations and publication of the newspapers. Each newspaper is solely responsible for its own news and editorial content. Under the amended and restated joint operating agreement between Star Publishing and Citizen (the Agency Agreement), The Arizona Daily Star remains the separate property of Star Publishing. Net pretax income or loss of TNI is allocated equally to Star Publishing and Citizen. Results of TNI are accounted for using the equity method.

The Newspaper Preservation Act of 1970 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. Newspapers in several cities operate under joint operating or agency agreements.

The Agency Agreement has governed the joint operations of the Arizona Daily Star and Tucson Citizen since 1940. The Board of Directors of TNI presently consists of three directors chosen by Star Publishing and three chosen by Citizen. Budgetary, personnel and other non-news and editorial policy matters, such as advertising and circulation policies and rates or prices, are determined by the Board of Directors of TNI. Both the Company and Citizen incur certain administrative costs and capital expenditures that are reported by their individual companies. The Arizona Daily Star and the Tucson Citizen benefit from increases, and can be adversely affected by decreases, in each other’s circulation. The Agency Agreement expires in 2015, but contains an option, which may be exercised by either party, to renew the agreement for successive periods of 25 years each.

Due to the agency relationship existing in Tucson, the Arizona Daily Star and Tucson Citizen cannot be viewed as competitors for advertising or circulation revenue. The Arizona Daily Star and Tucson Citizen compete primarily against other media, suburban, neighborhood and national newspapers, and other publications.

MADISON NEWSPAPERS

The Company owns 50% of the capital stock of Madison Newspapers, Inc. (MNI) and 17% of the nonvoting common stock of The Capital Times Company. The Capital Times Company owns the remaining 50% of the capital stock of MNI. The Company has a contract to furnish the editorial and news content for the Wisconsin State Journal, which is published by MNI, and periodically provides other services to MNI. The Wisconsin State Journal is classified as one of the Lee group of newspapers in the newspaper business and in the rating services. Results of MNI are accounted for using the equity method. MNI operates under the trade name Capital Newspapers.

ADVERTISING

More than 75% of the Company’s 2005 revenue was derived from advertising. The Company’s strategies are to increase its share of local advertising through increased sales pressure in its existing markets and, over time, to increase circulation unit sales through internal expansion into existing and contiguous markets, augmented by selective acquisitions. Acquisition efforts are focused on newspapers with daily circulation of 30,000 or more, as noted above, and other publications and online businesses that expand the Company’s operating revenue.

Many of the Company’s businesses operate in geographic groups of publications, or “clusters,” which provide operational efficiencies and extend sales penetration. Operational efficiencies are obtained through consolidation of sales forces, back office operations such as finance or human resources, management or production of the publications. Sales penetration can occur if the sales effort is successful in cross-selling advertising into multiple publications. A table under the caption “Daily Newspapers and Markets” in Item 1 identifies those groups of newspapers operating in clusters.

The Company’s newspapers and classified and specialty publications compete with newspapers having regional circulation, magazines, radio, television, other advertising media such as billboards, other classified and specialty publications, direct mail, yellow pages directories, as well as other information content providers such as online sites. Competition for advertising is based on audience size and composition, circulation levels, readership demographics, price and advertiser results. In addition, several of the Company’s daily and Sunday newspapers compete with other local daily or weekly newspapers. The Company estimates that it captures more than 50% of the total advertising dollars spent on print, broadcast and online advertising in substantially all of its markets and approximately 30% in St. Louis.

The number of competitors in any given market varies, and cannot be estimated with any degree of certainty. However, all of the forms of competition noted above exist to some degree in the Company’s markets, including those listed in the table under the caption “Daily Newspapers and Markets” in Item 1.

The following broadly define major categories of advertising revenue:

Retail advertising is revenue earned from sales of display advertising space in the publication, or for preprinted advertising inserted in the publication, to local accounts.

National advertising is revenue earned from display advertising space, or for preprinted advertising inserted in the publication, to national accounts, if there is no local retailer representing the account in the market.

Classified advertising, which includes automotive, real estate for sale or rent, employment and other categories, is revenue earned from sales of advertising space in the classified section of the publication or from publications consisting primarily of such advertising.

Niche publications are specialty publications, such as lifestyle, business, health or home improvement publications that contain significant amounts of advertising.

Online advertising consists of display, banner, classified or other advertising on websites integrated with the Company’s print publications.

Classified publications are periodic advertising publications available in racks or delivered free, by carriers or third-class mail, to all, or selected, households in a particular geographic area. Classified publications offer advertisers a cost-effective local advertising system and are particularly effective in larger markets with high media fragmentation in which metropolitan newspapers generally have low penetration.

The Company’s many geographic markets have significant differences in their advertising rate structures, some of which are highly complex. A single operation often has scores of rate alternatives.

LOGO

The chart above compares newspaper advertising spending, as measured by the Newspaper Association of America (NAA), and the Company’s same property advertising revenue, for the last five fiscal years. The advertising environment is influenced by the state of the overall economy, including unemployment rates, inflation, energy prices and consumer interest rates. The Company’s enterprises are generally located in midsize and smaller markets. These markets were more stable than major metropolitan markets during the most recent downturn in advertising spending but may not experience increases in such spending as significant as those in major metropolitan markets as the economy continues to improve.

READERSHIP AND CIRCULATION

Based on independent research, the Company estimates that, on an average Sunday, its newspapers are read by up to 75% of adults in its markets. In the St. Louis market, Scarborough research estimates the Company’s products are read by 62% of adults, including 55% of the key 18-34 year-old demographic. Readership by young adults is also significant in other of the Company’s markets. The Company’s newspapers are reaching an increasingly larger share of the market through rapid online growth, as illustrated in the table below, as well as through additional specialty and niche publications.

LOGO

After advertising, circulation is the Company’s largest source of revenue. According to national NAA data, daily newspaper circulation unit sales have decreased 14% cumulatively since their peak in 1984 and Sunday circulation unit sales have decreased 8% since their peak in 1990. For the six months ended September 2005, daily circulation, which includes Pulitzer, TNI and MNI, as measured by the Audit Bureau of Circulations (ABC), declined 1.8%, and Sunday circulation declined 2.2%, significantly outperforming the industry as a whole. The charts on page 6 depict the percentage change in daily and Sunday circulation unit sales of the Company’s newspapers over the last five years, compared to the corresponding six month period of the previous year. Such results are, in substantially all reporting periods, better than industry averages.

Growth in readership and circulation, as well as growth in online visitors, can, over time, also positively impact advertising revenue. The Company’s strategies to improve readership and circulation, as well as website visits, include continuous improvement of content and promotional efforts. Content can include focus on local news, features, other content, headline accuracy, presentation, writing style, tone, type style and reduction of factual errors. Promotional efforts include advertising, contests and other initiatives to increase awareness of the products. Customer service can also influence circulation. The Company’s enterprises are also focused on increasing the number of subscribers who pay for their subscriptions via automated payment mechanisms, such as credit cards or checking account withdrawals. Customers using these payment methods have historically higher retention. Other initiatives vary from location to location and are determined principally by the publishers at the local level in collaboration with senior management of the Company. Competition for circulation is generally based on the content, journalistic quality and price of the publication.

LOGO

Circulation competition exists in all markets, even from unpaid products, but is most significant in markets with competing daily newspapers. These markets tend to be near major metropolitan areas, where the size of the population is sufficient to support more than one daily newspaper.

LOGO

Changes in telemarketing regulations effective in 2004 reduced the Company’s ability to obtain new subscribers using this channel. Other methods to attract and retain subscribers have been and remain in use. However, telemarketing has historically been the largest single source of new subscribers. Same property circulation starts obtained through the Company’s marketing efforts increased more than 10% in 2004, in spite of new telemarketing restrictions, but declined 2% in 2005, including MNI.

In 2004, several major newspaper publishers (not including the Company) announced significant downward adjustments to previously reported circulation totals. The Company has not experienced any impact on its relationships with advertisers from such announcements by other publishers. Approximately 75% of the Company’s circulation is home delivery. Combined with small route sizes and the limited use of independent distributors, monitoring and inspection of the Company’s circulation is not as difficult as in some major metropolitan markets. Nonetheless, in 2004 the Company enhanced its existing procedures in several areas to further ensure the integrity of its reported circulation.

DAILY NEWSPAPERS AND MARKETS

The Company, MNI and TNI publish the following daily newspapers:

Paid Circulation⁽¹⁾

Newspaper

City

State

Daily

Sunday

St. Louis Post-Dispatch ⁽²⁾

St. Louis

Missouri

278,531

428,601

Arizona Daily Star ⁽²⁾⁽³⁾

Tucson

Arizona

103,708

161,975

Capital Newspapers ⁽⁴⁾

Wisconsin State Journal

Madison

Wisconsin

91,164

146,439

⁽⁵⁾

The Capital Times

Madison

Wisconsin

18,640

⁽⁵⁾

Daily Citizen

Beaver Dam

Wisconsin

10,318

Portage Daily Register

Portage

Wisconsin

4,905

Baraboo News Republic

Baraboo

Wisconsin

4,193

North County Times ⁽⁶⁾

Oceanside
and Escondido

California

88,648

93,151

The Times ⁽⁶⁾

Munster, Valparaiso,
and Crown Point

Indiana

81,392

89,241

Lincoln Group

Lincoln Journal Star

Lincoln

Nebraska

73,689

82,800

Columbus Telegram

Columbus

Nebraska

9,035

9,996

Fremont Tribune

Fremont

Nebraska

8,210

Beatrice Daily Sun

Beatrice

Nebraska

7,716

Quad-Cities Group

Quad-City Times

Davenport

Iowa

52,182

69,003

Muscatine Journal

Muscatine

Iowa

7,822

Billings Gazette

Billings

Montana

46,365

52,765

The Pantagraph ⁽²⁾

Bloomington

Illinois

45,980

50,245

Sioux City Journal ⁽⁶⁾

Sioux City

Iowa

43,007

41,562

The Courier ⁽⁶⁾

Waterloo and Cedar
Falls

Iowa

40,736

50,664

The Post-Star ⁽⁶⁾

Glens Falls

New York

34,345

36,897

Central Illinois Newspaper Group

Herald & Review

Decatur

Illinois

33,692

42,942

Journal Gazette ⁽⁶⁾

Mattoon

Illinois

10,294

Times-Courier ⁽⁶⁾

Charleston

Illinois

6,457

River Valley Newspaper Group

La Crosse Tribune

La Crosse

Wisconsin

32,838

40,902

Winona Daily News

Winona

Minnesota

11,303

12,705

The Daily Herald ⁽²⁾

Provo

Utah

30,695

37,476

Casper Star-Tribune ⁽⁶⁾

Casper

Wyoming

30,560

32,943

Missoula Group

Missoulian

Missoula

Montana

30,378

34,541

Ravalli Republic

Hamilton

Montana

5,186

⁽⁷⁾

Rapid City Journal

Rapid City

South Dakota

30,093

34,492

The Journal Times

Racine

Wisconsin

28,848

30,546

The Bismarck Tribune

Bismarck

North Dakota

27,548

30,867

The Southern Illinoisan

Carbondale

Illinois

27,446

36,491

The Daily News ⁽⁶⁾

Longview

Washington

21,442

21,480

Magic Valley Group

The Times-News ⁽⁶⁾

Twin Falls

Idaho

20,514

21,049

Elko Daily Free Press ⁽⁸⁾

Elko

Nevada

5,870

⁽⁷⁾

South Idaho Press ⁽⁸⁾

Burley

Idaho

3,232

⁽⁷⁾

2,763

⁽⁷⁾

Globe Gazette

Mason City

Iowa

18,743

23,174

Napa Valley Register ⁽²⁾

Napa

California

17,299

17,876

Paid Circulation⁽¹⁾

Newspaper

City

State

Daily

Sunday

Central Coast Newspapers

Santa Maria Times ⁽²⁾

Santa Maria

California

18,293

17,895

The Lompoc Record ⁽²⁾

Lompoc

California

6,529

6,775

Mid-Valley News Group

Albany Democrat-Herald

Albany

Oregon

17,239

17,730

Corvallis Gazette-Times

Corvallis

Oregon

11,524

12,021

The Times and Democrat ⁽⁶⁾

Orangeburg

South Carolina

17,040

16,876

Independent Record

Helena

Montana

14,328

14,878

The Montana Standard

Butte

Montana

14,236

14,402

The Sentinel ⁽⁶⁾

Carlisle

Pennsylvania

14,235

14,650

The Sentinel ⁽²⁾

Hanford

California

13,248

13,010

The World ⁽²⁾

Coos Bay

Oregon

12,562

The Citizen ⁽⁶⁾

Auburn

New York

11,912

13,781

Arizona Daily Sun ⁽²⁾

Flagstaff

Arizona

11,189

12,389

Daily Chronicle ⁽²⁾

DeKalb

Illinois

9,211

10,511

The Garden Island ⁽²⁾

Lihue

Hawaii

8,647

9,093

The Ledger Independent ⁽⁶⁾

Maysville

Kentucky

8,580

Daily Journal ⁽²⁾

Park Hills

Missouri

8,046

8,232

The Chippewa Herald

Chippewa Falls

Wisconsin

6,893

7,050

Shawano Leader ⁽⁴⁾

Shawano

Wisconsin

6,324

6,768

The Daily News ⁽²⁾

Rhinelander

Wisconsin

3,794

⁽⁷⁾

4,276

⁽⁷⁾

1,656,854

1,933,923

(1)	Source: ABC: Six months ended September 2005, unless otherwise noted.

(2)	Acquired in 2005.

(3)	Owned by Star Publishing but published through TNI.

(4)	Owned by MNI, which is 50% owned by the Company.

(5)	Combined edition.

(6)	Acquired in 2002.

(7)	Source: Company statistics.

(8)	Acquired in 2004.

ONLINE ADVERTISING AND SERVICES

The Company’s online activities include websites supporting each of its daily newspapers and certain of its other publications. The Company also owns 82.5% (81% in 2005) of an Internet service company, INN Partners, L.C. (doing business as TownNews.com) that provides online infrastructure for more than 1,000 daily and weekly newspapers, and shoppers. Internet activities of the newspapers, except for MNI and TNI, are reported and managed as a part of the Company’s publishing operations. In addition, the Company has minority investments in two Internet service companies, PowerOne Media, LLC and CityXpress Corp., which provide integrated online classified solutions for the newspaper industry, integrate online editorial content and provide transactional and promotional opportunities.

Online businesses of the Company have experienced rapid growth over the last several years, which is expected to continue.

COMMERCIAL PRINTING

The Company offers commercial printing services through the following entities:


		Location

Selma Enterprises		Selma, California
William Street Press		Decatur, Illinois
Hawkeye Printing and Trico Communications		Davenport, Iowa
Platen Press		Butte, Montana
Farcountry Press		Helena, Montana
Broadwater Printing		Townsend, Montana
Journal Star Commercial Printing		Lincoln, Nebraska
Plaindealer Publishing		Tekamah, Nebraska
Little Nickel Quik Print		Lynnwood, Washington
Spokane Print and Mail		Spokane, Washington
Triangle Press		Chippewa Falls, Wisconsin
Wingra Printing ⁽¹⁾		Madison, Wisconsin

(1)	Owned by MNI, which is 50% owned by the Company.

Certain of the Company’s newspapers also directly provide commercial printing services. Commercial printing business is highly competitive and generally has lower operating margins than newspapers.

NEWSPRINT

The basic raw material of newspapers, and classified and specialty publications, is newsprint. The Company and its subsidiaries purchase newsprint from U.S. and Canadian producers. The Company believes it will continue to receive a supply of newsprint adequate for its needs. Newsprint prices are volatile and fluctuate based upon factors that include both foreign and domestic production capacity and consumption. Between September 2004 and September 2005, the Resource Information Systems, Inc. 30 pound newsprint price index rose 11.8%. Price fluctuations can have a significant effect on the results of operations. The Company considers its relationship with newsprint producers to be good. The Company has not entered into derivative contracts for newsprint. For additional information regarding supply of newsprint, see “Contractual Obligations” under Item 7, included herein. For the quantitative impacts of these fluctuations, see “Quantitative And Qualitative Disclosures About Market Risk” under Item 7A, included herein.

EXECUTIVE TEAM

The following table lists executive team members of the Company as of November 30, 2005:


Name	Age	Service With The Company	Named To Present Office	Present Office

Mary E. Junck	58	June 1999	January 2002	Chairman, President and Chief Executive Officer

Rosanne M. Cheeseman	51	April 1998	November 2004	Vice President – Sales & Marketing

Terrance C.Z. Egger	48	June 2005	June 2005	Vice President – Publishing

Nancy L. Green	63	December 2000	September 2002	Vice President – Circulation

Michael R. Gulledge	45	October 1982	May 2005	Vice President – Publishing

Daniel K. Hayes	60	September 1969	September 2005	Vice President – Communications

James W. Hopson	59	July 2000	July 2000	Vice President – Publishing

Brian E. Kardell	42	January 1991	August 2003	Vice President – Production and Chief Information Officer

Vytenis P. Kuraitis	57	August 1994	January 1997	Vice President – Human Resources

Linda Ritchie Lindus	57	April 2000	October 2005	Vice President – Publishing

Kevin E. Mowbray	43	September 1986	November 2004	Vice President – Publishing

Gregory P. Schermer	51	February 1989	November 1997	Vice President – Interactive Media and Corporate Counsel

Carl G. Schmidt	49	May 2001	May 2001	Vice President, Chief Financial Officer and Treasurer

John VanStrydonck	52	March 1981	June 2000	Vice President – Publishing

Greg R. Veon	53	April 1976	November 1999	Vice President – Publishing

Mary E. Junck was elected Chairman, President and Chief Executive Officer in January 2002. From January 2001 to January 2002 she served as President and Chief Executive Officer. From January 2000 to January 2001 she served as President and Chief Operating Officer. From May 1999 to January 2000 she served as Executive Vice President and Chief Operating Officer. From May 1996 to April 1999 she served as Executive Vice President of The Times Mirror Company and President of Eastern Newspapers. She was named Publisher and Chief Executive Officer of The Baltimore Sun in 1993.

Rosanne M. Cheeseman was appointed Vice President – Sales & Marketing in November 2004. From October 2002 to November 2004 she served as Advertising Director of the North County Times and was named Associate Publisher in November 2004. From 2000 to October 2002 she served as Director – Sales and Development of the Company and from April 1998 to 2000 she served as National Sales Manager.

Terrance C. Z. Egger was elected a Vice President – Publishing in June 2005. From July 2002 to June 2005, he served as a Senior Vice President of Pulitzer. He has served as Publisher of the St. Louis Post-Dispatch since July 1999.

Nancy L. Green was appointed Vice President – Circulation in September 2002 and named Publisher of The Courier in August 2004. From December 2000 to September 2002, she served as Director of

Circulation Sales, Distribution and Marketing. For more than five years prior to December 2000, she served as a vice president in the University System of Georgia.

Michael R. Gulledge was elected a Vice President – Publishing in May 2005 and named Publisher of the Billings Gazette in October 2000. From February 2002 to May 2005 he served as a Group Publisher.

Daniel K. Hayes was appointed Vice President – Communications in September 2005. From 1998 to September 2005 he served as Director of Communications.

James W. Hopson was elected a Vice President – Publishing and named Publisher of the Wisconsin State Journal in July 2000. He also serves as President of MNI.

Brian E. Kardell was appointed Vice President – Production and Chief Information Officer in August 2003. From 2001 to August 2003, he served as Vice President – Information Systems and Chief Information Officer. From 1997 to 2001, he served as Director of Information Services and Chief Information Officer.

Vytenis P. Kuraitis was elected Vice President – Human Resources in 1997.

Linda Ritchie Lindus was elected a Vice President – Publishing in October 2005 and named publisher of The Pantagraph in June 2005. From February 2002 to October 2005 she served as a Group Publisher. From July 2002 to June 2005 she also served as Publisher of the Herald & Review. From April 2000 to February 2002, she served as Publisher of The Southern Illinoisan.

Kevin E. Mowbray was elected a Vice President – Publishing and named Publisher of The Times in November 2004. From July 2002 to November 2004 he served as Vice President – Sales & Marketing of the Company. From 2000 to July 2002 he served as Publisher of The Bismarck Tribune.

Gregory P. Schermer was elected Vice President – Interactive Media in November 1997. He has served as Corporate Counsel of the Company since 1989. He also serves on the Board of Directors of the Company.

Carl G. Schmidt was elected Vice President, Chief Financial Officer and Treasurer in May 2001. For more than five years prior to May 2001, he served as Senior Vice President and Chief Financial Officer of Johnson Outdoors Inc.

John VanStrydonck was elected a Vice President – Publishing in June 2000 and named Publisher of the Missoulian in October 2002. From September 1994 to June 2000 he served as Publisher of the Rapid City Journal.

Greg R. Veon was elected a Vice President – Publishing in November 1999.

EMPLOYEES

At September 30, 2005, the Company had approximately 10,000 employees, including approximately 2,800 part-time employees, exclusive of MNI and TNI. Full-time equivalent employees at September 30, 2005 total approximately 8,800. The Company considers its relationship with its employees to be good.

Bargaining unit employees represent approximately 80% of the total employees of the St. Louis Post-Dispatch. The St. Louis Post-Dispatch has contracts with substantially all bargaining unit employees with expiration dates ranging from November 2006 through January 2011. The St. Louis Post-Dispatch is currently in negotiations with the Graphic Communications International Union (GCIU) Local No. 6-505M, which represents approximately 35 employees. The GCIU contract expired in September 2002. All St. Louis Post-Dispatch labor contracts contain no-strike clauses.

Approximately 160 employees in eight additional locations are represented by collective bargaining units. Contracts at two of these locations are expired and negotiations are ongoing.

CORPORATE GOVERNANCE AND PUBLIC INFORMATION

The Company has a long, substantial history of progressive corporate governance practices. The Board of Directors has a lead independent director, and has had one for many years. Currently, six of eight members

of the 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 the Company’s independent registered public accounting firm and its affiliates.

In addition, the Company’s revenue, including same property results, is reported to the public on a monthly basis, as is certain other statistical information, improving the timeliness of reporting of information to investors. The Company was also among the first in the nation to voluntarily record expense related to employee stock options.

At www.lee.net, one may access a wide variety of information, including news releases, Securities and Exchange Commission filings, financial statistics, annual reports, presentations, governance documents, newspaper profiles and online links. The Company makes available via its website, all filings made by the Company under the Securities Exchange Act of 1934, including Forms 10-K, 10-Q and 8-K, and related amendments, as soon as reasonably practicable after their filing with the SEC.

OTHER MATTERS

In the opinion of management, compliance with present statutory and regulatory requirements respecting environmental quality will not necessitate significant capital outlays, materially affect the earning power of the business of the Company, or cause material changes in the Company’s business, whether present or intended.

ITEM 2. PROPERTIES

The Company’s executive offices are located in leased facilities at 201 North Harrison Street, Suite 600, Davenport, Iowa. The lease expires in 2019.

All of the Company’s principal printing facilities (except Madison, Wisconsin, which is owned by MNI, Tucson, which is jointly owned by Star Publishing and Citizen, a leased plant in Spokane, Washington and leased land for the Helena, Montana and Lihue, Hawaii plants) are owned. All facilities are well maintained, in good condition, suitable for existing office and publishing operations and adequately equipped. With the exception of St. Louis, none of the Company’s facilities is individually significant to its business.

Information related to St. Louis facilities is as follows:


	Square Feet
	Owned	Leased

St. Louis, Missouri (PD LLC)	753,819	56,107
St. Louis, Missouri (Suburban Journals)	127,335	41,330

The Baraboo News Republic, Beatrice Daily Sun, Corvallis Gazette-Times, Daily Citizen, Journal Gazette, The Lompoc Record, Muscatine Journal, Ravalli Republic, Times Courier and Winona Daily News, as well as many of the Company’s and MNI’s approximately 300 other publications, are printed at other Company facilities to enhance operating efficiency. The Company’s 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

The Company is involved in a variety of legal actions that arise in the normal course of business. Insurance coverage mitigates potential loss for certain of these matters. While the Company is unable to predict the ultimate outcome of these legal actions, it is the opinion of management that the disposition of these matters will not have a material adverse effect on the Company’s Consolidated Financial Statements, taken as a whole.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth quarter of 2005.

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON STOCK

AND RELATED STOCKHOLDER MATTERS

Common Stock of the Company is listed on the New York Stock Exchange. Class B Common Stock is not traded on an exchange but is readily convertible to Common Stock. Class B Common Stock was issued to stockholders of record of the Company in 1986 pursuant to a 100% stock dividend and is converted at sale, or at the option of the holder, into Common Stock. The table below includes the high and low prices of Common Stock for each quarter during the past three years, the closing price at the end of each quarter and dividends per common share.


	Quarter
	1st		2nd		3rd		4th

STOCK PRICES

2005
High	$	48.85	$	46.06	$	43.68	$	44.32
Low		44.87		42.70		39.82		39.90
Closing		46.08		43.40		40.09		42.48

2004
High	$	44.15	$	46.94	$	49.83	$	48.78
Low		38.67		43.35		45.05		44.65
Closing		43.65		45.18		48.01		46.34

2003
High	$	34.70	$	34.50	$	38.55	$	40.68
Low		29.75		30.35		31.35		36.40
Closing		33.52		31.52		37.53		38.67

DIVIDENDS

2005	$	0.18	$	0.18	$	0.18	$	0.18
2004		0.18		0.18		0.18		0.18
2003		0.17		0.17		0.17		0.17

Common Stock and Class B Common Stock have identical rights with respect to cash dividends and upon liquidation. For a more complete description of the relative rights of Common Stock and Class B Common Stock, see Note 12 of the Notes to Consolidated Financial Statements, included herein.

At September 30, 2005, the Company had 2,461 holders of Common Stock and 1,573 holders of Class B Common Stock.

During the three months ended September 30, 2005, the Company purchased shares of Common Stock, as noted in the table below, in transactions with participants in its 1990 Long-Term Incentive Plan. The transactions resulted from the withholding of shares to fund the exercise price and/or taxes related to the exercise of stock options. The Company is not currently engaged in share repurchases related to a publicly announced plan or program.


Month	Total Number Of Shares Purchased	Average Price Per Share

July	359	$	40.25

On November 16, 2005, the Board of Directors declared a dividend in the amount of $0.18 per share on the issued and outstanding Common Stock and Class B Common Stock of the Company, to be paid on January 3, 2006, to stockholders of record on December 1, 2005.

ITEM 6. SELECTED FINANCIAL DATA

Selected financial data is as follows:


(Thousands, Except Per Common Share Data)	2005			2004			2003			2002			2001
	⁽¹⁾									⁽²⁾			⁽³⁾⁽⁴⁾
OPERATING RESULTS

Operating revenue	$	860,859		$	683,324		$	647,333		$	518,568		$	426,966
Depreciation and amortization		60,828			48,027			45,507			34,464			31,357
Operating income, before equity in earnings of associated companies		155,441			138,214			129,640			109,350			76,622
Equity in earnings of associated companies		12,403			8,340			8,053			9,057			7,651
Operating income		167,844			146,554			137,693			118,407			84,273
Financial income		2,824			1,066			1,120			6,007			28,548
Financial expense		(38,038	)		(12,665	)		(16,535	)		(15,777	)		(11,963	)

Income from continuing operations	$	76,878		$	86,469		$	77,881		$	78,505		$	58,071
Discontinued operations		-			(398	)		160			1,325			254,399
Net income	$	76,878		$	86,071		$	78,041		$	79,830		$	312,470

EARNINGS PER COMMON SHARE

Basic:
Continuing operations	$	1.70		$	1.93		$	1.76		$	1.78		$	1.33
Discontinued operations		-			(0.01	)		-			0.03			5.81
Net income	$	1.70		$	1.92		$	1.76		$	1.81		$	7.14

Diluted:
Continuing operations	$	1.70		$	1.92		$	1.75		$	1.77		$	1.32
Discontinued operations		-			(0.01	)		-			0.03			5.77
Net income	$	1.70		$	1.91		$	1.75		$	1.80		$	7.09

Weighted average common shares:
Basic		45,118			44,792			44,316			44,087			43,784
Diluted		45,348			45,092			44,513			44,351			44,089

Dividends per common share	$	0.72		$	0.72		$	0.68		$	0.68		$	0.68

OTHER INFORMATION

Operating income as a percent of revenue		19.5	%		21.4	%		21.3	%		22.8	%		19.7	%
Income from continuing operations as a percent of revenue		8.9			12.7			12.0			15.1			13.6
Dividends as a percent of income from continuing operations		42.5			37.5			38.9			38.3			51.3

BALANCE SHEET INFORMATION (End of Year)

Total assets	$	3,445,200		$	1,403,844		$	1,421,377		$	1,463,830		$	1,000,397
Debt, including current maturities ⁽⁵⁾		1,688,000			213,600			305,200			409,300			173,400
Stockholders’ equity		936,410			876,843			802,156			742,774			683,193

(1)	Includes four months of operations from the Pulitzer acquisition, which was consummated in June 2005.

(2)	Includes six months of operations from the Howard acquisition, which was consummated in April 2002.

(3)	Includes gain on the sale of the Company’s broadcast properties, as reported in discontinued operations.

(4)	Effective in 2002, the Company adopted FASB Statement 142.

(5)	Principal amount, excluding fair value adjustments in 2005.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion includes comments and analysis relating to the Company’s results of operations and financial condition as of, and for the three years ended, September 2005. This discussion should be read in conjunction with the Consolidated Financial Statements and related Notes thereto.

NON-GAAP FINANCIAL MEASURES

Operating Cash Flow and Operating Cash Flow Margin

Operating cash flow, which is defined as operating income before depreciation, amortization, and equity in net income of associated companies, and operating cash flow margin (operating cash flow divided by operating revenue) represent non-GAAP financial measures that are used in the analysis below. The Company believes that operating cash flow and the related margin percentage are useful measures of evaluating its financial performance because of their focus on the Company’s results from operations before depreciation and amortization. The Company also believes that these measures are several of the alternative financial measures of performance used by investors, lenders, rating agencies and financial analysts to estimate the value of a company and evaluate its ability to meet debt service requirements.

A reconciliation of operating cash flow and operating cash flow margin to operating income, the most directly comparable measure under accounting principles generally accepted in the United States of America (GAAP), is included in the table below:


(Thousands)	2005		Percent Of Revenue		2004		Percent Of Revenue		2003		Percent Of Revenue

Operating cash flow	$	216,269	25.1	%	$	186,241	27.3	%	$	175,147	27.1	%
Depreciation and amortization		60,828	7.1			48,027	7.0			45,507	7.0
Operating income, before equity in earnings of associated companies		155,441	18.1			138,214	20.2			129,640	20.0
Equity in earnings of associated companies		12,403	1.4			8,340	1.2			8,053	1.2
Operating income	$	167,844	19.5	%	$	146,554	21.4	%	$	137,693	21.3	%

SAME PROPERTY COMPARISONS

Certain information below, as noted, is presented on a same property basis, which is exclusive of acquisitions and divestitures consummated in the current or prior year. The Company believes such comparisons provide meaningful information for an understanding of changes in its revenue and operating expenses. Same property comparisons exclude MNI. The Company owns 50% of the capital stock of MNI, which for financial reporting purposes is reported using the equity method of accounting. Same property comparisons also exclude corporate office costs.

CRITICAL ACCOUNTING POLICIES

The Company’s discussion and analysis of its financial condition and results of operations are based upon the Company’s Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its

estimates, including those related to intangible assets and income taxes. The Company bases its 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 the Company’s accounting policies.

Goodwill and Other Intangible Assets

In assessing the recoverability of the Company’s goodwill and other intangible assets, the Company makes assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets. The Company analyzes its goodwill and indefinite life intangible assets for impairment on an annual basis or more frequently if impairment indicators are present. See Note 6 of the Notes to Consolidated Financial Statements, included herein, for a more detailed explanation of the Company’s intangible assets.

Pension, Postretirement and Postemployment Benefit Plans

The Company evaluates its 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, employee turnover rates, anticipated mortality rates, expected investment returns on plan assets, asset allocation assumptions of plan assets, and other factors. If the Company 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.

Income Taxes

Deferred income taxes are provided using the 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 the opinion of management, it is more likely than not that 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.

The Company files income tax returns with the Internal Revenue Service and various state tax jurisdictions. From time to time, the Company is subject to routine audits by those agencies, and those audits may result in proposed adjustments. The Company has considered the alternative interpretations that may be assumed by the various taxing agencies, believes its positions taken regarding its filings are valid, and that adequate tax liabilities have been recorded to resolve such matters.

Revenue Recognition

Advertising revenue is recorded when advertisements are placed in the publication or on the related online site. Circulation revenue is recorded as newspapers are distributed over the subscription term. 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 newspapers or advance payments for advertising.

Uninsured Risks

The Company is self-insured for health care, workers compensation and certain long-term disability costs of its employees, subject to stop loss insurance, which limits exposure to large claims. The Company accrues its estimated health care costs in the period in which such costs are incurred, including an estimate of incurred but not reported claims. Other insurance carries deductible losses of varying amounts.

The Company’s reserve for workers compensation claims is based upon an estimate of the remaining liability for retained losses made by consulting actuaries. The amount has been determined based upon historical patterns of incurred and paid loss development factors from the insurance industry.

CONTINUING OPERATIONS

2005 vs. 2004

Operating results, as reported in the Consolidated Financial Statements, are summarized below:


							Percent Change
(Thousands, Except Per Common Share Data)	2005			2004			Total		Same Property

Advertising revenue:
Retail	$	358,253		$	287,661		24.5	%	3.5	%
National		33,075			18,434		79.4		12.4
Classified:
Daily newspapers:
Employment		63,992			44,478		43.9		16.0
Automotive		49,331			40,852		20.8		(4.3	)
Real estate		47,197			35,468		33.1		8.1
All other		29,240			24,290		20.4		(0.4	)
Other publications		44,044			33,237		32.5		1.5
Total classified		233,804			178,325		31.1		4.9
Online		19,294			11,125		73.4		33.8
Niche publications		13,223			11,212		17.9		1.1
Total advertising revenue		657,649			506,757		29.8		4.9
Circulation		154,226			130,552		18.1		(2.2	)
Commercial printing		21,362			20,249		5.5		(0.3	)
Online services and other		27,622			25,766		7.2		9.6
Total operating revenue		860,859			683,324		26.0		3.6
Compensation		342,237			276,204		23.9		2.3
Newsprint and ink		85,063			63,502		34.0		7.9
Other operating expenses		199,237			157,377		26.6		0.2
Early retirement program		9,124			-		NA		NA
Transition costs		8,929			-		NA		NA
		644,590			497,083		29.7		2.4
Operating cash flow		216,269			186,241		16.1		6.1
Depreciation and amortization		60,828			48,027		26.7		(7.2	)
Operating income, before equity in earnings of associated companies		155,441			138,214		12.5		9.8
Equity in earnings of associated companies		12,403			8,340		48.7
Operating income		167,844			146,554		14.5
Non-operating expense, net		(46,453	)		(11,893	)	290.6
Income from continuing operations before income taxes		121,391			134,661		(9.9	)
Income tax expense		44,353			48,192		(8.0	)
Minority interest		160			-		NA
Income from continuing operations	$	76,878		$	86,469		(11.1	)

Earnings per common share:
Basic	$	1.70		$	1.93		(11.9	)
Diluted		1.70			1.92		(11.5	)

Sundays generate substantially more advertising and circulation revenue than any other day of the week. 2005 had the same number of Sundays as 2004.

In June 2005, the Company acquired Pulitzer. Pulitzer publishes fourteen daily newspapers, including the St. Louis Post-Dispatch, and more than 100 weekly newspapers and specialty publications. Pulitzer also owns a 50% interest in TNI. The acquisition of Pulitzer increased the Company’s circulation by more than 50% and revenue, on an annualized basis, by more than 60%.

In total, acquisitions and divestitures accounted for $161,317,000 of revenue in 2005 and $7,912,000 in 2004.

Advertising Revenue

In 2005, total advertising revenue increased $150,892,000, or 29.8%, and same property advertising revenue increased $24,755,000, or 4.9%. Same property retail revenue increased $10,061,000, or 3.5%, in 2005. Continuing emphasis on rate discipline and an increase in active accounts, offset by a 1.8% decrease in advertising lineage contributed to the increase. Same property average retail rates, excluding preprint insertions, increased 4.1% in 2005. Rate discipline means adhering to standard rates rather than negotiating specific rates for individual customer situations.

Same property classified advertising revenue increased $8,612,000, or 4.9%, in 2005. Higher rate employment advertising at the daily newspapers increased 16.0% for the year on a same property basis. The Company’s increases in employment classified advertising compare favorably to national survey amounts. The September 2005 Help Wanted Index, as calculated by the Conference Board, increased 8.3% from the prior year level. Same property average automotive advertising decreased 4.3%, due to a 5.1% decrease in average automotive rates, offset by a 0.8% increase in lineage. Same property real estate advertising increased 8.1% due to an increase in advertising of real estate for sale. Other daily newspaper classified advertising decreased 0.4% on a same property basis. Same property classified advertising rates decreased 1.6%, primarily due to the decline in automotive rates.

Advertising lineage, as reported on a same property basis for the Company’s daily newspapers only, consists of the following:


(Thousands Of Inches)	2005	2004	Percent Change

Retail	10,463	10,656	(1.8	)%
National	561	537	4.5
Classified	11,700	10,942	6.9
	22,724	22,135	2.7	%

Online advertising increased 33.8% on a same property basis, due to expanded use of the Company’s online business model and cross-selling with the Company’s print publications. Online classified advertising registered particularly strong growth. Advertising in niche publications increased 1.1% on a same property basis, due to new publications in existing markets and penetration of new and existing markets, offset by the loss of one significant publication in a larger market.

Circulation and Other Revenue

Circulation revenue increased $23,674,000, or 18.1% in 2005, and same property circulation revenue decreased $2,827,000, or 2.2%. The Company’s total average daily newspaper circulation units, including Pulitzer, TNI and MNI, as measured by the ABC, declined 1.8% for the six months ended September 2005, compared to the same period in the prior year, and Sunday circulation declined 2.2%, significantly outperforming the industry as a whole. For the six months ended March 2005, total average daily circulation units, including MNI, declined 1.6% and Sunday circulation decreased 1.8%, again outperforming the industry. The Company is focused on growing readership, and circulation units and revenue, through a number of initiatives.

Same property commercial printing revenue decreased $50,000, or 0.3%, in 2005. Same property online services and other revenue increased $2,251,000, or 9.6%, in 2005.

Operating Expenses and Results of Operations

Costs other than depreciation and amortization increased $147,507,000, or 29.7%, in 2005, and increased $11,256,000, or 2.4%, on a same property basis. In total, acquisitions and divestitures accounted for $134,408,000 of operating expenses, excluding depreciation and amortization, in 2005 and $6,782,000 in 2004. Operating expenses will increase significantly in 2006, due to the full year impact of the acquisition of Pulitzer.

Compensation expense increased $66,033,000, or 23.9%, in 2005 due to costs of acquired businesses and a 2.3% increase in same property compensation expense. Normal salary adjustments and associated

increases in payroll taxes and benefits account for the increase in same property costs. Same property full time equivalent employees declined 0.4% in 2005 from the prior year level. In November 2005, the Company announced that the St. Louis Post-Dispatch concluded an offering of early retirement incentives that will result in an adjustment of staffing levels. Approximately 130 employees volunteered to take advantage of the offer, which included enhanced pension and insurance benefits, and lump-sum cash payments based on continuous service. The annual pretax savings from the program, net of positions filled, is estimated to be $6,500,000 to $7,000,000, with savings of $6,000,000 to $6,500,000 in 2006. The cost will total approximately $17,500,000 before income tax benefit, with $9,124,000 recognized in 2005, and approximately $8,400,000 in 2006. Approximately $7,000,000 of the cost represents cash payments, with the remainder due primarily to enhancements of pension and other post retirement benefits.

Newsprint and ink costs increased $21,561,000, or 34.0%, in 2005 due to price increases and costs of acquired businesses, and increased 7.9% on a same property basis. Volume decreased 0.1% on a same property basis. Newsprint unit costs have been rising since late 2002 and additional increases may negatively impact 2006 results.

Other operating costs, exclusive of depreciation and amortization, increased $41,860,000, or 26.6%, in 2005 and increased 0.2% on a same property basis. Transition costs related to the acquisition of Pulitzer, which are not included in same property comparisons, totaled $8,929,000 in 2005. The Company expects to incur additional transition costs in 2006. Costs associated with new niche publications and expenses to increase circulation using sources other than telemarketing also contributed to the growth in costs. Changes in telemarketing regulations enacted in 2004 may continue to impact the Company’s ability to solicit new subscribers, and the cost of such solicitation, in the future.

Operating cash flow increased 16.1% to $216,269,000 in 2005 from $186,241,000 in 2004, and increased 6.1% on a same property basis. Operating cash flow margin decreased to 25.1% from 27.3% in the prior year reflecting the overall lower margin of the Pulitzer newspapers, costs related to the Pulitzer acquisition and the St. Louis Post-Dispatch early retirement program.

Depreciation expense increased $4,235,000, or 20.6%, and amortization expense increased $8,566,000, or 31.2%, in 2005, due to the acquisition of Pulitzer. Equity in earnings in associated companies increased 48.7% in 2005 due to increasing earnings of MNI and the inclusion of TNI. Operating income increased $21,290,000, or 14.5%. Operating income margin decreased to 19.5% in 2005 from 21.4% due to the inclusion of Pulitzer results and early retirement and transition costs noted above.

Non-Operating Income and Expense

Financial expense increased $25,373,000, or 200.3%, to $38,038,000 due to increased debt and associated financing costs as a result of the Pulitzer acquisition and higher interest rates, partially offset by debt reduction funded by cash generated from operations. In June 2005, the Company refinanced its then existing debt which resulted in a one-time pretax loss from early extinguishment of debt of $11,181,000.

Overall Results

Income taxes were 36.5% of income from continuing operations before income taxes in 2005 and 35.8% in 2004. The favorable resolution of tax issues reduced income tax expense by approximately $1,200,000 in 2004. The effective rate would have been 36.7% in 2004 without this event. The Company believes, absent unusual tax settlements, that its effective income tax rate will decline in 2006, due to the initiation of the Federal manufacturing credit and changes in the expected makeup of its income from continuing operations before income taxes.

As a result of all of the above, income from continuing operations totaled $76,878,000 in 2005, a decrease of 11.1% compared to $86,469,000 in 2004. Earnings per diluted common share decreased 11.5% to $1.70 in 2005 from $1.92 in 2004. Early retirement, transition and debt extinguishment costs, all of which are related to the Pulitzer acquisition, totaled $29,234,000 before income tax benefit, or approximately $0.39 per diluted common share.

2004 vs. 2003

Operating results, as reported in the Consolidated Financial Statements, are summarized below:


							Percent Change
(Thousands, Except Per Common Share Data)	2004			2003			Total		Same Property

Advertising revenue:
Retail	$	287,661		$	275,931		4.3	%	3.5	%
National		18,434			15,642		17.8		14.2
Classified:
Daily newspapers:
Employment		44,478			39,032		14.0		13.6
Automotive		40,852			41,825		(2.3	)	(2.4	)
Real estate		35,468			31,946		11.0		10.8
All other		24,290			22,384		8.5		6.9
Other publications		33,237			30,940		7.4		3.8
Total classified		178,325			166,127		7.3		6.3
Online		11,125			8,359		33.1		32.6
Niche publications		11,212			9,227		21.5		20.3
Total advertising revenue		506,757			475,286		6.6		5.7
Circulation		130,552			130,191		0.3		(0.3	)
Commercial printing		20,249			18,683		8.4		6.7
Online services and other		25,766			23,173		11.2		11.1
Total operating revenue		683,324			647,333		5.6		4.7
Compensation		276,204			267,456		3.3		3.2
Newsprint and ink		63,502			56,955		11.5		10.0
Other operating expenses		157,377			147,775		6.5		5.3
		497,083			472,186		5.3		4.7
Operating cash flow		186,241			175,147		6.3		4.5
Depreciation and amortization		48,027			45,507		5.5		3.1
Operating income, before equity in earnings of associated companies		138,214			129,640		6.6		4.9
Equity in earnings of associated companies		8,340			8,053		3.6
Operating income		146,554			137,693		6.4
Non-operating expense, net		(11,893	)		(16,464	)	(27.8	)
Income from continuing operations before income taxes		134,661			121,229		11.1
Income tax expense		48,192			43,348		11.2
Income from continuing operations	$	86,469		$	77,881		11.0	%

Earnings per common share:
Basic	$	1.93		$	1.76		9.7	%
Diluted		1.92			1.75		9.7

Sundays generate substantially more advertising and circulation revenue than any other day of the week. 2004 had the same number of Sundays as 2003.

In total, acquisitions accounted for $5,692,000 of revenue in 2004.

Advertising Revenue

In 2004, total same property advertising revenue increased $26,896,000. Same property retail revenue increased $9,607,000, or 3.5%, in 2004. Continuing emphasis on rate discipline, an increase in active accounts and a 0.4% increase in advertising lineage contributed to the increase. Same property average retail rates, excluding preprint insertions, increased 2.8% in 2004.

Same property classified advertising revenue increased approximately $10,468,000, or 6.3%, in 2004. Higher rate employment advertising at the daily newspapers increased 13.6% for the year on a same property basis. The Company’s increases in employment classified advertising compare favorably to national survey amounts. The September 2004 Help Wanted Index, as calculated by the Conference Board, declined 2.7% from the prior year level. Same property average automotive advertising decreased by 2.4% due to a 3.7% decline in advertising lineage from increased promotional financing and related advertising in the prior year. Same property real estate advertising increased 10.8% due to low mortgage interest rates and increases in advertising of real estate for rent from growth in home ownership. Other daily newspaper classified advertising increased 6.9% on a same property basis. Same property classified advertising rates increased 3.3%, primarily due to increases in employment advertising rates offset by a decrease in real estate advertising rates.

Advertising lineage, as reported on a same property basis for the Company’s daily newspapers only, consists of the following:


(Thousands Of Inches)	2004	2003	Percent Change

Retail	10,656	10,618	0.4	%
National	537	475	13.1
Classified	10,942	10,568	3.5
	22,135	21,661	2.2	%

Online advertising increased 32.6% on a same property basis, due to expanded use of the Company’s online business model and cross-selling with the Company’s print publications. Online specialty employment and automotive advertising registered particularly strong growth. Advertising in niche publications increased 20.3% on a same property basis, due to new publications in existing markets and penetration of new and existing markets.

Circulation and Other Revenue

Same property circulation revenue decreased $412,000, or 0.3%, in 2004. The Company’s total average daily and Sunday newspaper circulation units, including MNI, as measured by the ABC, declined 0.1% for the six months ended September 2004 compared to the same period in the prior year, significantly outperforming the industry as a whole. For the six months ended March 2004, total average daily circulation units, including MNI, declined 0.2% and Sunday circulation increased 0.4%.

Same property commercial printing revenue increased $1,243,000, or 6.7%, in 2004. Same property online services and other revenue increased $2,571,000, or 11.1%, in 2004.

Operating Expenses and Results of Operations

Costs other than depreciation and amortization increased $24,897,000, or 5.3%, in 2004, and increased 4.7% on a same property basis. In total, acquisitions accounted for $5,052,000 of operating costs, excluding depreciation and amortization, in 2004.

Compensation expense increased $8,748,000, or 3.3%, in 2004 due to costs of acquired businesses and a 3.2% increase in same property compensation expense. Normal salary adjustments and associated increases in taxes and benefits account for the increase in same property costs. Same property full time equivalent employees declined 1.2% in 2004 from the prior year level. Reduced medical expense from plan changes in the current year offset other increases.

Newsprint and ink costs increased $6,547,000, or 11.5%, in 2004 due to price increases and a 2.5% increase in volume. Same property newsprint and ink costs increased 10.0%.

Other operating costs, exclusive of depreciation and amortization, increased $9,602,000, or 6.5%, in 2004 and increased 5.3% on a same property basis. A $550,000 accrual for the prospect that the Company, similar to others in the newspaper industry, will be required to refund approved critical vendor payments

received from Kmart Corporation following its bankruptcy proceedings in 2002 increased this category of costs. Costs of new niche publications and expenses to increase circulation using sources other than telemarketing also contributed to the growth in costs. In 2004, however, the Company was able to increase circulation starts obtained through the Company’s marketing efforts more than 10%, in spite of new telemarketing restrictions. The Company also experienced increases in delivery costs from rising fuel prices.

Operating cash flow increased 6.3% to $186,241,000 in 2004 from $175,147,000 in 2003. Operating cash flow margin increased to 27.3% from 27.1% in the prior year.

Depreciation expense increased $2,046,000, or 11.0% in 2004, due primarily to increases in capital spending in 2003 and 2004.

Equity in earnings in associated companies increased 3.6% in 2004. Operating income increased 6.4%, to $146,554,000. Operating income margin increased to 21.4% in 2004 from 21.3% in 2003. The Company was able to increase margins in 2004, in spite of significant increases in newsprint costs, due to strong revenue growth.

Non-Operating Income and Expense

Financial expense decreased $3,870,000, or 23.4%, to $12,665,000 due to $91,600,000 of debt reduction from operating cash flow, offset by rising interest rates on floating rate debt.

Overall Results

Income taxes were 35.8% of income from continuing operations before income taxes in 2004 and 2003. The favorable resolution of tax issues reduced income tax expense by approximately $1,200,000 in 2004. The effective rate would have been 36.7% in 2004 without this event.

As a result of all of the above, income from continuing operations totaled $86,469,000 in 2004, an increase of 11.0% compared to $77,881,000 in 2003. Earnings per diluted common share increased 9.7% to $1.92 in 2004 from $1.75 in 2003.

DISCONTINUED OPERATIONS

In February 2004, the Company exchanged its daily newspapers in Freeport, Illinois and Corning, New York for two daily newspapers and eight weekly and specialty publications in Nevada and Idaho. The transaction resulted in an after-tax loss of $228,000, which is recorded in discontinued operations in 2004.

There was no revenue from discontinued operations in 2005. Revenue from discontinued operations in 2004 and 2003 was $3,142,000 and $9,408,000, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operating activities of continuing operations was $160,448,000 in 2005, $130,519,000 in 2004 and $139,661,000 in 2003. Decreased income from continuing operations was more than offset by an increase in depreciation and amortization, losses related to financing activities and changes in operating assets and liabilities, accounting for the change between 2005 and 2004. Decreases in working capital accounted for the change between 2004 and 2003.

Cash required for investing activities totaled $1,272,950,000 in 2005, $27,088,000 in 2004, and $12,543,000 in 2003. Acquisitions accounted for substantially all of the usage of funds in 2005. 2005 capital spending totaled $24,737,000. Capital spending and acquisitions accounted for substantially all of the usage of funds in 2004. Capital spending accounted for substantially all of the usage of funds in 2003.

The Company anticipates that funds necessary for capital expenditures, which are expected to total approximately $38,000,000 in 2006, and other requirements, will be available from internally generated funds, availability under its existing Credit Agreement or, if necessary, by accessing the capital markets.

In June 2005, the Company entered into a Credit Agreement with a syndicate of financial institutions. The Credit Agreement provides for aggregate borrowings of up to $1,550,000,000 and consists of a

seven year, $800,000,000 A Term Loan, an eight year $300,000,000 B Term Loan and a seven year $450,000,000 revolving credit facility. The Credit Agreement also provides the Company with a right, with the consent of the administrative agent, to request at certain times prior to June 2012, that one or more lenders provide incremental term loan commitments of up to $500,000,000, subject to certain requirements being satisfied at the time of the request.

In June 2005, upon consummation of the Credit Agreement, the Company borrowed $800,000,000 under the A Term Loan, $300,000,000 under the B Term Loan, and $362,000,000 under the revolving credit facility. The proceeds were used to consummate the acquisition of Pulitzer, to repay existing indebtedness of the Company, as discussed more fully below, and to pay related fees and expenses.

In connection with the execution of the Credit Agreement, the Company redeemed, as of June 3, 2005, all of the outstanding indebtedness under its then existing credit agreement and, as of June 6, 2005, the existing senior notes of the Company under the Note Purchase Agreement, dated as of March 18, 1998. Refinancing of existing debt of the Company resulted in a pretax loss of $11,181,000.

In April 2005, the Company executed interest rate swaps in the notional amount of $350,000,000 with a forward starting date of November 30, 2005. The interest rate swaps have terms of 2 to 5 years, carry interest rates from 4.2% to 4.4% (plus the applicable LIBOR margin) and effectively fix the Company’s interest rate on debt in the amount, and for the time periods, of such instruments.

Debt agreements provide for restrictions as to indebtedness, liens, sales, mergers, acquisitions and investments and require the Company to maintain leverage and interest coverage ratios. Covenants under these agreements are not considered restrictive to normal operations or historical amounts of stockholder dividends. At September 30, 2005, the Company was in compliance with such covenants.

The Company is in the process of amending the Credit Agreement, which is expected to close in December 2005 and which will modify the current facilities with a new $450,000,000 revolving credit facility, a $950,000,000 A Term Loan and a $50,000,000 B Term Loan. Interest rate margins under the amended agreement are lower than under the existing facilities at September 30, 2005 by 0.25% to 0.5%. Other conditions of the amended agreement are largely unchanged from the Credit Agreement.

In August 2005, the Company filed a Form S-3 shelf registration statement (Shelf) with the SEC, which has been declared effective. The Shelf gives the Company the flexibility to issue and publicly distribute various types of securities, including preferred stock, common stock, 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 $500,000,000.

The Shelf enables the Company to sell securities quickly and efficiently when market conditions are favorable or financing needs arise. Net proceeds from the sale of any securities may be used for general corporate purposes, including repayment or refinancing of debt, working capital, capital expenditures, acquisitions or the repurchase of common stock, subject to conditions of existing debt agreements.

Cash provided by financing activities totaled $1,112,035,000 during 2005, and required $105,854,000 and $135,764,000 in 2004 and 2003, respectively. Borrowing to fund the Pulitzer acquisition and refinance existing debt accounted for substantially all of the funds provided in 2005. Debt reduction and dividends accounted for the majority of the usage of funds in 2004 and 2003. Cash dividend payments have been influenced primarily by timing. The annual dividend was $0.72 per share in 2005 and 2004 and $0.68 per share in 2003.

Cash required by discontinued operations totaled $631,000 in 2004 and primarily reflects tax payments related to nondeductible goodwill and basis differences in identified intangible assets associated with the exchange of the Company’s daily newspapers in Corning, New York and Freeport, Illinois in February 2004, offset by changes in working capital of sold properties. Cash provided by discontinued operations totaled $5,329,000 in 2003 and primarily reflects net proceeds from the sale of the Ashland, Oregon daily newspaper.

Cash and cash equivalents decreased $467,000 in 2005, $3,054,000 in 2004 and $3,317,000 in 2003.

SEASONALITY

The Company’s 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 first and third fiscal quarters. Advertising revenue is lowest in the second fiscal quarter.

Quarterly results of operations are summarized in Note 22 to the Consolidated Financial Statements, included herein.

INFLATION

The Company has not been significantly impacted by general inflationary pressures over the last several years. The Company anticipates that changing costs of newsprint, its basic raw material, may impact future operating costs. Price increases (or decreases) for the Company’s products are implemented when deemed appropriate by management. The Company continuously evaluates price increases, productivity improvements, sourcing efficiencies and other cost reductions to mitigate the impact of inflation.

In September 2005, several newsprint manufacturers announced price increases of $35 per metric ton, effective for deliveries in October 2005. In December 2005, a newsprint manufacturer announced a price increase of $40 per metric ton, effective for deliveries in February 2006. The final timing and amount of changes in prices, if any, are subject to negotiation between such manufacturers and the Company.

CONTRACTUAL OBLIGATIONS

The following table summarizes the more significant of the Company’s contractual obligations.


(Thousands Of Dollars)	Payments (Or Commitments) Due By Year
Nature of Obligation		Total		Less Than 1		1-3		3-5		More Than 5

Long-term debt (principal amount)	$	1,688,000	$	10,000	$	104,658	$	570,658	$	1,002,684
Lease obligations		21,526		4,028		5,517		3,613		8,368
Financial expense ⁽¹⁾		92,374		24,633		49,266		18,475		-
Capital expenditure commitments		11,891		11,891		-		-		-
	$	1,813,791	$	50,552	$	159,441	$	592,746	$	1,011,052

Newsprint (metric tons)		253,000		202,400		50,600		-		-

(1)	Financial expense excludes interest on floating rate debt. Based on interest rates and floating rate debt in effect on September 30, 2005 and including debt subject to interest rate swaps described above, annual interest on floating rate debt is approximately $74,000,000.

The table above excludes future cash requirements for pension, postretirement and postemployment obligations. The periods in which these obligations will be settled in cash is not readily determinable and are subject to numerous future events and assumptions. The Company’s estimate of cash requirements for these obligations in 2006 is approximately $1,300,000.

A substantial amount of the Company’s deferred income tax liabilities is related to acquisitions and will not result in future cash payments. See Note 14 of the Notes to Consolidated Financial Statements, included herein.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk stemming from changes in interest rates and commodity prices. Changes in these factors could cause fluctuations in earnings and cash flows. In the normal course of business, exposure to certain of these market risks is managed as described below.

INTEREST RATES

Restricted Cash and Investments

Interest rate risk in the Company’s restricted cash and investments is managed by investing only in securities with maturities no later than May 2010, after which time all restrictions on such funds lapse. Only U.S. Government and related securities are permitted. Interest-earning assets, including those in employee benefit plans, also function as a natural hedge against fluctuations in interest rates on debt.

Debt

The Company’s debt structure and interest rate risk are managed through the use of fixed and floating rate debt. The Company’s primary exposure is to the London Interbank Offered Rate (LIBOR). A 100 basis point increase to LIBOR would decrease income from continuing operations before income taxes on an annualized basis by approximately $10,320,000, based on floating rate debt outstanding at September 30, 2005, after consideration of the interest rate swaps described below, and excluding debt of MNI. Such interest rates may also decrease.

At September 30, 2005, after consideration of the forward starting interest rate swaps described above, approximately 61% of the principal amount of the Company’s debt is subject to floating interest rates.

COMMODITIES

Certain materials used by the Company are exposed to commodity price changes. The Company manages this risk through instruments such as purchase orders and non-cancelable supply contracts. The Company is also involved in continuing programs to mitigate the impact of cost increases through identification of sourcing and operating efficiencies. Primary commodity price exposures are newsprint and, to a lesser extent, ink and energy costs.

A $10 per metric ton newsprint price increase would result in an annualized reduction in income from continuing operations before income taxes of approximately $1,927,000 based on expected consumption in 2006, excluding consumption of MNI and TNI. Such prices may also decrease.

SENSITIVITY TO CHANGES IN VALUE

The estimate that follows is intended to measure the maximum potential impact on fair value of fixed rate debt of the Company in one year from adverse changes in market interest rates under normal market conditions. The calculation is not intended to represent the actual loss in fair value that the Company expects to incur. The estimate does not consider favorable changes in market rates. The position included in the calculation is fixed rate debt, the principal amount of which totals $306,000,000 at September 30, 2005.

The estimated maximum potential one-year loss in fair value from a 100 basis point movement in interest rates on market risk sensitive investment instruments outstanding at September 30, 2005, is approximately $10,160,000. There is no impact on reported results from such changes in interest rates.

Changes in the value of interest rate swaps from movements in interest rates are not determinable, due to the number of variables involved in the pricing of such instruments.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Information with respect to this Item is included herein under the caption “Consolidated Financial Statements”.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

In order to ensure that the information that must be disclosed in filings with the Securities and Exchange Commission is recorded, processed, summarized and reported in a timely manner, the Company has disclosure controls and procedures in place. The chief executive officer, Mary E. Junck, and chief financial officer, Carl G. Schmidt, have reviewed and evaluated disclosure controls and procedures as of September 30, 2005, and have concluded that such controls and procedures are effective.

There have been no changes in internal control over financial reporting that have materially affected or are reasonably likely to materially affect such controls, since September 30, 2005.

MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Lee Enterprises, Incorporated (the Company) is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control system is designed to provide reasonable assurance regarding the preparation and fair presentation of the Company’s Consolidated Financial Statements in accordance with generally accepted accounting principles in the United States of America.

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.

Management of the Company assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2005. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework. Based on the assessment and those criteria, we believe that the Company maintained effective internal control over financial reporting as of September 30, 2005.

The Company’s assessment of internal control over financial reporting excludes Pulitzer Inc. (Pulitzer), which was acquired by the Company on June 3, 2005. Pulitzer represents approximately 16.9% of revenue for the year ended September 30, 2005 and 14.1% of assets (excluding goodwill and identified intangible assets of Pulitzer) as of September 30, 2005.

Deloitte & Touche LLP, the Company’s independent registered public accounting firm, issued an attestation report on management’s assessment of the Company’s internal control over financial reporting. Their report appears below.



/s/ Mary E. Junck				/s/ Carl G. Schmidt
Mary E. Junck				Carl G. Schmidt
Chairman, President and Chief Executive Officer December 14, 2005				Vice President, Chief Financial Officer and Treasurer
				December 14, 2005

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders

Lee Enterprises, Incorporated and subsidiaries

Davenport, Iowa

We have audited management’s assessment, included in the accompanying Management Report on Internal Control Over Financial Reporting, that Lee Enterprises, Incorporated and subsidiaries (the Company) maintained effective internal control over financial reporting as of September 30, 2005, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As described in the Management Report on Internal Control Over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Pulitzer Inc., which was acquired on June 3, 2005 and whose financial statements reflect total assets (excluding goodwill and identified intangible assets of Pulitzer) and revenues constituting 14.1% and 16.9%, respectively, of the related consolidated financial statement amounts as of and for the year ended September 30, 2005. Accordingly, our audit did not include the internal control over financial reporting at Pulitzer Inc. 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. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of 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, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel 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 board of 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 the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the 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, management’s assessment that the Company maintained effective internal control over financial reporting as of September 30, 2005, is fairly stated, in all material respects, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2005, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Consolidated Financial Statements as of and for the year ended September 30, 2005 of the Company and our report dated December 14, 2005 expressed an unqualified opinion on those financial statements.

/s/ Deloitte & Touche LLP

Davenport, Iowa

December 14, 2005

ITEM 9B. OTHER INFORMATION.

In connection with its annual performance review process, in November 2005 the Company’s Executive Compensation Committee (ECC) increased the annual salary of Mary E. Junck, Chairman, President and Chief Executive Officer, to $800,000 per year; Carl G. Schmidt, Vice President, Chief Financial Officer and Treasurer, to $450,000 per year; Greg R. Veon, Vice President – Publishing, to $335,000 per year; and Vytenis P. Kuraitis, Vice President – Human Resources, to $234,000 per year. These increases are effective in October 2005.

Under the Company’s Incentive Compensation Program (Incentive Program) Ms. Junck was awarded a performance-based cash bonus of $930,000 and a discretionary bonus of $170,000 for her service in 2005. Mr. Schmidt was awarded a cash bonus of $197,600 for his 2005 service; Mr. Veon – $103,300; Mr. Kuraitis – $100,000; and James W. Hopson, Vice President – Publishing – $57,900. The ECC also awarded discretionary bonuses to the following named executive officers for their performance related to the acquisition of Pulitzer: Mr. Schmidt – $120,000; Mr. Veon – $15,000; and Mr. Kuraitis – $100,000.

For 2006, Ms. Junck is eligible for an annual cash bonus ranging from 0% to 200% of eligible salary with a target of 100%. For 2006, each of the other aforementioned executive officers is eligible for an annual cash bonus ranging from 0% to 113% of eligible salary with a target of 55%. Under the Incentive Program, Ms. Junck’s cash bonus potential is based upon the Company’s achievement of operating cash flow for fiscal 2006 compared to the Company’s annual operating plan (Plan). Bonuses under the Incentive Program for the other named executive officers are based upon their achievement of operating cash flow and revenue for the Company and enterprises related to their scope of responsibility under the Plan, and achievement of individual performance goals established by the chief executive officer.

In November 2005, the ECC granted Ms. Junck, subject to achievement of performance goals, a target award of 50,000 shares of restricted Common Stock (Target Award), each carrying a grant date of November 18, 2005, and which, upon vesting and achievement of the performance goals specified, do not require any payment by Ms. Junck, other than for applicable income taxes due for such awards.

Based on the Company’s change in operating cash flow in 2006 compared to 2005, the Target Award will be subject to adjustment – upward, but not to exceed 120% of the Target Award, or downward, to the extent that all shares awarded may be forfeited – on the first anniversary of the grant date to reflect the achievement of 2006 incentive performance targets established by the ECC (Final Award). The determination of the degree of achievement of the incentive performance targets will be made at the sole discretion of the ECC. Upon determination of the Final Award, Ms. Junck will be entitled to all distributions related to the restricted Common Stock.

The employment of each of the named executive officers is at will.

In November 2005, the Company approved an increase in the annual cash retainer to $40,000 per year from $35,000 per year and an increase in the in-person meeting fee to $2,000 per meeting from $1,000 per meeting for non-employee members of the Board of Directors. These increases are effective in January 2006.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information with respect to this Item, except for certain information included under the caption “Executive Team” in Part I of this Form 10-K, is included in the Company’s Proxy Statement to be filed in January 2006, which is incorporated herein by reference, under the captions “Proposal 1 - Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance”.

The Company has a Code of Business Conduct and Ethics (Code) that applies to all of its employees, including its principal executive officer, chief financial officer and principal financial and accounting officer. The Code is monitored by the Audit Committee of the Company’s Board of Directors and is annually affirmed by its directors and executive officers. The Company maintains a corporate governance page on its website which includes the Code. The corporate governance page can be found at www.lee.net by clicking on “Governance.” 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 the Company from, a provision of the Code will be posted on the Company’s website.

ITEM 11. EXECUTIVE COMPENSATION

Information with respect to this Item is included in the Company’s Proxy Statement to be filed in January 2006, which is incorporated herein by reference, under the captions, “Compensation of Directors” and “Executive Compensation”; provided, however, that the subsection entitled “Executive Compensation – Report of the Executive Compensation Committee of the Board of Directors on Executive Compensation” shall not be deemed to be incorporated by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Certain information with respect to this Item is included in the Company’s Proxy Statement to be filed in January 2006, which is incorporated herein by reference, under the caption “Voting Securities and Principal Holders Thereof”.

Information as of September 30, 2005 with respect to equity compensation plans is as follows:


Plan Category	Number Of Securities To Be Issued Upon Exercise Of Outstanding Options, Warrants And Rights	Weighted-Average Exercise Price Of Outstanding Options, Warrants And Rights		Number Of Securities Remaining Available For Future Issuance

Equity compensation plans approved by stockholders ⁽¹⁾⁽²⁾	981,218	$	37.76	480,806

(1)	1990 Long-Term Incentive Plan.

(2)

Excludes purchase rights accruing under the Company’s Employee Stock Purchase Plan (ESPP), which has a stockholder approved reserve of 672,000 shares. Under the ESPP, each eligible employee may purchase shares up to 5% of base compensation not to exceed $25,000 on the last business day of April each year at a purchase price per share equal to 85% of the lower of the average of the high and low market price on either the first or last business day of the plan year. Also, excludes purchase rights accruing under the Company’s Supplemental Employee Stock Purchase Plan (SPP), which has, as of September 30, 2005 376,900 shares available for issuance under the rules of the New York Stock Exchange. Under the SPP, each eligible employee of PD LLC and STL Distribution Services LLC may purchase shares up to 10% of base compensation on the last business day of each calendar quarter during the offering period at a purchase price per share equal to 85% of the market price on last business day of each calendar quarter during the offering period.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Vertis, Inc. (Vertis) provides the Company, in the normal course of business, with an Internet subscription service that allows access to advertising prototypes. Fees paid to Vertis totaled $104,000 in 2005, $95,000 in 2004, and $112,000 in 2003. A director of the Company, Herbert W. Moloney III, is a former officer of Vertis. In 2003, Vertis acquired The Newspaper Network, Inc. (TNN), which is in the business of placing advertising, including advertising in the Company’s newspapers, for its clients. TNN customarily receives fees from its clients for such services, but receives no compensation from the Company.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Information with respect to this Item is included in the Company’s Proxy Statement to be filed in January 2006, which is incorporated herein by reference, under the caption “Relationship with Independent Registered Public Accounting Firm”.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

The following documents are filed as part of this Annual Report on Form 10-K:

FINANCIAL STATEMENTS

Consolidated Balance Sheets – September 30, 2005 and 2004

Consolidated Statements of Income and Comprehensive Income – Years ended September 30, 2005, 2004 and 2003

Consolidated Statements of Stockholders’ Equity – Years ended September 30, 2005, 2004 and 2003

Consolidated Statements of Cash Flows – Years ended September 30, 2005, 2004 and 2003

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

FINANCIAL STATEMENT SCHEDULES

All schedules have been omitted as not required, not applicable, not deemed material or because the information is included in the Notes to Consolidated Financial Statements.

EXHIBITS

See Exhibit Index.

REPORTS ON FORM 8-K

The following reports on Form 8-K were filed during the three months ended September 30, 2005:


Date of Report	Item	Disclosure(s)

July 22, 2005	2	Earnings for the three months and nine months ended June 30, 2005 and revenue statistics for the month of June 2005

September 27, 2005	5	Resignation of Michael E. Phelps

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 14^th day of December 2005.


LEE ENTERPRISES, INCORPORATED

/s/ Mary E. Junck				/s/ Carl G. Schmidt
Mary E. Junck				Carl G. Schmidt
Chairman, President and Chief Executive Officer				Vice President, Chief Financial Officer and Treasurer (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 14^th day of December 2005.


Signature

/s/ Nancy S. Donovan				Director
Nancy S. Donovan

/s/ Mary E. Junck				Chairman, President, and Chief
Mary E. Junck				Executive Officer, and Director

/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/ Gordon D. Prichett				Director
Gordon D. Prichett

/s/ Gregory P. Schermer				Vice President - Interactive Media
Gregory P. Schermer				and Corporate Counsel, and Director

/s/ Mark Vittert				Director
Mark Vittert

EXHIBIT INDEX

Exhibits marked with an asterisk (*) are incorporated by reference to documents previously filed by the Company with the Securities and Exchange Commission, 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

2.1 *		Agreement and Plan of Merger dated as of January 29, 2005 among Lee Enterprises, Incorporated, LP Acquisition Corp. and Pulitzer Inc. (Exhibit 2.1 to Form 8-K filed on February 3, 2005).

2.2 *		Acquisition Agreement by and among Lee Enterprises, Incorporated, Howard Publications, Inc., Howard Energy Co., Inc. and the stockholders of Howard Publications, Inc. named therein dated February 11, 2002 and First Amendment thereto dated March 29, 2002 (Exhibit 2.1 to Form 8-K filed on April 2, 2002)

3.1.1a *		Restated Certificate of Incorporation of Lee Enterprises, Incorporated as of November 14, 2002 (Exhibit 3.1 to Annual Report on Form 10-K for the Fiscal Year Ended September 30, 2002)

3.1.2a *		Certificate of Amendment to Restated Certificate of Incorporation of Lee Enterprises, Incorporated as of March 3, 2005 (Exhibit 3.1 to Form 10-Q for the Fiscal Quarter Ended March 31, 2005)

3.2 *		Lee Enterprises, Incorporated Amended and Restated By-Laws as of January 23, 2002 (Exhibit 3 to Form 10-Q for Fiscal Quarter Ended March 31, 2002)

4 *		The description of the Company’s preferred stock purchase rights contained in its report on Form 8-K, filed with the Commission on May 7, 1998, and related Rights Agreement, dated as of May 7, 1998, between Lee Enterprises, Incorporated and The First Chicago Trust Company of New York, which includes the 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, (Exhibit 1.1 to Form 8-A filed on May 26, 1998 [File No. 1-6227]).

10.1 *		Credit Agreement, dated June 3, 2005, by and among Lee Enterprises, Incorporated, the lenders from time to time party thereto, Deutsche Bank Trust Company Americas, as Administrative Agent, Deutsche Bank Securities Inc. and SunTrust Capital Markets, Inc., as Joint Lead Arrangers, Deutsche Bank Securities Inc., as Book Running Manager, SunTrust Bank, as Syndication Agent and Bank of America, N.A., The Bank of New York and The Bank of Tokyo-Mitsubishi, Ltd., Chicago Branch, as Co-Documentation Agents (Exhibit 10.1 to Form 8-K filed on June 9, 2005).

10.2 *		Amended and Restated Agreement and Plan of Merger by and among Pulitzer Publishing Company, Pulitzer Inc. and Hearst-Argyle Television, Inc. dated as of May 25, 1998 (Exhibit 10.1 to Form 10-Q for the Fiscal Quarter Ended June 30, 2005)

10.3 *		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)

10.4 *		Partnership Agreement, dated December 22, 1988, between Star Publishing Company and Citizen Publishing Company (Exhibit 10.3 to Form 10-Q for the Fiscal Quarter Ended June 30, 2005)


Number		Description

10.5 *		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)

10.6 *		Joint Venture Agreement, dated as of May 1, 2000, among Pulitzer Inc., Pulitzer Technologies, Inc., The Herald Company, Inc. and St. Louis Post-Dispatch LLC (Exhibit 10.4 to Form 10-Q for the Fiscal Quarter Ended June 30, 2005)

10.7 *		Operating Agreement of St. Louis Post-Dispatch LLC, dated as of May 1, 2000, as amended on June 1, 2001 (Exhibit 10.5 to Form 10-Q for the Fiscal Quarter Ended June 30, 2005)

10.8 *		Indemnity Agreement, dated as of May 1, 2000, between The Herald Company, Inc. and Pulitzer Inc. (Exhibit 10.6 to Form 10-Q for the Fiscal Quarter Ended June 30, 2005)

10.9 *		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)

10.10 *		St. Louis Post-Dispatch LLC Note Agreement, dated as of May 1, 2000, as amended on November 23, 2004 (Exhibit 10.8 to Form 10-Q for the Fiscal Quarter Ended June 30, 2005)

10.11 *		Pulitzer Inc. Guaranty Agreement, dated as of May 1, 2000 as amended on August 7, 2000, November 23, 2004 and June 3, 2005 (Exhibit 10.9 to Form 10-Q for the Fiscal Quarter Ended June 30, 2005)

10.12 *		Non-Confidentiality Agreement, dated as of May 1, 2000 (Exhibit 10.10 to Form 10-Q for the Fiscal Quarter Ended June 30, 2005)

10.13 +*		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)

10.14 +*		Lee Enterprises, Incorporated 1990 Long-Term Incentive Plan effective as of October 1, 1999, as amended, restated and extended on January 26, 1999 (Exhibit A to Schedule 14A Definitive Proxy Statement for 1998)

10.15.1a +		Forms of related Incentive Stock Option Agreement, Non-Qualified Stock Option Agreement, Accelerated Ownership Non-Qualified Stock Option Agreement and Restricted Stock Option Agreement related to Lee Enterprises, Incorporated 1990 Long-Term Incentive Plan effective as of October 1, 1999, as amended, restated and extended on January 26, 1999

10.15.2a +*		Form of Key Executive Restricted Stock Agreement related to Lee Enterprises, Incorporated 1990 Long-Term Incentive Plan (Exhibit 10.2 to Form 8-K filed on November 26, 2004)

10.16 +*		Lee Enterprises, Incorporated 1996 Stock Plan for Non-Employee Directors, effective February 1, 1996 (Exhibit C to Schedule 14A Definitive Proxy Statement for 1996)

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