Lee Enterprises, Incorporated Annual Report 2005

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FY2005 Annual Report · Lee Enterprises, Incorporated

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2005 ANNUAL REPORT

A LANDMARK YEAR

58 intensely local

daily newspapers

with fast-growing

online sites,

plus more than 300

weeklies and specialty

publications, in 23 states

Newspaper markets

Other primary markets

Lee Enterprises is a premier
publisher of newspapers in
midsize markets, with 52 dailies
and a joint interest in six others,
a rapidly growing online business
and more than 300 weekly
newspapers and specialty
publications in 23 states. Our
newspapers have circulation of
1.7 million daily and 1.9 million
Sunday, reaching more
than four million readers
every day. Our online
sites reach more than two
million people, and our
weekly publications have
distribution of more than 4.5 million households.
Our operations include such diverse markets as Napa, California;
Bloomington, Illinois; Billings, Montana; Lincoln, Nebraska; Madison, Wisconsin; and St. Louis, Missouri.
Lee is based in Davenport, Iowa, and our stock is traded on the New York Stock Exchange under the
symbol LEE. For more information about Lee, please visit www.lee.net.

Other Information

Corporate Office
Lee Enterprises, Incorporated
201 N. Harrison St., Suite 600
Davenport, IA 52801-1939
(563) 383-2100

Securities Market
New York Stock Exchange
Ticker Symbol: LEE

Shareowner Services
Concerning transfer of shares, lost certificates
or changes of address, please contact
the Transfer Agent and Registrar:
Shareowner Services
Wells Fargo Bank Minnesota, N.A.
161 N. Concord Exchange
South St. Paul, MN
55075-1139
(800) 468-9716
www.wellsfargo.com/shareownerservices

Annual Meeting
The annual meeting of stockholders will
take place Wednesday, February 22, 2006,
at 9:00 a.m. at the
Figge Art Museum
225 W. 2nd St., Davenport, IA 52801

Online Information
www.lee.net provides a wide variety of information
about Lee Enterprises, including news releases,
Securities and Exchange Commission filings,
performance measures, annual reports, corporate
governance documents, newspaper profiles and online
links to our daily newspapers. You also may sign up for
e-mail notification of SEC filings and news releases.

General Counsel
Lane & Waterman LLP
220 N. Main St., Suite 600
Davenport, IA 52801-1987

Independent Registered
Public Accounting Firm
Deloitte & Touche LLP
Northwest Bank Building
101 W. Second St.
Davenport, IA 52801-1813

Career Opportunities
Lee Enterprises offers outstanding career opportunities
in journalism, advertising, sales & marketing, circulation,
interactive media, information systems, production,
finance and human resources. Lee is an equal
opportunity employer. Current openings are listed at
www.l ee.net/careers

Continuing Operations

860.9

Operating
Revenue
Millions of Dollars

647.3

683.3

518.6

427.0

Lee Enterprises 2005 Annual Report 1

Financial Highlights

Lee Enterprises, Incorporated and Subsidiaries

(Thousands, Except Per Common Share Data)

2004

2005
(1)

2001

2002

2003

2004

2005

For The Year Ended September 30

Operating revenue . . . . . . . . . . . . . . . . . . .

683,324

$ 860,859

Operating
Income
Millions of Dollars

137.7

118.4

84.3

167.8

(2)
Operating cash flow . . . . . . . . . . . . . . . . .

146.6

Operating income . . . . . . . . . . . . . . . . . . .

Income from continuing operations . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . .

Per Common Share (Diluted)

186,241

146,554

86,469

86,071

216,269

167,844

76,878

Income from continuing operations . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . .

Dividends . . . . . . . . . . . . . . . . . . . . . . . . . .

1.92

1.91

0.72

1.70

(4)

1.70

0.72

2001

2002

2003

2004

2005

At Year End

1.92

2.09ADJUSTED

1.70
REPORTED

(4)

EPS (Diluted)
Dollars

1.75

1.77
REPORTED
1.54
ADJUSTED

1.46
ADJUSTED
1.32
REPORTED

2001

2002

2003

2004

2005

Total assets . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,403,844

Debt, including current maturities . . . . . . .

(3)

Stockholders’ equity . . . . . . . . . . . . . . . . . .

213,600

876,843

$ 3,445,200

1,688,000

936,410

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

(2) Operating cash flow is a non-GAAP financial measure under SEC rules. See Item 7 in Form 10-K.

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

(4) Diluted earnings per common share from continuing operations, as reported, include: In 2001, a net negative impact
of 14 cents related primarily to losses on sales of businesses; in 2002, favorable resolution of tax issues of 23 cents;
in 2005, 39 cents of costs related to the acquisition of Pulitzer Inc.
2001
$1.46
(0.14)
$1.32

Earnings per common share, as adjusted
Adjustments
Earnings per common share, as reported

2005
$2.09
(0.39)
$1.70

2002
$1.54
0.23
$1.77

2 A Landmark Year for Lee Enterprises

To Our Stockholders

o
o
h
p

i
l

g
u
r
T
o
i
r
e
v
a
S

Mary Junck
Chairman, President and
Chief Executive Officer

2005: A LANDMARK YEAR

Fiscal 2005 was a landmark year for Lee Enterprises, beginning with our
acquisition of Pulitzer Inc. and ending with our fourth year in a row of meeting
our own high internal goals for strong operating and financial performance.

More importantly, we’ve set the stage for continued success in 2006 and beyond.

With our $1.46 billion purchase of Pulitzer in June, Lee has become the fourth
largest newspaper company in the country based on dailies owned and seventh
largest in total circulation.

Our dailies reach four-million-plus readers, and our rapidly growing online sites
already reach more than two million. At the same time, our non-dailies reach more
than four-and-a-half million households.

In both order of magnitude and revenue growth opportunities, our addition of the
14 Pulitzer newspapers was remarkably similar to our highly successful purchase
of the 16 Howard dailies in 2002. With Howard, Lee grew by 50% in revenue and
75% in circulation. With Pulitzer, we have grown by more than 60% in revenue
and 50% in circulation.

Look at how far we’ve come:

n Four years ago, at the end of fiscal 2001, there were 28 daily newspapers in the

Lee family. Today there are 58.

n Four years ago, our total revenue was $427 million. In 2006 our revenue will

approximate $1.2 billion.

n Four years ago, our enterprise value was $1.1 billion. At the end of fiscal 2005

it stood at $3.5 billion.

With Pulitzer, we’ve gained more exceptionally good newspapers in attractive,
diverse markets. As in the rest of Lee, most of our new markets are regional hubs,
and all rate high in measures for quality of life.

Our new markets stretch from Hawaii’s most scenic island to the California wine
country to the fast-growing Southwest to our solid base in the Midwest. In St.
Louis and its quickly expanding suburbs, we’ve gained an extensive media platform

Lee Enterprises 2005 Annual Report 3

We reach more people in our markets
today than ever before – and our
audiences continue to grow.

that includes a major market newspaper, the leading local online site and the
country’s largest group of metropolitan weekly newspapers, with distribution of
more than a million copies a week.

Also with the acquisition, we’ve gained nearly 4,000 employees and a talented
group of publishers, editors and managers. They have helped us make the transi-
tion quick, smooth and on track with projections as we’ve introduced Lee’s
emphasis on revenue growth, readership and circulation, strong local news, online
growth, employee development and careful cost controls.

Meanwhile, we kept our foot on the accelerator everywhere else – again driving
advertising revenue at a pace well above the industry.

In the September quarter, for example, Lee’s same property advertising revenue,
grew 4.7 % versus the industry average of 2.4 %. The chart on this page shows
Lee’s print plus online growth compared with the industry. There’s an equally
impressive chart on Page 4 of the accompanying Form 10-K showing Lee’s print-
only growth — for example, up 3.9% in the September quarter versus 1.6 % for the
average of other newspaper companies.

Of course, our online advertising revenue alone is growing very rapidly — up nearly
34% again in 2005 on a same property basis.

We credit our industry-leading revenue growth to our markets, our people and —
primarily — our relentless sales intensity, marked by speed, creativity and strong
execution.

As another measure of recognition, for the second year in a row, we found ourselves
on the Forbes list of “200 Best Small Companies.” We ranked 25th in profits, 29th
in market value and Number 1 in sales. This will be the last year we can make the
list, as we’ve outgrown the Forbes definition of “small.”

OUR AUDIENCES ARE GROWING

Because of our rapid online growth and addition of specialty publications, we reach
more people in our markets today than ever before – and our audiences continue to
grow.

More on that in just a moment. First, let me acknowledge that newspaper paid
circulation has slipped for Lee in the past year after three years of growth. In the

4 A Landmark Year for Lee Enterprises

Despite the current buzz about the
supposed, sudden decline of young
readers, newspaper readership
among younger audiences in our
markets remains very, very strong.

September 2005 ABC Fas-Fax report, Lee declined 1.8% daily and 2.2% on Sunday,
compared with the industry average of minus 2.6% daily and minus 3.1% on
Sunday. Although paid circulation is only one measure of our reach and effective-
ness, it remains one of our top priorities in Lee, and we have aggressive programs
in place for 2006.

Here’s a better measure of our strength — the number of people we reach through a
combination of our newspapers and online sites. In Lincoln, Nebraska, for
example: an impressive 81% of the adults in the market read the Lincoln Journal
Star or visit www.journalstar.com in a week. Decatur, Illinois: 79%. Casper,
Wyoming: 76%. St. Louis: 62%. Even in the Chicago suburbs of Northwest
Indiana, our newspaper plus its online site reaches 56% of all adults. These are
powerful numbers — and they’re growing. For more about this, please see the chart
on Page 5 of the accompanying Form 10-K.

WE’RE STRONG WITH YOUNG AUDIENCES, TOO

Despite the current buzz about the supposed, sudden decline of young readers,
newspaper readership among younger audiences in our markets remains very, very
strong.

Please take a look at the chart on this page.

In St. Louis, for example, 55% of all 18-to-24-year-olds in the market read the Post-
Dispatch or used the newspaper’s online site once or more in the last week. Seven-
teen percent of all 18-to-24-year-olds visited STLToday – which is, by far, the
leading local online site in the market. In Casper, Wyoming, the numbers rise to
69% for the newspaper and 21% for the online site.

Here’s the reason: We operate strong, locally focused franchises in primarily small
to midsize markets, where we’re the main source of news, information and adver-
tising in both print and online, and our brands are household names. As a result,
we capture the lion’s share of advertising in our markets – often more than half of
all the advertising dollars spent on print, television, radio and online combined.

As we build and diversify our online audiences through new features and increasing
interactivity, we’re also continuing to improve our printed newspapers.

For example, a year ago, The Times of Northwest Indiana launched a major
“reinvention” of the newspaper. This year, it was chosen by Suburban Newspapers

Lee Enterprises 2005 Annual Report 5

In both print and online, our newspapers make
a vital difference. We give our readers news,
information and advertising they can’t get
anywhere else, and we’re the memory and
conscience of our communities.

of America as national Newspaper of the Year. The SNA also honored three other
Lee newspapers — the North County Times of Oceanside/Escondido, California;
The Citizen in Auburn, New York, and The Daily News in Longview, Washington.

In September, the St. Louis Post-Dispatch launched a major redesign highlighting
improved local coverage and stronger design. Response has been enthusiastic from
both readers and advertisers.

Whether in print or online, what we do makes a vital difference. We give our
readers news, information and advertising they can’t get anywhere else, and we’re
the memory and conscience of our communities.

Throughout their histories, our newspapers have exposed evil, righted wrongs, cele-
brated achievement, fostered commerce, promoted education, explained issues,
guided voters, guarded good government, brought people together, inspired vision,
advanced ideas, provoked action, helped improve quality of life, and, day in and day
out, tied together the fabric of our communities. We draw great satisfaction from
helping make such a meaningful difference.

For all these reasons, our business is thriving, and we’re both confident and excited
about our prospects for continued growth. This is a terrific business, and we feel
lucky to be a part of it.

Moving into 2006, we remain intensely focused on our list of Top Priorities. As you
can see at the left, we’ve kept a clear and consistent direction year after year. You
can count on more of the same in 2006.

With best wishes and special thanks to all of our employees for keeping Lee strong
and growing,

Mary Junck
Chairman, President and Chief Executive Officer

December 2005

6 A Landmark Year for Lee Enterprises

Enterprise of the Year: Casper, Wyoming

The Casper Star-Tribune is flourishing under the
leadership of Publisher Nathan Bekke. He has
assembled a highly effective team and has racked
up an impressive string of successes in advertising
and online sales, as well as circulation growth and
content improvement.

Accomplishments in 2005 include:

Bekke

n Innovative and highly successful advertising sales
programs, leading to exceptional growth in revenue
and customer base across all categories.

n Continued rapid growth at www.casperstartribune.com, up 62%
in the last year.

n Launch of new publications and special projects, including
Wyoming Energy Journal; Live Well Wyoming, a fall edition of
Discover Wyoming; Bid and Buy online auction; 40 Under 40, a
statewide look at future leaders; and A Resource Reborn, a cooper-
ative initiative with the Casper Journal.

n A redesign that gives readers a cleaner look, bigger type and
time-saving elements, including features called “Quick Trib” and
“NewsTrackers.”

n High scores for reader satisfaction, resulting from ambitious
news reporting, improved news zoning, new features and a strong
focus on excellence in delivery and service.

n Exceptional productivity in the prepress, press and packaging departments.

n Innovations by the information technology department to help managers track projects.

n A re-engineered marketing department that brought research to life for customers, drove promotion of
the newspaper to new heights, and created a major event — Wyoming Women's Expo.

Kirk John Mitchell photography

n Successful integration of the Casper Journal, a strong weekly newspaper and former competitor,
combining production and delivery.

The Star-Tribune has circulation of 30,560 daily and 32,943 Sunday.

2005
Lee
President’s
Awards

EOY Finalist: Billings, Montana

The Billings Gazette, led by Publisher Mike
Gulledge and a strong management team, set
another remarkable pace in 2005, especially in
advertising sales and online growth. The news
product ranks among Lee’s best, and the news-
paper’s community leadership extends throughout
the state. The Gazette has circulation of 46,365
daily and 52,765 Sunday. Its businesses include
www.billingsgazette.com, Thrifty Nickel, Gazette
Glance, Work For You, Western Business, Montana
Land Magazine and Magic City Magazine.

Gulledge

Lee Spirit: David Fitzsimmons

EOY Finalist: Butte, Montana

David Fitzsimmons of the Arizona Daily Star in
Tucson is a prolific, award-winning editorial
cartoonist who supports the newspaper at every
turn and puts to work his enormous talents for
every worthy cause that comes knocking.

In the past year, he made 118 personal appear-
ances, before crowds as small as two dozen and
as large as 1,500, inspiring young people, enter-
taining senior citizens and helping raise hundreds
of thousands of dollars for good causes.

As for his cartoons, he’s enormously popular and
one of the most productive in the business,
producing six a week as well as a Sunday

Fitzsimmons

Opinion strip and a
weekly local-culture
cartoon for an enter-
tainment section.

He has been honored
by the Arizona Press
Club as the state’s top
editorial cartoonist
three years in a row,
and the mayor calls
him the conscience of
the community.

Publisher Rona Rahlf has guided The Montana
Standard to another exceptional year, with double-
digit revenue growth and continued circulation
gains, while successfully integrating our new
Bozeman publications. The Standard has circula-
tion of 14,236 daily and 14,402 Sunday. Its busi-
nesses include www.mtstandard.com, Celebrity,
Three Rivers Edition, Work For You and In
Business, all in Butte; Western Shopper in Deer
Lodge; and Mini Nickel, Explore and The Tributary,
all in Bozeman.

Rahlf

EOY Finalist: Lee Agri-Media

Lee Agri-Media, led by Brian Kroshus, turned in
another phenomenal year despite a continued tough
environment for producers and suppliers. Kroshus,
who was recently appointed publisher of The
Bismarck Tribune, continues to oversee Lee Agri-
Media as group publisher. Lee Agri-Media is based in
Bismarck and includes Farm & Ranch Guide,
Minnesota Farm Guide, Ag Weekly in Idaho, Iowa
Farmer Today, Midwest Messenger in Nebraska, The
Prairie Star in Montana, Tri-State Neighbor in South
Dakota, and an affiliate, Agri-View in Wisconsin.

Kroshus

Lee Enterprises 2005 Annual Report 7

Innovation: Elko, Nevada

Excellence in News: Missoula, Montana

The "Day in the Life" team at the
Elko Daily Free Press created a
powerful ongoing series of
feature stories about ordinary
people, and its popularity has
strengthened the bond with
readers, leading to increased
circulation. The newspaper has
donated $10,000 of advertising
revenue from the program to the
American Red Cross. Members are Ross Andreson, Mike Christensen, Adella Harding,
Martin Harris, Marianne Kobak, Mike Magney, Tom Martin, Jeff Mullins, Shelli Stumpp
and publisher Rhonda Zuraff.

The entire newsroom staff of the
Missoulian in Missoula, Montana,
was honored for creating popular
weekly feature-story obituaries of
everyday people. “Western
Montana Lives” is written so well
and displayed so prominently that
the feature stands far above similar
efforts at other newspapers across
the country. The citation says, in
part: “In the talented hands of Missoulian reporters, the life stories of our communities
become little novels full of all the funny, sad and sometimes unbelievable twists.” The
judges recommended that all newspapers consider following this example.

Innovation: Provo, Utah

Excellence in News: Northwest Indiana

The Circulation/Marketing Department of The Daily
Herald received a Lee President’s Award for its
innovative Savvy Shopper program. Every week,
Rebecca Pickett writes a print and online column full
of tidbits aimed at saving readers money by
shopping smart and using Daily Herald coupons.
In only six months, the Savvy Shopper program is
credited with attracting 700 new subscribers,
increasing Sunday single copy sales by 400 units
and improving overall subscriber retention by 2
percentage points. It also has strengthened relationships with grocers and generated
new revenue through sponsorship advertising. Karl Wurzbach created the program.
Others on the team are David Bake and Bryan Smith.

Wurzbach Pickett

Marc Chase of The Times of
Northwest Indiana, based in
Munster, led an investigative
reporting project that took a
powerful look at workplace safety.
The three-day series revealed a
pattern of violations of safety
standards, lax regulations and
minimum fines, resulting in a
human toll of 239 dead and 304
injured in the region over 30 years. This is Marc’s
second Lee President’s Award. He won in 2002
while at the Quad-City Times in Davenport, Iowa.

Chase

Innovation: Lincoln, Nebraska

Excellence in News: Tucson, Arizona

Ryan Bouc and Steve
Thomas of the Lincoln
Journal Star created a
process for Hispanic publi-
cations that drives revenue,
identifies underserved
readers and promotes
cooperation among Lee
papers. By centralizing
resources such as bilingual
editors, Lee is able to produce localized editions in Lincoln, Columbus and Omaha,
Nebraska; Sioux City and Muscatine, Iowa; and Twin Falls, Idaho. Bouc is general
manager of Hispanos Unidos, and Thomas is managing editor of the Lincoln Journal Star.

Thomas

Bouc

Michael Marizco and Kelly Presnell of the Arizona Daily
Star received their award for a series about how Mexican
children are smuggled into the United States to be reunited
with a parent who is here
illegally. Sometimes, the
children are intercepted by
kidnappers demanding
ransom. Despite great
difficulty, reporter Marizco
and photographer Presnell
reported on and showed real
people, using real names.

Marizco and Presnell

Innovation: Northwest Indiana

Excellence in News: Madison, Wisconsin

Andrea Walczak of The Times of
Northwest Indiana used innovation to tap
the undersold health care category. She
created a pocket-size regional health
guide, a new weekly health section and a
"code blue" in-paper and online
advertising program, then launched
compelling sales promotion featuring
candy pills and healthy foods. The
program quickly brought new revenue
totaling more than $100,000 at the Times,
and other newspapers in Lee are planning
to follow suit.

Walczak

A team at the
Wisconsin State
Journal produced a
compelling six-part
series that examined
the state’s prison
system and correc-
tions policies. Phil
Brinkman led the
project. Others on
the team were David Dombrowski, Phil Glende, Tim Kelley, Pat Reardon, Craig Schreiner,
Laura Sparks and Jonathan Utz. This is the State Journal’s fourth Lee President’s Award
for excellence in news over the last six years — all for outstanding investigative reporting.

Innovation: Suburban Journals, St. Louis

Excellence in News: Davenport, Iowa

The St. Louis Best Bridal
program includes aggres-
sive publication of engage-
ment and wedding
announcements, which
has helped build reader-
ship of the weekly newspa-
pers, coupled with a highly
successful multi-platform
advertising program. The
team includes Sherry Anders, Van Avanzado, Chris Culbertson, Mike Giger, Stephanie
Louvier, Jamie McClelland, Karen McKay, Bob Meyer, Chris Ortwerth, Laura Pauley,
Marcie Schnell, Alyssa Stahr, Dorothy Vogel and Mary Ann Wagner.

A team at the Quad-
City Times and the
Lee Enterprises state
bureau in Iowa
received an excel-
lence in news award
for “Getting By, Getting Lost,” a
provocative series about the
working poor — and ways to
help break the cycle. Team
members were John Humenik,
Jan Touney, Ann McGlynn, Dan Gearino, Charlotte Eby, Todd Dorman, Tory Brecht, Derek
Anderson, Jeff Cook, Larry Fisher, John Schultz and James Gale.

8 A Landmark Year for Lee Enterprises

Board of Directors

Mary E. Junck
Chairman, President and Chief Executive Officer; Director since 1999;
Chairman of Executive Committee

Nancy S. Donovan
Founding Partner, Circle Financial Group, LLC; Founding Partner,
Oakmont Partners, LLC; Director since 2003; member of Audit
Committee

William E. Mayer
Founding Partner, Park Avenue Equity Partners, L.P.; Director since
1998; Lead Director, Chairman of Executive Compensation Committee
and member of Executive and Nominating and Corporate Governance
committees

Herbert W. Moloney III
President and Publisher, Washington Examiner; Director since 2001;
member of Audit and Nominating and Corporate Governance
committees

Andrew E. Newman
Chairman and Chief Executive Officer, Race Rock International, Inc.,
and Culinary Essence, LLC; Director since 1991; Chairman of Audit
Committee and member of Executive Compensation Committee

Gordon D. Prichett
Partner, Cairnwood Cooperative, and Professor of Mathematics,
Statistics and Information Sciences, Babson College; Director since
1998; member of Audit and Executive committees

Gregory P. Schermer
Vice President – Interactive Media and Corporate Counsel; Director
since 1999

Mark Vittert
Private Investor; Director since 1986; Chairman of Nominating and
Corporate Governance Committee and member of Executive
Compensation Committee

Executive Team

Mary E. Junck
Chairman, President and
Chief Executive Officer

Daniel K. Hayes
Vice President –
Corporate Communications

Kevin E. Mowbray
Vice President – Publishing;
Publisher, The Times,
Northwest Indiana

Rosanne M. Cheeseman
Vice President –
Sales & Marketing

James W. Hopson
Vice President – Publishing;
Publisher, Wisconsin State
Journal, Madison, WI

Gregory P. Schermer
Vice President –
Interactive Media and
Corporate Counsel

Terrance C.Z. Egger
Vice President – Publishing;
Publisher, St. Louis Post-Dispatch

Brian E. Kardell
Vice President – Production
and Chief Information Officer

Nancy L. Green
Vice President – Circulation;
Publisher, The Courier,
Waterloo-Cedar Falls, IA

Michael R. Gulledge
Vice President – Publishing;
Publisher, Billings Gazette,
Billings, MT

Vytenis P. Kuraitis
Vice President –
Human Resources

Linda Ritchie Lindus
Vice President – Publishing;
Publisher, The Pantagraph,
Bloomington, IL

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

John VanStrydonck
Vice President – Publishing;
Publisher, Missoulian,
Missoula, MT

Greg R. Veon
Vice President – Publishing

As required by the rules of the Securities and Exchange Commission (SEC) and New York Stock
Exchange (NYSE), on December 14, 2005, the certifications of the Chief Executive Officer and
Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 were filed by
the Company with the SEC (these certifications are exhibits to the Company’s Annual Report on
Form 10-K), and on March 16, 2005, the Annual CEO Certification was filed with the NYSE.

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
(State of incorporation)

42-0823980
(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
Securities registered pursuant to Section 12(b) of the Act:
Common Stock - $2.00 par value
Preferred Share Purchase Rights

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

Name of Each Exchange On Which Registered

New York Stock Exchange
New York Stock Exchange

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
November 30, 2005. Common Stock and Class B Common Stock, $2.00 par value, $1,617,843,000.

the Registrant as of

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

Forward-Looking Statements

Business

Properties

Legal Proceedings

Submission of Matters to a Vote of Security Holders

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

Selected Financial Data

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

Quantitative and Qualitative Disclosures about Market Risk

Financial Statements and Supplementary Data

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Controls and Procedures

Other Information

Directors and Executive Officers of the Registrant

Executive Compensation

Security Ownership of Certain Beneficial Owners and Management

Certain Relationships and Related Transactions

Principal Accounting Fees and Services

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

Signatures

Exhibit Index

Consolidated Financial Statements

PAGE

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,”
“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.

“plans,” “projects,”

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:

Š Grow revenue creatively and rapidly;
Š
Improve readership and circulation;
Š Emphasize strong local news;
Š Accelerate online growth;
Š Nurture employee development and achievement; and
Š 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.

integration of Pulitzer into its
In 2005, the Company devoted substantial attention to the successful
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.

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
for the Company’s subsidiary, Star
Tucson, Arizona newspaper partnership. TNI, acting as agent
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
is
the publications. Sales penetration can occur if
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 sales effort

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,
the
publication or from publications consisting primarily of such advertising.

is revenue earned from sales of advertising space in the classified section of

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.

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.

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.

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.

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:

Newspaper

City

State

Paid Circulation (1)
Sunday

Daily

St. Louis Post-Dispatch (2)
Arizona Daily Star (2)(3)

Capital Newspapers (4)

Wisconsin State Journal
The Capital Times
Daily Citizen
Portage Daily Register
Baraboo News Republic

North County Times (6)

The Times (6)

Lincoln Group

Lincoln Journal Star
Columbus Telegram
Fremont Tribune
Beatrice Daily Sun

Quad-Cities Group
Quad-City Times
Muscatine Journal

Billings Gazette
The Pantagraph (2)
Sioux City Journal (6)
The Courier (6)

The Post-Star (6)
Central Illinois Newspaper Group

Herald & Review
Journal Gazette (6)
Times-Courier (6)

River Valley Newspaper Group

La Crosse Tribune
Winona Daily News

The Daily Herald (2)
Casper Star-Tribune (6)

Missoula Group
Missoulian
Ravalli Republic
Rapid City Journal
The Journal Times
The Bismarck Tribune
The Southern Illinoisan
The Daily News (6)

Magic Valley Group

The Times-News (6)
Elko Daily Free Press (8)
South Idaho Press (8)

Missouri
Arizona

278,531
103,708

428,601
161,975

Wisconsin
Wisconsin
Wisconsin
Wisconsin
Wisconsin
California

91,164
18,640
10,318
4,905
4,193
88,648

146,439 (5)
-
(5)
-
-
-
93,151

Indiana

81,392

89,241

Nebraska
Nebraska
Nebraska
Nebraska

Iowa
Iowa
Montana
Illinois
Iowa
Iowa

73,689
9,035
8,210
7,716

52,182
7,822
46,365
45,980
43,007
40,736

82,800
9,996
-
-

69,003
-
52,765
50,245
41,562
50,664

New York

34,345

36,897

Illinois
Illinois
Illinois

Wisconsin
Minnesota
Utah
Wyoming

33,692
10,294
6,457

32,838
11,303
30,695
30,560

Montana
Montana
South Dakota
Wisconsin
North Dakota
Illinois
Washington

30,378

5,186 (7)

30,093
28,848
27,548
27,446
21,442

42,942
-
-

40,902
12,705
37,476
32,943

34,541
-
34,492
30,546
30,867
36,491
21,480

Idaho
Nevada
Idaho

20,514

5,870 (7)
3,232 (7)

21,049
-

2,763 (7)

St. Louis
Tucson

Madison
Madison
Beaver Dam
Portage
Baraboo
Oceanside

and Escondido
Munster, Valparaiso,
and Crown Point

Lincoln
Columbus
Fremont
Beatrice

Davenport
Muscatine
Billings
Bloomington
Sioux City
Waterloo and Cedar

Falls
Glens Falls

Decatur
Mattoon
Charleston

La Crosse
Winona
Provo
Casper

Missoula
Hamilton
Rapid City
Racine
Bismarck
Carbondale
Longview

Twin Falls
Elko
Burley

Newspaper

City

State

Daily

Sunday

Paid Circulation(1)

Globe Gazette
Napa Valley Register (2)
Central Coast Newspapers
Santa Maria Times (2)
The Lompoc Record (2)

Mid-Valley News Group

Albany Democrat-Herald
Corvallis Gazette-Times
The Times and Democrat (6)
Independent Record
The Montana Standard
The Sentinel (6)
The Sentinel (2)
The World (2)
The Citizen (6)
Arizona Daily Sun (2)
Daily Chronicle (2)
The Garden Island (2)
The Ledger Independent (6)
Daily Journal (2)
The Chippewa Herald
Shawano Leader (4)
The Daily News (2)

Mason City
Napa

Santa Maria
Lompoc

Albany
Corvallis
Orangeburg
Helena
Butte
Carlisle
Hanford
Coos Bay
Auburn
Flagstaff
DeKalb
Lihue
Maysville
Park Hills
Chippewa Falls
Shawano
Rhinelander

Iowa
California

California
California

Oregon
Oregon
South Carolina
Montana
Montana
Pennsylvania
California
Oregon
New York
Arizona
Illinois
Hawaii
Kentucky
Missouri
Wisconsin
Wisconsin
Wisconsin

18,743
17,299

18,293
6,529

17,239
11,524
17,040
14,328
14,236
14,235
13,248
12,562
11,912
11,189
9,211
8,647
8,580
8,046
6,893
6,324
3,794 (7)

23,174
17,876

17,895
6,775

17,730
12,021
16,876
14,878
14,402
14,650
13,010
-
13,781
12,389
10,511
9,093
-
8,232
7,050
6,768
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:

Selma Enterprises
William Street Press
Hawkeye Printing and Trico Communications
Platen Press
Farcountry Press
Broadwater Printing
Journal Star Commercial Printing
Plaindealer Publishing
Little Nickel Quik Print
Spokane Print and Mail
Triangle Press
Wingra Printing (1)

Location

Selma, California
Decatur, Illinois
Davenport, Iowa
Butte, Montana
Helena, Montana
Townsend, Montana
Lincoln, Nebraska
Tekamah, Nebraska
Lynnwood, Washington
Spokane, Washington
Chippewa Falls, Wisconsin
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

Rosanne M. Cheeseman

Terrance C.Z. Egger

Nancy L. Green

Michael R. Gulledge

Daniel K. Hayes

James W. Hopson

Brian E. Kardell

Vytenis P. Kuraitis

Linda Ritchie Lindus

Kevin E. Mowbray

Gregory P. Schermer

Carl G. Schmidt

John VanStrydonck

Greg R. Veon

June 1999

January 2002

Chairman, President and Chief

Executive Officer

April 1998

November 2004

Vice President – Sales &

Marketing

June 2005

Vice President – Publishing

December 2000

September 2002

Vice President – Circulation

October 1982

May 2005

Vice President – Publishing

September 1969

September 2005

Vice President – Corporate

Communications

July 2000

Vice President – Publishing

January 1991

August 2003

Vice President – Production
and Chief Information
Officer

August 1994

January 1997

Vice President – Human

Resources

April 2000

October 2005

Vice President – Publishing

September 1986

November 2004

Vice President – Publishing

February 1989

November 1997

Vice President – Interactive
Media and Corporate
Counsel

May 2001

Vice President, Chief Financial

Officer and Treasurer

March 1981

June 2000

Vice President – Publishing

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 – Corporate 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

the Board of Directors are independent, as are all members of

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
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.

information,

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:

St. Louis, Missouri (PD LLC)
St. Louis, Missouri (Suburban Journals)

Square Feet

Owned

Leased

753,819
127,335

56,107
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 more than 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.

1st

2nd

3rd

4th

Quarter

STOCK PRICES

2005

High
Low
Closing

2004

High
Low
Closing

2003

High
Low
Closing

DIVIDENDS

2005
2004
2003

$48.85
44.87
46.08

$44.15
38.67
43.65

$34.70
29.75
33.52

$ 0.18
0.18
0.17

$46.06
42.70
43.40

$46.94
43.35
45.18

$34.50
30.35
31.52

$ 0.18
0.18
0.17

$43.68
39.82
40.09

$49.83
45.05
48.01

$38.55
31.35
37.53

$ 0.18
0.18
0.17

$44.32
39.90
42.48

$48.78
44.65
46.34

$40.68
36.40
38.67

$ 0.18
0.18
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

July

Total Number Of Shares
Purchased

Average Price
Per Share

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)

OPERATING RESULTS

Operating revenue
Depreciation and amortization
Operating income, before equity

in earnings of associated
companies

Equity in earnings of associated

companies

Operating income
Financial income
Financial expense

Income from continuing operations
Discontinued operations
Net income

EARNINGS PER COMMON SHARE

Basic:

Continuing operations
Discontinued operations

Net income

Diluted:

Continuing operations
Discontinued operations

Net income

2005
(1)

2004

2003

2002
(2)

2001
(3)(4)

$ 860,859 $ 683,324 $ 647,333 $ 518,568 $ 426,966
31,357

60,828

48,027

45,507

34,464

155,441

138,214

129,640

109,350

76,622

12,403
167,844
2,824
(38,038)

8,340
146,554
1,066
(12,665)

8,053
137,693
1,120
(16,535)

9,057
118,407
6,007
(15,777)

7,651
84,273
28,548
(11,963)

76,878 $
-
76,878 $

86,469 $
(398)
86,071 $

77,881 $
160
78,041 $

78,505 $
1,325

58,071
254,399
79,830 $ 312,470

1.70 $

1.93 $
(0.01)
1.92 $

1.76 $

1.78 $
0.03
1.81 $

1.70 $

1.92 $
(0.01)
1.91 $

1.75 $

1.77 $
0.03
1.80 $

1.33
5.81
7.14

1.32
5.77
7.09

Weighted average common shares:

Basic
Diluted

45,118
45,348

44,792
45,092

44,316
44,513

44,087
44,351

43,784
44,089

Dividends per common share

0.72 $

0.68 $

0.68

OTHER INFORMATION

Operating income as a percent of

operating revenue

Income from continuing operations

as a percent of operating revenue

Dividends as a percent of income
from continuing operations

19.5%

21.4%

21.3%

22.8%

19.7%

8.9

42.5

12.7

37.5

12.0

38.9

15.1

38.3

13.6

51.3

BALANCE SHEET INFORMATION (End of Year)

Total assets
Debt, including current maturities (5)
Stockholders’ equity

$3,445,200 $1,403,844 $1,421,377 $1,463,830 $1,000,397
173,400
683,193

1,688,000
936,410

409,300
742,774

213,600
876,843

305,200
802,156

Includes four months of operations from the Pulitzer acquisition, which was consummated in June 2005.
Includes six months of operations from the Howard acquisition, which was consummated in April 2002.
Includes gain on the sale of the Company’s broadcast properties, as reported in discontinued operations.

(1)
(2)
(3)
(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)

Operating cash flow
Depreciation and amortization
Operating income, before
equity in earnings of
associated companies

Equity in earnings of

associated companies

Operating income

2005

Percent Of
Revenue

2004

Percent Of
Revenue

2003

Percent Of
Revenue

$216,269
60,828

25.1% $186,241
48,027

7.1

27.3% $175,147
45,507

7.0

27.1%
7.0

155,441

18.1

138,214

20.2

129,640

20.0

12,403
$167,844

1.4

8,340
19.5% $146,554

1.2

8,053
21.4% $137,693

1.2
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
the Company evaluates its
disclosure of contingent assets and liabilities. On an on-going basis,

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:

(Thousands, Except Per Common Share Data)

2005

2004

Percent Change
Same
Property

Total

$358,253
33,075

$287,661
18,434

24.5%
79.4

3.5%

12.4

Advertising revenue:

Retail
National
Classified:

Daily newspapers:
Employment
Automotive
Real estate
All other

Other publications

Total classified
Online
Niche publications

Total advertising revenue
Circulation
Commercial printing
Online services and other
Total operating revenue
Compensation
Newsprint and ink
Other operating expenses
Early retirement program
Transition costs

Operating cash flow
Depreciation and amortization
Operating income, before equity in

earnings of associated companies

Equity in earnings of associated companies
Operating income
Non-operating expense, net
Income from continuing operations before

income taxes

Income tax expense
Minority interest
Income from continuing operations

63,992
49,331
47,197
29,240
44,044
233,804
19,294
13,223
657,649
154,226
21,362
27,622
860,859
342,237
85,063
199,237
9,124
8,929
644,590
216,269
60,828

155,441
12,403
167,844
(46,453)

121,391
44,353
160
$ 76,878

44,478
40,852
35,468
24,290
33,237
178,325
11,125
11,212
506,757
130,552
20,249
25,766
683,324
276,204
63,502
157,377

-
-

497,083
186,241
48,027

138,214
8,340
146,554
(11,893)

134,661
48,192
-

$ 86,469

16.0
(4.3)
8.1
(0.4)
1.5
4.9
33.8
1.1
4.9
(2.2)
(0.3)
9.6
3.6
2.3
7.9
0.2
NA
NA
2.4
6.1
(7.2)

9.8

43.9
20.8
33.1
20.4
32.5
31.1
73.4
17.9
29.8
18.1
5.5
7.2
26.0
23.9
34.0
26.6
NA
NA
29.7
16.1
26.7

12.5
48.7
14.5
290.6

(9.9)
(8.0)
NA
(11.1)

(11.9)
(11.5)

Earnings per common share:

Basic
Diluted

1.70
1.70

1.93
1.92

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 operating 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)

Retail
National
Classified

2005

10,463
561
11,700
22,724

2004

Percent Change

10,656
537
10,942
22,135

(1.8)%
4.5
6.9
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
the Pulitzer newspapers, costs related to the Pulitzer
acquisition and the St. Louis Post-Dispatch early retirement program.

lower margin of

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:

(Thousands, Except Per Common Share Data)

2004

2003

Percent Change
Same
Property

Total

Advertising revenue:

Retail
National
Classified:

Daily newspapers:
Employment
Automotive
Real estate
All other

Other publications

Total classified
Online
Niche publications

Total advertising revenue
Circulation
Commercial printing
Online services and other
Total operating revenue
Compensation
Newsprint and ink
Other operating expenses

Operating cash flow
Depreciation and amortization
Operating income, before equity in

earnings of associated companies

Equity in earnings of associated companies
Operating income
Non-operating expense, net
Income from continuing operations before

income taxes

Income tax expense
Income from continuing operations

Earnings per common share:

Basic
Diluted

$287,661
18,434

$275,931
15,642

4.3%

17.8

3.5%

14.2

13.6
(2.4)
10.8
6.9
3.8
6.3
32.6
20.3
5.7
(0.3)
6.7
11.1
4.7
3.2
10.0
5.3
4.7
4.5
3.1

4.9

44,478
40,852
35,468
24,290
33,237
178,325
11,125
11,212
506,757
130,552
20,249
25,766
683,324
276,204
63,502
157,377
497,083
186,241
48,027

138,214
8,340
146,554
(11,893)

134,661
48,192
$ 86,469

39,032
41,825
31,946
22,384
30,940
166,127
8,359
9,227
475,286
130,191
18,683
23,173
647,333
267,456
56,955
147,775
472,186
175,147
45,507

129,640
8,053
137,693
(16,464)

121,229
43,348
$ 77,881

1.93
1.92

1.76
1.75

14.0
(2.3)
11.0
8.5
7.4
7.3
33.1
21.5
6.6
0.3
8.4
11.2
5.6
3.3
11.5
6.5
5.3
6.3
5.5

6.6
3.6
6.4
(27.8)

11.1
11.2
11.0%

9.7%
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 operating 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)

Retail
National
Classified

2004

2003

Percent Change

10,656
537
10,942
22,135

10,618
475
10,568
21,661

0.4%

13.1
3.5
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
to certain
lenders provide incremental
requirements being satisfied at the time of the request.

term loan commitments of up to $500,000,000, subject

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.

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)

Nature of Obligation

Long-term debt (principal amount)
Lease obligations
Financial expense (1)
Capital expenditure commitments

Payments (Or Commitments) Due By Year

Total

Less
Than 1

1-3

3-5

More
Than 5

$1,688,000 $ 10,000 $104,658 $570,658 $1,002,684
8,368
-
-

-
$1,813,791 $ 50,552 $159,441 $592,746 $1,011,052

4,028
24,633
11,891

21,526
92,374
11,891

3,613
18,475

5,517
49,266

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
is
instruments outstanding at September 30, 2005,
rates on market
approximately $10,160,000. There is no impact on reported results from such changes in interest rates.

risk sensitive investment

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
Statements”.

to this Item is included herein under the caption “Consolidated Financial

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,
attestation report on management’s assessment of
reporting. Their report appears below.

the Company’s independent registered public accounting firm,

the Company’s internal control over

issued an
financial

/s/ Mary E. Junck
Mary E. Junck
Chairman, President and Chief Executive Officer
December 14, 2005

/s/ Carl G. Schmidt
Carl G. Schmidt
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

that Lee Enterprises,

included in the accompanying Management Report on
We have audited management’s assessment,
Internal Control Over Financial Reporting,
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
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.

included obtaining an understanding of

the company’s principal executive and principal

A company’s internal control over financial reporting is a process designed by, or under the supervision
of,
financial officers, or persons performing similar
functions, and effected by the company’s board of directors, management, and other personnel to provide
financial
reasonable assurance regarding the reliability of
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
transactions are
financial statements in accordance with generally
recorded as necessary to permit preparation of
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.

the company; (2) provide reasonable assurance that

financial reporting and the preparation of

the assets of

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 year ended
September 30, 2005 of the Company and our report dated December 14, 2005 expressed an unqualified
opinion on those financial statements.

the Consolidated Financial Statements as of and for

/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) 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:

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

Plan Category

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 15% 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 (f/k/a the Pulitzer Inc. 2000 Stock Purchase Plan) (“Original
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 the 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

September 27, 2005

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

Resignation of Michael E. Phelps

SIGNATURES

to the requirements of Section 13 or 15(d) of

Pursuant
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 14th day of December 2005.

the Securities Exchange Act of 1934,

LEE ENTERPRISES, INCORPORATED

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

/s/ Carl G. Schmidt
Carl G. Schmidt
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 14th day of
December 2005.

Signature

/s/ Nancy S. Donovan
Nancy S. Donovan

/s/ Mary E. Junck
Mary E. Junck

/s/ William E. Mayer
William E. Mayer

/s/ Herbert W. Moloney III
Herbert W. Moloney III

/s/ Andrew E. Newman
Andrew E. Newman

/s/ Gordon D. Prichett
Gordon D. Prichett

/s/ Gregory P. Schermer
Gregory P. Schermer

/s/ Mark Vittert
Mark Vittert

Director

Chairman, President, and Chief

Executive Officer, and Director

Director

Vice President - Interactive Media

and Corporate Counsel, and Director

Director

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

2.1 *

2.2 *

3.1.1a *

3.1.2a *

3.2 *

4 *

10.1 *

10.2 *

10.3 *

10.4 *

Description

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).

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)

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)

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)

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)

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]).

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).

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)

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)

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

10.5 *

10.6 *

10.7 *

10.8 *

10.9 *

10.10 *

10.11 *

10.12 *

10.13 +*

10.14 +*

Description

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)

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)

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)

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)

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)

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)

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)

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

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)

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 +*

10.17 +*

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

Lee Enterprises, Incorporated Supplementary Benefit Plan (Exhibit 10.4 to Form 10-K for
the Fiscal Year Ended September 30, 2002)

Number

10.18 +*

10.19 +*

10.20 +*

10.21 +*

10.22 +*

10.23 +*

10.24 +

10.25 +*

10.26 +*

31.1

31.2

Description

Amended and Restated Pulitzer Inc. Supplemental Executive Benefit Pension Plan
(restated as of June 3, 2005) (Exhibit 10.15 to Form 10-Q for the Fiscal Quarter Ended
June 30, 2005)

Form of Employment Agreement for Lee Enterprises, Incorporated Executive Officers
Group (Exhibit 10 to Form 10-K for the Fiscal Year Ended September 30, 1998)

Form of Indemnification Agreement for Lee Enterprises, Incorporated Directors and
Executive Officers Group (Exhibit 10 to Form 10-K for the Fiscal Year Ended September
30,1998)

Employment Agreement, dated August 26, 1998 between Pulitzer Inc. and Terrance C.Z.
Egger (Exhibit 10.11 to Form 10-Q for the Fiscal Quarter Ended June 30, 2005)

Pulitzer Inc. Executive Transition Plan (Exhibit 10.12 to Form 10-Q for the Fiscal Quarter
Ended June 30, 2005)

Pulitzer Inc. Executive Transition Agreement, by and between Pulitzer Inc. and Terrance
C.Z. Egger, dated as of January 1, 2002 (Exhibit 10.13 to Form 10-Q for the Fiscal
Quarter Ended June 30, 2005)

Executive Resignation Agreement dated September 28, 2005 between Lee Enterprises,
Incorporated and Michael E. Phelps

Lee Enterprises, Incorporated 2005 Incentive Compensation Program (Appendix A to
Schedule 14A Definitive Proxy Statement for 2005)

Cancellation Agreement dated November 19, 2004 between Lee Enterprises,
Incorporated and Mary E. Junck (Exhibit 10.1 to Form 8-K filed on November 26, 2004)

Subsidiaries and associated companies

Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm

Power of Attorney

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002

Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002

CONSOLIDATED FINANCIAL STATEMENTS

PAGE

Consolidated Balance Sheets

Consolidated Statements of Income and Comprehensive Income

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

CONSOLIDATED BALANCE SHEETS

(Thousands, Except Per Share Data)

ASSETS

Current assets:

September 30

2005

2004

Cash and cash equivalents
Accounts receivable, less allowance for doubtful accounts:

7,543

8,010

2005 $9,612; 2004 $6,374

Income taxes receivable
Receivable from associated companies
Inventories
Deferred income taxes
Other

Total current assets
Investments:

Associated companies
Restricted cash and investments
Other

Total investments
Property and equipment:

Land and improvements
Buildings and improvements
Equipment
Construction in process

Less accumulated depreciation

Property and equipment, net
Goodwill
Other intangible assets
Other

122,325
19,439
1,563
22,099
5,092
6,809
184,870

203,731
81,060
23,549
308,340

32,712
180,289
297,563
13,885
524,449
183,955
340,494
1,547,042
1,042,342
22,112

62,749
-
1,563
10,772
6,646
3,117
92,857

23,483
-
9,608
33,091

21,440
106,878
231,546
7,569
367,433
169,412
198,021
622,396
455,791
1,688

Total assets

$3,445,200

$1,403,844

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

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Current maturities of long-term debt
Accounts payable
Compensation and other accrued liabilities
Income taxes payable
Dividends payable
Unearned revenue
Total current liabilities
Long-term debt, net of current maturities
Pension obligations
Postretirement and postemployment benefit obligations
Other retirement and compensation
Deferred income taxes
Minority interest
Other
Total liabilities
Stockholders’ equity:

Serial convertible preferred stock, no par value;

authorized 500 shares; none issued
Common Stock, $2 par value; authorized

120,000 shares; issued and outstanding:

2005 38,409 shares;
2004 37,028 shares

Class B Common Stock, $2 par value; authorized

30,000 shares; issued and outstanding:

2005 7,084 shares;
2004 8,189 shares

Additional paid-in capital
Unearned compensation
Retained earnings
Accumulated other comprehensive income

Total stockholders’ equity
Total liabilities and stockholders’ equity

September 30

2005

2004

10,000
33,275
71,945
-
6,407
38,036
159,663
1,706,024
33,236
95,237
26,836
481,884
5,109
801
2,508,790

11,600
19,191
37,030
3,768
6,066
27,826
105,481
202,000
2,939
-
6,200
209,919
-
462
527,001

76,818

74,056

14,168

16,378

115,464
(5,505)
733,961
1,504
936,410
$3,445,200

100,537
(3,913)
689,785
-
876,843
$1,403,844

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Thousands, Except Per Common Share Data)

2005

2004

2003

Operating revenue:

Advertising
Circulation
Other

Total operating revenue
Operating expenses:
Compensation
Newsprint and ink
Depreciation
Amortization of intangible assets
Other operating expenses
Early retirement program
Transition costs

Total operating expenses
Operating income, before equity in earnings of associated companies
Equity in earnings of associated companies:

Madison Newspapers, Inc.
Tucson newspaper partnership
Other

Operating income
Non-operating income (expense):

Financial income
Financial expense
Loss on early extinguishment of debt
Other, net

Total non-operating expense, net
Income from continuing operations before income taxes
Income tax expense
Minority interest
Income from continuing operations
Discontinued operations:

Gain (loss) from discontinued operations, net of income tax effect
Loss on disposition, net of income tax effect

Net income
Accumulated other comprehensive income
Comprehensive income

Earnings per common share:

Basic:

Continuing operations
Discontinued operations

Net income

Diluted:

Continuing operations
Discontinued operations

Net income

Dividends per common share

$657,649 $506,757 $475,286
130,191
130,552
41,856
46,015
647,333
683,324

154,226
48,984
860,859

342,237
85,063
24,813
36,015
199,237
9,124
8,929
705,418
155,441

276,204
63,502
20,578
27,449
157,377

-
-

267,456
56,955
18,532
26,975
147,775

-
-

545,110
138,214

517,693
129,640

9,044
3,740
(381)
167,844

8,523
-
(183)
146,554

8,053
-
-

137,693

2,824
(38,038)
(11,181)
(58)
(46,453)
121,391
44,353
160
76,878

1,066
(12,665)
-
(294)
(11,893)
134,661
48,192
-
86,469

1,120
(16,535)
-
(1,049)
(16,464)
121,229
43,348
-
77,881

-
-
76,878
1,504

(149)
(249)
86,071
-

180
(20)
78,041
-

$ 78,382 $ 86,071 $ 78,041

1.70 $

1.93 $
(0.01)
1.92 $

1.70 $

1.92 $
(0.01)
1.91 $

1.76
-
1.76

1.75
-
1.75

0.72 $

0.68

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

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Thousands)

Common Stock:

Balance, beginning of year
Conversion from Class B

Common Stock

Shares issued
Shares reacquired

Balance, end of year
Class B Common Stock:

Balance, beginning of year
Conversion to Common Stock

Balance, end of year
Additional paid-in capital:

Balance, beginning of year
Stock option expense
Income tax benefit of stock options

exercised
Shares issued
Balance, end of year
Unearned compensation:

Balance, beginning of year
Restricted shares issued
Restricted shares canceled
Amortization

Balance, end of year
Retained earnings:

Balance, beginning of year
Net income
Cash dividends
Shares reacquired
Balance, end of year
Accumulated other comprehensive

income:

2005

Amount
2004

2003

2005

Shares
2004

2003

$ 74,056

$ 70,994

$ 69,242

37,028

35,497

34,621

2,210
580
(28)
76,818

16,378
(2,210)
14,168

1,870
1,228
(36)
74,056

18,248
(1,870)
16,378

100,537
2,807

749
11,371
115,464

78,697
3,285

2,509
16,046
100,537

(3,913)
(6,215)
45
4,578
(5,505)

(2,457)
(4,327)
164
2,707
(3,913)

1,132
638
(18)
70,994

1,105
290
(14)
38,409

935
614
(18)
37,028

566
319
(9)
35,497

19,380
(1,132)
18,248

8,189
(1,105)
7,084

9,124
(935)
8,189

9,690
(566)
9,124

67,084
2,954

399
8,260
78,697

(1,845)
(2,309)
9
1,688
(2,457)

689,785
76,878
(32,702)
-

733,961

636,674
86,071
(32,449)
(511)
689,785

588,913
78,041
(30,259)
(21)
636,674

Balance, beginning of year
Unrealized gain on interest rate

exchange agreements

Unrealized loss on available-for-sale

securities

Deferred income taxes, net

Balance, end of year
Total stockholders’ equity

2,707

(230)
(973)
1,504
$936,410

-
-
-

$876,843

$802,156

45,493

45,217

44,621

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

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Thousands)

2005

2004

2003

Cash provided by operating activities:

Net income
Results of discontinued operations

Income from continuing operations
Adjustments to reconcile income from continuing operations
to net cash provided by operating activities of continuing
operations:

Depreciation and amortization
Stock compensation expense
Amortization of debt fair value adjustment
Loss on early extinguishment of debt
Distributions less than earnings of associated

companies

Change in operating assets and liabilities, net of effects

from acquisitions:

Increase in receivables
Decrease (increase) in inventories and other
Increase (decrease) in accounts payable, accrued

expenses and unearned revenue

Increase (decrease) in pension, postretirement

and post employment benefits

Change in income taxes receivable or payable

Other

Net cash provided by operating activities
Cash required for investing activities:
Purchases of marketable securities
Sales of marketable securities
Purchases of property and equipment
Acquisitions, net
Increase in restricted cash and investments
Other

Net cash required for investing activities
Cash provided by (required for) financing activities:

Payments on notes payable, net
Payments on long-term debt
Purchases of common stock
Proceeds from long-term debt
Financing costs
Cash dividends paid
Other, primarily issuance of common stock

Net cash provided by (required for) financing activities
Net cash provided by (required for) discontinued

operations:

Operating activities
Investing activities

Net decrease in cash and cash equivalents
Cash and cash equivalents:

Beginning of year

End of year

76,878
-
76,878

$ 86,071
(398)
86,469

$ 78,041
160
77,881

60,828
7,879
(2,385)
11,181

48,027
5,874
-
-

45,507
4,628
-
-

(1,288)

(965)

(927)

(5,707)
5,724

(3,925)
(1,976)

(1,387)
2,414

4,736

3,337

(800)

6,939
(595)
(3,742)
160,448

(13,038)
67,199
(24,737)
(1,299,738)
(7,500)
4,864
(1,272,950)

(338,600)
(548)
1,507,000
(28,855)
(32,361)
5,399
1,112,035

(194)
(15,597)
9,469
130,519

-
-
(19,214)
(8,909)
-
1,035
(27,088)

(185,600)
(956)
94,000
-
(26,383)
13,085
(105,854)

(126)
11,450
1,021
139,661

-
-
(15,880)
(1,073)
-
4,410
(12,543)

(3,000)
(141,100)
(272)
40,000
-
(37,792)
6,400
(135,764)

-
-
(467)

(631)
-
(3,054)

5,146
183
(3,317)

8,010
7,543

11,064
8,010

14,381
$ 11,064

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 online services. The Company currently operates in a single reporting segment, as its
enterprises have similar economic characteristics, products, customers and distribution.

1 SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

In June 2005, the Company acquired Pulitzer Inc. (Pulitzer). This acquisition has a significant impact on
the Consolidated Financial Statements.

The Consolidated Financial Statements include the accounts of the Company and its subsidiaries, all of
which are wholly-owned, except for its 50% interest in Madison Newspapers, Inc., (MNI), 81% interest in
INN Partners, L.C., (INN), 36% interest in CityXpress Corp. (CityXpress), and Pulitzer’s (together with
another subsidiary) 95% interest in St. Louis Post-Dispatch LLC (PD LLC) and STL Distribution Services
LLC (DS LLC), a distribution company serving the St. Louis market, and 50% interest in the results of
operations of TNI Partners (TNI).

Certain amounts as previously reported have been reclassified to conform with the current year
presentation.

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

Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the
reported amount of assets and liabilities, revenue and expenses during the reporting period. Actual
results could differ from those estimates.

Principles of Consolidation

The Consolidated Financial Statements include the accounts of the Company and its wholly, or majority-
owned, subsidiaries. All significant intercompany transactions have been eliminated.

Investments in MNI, TNI and CityXpress are accounted for using the equity method and are reported at
cost plus the Company’s share of undistributed earnings since acquisition, less, for TNI, amortization of
intangible assets.

Minority interest in earnings of PD LLC, DS LLC and INN is recognized in the Consolidated Financial
Statements.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments purchased with an original maturity of three
months or less at date of acquisition to be cash equivalents.

Accounts Receivable

The Company evaluates its allowance for doubtful accounts receivable based on historical credit
experience, payment trends and other economic factors.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Inventories

Newsprint inventories are priced at the lower of cost or market, with cost being determined by the first-in,
first-out or last-in, first-out methods. Newsprint inventories at September 30, 2005 and 2004 are less than
replacement cost by $3,920,000 and $3,142,000, respectively.

The components of newsprint inventory by cost method are as follows:

(Thousands)

First-in, first-out
Last-in, first-out

September 30
2005

2004

$11,134
6,089
$17,223

-
6,592
$6,592

Other inventories consisting of ink, plates and film are priced at the lower of cost or market, with cost
being determined by the first-in, first-out method.

Restricted Cash and Investments

Until May 1, 2010, PD LLC is restricted from making distributions (except under specified circumstances),
capital expenditures and member loan repayments unless it has set aside out of its cash flow a reserve
equal to the product of $15,000,000 and the number of years since May 1, 2000, but not in excess of
$150,000,000 (the Reserve). PD LLC is not required to maintain the Reserve after May 1, 2010.
Investments in the Reserve are limited to U.S. Government and related securities and are recorded at fair
value, with unrealized gains and losses reported, net of applicable income taxes, in accumulated other
comprehensive income. The cost basis used to determine realized gains and losses is specific identification.

Other Investments

Other investments primarily consist of marketable securities held in trust under a deferred compensation
arrangement and investments for which no established market exists. Marketable securities are classified
as trading securities and carried at fair value with gains and losses reported in earnings. Non-marketable
securities are carried at cost.

Property and Equipment

for printing presses and mailroom
Property and equipment are carried at cost. Equipment, except
equipment, is depreciated primarily by declining-balance methods. The straight-line method is used for all
other assets. The estimated useful lives are as follows:

Buildings and improvements
Printing presses and mailroom equipment
Other

Years

5 – 54
2 – 28
1 – 14

The Company capitalizes interest as a component of the cost of constructing major facilities.

Goodwill and Other Intangible Assets

Intangible assets include covenants not to compete, consulting agreements, customer lists, newspaper
subscriber lists, mastheads and other. Intangible assets subject to amortization are being amortized as
follows:

Noncompete and consulting agreements
Customer lists
Newspaper subscriber lists
Other

Years

3 – 15
3 – 24
7 – 33
10

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.

Revenue Recognition

Advertising Costs

Advertising costs are expensed as incurred.

Pension, Postretirement and Postemployment Benefit Plans

Income Taxes

Interest Rate Exchange Agreements

The Company accounts for interest rate exchange agreements, which are comprised of floating-to-fixed
rate interest rate swaps, as cash flow hedges. The Company expects that
these
agreements will significantly offset changes in the cash flows of the associated floating rate debt. The fair
value of such instruments is recorded in accumulated other comprehensive income, net of applicable
income tax expense or benefit.

the fair value of

Stock Compensation

The Company has four stock-based compensation plans. The Company accounts for grants under those
plans under the fair value expense recognition provisions of FASB Statement 123, Accounting for Stock-
Based Compensation, as amended. The Company amortizes as compensation expense the value of
stock options and restricted Common Stock by the straight-line method over the vesting or restriction
period, which is generally one to three years.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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
incurred but not reported claims. Other insurance carries deductible losses of varying
estimate of
amounts. Letters of credit totaling $5,495,000 at September 30, 2005 are outstanding in support of the
Company’s insurance program.

Discontinued Operations

In accordance with the provisions of FASB Statement 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, the operations and related losses on properties sold, or identified as held for sale,
Income and
have been presented as discontinued operations in the Consolidated Statements of
Comprehensive Income for all years presented. Gains are recognized when realized.

2 ACQUISITIONS

All acquisitions are accounted for as a purchase and, accordingly, the results of operations since the
respective dates of acquisition are included in the Consolidated Financial Statements.

Acquisition of Pulitzer

On June 3, 2005, the Company and LP Acquisition Corp., an indirect, wholly-owned subsidiary of the
Company (the Purchaser), consummated an Agreement and Plan of Merger (the Merger Agreement)
dated as of January 29, 2005 with Pulitzer. The Merger Agreement provided for the Purchaser to be
merged with and into Pulitzer (the Merger), with Pulitzer as the surviving corporation. Each share of
Pulitzer’s Common Stock and Class B Common Stock outstanding immediately prior to the effective time
of the Merger was converted into the right to receive from the Company or the Purchaser in cash, without
interest, an amount equal to $64 per share. Pulitzer publishes fourteen daily newspapers, including the
St. Louis Post-Dispatch, and approximately 100 weekly newspapers and specialty publications. Pulitzer
also owns a 50% interest in TNI. See Note 4.

The Merger effected a change of control of Pulitzer. At the effective time of the Merger and as a result of
the Merger, Pulitzer became an indirect, wholly-owned subsidiary of the Company.

The unaudited pro forma condensed consolidated income statement information for 2005 and 2004, set
forth below, presents the results of operations as if the acquisition of Pulitzer had occurred at the
beginning of each year and is not necessarily indicative of future results or actual results that would have
been achieved had the acquisition occurred as of the beginning of such year. Pro forma results for 2005
include $29,554,000 of early retirement,
transition and debt extinguishment costs related to the
acquisition. Other acquisitions described below are excluded.

(Thousands, Except Per Common Share Data) (Unaudited)

Operating revenue
Income from continuing operations

Earnings per common share from continuing operations:

Basic
Diluted

2005

2004

$1,164,624
69,379

$1,122,910
91,043

1.54
1.53

2.03
2.02

The purchase price of Pulitzer is allocated as follows:

(Thousands)

Current assets
Restricted cash and investments
Property and equipment
Long-term investments
Goodwill
Intangible and other assets
Total assets acquired
Current liabilities
Long-term debt
Pension, postretirement and postemployment benefits
Deferred income taxes
Other long-term liabilities

$ 305,399
73,560
140,980
207,937
923,277
623,827
2,274,980
52,904
337,512
118,595
278,472
25,943
$1,461,554

Incremental goodwill recorded as a result of the Company’s acquisition of Pulitzer is not deductible for
income tax purposes. Future tax deductible goodwill recorded by Pulitzer as a result of prior transactions
is approximately $585,500,000.

Acquired intangible assets consist of the following:

(Thousands)

Amortizable intangible assets:

Customer lists
Newspaper subscriber lists

Nonamortized intangible assets:

Mastheads

Weighted-Average
Amortization
Period (Years)

21
9
20

Amount

$516,730
49,902
566,632

53,118
$619,750

In 2005, the Company incurred $8,929,000 of transition costs in connection with the acquisition of Pulitzer.

Other Acquisitions

The Company purchased three specialty publications at a cost of $1,073,000 in 2003. In 2004, the
Company exchanged its daily newspapers in Freeport, Illinois and Corning, New York and cash totaling
$2,215,000 for two daily newspapers in Burley, Idaho and Elko, Nevada and eight weekly and specialty
publications. In 2004 the Company also purchased five specialty publications at a cost of $6,694,000.

In 2005, the Company purchased two specialty publications at a cost of $309,000, made a final working
capital payment of $301,000 related to a specialty publication purchased in 2004 and exchanged an internet
service provider business for a weekly newspaper. In 2005, the Company also purchased eight specialty
publications at a cost of $3,908,000 and received final working capital payments of $78,000 from purchased
specialty publications. In 2005, INN purchased an Internet advertisement design business at a cost of
$200,000. These other acquisitions did not have a material effect on the Consolidated Financial Statements.

3 DISCONTINUED OPERATIONS

The 2004 exchange transaction (see Note 2) resulted in an after tax loss of $228,000, which is recorded
in discontinued operations. Results for Freeport and Corning are recorded in discontinued operations for
all years presented. Tax expense of $2,812,000 recorded in results of discontinued operations in 2004 is
related primarily to nondeductible goodwill and basis differences in identified intangible assets associated
with the 2004 exchange transaction.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Income from discontinued operations consists of the following:

(Thousands)

Operating revenue

Income from, or gain (loss) on sale of,

discontinued operations, net

Income tax expense

2004

2003

$3,142

$9,408

$2,305
2,703
$ (398)

$ 260
100
$ 160

Income tax expense related to discontinued operations differs from the amounts computed by applying
the U.S. federal income tax rate as follows:

Computed “expected” income tax expense
State income taxes, net of federal tax benefit
Other

4 INVESTMENTS IN ASSOCIATED COMPANIES

Madison Newspapers, Inc.

2004

35.0%
4.0
78.3
117.3%

2003

35.0%
3.5
-
38.5%

The Company has a 50% ownership interest
in MNI, a company that publishes daily and Sunday
newspapers, and other publications in Madison, Wisconsin, and other Wisconsin locations, as well as the
related online sites. MNI conducts its business under the trade name Capital Newspapers.

Summarized financial information of MNI is as follows:

(Thousands)

ASSETS

Current assets
Investments and other assets
Property and equipment, net

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities, excluding debt
Debt, including current maturities
Other liabilities
Stockholders’ equity

Summarized results of MNI are as follows:

(Thousands)

Operating revenue
Operating expenses, excluding depreciation and amortization
Operating income
Net income

Company’s 50% share of net income

September 30

2005

2004

$19,888
43,514
14,652
$78,054

$17,526
45,916
15,318
$78,760

$13,773
13,273
2,960
48,048
$78,054

$14,324
17,060
2,670
44,706
$78,760

2005

2004

2003

$122,021
87,429
29,504
18,088

$118,287
85,084
28,101
17,046

$112,471
80,977
26,410
16,106

$ 9,044

$ 8,523

$ 8,053

Accounts receivable from associated companies consist of dividends due from MNI. Fees for editorial,
marketing and information technology services provided to MNI by the Company are included in other
revenue and totaled $10,164,000, $9,994,000, and $9,665,000 in 2005, 2004, and 2003, respectively. In
2003, the Company also received $694,000 for purchase of a software system.

Certain other information relating to the Company’s investment in MNI is as follows:

(Thousands)

Company’s share of:

Stockholders’ equity
Undistributed earnings

TNI Partners

September 30

2005

2004

$24,024
23,774

$22,353
22,103

In Tucson, Arizona, TNI, acting as agent for the Company’s subsidiary, Star Publishing Company (Star
Publishing), and 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 Tucson Citizen.
TNI collects all receipts and income and pays substantially 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. Net pretax income or loss of TNI is allocated equally to Star Publishing
and Citizen.

Summarized financial information of TNI is as follows:

(Thousands)

ASSETS

Current assets
Investments and other assets

LIABILITIES AND MEMBERS’ EQUITY

Current liabilities
Members’ equity

September 30
2005

$13,782
20
$13,802

$ 8,021
5,781
$13,802

Summarized results of TNI from the June 3, 2005 date of acquisition to September 30, 2005 are as
follows:

(Thousands)

Operating revenue
Operating expenses, excluding depreciation and amortization
Operating income

Company’s 50% share of operating income
Less amortization of intangible assets
Equity in earnings of TNI

2005

$36,986
26,218
$10,768

$ 5,384
1,644
$ 3,740

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Star Publishing’s 50% share of TNI depreciation and certain general and administrative expenses
associated with its share of the operation and administration of TNI are reported as operating expenses in
the Company’s Consolidated Statements of Income and Comprehensive Income. These amounts totaled
$672,000 from the June 3, 2005 date of acquisition through September 30, 2005.

At September 30, 2005, the carrying value of the Company’s 50% investment in TNI is $179,326,000.
The difference between the Company’s carrying value and its 50% share of the members’ equity of TNI
relates principally to goodwill of $85,240,000, and other identified intangible assets, some of which are
being amortized over their estimated useful lives through 2025, of $92,636,000.

CityXpress Corp.

In 2004 the Company converted its notes receivable from CityXpress to common stock. As a result the
Company has a 36% ownership interest in CityXpress. The operations of, and the Company’s investment
in, CityXpress are not significant to the Consolidated Financial Statements.

5 MARKETABLE SECURITIES AVAILABLE-FOR-SALE

Marketable securities, which include certain of the Company’s restricted cash and investments, and are
classified as available-for-sale securities at September 30, 2005, consist of the following:

(Thousands)

Amortized
Cost

Gross
Unrealized
Losses

Fair
Value

Debt securities issued by the U.S. Government and agencies

$74,443

$230

$74,213

Proceeds from the sale of such securities are $67,199,000 in 2005, resulting in gross realized gains of
$84,000 and gross realized losses of $10,000.

The amortized cost and fair value of marketable securities as of September 30, 2005, by contractual
maturity, are as follows. Contractual maturities may differ from actual maturities as borrowers may have
the right to call or repay obligations with or without call or prepayment penalties.

(Thousands)

Due in one year or less
Due after one year through five years

September 30, 2005
Fair
Amortized
Value
Cost

$49,077
25,366
$74,443

$48,960
25,253
$74,213

6 GOODWILL AND OTHER INTANGIBLE ASSETS

Changes in the carrying amount of goodwill related to continuing operations are as follows:

(Thousands)

Goodwill, beginning of year
Goodwill related to acquisitions
Goodwill related to dispositions
Goodwill, end of year

2005

2004

$ 622,396
925,626
(980)
$1,547,042

$606,411
15,985
-

$622,396

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

(Thousands)

Nonamortized intangible assets:

Mastheads

Amortizable intangible assets:

Noncompete and consulting agreements
Less accumulated amortization

Customer and newspaper subscriber lists
Less accumulated amortization

September 30

2005

2004

78,896

$ 25,656

28,664
28,136
528
1,091,308
128,390
962,918
$1,042,342

28,463
26,369
2,094
522,183
94,142
428,041
$455,791

Annual amortization of
intangible assets related to continuing operations for the five years ending
September 2010 is estimated to be $55,811,000, $55,702,000, $55,153,000, $54,627,000, and
$54,546,000, respectively.

7 DEBT

Credit Agreement

In June 2005, the Company entered into a credit agreement (Credit Agreement) with a syndicate of
financial institutions. The Credit Agreement provides for aggregate borrowing 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.

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 certain 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.

The Credit Agreement is fully and unconditionally guaranteed on a joint and several basis by substantially
all of the Company’s existing and future, direct and indirect subsidiaries in which the Company holds a
direct or indirect interest of more than 50%; provided however, that Pulitzer and its subsidiaries will not be
required to enter into such guaranty for so long as their doing so would violate the terms of the Pulitzer
Notes described more fully below. The Credit Agreement is secured by first priority security interests in
the stock and other equity interests owned by the Company and each guarantor in their respective
subsidiaries. Both the guaranties and the collateral that secures them will be released in their entirety at
such time as the Company achieves a total
leverage ratio of 4:25:1 for two consecutive three-month
periods.

Debt under the A Term Loan, B Term Loan and revolving credit facility bears interest, at the Company’s
option, at either a base rate or an adjusted Eurodollar rate (LIBOR), plus an applicable margin. The base
rate for the facility is the greater of the prime lending rate of Deutsche Bank Trust Company Americas at

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

such time and 0.5% in excess of the overnight federal funds rate at such time. The margin applicable is a
percentage determined according to the following: For revolving loans and A Term Loans, maintained as
base rate loans, 0% to 0.5%, and maintained as Eurodollar
loans, 0.625% to 1.5% (1.5% at
September 30, 2005) depending, in each instance, upon the Company’s leverage ratio at such time. For
B Term Loans, the applicable margin for such loans maintained as base rate loans is 0.75% and for
Eurodollar loans is 1.75%. All loans at September 30, 2005 are Eurodollar-based.

The Company may voluntarily prepay principal amounts outstanding or reduce commitments under the
Credit Agreement at any time, in whole or in part, without premium or penalty, upon proper notice and
subject to certain limitations as to minimum amounts of prepayments. The Company is required to repay
principal amounts, on a quarterly basis until maturity, under the A Term Loan beginning on or about
September 30, 2006 and the B Term Loan on or about September 30, 2005.

In addition to the scheduled payments noted above, the Company is required to make mandatory
prepayments under the A Term Loan and B Term Loan, subject to certain exceptions, in the amount of
(a) 100% of the net cash proceeds of certain equity offerings and capital contributions up to the first
$300,000,000 of net cash proceeds, (b) 100% of the cash proceeds from the issuance or incurrence of
indebtedness, (c) 100% of the sales proceeds of certain asset dispositions, unless reinvested in the
business or assets of the business within 360 days of an asset sale, (d) up to 50% of its excess cash
leverage ratio, and (e) 100% of the net cash proceeds from an
flow, as defined, based on its total
insurance or condemnation recovery in excess of $500,000, unless, so long as no default or event of
default then exists, the Company or its subsidiaries elect to reinvest the proceeds within 360 days of
receipt. Any amount required to be paid as a mandatory prepayment under (b), (c), (d) or (e) above must
be applied to repay the outstanding principal balance of the A Term Loan and B Term Loan on a pro rata
basis. Any amount required to be paid as a mandatory prepayment under (a) above must be first applied
to repay the outstanding principal balance of the B Term Loan and any excess shall be applied generally
to repay any other outstanding term loans on a pro rata basis.

The Credit Agreement contains customary affirmative and negative covenants for financing of its type that
are subject to customary exceptions. These financial covenants include a maximum leverage ratio (6.25:1
at September 30, 2005) and minimum interest coverage ratio of 2.5:1. None of the covenants included in
the Credit Agreement are considered by the Company to be restrictive to normal operations or historical
amounts of stockholder dividends. At September 30, 2005, the Company is in compliance with such
covenants.

Pulitzer Notes

In conjunction with its formation, PD LLC borrowed $306,000,000 (the Pulitzer Notes) from a group of
institutional lenders (the Lenders). The aggregate principal amount of the Pulitzer Notes is payable in
April 2009 and bears interest at an annual rate of 8.05%. The Pulitzer Notes are guaranteed by Pulitzer
pursuant to a Guaranty Agreement dated May 1, 2000 (Guaranty Agreement) with the Lenders. In turn,
pursuant to an Indemnity Agreement dated May 1, 2000 (Indemnity Agreement) between The Herald
Company, Inc. (Herald) and Pulitzer, Herald agreed to indemnify Pulitzer for any payments that Pulitzer
may make under the Guaranty Agreement.

The terms of the Pulitzer Notes, as amended, contain certain covenants and conditions including the
maintenance, by Pulitzer, of EBITDA, as defined in the Guaranty Agreement, minimum net worth and
limitations on the incurrence of other debt. At September 30, 2005, the Company is in compliance with
such covenants. In addition, the Pulitzer Notes and the Operating Agreement with Herald (Operating
Agreement)
require that PD LLC maintain a minimum reserve balance, consisting of cash and
investments in U.S. government securities, totaling approximately $81,060,000 at September 30, 2005.
The Pulitzer Notes and the Operating Agreement provide for a $3,750,000 quarterly increase in the
minimum reserve balance through May 1, 2010, when the amount will total $150,000,000. See Note 20.

The purchase price allocation of Pulitzer (see Note 2) resulted in an increase in the value of the Pulitzer
Notes in the amount of $31,512,000, which is recorded as debt in the Consolidated Balance Sheets. This
amount will be amortized over the remaining life of the Pulitzer Notes, until April 2009, as a reduction in
interest expense using the interest method. This amortization will not increase the principal amount due
to, or reduce the amount of interest to be paid to, the Lenders.

Debt consists of the following:

(Thousands)

Credit Agreement:
A Term Loan
B Term Loan
Revolving credit facility

Pulitzer Notes:

Principal amount
Unamortized fair value adjustment

2002 revolving credit facility
1998 Note Purchase Agreement

Less current maturities

September 30

2005

2004

Interest Rate
September 30, 2005

5.04%

5.47 – 5.75
5.04

8.05

$ 800,000
230,000
352,000

-
-
-

306,000
28,024
-
-
1,716,024
10,000
$1,706,024

-
-
100,000
113,600
213,600
11,600
$202,000

Aggregate maturities of debt during the five years ending September 30, 2010 are $10,000,000,
$42,329,000, $62,329,000, $428,329,000, and $142,329,000, respectively.

8 INTEREST RATE EXCHANGE AGREEMENTS

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 two to five 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 amounts, and for the time periods, of such instruments. At
September 30, 2005, the Company recorded an asset of $2,707,000 related to the fair value of such
instruments. The change in this fair value is recorded in accumulated other comprehensive income, net of
income taxes.

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

In June 2005, the Company terminated fixed-to-floating interest rate swaps with a notional amount of
$150,000,000 previously executed by Pulitzer. The swaps were accounted for as fair value hedges. The
Company received cash of $2,100,000 upon termination.

9 PENSION PLANS

The Company and its subsidiaries have several noncontributory defined benefit pension plans that
together cover a significant number of St. Louis Post-Dispatch and selected other employees. Benefits
under the plans are generally based on salary and years of service. The Company’s liability and related
expense for benefits under the plans are recorded over the service period of active employees based
upon annual actuarial calculations. Plan funding strategies are influenced by tax regulations. Plan assets
consist primarily of domestic and foreign corporate equity securities, government and corporate bonds,
and cash.

The Company uses a June 30 measurement date for all of its pension plan obligations.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The U.S. Congress is considering changes to existing laws governing employer funding of defined benefit
pension plans and insurance premiums payable to the Pension Benefit Guarantee Corporation (PBGC).
While the ultimate timing and outcome of such deliberations cannot be determined with any degree of
certainty, the Company does not expect that any changes in such laws, based on pending legislation, will
require a significant change in funding to its plans from current assumptions. The Company also expects
that its PBGC insurance premiums will increase in future years.

The cost components of the Company’s pension plans (from the June 3, 2005 date of acquisition) are as
follows:

(Thousands)

Service cost for benefits earned during the year
Interest cost on projected benefit obligation
Expected return on plan assets
Cost for special termination benefits (see Note 20)
Net periodic pension cost

Changes in benefit obligations and plan assets are as follows:

(Thousands)

Benefit obligation, beginning of year
Fair value of benefit obligation acquired
Service cost
Interest cost
Actuarial gain
Benefits paid
Special termination benefits
Benefit obligation, end of year
Fair value of plan assets, beginning of year:
Fair value of plan assets acquired
Actual gain on plan assets
Benefits paid
Fair value of plan assets, June 30 measurement date

Funded status – benefit obligation in excess of plan assets
Unrecognized net actuarial gain
Net accrued benefit liability recognized

2005

$ 2,229
2,950
(4,212)
4,650
$ 5,617

2005

-
181,259
2,229
2,950
(3,884)
(724)
4,650
186,480
-
156,448
1,561
(724)
157,285

29,195
1,233
$ 30,428

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the
pension plans with accumulated benefit obligations in excess of plan assets are $71,755,000,
$66,505,000 and $62,162,000, respectively, at September 30, 2005.

Assumptions

Weighted-average assumptions used to determine benefit obligations are as follows:

Discount rate
Rate of compensation increase

September 30, 2005

5.0%
4.0

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

Discount rate
Expected long-term return on plan assets
Rate of compensation increase

2005

5.0%
8.5
4.0

The assumptions related to the expected long-term return on plan assets are developed through an
analysis of historical market returns and current market conditions.

Plan Assets

The weighted-average asset allocation of the Company’s pension assets is as follows:

Asset Classes

Equity securities
Debt securities

Policy Allocation

Allocation of Plan Assets
September 30, 2005

65% to 70%
35% to 30%

71%
29%

An investment policy outlines the governance structure for decision making, sets investment objectives
and restrictions, and establishes criteria for selecting and evaluating investment managers. The use of
derivatives is strictly prohibited, except on a case-by-case basis where the manager has a proven
capability, and only to hedge quantifiable risks such as exposure to foreign currencies. An investment
committee, consisting of Company executives and supported by independent consultants, is responsible
for monitoring compliance with the investment policy.

The pension trust holds no Company securities, directly or through separate accounts.

Cash Flows

Based on its forecast at September 30, 2005, the Company does not expect to make contributions to its
pension trust in 2006.

The Company anticipates future benefit payments, which reflect future service, to be paid from the
pension trust as follows:

(Thousands)

2006
2007
2008
2009
2010
2011-2015

Other Plans

$ 8,516
8,690
8,840
9,197
9,341
52,793

The Company is obligated under an unfunded plan to provide certain fixed retirement payments to certain
former employees. The plan is frozen and no additional benefits are being accrued. The accrued liability
under the plan is $3,006,000 and $3,152,000 at September 30, 2005 and 2004, respectively.

Certain of the Company’s employees participate in multi-employer retirement plans sponsored by their
respective bargaining units. The amount charged to operating expense, representing the Company’s
required contributions to these plans, is approximately $228,000 in 2005.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10 POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS

The Company provides retiree medical and life insurance benefits under postretirement plans at several
of its operating locations. The level and adjustment of participant contributions vary depending on the
specific plan. In addition, PD LLC provides postemployment disability benefits to certain employee groups
prior to retirement at the St. Louis Post-Dispatch. The Company’s liability and related expense for benefits
under the postretirement plans are recorded over the service period of active employees based upon
annual actuarial calculations. The Company accrues postemployment disability benefits when it becomes
probable that such benefits will be paid and when sufficient information exists to make reasonable
estimates of the amounts to be paid.

The Company uses a June 30 measurement date for all of its postretirement plans.

The net periodic postretirement benefit cost components for the Company’s postretirement plans are as
follows:

(Thousands)

Service cost for benefits earned during the year
Interest cost on projected benefit obligation
Expected return on plan assets
Cost for special termination benefits
Net periodic postretirement benefit cost

Changes in benefit obligations and plan assets are as follows:

(Thousands)

Benefit obligation, beginning of year
Fair value of benefit obligation acquired
Service cost
Interest cost
Actuarial gain
Benefits paid
Cost for special termination benefits
Benefit obligation, end of year
Fair value of plan assets, beginning of year
Fair value of plan assets acquired
Actual return on plan assets
Employer contributions
Benefits paid
Fair value of plan assets, end of year
Funded status
Unrecognized net actuarial gain
Fourth quarter contributions
Net accrued benefit cost recognized

Assumptions

2005

$1,107
2,196
(690)
450
$3,063

2005

-
133,687
1,107
2,196
(1,977)
(486)
450
134,977
-
43,757
430
486
(486)
44,187
90,790
1,717
(1,416)
$ 91,091

Weighted-average assumptions used to determine benefit obligations are as follows:

Discount rate
Expected long-term return on plan assets

September 30, 2005

5.0%
5.0

The assumptions related to the expected long-term return on plan assets are developed through an
analysis of historical market returns and current market conditions.

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

Discount rate
Expected long-term return on plan assets

Assumed health care cost trend rates are as follows:

Indemnity plans
PPO plans
HMO plans
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)
Year that the rate reaches the ultimate trend rate

2005

5.0%
5.0

September 30, 2005

11.0% – 12.0%
10.0% – 11.0%
8.5% – 9.5%
5.25%
2015

Administrative costs related to indemnity plans are assumed to increase at a constant annual rate of 6%.

Assumed health care cost
trend rates have a significant effect on the amounts reported for the
postretirement health care plans. A one percentage point change in assumed health care cost trend rates
would have the following annualized effects on reported amounts for 2005:

(Thousands)

Effect on net periodic postretirement benefit cost
Effect on postretirement benefit obligation

Plan Assets

One Percentage
Point
Increase Decrease

$ 618
19,614

(477)
(15,430)

The weighted-average asset allocation of the Company’s postretirement fund at September 30, 2005, is
as follows:

Asset Class

Debt securities

Policy Allocation

Allocation of Plan Assets
September 30, 2005

100%

The postretirement fund holds no Company securities, directly or through separate accounts.

The Company’s postemployment benefit obligation, representing certain disability benefits at the St. Louis
Post-Dispatch, is $4,146,000 at September 30, 2005.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash Flows

Based on its forecast at September 30, 2005, the Company expects to contribute $1,300,000 to its
postretirement plans in 2006.

In December 2003 the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act)
was signed into law. The Act introduced a prescription drug benefit under Medicare (Medicare Part D) and
a federal subsidy to sponsors of retiree health care benefit plans (Subsidy) that provide a benefit that is at
least actuarially equivalent (as that
term is defined in the Act) to Medicare Part D. The Company
concluded that it qualifies for the Subsidy under the Act since the prescription drug benefits provided
under the Company’s postretirement health care plans generally require lower premiums from covered
retirees and have lower deductibles than the benefits provided in Medicare Part D and, accordingly, are
actuarially equivalent to or better than, the benefits provided under the Act.

The Company anticipates future benefit payments, which reflect future services, to be paid either with
future contributions to the plan or directly from plan assets, as follows:

(Thousands)

2006
2007
2008
2009
2010
2011-2015

Less
Medicare
Part D
Subsidy

$ (567)
(601)
(626)
(656)
(685)
(3,795)

Net
Payments

$ 5,520
5,812
6,017
6,275
6,523
35,705

Gross
Payments

$ 6,087
6.413
6,643
6,931
7,208
39,500

11 OTHER RETIREMENT PLANS

Substantially all the Company’s employees are eligible to participate in a qualified defined contribution
retirement plan. The Company also has other retirement and compensation plans for executives and
others. Retirement and compensation plan costs, including interest on deferred compensation costs,
charged to continuing operations are $22,651,000 in 2005, $18,692,000 in 2004, and $16,962,000 in 2003.

In conjunction with the acquisition of Pulitzer, an existing supplemental executive benefit retirement plan
(SERP) was amended and converted into an individual account plan. An account was established for
each participant and was credited with an amount representing the present value of the participant’s
accrued benefit under the SERP, plus adjustments for certain individuals subject to existing transition
agreements. Interest is credited to each account at an annual rate of 5.75%. The SERP, as amended, will
be liquidated on or about May 1, 2008, or earlier upon a change of control of the Company, at which time
each participant will receive a lump sum payment equal to the balance in his account. Retired participants
will continue to receive annuity payments until the liquidation of the SERP. At September 30, 2005, the
Company’s liability under the SERP totals $19,054,000.

12 COMMON STOCK, CLASS B COMMON STOCK, AND PREFERRED SHARE PURCHASE RIGHTS

Class B Common Stock has ten votes per share on all matters and generally votes as a class with
Common Stock (which has one vote per share). The transfer of Class B Common Stock is restricted.
Class B Common Stock is at all times convertible into shares of Common Stock on a share-for-share
basis. Common Stock and Class B Common Stock have identical rights with respect to cash dividends
and upon liquidation. All outstanding Class B Common Stock converts to Common Stock when the shares
of Class B Common Stock outstanding total less than 5,600,000 shares.

In 1998, the Board of Directors adopted a Shareholder Rights Plan (Plan). Under the Plan, the Board
declared a dividend of one Preferred Share Purchase Right (Right) for each outstanding share of
Common Stock and Class B Common Stock (collectively Common Shares) of the Company. Rights are
attached to, and automatically trade with, the Company’s Common Shares.

Rights become exercisable only in the event that any person or group of affiliated persons becomes a
holder of 20% or more of the Company’s outstanding Common Shares, or commences a tender or
exchange offer which, if consummated, would result in that person or group of affiliated persons owning
at least 20% of the Company’s outstanding Common Shares. Once the Rights become exercisable, they
entitle all other stockholders to purchase, by payment of a $150 exercise price, one one-thousandth of a
share of Series A Participating Preferred Stock, subject to adjustment, with a value of twice the exercise
price. In addition, at any time after a 20% position is acquired and prior to the acquisition of a 50%
position, the Board of Directors may require, in whole or in part, each outstanding Right (other than Rights
held by the acquiring person or group of affiliated persons) to be exchanged for one share of Common
Stock or one one-thousandth of a share of Series A Preferred Stock. The Rights may be redeemed at a
price of $0.001 per Right at any time prior to their expiration in May 2008.

13 STOCK OWNERSHIP PLANS

Total stock compensation expense is $7,879,000, $5,874,000, and $4,628,000 in 2005, 2004, and 2003,
respectively.

Stock Options and Restricted Stock

The Company has reserved 1,462,024 shares of Common Stock for issuance to employees under an
incentive and nonstatutory stock option and restricted stock plan approved by stockholders. Options are
granted at a price equal to the fair market value on the date of grant, and are exercisable in cumulative
installments over a ten-year period. The fair value of each grant is estimated at the grant date using the
Black-Scholes option-pricing model with the following weighted-average assumptions for grants: dividend
rates of 1.5% to 2.0%; price volatility of 24.3% to 29.8%; risk-free interest rates based upon the life of the
option ranging from 2.3% to 3.6%; and expected lives based upon the life of the option ranging from 4.2
to 4.7 years.

A summary of stock option activity is as follows:

Number Of Shares
2004

2005

2003

921
140
(76)
(4)
981

608

1,177
245
(481)
(20)
921

1,049
301
(165)
(8)
1,177

368

579

2005

2004

2003

$47.64
30.28
37.76
11.00

$44.25
27.14
35.65
9.35

$32.52
25.66
30.39
7.39

(Thousands)

Under option, beginning of year
Granted
Exercised
Canceled
Under option, end of year

Exercisable, end of year

Weighted average prices of stock options are as follows:

Granted
Exercised
Under option, end of year
Fair value of options granted

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of stock options outstanding at September 30, 2005 is as follows:

Range of
Exercise
Prices

$15 to 20
20 to 25
25 to 30
30 to 35
35 to 40
40 to 45
45 to 50

Options Outstanding

Options Exercisable

Weighted-
Average
Remaining
Contractual
Life
(Years)

0.1
1.1
3.8
6.4
6.1
7.8
6.7
6.4

Weighted-
Average
Exercise
Price

Number
Exercisable

Weighted-
Average
Exercise
Price

$19.81
21.50
27.98
32.47
35.52
43.22
47.67
$37.76

1,400
2,100
86,575
172,848
227,256
62,605
55,618
608,402

$19.81
21.50
27.98
32.44
35.52
43.16
47.75
$35.39

Number
Outstanding

1,400
2,100
86,575
286,391
227,256
182,116
195,380
981,218

Restricted Common Stock is subject to an agreement requiring forfeiture by the employee in the event of
termination of employment, generally within three years of the grant date for reasons other than normal
retirement, death or disability. In 2005, 2004 and 2003, the Company granted 116,000, 100,000, and
71,000 shares, respectively, of restricted Common Stock to employees. At September 30, 2005, 278,800
shares of restricted Common Stock were outstanding.

At September 30, 2005, 480,800 shares are available for granting of stock options or issuance of
restricted Common Stock.

In November 2005, 174,920 options were granted at an exercise price of $39.60 per share and 163,230
shares of restricted Common Stock were issued.

In November 2004, 40,000 shares of restricted Common Stock granted to an officer of the Company in
November 2003 and 35,000 shares of restricted Common Stock granted in November 2002, were
cancelled and reissued. The reissued shares of restricted Common Stock are identical to the cancelled
shares with respect to voting rights and timing of vesting; however, the reissued shares are not eligible
for dividends until after the specific performance goals are met. The value per share to the recipient upon
vesting is unchanged. Vesting of the cancelled shares was not dependent upon future performance of the
Company. The reissued shares vest only if specified performance criteria are met and additional shares
may be issued if the performance criteria are exceeded. As the specified performance was exceeded,
15,000 additional shares of restricted Common Stock were issued in November 2005. The Company
the criteria for performance-based compensation under
believes the reissued shares meet
Section 162(m) of the Internal Revenue Code. Due to increases in the price of the Company’s Common
Stock from the original grant dates to November 2004, the reissued shares have a fair market value in
excess of the cancelled shares in the amount of $706,000.

Stock Purchase Plan

The Company has 672,000 shares of Common Stock available for issuance pursuant to the Company’s
Employee Stock Purchase Plan (ESPP). April 28, 2006 is the exercise date for the current offering. The
purchase price is the lower of 85% of the fair market value at the date of grant or the exercise date, which
is one year from the date of grant. The Company also has 376,900 shares of Common Stock available for
issuance under the Company’s Supplemental Employee Stock Purchase Plan (SPP). The last business
day of each calendar quarter through April 28, 2006 is the exercise date for the current offering period.
The purchase price is 85% of the market price on last business day of each calendar quarter during the
offering period. The weighted-average fair values of purchase rights granted under the ESPP in 2005,
2004, and 2003, computed using the Black-Scholes option-pricing model, are $8.43, $9.28, and $8.35,
respectively. The weighted-average fair value of purchase rights granted under the SPP in 2005,
computed using the Black-Scholes option-pricing model, is $7.33.

In 2005, 2004 and 2003 employees purchased 89,000, 88,000 and 76,000 shares, respectively, under the
ESPP at a price of $35.11 in 2005, $30.25 in 2004, and $30.08 in 2003. In 2005, employees purchased
5,600 shares at a price of $36.11 under the SPP.

14 INCOME TAXES

Income tax expense (benefit) consists of the following:

(Thousands)

Current:

Federal
State
Deferred

Continuing operations
Discontinued operations

2005

2004

2003

$35,979
5,851
2,523
$44,353

$44,353
-
$44,353

$36,048
5,868
8,979
$50,895

$48,192
2,703
$50,895

$43,116
7,183
(6,851)
$43,448

$43,348
100
$43,448

Income tax expense related to continuing operations differs from the amounts computed by applying the
U.S. federal income tax rate to income before income taxes. The reasons for these differences are as
follows:

Computed “expected” income tax expense
State income taxes, net of federal tax benefit
Net income of associated companies

taxed at dividend rates
Resolution of tax issues
Other

2005

2004

2003

35.0%
3.3

(2.1)
-
0.3
36.5%

35.0%
3.1

(1.8)
(0.9)
0.4
35.8%

35.0%
2.1

(1.9)
-
0.6
35.8%

Substantial deferred income tax liabilities were recorded in 2005 and 2002 as a result of acquisitions. Net
deferred income tax liabilities consist of the following components:

(Thousands)

Deferred income tax liabilities:
Property and equipment
Equity in undistributed earnings of affiliates
Investment in Tucson newspaper partnership
Identified intangible assets

Deferred income tax assets:
Accrued compensation
Allowance for doubtful accounts and losses on loans
Pension and postretirement benefits
Long-term debt and interest rate exchange agreements
State operating loss carryforwards
Other

Valuation allowance
Net deferred income tax liabilities

September 30

2005

2004

$ (58,653)
(2,556)
(68,482)
(438,957)
(568,648)

$ (32,675)
(2,056)
-
(181,744)
(216,475)

14,494
5,100
55,636
9,031
10,965
7,595
102,821
(10,965)
$(476,792)

7,203
3,517
-
-
-
2,482
13,202
-

$(203,273)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Net deferred income tax liabilities are classified as follows:

(Thousands)

Current assets
Non-current liabilities
Net deferred income tax liabilities

September 30

2005

2004

5,092
(481,884)
$(476,792)

6,646
(209,919)
$(203,273)

At September 30, 2005, the Company has approximately $269,300,000 of operating loss carryforwards
for state tax purposes that expire between 2006 and 2025.

15 FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions are used to estimate the fair value of each class of financial
is practicable to estimate value. The carrying amounts of cash and cash
instruments for which it
equivalents, accounts receivable, and accounts payable approximate fair value because of the short
maturity of those instruments. The carrying value of other investments, consisting of debt and equity
securities in a deferred compensation trust, is carried at fair value based upon quoted market prices.
the
Equity securities totaling $8,445,000, consisting primarily of
nonvoting common stock of The Capital Times Company and 4.9% interest in Cardinals Holdings LLC,
are carried at cost, as the fair value is not readily determinable. The fair value of floating rate debt
approximates the carrying amount. The fair value of
the Company’s fixed rate debt follows and is
estimated based on the quoted market prices for the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturities.

the Company’s 17% ownership of

(Thousands)

Carrying amount
Fair value

16 EARNINGS PER COMMON SHARE

September 30

2005

2004

$334,024
331,436

$113,600
124,200

The following table sets forth the computation of basic and diluted earnings per common share:

(Thousands, Except Per Common Share Data)

2005

2004

2003

Income (loss) applicable to common stock:

Continuing operations
Discontinued operations

Net income

Weighted average common shares
Less non-vested restricted Common Stock
Basic average common shares
Dilutive stock options and restricted Common Stock
Diluted average common shares

Earnings per common share:

Basic:

Continuing operations
Discontinued operations

Net income

Diluted:

Continuing operations
Discontinued operations

Net income

$76,878 $86,469 $77,881
160
$76,878 $86,071 $78,041

(398)

45,394
276
45,118
230
45,348

45,010
218
44,792
300
45,092

44,478
162
44,316
197
44,513

$ 1.70 $ 1.93 $ 1.76

(0.01)

$ 1.70 $ 1.92 $ 1.76

$ 1.70 $ 1.92 $ 1.75

(0.01)

$ 1.70 $ 1.91 $ 1.75

17 OTHER INFORMATION

Compensation and other accrued liabilities related to continuing operations consist of the following:

(Thousands)
Compensation
Retirement and stock purchase plans
Interest
Other

Cash payments are as follows:

(Thousands)

Interest
Income taxes, net of refunds

September 30

2005
$34,573
14,116
8,968
14,288
$71,945

2004
$18,740
8,076
171
10,043
$37,030

2005

2004

2003

$28,879 $11,489 $16,393
31,063
56,228

42,187

18 VALUATION AND QUALIFYING ACCOUNTS

Valuation and qualifying account information related to continuing operations is as follows:

(Thousands)

2005

2004

2003

ALLOWANCE FOR DOUBTFUL ACCOUNTS

Balance, beginning of year
Additions charged to expense
Reserves of businesses acquired or sold
Deductions from reserves
Balance, end of year

ALLOWANCE FOR LOSSES ON LOANS

Balance, beginning of year
Additions charged to expense
Conversion of loans to equity
Balance, end of year

19 RELATED PARTY TRANSACTIONS

2,960
5,024
(4,746)

$ 6,374 $ 5,527 $ 5,955
2,897
4,027
-
31
(3,325)
(3,211)
$ 9,612 $ 6,374 $ 5,527

$ 2,827 $ 2,710
117
-
$ 2,827

57
(2,884)
$ -

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.

20 COMMITMENTS AND CONTINGENT LIABILITIES

Newsprint

The Company has contracts for the annual purchase of 202,400 metric tons of newsprint, at market
prices, from six suppliers. The commitments represent substantially all of the Company’s annual volume,
inclusive of MNI, and expire at various dates through December 2006. Contracts with a single supplier
represent approximately 60% of the total.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Operating Leases

The Company has operating lease commitments for certain of its office, production, and distribution
facilities. Management expects that in the normal course of business, existing leases will be renewed or
replaced by other leases. Minimum lease payments during the five years ending September 2010 and
thereafter are $4,028,000, $3,113,000, $2,404,000, $2,016,000, $1,597,000 and $8,368,000,
respectively. Total operating lease expense is $4,164,000, $3,279,000, and $3,030,000, in 2005, 2004
and 2003, respectively.

Capital Commitments

At September 30, 2005, the Company had construction and equipment purchase commitments totaling
approximately $11,891,000.

Investment Commitments

At September 30, 2005, the Company had unfunded capital contribution commitments of up to $922,000
related to limited partnerships and other entities in which it is an investor.

St. Louis Post-Dispatch Early Retirement Program

incentives that will result

In November 2005, the Company announced that the St. Louis Post-Dispatch concluded an offering of
early retirement
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 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.

PD LLC Operating Agreement

On May 1, 2000, Pulitzer and Herald completed the transfer of their respective interests in the assets and
operations of the St. Louis Post-Dispatch and certain related businesses to a new joint venture (the
Venture), known as PD LLC. Pulitzer is the managing member of PD LLC. Under the terms of the
operating agreement governing PD LLC (the Operating Agreement), Pulitzer and another subsidiary hold
a 95% interest in the results of operations of PD LLC and Herald holds a 5% interest. Herald’s 5% interest
is reported as minority interest in the Consolidated Statements of Income and Comprehensive Income.
Also, under the terms of the Operating Agreement, Herald received on May 1, 2000 a cash distribution of
$306,000,000 from PD LLC (the Initial Distribution). This distribution was financed by the Pulitzer Notes.
Pulitzer’s entry into the Venture was treated as a purchase for accounting purposes.

During the first ten years of its term, PD LLC is restricted from making distributions (except under
specified circumstances), capital expenditures and member loan repayments unless it has set aside out
of its cash flow a reserve equal to the product of $15,000,000 and the number of years since May 1,
2000, but not in excess of $150,000,000 (the Reserve). PD LLC is not required to maintain the Reserve
after May 1, 2010. On May 1, 2010, Herald will have a one-time right to require PD LLC to redeem
Herald’s interest in PD LLC, together with Herald’s interest, if any, in another limited liability company
known as DS LLC in which Pulitzer is the managing member and which is engaged in the business of
delivering publications and products in the greater St. Louis metropolitan area. The May 1, 2010
redemption price for Herald’s interest will be determined pursuant to a formula yielding an amount which
will result in the present value to May 1, 2000 of the after tax cash flows to Herald (based on certain
assumptions) from PD LLC, including the Initial Distribution and the special distribution described below, if
any, and from DS LLC, being equal to $275,000,000.

In the event the transactions effectuated in connection with either the formation of the Venture and the
Initial Distribution or the organization of DS LLC are recharacterized by the IRS as a taxable sale by
Herald, with the result in either case that the tax basis of PD LLC’s assets increases and Herald is
required to recognize taxable income as a result of such recharacterization, Herald generally will be
entitled to receive a special distribution from PD LLC in an amount that corresponds, approximately, to

the present value of the after tax benefit to the members of PD LLC of the tax basis increase. The
adverse financial effect of any such special distribution to Herald on PD LLC (and thus Pulitzer and the
Company) will be partially offset by the current and deferred tax benefits arising as a consequence of the
treatment of the transactions effectuated in connection with the formation of the Venture and the Initial
Distribution or the organization of DS LLC as a taxable sale by Herald. The Company has been advised
that the IRS, in the course of examining the 2000 consolidated federal income tax return in which Herald
was included, has requested certain information and documents relating to the transactions effectuated in
connection with the formation of the Venture and the Initial Distribution. The Company is participating in
the formulation of Herald’s response to this IRS request for information and documents.

Upon termination of PD LLC and DS LLC, which will be on May 1, 2015 (unless Herald exercises the
redemption right described above), Herald will be entitled to the liquidating value of its interests in PD LLC
and DS LLC, to be paid in cash by Pulitzer. That amount would be equal to the amount of Herald’s capital
accounts, after allocating the gain or loss that would result from a cash sale of PD LLC and DS LLC’s
assets for their fair market value at that time. Herald’s share of such gain or loss generally will be 5%, but
will be reduced (but not below 1%) to the extent that the present value to May 1, 2000 of the after tax
cash flows to Herald from PD LLC and from DS LLC, including the Initial Distribution, the special
distribution described above, if any, and the liquidation amount (based on certain assumptions), exceeds
$325,000,000.

The actual amount payable to Herald either on May 1, 2010, or upon the termination of PD LLC and DS
LLC on May 1, 2015 will depend on such variables as future cash flows, the amounts of any distributions
to Herald prior to such payment, PD LLC’s and DS LLC’s rate of growth and market valuations of
the
newspaper properties. While the amount of such payment cannot be predicted with certainty,
Company currently estimates (assuming a 5% annual growth rate in Herald’s capital accounts, no special
distribution as described above and consistent newspaper property valuation multiples) that the amount of
such payment would not exceed $100,000,000. The Company further believes that it will be able to
finance such payment either from available cash reserves or with the proceeds of a debt issuance. The
redemption of Herald’s interest in PD LLC either on May 1, 2010 or upon termination of PD LLC in 2015 is
expected to generate significant tax benefits to the Company as a consequence of the resulting increase
in the tax basis of
the assets owned by PD LLC and DS LLC and the related depreciation and
amortization deductions.

Income Taxes

The Company files income tax returns with the Internal Revenue Service (IRS) 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 primary issues in audits currently in process or being
contested relate to the appropriate determination of gains, and allocation to the various taxing authorities
thereof, on businesses sold in 2001. The Company may also be subject to claims for transferee income
tax liability related to businesses acquired in 2000. 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.
However, the actual outcome cannot be determined with certainty and the difference could be material,
either positively or negatively, to the Consolidated Statements of Income and Comprehensive Income in
the periods in which such matters are ultimately determined. The Company does not believe the final
resolution of such matters will be material to its consolidated financial position.

Merger Agreement Indemnification

Pursuant to an Amended and Restated Agreement and Plan of Merger dated as of May 25, 1998 (the
HTV Merger Agreement), by and among Pulitzer, its predecessor, Pulitzer Publishing Company (Old
Pulitzer), and Hearst-Argyle Television, Inc. (Hearst-Argyle), on March 18, 1999 Hearst-Argyle acquired,
through the merger (the HTV Merger) of Old Pulitzer with and into Hearst-Argyle, Old Pulitzer’s television
and radio broadcasting operations (collectively, the Broadcasting Business) in exchange for the issuance
to Old Pulitzer’s stockholders of 37,096,774 shares of Hearst-Argyle’s Series A common stock. Prior to
the HTV Merger, Old Pulitzer’s newspaper publishing and related new media businesses were
contributed to Pulitzer in a tax-free “spin-off” to Old Pulitzer stockholders (the Spin-off). The HTV Merger
and Spin-off are collectively referred to as the Broadcast Transaction.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Pursuant to the HTV Merger Agreement, Pulitzer is obligated to indemnify Hearst-Argyle against losses
related to: (i) on an after tax basis, certain tax liabilities, including (a) any transfer tax liability attributable
to the Spin-off, (b) with certain exceptions, any tax liability of Old Pulitzer or any subsidiary of Old Pulitzer
attributable to any tax period (or portion thereof) ending on or before the closing date of the HTV Merger,
including tax liabilities resulting from the Spin-off, and (c) any tax liability of Pulitzer or any subsidiary of
Pulitzer; (ii) liabilities and obligations under any employee benefit plans not assumed by Hearst-Argyle;
and (iii) certain other matters as set forth in the HTV Merger Agreement.

In October 2001, the IRS formally proposed that the taxable income of Old Pulitzer for the tax year ended
March 18, 1999 be increased by approximately $80,400,000 based on its assertion that Old Pulitzer was
required to recognize a taxable gain in that amount as a result of the Spin-off. Under the HTV Merger
Agreement, Pulitzer has the right to control any proceedings relating to the determination of Old Pulitzer’s
tax liability for such tax period. In January 2002, Pulitzer filed a formal written protest of the IRS’ proposed
adjustment with the IRS Appeals Office.

In August 2002, Pulitzer, on behalf of Old Pulitzer, filed with the IRS amended federal corporate income
tax returns for the tax years ended December 1997 and 1998 and March 1999 in which tax refunds in the
aggregate amount of approximately $8,100,000, plus interest, were claimed. Under the HTV Merger
Agreement, Pulitzer is entitled to any refunds recovered from the IRS as a result of these claims.

In May 2005, discussions with the IRS Examination Division, to which the matter was ultimately referred,
culminated in the execution of agreements under which Pulitzer’s liability for Old Pulitzer’s net
consolidated federal income tax deficiency (excluding applicable interest) for 1997, 1998 and the tax year
ended March 18, 1999, after taking into account the effects of the refund claims, was determined to be
$81,000. The agreements with the IRS were subject to review by the U.S. Congressional Joint Committee
on Taxation. Such review was completed in 2005 and the matter is now closed.

Litigation

21 IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In December 2004 the FASB issued Statement 123-Revised, Accounting for Stock-Based Compensation
(Statement 123R). In April 2005, the SEC announced the adoption of a rule that defers the required
effective date of Statement 123R. Should the FASB amend Statement 123R to be consistent with SEC
guidelines, the required effective date of Statement 123R for the Company is October 1, 2005. In
addition, Statement 123R amends Statement 95, Statement of Cash Flows, to require that excess tax
benefits be reported as a financing cash inflow rather than a reduction of taxes paid.

Statement 123R establishes standards for accounting for transactions in which an entity exchanges its
equity instruments for goods and services (primarily accounting transactions in which an entity obtains
transactions, such as stock options). Statement 123R
employee services in share-based payment
requires a public entity to measure the cost of employee services received in exchange for an equity
instrument based on the grant-date fair value of the award. In general, the cost will be recognized over
the period during which an employee is required to provide the service in exchange for the award (usually
the vesting period). The fair-value based methods in Statement 123R are similar to the fair-value based
method in Statement 123 in most respects. The Company adopted Statement 123 in 2003.

In December 2004 the FASB issued Statement 153, Exchanges of Nonmonetary Assets. This
pronouncement amends APB Opinion 29, Accounting for Nonmonetary Transactions. Statement 153 is
effective for nonmonetary exchanges occurring in fiscal periods beginning after June 15, 2005. Statement
153 eliminates the exception for nonmonetary exchanges of similar productive assets present in APB
Opinion 29 and replaces it with a general exception for exchanges of nonmonetary assets that do not
have commercial substance (i.e. transactions that are not expected to result in significant changes in the
cash flows of the reported entity).

In May 2005 the FASB issued Statement 154, Accounting Changes and Error Corrections – a
replacement of APB Opinion No. 20 and FASB Statement No. 3, that changes the requirements for the
accounting and reporting of a change in accounting principle. Statement 154 eliminates the requirement
to include the cumulative effect of changes in accounting principle in the current period of change and
instead, requires that changes in accounting principle be retrospectively applied. Statement 154 is
effective for accounting changes made in fiscal years beginning after December 15, 2005.

The Company does not anticipate that the implementation of the statements discussed above will have a
material impact on its financial position, results of operations, or cash flows.

22 QUARTERLY FINANCIAL DATA (UNAUDITED)

(Thousands, Except Per Common Share Data)

1st

2nd

3rd

4th

Quarter

2005

Operating revenue
Net income

Earnings per common share:

Basic
Diluted

2004

Operating revenue
Income from continuing operations
Discontinued operations
Net income

Earnings per common share:

Basic:

Continuing operations
Discontinued operations

Net income

Diluted:

Income from continuing operations
Discontinued operations

Net income

$184,084 $168,695 $217,856 $290,224
13,106

27,011

18,698

18,064

0.60 $
0.60

0.40 $
0.40

0.41 $
0.41

0.29
0.29

$172,984 $160,344 $175,966 $174,030
21,248
66
$ 24,479 $ 15,814 $ 24,464 $ 21,314

16,272
(458)

24,552
(88)

24,397
82

0.55 $

0.36 $
(0.01)
0.35 $

0.55 $

0.54 $

0.55 $

0.36 $
(0.01)
0.35 $

0.54 $

0.47
-
0.47

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders
Lee Enterprises, Incorporated and subsidiaries
Davenport, Iowa

We have audited the accompanying Consolidated Balance Sheets of Lee Enterprises, Incorporated and
subsidiaries (the “Company”) as of September 30, 2005 and 2004, and the related Consolidated
Statements of Income and Comprehensive Income, Stockholders’ Equity, and Cash Flows for each of the
three years in the period ended September 30, 2005. These financial statements are the responsibility of
the Company’s management. Our responsibility is to express an opinion on these financial statements
based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

the
In our opinion, such Consolidated Financial Statements present
financial position of Lee Enterprises, Incorporated and subsidiaries at September 30, 2005 and 2004, and
the results of their operations and their cash flows for each of the three years in the period ended
September 30, 2005, in conformity with accounting principles generally accepted in the United States of
America.

in all material respects,

fairly,

We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the effectiveness of the Company’s 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 and our report dated
December 14, 2005 expressed an unqualified opinion on management’s assessment of the effectiveness
of the Company’s internal control over financial reporting and an unqualified opinion on the effectiveness
of the Company’s internal control over financial reporting.

Davenport, Iowa
December 14, 2005

Newspaper markets

Other primary markets

Other Information

Corporate Office
Lee Enterprises, Incorporated
201 N. Harrison St., Suite 600
Davenport, IA 52801-1939
(563) 383-2100

Securities Market
New York Stock Exchange
Ticker Symbol: LEE

Annual Meeting
The annual meeting of stockholders will
take place Wednesday, February 22, 2006,
at 9:00 a.m. at the
Figge Art Museum
225 W. 2nd St., Davenport, IA 52801

General Counsel
Lane & Waterman LLP
220 N. Main St., Suite 600
Davenport, IA 52801-1987

Independent Registered
Public Accounting Firm
Deloitte & Touche LLP
Northwest Bank Building
101 W. Second St.
Davenport, IA 52801-1813

2005 ANNUAL REPORT

A LANDMARK YEAR

58 intensely local

daily newspapers

with fast-growing

online sites,

plus more than 300

weeklies and specialty

publications, in 23 states