EX-99.1 2 earningsrelease2011q2.htm EARNINGS RELEASE WebFilings | EDGAR view
 

Exhibit 99.1 - Earnings Release – Second fiscal quarter ended March 27, 2011.
201 N. Harrison St.
Davenport, IA 52801
www.lee.net
 
NEWS RELEASE
 
Lee Enterprises reports Q2 results
 
DAVENPORT, Iowa (May 2, 2011) — Lee Enterprises, Incorporated (NYSE: LEE) reported today that for its second fiscal quarter ended March 27, 2011, digital advertising sales increased 26.3 percent compared with a year ago, while total revenue declined 3.8 percent, within the range forecast. Cash costs decreased 2.1 percent, and operating cash flow(1) decreased 11.6 percent.
 
Earnings per diluted common share declined from 7 cents a year ago to a loss of 3 cents. Excluding non-cash curtailment gains and other unusual matters in both years, adjusted earnings per diluted common share(2) declined from 1 cent a year ago to a loss of 5 cents.
 
Mary Junck, chairman and chief executive officer, said: "While the upward progress in the overall business climate cooled noticeably this past quarter, we expect year over year revenue comparisons to improve again as economic conditions in our markets also improve. We believe results for the March quarter were adversely impacted by the timing of the Easter holiday, as we have historically experienced an increase in advertising revenue in the weeks preceding that holiday."
 
SECOND QUARTER OPERATING RESULTS
 
Operating revenue for the quarter totaled $178.7 million, a decline of 3.8 percent compared with a year ago. Same property revenue, which was impacted by the sale of a small book publishing business in the quarter, declined 3.6 percent. Combined print and digital advertising revenue decreased 5.0 percent to $124.1 million, with retail advertising down 5.3 percent, national down 14.9 percent and classified down 3.1 percent. Combined print and digital classified employment revenue increased 8.4 percent. Automotive increased 3.2 percent, real estate decreased 23.4 percent and other classified decreased 3.4 percent. Digital advertising revenue on a stand-alone basis increased 26.3 percent to $14.3 million, representing 11.5 percent of total advertising revenue. Digital retail advertising revenue increased 43.8 percent and digital classified advertising decreased 0.7 percent.
 
Lee's digital sites attracted 25.0 million unique visitors in the month of March 2011, an increase of 54.1 percent from a year ago. Mobile page views in March increased 253 percent to 16.0 million. Circulation revenue decreased 0.4 percent.
 
Operating expenses, excluding depreciation and amortization, decreased 2.1 percent. Compensation declined 3.5 percent, with the average number of full-time equivalent employees down 3.8 percent. Newsprint and ink expense increased 13.7 percent, a result of higher prices partially offset by a reduction in newsprint volume of 4.1 percent. Other operating expenses decreased 3.9 percent. Despite the increased cost of newsprint, operating expenses, excluding depreciation, amortization and unusual matters, are expected to decrease approximately 2 percent in 2011, which is improved from previous forecasts.
 
Operating cash flow decreased 11.6 percent from a year ago to $29.4 million. Operating cash flow margin(1) decreased to 16.5 percent from 17.9 percent a year ago. Including equity in earnings of associated companies, depreciation and amortization, as well as unusual matters in both years, operating income totaled $14.1 million, compared with $26.7 million a year ago, due primarily to a smaller curtailment gain in the current year quarter. Operating income margin was 7.9 percent in the current year quarter. Non-operating expenses, primarily interest expense and debt financing costs, declined $2.2 million, due to lower debt

1

 

balances. Loss attributable to Lee Enterprises, Incorporated for the quarter totaled $1.5 million, compared with income of $3.0 million a year ago.
 
CURTAILMENT GAIN
 
A $2.0 million pretax non-cash curtailment gain resulted from changes during the quarter to postretirement medical plans for certain retirees. In addition, the plan changes reduced benefit liabilities by $3.0 million.
 
ADJUSTED EARNINGS AND EPS FOR THE QUARTER
 
Unusual matters affecting year-over-year comparisons consist primarily of curtailment gains in both years. The following table summarizes the impact from unusual matters on income attributable to Lee Enterprises, Incorporated and earnings per diluted common share. Per share amounts may not add due to rounding.
 
13 Weeks Ended
 
March 27
 
 
March 28
 
 
2011
 
 
2010
 
(Thousands of Dollars, Except Per Share Data)
Amount
 
 
Per Share
 
 
Amount
 
 
Per Share
 
 
 
 
 
 
 
 
 
Income (loss) attributable to Lee Enterprises, Incorporated, as reported
(1,472
)
 
(0.03
)
 
2,991
 
 
0.07
 
Adjustments(3):
 
 
 
 
 
 
 
Curtailment gains
(1,991
)
 
 
 
(13,882
)
 
 
Impairment of goodwill and other assets, including TNI Partners
 
 
 
 
3,290
 
 
 
Other, net
477
 
 
 
 
306
 
 
 
 
(1,514
)
 
 
 
(10,286
)
 
 
Income tax effect of adjustments, net, and other unusual tax matters
845
 
 
 
 
7,925
 
 
 
 
(669
)
 
(0.01
)
 
(2,361
)
 
(0.05
)
Income (loss) attributable to Lee Enterprises, Incorporated, as adjusted(3)
(2,141
)
 
(0.05
)
 
630
 
 
0.01
 
 
 

YEAR TO DATE OPERATING RESULTS
 
Operating revenue for the six months totaled $386.4 million, a decline of 2.3 percent compared with a year ago. Same property revenue decreased 2.2 percent. Combined print and digital advertising revenue decreased 3.2 percent to $275.8 million, with retail advertising down 3.1 percent, national down 9.9 percent and classified down 2.3 percent. Combined print and digital classified employment revenue increased 9.5 percent. Automotive increased 3.8 percent, real estate decreased 21.9 percent and other classified decreased 2.4 percent. Digital advertising revenue on a stand-alone basis increased 31.9 percent to $29.0 million, representing 10.5 percent of total advertising revenue. Digital retail advertising revenue increased 46.4 percent and digital classified advertising increased 3.1 percent. Circulation revenue increased 0.2 percent.
 
Operating expenses, excluding depreciation and amortization, decreased 2.0 percent. Compensation declined 4.3 percent, with the average number of full-time equivalent employees down 3.5 percent. Newsprint and ink expense increased 18.5 percent, a result of higher prices partially offset by a reduction in newsprint volume of 3.4 percent. Other operating expenses decreased 3.4 percent.
 
Operating cash flow decreased 3.4 percent from a year ago to $83.5 million. Operating cash flow margin(1) decreased to 21.6 percent from 21.9 percent a year ago. Including equity in earnings of associated companies, depreciation and amortization, as well as unusual matters in both years, operating income totaled $63.3 million, compared with $94.5 million a year ago, due to a smaller curtailment gain in the current year. Operating income margin was 16.4 percent in the current year. Non-operating expenses, primarily interest expense and debt financing costs, declined $8.2 million, due to lower debt balances. Income attributable to Lee Enterprises, Incorporated totaled $17.5 million, compared with $30.9 million a year ago.
 

2

 

 
 
 
ADJUSTED EARNINGS AND EPS FOR YEAR TO DATE
 
Unusual matters affecting year-over-year comparisons consist primarily of curtailment gains in both years. The following table summarizes the impact from unusual matters on income attributable to Lee Enterprises, Incorporated and earnings per diluted common share. Per share amounts may not add due to rounding.
 
26 Weeks Ended
 
March 27
 
 
March 28
 
 
2011
 
 
2010
 
(Thousands of Dollars, Except Per Share Data)
Amount
 
 
Per Share
 
 
Amount
 
 
Per Share
 
 
 
 
 
 
 
 
 
Income attributable to Lee Enterprises, Incorporated, as reported
17,471
 
 
0.39
 
 
30,897
 
 
0.69
 
Adjustments(3):
 
 
 
 
 
 
 
Curtailment gains
(12,163
)
 
 
 
(45,012
)
 
 
Impairment of goodwill and other assets, including TNI Partners
 
 
 
 
3,290
 
 
 
Other, net
791
 
 
 
 
1,095
 
 
 
 
(11,372
)
 
 
 
(40,627
)
 
 
Income tax effect of adjustments, net, and other unusual tax matters
4,762
 
 
 
 
20,413
 
 
 
 
(6,610
)
 
(0.15
)
 
(20,214
)
 
(0.45
)
Income attributable to Lee Enterprises, Incorporated, as adjusted(3)
10,861
 
 
0.24
 
 
10,683
 
 
0.24
 
 
 
 

DEBT AND FREE CASH FLOW(4)
 
Debt was reduced $26.2 million in the quarter and $55.8 million year to date. Debt, net of changes in cash, has been reduced $108.9 million in the last 12 months.
 
Carl Schmidt, vice president, chief financial officer and treasurer, said Lee remains in compliance with financial covenants and expects to continue repaying debt primarily with ongoing cash flow. Liquidity(5) at the end of the quarter totaled $116.7 million, which is an increase of $12.9 million from December 2010 and compares to $96.0 million of debt repayments due in the next four quarters.
 
Free cash flow totaled $11.3 million for the quarter, a 36.5 percent decrease from $17.8 million a year ago. The timing of income tax payments adversely impacted free cash flow in the current year quarter. Free cash flow in the last 12 months totaled $104.1 million.
 
ABOUT LEE
  
Lee Enterprises is the leading provider of local news and information, and a major platform for advertising, in the markets we serve, with 49 daily newspapers and a joint interest in four others, rapidly growing digital products and nearly 300 specialty publications in 23 states. Lee's newspapers have circulation of 1.4 million daily and 1.7 million Sunday, reaching nearly four million readers in print alone. Lee's digital sites attracted 25 million unique visitors in March 2011. Lee's markets include St. Louis, Mo.; Lincoln, Neb.; Madison, Wis.; Davenport, Iowa; Billings, Mont.; Bloomington, Ill.; and Tucson, Ariz. Lee Common Stock is traded on the New York Stock Exchange under the symbol LEE. For more information about Lee, please visit www.lee.net.
 
 
FORWARD-LOOKING STATEMENTS — The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This news release contains information that may be deemed forward-looking that is based largely on Lee Enterprises,

3

 

Incorporated’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, which in some instances are beyond its control, are the Company’s ability to generate cash flows and maintain liquidity sufficient to service its debt, and comply with or obtain amendments or waivers of the financial covenants contained in its credit facilities, if necessary. Other risks and uncertainties include the impact and duration of continuing adverse economic conditions, changes in advertising demand, potential changes in newsprint and other commodity prices, energy costs, interest rates and the availability of credit due to instability in the credit markets, labor costs, legislative and regulatory rulings, difficulties in achieving planned expense reductions, maintaining employee and customer relationships, increased capital costs, competition and other risks detailed from time to time in the Company’s publicly filed documents, including the Company Annual Report on Form 10-K for the year ended September 26, 2010. Any statements that are not statements of historical fact (including statements containing the words “may,” “will,” “would,” “could,” “believes,” “expects,” “anticipates,” “intends,” “plans,” “projects,” “considers” and similar expressions) generally should be considered forward-looking statements. Readers are cautioned not to place undue reliance on such forward-looking statements, which are made as of the date of this release. The Company does not undertake to publicly update or revise its forward-looking statements.
 
Contact: dan.hayes@lee.net, (563) 383-2100
 
 
 
 

4

 

LEE ENTERPRISES, INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
13 Weeks Ended
 
 
26 Weeks Ended
 
(Thousands of Dollars and Shares, Except Per Share Data)
March 27 2011
 
 
March 28 2010
 
 
Percent Change
 
 
March 27 2011
 
 
March 28 2010
 
 
Percent Change
 
 
 
 
 
 
 
 
 
 
 
 
 
Advertising revenue:
 
 
 
 
 
 
 
 
 
 
 
Retail
67,512
 
 
73,536
 
 
(8.2
)
 
159,003
 
 
168,315
 
 
(5.5
)
Classified:
 
 
 
 
 
 
 
 
 
 
 
Daily newspapers:
 
 
 
 
 
 
 
 
 
 
 
Employment
5,613
 
 
5,110
 
 
9.9
 
 
10,857
 
 
9,899
 
 
9.7
 
Automotive
5,735
 
 
5,879
 
 
(2.5
)
 
11,692
 
 
12,284
 
 
(4.8
)
Real estate
4,394
 
 
5,764
 
 
(23.8
)
 
9,390
 
 
12,135
 
 
(22.6
)
All other
10,120
 
 
10,512
 
 
(3.7
)
 
21,209
 
 
21,691
 
 
(2.2
)
Other publications
6,331
 
 
6,649
 
 
(4.8
)
 
12,732
 
 
13,248
 
 
(3.9
)
Total classified
32,193
 
 
33,914
 
 
(5.1
)
 
65,880
 
 
69,257
 
 
(4.9
)
Digital
14,288
 
 
11,314
 
 
26.3
 
 
28,963
 
 
21,963
 
 
31.9
 
National
6,758
 
 
8,734
 
 
(22.6
)
 
15,761
 
 
19,379
 
 
(18.7
)
Niche publications
3,302
 
 
3,065
 
 
7.7
 
 
6,214
 
 
6,051
 
 
2.7
 
Total advertising revenue
124,053
 
 
130,563
 
 
(5.0
)
 
275,821
 
 
284,965
 
 
(3.2
)
Circulation
44,821
 
 
45,018
 
 
(0.4
)
 
90,298
 
 
90,133
 
 
0.2
 
Commercial printing
2,891
 
 
2,696
 
 
7.2
 
 
5,943
 
 
5,627
 
 
5.6
 
Digital services and other
6,961
 
 
7,467
 
 
(6.8
)
 
14,331
 
 
14,857
 
 
(3.5
)
Total operating revenue
178,726
 
 
185,744
 
 
(3.8
)
 
386,393
 
 
395,582
 
 
(2.3
)
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
Compensation
76,529
 
 
79,298
 
 
(3.5
)
 
154,549
 
 
161,433
 
 
(4.3
)
Newsprint and ink
14,849
 
 
13,061
 
 
13.7
 
 
30,523
 
 
25,754
 
 
18.5
 
Other operating expenses
57,476
 
 
59,793
 
 
(3.9
)
 
117,144
 
 
121,270
 
 
(3.4
)
Workforce adjustments
443
 
 
290
 
 
52.8
 
 
635
 
 
687
 
 
(7.6
)
 
149,297
 
 
152,442
 
 
(2.1
)
 
302,851
 
 
309,144
 
 
(2.0
)
Operating cash flow
29,429
 
 
33,302
 
 
(11.6
)
 
83,542
 
 
86,438
 
 
(3.4
)
Depreciation
7,293
 
 
7,172
 
 
1.7
 
 
13,816
 
 
14,535
 
 
(4.9
)
Amortization
11,201
 
 
11,307
 
 
(0.9
)
 
22,484
 
 
22,627
 
 
(0.6
)
Impairment of goodwill and other assets
 
 
3,290
 
 
NM
 
 
 
 
3,290
 
 
NM
 
Curtailment gains
1,991
 
 
13,882
 
 
(85.7
)
 
12,163
 
 
45,012
 
 
(73.0
)
Equity in earnings of associated companies
1,148
 
 
1,277
 
 
(10.1
)
 
3,852
 
 
3,466
 
 
11.1
 
Operating income
14,074
 
 
26,692
 
 
(47.3
)
 
63,257
 
 
94,464
 
 
(33.0
)
 

5

 

CONSOLIDATED STATEMENTS OF OPERATIONS, continued
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13 Weeks Ended
 
 
26 Weeks Ended
 
(Thousands of Dollars and Shares, Except Per Share Data)
March 27 2011
 
 
March 28 2010
 
 
Percent Change
 
 
March 27 2011
 
 
March 28 2010
 
 
Percent Change
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-operating income (expense):
 
 
 
 
 
 
 
 
 
 
 
Financial income
18
 
 
146
 
 
(87.7
)
 
77
 
 
199
 
 
(61.3
)
Financial expense
(13,140
)
 
(15,643
)
 
(16.0
)
 
(26,578
)
 
(35,448
)
 
(25.0
)
Debt financing costs
(1,895
)
 
(1,972
)
 
(3.9
)
 
(3,861
)
 
(3,967
)
 
(2.7
)
Other, net
(231
)
 
 
 
NM
 
 
(684
)
 
 
 
NM
 
 
(15,248
)
 
(17,469
)
 
(12.7
)
 
(31,046
)
 
(39,216
)
 
(20.8
)
Income (loss) before income taxes
(1,174
)
 
9,223
 
 
NM
 
 
32,211
 
 
55,248
 
 
(41.7
)
Income tax expense
275
 
 
6,241
 
 
(95.6
)
 
14,682
 
 
24,309
 
 
(39.6
)
Net income (loss)
(1,449
)
 
2,982
 
 
NM
 
 
17,529
 
 
30,939
 
 
(43.3
)
Net (income) loss attributable to non-controlling interests
(23
)
 
9
 
 
NM
 
 
(58
)
 
(42
)
 
38.1
 
Income (loss) attributable to Lee Enterprises, Incorporated
(1,472
)
 
2,991
 
 
NM
 
 
17,471
 
 
30,897
 
 
(43.5
)
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per common share:
 
 
 
 
 
 
 
 
 
 
 
Basic
(0.03
)
 
0.07
 
 
NM
 
 
0.39
 
 
0.69
 
 
(43.5
)
Diluted
(0.03
)
 
0.07
 
 
NM
 
 
0.39
 
 
0.69
 
 
(43.5
)
 
 
 
 
 
 
 
 
 
 
 
 
Average common shares:
 
 
 
 
 
 
 
 
 
 
 
Basic
44,855
 
 
44,563
 
 
 
 
44,766
 
 
44,547
 
 
 
Diluted
44,855
 
 
44,957
 
 
 
 
44,768
 
 
44,860
 
 
 
 

 
FREE CASH FLOW
 
 
 
13 Weeks Ended
 
 
 
26 Weeks Ended
 
 
52 Weeks Ended
 
(Thousands of Dollars)
March 27 2011
 
 
March 28 2010
 
 
March 27 2011
 
 
March 28 2010
 
 
March 27 2011
 
 
 
 
 
 
 
 
 
 
 
Operating income
14,074
 
 
26,692
 
 
63,257
 
 
94,464
 
 
115,985
 
Depreciation and amortization
18,798
 
 
18,782
 
 
36,907
 
 
37,710
 
 
73,532
 
Impairment of goodwill and other assets
 
 
3,290
 
 
 
 
3,290
 
 
 
Curtailment gains
(1,991
)
 
(13,882
)
 
(12,163
)
 
(45,012
)
 
(12,163
)
Stock compensation
253
 
 
462
 
 
771
 
 
1,147
 
 
1,601
 
Cash interest expense
(13,277
)
 
(15,799
)
 
(26,851
)
 
(35,759
)
 
(54,830
)
Debt financing costs paid
(22
)
 
 
 
(115
)
 
 
 
(668
)
Financial income
18
 
 
146
 
 
77
 
 
199
 
 
289
 
Cash income tax benefit (paid)
(5,376
)
 
63
 
 
(7,171
)
 
1,334
 
 
(12,258
)
Non-controlling interests
(23
)
 
9
 
 
(58
)
 
(42
)
 
(89
)
Capital expenditures
(1,132
)
 
(1,928
)
 
(2,238
)
 
(4,796
)
 
(7,276
)
Total
11,322
 
 
17,835
 
 
52,416
 
 
52,535
 
 
104,123
 

6

 

SELECTED COMBINED PRINT AND DIGITAL ADVERTISING REVENUE
 
13 Weeks Ended
 
 
26 Weeks Ended
 
(Thousands of Dollars)
March 27 2011
 
 
March 28 2010
 
 
Percent Change
 
 
March 27 2011
 
 
March 28 2010
 
 
Percent Change
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail
72,918
 
 
77,013
 
 
(5.3
)
 
169,764
 
 
175,125
 
 
(3.1
)
Classified:
 
 
 
 
 
 
 
 
 
 
 
Employment
9,203
 
 
8,493
 
 
8.4
 
 
17,849
 
 
16,301
 
 
9.5
 
Automotive
10,326
 
 
10,002
 
 
3.2
 
 
21,142
 
 
20,369
 
 
3.8
 
Real estate
5,909
 
 
7,717
 
 
(23.4
)
 
12,631
 
 
16,171
 
 
(21.9
)
Other
14,588
 
 
15,097
 
 
(3.4
)
 
30,113
 
 
30,844
 
 
(2.4
)
Total classified
40,026
 
 
41,309
 
 
(3.1
)
 
81,735
 
 
83,685
 
 
(2.3
)
National
7,807
 
 
9,174
 
 
(14.9
)
 
18,107
 
 
20,103
 
 
(9.9
)
 
REVENUE BY REGION
 
13 Weeks Ended
 
 
26 Weeks Ended
 
(Thousands of Dollars)
March 27 2011
 
 
March 28 2010
 
 
Percent Change
 
 
March 27 2011
 
 
March 28 2010
 
 
Percent Change
 
 
 
 
 
 
 
 
 
 
 
 
 
Midwest
106,274
 
 
109,892
 
 
(3.3
)
 
232,205
 
 
236,268
 
 
(1.7
)
Mountain West
33,723
 
 
34,630
 
 
(2.6
)
 
72,767
 
 
74,340
 
 
(2.1
)
West
20,349
 
 
22,440
 
 
(9.3
)
 
44,149
 
 
47,392
 
 
(6.8
)
East/Other
18,380
 
 
18,782
 
 
(2.1
)
 
37,272
 
 
37,582
 
 
(0.8
)
Total
178,726
 
 
185,744
 
 
(3.8
)
 
386,393
 
 
395,582
 
 
(2.3
)
 
DAILY NEWSPAPER ADVERTISING VOLUME
 
13 Weeks Ended
 
 
26 Weeks Ended
 
(Thousands of Inches)
March 27 2011
 
 
March 28 2010
 
 
Percent Change
 
 
March 27 2011
 
 
March 28 2010
 
 
Percent Change
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail
2,336
 
 
2,380
 
 
(1.8
)
 
5,257
 
 
5,240
 
 
0.3
 
Classified
2,607
 
 
2,555
 
 
2.1
 
 
5,301
 
 
5,263
 
 
0.7
 
National
93
 
 
119
 
 
(22.3
)
 
209
 
 
271
 
 
(22.8
)
Total
5,036
 
 
5,054
 
 
(0.3
)
 
10,766
 
 
10,774
 
 
(0.1
)
 
SELECTED BALANCE SHEET INFORMATION
(Thousands of Dollars)
March 27 2011
 
 
March 28 2010
 
 
 
 
 
Cash
24,897
 
 
20,020
 
Restricted cash and investments
5,101
 
 
9,373
 
Debt (Principal Amount)
1,025,760
 
 
1,134,031
 

7

 

SELECTED STATISTICAL INFORMATION
 
13 Weeks Ended
 
 
26 Weeks Ended
 
 
March 27 2011
 
 
March 28 2010
 
 
Percent Change
 
 
March 27 2011
 
 
March 28 2010
 
 
Percent Change
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures (Thousands of Dollars)
1,132
 
 
1,928
 
 
(41.3
)
 
2,238
 
 
4,796
 
 
(53.3
)
Newsprint volume (Tonnes)
21,210
 
 
22,120
 
 
(4.1
)
 
44,011
 
 
45,574
 
 
(3.4
)
Average full-time equivalent employees
5,913
 
 
6,149
 
 
(3.8
)
 
6,006
 
 
6,224
 
 
(3.5
)
 
NOTES:
(1)
Operating cash flow, which is defined as operating income before depreciation, amortization, impairment charges, curtailment gains, and equity in earnings of associated companies, and operating cash flow margin (operating cash flow divided by operating revenue) are non-GAAP (Generally Accepted Accounting Principles) financial measures. Reconciliations of operating cash flow to operating income, the most directly comparable GAAP measure, are included in a table accompanying this release.
 
 
 
No non-GAAP financial measure should be considered as a substitute for any related GAAP financial measure. However, the company believes the use of non-GAAP financial measures provides meaningful supplemental information with which to evaluate its financial performance, or assist in forecasting and analyzing future periods. The company also believes such non-GAAP financial measures are alternative indicators of performance used by investors, lenders, rating agencies and financial analysts to estimate the value of a publishing business and its ability to meet debt service requirements.
 
 
(2)
Adjusted net income (loss) and adjusted earnings (loss) per common share, which are defined as income (loss) attributable to Lee Enterprises, Incorporated, and earnings (loss) per common share adjusted to exclude both unusual matters and those of a substantially non-recurring nature, are non-GAAP financial measures. See (1) above. Reconciliations of adjusted net income (loss) and adjusted earnings (loss) per common share to income (loss) attributable to Lee Enterprises, Incorporated, and earnings (loss) per common share are included in tables accompanying this release.
 
 
 
(3)
In 2010 and 2009, adjusted earnings and adjusted earnings per common share included adjustments to remove debt financing costs, due to significant debt financing costs charged to expense in 2009. 2011 and 2010 debt financing costs do not contain any unusual comparative differences. Accordingly, this adjustment has been removed. As a result, 2010 adjusted earnings and adjusted earnings per common share will differ from amounts previously reported.
 
 
(4)
Free cash flow, which is defined as operating income, plus depreciation and amortization, impairment charges, stock compensation, financial income and cash income tax benefit, minus curtailment gains, financial expense (exclusive of non-cash amortization and accretion), cash income taxes, capital expenditures and minority interest, is a non-GAAP financial measure. See (1) above. Reconciliations of free cash flow to operating income, the most directly comparable GAAP measure, are included in a table accompanying this release. Changes in working capital are excluded.
 
 
(5)
Liquidity is defined as the sum of cash, restricted cash and revolving credit facility availability.
 
 
(6)
Certain amounts as previously reported have been reclassified to conform with the current period presentation. The prior period has been adjusted for comparative purposes, and the reclassifications have no impact on earnings.