LEE ENTERPRISES, Inc 10-K

ITEM 9A. CONTROLS AND PROCEDURES EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we concluded an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our Company’s reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Based on this evaluation the Company identified material weaknesses in its internal control over financial reporting. Due to the material weaknesses, our principal executive officer and our principal financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were not effective. In light of the material weaknesses described below, management performed additional analysis and other procedures to ensure that our interim and annual consolidated financial statements were prepared in accordance with U.S. GAAP. Accordingly, management believes that the consolidated financial statements included in this Annual Report on Form 10-K fairly present, in all material respects, our financial position, results of operations, and cash flows as of and for the periods presented, in accordance with U.S. GAAP. Management's Report on Internal Control Over Financial Reporting The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) of the Exchange Act. 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. Under the supervision and with the participation of our senior management, including our chief executive officer and chief financial officer, we assessed the effectiveness of our internal control over financial reporting as of the Evaluation Date, using the criteria set forth in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has concluded that our internal control over financial reporting was not effective as of the Evaluation Date due to the material weaknesses in the Company's internal control over financial reporting described below. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. 29 Table of Contents The material weaknesses identified by the Company are described below: • Management did not maintain appropriately designed information technology general controls in the areas of user access for certain of its information systems that are relevant to the preparation of the Company’s consolidated financial statements and system of internal control over financial reporting. • Management did not maintain appropriately designed controls over data provided by third-party service organizations for which a System and Organization Controls (SOC) 1 Type 2 report is not available. Specifically, management did not design and implement controls over the validation of the completeness and accuracy of information received from these service organizations and correspondingly relied upon by the Company in the preparation of the Company’s consolidated financial statements. • Management did not maintain appropriately designed controls over validation of the accuracy of the tax basis associated with certain deferred tax assets and liabilities, which resulted in an immaterial error correction associated with the Company's previously issued consolidated financial statements. BDO USA, LLP, our independent registered public accounting firm, has issued an attestation report on our internal control over financial reporting as of September 25, 2022, which is included herein. As a result of the material weaknesses described above, such report includes an adverse audit report on the effectiveness of internal control over financial reporting as of September 25, 2022. Remediation Plans and Actions Management is committed to remediating the material weaknesses that have been identified and maintaining an effective system of disclosure controls and procedures. These remediation efforts, summarized below, are intended to both address the identified material weaknesses and to enhance our overall financial control environment. In this regard, our initiatives include: • Establishing a project team to review, evaluate, and remediate material weaknesses in internal controls over financial reporting. The Company's recently expanded Corporate Compliance function will lead management's efforts related to effective control design, documentation, and implementation, as well as remediate ineffective controls. • Undergoing a complete user access review related to our information technology systems to refine user roles and establish appropriate user access to various systems that the Company relies upon in its internal controls over financial reporting, which includes enhancing user access provisioning and monitoring controls to enforce appropriate system access and segregation of duties. • Providing training to relevant personnel reinforcing existing Company policies regarding user access and the steps and procedures required to perform the required reviews of access to Company systems. • Enhancing the design of internal controls around evaluating data provided by third-party service organizations for which a SOC 1, Type 2 is not available to validate completeness and accuracy. • Enhancing the design of internal controls to validate the accuracy of the tax basis for deferred tax assets and liabilities, including enhancing our record retention policy to include retaining documentation for complex tax items for as long as such tax items impact our consolidated financial statements. The material weaknesses will be considered remediated when management concludes that, through testing, the applicable remedial controls are designed and implemented effectively. When fully implemented and operational, we believe the measures described above will remediate the material weaknesses we have identified and strengthen our internal control over financial reporting. These material weaknesses will not be considered remediated until the remediated and/or newly implemented internal controls operate for a sufficient period of time and management has concluded, through testing, that these internal controls are operating effectively. We are working to have these material weakness remediated as soon as possible. We are committed to continuing to improve our internal control processes and will continue to review and assess our financial reporting controls and procedures on an ongoing basis. As we continue to evaluate and 30 Table of Contents improve our internal control over financial reporting, our management may determine it is appropriate or necessary to take additional measures. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING There have been no changes in our internal control over financial reporting that occurred during the 13 weeks ended September 25, 2022 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting. Report of Independent Registered Public Accounting Firm Stockholders and Board of Directors Lee Enterprises, Incorporated Davenport, Iowa Opinion on Internal Control over Financial Reporting We have audited Lee Enterprises, Incorporated’s (the “Company”) internal control over financial reporting as of September 25, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of September 25, 2022, based on the COSO criteria. We do not express an opinion or any other form of assurance on management’s statements referring to any corrective actions taken by the Company after the date of management’s assessment. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheet of the Company as of September 25, 2022, the related consolidated statements of income (loss) and comprehensive income (loss), stockholders’ equity (deficit), and cash flows for the fiscal year ended September 25, 2022, and the related notes (collectively referred to as the “consolidated financial statements”), and our report dated February 27, 2023, expressed an unqualified opinion thereon. Basis for Opinion 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, included in the accompanying Item 9A, Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Material weaknesses were identified regarding the following: 1. Management’s failure to design and maintain effective information technology general controls relating to user access for certain of its information systems that are relevant to the preparation of the Company’s consolidated financial statements and system of internal control over financial reporting. 2. Management’s failure to design and implement effective controls over data provided by third-party service organizations for which a System and Organization Controls (SOC) 1 Type 2 report is not 31 Table of Contents available. Specifically, management did not design and implement effective controls to validate the completeness and accuracy of information received from these service organizations and correspondingly relied upon by the Company in its revenue recognition process and the preparation of the Company’s consolidated financial statements. 3. Management's failure to design and implement effective controls over validation of the accuracy of the tax basis associated with certain deferred tax assets and liabilities that are relevant to the preparation of the Company's consolidated financial statements. These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements, and this report does not affect our report dated February 27, 2023 on those consolidated financial statements. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ BDO USA, LLP Chicago, Illinois February 27, 2023 32 Table of Contents ITEM 9B. OTHER INFORMATION None. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE DIRECTORS David T. Pearson, 57, Director since 2020 Mr. Pearson is a private investor and business consultant. He was Chief Financial Officer of Vonage (NASDAQ: VG) from May 2013 until August 2020. In that position, he managed Vonage’s Finance, Corporate Development and Investor Relations organizations. Before Mr. Pearson joined Vonage, he spent over nine years with Deutsche Bank Securities focused on Technology, Media & Telecom (TMT) as a Managing Director and Global Media & Telecom Group Head. Prior to joining Deutsche Bank, Mr. Pearson worked at Goldman, Sachs & Co. in the firm’s TMT practice for nine years, leaving as a Managing Director. He began his career at Coopers & Lybrand and holds a M.B.A. from Harvard Business School and his A.B. in Political Science and Organizational Behavior/Management from Brown University. Mr. Pearson is a member of the boards of directors of Magnite, Inc. (NASDAQ: MGNI) and Potbelly, Inc. (NASDAQ: PBPB), where he serves as Chairperson of each company’s Audit Committee. Mr. Pearson is a member of the Audit Committee and serves as one of the Audit Committee’s designated financial experts. Mr. Pearson has significant executive experience, including in the areas of operations, technology, finance, capital allocation, capital markets and mergers and acquisitions, as a result of his career as an executive at and advisor to companies in the technology, media and telecommunications sectors. Additionally, through his role as Chief Financial Officer of Vonage as well as his investment banking roles, Mr. Pearson has developed a strong understanding of financial and disclosure responsibilities, internal controls and procedures, and risk management functions, making him well-qualified to serve on the Audit Committee as one of its designated financial experts. Margaret R. Liberman, 54, Director since 2019 Ms. Liberman is Senior Vice President, News, Talk & Entertainment at SiriusXM (NASDAQ: SIRI), where she has served since October 2017 and is responsible for content and strategic direction of the talk portfolio, overseeing 60 original and partner channels and all podcast programming produced under the Stitcher and Earwolf labels. Previously, she was Vice President and Editor in Chief of the Yahoo News Group from September 2013 to June 2017 and spent 13 years at The New York Times (NYSE: NYT), most recently as Deputy News Editor for Digital Development from 2010 to 2013. From 2001 to 2010, Ms. Liberman worked at The New York Times Magazine , first as a Story Editor before becoming Deputy Editor, where she oversaw numerous award-winning video and multimedia projects. Ms. Liberman began her career at a small children’s book publisher before assuming various editorial roles at Us Weekly , Swing Magazine , Martha Stewart Living , and Bridal Guide Magazine . Ms. Liberman earned a Bachelor of Arts degree from Barnard College in 1990 and a Master of Science degree from Columbia Graduate School of Journalism in 1995. Ms. Liberman is a member of the Nominating and Corporate Governance Committee. Ms. Liberman is a lifelong journalist and highly accomplished digital media executive. She brings top-tier experience and tremendous expertise developing and implementing effective digital platform strategies and directing award-winning editorial content. Her extensive experience and industry familiarity enables her to contribute effectively to the Board’s oversight of the Company’s strategy and operations. Brent Magid, 58, Director since 2010 Mr. Magid is President and Chief Executive Officer of Frank N. Magid Associates, Inc., a research-based strategy consulting company with expertise in a wide range of media. From 2007 to 2009, Mr. Magid served as a director of Quattro Wireless, a mobile advertising company. From 1989 to 1991, Mr. Magid worked in the entertainment group of JPMorgan Chase & Co. 33 Table of Contents Mr. Magid is Chairman of the Audit Committee and serves as one of the Audit Committee’s designated financial experts and is also a member of the Executive Compensation Committee. Mr. Magid provides the Board with experience and insight into key marketing and advertising trends and related media industry strategies, especially digital media and digital services. Also, Mr. Magid provides significant financial experience and contributes extensively to the oversight and integrity of the Company’s financial statements, risk management and risk assessment, ethics and compliance functions, and procedures and controls, which qualify him to serve as Chairman of the Company’s Audit Committee and as one of its designated financial experts. Steven C. Fletcher, 55, Director since 2020 Mr. Fletcher has served as the Chief Executive Officer of technology company Explorer Parent LLC, a firm that sponsors special purpose acquisition companies (SPACs), since July 2020, an advisor to Carney Technology Acquisition Corp. II (NASDAQ: CTAQ) since December 2020, an advisor to Epiphany Technology Acquisition Corp. (NASDAQ: EPHY) since January 2021, an advisor to BioPlus Acquisition Corp. (NASDAQ: BIOS) since January 2021 and an advisor to Enterprise 4.0 Technology Acquisition Corp. (NASDAQ: ENTF) since October 2021. He served from 2013 to August 2022 as an independent director of atVenu, a leading live event commerce platform, where he was a member of the Audit and Compensation Committees, and as an independent director of Life Signals, Inc. a healthcare technology company since November 2021. From 2003 to May 2018, Mr. Fletcher was a Managing Director, Co-Head of the Digital Media Group and Head of the Software Group at GCA Savvian, a global investment bank. He was also a member of the firm’s Management Committee. From 1994 until 2002, Mr. Fletcher worked at Goldman, Sachs & Co., where he held a number of leadership roles including Head of the Private Placement Group, Head of the IT Services sector and Co-Head of the Hardware, Storage, EMS, and Internet Infrastructure sectors. He began his career at Deloitte & Touche as a CPA. Mr. Fletcher received a B.A. in Economics from UCLA and an M.B.A. from the Wharton School of the University of Pennsylvania. Mr. Fletcher is the Chairman of the Nominating and Corporate Governance Committee, and a member of the Audit Committee and Executive Compensation Committee. Mr. Fletcher brings to the Board more than 20 years of experience in the investment banking industry, and he has extensive expertise with respect to debt and equity financing, strategic transactions, capital allocation, capital markets and corporate financial management, particularly in the digital media sector. He also has significant experience with corporate governance through prior service on several boards. His experience enables him to provide strong oversight of financial and disclosure responsibilities, controls, and procedures, and he serves as one of the Audit Committee’s designated financial experts. Shaun McAlmont, 57, Director since May 2022 Dr. McAlmont is a seasoned executive with deep experience overseeing successful digital transformations, change management and strategic partnerships. In early 2022, Dr. McAlmont joined a cybersecurity training company, NINJIO, LLC, as President and CEO, after serving since 2018 as the President of Career Learning at Stride, Inc. (NYSE: LRN), a $1.5 billion technology-based education company, where he led a multi-year digital transformation that doubled the size of the career learning business through the introduction of new IT, business and healthcare career training programs, three acquisitions, and strategic corporate and higher education partnerships. From 2015 to 2017, he was the President and CEO of Neumont College of Computer Science, a for-profit training institution. Dr. McAlmont also served as the President and CEO of Lincoln Educational Services (NASDAQ: LINC) from 2005 to 2015. Dr. McAlmont held senior-level manager positions at Alta Colleges, where he pioneered online learning at scale, and Heald Colleges from 1991 to 2005, after beginning his career at Stanford University. Dr. McAlmont received a Bachelor of Science degree in Psychology from Brigham Young University and multiple graduate degrees in the education field, including a Doctorate of Higher Education Management from the University of Pennsylvania. He recently completed the Board Education Program at Stanford University Directors College. Dr. McAlmont is a member of the BorgWarner (NYSE: BWA) board of directors, where he serves on its compensation committee. Dr. McAlmont is a member of the Executive Compensation Committee. 34 Table of Contents Dr. McAlmont brings to the Board more than 25 years of career leading successful digital transformations at scale in online learning and workforce training and has leveraged past learnings to drive growth and generate value at several companies. He has significant executive leadership and public company board experience. Gregory P. Schermer, 68, Director since 1999 Mr. Schermer served as Vice President — Strategy of the Company from March 2012 until his retirement in September 2016. From 1989 to July 2006, Mr. Schermer served as Corporate Counsel of the Company, and from July 2006 until October 2012, he served as Vice President — Interactive Media of the Company. Mr. Schermer led the development of the Company’s digital media strategies and platforms, including the successful expansion of BLOX Digital and represented the Company in several industry digital media initiatives, including The Local Media Consortium (the “Consortium”), a group of 82 companies that create digital partnerships for local media operations. Mr. Schermer served as a member of the Consortium’s executive committee. Mr. Schermer is a member of the Audit Committee and Nominating and Corporate Governance Committee. Mr. Schermer provides the Board with insight and operational perspective on the Company’s digital media strategies and his in-depth understanding of the Company’s business, strategy and operations makes him well-qualified to provide guidance to the Board in its oversight of the Company’s digital transformation. Through his former role as the Company’s corporate counsel, he also provides the Board with valuable insight on legal matters, compliance and risk assessment, and corporate governance. Mary E. Junck, 75, Director since 1999 Mary E. Junck was elected Executive Chairman of the Company in February 2016 and elected Chairman in February 2019. She joined Lee in 1999 as Executive Vice President and Chief Operating Officer. She became president in 2000, Chief Executive Officer in 2001 and Chairman in January 2002. She previously held senior executive positions at the former Times Mirror Company, where she was responsible for the operations of Newsday , The Baltimore Sun (publisher and chief executive officer), the Hartford Courant, The Morning Call, Southern Connecticut Newspapers and St. Paul Pioneer Press (publisher and president). She also had responsibility for Times Mirror magazines and StayWell, Times Mirror’s consumer health company. She was a member of the board of directors of The Associated Press from 2004 to 2017 and was chairman from 2012 to 2017. Since October 2016, Ms. Junck has served as a director of Postmedia Network Canada Corp. (TSE: PNC.A), a public company based in Toronto, Canada, that owns numerous newspapers and associated online platforms throughout Canada. Ms. Junck’s in-depth knowledge of the Company and the publishing industry, in which she has worked in executive and senior management positions for more than 32 years, enables her to lead the Board effectively in her capacity as Chairman. Ms. Junck provides a valuable and unique perspective in Board deliberations about the Company’s business, competitive landscape, strategic relationships and opportunities, senior leadership and operational and financial performance. As Chairman, Ms. Junck serves as an advisor to the Chief Executive Officer and provides overall leadership for the Board. Her experience provides her with a thorough understanding of strategic direction and partnerships, financial matters and board management. Herbert W. Moloney III, 72, Director since 2001 From December 2006 until his retirement in July 2011, Mr. Moloney was President and Chief Operating Officer of Western Colorprint, Inc., a privately held company that provided advertising supplements and commercial printing services to the publishing industry. From April 2005 to November 2006, Mr. Moloney was President and Publisher of the Washington Examiner. From 2000 to March 2005, Mr. Moloney was the Chief Operating Officer, North America, and an Executive Vice President of Vertis, Inc., a premium provider of targeted advertising and marketing solutions to leading retail and consumer services companies. Mr. Moloney is Chairman of the Executive Compensation Committee and a member of the Audit Committee, the Nominating and Corporate Governance Committee, and the Executive Committee. Mr. Moloney has been designated as the Company’s Lead Director by the independent directors to preside over executive sessions of non-management directors, among other duties. 35 Table of Contents Mr. Moloney brings to the Board more than 30 years of executive and management experience in the publishing and television industries. His extensive relevant industry and executive leadership experience provides him with substantive knowledge about a variety of issues that are related to the Company’s business, including digital and print advertising and marketing, operations and strategy development. Kevin D. Mowbray, 61, Director since 2016 Mr. Mowbray was elected as the Company’s President and Chief Executive Officer (“CEO”) in February 2016. Prior to his election as CEO, Mr. Mowbray was the Company’s Executive Vice President and Chief Operating Officer from April 2015, and served as Vice President and Chief Operating Officer since 2013. He previously was publisher of the Company’s largest newspaper, the St. Louis Post-Dispatch, from 2006 to 2013, where he drove the Company’s digital efforts and piloted many significant digital products and initiatives. Mr. Mowbray is a member of the News Media Alliance board of directors, where he also serves on its executive committee and is the chair of the board of trustees of the American Press Institute. He is also a member of the board of directors of the Associated Press. As President and CEO, Mr. Mowbray has direct responsibility for all aspects of the Company’s operations, including more than 77 markets in 26 states and the corporate staff, with special focus on digital growth, revenue expansion and business transformation. His familiarity with the Company and his role in spearheading the development of our five-year strategic plan and digital strategies and overseeing our transformation, coupled with his 36 years of executive and management experience in the publishing industry, makes him a valuable addition to our Board. 36 Table of Contents EXECUTIVE OFFICERS Name Offices or Positions to be Held Biographical Information Kevin D. Mowbray President and Chief Executive Officer Mr. Mowbray, age 61, has been President and Chief Executive Officer since February 2016. Previously, Mr. Mowbray held the titles of Executive Vice President and Chief Operating Officer from April 2015 to February 2016, Vice President and Chief Operating Officer from May 2013 to April 2015, Publisher of the St. Louis Post-Dispatch from 2006 to May 2013, and Vice President - Publishing from 2004 to May 2013. Mr. Mowbray joined the Company in 1986 and served in several positions in the Company’s sales and marketing and newspaper management functions, including as Vice President for Sales and Marketing and General Manager, the Missoulian. Timothy R. Millage Vice President, Chief Financial Officer and Treasurer Mr. Millage, age 42, has been Vice President, Chief Financial Officer and Treasurer since August 2018. Mr. Millage served as the corporate controller of the Company from 2012 to 2018. Prior to joining the Company, Mr. Millage served as an audit manager with Deloitte, LLP and worked for multinational clients in various industries. Nathan E. Bekke Operating Vice President; Vice President - Audience Strategy Mr. Bekke, age 53, has been Vice President - Consumer Sales and Marketing since February 2015. Previously, Mr. Bekke served as Publisher of the Casper Star-Tribune, a Company newspaper, from 2003 to February 2015. Mr. Bekke joined the Company in 1988 and served in several positions in the Company’s sales and marketing function, including as director of sales and marketing at Billings Gazette and the Independent Record. Astrid J. Garcia Vice President - Human Resources and Legal; Chief Legal Officer Ms. Garcia, age 72, has been Vice President - Human Resources and Legal since 2013. Previously, Ms. Garcia served as Vice President of Human Resources and Operations at the St. Louis Post-Dispatch from December 2006 to 2013. Prior to joining the Company, Ms. Garcia served as a senior human resources professional and legal advisor for a number of companies in the publishing industry. Joseph J. Battistoni Vice President - Sales and Marketing Mr. Battistoni, age 40, has been Vice President - Sales and Marketing since November 2020. Previously, Mr. Battistoni held the titles of Vice President - Local Advertising from January 2020 to November 2020 and General Manager and Vice President of Sales and Marketing at The Times of Northwest Indiana from November 2015 to January 2020. Mr. Battistoni joined the Company as Digital Director of The Times in March 2014. Prior to joining the Company, Mr. Battistoni was employed by Tribune Media Company in various leadership positions involving the delivery of digital services and targeted media. Jolene Sherman Vice President - Business Development and Market Strategy Ms. Sherman, age 41, has been Vice President - Business Development and Market Strategies since June 2022. Previously Ms. Sherman was Vice President - Digital Sales and Agency Strategies from March 2020 until June 2022. Prior to that, Ms. Sherman served as the Vice President and Managing Director of Amplified Digital from 2017 until March 2020. Ms. Sherman joined the Company in 2005 as a sales executive with the St. Louis Post-Dispatch. 37 Table of Contents DELINQUENT SECTION 16(a) REPORTS Section 16(a) of the Exchange Act requires our executive officers and directors to file initial reports of ownership and reports of changes in that ownership with the SEC. Specific due dates for these reports have been established and we are required to disclose in our Proxy Statement any failure to file by these dates in 2021. Based solely on review of the reports received by the Company, and on written representations from certain reporting persons, the Company believes the persons subject to Section 16(a) reporting complied with applicable SEC filing requirements during fiscal year 2022, with the exception of a Form 3 filing on behalf of Dr. Shaun E. McAlmont, related to his election as a Director, which was effective May 9, 2022, and filed late on September 6, 2022. CODE OF ETHICS We have a Code of Business Conduct and Ethics ("Code") that applies to all of our employees, including our principal executive officer, and principal financial and accounting officer. The Code is monitored by the Audit Committee of our Board of Directors and is annually affirmed by our directors and executive officers. We maintain a corporate governance page on our website which includes the Code. The corporate governance page can be found at www.lee.net by clicking on “Governance” under the "About" tab. 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 us from, a provision of the Code will be posted on our website. AUDIT COMMITTEE The Company’s Board of Directors has a separately designated standing Audit Committee. The Audit Committee of the Company’s Board of Directors consists of Messrs. Fletcher, Magid, Moloney, Pearson, and Schermer, with Mr. Magid serving as chairman. Each member of the Audit Committee meets the financial sophistication requirements of NASDAQ. Our Board has determined that Messrs. Magid, Fletcher, and Pearson meet the requirements of an audit committee financial expert, as defined by the SEC, and that all Audit Committee members are financially sophisticated and meet the NASDAQ’s independence requirements and definition of an independent director. ITEM 11. EXECUTIVE COMPENSATION EXECUTIVE COMPENSATION References to “we,” “our” or “us” under “Executive Compensation” refer to the Executive Compensation Committee. The following describes certain aspects, elements, and objectives of and information concerning the Company's executive compensation program with respect to the Company's NEOs in 2022. 2022 Corporate Performance Assessment In 2022, the Company continued to grow digital revenue, managed print revenue in a difficult environment, controlled costs and significantly reduced debt. Significant results for the year included the following: • Total operating revenue was $781 million, down 2% versus the prior year. • Total Digital Revenue was $240 million, a 27% increase over the prior year, and represented 31% of our total operating revenue. • Digital-only subscription revenue increased 42% in 2022 compared to 2021. • Digital advertising and marketing services revenue represented 50% of our total advertising revenue and totaled $181 million, a 28% increase over the prior year. Digital marketing services revenue at Amplified Digital® fueled the growth, with revenue of $76 million, an 83% increase over the prior year. • Digital services revenue, which is predominantly BLOX Digital, totaled $18 million in the year. On a standalone basis, revenue at BLOX Digital totaled $31 million, a 14% increase over the prior year. 38 Table of Contents • Operating expenses totaled $762 million and Cash Costs were up 1%. Rapidly rising prices, incremental investments in digital talent and technology tied to our digital growth strategy, and an increase in cost of goods sold attributed to revenue growth at Amplified Digital® were partially offset by reductions in costs tied to our legacy print revenue streams. • Net income totaled $0.1 million and Adjusted EBITDA totaled $96 million. The Named Executive Officers The Company's NEOs include the principal executive officer, the principal financial officer and the other most highly compensated executive officer who was serving as an executive officer at September 25, 2022. In 2022, the NEOs were: Kevin D. Mowbray President and Chief Executive Officer Timothy R. Millage Vice President, Chief Financial Officer & Treasurer Nathan E. Bekke Operating Vice President, Vice President - Audience Strategy Elements of Compensation Our compensation program reinforces the key drivers of success in the Company’s business. Our financial emphasis is on revenue and operating cash flow. We believe these two measures are key measures of long and short-term success in our industry. Compensation for our NEOs includes the following: • Salaries; • Annual cash incentives which are based, to a large extent, on annual performance of the Company and the operations the individual manages; • Discretionary cash bonus awards in those circumstances where we believe exceptional performance is not adequately rewarded under our annual cash incentive compensation program; • Long-term equity incentives in the form of stock options or restricted Common Stock awards that fully vest three years after grant; and • Benefits, including health, life and disability insurance, a 401(K) plan and a supplemental deferred compensation plan. Our annual cash incentive program places a portion of NEO compensation at risk, based on performance criteria. In addition, stock options, when granted, are inherently performance-based because an option only has value if the stock price rises after the option is granted. In some instances, we also make restricted Common Stock awards conditioned on the achievement of one or more specified performance goals under our Incentive Compensation Program. Say-On-Pay Proposals At our 2017 annual meeting, we conducted a non-binding advisory vote of the shareholders on the frequency of advisory votes on the Company’s compensation of its NEOs (the “say-on-frequency” vote). Of the 4,273,000 shares represented at the meeting, a plurality of approximately 41.0% of the shares represented at the meeting were voted in favor of a one-year frequency vote; 25.2% of such shares were voted in favor of a three-year frequency for such votes; and due to broker non-votes, approximately 32.8% of the shares represented at the meeting were not voted in favor of any alternative. Due to the inconclusive nature of the advisory voting results, the Executive Compensation Committee considered several factors in making its determination regarding the frequency of advisory shareholder votes on the Company’s executive compensation program. • In 2011, 2014, and 2017, the shareholders recommended, on an advisory basis, the approval of the compensation philosophy, policies and procedures employed by the Executive Compensation Committee, substantially as described herein (the “say-on-pay” vote). 39 Table of Contents • In 2011, 2014, and 2017, 93.6%, 95.8%, and 95.4% of the votes cast were voted in favor of the say-on-pay proposal, respectively. • Shareholder engagement and feedback findings do not indicate any concerns with the Company’s executive compensation program. • Shareholders who have concerns about executive compensation during the interval between “say-on-pay” votes are welcome to bring their specific concerns to the attention of the Board and the Executive Compensation Committee. Consistent with the recommendation of the Board as set forth in the Company’s proxy statement for its 2017 annual meeting, the Board determined, after consideration, to continue holding an advisory shareholder vote on the compensation of the Company’s NEOs every three years. This policy remains in effect until the “say-on-frequency” advisory vote regarding the compensation of the Company’s NEOs at the Annual Meeting. The next scheduled “say-on-pay” advisory vote related to executive compensation matters will be conducted at the 2023 Annual Meeting and the Board is recommending a change to an annual “say-on-pay frequency” advisory vote in order to reflect market trends and best practices. Valuation of Equity Awards The accounting value of equity awards is charged to expense over the vesting period of the equity award. The accounting value of equity awards to NEOs is summarized below: (Dollars) Total Accounting Value of 2022 Grants Accounting Charge Recorded in 2022 for 2022 Grants Accounting Charge Recorded in 2022 for 2021, 2020 and 2019 Grants Accounting Charge to be Recorded in 2023-2025 for 2022 Grants Kevin D. Mowbray 400,000 105,556 327,500 294,444 Timothy R. Millage 250,000 65,976 68,028 184,024 Nathan E. Bekke 250,000 65,976 30,556 184,024 Summary Compensation Table The following table summarizes the 2022 and 2021 compensation of the NEOs: (Dollars) Year Salary Stock Awards (1) Option Awards (1) Non-Equity Incentive Plan Compensation (2) All Other Compensation (3) (4) Total Kevin D. Mowbray 2022 900,000 400,000 — 1,008,056 23,779 2,331,835 President and Chief Executive Officer 2021 900,000 168,000 — 1,083,595 23,017 2,174,612 Timothy R. Millage 2022 506,250 250,000 — 283,516 11,570 1,051,336 Vice President, Chief Financial Officer, and Treasurer 2021 450,000 56,000 — 270,899 12,829 789,728 Nathan E. Bekke 2022 500,833 250,000 — 355,484 11,301 1,117,618 Operating Vice President; Vice President - Audience Strategy 2021 400,000 39,823 — 240,799 11,432 692,054 (1) Stock and option awards are granted at a price equal to the fair market value on the date of grant. Information with respect to stock awards granted to the NEOs is reflected in “Outstanding Equity Awards at September 25, 2022” below. 40 Table of Contents (2) Includes discretionary amounts paid under the annual cash incentive plan. (3) Includes matching contributions made to the Company's Retirement Account Plan and Non-Qualified Plan during the year. To the extent qualifying compensation was not received during the year, such as certain non-equity incentive plan compensation, the related matching contribution may be reported in a subsequent year. (4) The Lee Foundation, an affiliate of the Company, matches on a dollar-for-dollar basis up to $5,000 annually, charitable contributions made by NEOs to qualifying organizations. Such matching contributions are not considered compensation of the NEO. Grants of Plan-Based Awards The following table summarizes information related to 2022 grants of equity compensation under the LTIP and the Incentive Compensation Program for the CEO, and under the LTIP for the other NEOs. (Dollars) 2022 Grant Date All Other Stock Awards: Number of Shares of Stock 2022 Grant Date Fair Value of Stock Awards Kevin D. Mowbray 12/10/2021 13,329 400,000 Timothy R. Millage 12/10/2021 8,331 250,000 Nathan E. Bekke 12/10/2021 8,331 250,000 Outstanding Equity Awards at September 25, 2022 The following table summarizes outstanding equity awards to the NEOs as of September 25, 2022: (Dollars, Except Share Data) Restricted Common Stock Awards Number of Shares of Stock That Have Not Vested Market Value of Shares of Stock That Have Not Vested (1) Kevin D. Mowbray 2022 Stock Award 13,329 226,726 2021 Stock Award 15,000 255,150 2020 Stock Award 20,000 340,200 Timothy R. Millage 2022 Stock Award 8,331 141,710 2021 Stock Award 5,000 85,050 2020 Stock Award 5,400 91,854 Nathan E. Bekke 2022 Stock Award 8,331 141,710 2021 Stock Award 3,556 60,488 2020 Stock Award 3,200 54,432 (1) Based on closing market price of $17.01 on September 23, 2022. 41 Table of Contents Option Exercises and Stock Vested The following table summarizes information related to vesting of restricted Common Stock of the NEOs in 2022: Restricted Common Stock (Dollars, Except Share Date) Number of Shares Acquired on Vesting Value Realized on Vesting Kevin D. Mowbray 20,000 334,800 Timothy R. Millage 5,400 90,396 Nathan E. Bekke 3,200 53,568 42 Table of Contents Non-Qualified Deferred Compensation The following table summarizes information related to 2022 activity in the Non-Qualified Plan for the NEOs. (Dollars) NEO Contributions Company Contributions Aggregate Earnings Distributions Aggregate Balance at September 25, 2022 (1) (2) (3) (4) Kevin D. Mowbray 44,197 17,679 3,611 — 549,724 Timothy R. Millage 13,674 5,470 (12,932) — 62,345 Nathan E. Bekke 13,002 5,201 (6,788) — 75,148 (1) Amounts included in total compensation in the Summary Compensation Table under “Salary.” (2) Amounts included in total compensation in the Summary Compensation Table under “All Other Compensation”. (3) Earnings are based on the performance of investments selected by the NEO. (4) Amounts include compensation to the NEO in the form of Company contributions prior to 2021. For those NEOs continuing to participate in the Non-Qualified Plan in 2020 and thereafter, withdrawals are permitted following termination of employment. Employee contributions are limited to 45% of salary and bonus compensation. See “Primary Benefits” above for additional information with regard to the Non-Qualified Plan. Change of Control, Employment and Other Agreements In 2015, we entered into amended and restated employment agreements between the Company and eight senior executive officers, including all of our NEOs, with the exception of Messrs. Farris and Millage, who entered into such agreements in 2018. The employment agreements entitle these executives to severance and other benefits upon termination without cause or for good reason that becomes effective only upon a change of control. We approved the new agreements because we believe they better align our agreements with general industry change of control employment agreements. A change of control is defined to include certain mergers and acquisitions, liquidation or dissolution of the Company, changes in the membership of the Company's Board and acquisition of 15% of the outstanding stock of the Company for the purpose of changing the control of the Company. The new agreements superseded agreements originally entered into in 1998 and amended and restated in 2008 and provide substantially lower benefits upon a change of control. Absent a change of control, the agreements do not require the Company to retain the executives or to pay them any specified level of compensation or benefits, and they remain employees at will. The agreements extend for two years from the date of signature. On each annual anniversary date of the agreements (each a “Renewal Date”), the change of control period will be automatically extended so as to terminate two years from such Renewal Date, unless at least 60 days prior to the Renewal Date the Company gives notice to the executive that the change of control period will not be extended. The agreements are subject to the following triggers: • The agreements become effective and the protective features vest upon a change of control or if an executive's employment is terminated as a consequence of such event. • The agreements provide that each executive is to remain an employee for a two-year period following a change of control of the Company unless the executive resigns for good reason or is terminated for cause, each as defined in the agreement. Under the agreements, a termination pursuant to the terms of the change of control agreement triggers the following compensation and benefits for the executives: 43 Table of Contents Employment Period Benefits During the two-year employment period, the executives are entitled to: • An annual base salary, payable monthly in an amount at least equal to their highest monthly base salary during the year prior to the change of control; • An annual bonus, payable in a lump sum within 75 days following each fiscal year in an amount at least equal to their highest annual bonus in the three years prior to the change of control; • Continued participation in the Company's incentive, savings, retirement, and welfare benefit plans; and • Payment of expenses and fringe benefits (including office and support staff, tax and financial planning services, applicable club dues and use of an automobile and related expenses) to the extent paid or provided to such executive immediately prior to the change of control or to other peer executives of the Company. Benefits Upon Termination If the executive's employment is terminated during the two-year employment period other than for cause, death or disability, or the executive terminates employment for good reason, the executive will be entitled to the following benefits: • All accrued and unpaid annual base salary and annual bonus for the prior fiscal year payable in a lump sum within 30 days of termination; • A lump sum severance payment equal to the amount corresponding to the executive's title set forth in the following table: • CEO 3x annual base salary and highest recent annual bonus • Vice Presidents 1x annual base salary and highest recent annual bonus • A payment equal to the payment multiple above of the Company's average annual contributions on behalf of the executive under all defined contribution plans maintained by the Company during the three-year period immediately preceding the termination; • Any legal fees and expenses incurred by the executive in asserting legal rights in connection with the agreement; and • Continued welfare benefits for the period equal to the multiple of their base salary payable plus certain outplacement services. Under the agreements, termination for cause means termination of the executive's employment due to the (1) willful and continued failure of the executive to perform substantially the executive's duties with the Company or one of its affiliates, or (2) the willful engaging by the executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company. Good reason means actions taken by the Company that result in a material negative change in the employment relationship, including a detrimental change in responsibilities, a reduction in salary or benefits or a relocation of office, as described in the agreement. Excise Tax Cap on Payments To reduce the impact of any excise tax imposed on the executive related to the change of control, the agreements also require the Company to cap the overall value of payments if such reduction results in a larger net after-tax payment than would result if such payments were not capped and subject to an excise tax. 44 Table of Contents Other Provisions For a period of one year after the agreements become effective, the executives are restricted from: • Disclosing the confidential information of the Company and its affiliates; • Competing against the Company and its affiliates; • Soliciting the customers of the Company and its affiliates; and • Soliciting the employees of the Company and its affiliates for employment and hiring them, unless the employee is responding to employment advertising of a general nature or unless approved by the President of the Company in advance. There is no requirement in the agreements that the executives execute a release of claims in favor of the Company and its affiliates. Acquirer's Obligations The agreements mandate that the Company require an acquirer to assume and satisfy the Company's obligations under the agreements. Equity Awards The Company's LTIP was amended to provide that, if a change of control occurs, for early vesting and exercise and issuance or payment will be subject to a “double-trigger” for the following awards to executives (subject to certain limits): • Awards of restricted Common Stock; • Stock options and stock grants; or • Amounts payable instead of such issuance in a lump-sum payment within 30 days of surrender of such stock options to the Company. Generally, vesting and payment will not occur if replacement awards equal in value and vesting terms are granted to the affected executive in connection with the change of control, unless the executive is thereafter terminated within the specified protection period. Potential Payments Upon Termination or Change of Control The following summarizes information as of September 25, 2022, related to estimated potential cash payments upon a change of control to the NEOs. Amounts in the table do not reflect income tax benefits that may be realized by the Company. The estimated payments also make assumptions as to whether certain discretionary bonus payments made to NEOs are qualifying annual incentive plan payments under the agreements. (Dollars) Estimated Net Present Value of Change of Control Severance and Benefits Kevin D. Mowbray 7,178,428 Timothy R. Millage 1,195,522 Nathan E. Bekke 1,141,568 COMPENSATION OF NON-EMPLOYEE DIRECTORS We desire to compensate our directors in a manner that is comparable to compensation levels at companies in our peer group and companies of a similar size (see “Peer Group Information” under “Executive Compensation” below) and provides stock ownership. Peer group proxy statements are provided to the Executive Compensation Committee with information on annual retainers and compensation for attendance at board and committee meetings. The Executive Compensation Committee reviews the information and makes a 45 Table of Contents recommendation to the full Board for its approval. In 2019, the Executive Compensation Committee also requested a comprehensive report on peer group director compensation from Korn Ferry, its independent consultant (the “Korn Ferry report”). In December 2019, upon the recommendation of the Executive Compensation Committee after review and analysis of industry peer board compensation practices and the Korn Ferry report, as part of the Board's ongoing review of the Company's governance practices, the Board approved the following Board compensation program: • Annual cash retainer to $100,000 in lieu of such fees; • Implementation of an annual cash retainer for the following committee chairs and Lead Director: • Lead Director $20,000 • Audit and ECC $15,000 • NCGC $10,000 • Implementation of non-employee director stock ownership guidelines, as reflected in the Company Corporate Governance Guidelines; and • Annual restricted stock awards under the 2020 Long-Term Incentive Plan (“2020 Plan”) to non-employee directors, with the 2020 stock award to be shares of Company common stock with a fair market value of $50,000 on June 1, 2020, subject to shareholder approval of the 2020 Plan. At the 2020 Annual Meeting, the shareholders approved the 2020 Plan, and the 2020 Plan was implemented in March 2020 and remains in effect in 2023. In 2022, the annual restricted stock award to non-employee directors was increased to $60,000. Directors engaged to provide consultative services are normally compensated at the rate of $1,500 per day. None of our non-employee directors received compensation for consultative services in 2022. The following table summarizes non-employee director compensation for calendar 2022: (Dollars) Fees Earned or Paid in Cash (1) Value of Stock Awards (2) Total Steven C. Fletcher 105,000 60,000 165,000 Margaret R. Liberman 100,000 60,000 160,000 Brent M. Magid 115,000 60,000 175,000 Shaun E. McAlmont 64,516 60,000 124,516 Herbert W. Moloney lll 135,000 60,000 195,000 David T. Pearson 100,000 60,000 160,000 Gregory P. Schermer 105,000 60,000 165,000 Mary E. Junck 250,000 180,000 430,000 (1) Cash compensation in excess of the 2022 annual retainer represents payment for directors as a committee chair or, in the case of Mr. Moloney, for his service as Lead Director. (2) All restricted stock awards are fully vested on the first anniversary of the grant date. Restricted Stock awards are granted at a price equal to the fair market value of the date of the grant. The Board has authorized non-employee directors, prior to the beginning of any calendar year, to elect to defer receipt of all or any part of the cash compensation a director might earn during such year under our Outside Directors Deferral Plan (Amended and Restated as of January 1, 2008). Amounts so deferred will be paid to the director upon his or her separation from service, death, or disability, adjusted for any investment gains (or losses) thereon. Alternatively, directors may elect to have deferred compensation credited to a “rabbi trust” established by us with an independent trustee, which administers the investment of amounts so credited for the 46 Table of Contents benefit and at the direction of the trust beneficiaries until their accounts are distributed under the deferred compensation plan. Amounts so credited for the benefit of non-employee directors are invested in investment alternatives selected by the director. None of our employees receives any compensation for serving as a director. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS EQUITY COMPENSATION PLAN INFORMATION Information as of September 25, 2022, with respect to equity compensation plans is as follows: Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (A) Weighted Average Exercise Price of Outstanding Options, Warrants and Rights (Dollars) (B) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Shares in column A) (1) (2) (3) Equity compensations plans approved by shareholders — — 279,810 (1) LTIP (2) Includes the number of securities remaining available for future issuance under our LTIP (3) Those securities not issued as a result of cancellation, forfeiture or surrender of previously outstanding options or adjustment of target restricted stock awards remain available for issuance, at the discretion of the Executive Compensation Committee, under the LTIP. Such shares are excluded from the total presented as the amount cannot be ascertained. Unvested restricted stock awards are not included in the number of shares presented as they are no longer available for future issuance once granted. VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF The following table sets forth information as of January 12, 2023, except as set forth below, as to each person known by us to own beneficially more than 5% of our Common Stock. Name and Address of Beneficial Owner Title of Class Shares of Common Stock Percent of Class Cannell Capital, LLC (1) 245 Meriwether Circle, Alta, WY 83414 Common Stock 546,935 9.15 % Praetorian Capital Fund LLC (2) 330 Mangrove Thicket Blvd, Ponte Vedra, FL 32081 Common Stock 430,000 7.30 % Mason P. Slaine Revocable Trust (3) 1000 S. Ocean Blvd, Unit 501, Boca Raton, FL 33432 Common Stock 299,000 5.00 % (1) Information is based solely on a report on Schedule 13D/A filed with the SEC on December 8, 2022. (2) Information is based solely on a report on Schedule 13D, filed with the SEC on February 2, 2022. (3) Information is based solely on a report on Schedule 13D filed with the SEC on September 23, 2022. 47 Table of Contents The following table sets forth information as to our Common Stock beneficially owned as of January 12, 2023, by each director and nominee, each of the NEOs listed in the Summary Compensation Table, and by all directors and executive officers as a group: Beneficial Owner Shares of Common Stock Percent of Class Nathan E. Bekke 30,800 * Astrid J. Garcia 18,991 * Joseph J. Battistoni 16,047 * Ray G. Farris (1) 22,716 * Steven C. Fletcher 9,644 * Mary E. Junck 185,784 3.1% Margaret R. Liberman 8,644 * Brent M. Magid 17,482 * Shaun E. McAlmont 3,067 * Timothy R. Millage 29,092 * Kevin D. Mowbray 117,316 1.9% Herbert W. Moloney lll 18,819 * David T. Pearson 9,745 * Gregory P. Schermer (2) 132,895 2.2% Jolene N. Sherman 5,596 * All executive officers and directors as a group (15 persons) (1) (2) 10.4% * Less than one percent of the class (1) Mr. Farris retired as an Executive Officer of the Company effective January 1, 2023. (2) Mr. Schermer disclaims beneficial ownership of the following shares, included above - 3,182 shares of Common Stock held by a trust for the benefit of his son, 2,782 shares of Common Stock held by a trust for the benefit of a daughter and 4,764 shares of Common Stock held by separate trusts for the benefit of two other daughters as to which Mr. Schermer shares voting and investment authority. (3) None of the shares shown in the table as beneficially owned by directors and executive officers is hedged or pledged as security for any obligation. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS We have adopted procedures that apply to any transaction or series of transactions in which the Company or a subsidiary is a participant involving an amount in excess of $120,000, and a related person has a direct or indirect material interest. Under SEC rules, a related person is a director, nominee for director, executive officer, owner of more than 5% of our Common Stock or immediate family member of any of the above. On an annual basis, each director, nominee for director and officer and certain 5% or greater shareholders are required to complete a Director and Officer Questionnaire that requires disclosure of any transactions with us in which a related person has a direct or indirect material interest. Our general counsel is primarily responsible for the development and implementation of procedures and controls to obtain information from these related persons. The charter of our Audit Committee provides that the Audit Committee is responsible for review, approval, or ratification of related-person transactions. Though we have no written policy, it is the practice of our Audit Committee to approve such transactions only if it deems them to be in the best interests of the Company. When considering a transaction, the Audit Committee will review all relevant factors, including our rationale for entering into a related-person transaction, alternatives to the transaction, whether the transaction is on terms at least as fair to the Company as would be the case were the transaction entered into with a third party, and potential for an actual or apparent conflict of interest. The Audit Committee reports its findings to the Board. 48 Table of Contents We have entered into indemnification agreements with each of our directors and executive officers. These agreements require us to indemnify such individuals, to the fullest extent permitted by Delaware law, for certain liabilities to which they may become subject as a result of their affiliation with the Company. BOARD LEADERSHIP AND COMMITTEE STRUCTURE Our Board has three standing committees: the Audit Committee, the Executive Compensation Committee, and the Nominating and Corporate Governance Committee. Each committee is composed of at least three independent directors, and each committee operates under a written charter, which are all available on our website www.lee.net by clicking on “About” and then “Governance.” The members of the committees are shown in the table below: Audit Committee (1) ECC (1) NCGC (1) Steven C. Fletcher Member Member Chairman Margaret R. Liberman — — Member Mary E. Junck — — — Brent M. Magid Chairman Member — Shaun E. McAlmont — Member — Herbert W. Moloney lll Member Chairman Member Kevin D. Mowbray — — — David T. Pearson Member — — Gregory P. Schermer Member — Member (1) The Committee is composed of “independent” non-employee directors. See discussion of “Director Independence” below. As stated in our Corporate Governance Guidelines, our Board has no formal policy with respect to the separation of the offices of Chairman and the CEO. Our Board presently believes that having a separate Chairman and CEO, together with an independent Lead Director, provides the best Board leadership structure for the Company. This structure, together with our other corporate governance practices, provides strong independent oversight of management, while ensuring clear strategic alignment throughout the Company. Ms. Junck serves as Chairman of the Board and Kevin Mowbray serves as President and CEO. Our Lead Director is a non-employee director who is elected by the independent members of the Board at its annual meeting. Herbert W. Moloney III, a director since 2001, currently serves as our Lead Director. The role of Mr. Moloney, as Lead Director, includes the following duties: • Preside at all meetings of the Board when the Chairman is not present; • Call meetings of the non-management directors, as needed; • Develop the agendas for meetings of the non-management directors; • Preside at executive sessions of the non-management directors; • Confer regularly with the Chairman and the CEO; • Serve as a liaison between the CEO and the non-management directors; • In consultation with the Chairman, review and approve Board meeting schedules and agendas; and • Meet with shareholders as appropriate. 49 Table of Contents DIRECTOR INDEPENDENCE The Nominating and Corporate Governance Committee assesses the independence of each director and director nominee and makes recommendations to the Board. For a director or director nominee to be “independent,” the Board must affirmatively determine that the director has no material relationship with the Company other than his or her service as a director. In addition, members of the Audit Committee and Executive Compensation Committee must meet heightened independence standards under applicable NASDAQ and SEC rules. Our Board has examined the relationship between each of our non-employee directors and the Company and has determined that Ms. Junck and Ms. Liberman and Messrs. Fletcher, Magid, McAlmont, Moloney. Pearson and Schermer qualify as “independent” directors in accordance with NASDAQ rules and, in the case of the Audit Committee and Executive Compensation Committee, the rules of the SEC. Mr. Mowbray does not qualify as an independent director because he is an employee of the Company. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES For 2022 and 2021, BDO and KPMG performed the following professional services and received, or will receive, fees in the amounts indicated. (Dollars) 2022 2021 BDO KPMG Audit fees 825,000 1,736,500 Audit-related fees — — Tax Fees — — All other Fees — — 825,000 1,736,500 All services rendered by BDO and KPMG are permissible under applicable laws and regulations. The Audit Committee reviewed and pre-approved all services related to the fees listed in the above table in accordance with our Policy Regarding the Approval of Audit and Non-Audit Services by Independent Public Accountants (“Policy”). Under the Policy, Audit Committee pre-approval includes audit services, audit-related services, tax services, other services and services exceeding the pre-approved cost range. In some instances, pre-approval is provided by the full Audit Committee for up to a year with any such pre-approval relating to a particular defined assignment or scope of work and subject to a specific defined budget. In other instances, the Audit Committee may delegate pre-approval authority of additional services to one or more designated members with any such pre-approval reported to the Audit Committee at its next scheduled meeting. Any pre-approved service requires the submission of an engagement letter or other detailed back-up information. Pursuant to rules of the SEC, the fees paid to BDO and KPMG for services are disclosed in the table above under the categories described below, as applicable. Audit Fees – Fees for professional services for the audit of our Consolidated Financial Statements, review of financial statements included in our quarterly Form 10-Q filings, attestation reporting on the effectiveness of our internal control over financial reporting, and services that are normally provided in connection with statutory and regulatory filings or engagements. Audit-Related Fees – Fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements. This includes due diligence related to mergers and acquisitions, preparation of comfort letters related to financing or other transactions, attestations that are not required by statute or regulation, and consulting related to financial accounting or reporting standards. Tax Fees – Fees for professional services with respect to tax compliance and advice and planning. This includes preparation of original and amended tax returns for the Company and its consolidated subsidiaries, refund claims, payment planning, tax audit assistance and tax work stemming from audit-related matters. We also engage the services of other accounting firms and law firms for such services. Fees paid to such firms are 50 Table of Contents not reflected in the table above except to the extent BDO and KPMG is engaged directly by such firms to perform services on behalf of the Company. All Other Fees - Fees for other permissible work that does not meet the above category descriptions. These services are actively monitored both as to spending level and work content by the Audit Committee to maintain the appropriate objectivity and independence in our independent registered public accounting firm's core work, which is the audit of our Consolidated Financial Statements. PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES The following documents are filed as part of this Annual Report: FINANCIAL STATEMENTS Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) - 52 weeks ended September 25, 2022, 52 weeks ended September 26, 2021 and 52 weeks ended September 27, 2020 Consolidated Balance Sheets - September 25, 2022 and September 26, 2021 Consolidated Statements of Stockholders' Equity (Deficit) - 52 weeks ended September 25, 2022, 52 weeks ended September 26, 2021 and 52 weeks ended September 27, 2020 Consolidated Statements of Cash Flows - 52 weeks ended September 25, 2022, 52 weeks ended September 26, 2021 and 52 weeks ended September 27, 2020 Notes to Consolidated Financial Statements Reports of Independent Registered Public Accounting Firm's* * BDO USA, LLP ; Chicago, IL ; PCAOB Firm ID# 243 FINANCIAL STATEMENT SCHEDULES All schedules have been omitted as they are not required, not applicable, not deemed material or because the information is included in the Notes to Consolidated Financial Statements, included herein. EXHIBITS See Exhibit Index, included herein. 51 Table of Contents CONSOLIDATED FINANCIAL STATEMENTS PAGE Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) 53 Consolidated Balance Sheets 54 Consolidated Statements of Stockholders' Equity (Deficit) 56 Consolidated Statements of Cash Flows 57 Notes to Consolidated Financial Statements 58 Report s of Independent Registered Public Accounting Fi r m's 94 52 Table of Contents CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) (Thousands of Dollars, Except Per Common Share Data) 2022 2021 2020 Operating revenue: Advertising and marketing services 366,428 369,283 289,655 Subscription 353,624 357,713 268,285 Other 60,917 67,653 60,064 Total operating revenue 780,969 794,649 618,004 Operating expenses: Compensation 317,789 330,896 243,023 Newsprint and ink 30,101 29,775 24,243 Other operating expenses 344,905 325,597 259,382 Depreciation and amortization 36,544 42,841 36,133 Assets loss (gain) on sales, impairments and other 9,716 8,214 ( 5,403 ) Restructuring costs and other 22,720 7,182 13,751 Total operating expenses 761,775 744,505 571,129 Equity in earnings of associated companies 5,657 6,412 3,403 Operating income 24,851 56,556 50,278 Non-operating income (expense): Interest expense ( 41,770 ) ( 44,773 ) ( 47,743 ) Debt financing and administrative costs — — ( 11,966 ) Curtailment gain 1,027 23,830 — Pension withdrawal cost ( 2,335 ) ( 12,862 ) — Pension and OPEB related benefit (cost) and other, net 19,022 9,296 12,274 Total non-operating expense, net ( 24,056 ) ( 24,509 ) ( 47,435 ) Income before income taxes 795 32,047 2,843 Income tax expense 698 7,255 2,973 Net Income (loss) 97 24,792 ( 130 ) Net income attributable to non-controlling interests ( 2,114 ) ( 2,047 ) ( 1,845 ) (Loss) income attributable to Lee Enterprises, Incorporated ( 2,017 ) 22,745 ( 1,975 ) Other comprehensive (loss) income, net of income taxes ( 25,534 ) 62,237 9,064 Comprehensive (loss) income attributable to Lee Enterprises, Incorporated ( 27,551 ) 84,982 7,089 Earnings (loss) per common share: Basic: ( 0.35 ) 3.98 ( 0.35 ) Diluted: ( 0.35 ) 3.90 ( 0.35 ) The accompanying Notes are an integral part of the Consolidated Financial Statements. 53 Table of Contents CONSOLIDATED BALANCE SHEETS (Thousands of Dollars) September 25 2022 September 26 2021 ASSETS Current assets: Cash and cash equivalents 16,185 26,112 Accounts receivable, less allowance for credit losses: 2022 $ 5,237 ; 2021 $ 6,574 69,522 65,070 Inventories 8,265 6,297 Prepaids and other 15,151 11,320 Total current assets 109,123 108,799 Investments: Associated companies 27,378 26,682 Other 5,971 6,065 Total investments 33,349 32,747 Property and equipment: Land and improvements 14,505 16,576 Buildings and improvements 95,111 106,890 Equipment 215,731 228,817 Construction in process 1,449 2,813 326,796 355,096 Less accumulated depreciation 253,083 271,830 Property and equipment, net 73,713 83,266 Operating lease right-of-use assets 47,490 65,682 Goodwill 329,504 330,204 Other intangible assets, net 121,373 156,671 Pension plan assets, net 528 35,855 Medical plan assets, net 19,066 16,695 Other 9,896 13,632 Total assets 744,042 843,551 The accompanying Notes are an integral part of the Consolidated Financial Statements. 54 Table of Contents (Thousands of Dollars and Shares, Except Per Share Data) September 25 2022 September 26 2021 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of lease liabilities 7,859 8,612 Current maturities of long-term debt — 6,112 Accounts payable 28,608 20,420 Compensation and other accrued liabilities 44,740 45,076 Unearned revenue 49,929 61,404 Total current liabilities 131,136 141,624 Long-term debt, net of current maturities 462,554 476,504 Operating lease liabilities 46,003 57,683 Pension obligations 966 22,444 Postretirement and postemployment benefit obligations 9,221 11,008 Deferred income taxes 42,719 53,763 Income taxes payable 8,292 9,174 Withdrawal liabilities and other 25,914 28,121 Total liabilities 726,805 800,321 Equity: Stockholders' equity: Serial convertible preferred stock, no par value; authorized 500 shares; none issued — — Common Stock, authorized 12,000 shares; issued and outstanding: 60 59 September 25, 2022; 5,979 shares; $ 0.01 par value September 26, 2021; 5,889 shares; $ 0.01 par value Class B Common Stock, $ 2 par value; authorized 3,000 shares; none issued — — Additional paid-in capital 259,521 258,063 Accumulated deficit ( 261,229 ) ( 259,212 ) Accumulated other comprehensive income 16,653 42,187 Total stockholders' equity 15,005 41,097 Non-controlling interests 2,232 2,133 Total equity 17,237 43,230 Total liabilities and equity 744,042 843,551 The accompanying Notes are an integral part of the Consolidated Financial Statements. 55 Table of Contents CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) Amount Shares (Thousands of Dollars and Shares) 2022 2021 2020 2022 2021 2020 Common Stock: Balance, beginning of year 59 58 58 5,889 5,835 5,765 Shares issued 1 1 — 90 54 70 Balance, end of year 60 59 58 5,979 5,889 5,835 Additional paid-in capital: Balance, beginning of year 258,063 256,957 256,002 Stock compensation 1,487 854 1,042 Shares (redeemed) issued ( 29 ) 252 ( 87 ) Balance, end of year 259,521 258,063 256,957 Accumulated deficit: Balance, beginning of year ( 259,212 ) ( 281,957 ) ( 265,423 ) Correction of an error — — ( 14,559 ) Corrected Balance, beginning of year ( 259,212 ) ( 281,957 ) ( 279,982 ) Net income (loss) 97 24,792 ( 130 ) Net income attributable to non-controlling interests ( 2,114 ) ( 2,047 ) ( 1,845 ) Balance, end of year ( 261,229 ) ( 259,212 ) ( 281,957 ) Accumulated other comprehensive income (loss): Balance, beginning of year 42,187 ( 20,050 ) ( 29,114 ) Change in pension and postretirement benefits ( 32,202 ) 82,204 11,464 Deferred income taxes, net 6,668 ( 19,967 ) ( 2,400 ) Balance, end of year 16,653 42,187 ( 20,050 ) Total stockholders' equity (deficit) 15,005 41,097 ( 44,992 ) 5,979 5,889 5,835 The accompanying Notes are an integral part of the Consolidated Financial Statements. 56 Table of Contents CONSOLIDATED STATEMENTS OF CASH FLOWS (Thousands of Dollars) 2022 2021 2020 Cash provided by operating activities: Net income (loss) 97 24,792 ( 130 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 36,544 42,841 36,133 Curtailment gain ( 1,027 ) ( 23,830 ) — Pension withdrawal cost 2,335 12,862 — Stock compensation expense 1,337 854 1,294 Asset loss (gain) on sales, impairments and other, net 9,716 8,214 ( 5,403 ) Deferred income taxes ( 4,377 ) 5,160 ( 4,691 ) Debt financing and administrative costs — — 11,966 Pension contributions ( 112 ) ( 965 ) ( 6,215 ) Return of collateral on (Payments to collateralize) letters of credit 2,451 1,686 ( 11,502 ) Other, net ( 2,015 ) ( 1,253 ) 319 Changes in operating assets and liabilities, net of acquisitions: (Increase) Decrease in receivables and contract sales ( 2,614 ) ( 12,472 ) 26,908 (Increase) Decrease in inventories and other ( 3,088 ) 1,237 2,724 (Decrease) increase in accounts payable, unearned revenue and other accrued liabilities ( 14,645 ) 4,731 ( 8,341 ) (Decrease) increase in pension, postretirement and postemployment benefit obligations ( 21,449 ) ( 2,667 ) ( 2,950 ) Change in income taxes payable ( 236 ) ( 8,418 ) 7,123 Other 512 ( 2,694 ) 2,634 Net cash provided by operating activities 3,429 50,078 49,869 Cash provided by (required for) investing activities: Purchases of property and equipment ( 7,536 ) ( 7,479 ) ( 8,096 ) Proceeds from sales of assets 14,835 4,616 21,710 Acquisitions, net of cash acquired — — ( 130,985 ) Distributions greater (less) than earnings of TNI and MNI ( 576 ) 1,038 ( 329 ) Other, net ( 386 ) ( 453 ) ( 476 ) Net cash provided by (required for) investing activities 6,337 ( 2,278 ) ( 118,176 ) Cash (required for) provided by financing activities: Proceeds from long-term debt — — 576,000 Payments on long-term debt — — ( 443,627 ) Principal payments on long-term borrowings ( 20,062 ) ( 55,674 ) ( 37,710 ) Debt financing and administrative costs paid — — ( 684 ) Sale (purchases) of common stock transactions 369 253 ( 584 ) Net cash (required for) provided by financing activities ( 19,693 ) ( 55,421 ) 93,395 Net (decrease) increase in cash and cash equivalents ( 9,927 ) ( 7,621 ) 25,088 Cash and cash equivalents: Beginning of year 26,112 33,733 8,645 End of year 16,185 26,112 33,733 The accompanying Notes are an integral part of the Consolidated Financial Statements. 57 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS References to "we", "our", "us" and the like throughout the Consolidated Financial Statements refer to Lee Enterprises, Incorporated and subsidiaries (the "Company"). Lee Enterprises, Incorporated is a leading provider of high quality, trusted, local news and information, and a major platform for advertising in the markets we serve. We operate 77 principally mid-sized local media operations (including TNI Partners ("TNI") and Madison Newspapers, Inc. ("MNI")) across 26 states. 1. SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The Consolidated Financial Statements include our accounts and those of our subsidiaries, all of which are wholly-owned, except for our 50 % interest in TNI, 50 % interest in MNI and 82.5 % interest in BLOX Digital. TNI and MNI are accounted for under the equity method. Results of BLOX Digital are consolidated. On March 16, 2020, the Company completed the acquisition of BH Media Group, Inc. and The Buffalo News, Inc. for a combined purchase price of $ 140,000,000 (collectively, the "Transactions"). Certain amounts in prior period Consolidated Financial Statements have been reclassified to conform to the current year presentation. Pursuant to our acquisition of BH Media and Buffalo News, we realigned the presentation of certain home delivery print revenue and certain other Subscription revenue from other revenue to subscription revenue on the Consolidated Statements of Income (loss) and Comprehensive Income (loss). As a result of this updated presentation, subscription revenue increased and other revenue decreased by $ 828,000 in 2021 and by $ 2,346,000 in 2020. Operating revenues, net income (loss), accumulated deficit, and earnings per share remain unchanged. In 2021 and 2020, we allocated revenue from our full access subscriptions between print and digital subscription revenues. In 2022, due to the increased prominence of digital-only revenues, we revised this presentation to classify full access subscriptions as print subscription revenue, and discretely present digital-only subscription revenues. 2021 and 2020 amounts were reclassified in Note 4 to conform to the current year presentation. Operating revenues, net income (loss), accumulated deficit, and earnings per share remain unchanged. On February 25, 2021, our Board of Directors declared a one-for-ten split of the Company's common stock (the "Reverse Stock Split"). Effective March 15, 2021 the Company's shares began trading on a post reverse split basis. Prior period results have been adjusted to reflect the Reverse Stock Split in March 2021. The split did not change the Company's Common Stock Par value but changed opening Common Stock and Additional Paid in Capital balances by offsetting amounts. During the year ended September 26, 2021 we identified an error related to pension contributions recorded incorrectly in the year ended September 27, 2020. The error was due to a directional issue whereby pension contributions were reported as operating cash inflows in the statement of cash flows instead of operating cash outflows. Recording this out of period adjustment had no impact to the Consolidated Statements of Income (loss) and Comprehensive Income (loss) for the 52 weeks ended September 26, 2021 and had no impact on the Consolidated Balance Sheet. The correction impacted the Consolidated Statement of Cash Flows. Pension contributions were corrected to a cash outflow of $ 6,215,000 and the change in pension, postretirement and postemployment benefit obligations have been corrected to a decrease of $ 2,950,000 . Net cash provided by operating activities did not change. We did not believe the impact of the adjustment was material to our consolidated financial statements for any previously issued financial statements taken as a whole. Fiscal Year All of our enterprises use period accounting with the fiscal year ending on the last Sunday in September. References to "2022", "2021", "2020" and the like refer to the fiscal years ended the last Sunday in September. Fiscal years 2022, 2021, and 2020 include 52 weeks of operations. Accounting Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires us to make estimates and judgments that affect the reported amounts of 58 Table of Contents assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates, which include estimates used in the valuation of goodwill and intangible assets periodically. We evaluate our estimates used in connection with our business combinations, the discount rate assumptions applied to our pension and postretirement plan obligations, the expected long-term rate of return on plan assets, and the provision for income taxes on an on-going basis. 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. Principles of Consolidation All significant intercompany transactions and balances have been eliminated. Investments in TNI and MNI are accounted for using the equity method and are reported at cost, plus our share of undistributed earnings since acquisition less, for TNI, amortization of, and reductions in the value of, intangible assets. Cash and Cash Equivalents We consider 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 We evaluate our allowance for credit losses based on historical credit experience, payment trends and other economic factors. Accounts considered to be uncollectible are written off. Inventories Newsprint inventories and other inventories are priced at the lower of cost or net realizable value. LIFO newsprint inventories at September 25, 2022 and September 26, 2021 are less than replacement cost by $ 1,448,000 and $ 988,000 , respectively. The components of inventory by cost method are as follows: (Thousands of Dollars) September 25, 2022 September 26, 2021 Newsprint - FIFO method 393 409 Newsprint - LIFO method 447 903 Other inventory - FIFO method 2,219 2,870 Specific identification 5,206 2,115 8,265 6,297 Investments Investments in unconsolidated affiliates over which Lee exercises significant influence, but does not control, are accounted for by the equity method. Under this method, an investment account for each unconsolidated affiliate is increased by contributions made and by Lee's share of net income of the unconsolidated affiliate, and decreased by the share of net losses of and distributions from the unconsolidated affiliate. 59 Table of Contents Property and Equipment Property and equipment are carried at cost. Equipment and all other assets are depreciated using the straight line method. The estimated useful lives are as follows: Years Buildings and improvements 5 - 40 Printing presses and insertion equipment 5 - 25 Leasehold improvements 3 - 10 Other 3 - 15 Depreciation expense for 2022, 2021 and 2020 was $ 14,365,000 , $ 17,982,000 , and $ 15,385,000 , respectively. Goodwill and Other Intangible Assets Goodwill and other intangible assets are summarized in Note 6. Intangible assets include customer lists, newspaper subscriber lists and mastheads. Intangible assets subject to amortization are being amortized using the straight-line method except for intangible assets acquired in the Transactions which are being amortized in an accelerated manner consistent with the expected economic benefit. Years Customer lists 10 - 20 Newspaper subscriber lists 10 - 20 We review goodwill and non-amortizing intangible assets, which include only newspaper mastheads, for impairment annually as of the first day of the fiscal fourth quarter, or more frequently in events or changes in circumstances indicate that an asset may be impaired in accordance with FASB Accounting Standards Codification ("ASC") Topic 350, " Intangibles - Goodwill and Other ." Under ASC Topic 350, the impairment test for goodwill and non-amortizing intangible assets must be based on estimated fair values. Impairment would occur when the carrying amount of the reporting unit is greater than its fair value. Companies with reporting units with zero or negative carrying value are required to disclose the amount of goodwill for those reporting units. Leases The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use ("ROU") lease assets, current portion of long-term lease liabilities and operating lease liabilities on the Consolidated Balance Sheets. Finance lease would be included in property, plant and equipment, current portion of long-term debt and long-term debt on the Consolidated Balance Sheets. Amortization of operating lease ROU assets is included in other operating expenses. Amortization of finance leases would be included in depreciation expense. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. The ROU asset is adjusted to include lease payments made to date and initial direct costs incurred and to deduct for lease incentives received and impairment recognized. As most of the Company's leases do not provide an implicit rate, We determined the incremental borrowing rate based on a senior secured collateral adjusted yield curve for the Company. This yield curve reflects the estimated rate that would have been paid by the Company to borrow on a collateralized basis over a similar term in a similar economic environment. The lease terms may include options to extend or terminate the lease when it is reasonable certain that the option will be exercised. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Certain lease agreements have lease and non-lease components, which are accounted for together. See Note 8 for additional information related to leases. 60 Table of Contents Business Combinations The Company accounts for acquisitions in accordance with the provisions of ASC Topic 805 - " Business Combinations ", which provides guidance for recognition and measurement of identifiable assets and goodwill acquired, liabilities assumed, and any non-controlling interest in the acquiree at fair value. In a business combination, the assets acquired, liabilities assumed and non-controlling interest in the acquiree are recorded as of the date of acquisition at their respective fair values with limited exceptions. Any excess of the purchase price (consideration transferred) over the estimated fair values of net assets acquired is recorded as goodwill. Transaction costs are expensed as incurred. The operating results of the acquired business are reflected in the Company's Consolidated Financial Statements from the date of acquisition. Revenue Recognition Revenue is recognized when a performance obligation is satisfied by the transfer of control of the contracted goods or services to our customers, in an amount that reflects the consideration we expect to receive in exchange for those goods or services. Restructuring Costs and Other Restructuring costs and other primarily related to severance expenses associated with involuntary terminations, as well as litigation, advisor, and other expenses associated with the unsolicited bid offer in November 2021. These costs are expensed as incurred. Prior to 2021, other costs included in Restructuring Costs and Other include estimated impacts of withdrawals from our multiemployer plans. Multiemployer plans are discussed in Note 10. Pension, Postretirement and Postemployment Benefit Plans We evaluate our liabilities 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, when applicable, employee turnover rates, anticipated mortality rates, expected investment returns on plan assets, asset allocation assumptions of plan assets and other factors. We apply a practical expedient under ASC Topic 715, Compensation – Retirement Benefits , which allows us to measure plan assets and benefit obligations using the month-end that is closest to our fiscal year-end. Accordingly, we measure our plan assets and benefit obligations as of September 30, or upon a remeasurement event. We use the alternative spot rate approach which utilizes a full yield curve to estimate the interest cost component of benefit cost by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. Multiemployer Pension Plans The Company contributes to a number of multiemployer defined benefit pension plans under the terms of collective-bargaining agreements that cover certain of the Company's union represented employees. The risks of participating in these multiemployer plans are different from single-employer plans in that assets contributed are pooled and may be used to provide benefits to employees of other participating employers. If a participating employer withdraws from or otherwise ceases to contribute to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers. Alternatively, if the Company chooses to stop participating in one of its multiemployer plans, it may incur a withdrawal liability based on its actuarially determined share of the unfunded status of the plan. Contributions made to multiemployer plans are based on collective-bargaining agreements and are accounted for under guidance related to multiemployer plans, which essentially provides that contributions to such plans are expensed when due. Any withdrawal liability would be recognized at the point withdrawal from the plan becomes probable. See Note 10 for additional information. Income Taxes Deferred income tax assets are recognized for deductible temporary differences and loss carryforwards and deferred income tax liabilities are recognized for taxable temporary differences which are the difference 61 Table of Contents between the reported amounts of assets and liabilities and their tax basis. Deferred income tax assets are reduced by a valuation allowance when, in our opinion, 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. We recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. We record interest and penalties related to unrecognized tax benefits as a component of income tax expense. Fair Value Measurements We utilize ASC Topic 820 - Fair Value Measurements and Disclosures , to measure and report fair value. ASC Topic 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC Topic 820 establishes a three-level hierarchy of fair value measurements based on whether the inputs to those measurements are observable or unobservable, which consists of the following levels: Level 1 - Quoted prices for identical instruments in active markets. Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets. Level 3 - Valuations derived from valuation techniques in which one or more significant inputs are unobservable. Investments measured at net asset value, as a practical expedient for fair value, are excluded from the fair value hierarchy. Valuation methodologies used for pension and postretirement assets measured at fair value are as follows: Cash and cash equivalents consist of short term deposits valued based on quoted prices in active markets. Such investments are classified as Level 1. Treasury Inflation-Protected Securities ("TIPS") consist of low yield mutual funds and are valued by quoted inactive market prices . Such investments are classified as Level 2. Equity securities are valued based on the closing market price in an active market and are classified as Level 1. Certain investments in commingled funds are valued at the end of the period based upon the value of the underlying investments as determined by quoted market prices. Such investments are classified as Level 2. Certain equity securities are part of a collective investment fund for which there is no readily determinable fair value. This fund is valued at the net asset value of units held at the end of the period based upon the value of the underlying investments, which is determined using multiple approaches including by quoted market prices and by private market quotations. Such investments are excluded from the fair value hierarchy. Debt securities consist of government securities, corporate bonds, and mutual funds. Government securities and corporate bonds are valued based upon quoted market prices in an inactive market. Such investments are classified as Level 2. Mutual funds are valued based upon quoted market prices in an active market. Such investments are classified as Level 1. Hedge funds consist of a long/short equity funds and a diversified fund of funds for which there is no readily determinable fair value. These funds are valued at the net asset value of units held at the end of the period based upon the value of the underlying investments, which is determined using multiple approaches including by quoted market prices and by private market quotations. Such investments are excluded from the fair value hierarchy. Segments Our business consists of approximately 50 strategic business units ("SBU's"). The SBU's generally include print and digital subscription products and the associated advertising and marketing services. Each of our SBUs 62 Table of Contents comparable types of costs (compensation, newsprint/ink, and other costs) to generate similar sources of advertising and marketing services revenue and subscription revenue, they produce products in similar manner; they have same class of customers and they use the same distribution processes. In other words, each SBU engages in the same business activities. Separate operating results of each SBU are not reviewed by the chief operating decision maker ("CODM"). The CODM reviews consolidated statements of income and consolidated balance sheets on a monthly basis, and reviews the consolidated statements of cash flows ("SOCF") on a quarterly basis. The balance sheets and SOCF are only prepared on a consolidated level. Selective revenue and expense details by SBU are reviewed by the CODM, however, the focus of those reviews is on details of advertising and marketing services revenue by SBU and subscription revenue by SBU. Complete operating results or other profitability measures by SBU are not reviewed by the CODM. Further, business decisions by the CODM, including the allocation of resources, are determined based on reviewing consolidated information. Stock Compensation and Warrants We have several stock-based compensation plans. We account for grants under those plans under the fair value expense recognition provisions of ASC Topic 718 - Compensation-Stock Compensation . We determine the fair value of stock options using the Black-Scholes option pricing formula. Key inputs to this formula include expected term, expected volatility and the risk-free interest rate. The expected term represents the period that our stock-based awards are expected to be outstanding, and is determined based on historical experience of similar awards, giving consideration to contractual terms of the awards, vesting schedules and expectations of future employee behavior. The volatility factor is calculated using historical market data for our Common Stock. The time frame used is equal to the expected term. We base the risk-free interest rate on the yield to maturity at the time of the stock option grant on zero-coupon U.S. government bonds having a remaining term equal to the option's expected term. When estimating forfeitures, we consider voluntary termination behavior as well as actual option forfeitures. We amortize as compensation expense the value of stock options and restricted Common Stock using the straight-line method over the requisite service period or restriction period, which is generally one to four years . Prior to 2022, we also had 600,000 warrants outstanding to purchase shares of our Common Stock. Warrants were recorded at fair value determined using the Black-Scholes option pricing formula. These warrants expired in 2022. See Notes 7, 12 and 15. Uninsured Risks We are self-insured for health care, workers compensation and certain long-term disability costs of our employees, subject to stop loss insurance, which limits our losses in the event of large claims. We accrue our estimated health care costs in the period in which such costs are incurred, including an estimate of incurred but not reported claims. Other risks are insured and carry deductible losses of varying amounts. We have posted cash collateral totaling $ 4,600,000 at September 25, 2022 in support of our insurance programs recorded under Other on the consolidated balance sheets. Our accrued reserves for health care and workers compensation claims are based upon estimates of the remaining liability for retained losses made by consulting actuaries. The amount of workers compensation reserve has been determined based upon historical patterns of incurred and paid loss development factors from the insurance industry. Recently Issued Accounting Standards - Standards Adopted in 2022 None Recently Issued Accounting Standards - Standards Adopted in 2021 In June 2016, the FASB issued a new standard ASC Topic 326 Financial Instruments - Credit Losses to replace the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a wider array of reasonable and supportable information to inform and develop credit loss estimates. We are required to use a forward-looking expected credit loss model for both accounts receivables 63 Table of Contents and other financial instruments. The new standard was adopted on September 28, 2020, using a modified retrospective approach. This standard did not have a material impact on our Consolidated Financial Statements. In August 2018, the FASB issued Accounting Standards Update ("ASU") 2018-13 Fair Value Measurements that changes disclosure requirements related to fair value measurements as part of the disclosure framework project. The disclosure framework project aims to improve effectiveness of disclosures in the notes to the financial statements by focusing on requirements that clearly communicate the most important information to users of the financial statements. The new guidance was adopted on September 28, 2020, and did not have a material impact on our Consolidated Financial Statements. In December 2019, the FASB issued new guidance that simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC Topic 740 Income Taxes related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition for deferred tax liabilities for outside basis differences. The standard also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. This new guidance was adopted September 28, 2020, and did not have a material impact on our Consolidated Financial Statements. In August 2018, FASB issued ASU 2018-14 Compensation - Retirement Benefits - Defined Benefit Plans to amend disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The new standard was adopted on September 28, 2020 using a retrospective approach, and did not have a material impact on our Consolidated Financial Statements. 2. IMMATERIAL CORRECTIONS TO PRIOR PERIOD FINANCIAL STATEMENTS In 2022, the Company identified an immaterial error in its accounting for certain deferred tax assets contained in its previously issued audited consolidated financial statements for the fiscal years ended September 26, 2021, and September 27, 2020 (including the unaudited interim periods within those fiscal years), and the unaudited interim consolidated financial statements for the interim periods ended June 26, 2022, March 27, 2022, and December 26, 2021. The error relates to tax basis associated with goodwill and a put option that had been recognized in 2008 in connection with the acquisition of Pulitzer, Inc. When the put option was settled in 2009, the Company should have remeasured the tax basis to reflect the cash settlement of the put option, but did not. This remeasurement would have resulted in the deferred tax assets being reduced to zero and the recognition of a deferred tax liability. The Company assessed the materiality of these errors in accordance with SEC Staff Accounting Bulletins (SAB) No. 99, Materiality , and SAB No. 108, Quantifying Misstatements , on its previously issued consolidated financial statements and determined that, after reviewing the nature of the corrections, as well as evaluating the quantitative and qualitative characteristics of the errors, these adjustments do not represent a material change to the prior period financial statements. The Company has revised its previously issued consolidated financial statements as set forth in the tables below. As a result of this error, the Company recorded an adjustment to the opening balance sheet in the fiscal period ended September 27, 2020, to increase net deferred tax liabilities and accumulated deficit by $ 14,559,000 . 64 Table of Contents The table below sets forth the impact of correcting the error in the Consolidated Statements of Income (loss) and Comprehensive Income (loss). (Thousands of Dollars, Except Per Common Share Data) Year Ended September 26, 2021 Year Ended September 27, 2020 As previously reported Adjustment As Revised As previously reported Adjustment As Revised Income before Income Taxes 32,047 — 32,047 2,843 — 2,843 Income tax expense 7,215 40 7,255 4,104 ( 1,131 ) 2,973 Net income (loss) 24,832 ( 40 ) 24,792 ( 1,261 ) 1,131 ( 130 ) (Loss) income attributable to Lee Enterprises, Incorporated 22,785 ( 40 ) 22,745 ( 3,106 ) 1,131 ( 1,975 ) Comprehensive (loss) income attributable to Lee Enterprises, Inc. 85,022 ( 40 ) 84,982 5,958 1,131 7,089 Earnings per common share Basic 3.99 ( 0.01 ) 3.98 ( 0.55 ) 0.20 ( 0.35 ) Diluted 3.91 ( 0.01 ) 3.90 ( 0.55 ) 0.20 ( 0.35 ) The table below sets forth the impact of correcting the error in the Consolidated Balance Sheets. (Thousands of Dollars) As of September 26, 2021 As of September 27, 2020 As previously reported Adjustment As Revised As previously reported Adjustment As Revised Liabilities Deferred incomes taxes 40,295 13,468 53,763 15,208 13,428 28,636 Total liabilities 786,853 13,468 800,321 893,690 13,428 907,118 Accumulated deficit ( 245,744 ) ( 13,468 ) ( 259,212 ) ( 268,529 ) ( 13,428 ) ( 281,957 ) Total stockholders' equity (deficit) 54,565 ( 13,468 ) 41,097 ( 31,564 ) ( 13,428 ) ( 44,992 ) Total equity (deficit) 56,698 ( 13,468 ) 43,230 ( 29,633 ) ( 13,428 ) ( 43,061 ) Total liabilities and stockholders' equity 843,551 — 843,551 864,057 — 864,057 The table below sets forth the impact of correcting the error in the Consolidated Statements of Stockholders' Equity (Deficit) (Thousands of Dollars) Year Ended September 26, 2021 Year Ended September 27, 2020 As previously reported Adjustment As Revised As previously reported Adjustment As Revised Accumulated deficit: Balance, beginning of year ( 268,529 ) ( 13,428 ) ( 281,957 ) ( 265,423 ) ( 14,559 ) ( 279,982 ) Net income (loss) 24,832 ( 40 ) 24,792 ( 1,261 ) 1,131 ( 130 ) Balance, end of year ( 245,744 ) ( 13,468 ) ( 259,212 ) ( 268,529 ) ( 13,428 ) ( 281,957 ) 65 Table of Contents The table below sets forth the impact of correcting the error in the Consolidated Statements of Cash Flows. (Thousands of Dollars) Year Ended September 26, 2021 Year Ended September 27, 2020 As previously reported Adjustment As Revised As previously reported Adjustment As Revised Operating Activities Net income (loss) 24,832 ( 40 ) 24,792 ( 1,261 ) 1,131 ( 130 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Deferred income taxes 5,120 40 5,160 ( 3,560 ) ( 1,131 ) ( 4,691 ) Unaudited Interim Financial Information The tables below sets forth the impact of the error correction on the unaudited interim Consolidated Balance Sheets for the interim periods in 2022. The error had no impact on the unaudited interim Consolidated Statements of Income (Loss) and Comprehensive Income (Loss), and Statements of Cash Flows, in the 2022 interim periods. (Thousands of Dollars) As of December 26, 2021 As of March 27, 2022 As previously reported Adjustment As Revised As previously reported Adjustment As Revised Liabilities Deferred incomes taxes 38,957 13,468 52,425 38,397 13,468 51,865 Total liabilities 768,744 13,468 782,212 740,032 13,468 753,500 Accumulated deficit ( 233,086 ) ( 13,468 ) ( 246,554 ) ( 240,362 ) ( 13,468 ) ( 253,830 ) Total stockholders' equity 60,912 ( 13,468 ) 47,444 53,129 ( 13,648 ) 39,481 Total equity 63,105 ( 13,468 ) 49,637 55,369 ( 13,468 ) 41,901 Total liabilities and stockholders' equity 831,849 — 831,849 795,401 — 795,401 (Thousands of Dollars) As of June 26, 2022 As previously reported Adjustment As Revised Liabilities Deferred incomes taxes 37,295 13,468 50,763 Total liabilities 740,221 13,468 753,689 Accumulated deficit ( 240,631 ) ( 13,468 ) ( 254,099 ) Total stockholders' equity 52,391 ( 13,468 ) 41,147 Total equity 54,615 ( 13,468 ) 41,147 Total liabilities and stockholders' equity 794,836 — 794,836 3. ACQUISITIONS On March 16, 2020, the Company completed the Purchase Agreement. As part of the Purchase Agreement, the Company agreed to purchase certain assets and assume certain liabilities of BH Media's newspapers and 66 Table of Contents related publications business ("BH Media Newspaper Business"), excluding real estate and fixtures such as production equipment, and all of the issued and outstanding capital stock of Buffalo News for a combined purchase price of $ 140,000,000 . BH Media includes 30 daily newspapers and digital operations, in addition to 49 paid weekly newspapers with websites and 32 other print products. Buffalo News is a provider of local print and digital news to the Buffalo, NY area. The rationale for the acquisition was primarily the attractive nature of the various publications, businesses, and digital platforms as well as the revenue growth and operating expense synergy opportunities. The Transactions were funded pursuant to a Credit Agreement dated as of January 29, 2020, between the Company and BH Finance LLC, a Nebraska limited liability company affiliated with Berkshire (the "Credit Agreement"), as described further in Note 7. Between July 2, 2018 and March 16, 2020, the Company managed the BH Media Newspaper Business pursuant to the Management Agreement between BH Media and the Company dated June 26, 2018 ("Management Agreement"). In connection with the Transactions, the Management Agreement terminated on March 16, 2020. As part of the settlement of the preexisting relationship, the Company received $ 5,425,000 at closing. This amount represents $ 1,245,000 in fixed fees pro-rated under the contract and $ 4,180,000 in variable fees based upon the pro-rated annual target. The amount we received settled our existing contract asset balance, which totaled $ 3,589,000 as of December 29, 2019, and the remaining amount was reflected in Other Revenue for the 13 weeks ended March 29, 2020. The amount of variable fees was estimated based on BH Media financial performance through March 16, 2020. Actual financial performance through March 16, 2020 did not vary materially from the estimated amount. As such, the Company did not recognize a gain or loss as a result of the settlement of this preexisting relationship. In connection with the Transactions, the Company entered into a lease agreement between BH Media, as Landlord, and the Company, as Tenant, providing for the leasing of 68 properties and related fixtures (including production equipment) used in the BH Media Newspaper Business ("BH Lease"). The BH Lease commenced on March 16, 2020. The BH Lease requires the Company to pay annual rent of $ 8,000,000 , payable in equal payments, as well as all operating costs relating to the properties (including maintenance, repairs, property taxes and insurance). Rent payments are subject to a Rent Credit (as defined in the Lease) equal to 8.00 % of the net consideration for any leased real estate sold by BH Media during the term of the Lease. As of September 25, 2022, the Company has earned monthly rent credits of $ 166,000 , making current annual rent of $ 6,004,000 . In connection with the BH Lease, the Company recognized $ 56,226,000 and $ 56,226,000 in ROU assets and offsetting lease liabilities as of March 16, 2020. The allocation of the purchase price is final. As part of the Transactions, the Company also entered into the Credit Agreement and the BH Lease, as described above. The Company concluded that these agreements were not separate from the Transactions and evaluated these agreements for off-market terms and no such terms were identified. As such, the consideration for the acquisitions was limited to cash consideration, as shown below. 67 Table of Contents The following table summarizes the final determination of fair values of the assets and liabilities for the Transactions. (Thousands of Dollars) Estimated fair value as previously reported (a) Measurement period adjustments Fair value as adjusted Cash and cash equivalents 22,293 — 22,293 Current assets 52,559 ( 855 ) 51,704 Other assets 12,167 4,343 16,510 Property and equipment 42,952 33 42,985 Operating lease assets 7,445 101 7,546 Advertiser relationships 38,780 ( 11,160 ) 27,620 Subscriber relationships 36,060 ( 8,210 ) 27,850 Commercial print relationships 17,130 2,430 19,560 Mastheads 21,680 ( 1,290 ) 20,390 Goodwill 63,559 16,337 79,896 Total assets 314,625 1,729 316,354 Current liabilities assumed ( 73,451 ) 1,074 ( 72,377 ) Operating lease liabilities ( 6,625 ) ( 921 ) ( 7,546 ) Other liabilities assumed ( 2,246 ) ( 1,882 ) ( 4,128 ) Pension obligations ( 43,503 ) — ( 43,503 ) Postemployment benefit obligations ( 36,800 ) — ( 36,800 ) Total liabilities ( 162,625 ) ( 1,729 ) ( 164,354 ) Net assets 152,000 — 152,000 Less: acquired cash ( 22,293 ) — ( 22,293 ) Total consideration less acquired cash 129,707 — 129,707 (a) As previously reported in the Company's Quarterly Report on Form 10-Q for the period ended March 29, 2020. The Company had various measurement period adjustments due to additional knowledge gained after the acquisition date but prior to the end of the measurement period. The significant adjustments included $ 11,160,000 decrease to Advertiser relationships, $ 8,210,000 decrease to Subscriber relationships, and $ 2,430,000 increase to Commercial print relationships due to updates in assumptions related to the forecast and attrition rates, and the changes were offset in Goodwill. Other changes included adjustments to accrued liabilities of $ 634,000 , uncertain tax position allowance of $ 138,000 , and a $ 3,600,000 reclassification involving workers compensation and medical reserves that was identified during management's review. Pro Forma Information (Unaudited) The following table sets forth unaudited pro forma results of operations assuming the Transactions, along with the credit arrangements necessary to finance the Transactions, occurred on the first day of fiscal year 2020. Unaudited (Thousands of Dollars, Except Per Share Data) September 27, 2020 Total revenues 821,793 Income attributable to Lee Enterprises, Incorporated 17,632 Earnings per share - diluted 3.10 This pro forma financial information is based on historical results of operations, adjusted for the allocation of the purchase price and other acquisition accounting adjustments. This pro forma information is not necessarily 68 Table of Contents indicative of what our results would have been had we operated the businesses since the beginning of the periods presented. The pro forma adjustments reflect the income statement effects of depreciation expense and amortization of intangibles related to the fair value adjustments of the assets acquired, acquisition-related costs, incremental interest expense related to the financing of the Transactions and 2020 Refinancing, the BH Lease entered into as part of the Transactions, the elimination of certain intercompany activity and the related tax effects of the adjustments. The only material, nonrecurring adjustments relate to the write-off of previously unamortized debt-issuance costs as of October 1, 2018, related to the refinanced debt resulted in an $ 8,973,000 increase to net income for 2020. No other periods were affected by the adjustments. 4. REVENUE Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for goods or services. Revenues are recognized as performance obligations are satisfied either at a point in time, such as when and advertisement is published, or over time, such as audience subscription revenue. No single customer represented 10% or more of the Company's net revenue in any fiscal period presented. Advertising and marketing services revenue Print advertising revenue includes amounts charged to customers for retail, national, or classified advertising space purchased in our newspapers, advertising marketing services and other print advertising products such as preprint inserts and direct mail. Digital advertising revenue includes amounts advertisements placed on our digital platforms, amounts charged to customers for digital marketing services which include: audience extension, Search Engine Optimization, Search Engine Marketing, web and mobile production, social media services and reputation monitoring and management. Payments for print and digital advertising revenue are due upon completion of our performance obligations at previously agreed upon rates. In instances where the timing of revenue recognition differs from the timing of invoicing, such timing differences are not large. As a result, we have determined that our contracts do not include a significant financing component. Subscription revenue Print subscription revenue results from the sale of print editions of newspapers to individual subscribers and to sales outlets that resell the newspapers. Print subscriptions include full access to all forms of content provided. Single copy revenue is also included in subscription revenue. Subscription revenue from single-copy and home delivery subscriptions are recognized at the point in time the publications are delivered. Digital subscription revenue results from the sale of digital only access to the Company's content delivered via digital products purchased. Digital subscription revenue is recognized over time as performance obligations are met throughout the contract term. Payments for print and digital subscription revenue are typically collected in advance, are for contract periods of one year or less and result in an unearned revenue liability that is reduced when revenue is recognized. Other revenue Other revenue primarily consists of digital services, commercial printing and delivery of third party products. Digital services revenues, which are primarily delivered through BLOX Digital, are primarily comprised of contractual agreements to provide webhosting and content management services. As such, digital services revenue is recognized over the contract period. Prices for digital services are agreed upon in advance of the contract beginning and are typically billed in arrears on a monthly basis, with the exception of implementation fees which are recognized as deferred revenue and amortized over the contract period. Commercial printing and delivery revenue is recognized when the product is delivered to the customer. Additionally in 2020, other revenue included fixed and variable fees collected from our Management Agreement. Fixed fee revenue from the Management Agreement was recognized over time and paid quarterly and variable 69 Table of Contents fees were paid annually. Variable fees were recognized when the fees were deemed earned and it was probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration was subsequently resolved. The Management Agreement expired in 2020 upon the completion of the Transactions. The following table presents our revenue disaggregated by source: (Thousands of Dollars) 2022 2021 2020 Operating revenue: Print advertising revenue 184,963 227,892 183,164 Digital advertising revenue 181,465 141,391 106,491 Advertising and marketing services revenue 366,428 369,283 289,655 Print subscription revenue 313,504 329,484 248,913 Digital-only subscription revenue 40,120 28,229 19,372 Subscription Revenue 353,624 357,713 268,285 Print other revenue 42,962 48,656 39,632 Digital other revenue 17,955 18,997 20,432 Other revenue 60,917 67,653 60,064 Total operating revenue 780,969 794,649 618,004 Contract Assets and Liabilities: The Company’s primary source of unearned revenue is from subscriptions paid in advance of the service provided. The Company expects to recognize the revenue related to unsatisfied performance obligations over the next twelve months in accordance with the terms of the subscriptions and other contracts with customers. The unearned revenue balances described herein are the Company's only contract liability. Unearned revenue was $ 49,929,000 as of September 25, 2022 and $ 61,404,000 as of September 26, 2021. Revenue recognized in 2022 that was included in the contract liability as of September 26, 2021 was $ 54,739,000 . Accounts receivable, excluding allowance for credit losses and contract assets, was $ 74,759,000 and $ 71,644,000 as of September 25, 2022 and September 26, 2021 respectively. Allowance for credit losses was $ 5,237,000 and $ 6,574,000 as of September 25, 2022 and September 26, 2021, respectively. Practical expedients: Sales commissions are expensed as incurred as the associated contractual periods are one year or less. These costs are recorded within compensation. The vast majority of our contracts have original expected lengths of one year or less and revenue is earned at a rate and amount that corresponds directly with the value to the customer. 5. INVESTMENTS IN ASSOCIATED COMPANIES TNI Partners In Tucson, Arizona, TNI, acting as agent for our subsidiary, Star Publishing Company (“Star Publishing”) and Citizen Publishing Company (“Citizen”), a subsidiary of Gannett Co. Inc., is responsible for printing, delivery, advertising and subscription activities of the Arizona Daily Star , as well as the related digital platforms and specialty publications. TNI collects all receipts and records income and pays substantially all operating expenses incident to the partnership's operations and publication of the newspaper and other media. Income or loss of TNI is allocated equally to Star Publishing and Citizen. 70 Table of Contents Summarized financial information of TNI is as follows: (Thousands of Dollars) September 25 2022 September 26 2021 ASSETS Current assets 2,801 2,238 Investments and other assets 1,584 1,693 Total assets 4,385 3,931 LIABILITIES AND MEMBERS' EQUITY Current liabilities 5,005 5,027 Members' equity ( 620 ) ( 1,096 ) Total liabilities and members' equity 4,385 3,931 Summarized results of TNI are as follows: (Thousands of Dollars) 2022 2021 2020 Operating revenue 34,153 34,782 37,101 Operating expenses 25,445 25,320 29,673 Net income 8,708 9,462 7,428 Company's 50 % share 4,354 4,731 3,714 Less amortization of intangible assets — — 209 Equity in earnings of TNI 4,354 4,731 3,505 TNI makes periodic distributions of its earnings. We received $ 3,831,000 , $ 5,150,000 , and $ 3,176,000 in distributions in 2022, 2021 and 2020, respectively. At September 25, 2022 and September 26, 2021, the carrying value of the Company's 50 % investment in TNI is $ 15,345,000 and $ 14,702,000 , respectively. The difference between our carrying value and our 50 % share of the members' equity of TNI relates principally to goodwill of $ 12,366,000 and other identified intangible assets of $ 2,336,000 , certain of which have been amortized over their estimated useful lives through 2020. See Note 6. TNI provides editorial services to the Company. Editorial service costs are included in other operating expenses in the Consolidated Statements of Income and Comprehensive Income and totaled $ 5,164,000 , $ 4,520,000 , and $ 4,904,000 in 2022, 2021 and 2020, respectively. Madison Newspapers, Inc. We have a 50 % ownership interest in MNI, which publishes daily and Sunday newspapers, and other publications in Madison, Wisconsin, and other Wisconsin locations, and related digital sites. Net income or loss of MNI (after income taxes) is allocated equally to us and The Capital Times Company (“TCT”). MNI conducts its business under the trade name Capital Newspapers. 71 Table of Contents Summarized financial information of MNI is as follows: (Thousands of Dollars) September 25 2022 September 26 2021 ASSETS Current assets 5,837 6,930 Investments and other assets 29,903 30,422 Total assets 35,740 37,352 LIABILITIES AND MEMBERS' EQUITY Current liabilities 5,922 6,921 Other liabilities 5,696 6,470 Stockholders' equity 24,122 23,961 Total liabilities and stockholders' equity 35,740 37,352 Summarized results of MNI are as follows: (Thousands of Dollars) 2022 2021 2020 Operating revenue 47,621 46,015 48,056 Operating expenses, excluding restructuring costs, depreciation and amortization 37,922 35,583 46,845 Restructuring costs 169 107 274 Depreciation and amortization 672 711 697 Operating income 8,857 9,614 240 Net income (loss) 2,605 3,362 ( 204 ) Equity in earnings of MNI 1,303 1,681 ( 102 ) MNI makes periodic distributions of its earnings. We received $ 1,250,000 , $ 2,300,000 , and $ 1,300,000 in distributions in 2022, 2021 and 2020, respectively. We provide editorial services to MNI. Editorial service fees are included in other revenue in the Consolidated Statements of Income and Comprehensive Income and totaled $ 5,607,000 , $ 5,562,000 , and $ 6,152,000 in 2022, 2021 and 2020, respectively. At September 25, 2022 and September 26, 2021, the carrying value of the Company's 50 % investment in MNI is $ 12,033,000 and $ 11,980,000 , respectively. 6. GOODWILL AND OTHER INTANGIBLE ASSETS Changes in the carrying amount of goodwill are as follows: (Thousands of Dollars) 2022 2021 Goodwill, gross amount 1,618,933 1,617,174 Accumulated impairment losses ( 1,288,729 ) ( 1,288,729 ) Goodwill, beginning of year 330,204 328,445 Measurement period adjustments — 1,759 Disposal ( 700 ) — Goodwill, end of year 329,504 330,204 72 Table of Contents Identified intangible assets related to continuing operations consist of the following: (Thousands of Dollars) September 25 2022 September 26 2021 Non-amortized intangible assets: Mastheads 26,346 39,672 Amortizable intangible assets: Customer and newspaper subscriber lists (1) 323,568 774,242 Less accumulated amortization (1) ( 228,541 ) ( 657,243 ) 95,027 116,999 Non-compete and consulting agreements (1) — 28,656 Less accumulated amortization (1) — ( 28,656 ) — — Identified intangible assets 121,373 156,671 (1) Fully amortized balances were removed in 2022. In the first quarter of fiscal 2022, the Company wrote off approximately $ 199.9 million of gross cost and accumulated amortization related to fully amortized customer and newspaper subscriber lists, as well as $ 28.7 million of gross cost and accumulated amortization related to fully amortized non-compete and consulting agreements. In the fourth quarter of fiscal 2022, the Company wrote off the gross cost and accumulated amortization for additional fully amortized customer and newspaper subscriber lists, and wrote down the gross cost and accumulated amortization for customer and newspaper subscriber lists that were previously impaired, for an aggregate total of $ 251.1 million. The adjustments did not have an impact on the net balances previously reported during any of the interim periods during 2022, nor any prior fiscal periods. As discussed in Note 1, the Company reviews goodwill and non-amortized intangible assets for impairment annually on the first day of the fourth quarter, or more frequently if events or changes in circumstances indicate that an asset may be impaired in accordance with ASC Topic 350. All of the Company’s goodwill is attributed to the single reporting unit. For goodwill, the calculated fair value exceeded the carrying value. For goodwill, the calculated fair value was determined using the income approach. Estimates of fair value include Level 3 inputs as they are subjective in nature, involve uncertainties and matters of significant judgement and are made at a specific point in time. Thus changes in key assumptions from period to period could significantly affect the estimates of fair value. The Company performed its annual assessment on the first day of our fourth fiscal quarter, and determined the fair value of our single reporting unit was in excess of carrying value and as such, there was no impairment in 2021 and 2022. In 2022, the Company disposed of a non-core operation with $ 700,000 of attributable goodwill. For mastheads, the calculated fair value includes Level 3 inputs that were determined using the royalty savings method. The key assumptions used in the fair value estimates under the royalty savings method are revenue and market growth, royalty rates for newspaper mastheads (the royalty rates utilized range from 0.0 % to 1.5 %), estimated tax rates, and appropriate risk-adjusted weighted-average cost of capital (for 2022, 2021 and 2020, the weighted-average cost of capital used was 11.00 %, 10.50 % and 9.50 %, respectively). These assumptions reflect Lee's best estimates, but these items involve inherent uncertainties based on market conditions generally outside of the Company's control. A 50 basis point decrease in royalty rates would result in an additional $ 6,992,000 of impairment. Increasing the discount rate by 100 basis points would result in an additional $ 257,000 of impairment. In 2022, 2021, and 2020, we recorded non-cash charges to reduce the carrying value of non-amortized intangible assets. Such charges are recorded in assets loss (gain) on sales, impairments and other in the Consolidated Statements of Income (Loss) and Comprehensive Income (Loss). We recorded deferred income tax benefits related to these charges. 73 Table of Contents A summary of the pretax impairment charges is included in the table below: (Thousands of Dollars) 2022 2021 2020 Non-amortized intangible assets 14,203 787 972 Property, equipment and other assets — 190 — 14,203 977 972 Amortization expense for 2022, 2021, and 2020 was $ 22,180,000 , $ 24,859,000 , and $ 20,748,000 , respectively. The Company recognized $ 27,620,000 of advertiser relationships, $ 27,850,000 of subscriber relationships, $ 19,560,000 of commercial print relationships, and $ 20,390,000 of indefinite-lived masthead assets as part of the Transactions. Annual amortization of intangible assets for the years ending September 2023 to September 2027 is estimated to be $ 19,370,000 , $ 16,623,000 , $ 10,917,000 , $ 7,040,000 , and $ 5,072,000 , respectively. The weighted average amortization period for those amortizable assets acquired as part of the Transactions is 12.5 years. The Company recognized $ 79,896,000 of Goodwill as part of the Transactions. The value of the acquired Goodwill is primarily related to an assembled workforce and expected synergies from combining operations. For tax, purposes, the amount of Goodwill that is expected to be deductible is $ 42,442,000 . 7. DEBT On March 16, 2020 concurrent with closing the Transactions, the Company completed a comprehensive refinancing of its debt (the "2020 Refinancing"). The 2020 Refinancing consists of the Credit Agreement and Term Loan. The proceeds of the Term Loan were used, along with cash on hand, to refinance the Company's $ 431,502,000 it incurred in 2014 (the "2014 Refinancing") as well as to fund the acquisition of BH Media Newspaper Business assets and the stock of Buffalo News for $ 140,000,000 in cash. With the closing of this transaction, BH Finance became Lee's sole lender. Proceeds of the Term Loan were used to finance the Transactions and refinance all of the Company's outstanding debt at par. The Term Loan matures in March 2045. The Company's debt is collateralized by all company assets. As of September 25, 2022, the Company has $ 462,554,000 in aggregate principle outstanding under the Term Loan. The debt has a fixed interest rate at September 25, 2022 of 9.0 %. During the twelve months ended September 25, 2022, we made principal debt payments of $ 20,062,000 . Payments consisted of $ 10,450,000 from sale of non-core assets, $ 6,112,000 from September 26, 2021 excess cash flow, and $ 3,500,000 in voluntary prepayments. Future payments are contingent on the Company's ability to generate future excess cash flow. The Credit Agreement contains certain customary representations and warranties, certain affirmative and negative covenants and certain conditions, including restrictions on incurring additional indebtedness, creating certain liens, making certain investments or acquisitions, issuing dividends, repurchasing shares of stock of the Company and certain other capital transactions. Certain existing and future direct and indirect material domestic subsidiaries of the Company are guarantors of the Company's obligations under the Credit Agreement. The Credit Agreement restricts us from paying dividends on our Common Stock. This restriction does not apply to dividends issued with the Company's Equity Interests or from the proceeds of a sale of the Company's Equity Interests. Further, the Credit Agreement restricts or limits, among other things, subject to certain exceptions, the ability of the Company and its subsidiaries to: (i) incur additional indebtedness, (ii) make certain investments, (iii) enter into mergers, acquisitions and asset sales, (iv) incur or create liens and (v) enter into transactions with certain affiliates. The Credit Agreement contains various representations and warranties by the Company and may be terminated upon the occurrence of certain events of default, including non-payment. The Credit Agreement also contains cross-default provisions tied to other agreements with BH Finance entered into by the Company and its subsidiaries in connection with the 2020 Refinancing. 74 Table of Contents Principal Payments Voluntary pre-payments under the Credit Agreement are not subject to call premiums and are payable at par, with the exception of the change of control provisions discussed below. Excluding the Excess Cash Flow payments described below, there are no scheduled mandatory principal payments required under the Credit Agreement. The Company is required to make mandatory prepayments of the Term Loan as follows: • The Company must prepay the Term Loan in an aggregate amount equal to 100 % of any Net Cash Proceeds received by the Company or any Subsidiary from a sale, transfer, license, or other disposition of any property of the Company or any subsidiary in excess of $ 500,000 in any ninety (90) day period. • The Company is required to prepay the Term Loan with excess cash flow, defined as cash on the balance sheet at quarter end in excess of $ 20,000,000 ("Excess Cash Flow"). Excess Cash Flow is used to prepay the Term Loan, at par, and is due within 50 -days of quarter end. • If there is a Change of Control (as defined in the Credit Agreement), BH Finance has the option to require the Company to prepay the Term Loan in cash equal to 105 % of the unpaid principal balance, plus accrued and unpaid interest. The Company may, upon notice to BH Finance, at any time or from time to time, voluntarily prepay the Term Loan in whole or in part, at par, provided that any voluntary prepayment of the Term Loan shall be accompanied by payment of all accrued interest on the amount of principal prepaid to the date of prepayment. Warrants In connection with the 2 nd Lien Term Loan entered into in the 2014 Refinancing, we entered into a Warrant Agreement dated as of March 31, 2014 (the "Warrant Agreement"). Under the Warrant Agreement, certain affiliates or designees of the 2 nd Lien Lenders received on March 31, 2014 their pro rata share of warrants to purchase, in cash, an initial aggregate of 600,000 shares of Common Stock, subject to adjustment pursuant to anti-dilution provisions (the "Warrants"). The Warrants represent, when fully exercised, approximately 10.1 % of shares of Common Stock outstanding at March 30, 2014 on a fully diluted basis. The exercise price of the Warrants was $ 41.90 per share. The Warrants expired in March 2022. The Warrant Agreement contained provisions requiring the Warrants to be measured at fair value and included in warrants and other liabilities in our Consolidated Balance Sheets. We re-measure the fair value of the liability each reporting period, with changes reported in other, net non-operating income (expense). The initial fair value of the Warrants was $ 16,930,000 . See Note 15. In connection with the issuance of the Warrants, we entered into a Registration Rights Agreement dated as of March 14, 2014 (the "Registration Rights Agreement"). The Registration Rights Agreement requires, among other matters, that we use our commercially reasonable efforts to maintain the effectiveness for certain specified periods of a shelf registration statements related to the shares of Common Stock to be issues upon exercise of the Warrants. Other In connection with the 2014 Refinancing, we capitalized $ 37,819,000 of debt financing costs. Amortization of debt financing costs totaled $ 11,282,000 in 2020. In connection with the Transactions, we accelerated recognition of the unamortized debt financing costs of $ 9,583,000 in 2020. Liquidity Pursuant to the terms of the Credit Agreement, our debt does not include a revolver. Our liquidity, consisting of cash on the balance sheet, totals $ 16,185,000 at September 25, 2022. This liquidity amount excludes any future cash flows. We expect all interest and principal payments due in the next twelve 75 Table of Contents months will be satisfied by existing cash and our cash flows, which will allow us to maintain an adequate level of liquidity. There are numerous potential consequences under the Term Loan 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 BH Finance to exercise their remedies under the Credit Agreement 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 repay, refinance or amend our debt agreements as they become due. The Credit Agreement (as defined above) has only limited affirmative covenants with which we are required to maintain compliance and there are no leverage or financial performance covenants. We are in compliance with our debt covenants at September 25, 2022. 8. LEASES We lease certain real estate, vehicles, and equipment. Our leases have remaining lease terms of 1 to 40 years, some of which may include options to extend the leases, and some of which may include options to terminate the leases. The exercise of lease renewal options is at our sole discretion. The depreciable lives of assets and leasehold improvements are limited by the expected lease term unless there is a transfer of title or purchase option reasonably certain of exercise. During the period ended September 25, 2022, the Company permanently vacated office and distribution space related to 14 leases. The space was vacated as some of our locations have transitioned to long-term remote working arrangements and space consolidation. The abandonment of lease space is an indicator of impairment and the Company assessed the lease ROU asses and leasehold improvements for impairment. Estimates of fair value include Level 3 inputs which are subjective in nature and involve uncertainties and matters of significant judgement and are made at a specific point in time. During the period ended September 25, 2022, the Company recorded non-cash impairment losses of $ 7,815,000 for right-of-use assets, which is recorded on the Income Statement under the line item assets loss (gain) on sales, impairments and other. Total lease expense consists of the following: (Thousands of Dollars) 2022 2021 2020 Operating lease costs 13,786 14,846 10,148 Variable lease costs 1,201 92 1,911 Short-term lease costs 217 — 426 Total Operating Lease Expense 15,205 14,938 12,485 Supplemental cash flow information related to our operating leases was as follows: (Thousands of Dollars) 2022 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash outflow from operating leases 14,325 14,789 10,003 Right-of-use assets obtained in exchange for operating lease liabilities 990 932 1,630 76 Table of Contents As of September 25, 2022, maturities of lease liabilities were as follows: (Thousands of Dollars) 2023 12,921 2024 11,871 2025 10,630 2026 9,187 2027 7,736 Thereafter 18,799 Total lease payments 71,144 Less: interest ( 17,282 ) Present value of lease liabilities 53,862 Our lease contracts are discounted using the incremental borrowing rate for the Company. We determined the incremental borrowing rate based on a senior secured collateral adjusted yield curve for the Company. This yield curve reflects the estimated rate that would have been paid by the Company to borrow on a collateralized basis over a similar term in a similar economic environment. The weighted average revolving lease terms and discount rates for all of our operating leases were as follows. September 25, 2022 Weighted average remaining lease term (years) 6 years, 7 months, 2 days Weighted Average discount rate 7.99 % 9. DEFINED BENEFIT PENSION PLANS During 2022, the Company made several changes to its defined benefit plans. At the beginning of 2022, the Company was the sponsor of seven single employer defined benefit plans, two of which were frozen to new participants and future benefits. As of September 25, 2022, we are the sponsor of two single-employer defined benefit plans, which provide benefits to certain current and former employees of Lee. During 2022 we notified certain participants in our defined benefit plans of changes to be made to the plans. The Company froze future benefits and participation for an additional four of the defined benefit plans. The freeze of future benefits resulted in a non-cash curtailment gain of $ 1,027,000 related to the four plans. In connection with the freeze the Company provided certain benefit enhancements that resulted in an increase to our net pension liability and a decrease to Accumulated Other Comprehensive income of $ 6,077,000 . Additionally, the Company merged the six frozen plans into one fully-funded defined benefit plan, the Lee Enterprises Incorporated Pension Plan ("Plan") effective in the second quarter of fiscal 2022. During September of 2022, as part of a pension de-risking strategy for the Plan, the Company, executed an agreement pursuant to transfer to a third party insurance company (the "Insurer") $ 85,622,000 of the Plan's liabilities in exchange for $ 81,377,000 of Plan assets and recorded a non-cash settlement gain of $ 4,245,000 in Pension and OPEB related benefit (cost) and other, net. 77 Table of Contents The net periodic cost (benefit) components of our pension plans are as follows: (Thousands of Dollars) 2022 2021 2020 Service cost for benefits earned during the year 467 2,529 1,361 Interest cost on projected benefit obligation 7,941 7,147 7,577 Expected return on plan assets ( 18,140 ) ( 18,688 ) ( 12,986 ) Amortization of net (gain) loss ( 3,320 ) 4,018 3,166 Amortization of prior service benefit 636 ( 6 ) ( 6 ) Settlement gain ( 4,245 ) — — Curtailment gain ( 1,027 ) — — Net periodic pension cost (benefit) ( 17,688 ) ( 5,000 ) ( 888 ) Changes in benefit obligations and plan assets are as follows: (Thousands of Dollars) 2022 2021 Benefit obligation, beginning of year 384,187 401,381 Service cost 467 2,529 Interest cost 7,941 7,147 Plan Amendments 6,077 — Actuarial (gain) loss ( 85,754 ) ( 5,413 ) Benefits paid ( 21,686 ) ( 21,182 ) Liability (gain)/loss due to curtailment ( 1,027 ) — Settlements ( 81,377 ) — Administrative expenses paid — ( 275 ) Benefit obligation, end of year 208,828 384,187 Fair value of plan assets, beginning of year: 398,430 331,354 Actual return on plan assets ( 84,000 ) 89,892 Benefits paid ( 21,686 ) ( 21,182 ) Administrative expenses paid ( 2,123 ) ( 2,599 ) Settlements ( 81,377 ) — Employer contributions 112 965 Fair value of plan assets, end of year 209,356 398,430 Funded status 528 14,243 Disaggregated amounts recognized in the Consolidated Balance Sheets are as follows: (Thousands of Dollars) September 25 2022 September 26 2021 Pension obligations 528 14,243 Accumulated other comprehensive income (before income taxes) 5,452 36,965 78 Table of Contents Amounts recognized in accumulated other comprehensive income (loss) are as follows: (Thousands of Dollars) September 25 2022 September 26 2021 Unrecognized net actuarial gain (loss) 10,893 36,965 Unrecognized prior service cost ( 5,441 ) — 5,452 36,965 We do not expect to recognize any net actuarial gain (loss), in net periodic pension cost in 2023. Assumptions Weighted-average assumptions used to determine benefit obligations are as follows: (Percent) September 25 2022 September 26 2021 Discount rate 5.3 2.7 Interest crediting rate 2.5 2.5 Weighted-average assumptions used to determine net periodic benefit cost are as follows: (Percent) 2022 2021 2020 Discount rate - service cost 5.4 3.0 3.3 Discount rate - interest cost 5.3 1.9 2.6 Expected long-term return on plan assets 5.0 5.9 6.0 For 2022, the expected long-term return on plan assets is 5.0 %. The assumptions related to the expected long-term return on plan assets are developed through an analysis of historical market returns, current market conditions and composition of plan assets. For the year ended September 25, 2022, the most significant driver of the decrease in benefit obligation was the higher actuarial gains experienced by all plans and the annuity purchase mentioned above. The plans recognized actuarial gains due to significant increases in bond yields that resulted in increases to the discount rates. Discount rate increases were partially offset by actual return on assets falling behind expected returns for the year. For the year ended September 26, 2021, the most significant driver of the decrease in benefit obligations for the plans was the higher actuarial gains experienced by all plans. The pension plans recognized actuarial gains due to small increases in bond yields that resulted in increases to the discount rates and actual return on assets exceeding expected returns for the year improving the funded status of the plans. Plan Assets The primary objective of our investment strategy is to satisfy our pension obligations at a reasonable cost. Assets are actively invested to balance real growth of capital through appreciation, reinvestment of dividend and interest income, and safety of invested funds. Our 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 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 certain of our executives and supported by independent consultants, is responsible for monitoring compliance with the investment policy. Assets are periodically redistributed to maintain the appropriate policy allocation. 79 Table of Contents The weighted-average asset allocation of our pension assets, is as follows: (Percent) Policy Allocation Actual Allocation Asset Class September 25 2022 September 25 2022 September 26 2021 Equity securities 25 41 50 Debt securities 65 43 34 TIPS — — 4 Hedge fund investments 10 15 11 Cash and cash equivalents 1 1 1 Plan assets include no Company securities. Assets include cash and cash equivalents and receivables from time to time due to the need to reallocate assets within policy guidelines. As of September 26, 2021, Buffalo News had a different policy for asset allocation than the Company's other plans. As of September 25, 2022, all Company plans asset allocation were the same. Due to the timing of the annuity purchase (as discussed above), funds were organized in a way that provided sufficient liquidity for the transaction. This caused our pension plans asset allocation to differ significantly from our desired policy as of September 25, 2022. Fair Value Measurements The fair value hierarchy of pension assets at September 25, 2022 is as follows: (Thousands of Dollars) NAV Level 1 Level 2 Level 3 Cash and cash equivalents — 1,562 — — Domestic equity securities 2,235 67,661 — — International equity securities — 5,743 4,519 — Emerging equity securities — 4,996 — — Debt securities — 25,742 65,364 — Hedge fund investments 32,515 — — — The fair value hierarchy of pension assets at September 26, 2021 was as follows: (Thousands of Dollars) NAV Level 1 Level 2 Level 3 Cash and cash equivalents — 4,447 — — Domestic equity securities 7,236 78,577 42,448 — International equity securities — 9,485 9,505 — Emerging equity securities — 8,077 — — TIPS — 7,280 — — Debt securities — 181,908 32,781 — Hedge fund investments 18,758 — — — 80 Table of Contents There were no purchases, sales or transfers of assets classified as Level 3 in 2022 or 2021. Pension assets that are excluded from the fair value hierarchy and are measured at net asset value or "NAV", include three investments: • U.S. small cap value equity common/collective fund for which fund prices are not publicly available. The balance of this investment is $ 2,235,000 and $ 7,236,000 as of September 25, 2022 and September 26, 2021, respectively. We can redeem this fund on a monthly basis. • Global equity long/short common/collective hedge fund-of-funds for which fund prices are established on a monthly basis. The balance of this investment is $ 16,663,000 and $ 8,371,000 as of September 25, 2022 and September 26, 2021, respectively. We can redeem up to 90 % of our investment in this fund within 90 - 120 days of notice with the remaining distributed following completion of the audit of the Fund's financial statements for the year. • Global equity long/short common/collective hedge fund-of-funds for which fund prices are established on a monthly basis. The balance of this investment is $ 15,852,000 and $ 10,387,000 as of September 25, 2022 and September 26, 2021, respectively. We can redeem up to 50 % of our investment in this fund twice per year. The activity within Other comprehensive income (loss) for both pension plans and postretirement plans was as follows: (Thousands of Dollars) 2022 2021 2020 Comprehensive (loss) income, net of taxes: Change in unrecognized benefit plan gain (loss) arising during the period, net of taxes $ 279 , $ 19,148 , and $ 4,095 , respectively ( 14,485 ) 59,663 10,329 Amortization of items to periodic pension and other post-employment benefit costs during the period, net of taxes $ 6,389 , $ 819 , and $ 542 , respectively ( 11,049 ) 2,574 ( 1,265 ) Other comprehensive (loss) income recognized in operations, net of taxes ( 25,534 ) 62,237 9,064 Cash Flows Based on our forecast at September 25, 2022, we expect to make no contributions to our pension trust in 2023. We anticipate future benefit payments to be paid from the pension trust as follows: (Thousands of Dollars) 2023 14,668 2024 14,830 2025 14,947 2026 15,126 2027 15,204 2028-2032 75,362 Other Plans We are the plan sponsor for other funded and unfunded defined benefit pension plans that are not considered material. The net benefit obligation for these plans are $ 967,000 and $ 996,000 at September 25, 2022 and September 26, 2021, respectively. 81 Table of Contents 10. POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS We provide retiree medical and life insurance benefits under postretirement plans at several of our operating locations. The level and adjustment of participant contributions vary depending on the specific plan. Our liability and related expense for benefits under the postretirement plans are recorded over the service period of active employees based upon annual actuarial calculations. We accrue 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 net periodic postretirement benefit cost (benefit) components for our postretirement plans are as follows: (Thousands of Dollars) 2022 2021 2020 Service cost for benefits earned during the year 108 207 500 Interest cost on projected benefit obligation 340 429 869 Expected return on plan assets ( 1,053 ) ( 1,007 ) ( 1,060 ) Amortization of net actuarial gain ( 994 ) ( 685 ) ( 743 ) Amortization of prior service benefit ( 647 ) ( 647 ) ( 647 ) Curtailment gains — ( 23,830 ) — Net periodic postretirement benefit ( 2,246 ) ( 25,533 ) ( 1,081 ) Changes in benefit obligations and plan assets are as follows: (Thousands of Dollars) 2022 2021 Benefit obligation, beginning of year 18,538 47,637 Service cost 108 207 Interest cost 340 429 Liability (gain) loss due to Curtailment — ( 23,830 ) Actuarial loss (gain) ( 4,729 ) ( 4,285 ) Benefits paid, net of premiums received ( 1,958 ) ( 1,678 ) Medicare Part D subsidies ( 12 ) 58 Benefit obligation, end of year 12,287 18,538 Fair value of plan assets, beginning of year 26,802 25,706 Actual return on plan assets ( 2,453 ) 1,534 Employer contributions 1,525 1,293 Benefits paid, net of premiums and Medicare Part D subsidies received ( 2,105 ) ( 1,795 ) Plan participant contributions 134 64 Fair value of plan assets at measurement date 23,903 26,802 Funded status 11,616 8,264 Disaggregated amounts recognized in the Consolidated Balance Sheets are as follows: (Thousands of Dollars) September 25 2022 September 26 2021 Non-current assets 19,066 17,664 Postretirement benefit obligations ( 7,450 ) ( 9,859 ) Accumulated other comprehensive income (before income tax benefit) 17,327 17,747 82 Table of Contents Amounts recognized in accumulated other comprehensive income (loss) before income tax benefit are as follows: (Thousands of Dollars) September 25 2022 September 26 2021 Unrecognized net actuarial gain 14,298 14,071 Unrecognized prior service benefit 3,029 3,676 17,327 17,747 We expect to recognize $ 1,014,000 and $ 647,000 of unrecognized net actuarial gain and unrecognized prior service benefit, respectively, in net periodic postretirement benefit in 2023 . Assumptions Weighted-average assumptions used to determine postretirement benefit obligations are as follows: (Percent) September 25 2022 September 26 2021 Discount rate 5.3 2.6 Expected long-term return on plan assets 5.0 4.0 The assumptions related to the expected long-term return on plan assets are developed through an analysis of historical market returns, current market conditions and composition of plan assets. Weighted-average assumptions used to determine net periodic benefit cost are as follows: (Percent) 2022 2021 2020 Discount rate - service cost 5.5 2.5 3.4 Discount rate - interest cost 5.1 1.9 2.8 Expected long-term return on plan assets 5.0 4.0 4.5 For 2022 , the expected long-term return on plan assets is 5.0 %. The assumptions related to the expected long-term return on plan assets are developed through an analysis of historical market returns, current market conditions and composition of plan assets. Assumed health care cost trend rates are as follows: (Percent) September 25 2022 September 26 2021 Health care cost trend rates 10.6 6.2 Rate to which the cost trend rate is assumed to decline (the “Ultimate Trend Rate”) 4.5 4.5 Year in which the rate reaches the Ultimate Trend Rate 2032 2030 Administrative costs related to indemnity plans are assumed to increase at the health care cost trend rates noted above. In 2021 , we notified certain participants in one of our postemployment medical plans of changes to their plan, including elimination of coverage for certain participants. These changes resulted in a non-cash curtailment gain of $ 23,830,000 in 2021 . The curtailment gain is recorded in Curtailment gain in the Consolidated 83 Table of Contents Statements of Income (loss) and Comprehensive Income (loss). These charges also reduced the postemployment benefit obligation by $ 23,830,000 in 2021 . For the year ended September 25, 2022 , the most significant driver of the decrease in benefit obligations for the plans was the higher actuarial gains experienced by all plans. The plans recognized actuarial gains due to significant increases in bond yields that resulted in increases to the discount rates. Discount rate increases were partially offset by actual return on assets falling behind expected returns for the year. For the year ended September 26, 2021, the most significant driver of the decrease in benefit obligations for the plans was the higher actuarial gains experienced by all plans. The plans recognized actuarial gains due to small increases in bond yields that resulted in increases to the discount rates, actual return on assets exceeding expected returns for the year, and updated expected future claims costs. Plan Assets Assets of the retiree medical plan are invested in a master trust. The master trust also pays benefits of active employee medical plans for the same union employees. The fair value of master trust assets allocated to the active employee medical plans at September 25, 2022 and September 26, 2021 is $ 614,000 and $ 631,000 , respectively, which are included within the tables below. The primary objective of our investment strategy is to satisfy our postretirement obligations at a reasonable cost. Assets are actively invested to balance real growth of capital through appreciation and reinvestment of dividend and interest income and safety of invested funds. Our 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 certain of our executives and supported by independent consultants, is responsible for monitoring compliance with the investment policy. Assets are periodically redistributed to maintain the appropriate policy allocation. The weighted-average asset allocation of our postretirement assets is as follows: (Percent) Policy Allocation Actual Allocation Asset Class September 25 2022 September 25 2022 September 26 2021 Equity securities 20 17 20 Debt securities 70 71 68 Hedge fund investment 10 12 12 Cash and cash equivalents — — — Plan assets include no Company securities. Assets include cash and cash equivalents and receivables from time to time due to the need to reallocate assets within policy guidelines. 84 Table of Contents Fair Value Measurements The fair value hierarchy of postretirement assets at September 25, 2022 is as follows: (Thousands of Dollars) NAV Level 1 Level 2 Level 3 Cash and cash equivalents — 26 — — Domestic equity securities 791 1,910 — — Emerging equity securities — 456 — — International equity securities — 573 480 — Debt securities — 17,248 — — Hedge fund investment 2,782 — — — The fair value hierarchy of postretirement assets at September 26, 2021 is as follows: (Thousands of Dollars) NAV Level 1 Level 2 Level 3 Cash and cash equivalents — 25 — — Domestic equity securities 904 2,643 — — Emerging equity securities — 603 — — International equity securities — 747 660 — Debt securities — 18,363 — — Hedge fund investment 3,235 — — — There were no purchases, sales or transfers of assets classified as Level 3 in 2022 or 2021 . Postretirement assets that are excluded from the fair value hierarchy and are measured at net asset value or "NAV", include two investments: • U.S. small cap value equity common/collective fund for which fund prices are not publicly available. The balance of this investment is $ 791,000 and $ 904,000 as of September 25, 2022 and September 26, 2021, respectively. We can redeem this fund on a monthly basis. • Global equity long/short common/collective hedge fund-of-funds for which fund prices are established on a monthly basis. The balance of this investment is $ 2,782,000 and $ 3,235,000 as of September 25, 2022 and September 26, 2021, respectively. We can redeem up to 90 % of our investment in this fund within 90 - 120 days of notice with the remaining distributed following completion of the audit of the Fund's financial statements for the year. Cash Flows Based on our forecast at September 25, 2022, we do not expect to contribute to our postretirement plans in 2023 . The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Modernization 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 at least actuarially equivalent (as that term is defined in the Modernization Act) to Medicare Part D. We concluded we qualify for the Subsidy under the Modernization Act since the prescription drug benefits provided under our 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 Modernization Act. 85 Table of Contents We anticipate future benefit payments to be paid either with future contributions to the plan or directly from plan assets, as follows: (Thousands of Dollars) Gross Payments Less Medicare Part D Subsidy Net Payments 2023 980 — 980 2024 991 — 991 2025 985 — 985 2026 987 — 987 2027 955 — 955 2028-2032 4,563 — 4,563 Postemployment Plan Our postemployment benefit obligation, which represents certain disability benefits, is $ 1,771,000 at September 25, 2022 and $ 2,233,000 at September 26, 2021. 11. OTHER RETIREMENT PLANS Substantially all of our employees are eligible to participate in a qualified defined contribution retirement plan. We also have a non-qualified plan for employees whose incomes exceed qualified plan limits. The defined contribution retirement plan costs were $ 3,565,000 in 2022, $ 3,403,000 in 2021 and $ 2,666,000 in 2020. Multiemployer Pension Plans We contributed to various multiemployer defined benefit pension plans under the terms of collective bargaining agreements ("CBAs"). The risks of participating in these multiemployer plans are different from our company-sponsored plans in the following aspects: • We do not manage the plan investments or any other aspect of plan administration; • Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers; • If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers; and • If we choose to stop participating in one or more multiemployer plans, we may be required to fund over time an amount based on the unfunded status of the plan at the time of withdrawal, referred to as a "withdrawal liability". 86 Table of Contents Information related to these plans is outlined in the table below: (Thousands of Dollars) Zone Status September 30 Funding Improvement Plan/Rehabilitation Plan Status Contributions Pension Plan 2022 2021 Status 2022 2021 2020 Surcharge Imposed EIN Expiration Dates of CBAs GCIU- Employer Retirement Fund Critical Red Implemented — 10 87 No 91-6024903 N/A (1) District No. 9, International Association of Machinists and Aerospace Workers Pension Trust Endangered Red Implemented — 15 31 N/A 51-0138317 N/A (1) CWA/ITU negotiated Pension Plan Critical Red Implemented — 81 456 No 13-6212879 N/A (1) IAM National Pension Fund Green Red N/A 57 67 86 N/A 51-6031295 1/1/2024 Operating Engineers Central Pension Fund of the International Union of Operating Engineers and Participating Employers (2) Green Green N/A 50 49 52 N/A 36-6052390 2/28/2023 11/1/2023 (1) The Company has withdrawn from the multi-employer plans (2) We are subject to two different CBA's under the multi-employer plan. The Company has effectuated withdrawals from several multiemployer plans. We record estimates of withdrawal liabilities as of the time the contracts agreeing to withdraw from those plans are ratified. As of September 25, 2022 and September 26, 2021, we had $ 24,995,000 and $ 23,471,000 of accrued withdrawal liabilities. The liabilities reflect the estimated net present value of payments to the fund, payable over 20 years. Several multiemployer plans have CBAs that expire in the next twelve months. It is reasonably possible that if the Company is unable to renegotiate these agreements employees could go on strike which could disrupt the normal operations of the Company. Of our employees in CBA's, approximately 55 % have CBA's that expire in the next 12 months. 12. COMMON STOCK Warrant Agreement In connection with the previous 2nd Lien Term Loan entered into as part of the 2014 Refinancing, we entered into the Warrant Agreement. Under the Warrant Agreement, certain affiliates or designees of the 2nd Lien 87 Table of Contents Lenders received on March 31, 2014, their pro rata share of Warrants to purchase, in cash, 600,000 shares of Common Stock, subject to adjustment pursuant to anti-dilution provisions. The Warrants represent, when fully exercised, approximately 10.1 % of shares of Common Stock outstanding at March 30, 2014, on a fully diluted basis. The exercise price of the Warrants is $ 41.90 per share. The Warrant Agreement contains a cash settlement provision in the event of a change of control prior to March 31, 2018, as well as other provisions requiring the Warrants be measured at fair value and classified as warrants and other liabilities in our Consolidated Balance Sheets. We re-measure the liability to fair value each reporting period, with changes reported in other non-operating income (expense). The initial fair value of the Warrants was $ 16,930,000 . The Warrants expired in March 2022. In connection with the issuance of the Warrants, we entered into the Registration Rights Agreement. The Registration Rights Agreement requires, among other matters, that we use our commercially reasonable efforts to file and maintain the effectiveness for certain specified periods of a shelf registration statement covering the shares of Common Stock upon exercise of the Warrants. 13. STOCK OWNERSHIP PLANS Total non-cash stock compensation expense is $ 1,337,000 , $ 854,000 and $ 1,042,000 , in 2022, 2021 and 2020, respectively. At September 25, 2022, we have reserved 279,810 shares of Common Stock for issuance to employees under an incentive and non-statutory stock option and restricted stock plan approved by stockholders of which 279,810 shares are available for granting of non-qualified stock options or issuance of restricted Common Stock. Stock Options Options are granted at a price equal to the fair market value on the date of the grant and are exercisable, upon vesting, over a ten-year period. A summary of stock option activity is as follows: (Thousands of Shares) 2022 2021 2020 Outstanding, beginning of year 36 41 81 Exercised ( 9 ) ( 2 ) — Canceled ( 27 ) ( 3 ) ( 40 ) Outstanding, end of year — 36 41 Exercisable, end of year — 36 41 Weighted average prices of stock options are as follows: (Dollars) 2022 2021 2020 Exercised 11.30 11.30 — Cancelled 11.30 11.30 25.30 Outstanding, end of year — 11.40 11.40 88 Table of Contents Restricted Common Stock A summary of restricted Common Stock activity follows: (Thousands of Shares) 2022 2021 2020 Outstanding, beginning of year 154 155 148 Granted 78 46 72 Vested ( 66 ) ( 45 ) ( 61 ) Forfeited ( 1 ) ( 2 ) ( 4 ) Outstanding, end of year 165 154 155 Weighted average grant date fair values of restricted Common Stock are as follows: (Dollars) 2022 2021 2020 Outstanding, beginning of year 16.70 21.50 24.90 Granted 30.01 11.20 16.20 Vested 20.93 27.30 23.40 Forfeited 23.60 16.10 24.40 Outstanding, end of year 21.21 16.70 21.50 Total unrecognized compensation expense for unvested restricted Common Stock at September 25, 2022 is $ 1,876,000 , which will be recognized over a weighted average period of 1.3 years. Employee Stock Purchase Plans We have 27,000 shares of Common Stock available for issuance pursuant to our Employee Stock Purchase Plan. We also have 870 shares of Common Stock available for issuance under our Supplemental Employee Stock Purchase Plan. There has been no activity under these plans in 2022, 2021, or 2020. 14. INCOME TAXES Income tax expense (benefit) consists of the following: (Thousands of Dollars) 2022 2021 2020 Current: Federal 4,932 ( 2,431 ) 8,779 State 142 3,642 ( 10 ) Deferred ( 4,376 ) 6,044 ( 5,796 ) 698 7,255 2,973 89 Table of Contents Income tax (benefit) expense related to operations differs from the amounts computed by applying the U.S. federal income tax rate to income (loss) before income taxes. The reasons for these differences are as follows: (Percent of (Loss) Income Before Income Taxes) 2022 2021 2020 Computed “expected” income tax expense 21.0 21.0 21.0 State income tax benefit, net of federal tax benefit ( 8.9 ) 5.6 21.7 Net income of associated companies ( 77.2 ) ( 1.8 ) ( 18.3 ) Resolution of tax matters ( 32.2 ) 3.2 ( 30.5 ) Remeasurement due to rate changes ( 11.2 ) 0.1 ( 31.0 ) Non-deductible expenses 124.0 0.9 19.4 Provision to return adjustment 70.2 — — Valuation allowance 11.9 ( 6.0 ) 125.2 Wage credit, net addback ( 7.5 ) — — Warrant valuation ( 1.9 ) ( 0.4 ) ( 7.3 ) Other — — 4.4 88.2 22.6 104.6 Net deferred income tax liabilities consist of the following components: (Thousands of Dollars) September 25 2022 September 26 2021 Deferred income tax liabilities: Property and equipment ( 11,712 ) ( 13,284 ) Identified intangible assets ( 21,649 ) ( 27,543 ) ASC 842 - Leases DTL ( 11,308 ) ( 15,813 ) Pension and postretirement benefits — ( 6,346 ) Investments ( 26,489 ) ( 14,823 ) ( 71,158 ) ( 77,809 ) Deferred income tax assets: Allowance for credit losses 802 237 Pension and postretirement benefits 3,445 — Long-term debt 161 716 Interest deduction limitation 4,809 — Operating loss carryforwards 26,224 26,999 ASC 842 - Leases DTA 13,112 15,840 Accrued compensation 1,914 6,630 Accrued expenses 1,663 443 Other 2,964 812 55,094 51,677 Valuation allowance ( 26,655 ) ( 27,631 ) Net deferred income tax liabilities ( 42,719 ) ( 53,763 ) All deferred taxes are categorized as non-current. 90 Table of Contents A reconciliation of 2022 and 2021 changes in gross unrecognized tax benefits is as follows: (Thousands of Dollars) 2022 2021 Balance, beginning of year 18,279 27,008 Changes in tax positions for prior years ( 307 ) 1,008 Increases (decrease) in tax positions for the current year 1,887 ( 8,940 ) Lapse in statute of limitations ( 1,617 ) ( 797 ) Balance, end of year 18,242 18,279 Approximately $ 11,942,000 and $ 10,984,000 of the gross unrecognized tax benefit balances for 2022 and 2021, respectively, relate to state net operating losses which are netted against deferred taxes on our balance sheet. The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was $ 3,582,000 at September 25, 2022. The company does not expect that unrecognized tax benefits will fluctuate significantly in the next twelve months. We recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense. The amount of accrued interest related to unrecognized tax benefits was, net of tax, $ 1,476,000 at September 25, 2022 and $ 1,393,000 at September 26, 2021. There were no amounts provided for penalties at September 25, 2022 or September 26, 2021. At September 25, 2022 and September 26, 2021, we had a deferred tax asset of $ 4,809,000 and $ 0 , respectively, related to disallowed interest expense. The company is current undergoing a New York Franchise Tax audit that includes fiscal year periods 2019 through 2021. Certain of the Company's state income tax returns for the year ended September 25, 2016 are open for examination. The Federal and remaining state returns are open beginning with the September 24, 2017 year. At September 25, 2022, we have state tax benefits of approximately $ 45,137,000 in net operating loss ("NOL") carryforwards that expire between 2022 and 2040. These NOL carryforwards result in a deferred income tax asset of $ 35,658,000 at September 25, 2022, a portion of which is offset by a valuation allowance. 15. FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions are used to estimate the fair value of each class of financial instruments for which it is practicable to estimate value. The carrying amounts of cash equivalents, accounts receivable and accounts payable approximate fair value because of the short maturity of those instruments. Certain other investments totaling $ 4,226,000 , including our 16.7 % ownership of the non-voting common stock and 0.7 % of the voting common stock of TCT, which represents 8.7 % of total TCT stock, and a private equity investment, are carried at cost. Certain other investments totaling $ 1,745,000 which include securities held in trust under a deferred compensation arrangement, are carried at fair value with gains and losses reported in earnings. These represent Level 2 fair value measurements. At September 25, 2022, we had no floating rate debt. Our fixed rate debt consists of $ 462,554,000 principal amount of the Term Note. At September 25, 2022 the fair value is $ 463,446,000 . This represents a Level 2 fair value measurement. As discussed more fully in Notes 7 and 12 , we recorded a liability for the Warrants issued in connection with the Warrant Agreement. The liability was initially measured at its fair value and we re-measure the liability to fair value each reporting period, with changes reported in other non-operating income (expense). The initial fair value of the Warrants was $ 16,930,000 . The fair value of the Warrants at September 25, 2022, September 26, 2021, and September 27, 2020 were zero , $ 71,000 and $ 363,000 , respectively. In other, net non-operating income (expense) in the Consolidated Statements of Income (loss) and Comprehensive Income (Loss), we recognized income of $ 71,000 in 2022, $ 292,000 in 2021, and of $ 832,000 in 2020, for adjustments in the fair value of the Warrants. The Warrants expired in March 2022. 91 Table of Contents The following assumptions were used to estimate the fair value of the Warrants: 2022 2021 2020 Volatility (Percent) — 43 84 Risk-free interest rate (Percent) — 0.05 0.12 Expected term (Years) — 0.5 1.5 Estimated fair value (Dollars) — 0.12 0.06 16. EARNINGS PER COMMON SHARE The following table sets forth the computation of basic and diluted earnings per common share: (Thousands of Dollars and Shares, Except Per Common Share Data) 2022 2021 2020 (Loss) income attributable to Lee Enterprises, Incorporated: ( 2,017 ) 22,745 ( 1,975 ) Weighted average Common Stock 5,946 5,873 5,811 Less non-vested restricted Common Stock ( 167 ) ( 156 ) ( 154 ) Basic average Common Stock 5,778 5,717 5,657 Dilutive stock options and restricted Common Stock — 109 37 Diluted average Common Stock 5,778 5,826 5,694 Earnings per common share: Basic: ( 0.35 ) 3.98 ( 0.35 ) Diluted ( 0.35 ) 3.90 ( 0.35 ) For 2021 we had 600,000 weighted average shares not considered in the computation of diluted earnings per share because the exercise prices of the related stock options and Warrants were in excess of the fair market value of our Common Stock. For 2022 and 2020 we had 74,304 and 600,000 weighted average shares, respectively, not considered in the computation of diluted earnings per share because the Company recorded net losses. 17. ALLOWANCE FOR CREDIT LOSSES Valuation and qualifying account information related to the allowance for credit losses related to continuing operations is as follows: (Thousands of Dollars) 2022 2021 2020 Balance, beginning of year 6,574 13,431 6,434 Additions charged to expense 5,190 1,505 8,607 Deductions from reserves ( 6,527 ) ( 8,362 ) ( 1,610 ) Balance, end of year 5,237 6,574 13,431 92 Table of Contents 18. OTHER INFORMATION Compensation and other accrued liabilities consist of the following: (Thousands of Dollars) September 25 2022 September 26 2021 Compensation 20,815 20,849 Retirement plans 549 554 Other 23,376 23,673 44,740 45,076 Supplemental cash flow information includes the following cash payments: (Thousands of Dollars) 2022 2021 2020 Interest 41,770 45,214 49,518 Debt financing and reorganization costs — — 707 Income tax payments, net 5,311 7,604 446 Accumulated other comprehensive income (loss), net of deferred income taxes at September 25, 2022, and September 26, 2021, is related to pension and postretirement benefits. 19. COMMITMENTS AND CONTINGENT LIABILITIES Capital Expenditures At September 25, 2022, we had construction and equipment purchase commitments totaling approximately $ 3,872,000 . Income Taxes Commitments exclude unrecognized tax benefits to be recorded in accordance with ASC Topic 740, Income Taxes. We are unable to reasonably estimate the ultimate amount or timing of cash settlements with the respective taxing authorities for such matters. See Note 14. We file income tax returns with the Internal Revenue Service and various state tax jurisdictions. From time to time, we are subject to routine audits by those agencies, and those audits may result in proposed adjustments. We have considered the alternative interpretations that may be assumed by the various taxing agencies, believe our positions taken regarding our 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 (Loss) in the periods in which such matters are ultimately determined. We do not believe the final resolution of such matters will be material to our consolidated financial position or cash flows. We have various income tax examinations ongoing and at various stages of completion, but generally our income tax returns have been audited or closed to audit through 2014. Legal Proceedings We are 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 we are unable to predict the ultimate outcome of these legal actions, it is our opinion that the disposition of these matters will not have a material adverse effect on our Consolidated Financial Statements, taken as a whole. 93 Table of Contents Report of Independent Registered Public Accounting Firm Stockholders and Board of Directors Lee Enterprises, Incorporated. Davenport, Iowa Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheet of Lee Enterprises, Incorporated (the “Company”) as of September 25, 2022, the related consolidated statements of income (loss) and comprehensive income (loss), stockholders’ equity (deficit), and cash flows for the fiscal year ended September 25, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at September 25, 2022, and the results of its operations and its cash flows for the fiscal year ended September 25, 2022 , in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of September 25, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated February 27, 2023, expressed an adverse opinion thereon. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Valuation of indefinite-lived mastheads As described in Notes 1 and 6 to the consolidated financial statements, the Company’s non-amortized intangible assets in mastheads are $26.3 million as of September 25, 2022. The Company reviews the indefinite-lived mastheads for impairment on an annual basis or more frequently if events or changes in circumstances indicate the assets might be impaired. The impairment test consists of comparing the fair value 94 Table of Contents of each masthead with its carrying amount. The Company determines fair value using the relief from royalty method, which utilizes a discounted cash flow model to determine the fair value of each masthead. The significant assumptions used in the determination of the fair value of indefinite-lived mastheads are the discount rate (weighted-average cost of capital) and royalty rates. During the year ended September 25, 2022, the Company recognized impairments of $13.5 million on these indefinite-lived mastheads. We identified the determination of the fair values of the indefinite-lived mastheads as a critical audit matter because of the significant estimates and assumptions the Company makes to calculate their fair value, specifically the discount rate and royalty rates. Auditing the significant assumptions involved a high degree of subjective auditor judgment due to their significant estimation uncertainty, including the extent of specialized skills and knowledge needed. The following are the primary procedures we performed to address this critical audit matter: • Utilizing personnel with specialized skills and knowledge in valuation, who assisted in: • Evaluating the discount rate by developing an independent estimate using independently obtained market data of guideline public companies and compared to the rate used by the Company; and • Evaluating the royalty rates by (i) evaluating management’s profit-split analysis and (ii) comparing them to a range based on publicly available royalty rates. Valuation of defined benefit pension plan assets and postretirement plan assets that do not have a readily determinable fair value As described in Notes 1, 9, and 10 to the consolidated financial statements, the Company has certain defined benefit pension plan assets and postretirement plan assets for which there is not a readily determinable fair value, and the Company applies a practical expedient to exclude such assets from the fair value hierarchy. As described in Note 9 to the consolidated financial statements, the fair value of defined benefit pension plan assets was $209.4 million at September 25, 2022, which included $34.8 million of assets excluded from the fair value hierarchy. As described in Note 10 to the consolidated financial statements, the fair value of postretirement plan assets was $23.9 million at September 25, 2022, which included $3.6 million of assets excluded from the fair value hierarchy. As described in Note 1 to the consolidated financial statements, these plan assets include certain investments in equity funds and diversified funds valued at the net asset value of units held at the end of the period based upon the value of the underlying investments, which is determined using multiple approaches including quoted market prices and private market quotations. We identified the valuation of plan assets that have no readily determinable fair value as a critical audit matter. The valuation of these plan assets was complex due to the higher estimation uncertainty of the inputs in the determinations of the net asset value of units held at the end of the reporting period. Auditing these elements involved subjective auditor judgment because certain information regarding the valuation of these investments is based on unaudited information available to management at the time of the valuation, including the extent of specialized skills and knowledge needed. The following are the primary procedures we performed to address this critical audit matter: • Utilizing personnel with specialized skills and knowledge in valuation, who assisted in: • Obtaining the latest audited financial statements for certain investments, performing a roll forward of the investment balance to compute an estimated market return on investment, and comparing the market return to relevant benchmarks of various public funds. Yield curve utilized in determining the discount rates used in measurement of certain defined benefit pension and postretirement benefit obligations As described in Notes 1 and 9 to the consolidated financial statements, the Company’s defined benefit pension obligations were $208.8 million, compared to the fair value of defined benefit pension plan assets of $209.4 95 Table of Contents million at September 25, 2022. As described in Notes 1 and 10 to the consolidated financial statements, the Company’s postretirement benefit obligations were $12.3 million, compared to the fair value of postretirement plan assets of $23.9 million at September 25, 2022. As described in Note 1 to the consolidated financial statements, the Company updates the assumptions used to measure the benefit obligations, including discount rates, at the month-end closest to the fiscal year-end. The Company determines the discount rates used to measure the obligations based on investment yields available at year-end on corporate bonds rated AA and above with a maturity to match the expected benefit payment stream. We identified the yield curve utilized in the determination of the discount rate assumptions, which are utilized in the measurement of certain of the defined benefit pension and postretirement benefit obligations, as a critical audit matter. The discount rates have a significant effect on the measurement of certain of the defined benefit pension and postretirement benefit obligations. Auditing the yield curve utilized in the determination of the discount rates was complex because it involved especially subjective auditor judgment, including the extent of specialized skills and knowledge needed. The following are the primary procedures we performed to address this critical audit matter: • Utilizing personnel with specialized skills and knowledge in actuarial valuation, who assisted in: • Evaluating the reasonableness of the selected yield curve used to determine the discount rates applied in measuring certain of the defined benefit pension and postretirement benefit obligations, which included comparing the discount rates based on the yield curve used by the Company to independent estimates of discount rates based on a separate publicly available yield curve. /s/ BDO USA, LLP We have served as the Company's auditor since 2021. Chicago, Illinois February 27, 2023 96 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Lee Enterprises, Incorporated: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheet of Lee Enterprises, Incorporated and subsidiaries (the Company) as of September 26, 2021, the related consolidated statements of income (loss) and comprehensive income (loss), stockholders’ equity (deficit), and cash flows for each of the 52-week periods ended September 26, 2021 and September 27, 2020, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 26, 2021, and the results of its operations and its cash flows for the 52-week periods ended September 26, 2021 and September 27, 2020, in conformity with U.S. generally accepted accounting principles. Change in Accounting Principle As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for credit losses on financial instruments as of September 28, 2020, due to the adoption of Accounting Standard Codification Topic 326, Financial Instruments – Credit Losses . Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ KPMG LLP We served as the Company’s auditor from 2008 to 2021. Chicago, Illinoi s December 10, 2021 except for the immaterial corrections to prior period financial statements as described in Note 2, as to which the date is February 27, 2023. 97 Table of Contents EXHIBIT INDEX Exhibits marked with an asterisk (*) are incorporated by reference to documents previously filed by us with the SEC, as indicated. Exhibits marked with a plus (+) are management contracts or compensatory plan contracts or arrangements filed pursuant to Item 601(b)(10)(iii)(A) of Regulation S-K. All other documents listed are filed with this Annual Report on Form 10-K. Number Description 3.1 * Amended and Restated Certificate of Incorporation of Lee Enterprises, Incorporated effective as of January 30, 2012 (Exhibit 3.1 to Form 8-K filed on February 3, 2012) 3.2 * Second Amended and Restated By-Laws of Lee Enterprises, Incorporated effective as of June 26, 2019 (Exhibit 3.1 to Form 8-K filed June 27, 2019) 4.1 * Form of Indenture of Lee Enterprises, Incorporated (Exhibit 4.3 to Form S-3 Registration Statement filed on February 10, 2020) 4.2 * Warrant Agreement dated as of March 31, 2014 between Lee Enterprises, Incorporated and Equiniti Trust Company (formerly Wells Fargo Bank, National Association) (Exhibit 4.2 to Form 8-K filed on April 4, 2014) 4.3 * Registration Rights Agreement dated as of March 31, 2014 among Lee Enterprises, Incorporated, Mudrick Capital Management, LP, Hawkeye Capital Management, LLC, Cohanzick Management, LLC, Aristeia Capital, L.L.C., CVC Credit Partners, LLC, Franklin Mutual Advisors, LLC and Wingspan Master Fund, LP (Exhibit 4.3 to Form 8-K filed on April 4, 2014) 4.4 * Rights Agreement dated as of November 24, 2021, between Lee Enterprises, Incorporated and Equiniti Trust Company, as Rights Agent (Exhibit 4.1 to Current Report on Form 8-K filed on November 24, 2021) 10.1 * Asset and Stock Purchase Agreement dated January 29, 2020 by and among Lee Enterprises, Incorporated, Berkshire Hathaway Inc. and BH Media Group, Inc. (Exhibit 10.1 to Form 8-K filed on January 29, 2020) 10.2 * Credit Agreement dated January 29, 2020 by and between Lee Enterprises, Incorporated and BH Finance LLC (Exhibit 10.2 to Form 8-K filed on January 29, 2020) 10.3 * Form of Lease Agreement by and between Lee Enterprises, Incorporated and BH Media Group, Inc. (Exhibit 10.3 to Form 8-K filed on January 29, 2020) 10.4 * Operating Agreement of St. Louis Post-Dispatch LLC, dated as of May 1, 2000, as amended by Amendment No. 1 to Operating Agreement of St. Louis Post-Dispatch LLC, dated as of June 1, 2001 (Exhibit 10.5 to Form 10-Q for the Fiscal Quarter Ended June 30, 2005) 10.5 * Amendment Number Two to Operating Agreement of St. Louis Post-Dispatch LLC, effective February 18, 2009, between Pulitzer Inc. and Pulitzer Technologies, Inc. (Exhibit 10.13 to Form 10-Q for the Fiscal Quarter Ended March 29, 2009) 10.6 * 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) 98 Table of Contents Number Description 10.7 * Amended and Restated Partnership Agreement, dated as of November 30, 2009, between Star Publishing Company and Citizen Publishing Company (Exhibit 10.2 to Form 10-Q for the Fiscal Quarter Ended December 27, 2009) 10.8 * Amended and Restated Management Agreement, dated as of November 30, 2009, between Star Publishing Company and Citizen Publishing Company (Exhibit 10.1 to Form 10-Q for the Fiscal Quarter Ended December 27, 2009) 10.9 * License Agreement (Star), as amended and restated November 30, 2009, between Star Publishing Company and TNI Partners (Exhibit 10.3 to Form 10-Q for the Fiscal Quarter Ended December 27, 2009) 10.10 * License Agreement (Citizen), as amended and restated November 30, 2009, between Citizen Publishing Company and TNI Partners (Exhibit 10.4 to Form 10-Q for the Fiscal Quarter Ended December 27, 2009) 10.11 * License Agreement, dated as of May 1, 2000, by and between Pulitzer Inc. and St. Louis Post-Dispatch LLC (Exhibit 10.7 to Form 10-Q for the Fiscal Quarter Ended June 30, 2005) 10.12 * Non-Confidentiality Agreement, dated as of May 1, 2000 (Exhibit 10.10 to Form 10-Q for the Fiscal Quarter Ended June 30, 2005) 10.13.1+ * Lee Enterprises, Incorporated 2020 Long-Term Incentive Plan (effective February 19, 2020) (Exhibit 4.2 to Registration Statement on Form S-8 (Reference No. 333-237605) filed on April 8, 2020) 10.13.2+* Form of Restricted Stock Agreement related to Lee Enterprises, Incorporated 2020 Long-Term Incentive Plan (Effective February 19, 2020) (Exhibit 10.2 to Form 8-K filed on February 23, 2016) 10.13.3+ * Form of Incentive Stock Option Agreement related to Lee Enterprises, Incorporated 2020 Long-Term Incentive Plan (Effective February 19, 2020) (Exhibit 10.3 to Form 8-K filed on February 23, 2016) 10.13.4+ * Form of Non-Qualified Stock Option Agreement related to Lee Enterprises, Incorporated 2020 Long-Term Incentive Plan (Effective February 19, 2020) (Exhibit 10.4 to Form 8-K filed on February 23, 2016) 10.14 +* Lee Enterprises, Incorporated Supplementary Benefit Plan, Amended and Restated as of January 1, 2008 (Exhibit 10.25 to Form 10-K for the Fiscal Year Ended September 28, 2008) 10.15+ * Lee Enterprises, Incorporated Outside Directors Deferral Plan, Amended and Restated as of January 1, 2008 (Exhibit 10.26 to Form 10-K for the Fiscal Year Ended September 28, 2008) 10.16.1+* Form of Amended and Restated Employment Agreement between Lee Enterprises, Incorporated and its President and Chief Executive Officer (Exhibit 10.31.2 to Form 10-K for the Fiscal Year Ended September 30, 2018) 10.16.2+* Form of Employment Agreement between Lee Enterprises, Incorporated and Certain of its Senior Executive Officers (Exhibit 10.31.3 to Form 10-K for the Fiscal Year Ended September 30, 2018) 99 Table of Contents Number Description 10.17+* Form of Indemnification Agreement for Lee Enterprises, Incorporated Directors and Executive Officers Group (Exhibit 10.32 to Form 10-K for the Fiscal Year Ended September 30, 2018) 10.18+* Lee Enterprises, Incorporated Amended and Restated Incentive Compensation Program (Effective February 22, 2017) (Appendix B to Schedule 14A Definitive Proxy Statement for 2017) 21 Subsidiaries and associated companies 23 Consent of KPMG LLP, Independent Registered Public Accounting Firm 23.1 Consent of BDO USA, LLP, Independent Registered Public Accounting Firm 24 Power of Attorney 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32 Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) 100 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized on the 27 th day of February 2023. LEE ENTERPRISES, INCORPORATED /s/ Kevin D. Mowbray /s/ Timothy R. Millage Kevin D. Mowbray Timothy R. Millage President and Chief Executive Officer Vice President, Chief Financial Officer and Treasurer (Principal Executive Officer) (Principal Financial and Accounting Officer) 101 Table of Contents 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 27 th day of February 2023. Signature /s/ Steven C. Fletcher Director Steven C. Fletcher /s/ Margaret R. Liberman Director Margaret R. Liberman /s/ Mary E. Junck Director Mary E. Junck /s/ Brent M. Magid Director Brent M. Magid /s/ Shaun E. McAlmont Director Shaun E. McAlmont /s/ Herbert W. Moloney III Director Herbert W. Moloney III /s/ David T. Pearson Director David T. Pearson /s/ Gregory P. Schermer Director Gregory P. Schermer /s/ Kevin D. Mowbray President and Chief Executive Officer, and Director Kevin D. Mowbray /s/ Timothy R. Millage Vice President, Chief Financial Officer and Treasurer Timothy R. Millage 102