The following discussion includes comments and analysis relating to our results of operations and financial condition as of and for the 13 weeks ended December 30, 2012. This discussion should be read in conjunction with the Consolidated Financial Statements and related Notes thereto, included herein, and our 2012 Annual Report on Form 10-K.

NON-GAAP FINANCIAL MEASURES

No non-GAAP financial measure should be considered as a substitute for any related financial measure under accounting principles generally accepted in the United States of America ("GAAP"). However, we believe the use of non-GAAP financial measures provides meaningful supplemental information with which to evaluate our financial performance, or assist in forecasting and analyzing future periods. We also believe such non-GAAP financial measures are alternative indicators of performance used by investors, lenders, rating agencies and financial analysts to estimate the value of a publishing business or its ability to meet debt service requirements.

Operating cash flow is defined as operating income before depreciation, amortization, impairment of goodwill and other assets, curtailment gains and equity in earnings of associated companies. Operating cash flow margin is defined as operating cash flow divided by operating revenue. Both represent non-GAAP financial measures that are used in the analysis below. We believe these measures provide meaningful supplemental information because of their focus on results from operations excluding such non-cash factors.

Reconciliations of operating cash flow and operating cash flow margin to operating income and operating income margin, the most directly comparable measures under GAAP, are included in the tables below:

                                                                         13 Weeks Ended
                                    December 30   Percent of   December 25   Percent of
(Thousands of Dollars)                     2012      Revenue          2011      Revenue

Operating cash flow                      51,506         27.8        52,998         27.6
Depreciation and amortization           (15,230 )       (8.2 )     (16,965 )       (8.8 )
Equity in earnings of associated
companies                                 3,045          1.6         2,812          1.5
Operating income                         39,321         21.2        38,845         20.2

Adjusted net income and adjusted earnings per common share, which are defined as income attributable to Lee Enterprises, Incorporated and earnings per common share adjusted to exclude both unusual matters and those of a substantially non-recurring nature, are non-GAAP financial measures that are used in the analysis below. We believe these measures provide meaningful supplemental information by identifying matters that are not indicative of core business operating results or are of a substantially non-recurring nature.

Reconciliations of adjusted net income and adjusted earnings per common share to income attributable to Lee Enterprises, Incorporated and earnings per common share, respectively, the most directly comparable measures under GAAP, are set forth in Item 2, included herein, under the caption "Overall Results".

CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of results of operations and financial condition are based upon our Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our critical accounting policies include the following:

•Goodwill and other intangible assets;
•Pension, postretirement and postemployment benefit plans;
•Income taxes;
•Revenue recognition; and
•Uninsured risks.

Additional information regarding these critical accounting policies can be found under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2012 Annual Report on Form 10-K and the Notes to Consolidated Financial Statements, included herein.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In July 2012, the FASB issued an amendment to an existing accounting standard, which provides entities an option to perform a qualitative assessment to determine whether further impairment testing on indefinite-lived intangible assets is necessary. Specifically, an entity has the option to first assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test. If an entity believes, as a result of its qualitative assessment, that it is more-likely-than-not that the fair value of an indefinite-lived intangible asset is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required. This guidance is effective for annual and interim indefinite-lived intangible asset impairment tests performed for fiscal years beginning after September 15, 2012, and early adoption is permitted. We do not believe that the adoption of this amendment, which will occur in 2013, will have a material impact on our Consolidated Financial Statements.

EXECUTIVE OVERVIEW

We are a leading provider of local news and information, and a major platform for advertising, in the markets we serve, which are located primarily in the Midwest, Mountain West and West regions of the United States. With the exception of St. Louis, Missouri, our 51 daily newspaper markets, across 23 states, are principally midsize or small. Through our print and digital platforms, we reach an overwhelming majority of adults in our markets.

Our platforms include:

• 51 daily and 39 Sunday newspapers with circulation totaling 1.2 million and 1.4 million, respectively, for the 13 weeks ended December 30, 2012, read by nearly four million people in print;

• Websites and mobile and tablet products in all of our markets that complement our newspapers and attracted 21.5 million unique visitors in December 2012 with 187.3 million page views; and

• Nearly 300 weekly newspapers and classified and niche publications.

Our markets have established retail bases, and most are regional shopping hubs. We are located in four state capitals. Six of our top ten markets by revenue include major universities, and seven are home to major corporate headquarters. Based on data from the Bureau of Labor of Statistics as of December 2012, the unemployment rate in eight of our top ten markets by revenue was lower than the national average. We believe that all of these factors have had a positive impact on advertising revenue.

We do not face significant competition from other local daily newspapers in most of our markets, although there is significant competition for readers and viewers in those markets from other media. In our top ten markets by revenue, only two have significant local daily print competition. In the balance of our markets, we have little or no local daily print competition.

ECONOMIC CONDITIONS

According to the National Bureau of Economic Research, the United States economy was in a recession from December 2007 until June 2009. It is widely believed that certain elements of the economy, such as housing, auto sales and employment, were in decline before December 2007, and have still not recovered to pre-recession levels. Revenue, operating results and cash flows were significantly impacted by the recession and its aftermath. The domestic economy contracted again in the December 2012 quarter. The duration and depth of an economic recession, and pace of economic recovery, in markets in which we operate may influence our future results.

IMPAIRMENT OF GOODWILL AND OTHER ASSETS

Due primarily to the difference between our stock price and the per share carrying value of our net assets, we analyzed the carrying value of our net assets in 2008, 2009 and 2011. Continued deterioration in our revenue and the weak economic environment were also factors in the timing of the analyses. We concluded the fair value of our business did not exceed the carrying value of our net assets.

As a result, we recorded pretax, non-cash charges to reduce the carrying value of goodwill and nonamortized and amortizable intangible assets in 2008, 2009, and 2011. Additional pretax, non-cash charges were recorded to reduce the carrying value of TNI. We also recorded pretax, non-cash charges to reduce the carrying value of property and equipment in 2008, 2009, 2010, 2011 and 2012. We recorded deferred income tax benefits related to these charges.

DEBT AND LIQUIDITY

We have a substantial amount of debt, as discussed more fully (and certain capitalized terms used below defined) in Item 2, "Liquidity" and Note 5 of the Notes to Consolidated Financial Statements, included herein. In February 2009, we completed a comprehensive restructuring of our then-existing credit agreement and a refinancing of our Pulitzer Notes debt, substantially enhancing our liquidity and operating flexibility. Since February 2009, we have satisfied all interest payments and substantially all principal payments due under our debt facilities with our cash flows.

Substantially all of our debt was scheduled to mature in April 2012. We used a voluntary, prepackaged petition under the U. S. Bankruptcy Code to accomplish a comprehensive refinancing that extends the maturity to December 2015 for most of our debt, with the remainder maturing in April 2017. Interest expense has increased as a result of the refinancing and mandatory principal payments were reduced. Our ability to make payments on our indebtedness will depend on our ability to generate future cash flows. This ability, to a certain extent, is subject to general economic, financial, competitive, business, legislative, regulatory and other factors that are beyond our control.

At February 8, 2013, the principal amount of our outstanding debt totals $903,500,000. This amount is already less than the $938,700,000 amount projected in the Plan for September 2013 and is approaching the $893,100,000 amount projected for September 2014. Lower cash balances and asset sales have contributed to the improvement in debt repayment compared to the Plan.

There are numerous potential consequences under the 1st Lien Agreement, 2nd Lien Agreement, and the Note and Guaranty Agreements related to the Pulitzer Notes, if an event of default, as defined, occurs and is not remedied. Many of those consequences are beyond our control. The occurrence of one or more events of default would give rise to the right of the 1st Lien Lenders, 2nd Lien Lenders and/or the Noteholders, to exercise their remedies under the 1st Lien Agreement, 2nd Lien Agreement, and the Note and Guaranty Agreements, respectively, including, without limitation, the right to accelerate all outstanding debt and take actions authorized in such circumstances under applicable collateral security documents.

Our ability to operate as a going concern is dependent on our ability to remain in compliance with debt covenants and to refinance or amend our debt agreements as they become due, or earlier if available liquidity is consumed. We are in compliance with our debt covenants at December 30, 2012.

EQUITY CAPITAL

As of July 1, 2011, our Common Stock traded at an average 30-day closing market price of less than $1 per share. Under the NYSE listing standards, if our Common Stock fails to maintain an adequate per share price and total market capitalization of less than $50,000,000, our Common Stock could be removed from the NYSE and traded in the over the counter market. In July 2011, the NYSE first notified us that our Common Stock did not meet the NYSE continued listing standards due to the failure to maintain an adequate share price. Under the NYSE rules, our Common Stock was allowed to continue to be listed during a cure period. In February 2012, after completing our debt refinancing, the NYSE notified us that we were again in compliance with the minimum closing price standard. In January 2013, the NYSE notified us that we had returned to full compliance with all continued listing standards.

13 WEEKS ENDED DECEMBER 30, 2012

Operating results, as reported in the Consolidated Financial Statements, are
summarized below. Certain prior period amounts have been reclassified to conform
with the current year presentation.
                                                                        13 Weeks Ended
                                                 December 30   December 25     Percent
(Thousands of Dollars, Except Per Share Data)           2012          2011      Change

Advertising revenue:
Retail                                                84,923        88,261        (3.8 )
Classified:
Employment                                             7,717         8,472        (8.9 )
Automotive                                             9,320        10,013        (6.9 )
Real estate                                            4,680         5,290       (11.5 )
All other                                             11,715        12,445        (5.9 )
Total classified                                      33,432        36,220        (7.7 )
National                                               7,674        10,126       (24.2 )
Niche publications                                     2,661         2,715        (2.0 )
Total advertising revenue                            128,690       137,322        (6.3 )
Circulation                                           46,226        44,506         3.9
Commercial printing                                    3,305         3,064         7.9
Other                                                  7,238         7,150         1.2
Total operating revenue                              185,459       192,042        (3.4 )
Compensation                                          66,435        69,839        (4.9 )
Newsprint and ink                                     12,247        14,086       (13.1 )
Other operating expenses                              54,468        54,821        (0.6 )
Workforce adjustments                                    803           298          NM
                                                     133,953       139,044        (3.7 )
Operating cash flow                                   51,506        52,998        (2.8 )
Depreciation and amortization                         15,230        16,965       (10.2 )
Equity in earnings of associated companies             3,045         2,812         8.3
Operating income                                      39,321        38,845         1.2
Non-operating expense, net                           (16,426 )     (14,721 )      11.6
Income from continuing operations before
reorganization costs and income taxes                 22,895        24,124        (5.1 )
Reorganization costs                                       -         1,241          NM
Income from continuing operations before income
taxes                                                 22,895        22,883         0.1
Income tax expense                                     9,379         8,477        10.6
Net income from continuing operations                 13,516        14,406        (6.2 )
Discontinued operations, net of income taxes           1,167           218          NM
Net income                                            14,683        14,624         0.4
Net income attributable to non-controlling
interests                                               (117 )         (70 )        NM
Income attributable to Lee Enterprises,
Incorporated                                          14,566        14,554         0.1
Other comprehensive income (loss), net of income
taxes                                                    (93 )         152          NM
Comprehensive income attributable Lee
Enterprises, Incorporated                             14,473        14,706        (1.6 )

Income from continuing operations attributable
to Lee Enterprises, Incorporated                      13,399        14,336        (6.5 )

Earnings per common share:
Basic                                                   0.28          0.32       (12.5 )
Diluted                                                 0.28          0.32       (12.5 )

References to the "2013 Quarter" refer to the 13 weeks ended December 30, 2012. Similarly, references to the "2012 Quarter" refer to the 13 weeks ended December 25, 2011.

In the 2013 Quarter, combined print and digital advertising revenue decreased $8,632,000, or 6.3%, compared to the 2012 Quarter. Retail advertising decreased 3.8%. Retail preprint insertion revenue increased 1.1%. Digital retail advertising increased 6.2%, partially offsetting print declines.

On a combined basis, print and digital classified revenue decreased 7.7% in the 2013 Quarter. Employment revenue decreased 8.9% while automotive advertising decreased 6.9%, real estate decreased 11.5% and other classified decreased 5.9%. Digital classified revenue increased 11.0%, partially offsetting print declines.

National advertising decreased $2,452,000, or 24.2%. Advertising in niche publications decreased 2.0%.

On a stand-alone basis, digital advertising revenue increased 4.8% in the 2013 Quarter, representing 12.7% of total advertising revenue. Year-over-year total digital advertising turned positive in the month of December 2009 and has been rising steadily since that time. Print advertising revenue on a stand-alone basis decreased 7.7%.

Our total advertising results since 2000 have benchmarked favorably to industry averages reported by the Newspaper Association of America in 43 of the last 47 quarters.

Circulation revenue increased $1,720,000, or 3.9%, in the 2013 Quarter due to price increases and increases in digital subscribers, which were partially offset by decreases in print subscribers.

Our unaudited average daily newspaper circulation units, including TNI and MNI, decreased 4.5% and Sunday circulation decreased 10.1% in the 2013 Quarter compared to the 2012 Quarter.

Our digital sites attracted 21.5 million unique visitors in the month of December 2012, an increase of 2.2% from a year ago, with 187.3 million page views. The number of mobile page views grew 93% to 60.7 million in December 2012. Research in our larger markets indicates we are maintaining our share of audience through the combination of rapid digital audience growth and strong newspaper readership.

Commercial printing revenue increased $241,000, or 7.9%, in the 2013 Quarter. Other revenue increased $88,000, or 1.2%, in the 2013 Quarter.

Operating expenses, other than depreciation, amortization and unusual matters, decreased $5,596,000, or 4.0%, in the 2013 Quarter.

Compensation expense decreased $3,404,000, or 4.9%, in the 2013 Quarter, driven by a decline in average full time equivalent employees of 8.7%.

Newsprint and ink costs decreased $1,839,000, or 13.1%, in the 2013 Quarter as a result of a reduction in newsprint volume of 12.6%. See Item 3, "Commodities", included herein, for further discussion and analysis of the impact of newsprint on our business.

Other operating expenses, which are comprised of all operating costs not considered to be compensation, newsprint, depreciation, amortization, or unusual matters, decreased $353,000, or 0.6%, in the 2013 Quarter.

Reductions in staffing resulted in workforce adjustment costs totaling $803,000 and $298,000 in the 2013 Quarter and 2012 Quarter, respectively.

We are engaged in various efforts to continue to manage our operating expenses. We expect 2013 operating expenses, excluding depreciation, amortization and unusual matters, to decrease 3.5-4.5% from their 2012 level.

As a result of the factors noted above, operating cash flow decreased 2.8%, to $51,506,000, in the 2013 Quarter compared to $52,998,000 in the 2012 Quarter. Operating cash flow margin increased to 27.8% from 27.6% a year ago reflecting a larger percentage decrease in operating expenses than the decrease in operating revenue.

Depreciation expense decreased $515,000, or 8.5%, in the 2013 Quarter and amortization expense decreased $1,220,000, or 11.2%, in the 2013 Quarter.

Equity in earnings in associated companies increased $233,000 in the 2013 Quarter.

The factors noted above resulted in operating income of $39,321,000 in the 2013 Quarter compared to $38,845,000 in the 2012 Quarter. Operating income margin increased to 21.2% from 20.2% a year ago.

Financial expense increased $8,737,000, or 59.1%, to $23,513,000 in the 2013 Quarter due primarily to higher interest rates on our debt, which were partially offset by lower debt balances. Our weighted average cost of debt was 9.3% at December 30, 2012, compared to 5.0% at December 25, 2011. Financial expense in the 2013 Quarter also includes $1,359,000 of non-cash amortization of a present value adjustment of debt.

The increase in financial expense from the refinancing of our debt in January 2012 will cycle in January 2013. Absent a significant increase in LIBOR, we expect financial expense to begin to decrease after January 2013 due to lower debt balances, which decreased $29,000,000 in the 2013 Quarter and $74,015,000 since the January 2012 refinancing.

In December 2012, we recognized a gain of $7,093,000 from a distribution related to the partial sale of assets in a private equity investment.

We recognized $1,241,000 of reorganization costs in the 2012 Quarter. We recognized income tax expense of 41.0% of income from continuing operations before income taxes in the 2013 Quarter and 37.0% in the 2012 Quarter. See Note 7 of the Notes to Consolidated Financial Statements, included herein, for a reconciliation of the expected federal income tax rate to the actual tax rates.

As a result of the factors noted above, income attributable to Lee Enterprises, Incorporated (which includes discontinued operations) totaled $14,566,000 in the 2013 Quarter compared to $14,554,000 in the 2012 Quarter. We recorded earnings per diluted common share of $0.28 in the 2013 Quarter and $0.32 in the 2012 Quarter. Excluding unusual matters, as detailed in the table below, diluted earnings per common share, as adjusted, were $0.20 in the 2013 Quarter, compared to $0.37 in the 2012 Quarter. Per share amounts may not add due to rounding.

                                                                       13 Weeks Ended
                                                   December 30            December 25
                                                          2012                   2011
(Thousands of Dollars, Except Per Share
Data)                                       Amount   Per Share     Amount   Per Share

Income attributable to Lee Enterprises,
Incorporated, as reported                   14,566        0.28     14,554        0.32
Adjustments:
Debt financing and reorganization costs         47                  3,265
Gain on sale of investment, net             (6,909 )                    -
Other, net                                   2,424                    155
                                            (4,438 )                3,420
Income tax effect of adjustments, net and
unusual tax matters                          1,553                 (1,193 )
                                            (2,885 )     (0.06 )    2,227        0.05
Unusual matters related to discontinued
operations                                  (1,167 )     (0.02 )       25           -
Income attributable to Lee Enterprises,
Incorporated, as adjusted                   10,514        0.20     16,806        0.37

DISCONTINUED OPERATIONS

In October 2012, we sold the North County Times in Escondido, CA for $11,950,000 in cash. The transaction resulted in a gain of $1,167,000, after income taxes, and is recorded in discontinued operations in the Consolidated Statements of Operations and Comprehensive Income (Loss) in the 13 weeks ended December 30, 2012. Operating results of the North County Times have been classified as discontinued operations for all periods presented.

In January 2013, we entered into an agreement to sell The Garden Island newspaper and digital operations in Lihue, HI for $2,000,000, before income taxes. The transaction, which is subject to customary closing conditions, is expected to be completed in the 13 weeks ending March 31, 2013. We expect to record a loss on the sale of The Garden Island of approximately $2,500,000 after income taxes.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operating activities of continuing operations was $18,703,000 in the 2013 Quarter and $24,565,000 in the 2012 Quarter. We recorded net income of $14,683,000 in the 2013 Quarter and $14,624,000 in the 2012 Quarter. Increased financial expense accounts for the decline in cash provided by operating activities of continuing operations. We recognized a $1,167,000 gain on sale of discontinued operations in the 2013 Quarter and incurred $1,241,000 of reorganization costs in the 2012 Quarter. We also recognized a gain on sale of an investment of $7,093,000 in the 2013 Quarter. Changes in deferred income taxes, operating assets and liabilities and the timing of income tax payments accounted for the bulk of the remainder of the change in cash provided by operating activities of continuing operations in both periods.

Cash provided by investing activities of continuing operations totaled $4,074,000 in the 2013 Quarter and $5,007,000 in the 2012 Quarter. Capital spending totaled $2,073,000 in the 2013 Quarter and $1,875,000 in the 2012 Quarter. We received $7,215,000 from sales of assets in the 2013 Quarter compared to $1,324,000 in the 2012 Quarter. Restricted cash was reduced $4,972,000 in the 2012 Quarter.

We anticipate that funds necessary for capital expenditures, which are expected to total approximately $12,000,000 in 2013, and other requirements, will be available from internally generated funds or availability under our revolving credit facility.

. . .