1	BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited, interim, Consolidated Financial Statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for quarterly reports. In the opinion of management, these financial statements contain all adjustments (consisting of only normal recurring items) necessary to present fairly the financial position of Lee Enterprises, Incorporated and subsidiaries (the “Company”) as of

December 29, 2019

and our results of operations and cash flows for the periods presented. The Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company's

2019

Annual Report on Form

-K.

Because of seasonal and other factors, the results of operations for the

weeks ended

December 29, 2019

are

not

necessarily indicative of the results to be expected for the full year.

References to “we”, “our”, “us” and the like throughout the Consolidated Financial Statements refer to the Company. References to

“2020”,

“2019”

and the like refer to the fiscal years ended the last Sunday in

September.

The Consolidated Financial Statements include our accounts and those of our subsidiaries, all of which are wholly-owned, except for our

82.5%

interest in INN Partners, L.C. ("TownNews.com"),

50%

interest in TNI Partners (“TNI”) and

50%

interest in Madison Newspapers, Inc. (“MNI”).

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 intangible assets.

Subsequent Events

Purchase Agreement with Berkshire Hathaway

January 29, 2020,

the Company entered into an Asset and Stock Purchase Agreement (“Purchase Agreement”) with Berkshire Hathaway Inc., a Delaware corporation (“Berkshire”) and BH Media Group, Inc., a Delaware corporation (“BHMG”). Subject to the terms and conditions of the Purchase Agreement, The Company has agreed to purchase certain assets and assume certain liabilities of BHMG’s newspapers and related community publications business (“BH Media Newspaper Business”), excluding real estate and fixtures such as production equipment, for a purchase price of

$130,000,000,

and all of the issued and outstanding capital stock of The Buffalo News, Inc., a Delaware corporation (“Buffalo News”) for a purchase price of

$10,000,000

(collectively, the “Transactions”).

The Company expects that the

$140,000,000

purchase price will be financed with new debt. As further discussed below, the Company has entered into an agreement for the financing of the Transactions.

Since

July 2, 2018,

The Company has managed the BH Media Newspaper Business pursuant to a Management Agreement between BHMG and the Company dated

June 26, 2018 (

“Management Agreement”). BHMG includes

daily newspapers and digital operations, in addition to

paid weekly newspapers with websites and

other print products. Buffalo News is a provider of local print and digital news to the Buffalo, NY area.

Consummation of the Transactions is subject to certain closing conditions, including the closing of the refinancing of the Company’s existing credit facilities under the Credit Agreement, as described below (“Debt Financing”), the execution and delivery of specified ancillary agreements, including a

-year term lease between BHMG and the Company as described below (the “Lease”) and review by the U.S. Department of Justice. The Transactions are expected to close

March 16, 2020,

although there can be

assurance that the closing of the Transactions will occur by such date. Either party

may

terminate the Purchase Agreement if the Transactions are

not

consummated on or before

April 30, 2020.

Management Agreement with BH Media Group

In connection with the Transactions, the Management Agreement will terminate at the closing of the Transactions. Amounts due under the Management Agreement will be credited to the purchase price of the Transactions. We expect the credits to total approximately

$5,425,000,

including an estimated

$4,180,000

reflective of the pro-rated variable portion of the Management Agreement based on the year-to-date performance of BHMG.

Debt Financing

In connection with the Purchase Agreement, the Company entered into a Credit Agreement dated as of

January 29, 2020,

with BH Finance, LLC, a Nebraska limited liability company (“BH Finance”), as lender (“Credit Agreement”) pursuant to which BH Finance will provide a secured

-year term loan in an aggregate principal amount of approximately

$576,000,000,

subject to the satisfaction of certain customary closing conditions, including the simultaneous closing of the Transactions and the Debt Financing. The Debt Financing under the Credit Agreement will bear interest at a per annum rate equal to

9.00%,

payable monthly. Principal reductions will be required periodically in the amount equal to the Company’s excess cash flow (as defined in the Credit Agreement) for each fiscal quarter beginning with the period ended

June 28, 2020,

and from the proceeds of the sale of assets as they

may

be received from time to time. Substantially all of the proceeds of the Debt Financing will be used to finance the Transactions; refinance the Company’s existing indebtedness, including payment in full of its outstanding Senior Secured Notes,

second

lien loans and revolving loan indebtedness; and provide working capital to the Company in lieu of a revolving credit facility.

The Credit Agreement also 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.

Lease Agreement

In connection with the Purchase Agreement, the Company will enter into a

-year term lease with BHMG, as landlord, of the real estate and fixtures used in the BH Media Newspaper Business. The Lease will commence upon closing of the Transactions, and requires the Company to pay annual rents of

$8,000,000,

payable in equal monthly installments, as well as all operating costs of the properties, including real estate taxes, insurance, maintenance and repairs. Rent payments will be subject to a credit for any leased real estate sold by BH Media during the term of the Lease equal to

8.00%

of the net sales proceeds from such transactions.

Use of Estimates

The preparation of the Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We evaluate these estimates and judgments on an ongoing 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.

Recently Issued Accounting Standards - Standards Adopted in

2020

February 2016,

the FASB issued a new standard for the accounting treatment of leases, known as Accounting Standards

842

("AS

842"

). The new standard is based on the principle that entities should recognize assets and liabilities arising from leases. The new standard's primary change is the requirement for entities to recognize a lease liability for payments and a right of use asset representing the right to use the leased asset during the term on most operating lease arrangements. We adopted the standard effective

September 30, 2019,

the

first

day of fiscal year

2020.

We elected the package of practical expedients which permits the Company to

not

reassess under the new standard the prior conclusions about lease identification, lease classification, or initial direct costs. In addition, we did reassess whether existing land easements which were previously

not

accounted for as leases are or contain leases under the new guidance. We have elected to combine non-lease and lease components when accounting for leases. The Company has made a policy election to exclude short-term leases, those with an original term of less than

twelve

months, from recognition and measurement under AS

842.

As such, we have

not

recognized a right-of-use (“ROU”) asset or lease liability for these leases. Additional information and disclosures required by this new standard are contained in Note

Recently Issued Accounting Standards - Standards

Not

Yet Adopted

June 2016,

the FASB issued a new standard to replace the incurred loss impairment methodology under then current GAAP 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 will be required to use a forward-looking expected credit loss model for both accounts receivables and other financial instruments. The new standard will be adopted beginning

September 30, 2020

using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the effective date to align our credit loss methodology with the new standard. We are currently evaluating the impact of this standard on our consolidated financial statements.