Charles Arms - Director of Corporate Communications Mary Junck - Chairman and Chief Executive Officer Kevin Mowbray - Executive Vice President and Chief Operating Officer Ron Mayo - Vice President and Chief Financial Officer Paul Farrell - Vice President of Sales James Green - Vice President of Digital Nathan Bekke - Vice President of Consumer Sales and Marketing.

Avi Steiner - JPMorgan.

Welcome to the Lee Enterprises’ 2016 First Quarter Webcast and Conference Call. The call is being recorded and will be available for replay beginning later this morning at lee.net. At the close of the planned remarks, there will be an opportunity for questions. Several analysts have been invited to participate.

Also participants accessing this call by webcast may submit written questions through the website and they will be answered during the call as time permits. Otherwise, you will receive a response later. A link to the live webcast can be found at www.lee.net.

Now I will turn the call over to your host, Charles Arms, Director of Corporate Communications..

Good morning and thank you for joining us. Speaking on today’s call will be Mary Junck, our Chairman and Chief Executive Officer; Kevin Mowbray, Executive Vice President and Chief Operating Officer; and Ron Mayo, Vice President and Chief Financial Officer.

Also with us today are Paul Farrell, Vice President of Sales; James Green, Vice President of Digital and Nathan Bekke, Vice President of Consumer Sales and Marketing. Earlier today, we issued a news release with preliminary results for our December quarter. It is available at lee.net, as well as major financial websites.

As a reminder, our discussion today will include forward-looking statements that are based on our current expectations and are subject to certain risks, trends and uncertainties that could cause actual results to differ materially. Such factors are described in our news release this morning and also in our SEC filings.

During the call, we will reference certain non-GAAP financial measures, which are defined in our news release. Reconciliations to the relevant GAAP measures are included in tables accompanying the release. And now to open our discussion is our CEO, Mary Junck..

Thank you, Charles, and thank you all for joining the conference call this morning to review our first quarter results. We are off to a strong start in 2016 and we are optimistic about the year.

Our growing revenue categories, which include digital advertising, subscriptions, digital services and other revenue including commercial printing and distribution deals accounted for more than half of our total revenue in the quarter, and we believe there is opportunity for continued growth in each of these categories.

As always, we carefully managed cash cost and expect 2016 to be another year of strong cash flow for Lee allowing us to continue our aggressive and substantial debt reduction. In the first quarter of 2016, we reduced debt by nearly $22 million and have paid down more than $80 million in the last 12 months.

We also received an insurance settlement payment of more than $30 million in January and will use the proceeds to further reduce our debt. Ron will discuss the details shortly. Here are a few more financial highlights from the quarter.

While overall revenue decreased 5% in the first quarter and total ad and marketing services revenue decreased 8.8%, both categories steadily improved throughout the quarter. We are especially pleased by our December results. Digital ad revenue was up 7.2% and accounted for 20.6% of total advertising revenue in the quarter.

Mobile ad revenue which is included in digital increased 12.4%. Digital services revenue, primarily TownNews.com increased 5.7% to $3.3 million. Total cash cost excluding workforce adjustment cost decreased 5.2%. First quarter operating cash flow totaled $43.6 million, a 5.2% decline from the prior year.

Our share of EBITDA from Madison and Tucson increased 1.4%. Adjusted EBITDA totaled $48.6 million, a 3.6% decline from the prior year. We have made excellent progress with several key transformational initiatives.

We relaunched many of our websites, both mobile and desktop with a new design aimed at increasing reader engagement and driving digital revenue. We'll complete the transition later this spring. Re-designed print products have been introduced in many of our markets, and they have been very well received by our readers.

This on-going re-design and reorganisation which we call the 'daVinci Project' improves the look of our newspapers and through resource consolidation, improves workflow and creates cost savings.

Currently, more than 40% of our print subscribers have activated their digital subscriptions through our full access subscription model and it continues to grow, providing our print readers with additional content and further expanding our digital audiences. Now, here’s Kevin with more detail on our key areas of strategic transformation in 2016..

Thank you, Mary. We’ve long held the belief that our strength lies in our local sales forces and strong relationships we have with advertisers in the communities we serve.

Our enterprises have the largest sales forces and the most news gathering resources in the markets, and both readers and advertisers alike highly value our strong local news and advertising content. As Mary mentioned in the first quarter, more than 50% of our revenue came from categories that are growing.

In fiscal 2016, local controller revenue categories which include advertising accounts with local decision makers, subscription and other revenue make up 80% of the total revenue for the company.

Our highly successful big pitch initiative drives local controllable revenues through the use of strong, creative advertising campaign concepts matched with our diverse set of print in digital products. We are well into the implementation of extending the big pitch with the centralized creative resource approach, called the big pitch bow [ph] pads.

This team will dramatically accelerate the total number of pitches created and provide faster speed to market. By adapting the best big pitch ideas for use throughout Lee, more pitches were made and more pitches are closed.

The smaller advertisers were using new cost effective channels like e-mail marketing, self service, seminars and telesales to drive revenue from smaller advertisers.

Another local controllable revenue category is subscription revenue, to more efficiently grow subscription revenue, we are centralizing our circulation sales and marketing and investing in technology. We’ve repositioned our best and brightest circulation management to direct and oversee initiatives across all of our markets.

To help us better predict and evaluate the effectiveness of our marketing programs, we’ve also invested in a database which merges internal data from all of our markets with a variety of external demographic and behavioral data, giving us a much broader understanding of our subscribers, their behaviour and our ability to drive revenue at the subscriber level.

This information can also be used in advertising sales. And now here is Ron Mayo with some additional financial highlights..

Thank you, Kevin. We've reported earnings of $0.21 per diluted common share for the quarter compared to earnings of $0.18 a year ago. Excluding unusual matters, adjusted earnings per diluted common share totaled $0.22 which is the same as a year ago.

We continue to centralized services and transform our business practices to more efficiently manage our cash cost. Total cash cost excluding workforce adjustments decreased 5.2% for the quarter and we are reaffirming our annual cost guidance-- cost reductions in the 3.5% to 4% range for the full fiscal year.

We continue to make substantially quarterly debt reductions with total debt reduced by $21.9million in the first quarter and $80.5 million in the trailing 12 months. In the quarter we reduced our highest cost of debt capital for 2nd Lien Term Loan by $5.6 million and repurchased $5 million of our 9.5% senior notes at a substantial discount.

As of December 27, 2015 the principal amount of our debt was $704 million. Cash interest expense was reduced $1.6 million in the first quarter as a result of debt reductions which provides additional free cash flow that will be used for future debt reductions.

On January 15, 2016 Lee received payment of more than $30 million from our insurer for our share of a subrogation recovery arising from the settlement of claims for damages suffered as result of a 2009 loss at one of our Lee Legacy production facilities.

Of the total proceeds we received $20 million was used immediately to reduce outstanding debt under our 1st Lien Term Loan due to extent permissible and available at a discount, we intent to use all of the remaining proceeds to either repurchase outstanding senior notes or to further pay down the 1st Lien Term Loan.

We continue to produce to strong EBITDA, for the last 12 months EBITDA totaled $155.7 million, adjusted EBITDA totaled $161.5 million and unlevered free cash flow totaled $149 million. We’ll continue to use substantially all free cash flow to reduce debt and strengthen the company’s capital structure.

We’ve also initiated a comprehensive review of our real estate portfolio with plans to monetize those assets were beneficial. Un-depreciated book value of the portfolio is more than $200 million. Lastly, we expect to file our 10-Q with the SEC tomorrow and as always it will include additional information on our results and expectations..

This includes our remarks. The team will remain on the line for any questions you may have. Operator, please open the lines for questions..

Thank you. [Operator Instructions] And as reminder, please state your name and company prior to asking your questions. Your line is now open. You may proceed with your question..

Hi. It’s Avi Steiner from JPMorgan. I’ve got three structural type questions away from the quarters. That’s okay.

Number one; the 200 million of real estate proceeds pre-depreciation, are you able to segment that for us between silos please?.

I’m not sure what you mean by between Legacy and….

Yes, yes..

You know, we haven’t disclosed that separately, I mean, we know what it is, but no, we haven’t disclosed that separately. And just to be clear on the $200 million in real estate that’s out there that we’re evaluating, that’s the unappreciated book value. It may or may not be an indicator of fair market value.

We’re trying to go through and evaluate the real estate program.

Does it make sense to own it long term? Can we monetize the real estate and sell it and then lease based and this is all been driven by the fact that due to transformation and centralization we find ourselves holding a lot of real state that is going largely unused because we transformed ourselves and we actually have fever people working out of our building.

So, we transition these buildings.

It will be where we identified that the sell price is very good just because the real estate market and local markets really good or places where we can sell the real estate and essentially lease space [ph], much less space that we currently occupy or basically our holding cost which we define as our property taxes are insurance and our real estate..

Fair enough. And I’m not going to hold you at any number.

My second question is, can you remind us of your ability pleased to buyback the Lee bonds and can you do that with free cash flow and proceeds from asset sales, just any color you can gives around your ability as opposed to what you may do?.

Basically what generates our ability to buy this back is driven by the 1st Lien excess cash flow payment.

So, due to the extent of flows through income and I’ll use the insurance proceeds as an example, because that flows through net income, it flows through our excess cash flow payments that we have to make, so the vast majority of that’s going to be acquired to be a part of that excess cash flow payment.

The excess cash flow payments limited to 90% of the total and the calculation, so that 10% extra that we’re going to have on there. And also when we have instances such as we did. And this current quarter where we have an excess cash flow payment on the 2nd Lien and they decline to get repaid.

Again that money becomes available for the repurchase of the 9.5% notes. We’re never going to have – I should say never but in the near term we’re not going to have substantial dollars in there, but we think we’re going to have a steady flow of dollars that we’re going to be able to apply towards that..

Terrific. And last question from me. And thank you for the time. One of your newspaper appears today got in a private equity investment or private placement type investment, while I’m not going to ask you to comment on their plans per say.

I’m curious how you view your current capitalization both on a standalone basis and then at the risk of repeating questions you get all the time, how you view your capitalization in light of potential strategic opportunities down the line? And again thank you very much for the time..

Well, thanks Avi. I mean obviously, it was Tribune who got the capital infusion in their private deals that they get today. And it’s not something that we’re currently looking at because we’re still focused on using all of our available free cash flow to pay down our debt and presumably maybe they have something they need to do with that.

I don’t know, because I don’t want really to comment on those, but to the extend we have an opportunity that we need that kind of a capital, we would certainly look at that as an option. We just don’t see that as a need for ourselves currently..

Thank you, guys..

And we’ll go to our next questioner..

Hey. This is Steven [Indiscernible]..

Hi, Steven..

Thanks for taking my question.

So just here -- just want to confirm the revenue figure because we’re now through a full cycle of that description related expense adjusted during last year, so the 158 this quarter, that’s a clean number, right, there is no adjustment that we’re going to see in the 10-Q or anything like that?.

No. When you’re looking at the December 2014 and the December 2015 numbers and those are comparable numbers.

We use to break them out differently because the two numbers were not comparable because of the circulation paper piece that we use to have, but we have substantially cycle through all of the changes that are result of paper piece, so the numbers are comparable basis now..

Okay. So the 158 is comparable to the 177 or the last quarter one or two….

You went back there and you look at the adjusted paper piece, yeah, that would not be comfortable way to look at..

Okay.

So is the 5% decline of 177 for this quarter?.

That is correct..

That is comparable. Okay.

And then just on the review I know you discuss it briefly, but -- so this is release to see what’s left to monetize, because you have been doing selective monetization for few years now, this isn’t be leaded to a significant overall monetization and it’s just basically reviewed to see what makes sense or what’s left that make sense?.

What we historically looked at is places to sell where we did not have production facilities.

And so, on this part on this process we’re going back and reviewing places where we do indeed have production facilities and at the real state value is to such an extend that you could sell it and outsource the production and still make the economics workout. We would entertain doing that which was not previously something we were looking at.

It was just – if we have production if we did than we generally stop and did not continue to evaluate to sell that property..

Okay. The last question, I know, it is asked all the time, but given the weakness in the shares and especially as it relates and you do, I think you have the authorization to purchase of the $5 million worth of stock.

Would you consider now the stock, the buck 18 as we speak utilizing buyback option?.

Well that something that we routinely think about and discuss with our board. We have as you know been extremely consistent about using our cash flow to pay down debt. We’ve been extremely focus on that and I expect that we’ll continue to be focused on that. However, I will add that with the share pricing what it is it opens the discussion once again..

Yes. I definitely believe that any excess account should be use and debt of the market will reward that, but I guess, try something different, its like the look is probably good, so thanks for taking my questions. I’ll go back to queue..

We’ll go to our next questioner..

Thank you. I wonder if you could talk about what you’re seeing in some of your markets. You provide in the past by geography what revenue trends have been.

Could you discus that?.

We are really broken out by geography recently and what I would say is some of our larger enterprises are actually performing very well. We’re pleased with what we’re seeing on the retail front, in the retail categories particularly local controllable revenue that I mentioned in my remarks.

We’re still seeing some challenge in the classified categories. We probably noted, we put two of our top executives after classified categories just this past October.

We’re beginning to see the trend lines improve in auto and what I would say, the recent the number has still now where we like to be, because we have two of our enterprises that are dragging down the overall trend lines.

So we are pleased that release [ph] of our newspapers have moved, the trend line is up but we got to do a little bit better with two that are underperforming. We are pretty pleased with our circulation revenue and that’s proceeding along well, so overall I think we’re moving the revenue picture in the direction it needs to move..

I mean the comps get easier in the second half of the year, but within Lee Legacy business still I think that 9.5% advertising decline this quarter. So, what’s driving that? That is outside the norm where the company is operated for last several years..

It’s classified..

Is it safe in the market or is something cyclical?.

Yes. It’s classified and it’s the energy market..

Have you guys tried to put together a number or even if it’s very round number as to the impact to classified from or to overall revenues from energy market?.

We have not broken that out. We’re not breaking out our energy markets and non-energy markets.

And then frankly the most of the stuff what you’re going to see in the energy market, this was the last quarter, the December quarter of 2014 was the last quarter that they were really good and then this kind of steady decline, so that is going to not be part of the future assuming, you know, energy doesn’t go down by $10 a barrel and I’m not sure what happens at that point in time, but ultimately that piece of the business is we’re going to cycle through that..

And just as a reminder, even though we don’t break it out just for your reference, our energy markets that are Casper, Wyoming, Bismarck, Rapid City into some smaller degree Billings, Montana..

And there are some pretty sizeable markets are profitable markets for the company.

Correct..

So you’re saying that your getting close to cycling through that, but is a decline that you saw through 2015, do you think is it accelerating, is the decline decelerating at this point?.

It’s decelerating..

Okay. And then on retail you mentioned some strength there, which make sense, right.

There were some heavy discounting, assumably there was quite a bit of marketing as well in the quarter to get bodies into those retail locations, but now that we’re in Q1, how has that business, trend continued?.

Well, I guess what I would say about that and I noticed this in sort of the prepared remarks is that the quarter -- we saw the quarter improve as it went along and a nice contributor to that was the retail space. So, to your point, you’re correct, that’s what happens.

We are a little reluctant to talk about where we are, but let’s just say, for the moment, we’re pretty happy with what we’re seeing..

Okay. All right, well thank you very question. I know there’s a lot of a question. I’ll get back in queue. Thanks..

[Operator Instructions] And with no other questions in the queue, I’d like to turn the conference back to Charles for any webcast questions..

Yes. We do have some webcast questions.

The first question is what is the ultimate amount of debt you would feel comfortable having on the balance sheet?.

What we said in several firms that our sort of aspirational debt goal is 2x, and I would say we would be comfortable -- I mean, we would be very comfortable with that, but as we head towards 3x, I would put that completely in the comfort zone..

Second question, how many of the newspaper properties have asked for iPhone, Android, Blackberries that can deliver push notifications at local news and would be a good solution for mobile ads?.

Let me lead up with that and then I’m going to turn it over to James Green and the answer to that is 100% of our newspapers have apps for iPhone, Android, Blackberry and also have ability for push notification for both news and advertising, but you might want to put some local color on that James..

Sure. Thanks, Mary.

Really, with 100% of our newspaper and properties having apps and a great majority of our traffic at this point coming from the mobile device, its something that we pay attention to it very closely, not only from a technology standpoint and making sure they are [Indiscernible] but obviously training our newsroom and to make sure that they’re taking advantage of the notification capability that we have from the technology standpoint.

That you would expect every time we push out any sort of notifications [Indiscernible] traffic almost immediately, so I think these are what we’re doing..

The next question do you see yourself closer to declaring a dividend?.

Well, let me lead off that and then Ron may want to jump in too. Another thing that’s on our list that we routinely think about is the possibility at some point of declaring a dividend. Our covenants are such that our leverage needs to be at 3.25 and we’re not there, but we will be there and when we get there, that will certainly be on our list..

Yes. I mean, it’s such a gating [ph] factor based on the covenants that are contained within our current credit agreement.

And I think we’ve made substantial progress on the leverage involve -- the leverage number that we are at the end of the December quarter is 4.3 times, once you include the totality of the insurance proceeds that puts us just a little over 4 times leverage.

And with our track record of paying down debt significantly each quarter continuing, we think that we will be below four times after at the end of this fiscal year..

Our next question is, you said you repurchase the note at a substantial discount, can you quantify?.

Well, based where they are trading right now and the last indicator of trading I got was between 92 and 93..

Are you considering keeping and leasing any of the unused real estate to generate future income and capital appreciation from these properties?.

We are looking at our real estate as it’s something that we can monetize and use the pay down debt not as a real estate holding from a speculative places, so no, we’re not looking at a real estate investment company kind of reap [ph] kind of scenario if you will or we’re trying to get the appreciated value.

We’d rather take that capital and redeploy it back to shareholders where we can..

While the operations of the company continue to meet internal and external expectation, can you speak why the share price makes new lows on a daily basis?.

No, I can’t because to the point of this question, we do continue to meet the internal and external expectations. We have continued to pay down debt to beat the band. Our leverage is improving. We’ve produced very strong cash flow and we find it inexplicable..

And that concludes the questions from the webcast..

Well let me quickly wrap up here. Again, we appreciate all of you joining us on the call today. We appreciate your time and we especially appreciate your interest in the company. Thanks so much..

That does conclude today’s conference. We thank you for your participation..