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Medianews Group Inc · 10-Q · For 9/30/07

Filed On 11/14/07, 4:36pm ET   ·   Accession Number 950134-7-24005   ·   SEC File 33-75156

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11/14/07  Medianews Group Inc               10-Q        9/30/07    9:585K                                   Bowne of Dallas I..01/FA

Quarterly Report   —   Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                    HTML    237K 
 2: EX-3.1      Fourth Amended and Restated Certificate of          HTML     62K 
                          Incorporation                                          
 3: EX-10.1     Seventh Amendment to Credit Agreement               HTML     73K 
 4: EX-10.2     Shareholders' Agreement                             HTML    144K 
 5: EX-31.1     Certification Pursuant to Section 302               HTML     11K 
 6: EX-31.2     Certification Pursuant to Section 302               HTML     11K 
 7: EX-31.3     Certification Pursuant to Section 302               HTML     11K 
 8: EX-32.1     Certification Pursuant to Section 906               HTML      8K 
 9: EX-32.2     Certification Pursuant to Section 906               HTML      8K 


10-Q   —   Quarterly Report
Document Table of Contents

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11st Page   -   Filing Submission
"Table of Contents
"Part I -- Financial Information
"Financial Statements
"Management's Discussion and Analysis of Financial Condition and Results of Operations
"Quantitative and Qualitative Disclosure of Market Risk
"Controls and Procedures
"Part Ii -- Other Information
"Risk Factors
"Submission of Matters to a Vote of Security Holders
"Exhibits
"Signatures
"Condensed Consolidated Balance Sheets
"Condensed Consolidated Statements of Operations
"Condensed Consolidated Statements of Cash Flows
"Notes to Condensed Consolidated Statements

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2007
OR
(     ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number 033-75156
MEDIANEWS GROUP, INC.
(Exact name of registrant as specified in its charter)
     
Delaware   76-0425553
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification Number)
     
101 W. Colfax Avenue, Suite 1100
Denver, Colorado
(Address of principal executive offices)
 
80202
(Zip Code)
Registrant’s telephone number, including area code: (303) 954-6360
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Item (1) Yes [X] No [   ]; Item (2) Yes [   ] No [X]*
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [   ]            Accelerated filer [   ]            Non-accelerated filer [X]
Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).
Yes [   ]            No [X]
The total number of shares of the registrant’s Class A and Class C Common Stock outstanding as of November 14, 2007 was 2,278,352 and 100, respectively.
*The registrant’s duty to file reports with the Securities and Exchange Commission has been suspended in respect of its fiscal year commencing July 1, 2007 pursuant to Section 15(d) of the Securities Exchange Act of 1934. It is filing this Quarterly Report on Form 10-Q on a voluntary basis.
 
 

 



 

INDEX TO MEDIANEWS GROUP, INC.
REPORT ON FORM 10-Q FOR THE QUARTER ENDED
SEPTEMBER 30, 2007

             
Item No.       Page  
PART I — FINANCIAL INFORMATION
       
  Financial Statements     3  
  Management’s Discussion and Analysis of Financial Condition and Results of Operations     3  
  Quantitative and Qualitative Disclosure of Market Risk     3  
  Controls and Procedures     3  
 
           
PART II — OTHER INFORMATION
       
1
  Legal Proceedings     N/A  
  Risk Factors     4  
2
  Unregistered Sales of Equity Securities and Use of Proceeds     N/A  
3
  Defaults Upon Senior Securities     N/A  
  Submission of Matters to a Vote of Security Holders     4  
5
  Other Information     N/A  
  Exhibits     4  
 
           
Signatures        
 Fourth Amended and Restated Certificate of Incorporation
 Seventh Amendment to Credit Agreement
 Shareholders' Agreement
 Certification Pursuant to Section 302
 Certification Pursuant to Section 302
 Certification Pursuant to Section 302
 Certification Pursuant to Section 906
 Certification Pursuant to Section 906

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PART I — FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS
     The information required by this item is filed as part of this report on Form 10-Q. See Index to Financial Information on page 6 of this report on Form 10-Q.

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
     The information required by this item is filed as part of this report on Form 10-Q. See Index to Financial Information on page 6 of this report on Form 10-Q.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK
     The information required by this item is filed as part of this report on Form 10-Q. See Index to Financial Information on page 6 of this report on Form 10-Q.

ITEM 4T: CONTROLS AND PROCEDURES
     As of September 30, 2007, we had carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer, President, and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, the Chief Executive Officer, President, and Chief Financial Officer concluded that our disclosure controls and procedures were sufficiently effective to provide reasonable assurance that material information regarding us and/or our subsidiaries required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, as required, within the time periods specified in the Securities and Exchange Commission rules and forms.
     During the period covered by this quarterly report, there have been no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
     The Company’s management, including the Chief Executive Officer, President, and Chief Financial Officer, does not expect that our disclosure controls or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons or by collusion of two or more people. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II — OTHER INFORMATION

ITEM 1A: RISK FACTORS
     See factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended June 30, 2007 for risk factors that could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
     As of October 1, 2007, the holders of 93.1% of all outstanding shares of our Class A Common Stock acted by written consent in lieu of an annual meeting to re-elect Richard B. Scudder, William Dean Singleton, Jean L. Scudder and Howell E. Begle to our Board of Directors. Following the effectiveness of that action, our Board of Directors consisted of Richard B. Scudder, William Dean Singleton, Jean L. Scudder and Howell E. Begle.
     As of October 19, 2007, the holders of 93.1% of all outstanding shares of our Class A Common Stock acted by written consent in lieu of a meeting to amend and restate the certificate of incorporation of the Company to, among other things, create a new class of Class C Common Stock.

ITEM 6: EXHIBITS
     See Exhibit Index for list of exhibits filed with this report.

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FORWARD-LOOKING STATEMENTS
     This report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements contained herein and elsewhere in this report are based on current expectations. Such statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The terms “expect,” “anticipate,” “intend,” “believe,” and “project” and similar words or expressions are intended to identify forward-looking statements. These statements speak only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results and events to differ materially from those anticipated and should be viewed with caution. Potential risks and uncertainties that could adversely affect our ability to obtain these results, and in most instances are beyond our control, include, without limitation, those listed under “Risk Factors” in our Annual Report on Form 10-K for the year ended June 30, 2007 and the following additional factors: (a) acquisitions of new businesses or dispositions of existing businesses, (b) costs or difficulties related to the integration of businesses acquired by us may be greater than expected, (c) increases in interest or financing costs, and (d) other unanticipated events and conditions. It is not possible to foresee or identify all such factors. We make no commitment to update any forward-looking statement or to disclose any facts, events, or circumstances after the date hereof that may affect the accuracy of any forward-looking statements.

SIGNATURES
     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
         
  MEDIANEWS GROUP, INC.
 
 
Dated: November 14, 2007  By:   /s/Ronald A. Mayo    
    Ronald A. Mayo   
    Vice President, Chief Financial Officer and
Duly Authorized Officer of Registrant 
 
 

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MEDIANEWS GROUP, INC.
Index to Financial Information
         
    Page  
Item 1: Financial Statements
       
 
       
    7  
    9  
    10  
    11  
 
       
    17  
 
       
    24  

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MEDIANEWS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
                         
    (Unaudited)    
      June 30, 2007
    (Dollars in thousands)
ASSETS
               
CURRENT ASSETS
               
Cash and cash equivalents
  $ 15,845     $ 9,085  
Accounts receivable, less allowance for doubtful accounts of $13,038 at September 30, 2007 and $13,800 at June 30, 2007
    180,135       174,936  
Inventories of newsprint and supplies
    20,671       22,781  
Prepaid expenses and other assets
    27,954       32,668  
 
               
TOTAL CURRENT ASSETS
    244,605       239,470  
 
               
PROPERTY, PLANT AND EQUIPMENT
               
Land
    71,788       73,983  
Buildings and improvements
    202,397       205,035  
Machinery and equipment
    507,415       501,846  
Construction in progress
    9,134       11,942  
 
               
TOTAL PROPERTY, PLANT AND EQUIPMENT
    790,734       792,806  
Less accumulated depreciation and amortization
    (282,239 )     (272,773 )
 
               
NET PROPERTY, PLANT AND EQUIPMENT
    508,495       520,033  
 
               
OTHER ASSETS
               
Investment in unconsolidated JOAs (Denver and Salt Lake City)
    252,532       253,613  
Equity investments
    46,408       48,141  
Subscriber accounts, less accumulated amortization of $179,910 at September 30, 2007 and $173,232 at June 30, 2007
    61,717       68,395  
Excess of cost over fair value of net assets acquired
    840,787       842,353  
Newspaper mastheads
    380,669       380,669  
Advertiser lists, covenants not to compete and other identifiable intangible assets, less accumulated amortization of $53,895 at September 30, 2007 and $52,611 at June 30, 2007
    190,927       192,211  
Other
    54,031       50,424  
 
               
TOTAL OTHER ASSETS
    1,827,071       1,835,806  
 
               
TOTAL ASSETS
  $ 2,580,171     $ 2,595,309  
 
               
See notes to condensed consolidated financial statements

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MEDIANEWS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
                         
    (Unaudited)    
      June 30, 2007
    (Dollars in thousands, except share data)
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
CURRENT LIABILITIES
               
Trade accounts payable
  $ 56,143     $ 70,152  
Accrued liabilities
    128,698       128,956  
Unearned income
    52,874       55,921  
Current portion of long-term debt and obligations under capital leases
    22,440       17,588  
 
               
TOTAL CURRENT LIABILITIES
    260,155       272,617  
 
               
LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES
    1,118,810       1,107,045  
 
               
DEFINED BENEFIT AND OTHER POST EMPLOYMENT BENEFIT PLAN LIABILITIES
    31,791       33,342  
 
               
OTHER LIABILITIES
    24,622       25,509  
 
               
DEFERRED INCOME TAXES, NET
    119,052       119,890  
 
               
MINORITY INTEREST
    598,889       606,052  
 
               
PUTABLE COMMON STOCK
    29,881       33,165  
 
               
ST. PAUL, MONTEREY AND TORRANCE PURCHASE PRICE (HEARST)
    311,098       306,525  
 
               
SHAREHOLDERS’ EQUITY
               
Common stock, par value $0.001; 3,150,000 shares authorized: 2,314,346 shares issued and shares outstanding of 2,276,846 at September 30, 2007 and 2,298,346 at June 30, 2007
    2       2  
Accumulated other comprehensive loss, net of taxes
    (17,323 )     (17,341 )
Retained earnings
    108,204       110,503  
Common stock in treasury, at cost, 37,500 shares at September 30, 2007 and 16,000 shares at June 30, 2007
    (5,010 )     (2,000 )
 
               
TOTAL SHAREHOLDERS’ EQUITY
    85,873       91,164  
 
               
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
  $ 2,580,171     $ 2,595,309  
 
               
See notes to condensed consolidated financial statements

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MEDIANEWS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
                 
    Three Months Ended
    September 30,
    2007   2006
    (Dollars in thousands)
REVENUES
               
Advertising
  $ 263,681     $ 236,804  
Circulation
    57,261       45,608  
Other
    13,771       12,890  
 
               
TOTAL REVENUES
    334,713       295,302  
 
               
INCOME (LOSS) FROM UNCONSOLIDATED JOAS (DENVER AND SALT LAKE CITY)
    1,210       (2,345 )
 
               
COST AND EXPENSES
               
Cost of sales
    102,045       95,024  
Selling, general and administrative
    180,768       152,189  
Depreciation and amortization
    17,858       16,391  
Interest expense
    20,685       19,249  
Other (income) expense, net
    1,353       (5,513 )
 
               
TOTAL COSTS AND EXPENSES
    322,709       277,340  
 
               
EQUITY INVESTMENT INCOME (LOSS), NET
    (1,451 )     717  
 
               
GAIN (LOSS) ON SALE OF ASSETS, NET
    (37 )     16,330  
 
               
MINORITY INTEREST
    (13,465 )     (13,351 )
 
               
 
               
INCOME (LOSS) BEFORE INCOME TAXES
    (1,739 )     19,313  
 
               
INCOME TAX BENEFIT (EXPENSE)
    729       (5,995 )
 
               
 
               
NET INCOME (LOSS)
    (1,010 )     13,318  
 
               
ACCRETION RELATED TO ST. PAUL, MONTEREY AND TORRANCE PURCHASE PRICE
    (4,573 )     (2,610 )
 
               
 
               
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK
  $ (5,583 )   $ 10,708  
 
               
See notes to condensed consolidated financial statements

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MEDIANEWS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
                 
    Three Months Ended September 30,
    2007   2006
    (Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
               
Net income (loss)
  $ (1,010 )   $ 13,318  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    18,824       17,336  
Provision for losses on accounts receivable
    3,302       2,765  
Amortization of debt discount and deferred debt issuance costs
    192       216  
Net (gain) loss on sale of assets
    37       (16,330 )
Proportionate share of net income from unconsolidated JOAs
    (12,223 )     (9,785 )
Distributions of net income from unconsolidated JOAs (a)
    9,435       9,456  
Equity investment (income) loss, net
    1,451       (717 )
Distributions of net income from equity investments (b)
    6       625  
Change in defined benefit plan assets, net of cash contributions
    (2,322 )     (997 )
Deferred income tax (benefit) expense
    (696 )     5,000  
Change in estimated option repurchase price
          125  
Minority interest
    13,465       13,351  
Distributions of net income paid to minority interest
    (12,931 )     (13,351 )
Unrealized loss on hedging activities and amortization of prior service costs and actuarial losses, reclassified to earnings from accumulated other comprehensive loss
    456       114  
Change in operating assets and liabilities
    (19,755 )     32,059  
 
               
NET CASH FLOWS FROM OPERATING ACTIVITIES
    (1,769 )     53,185  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Business acquisitions and related costs, net of cash acquired
    (1,729 )     (400,506 )
Business dispositions
          14,000  
Distributions in excess of net income from JOAs(a)
    2,371       6,373  
Distributions in excess of net income from equity investments(b)
    619       618  
Investments, net
    (173 )     (547 )
Capital expenditures
    (2,877 )     (5,936 )
Proceeds from the sale of assets
    7,154       19,820  
 
               
NET CASH FLOWS FROM INVESTING ACTIVITIES
    5,365       (366,178 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Issuance of long-term debt, net of credit amendment fees
    36,998       404,815  
Repurchase of common stock
    (3,010 )      
Reduction of long-term debt and other liabilities
    (23,143 )     (65,122 )
Distributions in excess of net income to minority interests
    (7,681 )     (19,579 )
 
               
NET CASH FLOWS FROM FINANCING ACTIVITIES
    3,164       320,114  
 
INCREASE IN CASH AND CASH EQUIVALENTS
    6,760       7,121  
 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    9,085       424  
 
               
CASH AND CASH EQUIVALENTS AT END OF PERIOD
  $ 15,845     $ 7,545  
 
               
 
               
 
               
 
               
(a) Total distributions from unconsolidated JOAs were $11.8 million and $15.8 million for the three months ended September 30, 2007 and 2006, respectively.
 
               
(b) Total distributions from equity investments were $0.6 million and $1.2 million for the three months ended September 30, 2007 and 2006, respectively.
 
               
Supplemental schedule of noncash investing activities:
               
Business acquisitions (St. Paul and Monterey)
  $     $ (264,703 )
Business acquisitions (San Jose and Contra Costa)
          (337,230 )
Investment in Salt Lake Newspaper Production Facilities, LLC
          (45,469 )
See notes to condensed consolidated financial statements

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NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(UNAUDITED)
Note 1: Significant Accounting Policies and Other Matters
Basis of Quarterly Financial Statements
     The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by generally accepted accounting principles for complete consolidated financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in MediaNews Group, Inc.’s (“MediaNews” or the “Company”) Annual Report on Form 10-K for the year ended June 30, 2007. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three-month period ended September 30, 2007 are not necessarily indicative of the results that may be expected for future interim periods or for the year ending June 30, 2008.
     The unaudited condensed consolidated financial statements include the operating results of the San Jose Mercury News, Contra Costa Times, The Monterey County Herald and the Pioneer Press (St. Paul) beginning August 2, 2006. Through December 31, 2006, these four entities reported on a 52- or 53-week fiscal year. Beginning January 1, 2007, these four entities began reporting on a calendar basis consistent with the Company.
Joint Operating Agencies
     A joint operating agency (“JOA”) performs the production, sales, distribution and administrative functions for two or more newspapers in the same market under the terms of a joint operating agreement. Editorial control and news at each newspaper party to a joint operating agreement continue to be separate and outside of a JOA. As of September 30, 2007, the Company, through its partnerships and subsidiaries, participates in JOAs in Denver, Colorado, Salt Lake City, Utah, York, Pennsylvania, Detroit, Michigan and Charleston, West Virginia. See Note 3: Joint Operating Agencies of the Company’s consolidated financial statements included in its June 30, 2007 Annual Report on Form 10-K for a description of the Company’s accounting for the Denver and Salt Lake City JOAs.
     The operating results from the Company’s unconsolidated JOAs (Denver and Salt Lake City) are reported as a single net amount in the accompanying financial statements in the line item “Income from Unconsolidated JOAs.” This line item includes:
    The Company’s proportionate share of net income from JOAs,
 
    The amortization of subscriber lists created by the original purchase, as the subscriber lists are attributable to the Company’s earnings in the JOAs, and
 
    Editorial costs, miscellaneous revenue received outside of the JOA, and other charges incurred by the Company’s consolidated subsidiaries directly attributable to the JOAs in providing editorial content and news for the Company’s newspapers party to the JOAs.
     The Company’s investments in the Denver and Salt Lake City JOAs are included in the condensed consolidated balance sheets under the line item “Investment in Unconsolidated JOAs.” See Note 3: Denver and Salt Lake City Joint Operating Agencies for further discussion of our accounting for these two JOAs.
     Because of the structure of the Detroit partnership and the Company’s ownership interest therein, the Company’s accounting for its investment in the Detroit JOA only includes the preferred distributions the Company receives from the Detroit JOA. The Company’s investment in The Detroit News, Inc. is included in other long-term assets.
     Under the Charleston JOA, the Company is reimbursed for the cost of providing the news and editorial content of the Charleston Daily Mail and is paid a management fee. The Company’s limited partnership interest in the Charleston JOA does not entitle the Company to any share of the profits or losses of the limited partnership.

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NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(UNAUDITED)
     The Company owns all of the York JOA and accordingly, consolidates its results. The York Dispatch (one of the newspapers in the JOA) is edited by a third party, and the Company reimburses the third party for all related expenses. These expenses are included in the Company’s consolidated results.
Income Taxes
     At the end of each interim period, the Company makes its best estimate regarding the effective tax rate expected to be applicable for the full fiscal year. The rate so determined is used in providing for income taxes on a current year to date basis. Accordingly, the effective tax rate for the three-month period presented in this interim report on Form 10-Q may vary significantly in future periods. The effective income tax rate varies from the federal statutory rate because of state income taxes and the non-deductibility of certain expenses.
Seasonality
     Newspaper companies tend to follow a distinct and recurring seasonal pattern, with higher advertising revenues in months containing significant events or holidays. Accordingly, the fourth calendar quarter, or the Company’s second fiscal quarter, is the Company’s strongest revenue quarter of the year. Due to generally poor weather and lack of holidays, the first calendar quarter, or the Company’s third fiscal quarter, is the Company’s weakest revenue quarter of the year.
NOTE 2: Comprehensive Income
     The Company’s comprehensive income (loss) consisted of the following:
                 
    Three Months Ended September 30,
    2007   2006
    (Dollars in thousands)
Net income (loss)
  $ (1,010 )   $ 13,318  
Unrealized gain (loss) on hedging activities, net of tax
    (438 )     341  
Unrealized loss on newsprint hedging activities, reclassified to earnings, net of tax
    114       114  
Amortization of prior service costs and actuarial losses reclassified to earnings, net of tax
    342        
 
               
Comprehensive income (loss)
  $ (992 )   $ 13,773  
 
               
NOTE 3: Denver and Salt Lake City Joint Operating Agencies
     The following tables present the summarized results of the Company’s unconsolidated JOAs in Denver and Salt Lake City. The Salt Lake City JOA and Denver JOA information is presented at 100%, with the other partners’ share of income from the related JOAs subsequently eliminated. The Salt Lake City JOA column includes its affiliate Salt Lake Newspapers Production Facilities, LLC (“SLNPF”). The editorial costs, miscellaneous revenue received outside of the JOA, depreciation, amortization, and other direct costs incurred outside of the JOAs by our subsidiaries associated with The Salt Lake Tribune and The Denver Post are included in the line “Associated Revenues and Expenses.” See Note 3: Joint Operating Agencies for further discussion of the accounting for the Denver and Salt Lake City JOAs.

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NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(UNAUDITED)
                                   
    Three Months Ended September 30, 2007  
    SLNPF and                     Total Income
    Salt Lake           Associated     from
    City JOA           Revenues and     Unconsolidated
    Consolidated   Denver JOA   Expenses   JOAs
    (Dollars in thousands)  
Income Statement Data:
                                 
Total revenues
  $ 37,648     $ 90,005     $ 75            
 
                                 
Cost of sales
    8,052       24,491       7,337            
Selling, general and administrative
    13,690       47,279       2,770            
Depreciation and amortization
    1,517       9,051       966            
Other
    478       1,272       15          
 
                                 
Total costs and expenses
    23,737       82,093       11,088            
 
                                 
Net income
    13,911       7,912       (11,013 )          
Partners’ share of income from unconsolidated JOAs
    (5,644 )     (3,956 )                
 
                                 
Income from unconsolidated JOAs
  $ 8,267     $ 3,956     $ (11,013 )     $ 1,210  
 
                                 
 
    Three Months Ended September 30, 2006
    SLNPF and                 Total Loss
    Salt Lake           Associated     from
    City JOA           Revenues and     Unconsolidated
    Consolidated   Denver JOA   Expenses   JOAs
    (Dollars in thousands)  
Income Statement Data:
                                 
Total revenues
  $ 38,683     $ 102,253     $ 45            
 
                                 
Cost of sales
    8,691       34,149       8,141            
Selling, general and administrative
    13,869       51,331       2,920            
Depreciation and amortization
    1,417       12,160       945            
Other
    561       1,491       170            
 
                                 
Total costs and expenses
    24,538       99,131       12,176            
 
                                 
Net income
    14,145       3,122       (12,131 )          
Partners’ share of income from unconsolidated JOAs
    (5,920 )     (1,561 )                
 
                                 
Loss from unconsolidated JOAs
  $ 8,225     $ 1,561     $ (12,131 )     $ (2,345 )
 
                                 

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NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(UNAUDITED)
NOTE 4: Contingent Matters and Commitments
     There have been no material changes in the other contingent matters discussed in Note 11: Commitments and Contingencies of the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2007.
NOTE 5: Long-Term Debt
     As disclosed in Note 6: Long-Term Debt of the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2007, on September 17, 2007, the Company entered into an amendment to its December 30, 2003 bank credit facility (“Credit Facility”). The amendment addressed several provisions, including an increase in the consolidated total leverage ratio and the ratio of consolidated senior debt to consolidated operating cash flow for the remaining life of the Credit Facility (effective June 30, 2007) and a lowered ratio of consolidated operating cash flow to consolidated fixed charges for the quarters ending September 30 and December 31, 2007. The Company also voluntarily reduced the commitments under the bank revolver to $235.0 million from the previous $350.0 million effective October 1, 2007. As a result of the amendment, interest margins increased by 50 basis points for all loan tranches under the Credit Facility effective with the date of the amendment. Certain other definitional and minor structural changes were also made to the Credit Facility. An amendment fee of 0.25% was paid to all consenting lenders upon closing of the amendment. In connection with the amendment, the Company wrote off a small amount of debt issuance costs that were capitalized in conjunction with the original Credit Facility.
     The nature of the Company’s other long-term debt and related maturities has not materially changed since June 30, 2007.
NOTE 6: Employee Benefit Plans
Components of Net Periodic Benefit Cost (Pension and Other Benefits)
                                    
    Pension Plans   Other Benefits
    Three Months Ended September 30,   Three Months Ended September 30,
    2007   2006   2007   2006
    (Dollars in thousands)   (Dollars in thousands)
Service cost
  $ 574     $ 515     $ 75     $ 135  
Interest cost
    4,322       3,290       153       173  
Expected return on plan assets
    (5,205 )     (3,625 )            
Amortization of deferral
    70       70       (3 )     (3 )
Amortization of net actuarial loss
    312       480       18       32  
 
                               
Net periodic benefit cost
  $ 73     $ 730     $ 243     $ 337  
 
                               
     The Company has made contributions of approximately $1.9 million through September 30, 2007.
NOTE 7: Treasury Stock
     In July 2007, the Company repurchased 21,500 shares of Class A Common Stock from the estate of a beneficial owner of the stock held under the Scudder Family Voting Trust for $3.0 million. The $3.0 million repurchase price was based on the Company’s estimate of fair market value of the shares purchased and was funded with borrowings under the Company’s Credit Facility. The estate repurchased 1,506 shares of the Class A Common Stock held in treasury on October 26, 2007 for approximately $0.2 million.

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NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(UNAUDITED)
NOTE 8: Recently-Issued Accounting Standards
     In February 2007, the Financial Accounting Standards Board issued Statement of Financial Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS No. 159”). SFAS No. 159 allows entities to voluntarily choose, at specified election dates, to measure many financial assets and financial liabilities at fair value (the “fair value option”). The election is made on an instrument-by-instrument basis and is irrevocable. If the fair value option is elected for an instrument, SFAS No. 159 requires all subsequent changes in fair value for that instrument be reported in earnings. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007, or for the Company, beginning July 1, 2008. The Company is in the process of evaluating what impact, if any, SFAS No. 159 is expected to have on the Company’s financial position and results of operations.
     In September 2006, the FASB issued Statement of Financial Standards No. 157, Fair Value Measurements, (“SFAS No. 157”). SFAS No. 157 provides enhanced guidance for using fair value to measure assets and liabilities and applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. Under the standard, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years, or for the Company beginning July 1, 2008. The Company is in the process of evaluating what impact, if any, SFAS No. 157 is expected to have on the Company’s financial position and results of operations.
     In July 2006, the FASB issued Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109, effective for fiscal years beginning after December 15, 2006. FIN 48 created a single model to address uncertainty in tax positions, prescribed the minimum recognition threshold, and provided guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 also expanded disclosure requirements, which included a tabular rollforward of the beginning and ending aggregate unrecognized tax benefits, as well as specific detail related to tax uncertainties for which it is reasonably possible the amount of unrecognized tax benefit will significantly increase or decrease within twelve months. The adoption of FIN 48 on July 1, 2007 did not have any impact on the Company’s consolidated financial statements and the Company does not have any unrecognized tax benefits for financial reporting purposes.
     The Company adopted Statement of Financial Standards No. 158, Employer’s Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132 (R) (“SFAS No. 158”) effective June 30, 2007.  Because the Denver JOA operates on a calendar year-end basis, it is not required to adopt the requirements of SFAS No. 158 until December 31, 2007, at which time the Company will reflect its share of the change in accumulated other comprehensive income related to the Denver JOA’s adoption of the pronouncement.
NOTE 9: Subsequent Events
Hearst Stock Purchase Agreement
     On August 2, 2006, the Company and The Hearst Corporation (“Hearst”) entered into a Stock Purchase Agreement (the “MediaNews/Hearst Agreement”) pursuant to which (i) Hearst agreed to make an equity investment in the Company (such investment does not include any governance or economic rights or interest in the Company’s publications in the San Francisco Bay area) and (ii) the Company agreed to purchase from Hearst The Monterey County Herald and the St. Paul Pioneer Press with a portion of the Hearst equity investment in the Company. The Company subsequently also agreed to purchase from Hearst the Torrance Daily Breeze with a portion of the proceeds of such equity investment.
     The Hearst transaction discussed above was consummated on October 19, 2007 and the Company issued to Hearst 100 shares of its Class C Common Stock. Such shares afford Hearst an equity interest of 31% in the Company’s publications outside the San Francisco Bay area. The purchase price for such shares was approximately $317.3 million, of which approximately $290.3 million was applied to pay the purchase price of The Monterey County Herald, the St. Paul Pioneer Press and the Torrance Daily Breeze and related publications and Web sites, and approximately $27.0 million was paid to the Company in cash at closing.

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NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(UNAUDITED)
     In connection with the consummation of the Hearst equity investment, the Company and members of the Singleton and Scudder families restated their Shareholders’ Agreement to add Hearst as a party and to afford Hearst certain protective rights in respect of its equity investment in the Company’s business outside the San Francisco Bay area.
     The Company will record the consummation of the Hearst equity investment in the Company’s second quarter. Of the total $311.1 million purchase price obligation reflected in the financial statements at September 30, 2007, $290.6 million related to the acquisition cost of the St. Paul Pioneer Press, The Monterey County Herald and Torrance Daily Breeze will be reclassified into shareholders’ equity as Class C Common Stock along with Hearst’s $27.0 million cash investment. The remaining $20.5 million related to the accretion of Hearst’s cost of funds will be eliminated as an obligation of the Company with a corresponding increase in retained earnings, where the accretion was charged prior to the Hearst equity investment. As a result of the Hearst equity investment, the Company will no longer report net income applicable to common stock after this quarter.
Monterey Newspapers Partnership
     On October 19, 2007, the Company and S.F. Holding Corp. (“Stephens”) formed the Monterey Newspapers Partnership to which the Company contributed The Monterey County Herald and Stephens paid the Company approximately $27.4 million for a 32.64% interest in the new partnership. The operations of The Monterey County Herald will continue to be consolidated with the operations of the Company with a minority interest reflected to account for the 32.64% of the new partnership owned by Stephens. Stephens has a separate right to require the Monterey Newspapers Partnership to redeem its interest in the partnership at fair market value. Upon notification of the exercise of this right and obtaining a valuation of the partnership interest, the Monterey Newspapers Partnership has two years to complete the purchase. The Company is not currently aware of any intentions on the part of Stephens to exercise its put.
Dividend Declared
     On October 19, 2007, the Company declared a dividend of $10.98 per share on its Class A Common Stock, amounting to approximately $25.0 million in the aggregate. The payment date for such dividend was October 26, 2007. Such dividend was funded with the proceeds from the cash portion of the purchase price paid by Hearst for its equity investment in the Company.
Management Agreement (Connecticut)
     On November 1, 2007, the Company entered into an agreement with Hearst to expand the management agreement with regard to The News-Times (Danbury, Connecticut) and the Connecticut Post to now include The Advocate and Greenwich Time in Stamford and Greenwich, Connecticut, respectively, which were both purchased by Hearst on November 1, 2007 for $62.4 million, including an adjustment to the extent working capital is greater or less than $1.8 million. Under the amended agreement, the Company controls the management of the Connecticut Post (owned by the Company) and The News-Times, The Advocate and Greenwich Time (owned by Hearst) and is entitled to retain 60% of the profits and losses of all newspapers on a combined basis; however, the Company and Hearst retain ownership of the assets and liabilities of their respective papers. Profits and losses refer to net income, adjusted so that each partner retains 100% of any related gain or loss taken related to the disposition of its contributed assets. As a result of the revision to the management agreement, the Company began consolidating the results of The Advocate and Greenwich Time, and recording minority interest for Hearst’s 40% interest in the combined results beginning November 1, 2007. Prior to the revision to the management agreement, the Company consolidated the results of The News-Times and recorded minority interest for Hearst’s 27% interest in the combined profits and losses of the Connecticut Post and The News-Times. The Company is in the process of evaluating the accounting for this business combination.
St. Paul Defined Benefit Plan
     In October 2007, the Company negotiated a new contract with a union in St. Paul which will result in the union’s defined benefit pension plan being frozen effective December 31, 2007. The Company is in the process of evaluating the impact, but expects to realize a curtailment gain which will be accounted for as an adjustment to the acquisition purchase price.
Investment in Kaango, LLC
     On November 14, 2007, the Company and The Hearst Corporation jointly purchased 80% of Kaango, LLC (“Kaango”), a provider of online classified advertising software, for approximately $20.0 million. Kaango will be held by a newly formed limited liability company, which is 50% owned by each of Hearst and the Company. The remaining 20% of Kaango is owned by its founders and is subject to a call option and is expected to be purchased in the future.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Operating Results
     We have provided below certain summary historical financial data for the three months ended September 30, 2007 and 2006, including the percentage change between periods.
                         
    Three Months Ended September 30,    
    2007   2006   2007 vs. 2006
    (Dollars in thousands)        
INCOME STATEMENT DATA:
                       
Total Revenues
  $ 334,713     $ 295,302       13.3 %
 
                       
Income (Loss) from Unconsolidated JOAs
    1,210       (2,345 )     (c )
 
                       
Cost of Sales
    102,045       95,024       7.4  
Selling, General and Administrative
    180,768       152,189       18.8  
Depreciation and Amortization
    17,858       16,391       9.0  
Interest Expense
    20,685       19,249       7.5  
Other (Income) Expense, Net
    1,353       (5,513 )     (c )
 
                       
Total Costs and Expenses
    322,709       277,340       16.4  
 
                       
Equity Investment Income, Net
    (1,451 )     717       (c )
 
                       
Gain (Loss) on Sale of Assets
    (37 )     16,330       (c )
 
                       
Minority Interest
    (13,465 )     (13,351 )     0.9  
 
                       
Net Income (Loss)
    (1,010 )     13,318       (c )
 
                       
Net Income (Loss) Applicable to Common Stock
    (5,583 )     10,708       (c )
 
                       
CASH FLOW DATA:
                       
Cash Flows from:
                       
Operating Activities
  $ (1,769 )   $ 53,185          
Investing Activities
    5,365       (366,178 )        
Financing Activities
    3,164       320,114          
 
                       
NON-GAAP FINANCIAL DATA(a):
                       
Adjusted EBITDA
  $ 51,900     $ 48,089       7.9 %
Minority Interest in Adjusted EBITDA
    (18,563 )     (18,193 )     2.0  
Combined Adjusted EBITDA of Unconsolidated JOAs
    8,318       6,743       23.4  
EBITDA of Prairie Mountain Publishing Company (b)
    594       612       (2.9 )
 
                       
Adjusted EBITDA Available to Company
  $ 42,249     $ 37,251       13.4 %
 
                       
 
(a)   Non-GAAP Financial Data. Adjusted EBITDA and Adjusted EBITDA Available to Company are not measures of performance recognized under GAAP. However, we believe that they are indicators and measurements of our leverage capacity and debt service ability. Adjusted EBITDA and Adjusted EBITDA Available to Company should not be considered as an alternative to measure profitability, liquidity, or performance, nor should they be considered an alternative to net income, cash flows generated by operating, investing or financing activities, or other financial statement data presented in our condensed consolidated financial statements. Adjusted EBITDA is calculated by deducting cost of sales and SG&A expense from total revenues. Adjusted EBITDA Available to Company is calculated by: (i) reducing Adjusted EBITDA by the minority interest in the Adjusted EBITDA generated from the California Newspapers Partnership and the Texas-New Mexico Newspapers Partnership, our less than 100% owned consolidated subsidiaries as well as the Connecticut newspapers (beginning March 30, 2007) (“Minority Interest in Adjusted EBITDA”); (ii) increasing Adjusted EBITDA by our combined proportionate share of the Adjusted EBITDA generated by our unconsolidated JOAs in Denver and Salt Lake City (“Combined Adjusted EBITDA of Unconsolidated JOAs”); and (iii) increasing Adjusted EBITDA by our proportionate share of EBITDA of the Prairie Mountain Publishing Company (see footnote (b)). See “Reconciliation of GAAP and Non-GAAP Financial Information — Reconciliation of Cash Flows from Operating Activities (GAAP measure) to Adjusted EBITDA (Non-GAAP measure)” for a reconciliation of Non-GAAP financial information.
 
(b)   EBITDA of Prairie Mountain Publishing Company. The Prairie Mountain Publishing Company agreement requires the partnership to make distributions equal to the earnings of the partnership before depreciation and amortization (EBITDA). Our 50% share of the EBITDA of Prairie Mountain Publishing Company has been included in Adjusted EBITDA Available to Company as it is an integral part of our cash flows from operations as defined by our debt covenants.
 
(c)   Not meaningful.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Summary Supplemental Non-GAAP Financial Data
     Joint operating agencies, or JOAs, represent an operating structure that is unique to the newspaper industry. Prior to EITF 00-1, which eliminated the use of pro-rata consolidation except in the extractive and construction industries, we reported the results of our JOA interests on a pro-rata consolidated basis. Under this method, we consolidated, on a line-item basis, our proportionate share of the JOAs’ operations. Although pro-rata consolidation is no longer considered an acceptable method for our financial reporting under GAAP, we believe it provides a meaningful presentation of the results of our operations and the amount of operating cash flow available to meet debt service and capital expenditure requirements. Our JOA agreements in Denver and Salt Lake City do not restrict cash distributions to the owners and in general the Denver and Salt Lake City JOAs make monthly distributions. We use pro-rata consolidation to internally evaluate our performance and present it here because our bank credit agreement and the indentures governing our senior subordinated notes define cash flows from operations for covenant purposes using pro-rata consolidation. We also believe financial analysts and investors use pro-rata consolidation and the resulting Adjusted EBITDA, combined with capital spending requirements, and leverage analysis to evaluate our performance. This information should be used in conjunction with GAAP performance measures in order to evaluate our overall prospects and performance. Net income determined using pro-rata consolidation is identical to net income determined under GAAP.
     In the table below, we have presented the results of operations of our JOAs in Denver and Salt Lake City using pro-rata consolidation for all periods presented (the operations of the Detroit and Charleston JOA have not been included on a pro-rata consolidated basis). See Notes 1 and 3 to the condensed consolidated financial statements for additional discussion and analysis of the GAAP accounting for our JOAs.
THE INFORMATION IN THE FOLLOWING TABLE IS NOT PRESENTED IN ACCORDANCE WITH GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES AND DOES NOT COMPLY WITH ARTICLE 11 OF REGULATION S-X FOR PRO
FORMA FINANCIAL DATA
                                        
    Summary Selected Non-GAAP    
    Financial Data    
    Three Months Ended September 30,   2007 vs.
    2007   2006   2006
    (Dollars in thousands)        
PRO-RATA CONSOLIDATED INCOME STATEMENT DATA:
                       
Total Revenues
  $ 401,634     $ 368,930       8.9 %
 
                       
Cost of Sales
    126,298       125,280       0.8  
Selling, General and Administrative
    215,118       188,818       13.9  
Depreciation and Amortization
    24,229       24,237       0.0  
Interest Expense
    21,372       19,854       7.6  
Other (Income) Expense, Net
    1,403       (5,068 )     (c )
 
                       
Total Costs and Expenses
    388,420       353,121       10.0  
 
                       
Minority Interest
    (13,465 )     (13,351 )     0.9  
 
                       
Gain (Loss) on Sale of Assets
    (35 )     16,138       (c )
 
                       
Net Income
    (1,010 )     13,318       (c )
 
                       
Net Income (Loss) Applicable to Common Stock
    (5,583 )     10,708       (c )
 
                       
CASH FLOW DATA (GAAP BASIS):
                       
Cash Flows from:
                       
Operating Activities
  $ (1,769 )   $ 53,185          
Investing Activities
    5,365       (366,178 )        
Financing Activities
    3,164       320,114          
 
                       
PRO-RATA OTHER DATA(a):
                       
Adjusted EBITDA
  $ 60,218     $ 54,832       9.8 %
Minority Interest in Adjusted EBITDA
    (18,563 )     (18,193 )     2.0  
EBITDA of Prairie Mountain Publishing Company (b)
    594       612       (2.9 )
 
                       
Adjusted EBITDA Available to Company
  $ 42,249     $ 37,251       13.4 %
 
                       
 
     See “Reconciliation of GAAP and Non-GAAP Financial Information — Reconciliation of Income Statement Data presented on a historical GAAP basis to Non-GAAP Income Statement Data presented on a pro-rata consolidation basis” and “Reconciliation of Cash Flows from Operating Activities (GAAP measure) to Adjusted EBITDA presented on a pro-rata consolidation basis (Non-GAAP measure)” for a reconciliation of Non-GAAP financial information.
(a)   See footnote (a) under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Operating Results” for discussion of Adjusted EBITDA, EBITDA of Prairie Mountain Publishing Company and Adjusted EBITDA Available to Company. The Minority Interest in Adjusted EBITDA shown above is calculated in the same manner as described in footnote (a) under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Operating Results.”
 
(b)   See footnote (b) under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Operating Results” for discussion of EBITDA of Prairie Mountain Publishing Company.
 
(c)   Not meaningful.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Critical Accounting Policies
     The preparation of financial statements in accordance with generally accepted accounting principles at times requires the use of estimates and assumptions. We make our estimates based on historical experience, actuarial studies and other assumptions, as appropriate, to assess the carrying values of assets and liabilities and disclosure of contingent matters. We re-evaluate our estimates on an ongoing basis. Actual results could differ from these estimates. Critical accounting policies for us include revenue recognition; accounts receivable allowances; recoverability of our long-lived assets, including goodwill and other intangible assets, which are based on such factors as estimated future cash flows and current fair value estimates; pension and retiree medical benefits, which require the use of various estimates concerning the work force, interest rates, plan investment return, and involve the use of advice from consulting actuaries; and reserves for the self-insured portion of our workers’ compensation programs, which are based on such factors as claims growth and also involve advice from consulting actuaries. Our accounting for federal and state income taxes is sensitive to interpretation of various laws and regulations and the valuation of deferred tax assets. The notes to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended June 30, 2007 contain a more complete discussion of our significant accounting policies.
     Advertising revenue is earned and recognized when advertisements are published, inserted, aired or displayed and are net of provisions for estimated rebates, rate adjustments and discounts. Circulation revenue includes home delivery subscription revenue, single copy and third party sales. Single copy revenue is earned and recognized based on the date the publication is delivered to the single copy outlet, net of provisions for returns. Home delivery subscription revenue is earned and recognized when the newspaper is sold and delivered to the customer or sold to a home delivery independent contractor. Amounts received in advance of an advertising run date or newspaper delivery are deferred and recorded on the balance sheet as a current liability (“Unearned Income”) and recognized as revenue when earned.
     The operating results of our unconsolidated JOAs (Denver and Salt Lake City) are reported as a single net amount in the accompanying financial statements in the line item “Income (Loss) from Unconsolidated JOAs.” This line item includes:
    Our proportionate share of net income from JOAs,
 
    The amortization of subscriber lists created by the original purchase as the subscriber lists are attributable to our earnings in the JOAs, and
 
    Editorial costs, miscellaneous revenue received outside of the JOA, and other charges incurred by our consolidated subsidiaries directly attributable to providing editorial content and news for our newspapers party to a JOA.
Seasonality
     Newspaper companies tend to follow a distinct and recurring seasonal pattern, with higher advertising revenues in months containing significant events or holidays. Accordingly, the fourth calendar quarter, or our second fiscal quarter, is our strongest revenue quarter of the year. Due to generally poor weather and lack of holidays, the first calendar quarter, or our third fiscal quarter, is our weakest revenue quarter of the year.
Comparison of the Three Months Ended September 30, 2007 and 2006
     Our results for the three months ended September 30, 2007 and 2006 were impacted by the following transactions completed during fiscal years 2008 and 2007:
Fiscal Year 2008
    On September 17, 2007, we amended our Credit Facility which, among other things, increased interest rate margins by 50 basis points for all loan tranches under the Credit Facility effective with the date of the amendment.
Fiscal Year 2007
    On August 2, 2006, we acquired the San Jose Mercury News and Contra Costa Times and began managing The Monterey County Herald and Pioneer Press (St. Paul) for The Hearst Corporation (“Hearst”). Under the agreement with Hearst, we have all the economic risks and rewards associated with ownership of The Monterey County Herald

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
      and Pioneer Press (St. Paul) and retain all of the cash flows generated by them as a management fee. As a result, we began consolidating the financial statements of The Monterey County Herald and Pioneer Press (St. Paul), along with the San Jose Mercury News and Contra Costa Times, beginning August 2, 2006.
 
    On August 2, 2006, we amended our Credit Facility to authorize a new $350.0 million term loan “C” facility which was used, along with borrowings under the revolver portion of our bank credit facility, to finance our share of the California Newspapers Partnership’s purchase of the San Jose Mercury News and Contra Costa Times.
 
    On September 29, 2006, the California Newspapers Partnership sold the Original Apartment Magazine.
 
    On December 15, 2006, we began managing for Hearst the Daily Breeze and three weekly newspapers, published in Torrance, California. The accounting treatment of the Daily Breeze is the same as the Pioneer Press (St. Paul) and The Monterey County Herald for the reasons previously described. As a result, we began consolidating the financial statements of the Torrance publications beginning December 15, 2006.
 
    On February 2, 2007, the California Newspapers Partnership acquired the Santa Cruz Sentinel.
 
    On March 30, 2007, we entered into an agreement with Hearst to manage The News-Times (Danbury, Connecticut). Under the agreement, we manage and control both the Connecticut Post (owned by us) and The News-Times (owned by Hearst) and are entitled to 73% of the combined profits and losses generated by the two newspapers. As a result, we began consolidating the operating results of The News-Times and recording minority interest for Hearst’s 27% interest in the combined operations beginning March 30, 2007. In conjunction with entering into the management agreement, we recognized a $27.0 million pre-tax nonmonetary gain on the “sale” of 27% of our interest in the Connecticut Post.
 
    In September 2006 and June 2007, we sold office buildings in Long Beach and Woodland Hills, California, respectively. We recognized a $16.7 million pre-tax gain related to the Long Beach office building sale and a $20.7 pre-tax gain on the Woodland Hills office building sale.
Revenues
     On a same newspaper basis (after adjusting for the aforementioned transactions), the following changes occurred in our significant revenue categories for the three-month period ended September 30, 2007 as compared to the same period in the prior year.
     Advertising Revenues. The aforementioned fiscal year 2007 transactions had the net impact of increasing advertising revenues by $42.3 million for the three months ended September 30, 2007. Excluding the aforementioned transactions, advertising revenues decreased 9.3% for the three months ended September 30, 2007 as compared to the prior year. The decrease in advertising revenues was due principally to decreases in volumes from retail, national and classified advertisers, offset in part by increases in revenues from our preprint advertising category. Revenues from our Internet operations remained relatively flat. Within the classified advertising category, we had decreases across all categories including real estate, automotive and employment.
     Circulation Revenues. The aforementioned fiscal year 2007 transactions had the net impact of increasing circulation revenues by $12.6 million for the three months ended September 30, 2007 as compared to the same period in the prior year. Excluding the aforementioned transactions, circulation revenues decreased 2.9% for the three months ended September 30, 2007 as compared to the prior year. The decrease was primarily due to home delivery pricing pressures at most of our newspapers, which resulted in our offering greater discounts to acquire new and retain existing subscribers in order to help achieve our home delivery volume goals. To offset some of these discounts, we have increased home delivery prices at most of our newspapers. We continue to honor existing subscription rates through expiration, so the impact of these price increases will continue to grow throughout the year. Total circulation volumes have decreased; however, 26 of our newspapers increased daily circulation in the most recent Audit Bureau of Circulation report for September 30, 2007.
Income from Unconsolidated JOAs
     As noted in our discussion of critical accounting policies, income from unconsolidated JOAs (Denver and Salt Lake City) includes our proportionate share of net income from those JOAs, the amortization of subscriber lists created by the

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
original purchase, editorial costs, miscellaneous revenue and other charges directly attributable to providing editorial content and news for newspapers party to a JOA. The following discussion takes into consideration all of the associated revenues and expenses just described. The results for the three months ended September 30, 2007 as compared to the same period in the prior year were positively impacted by a reduction in the accelerated depreciation taken on certain fixed assets at production facilities in Denver that were or will be retired earlier than originally expected due to the construction of a new production facility. The acceleration of depreciation has decreased as the associated assets are becoming fully depreciated. Excluding depreciation and amortization, which were significantly impacted by the effect of accelerated depreciation in the prior year, our income from the Denver JOA was up approximately $2.0 million as compared to the prior year. While the results of the Denver JOA were negatively impacted by a soft advertising market, the impact was offset by lower newsprint prices, reduced newsprint consumption and decreased employee costs. The results of the Salt Lake City JOA were relatively flat year over year with cost-cutting initiatives keeping pace with a softening advertising market in Salt Lake City.
Cost of Sales
     The aforementioned fiscal year 2007 transactions had the net impact of increasing cost of sales by $17.6 million for the three months ended September 30, 2007 as compared to the same period in prior year. Excluding the aforementioned transactions, cost of sales decreased 13.6%. We had decreases in editorial expenses, primarily personnel, and production expenses, mostly due to the consolidation of certain production facilities, as well as significant decreases in newsprint expense. There was an 8% decrease in newsprint prices as compared to the same period in prior year, our average price of newsprint consumed was $558 per metric ton for the three months ended September 30, 2007 as compared to $606 per metric ton for the prior year. In addition, our newsprint consumption decreased in volume by approximately 23% for the three months ended September 30, 2007.
Selling, General and Administrative
     The aforementioned fiscal year 2007 transactions had the net impact of increasing SG&A by $35.1 million for the three months ended September 30, 2007 as compared to the prior year. Excluding the aforementioned transactions, SG&A decreased 7.2%. The year over year decrease in SG&A was the result of a combination of cost-cutting initiatives that began in fiscal year 2007 and continue into fiscal year 2008. The first quarter of fiscal 2007 also had several charges that caused SG&A to be above the actual run rate. These charges included the $1.3 million severance payable to the Company’s former chief operating officer and $1.9 million of bonuses awarded to certain officers and employees in connection with the August 2, 2006 acquisitions and related transactions.
Interest Expense
     The increase in interest expense was the result of an increase in the average debt outstanding, as well as an increase in the weighted average cost of debt. Significant borrowings impacting the year over year comparison related to the borrowings on February 2, 2007 for our share of CNP’s purchase of the Santa Cruz Sentinel and the borrowings on August 2, 2006 for our share of the purchase of the San Jose Mercury News and Contra Costa Times. For the three months ended September 30, 2007, our average debt outstanding increased $53.8 million, or 4.8%, to $1,166.2 million and our weighted average interest rate increased 8 basis points as compared to the prior year due to increases in LIBOR over the prior year (the average daily one month rate of LIBOR increased 9 basis points, for the three months ended September 30, 2007 as compared to the same period in prior year). The interest rates under our bank credit facility are based on LIBOR, plus a borrowing margin based on our leverage ratio. In conjunction with the September 17, 2007 amendment of our Credit Facility, interest rate margins increased by 50 basis points for all loan tranches effective with the date of the amendment.
Other (Income) Expense, Net
     We include expenses and income items that are not related to current operations in other (income) expense, net.
     The charges incurred for the three months ended September 30, 2007 relate to litigation expense of $0.9 million associated with the acquisition of Kearns-Tribune, LLC (Salt Lake City) and the lawsuit against the former publisher of the Pioneer Press (St. Paul), $0.2 million related to hedging and investing activities that did not qualify for hedge accounting under SFAS No. 133, $0.2 million related to the write-off of debt issuance costs associated with our amended bank credit facility and $0.1 million associated with various other items that were not related to ongoing operations.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Cash Flow Activity
     Our sources of liquidity are existing cash and other working capital, cash flows provided from operating activities, distributions from JOAs and partnerships and the borrowing capacity under our bank credit facility. Our operations, consistent with the newspaper industry, require little investment in inventory, as less than 30 days of newsprint is generally maintained on hand. From time to time, we increase our newsprint inventories in anticipation of price increases. In general, our receivables have been collected on a timely basis.
     The net cash flows related to operating activities decreased $55.0 million for the three-month period ended September 30, 2007 compared to the comparable prior year period. The majority of the decrease was attributable to changes in operating assets and liabilities associated with the timing of payments of accounts payable and accrued liabilities and the timing of cash receipts. The difference was a net cash outflow of $19.8 million during the first quarter of fiscal 2007 compared to net cash inflow of $32.1 million in the same period last year.
     The net cash flows related to investing activities increased by $371.5 million for the three-month period ended September 30, 2007 as compared to the comparable prior year period, primarily due to the prior year August 2, 2006 purchase of the San Jose Mercury News and Contra Costa Times, which was offset in part by prior year cash inflows of $33.8 million associated with the sale of Original Apartment Magazine and our building in Long Beach, California. Capital expenditures for the three-month period ended September 30, 2007 were down $3.1 million year over year.
     The net cash flows related to financing activities decreased by $317.0 million for the three-month period ended September 30, 2007 compared to the comparable prior year period. In the prior year period, borrowings of approximately $406.3 million were used to fund our share of the August 2, 2006 transactions. Activity for the three-month period ended September 30, 2006 also included normal borrowings and paydowns on long-term debt. Activity for the three-month period ended September 30, 2007 generally included normal borrowings and paydowns on long-term debt and the repurchase of $3.0 million of common stock. Excluding the refinancing costs of the new credit facility, as well as the repurchase of common stock, we borrowed approximately $10.9 million of debt in the current quarter.
Liquidity
     On September 17, 2007, we amended our December 30, 2003 credit agreement (the “Credit Facility”). The amendment changed several provisions, including an increase to the consolidated total leverage ratio and the ratio of consolidated senior debt to consolidated operating cash flow covenants for the remaining life of the Credit Facility (effective June 30, 2007); a decrease to the ratio of consolidated operating cash flow to consolidated fixed charges for the quarters ending September 30 and December 31, 2007; and a voluntary reduction to the commitments under the revolver to $235.0 million from the previous $350.0 million effective October 1, 2007. As a result of the amendment, interest rate margins increased by 50 basis points for all loan tranches under the Credit Facility, effective with the date of the amendment. Certain other definitional and minor structural changes were also made to the Credit Facility. An amendment fee of 0.25% was paid to all consenting lenders upon closing of the amendment. The amendment maintained the revolving credit facility (reduced to $235.0 million effective October 1, 2007), the $100.0 million term loan “A,” the $147.3 million term loan “B” and the $350.0 million term loan “C.” Any payments on the term loans cannot be reborrowed, regardless of whether such payments are scheduled or voluntary. On September 30, 2007, the balances outstanding under the revolving credit portion of the Credit Facility, term loan “A,” term loan “B” and term loan “C” were $78.5 million, $100.0 million, $143.9 million and $345.6 million, respectively. Giving effect to the October 1, 2007 reduction to the revolver, the amount available under the revolving portion of the Credit Facility, net of letters of credit, would have been $139.4 million at September 30, 2007. The total amount we can borrow at any point in time under the revolving credit portion of the bank credit facility may be reduced by limits imposed by the financial covenants of our various debt agreements.
     S.F. Holding Corporation (“Stephens”), a 26.28% partner in the California Newspapers Partnership (“CNP”), has a right to require CNP to redeem its interest in CNP at its fair market value (plus interest through closing). If such right is exercised, Stephens’ interest must be redeemed within two years of the determination of its fair market value. We are not currently aware of any intentions on the part of Stephens to exercise its put. No amounts are recorded in our financial statements related to potential liability associated with Stephens’ put right.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
     On October 19, 2007, MediaNews and Stephens formed the Monterey Newspapers Partnership to which we contributed The Monterey County Herald and Stephens paid us approximately $27.4 million in exchange for a 32.64% interest in the new partnership. Similar to the CNP agreement, Stephens has a right to require the Monterey Newspapers Partnership to redeem its interest in the partnership at its fair market value (plus interest through closing). If such right is exercised, Stephens’ interest must be redeemed within two years of the determination of its fair market value. We are not currently aware of any intentions on the part of Stephens to exercise its put.
     In September 2005, the management committee of the Denver JOA authorized the incurrence of up to $150.0 million of debt by the Denver JOA to finance furniture, fixtures and computers for its new office building and new presses and related equipment and building costs related to consolidation of two existing production facilities into one for the Denver JOA. We own a 50% interest in the Denver JOA. As of September 30, 2007, our share of the debt incurred by the Denver JOA under the $150.0 million credit facility was approximately $59.8 million. This debt is not reflected in our consolidated financial statements. The Denver JOA debt is non-recourse to MediaNews and is secured by the assets of the Denver JOA.
     As of September 30, 2007, the Company was in compliance with all of its financial covenants under the Company’s bank credit facility (as amended) and subordinated note agreements. In order to remain in compliance with these covenants in the future, the Company needs to increase or maintain its existing “Consolidated Operating Cash Flow” as defined in its credit agreements and/or reduce its total debt outstanding.
     Our ability to service our debt and fund planned capital expenditures depends on our ability to continue to generate operating cash flows in the future. Based on current levels, we believe our cash flow from operations, available cash and available borrowings under our bank credit facility will be adequate to meet our future liquidity needs for at least the next twelve months.
     We estimate minimum contributions to our defined benefit pension plans in fiscal year 2008 will be approximately $9.0 million to $10.0 million. We have made contributions of approximately $1.9 million through September 30, 2007.
Off-Balance Sheet Arrangements and Contractual Obligations
     Our various contractual obligations and funding commitments related to our long-term debt have not materially changed since our Annual Report on Form 10-K for the year ended June 30, 2007.
Near Term Outlook
Newsprint Prices
     North American newsprint supply and demand imbalances have continued in the second half of calendar year 2007, putting downward pressure on prices. As a result, the cost of newsprint declined in the September 2007 quarter. We expect the average price in the December 2007 quarter to be significantly less than the same quarter of the prior year. The October 2007 RISI (“Resource Information Systems, Inc.”) price index for 30-pound newsprint was $558 per metric ton compared to $660 per metric ton in October 2006. As a large buyer of newsprint, our cost of newsprint continues to be well below the RISI price index.

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QUANTITATIVE AND QUALITATIVE
DISCLOSURE OF MARKET RISK
Debt
     We are exposed to market risk arising from changes in interest rates associated with our bank debt, which includes the bank term loans and the revolving credit portion of our bank credit facility. Our bank debt bears interest at rates based upon, at our option, Eurodollar or prime rates, plus a spread based on our leverage ratio. The nature and position of our bank debt has not materially changed from the disclosure made in our Annual Report on Form 10-K for the year ended June 30, 2007 as the disclosure included the September 17, 2007 changes to the interest rate margins.
Newsprint
     See Near Term Outlook for further discussion regarding newsprint prices.

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RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL INFORMATION
Reconciliation of GAAP and Non-GAAP Financial Information
     The following tables have been provided to reconcile the Non-GAAP financial information (Adjusted EBITDA and Pro-Rata Consolidation Income Statement Data) presented under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Operating Results” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary Supplemental Non-GAAP Financial Data” of this report on Form 10-Q to their most directly comparable GAAP measures (Cash Flows from Operating Activities and GAAP Income Statement Data).
Reconciliation of Cash Flows from Operating Activities (GAAP measure) to Adjusted EBITDA (Non-GAAP measure).
                 
    Three Months Ended September 30,
    2007   2006
    (Dollars in thousands)
NON-GAAP FINANCIAL DATA(a)
               
Cash Flows from Operating Activities (GAAP measure)
  $ (1,769 )   $ 53,185  
 
Net Change in Operating Assets and Liabilities
    19,755       (32,059 )
Distributions of Net Income Paid to Minority Interest
    12,931       13,351  
Distributions of Net Income from Unconsolidated JOAs
    (9,435 )     (9,456 )
Distributions of Net Income from Equity Investments
    (6 )     (625 )
Interest Expense
    20,685       19,249  
Bad Debt Expense
    (3,302 )     (2,765 )
Pension Expense, Net of Cash Contributions
    2,322       997  
Direct Costs of the Unconsolidated JOAs, Incurred Outside of the Unconsolidated JOAs(b)
    11,013       12,131  
Net Cash Related to Other (Income), Expense
    (294 )     (5,919 )
 
               
Adjusted EBITDA
    51,900       48,089  
Minority Interest in Adjusted EBITDA
    (18,563 )     (18,193 )
Combined Adjusted EBITDA of Unconsolidated JOAs
    8,318       6,743  
EBITDA of Prairie Mountain Publishing Company(c)
    594       612  
 
               
Adjusted EBITDA Available to Company
  $ 42,249     $ 37,251  
 
               
 
    Footnotes for table above.
 
(a)   Non-GAAP Financial Data. Adjusted EBITDA and Adjusted EBITDA Available to Company are not measures of performance recognized under GAAP. However, we believe that they are indicators and measurements of our leverage capacity and debt service ability. Adjusted EBITDA and Adjusted EBITDA Available to Company should not be considered as an alternative to measure profitability, liquidity, or performance, nor should they be considered an alternative to net income, cash flows generated by operating, investing or financing activities, or other financial statement data presented in our condensed consolidated financial statements. Adjusted EBITDA is calculated by deducting cost of sales and SG&A expense from total revenues. Adjusted EBITDA Available to Company is calculated by: (i) reducing Adjusted EBITDA by the minority interest in the Adjusted EBITDA generated from the California Newspapers Partnership and the Texas-New Mexico Newspapers Partnership, our less than 100% owned consolidated subsidiaries as well as the Connecticut newspapers (beginning March 30, 2007) (“Minority Interest in Adjusted EBITDA”); (ii) increasing Adjusted EBITDA by our combined proportionate share of the Adjusted EBITDA generated by our unconsolidated JOAs in Denver and Salt Lake City (“Combined Adjusted EBITDA of Unconsolidated JOAs”); and (iii) increasing Adjusted EBITDA by our proportionate share of EBITDA of the Prairie Mountain Publishing Company (see footnote (c)).
 
(b)   Direct Costs of the Unconsolidated JOAs Incurred Outside of the Unconsolidated JOA. Includes the editorial costs, revenues received outside of the JOAs, depreciation, amortization, and other direct costs incurred outside of the JOAs by our consolidated subsidiaries associated with The Salt Lake Tribune and The Denver Post. See Note 1: Significant Accounting Policies and Other Matters — Joint Operating Agencies and Note 3: Denver and Salt Lake City Joint Operating Agencies in the notes to our condensed consolidated financial statements for further description and analysis of this adjustment.
 
(c)   EBITDA of Prairie Mountain Publishing Company. The Prairie Mountain Publishing Company agreement requires the partnership to make distributions equal to the earnings of the partnership before depreciation and amortization (EBITDA). Our 50% share of the EBITDA of the Prairie Mountain Publishing Company has been included in Adjusted EBITDA Available to Company, as it is an integral part of our cash flows from operations as defined by our debt covenants.

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RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL INFORMATION
Reconciliation of Income Statement Data presented on a historical GAAP basis to Non-GAAP Income Statement Data presented on a pro-rata consolidation basis. Dollar amounts shown are in thousands.
                         
    Three Months Ended September 30, 2007
            Unconsolidated    
    As Presented   JOAs Pro-Rata   As Presented on a
    Under GAAP   Adjustment(1)   Pro-Rata Basis
Total Revenues
  $ 334,713     $ 66,921     $ 401,634  
 
                       
Income from Unconsolidated JOAs
    1,210       (1,210 )      
 
                       
Cost of Sales
    102,045       24,253       126,298  
Selling, General and Administrative
    180,768       34,350       215,118  
Depreciation and Amortization
    17,858       6,371       24,229  
Interest Expense
    20,685       687       21,372  
Other (Income) Expense, Net
    1,353       50     1,403  
 
                       
Total Costs and Expenses
    322,709       65,711       388,420  
 
                       
Net Loss
    (1,010 )           (1,010 )
 
                       
Adjusted EBITDA(2)
  $ 51,900     $ 8,318     $ 60,218  
                         
    Three Months Ended September 30, 2006
            Unconsolidated    
    As Presented   JOAs Pro-Rata   As Presented on a
    Under GAAP   Adjustment(1)   Pro-Rata Basis
Total Revenues
  $ 295,302     $ 73,628     $ 368,930  
 
                       
Loss from Unconsolidated JOAs
    (2,345 )     2,345        
 
                       
Cost of Sales
    95,024       30,256       125,280  
Selling, General and Administrative
    152,189       36,629       188,818  
Depreciation and Amortization
    16,391       7,846       24,237  
Interest Expense
    19,249       605       19,854  
Other (Income) Expense, Net
    (5,513 )     445       (5,068 )
 
                       
Total Costs and Expenses
    277,340       75,781       353,121  
 
                       
Gain (Loss) on Sale of Assets
    16,330       (192 )     16,138  
 
                       
Net Income
    13,318             13,318  
 
                       
Adjusted EBITDA(2)
  $ 48,089     $ 6,743     $ 54,832  
 
    Footnotes for tables above.
 
(1)   Unconsolidated JOAs Pro-Rata Adjustment. The adjustment to pro-rata consolidate our unconsolidated JOAs includes our proportionate share, on a line item basis, of the income statements of our unconsolidated JOAs (Denver and Salt Lake City). Our interest in the earnings of the Salt Lake City JOA is 58%, while our interest in the Denver Newspaper Agency is 50%. This adjustment also includes the editorial costs, revenues received outside of these JOAs, depreciation, amortization, and other direct costs incurred outside of the JOAs by our consolidated subsidiaries associated with The Salt Lake Tribune and The Denver Post. See Note 1: Significant Accounting Policies and Other Matters — Joint Operating Agencies and Note 3: Denver and Salt Lake City Joint Operating Agencies in the notes to our condensed consolidated financial statements for further description and analysis of the components of this adjustment.
 
(2)   Adjusted EBITDA. Adjusted EBITDA is a non-GAAP measure.

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RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL INFORMATION
Reconciliation of Cash Flows from Operating Activities (GAAP measure) to Adjusted EBITDA presented on a pro-rata consolidation basis (Non-GAAP measure).
                 
    Three Months Ended September 30,
    2007   2006
    (Dollars in thousands)
NON-GAAP FINANCIAL DATA(a)
               
Cash Flows from Operating Activities (GAAP measure)
  $ (1,769 )   $ 53,185  
 
Net Change in Operating Assets and Liabilities
    19,755       (32,059 )
Distributions of Net Income Paid to Minority Interest
    12,931       13,351  
Distributions of Net Income from Unconsolidated JOAs
    (9,435 )     (9,456 )
Distributions of Net Income from Equity Investments
    (6 )     (625 )
Interest Expense
    20,685       19,249  
Bad Debt Expense
    (3,302 )     (2,765 )
Pension Expense, Net of Cash Contributions
    2,322       997  
Net Cash Related to Other (Income), Expense
    (294 )     (5,919 )
Combined Adjusted EBITDA of Unconsolidated JOAs(b)
    8,318       6,743  
Direct Costs of the Unconsolidated JOAs, Incurred Outside of the Unconsolidated JOAs(c)
    11,013       12,131  
 
               
Adjusted EBITDA
    60,218       54,832  
Minority Interest in Adjusted EBITDA
    (18,563 )     (18,193 )
EBITDA of Prairie Mountain Publishing Company (d)
    594       612  
 
               
Adjusted EBITDA Available to Company
  $ 42,249     $ 37,251  
 
               
 
    Footnotes for table above.
 
(a)   Non-GAAP Financial Data. Adjusted EBITDA and Adjusted EBITDA Available to Company are not measures of performance recognized under GAAP. However, we believe that they are indicators and measurements of our leverage capacity and debt service ability. Adjusted EBITDA and Adjusted EBITDA Available to Company should not be considered as an alternative to measure profitability, liquidity, or performance, nor should they be considered an alternative to net income, cash flows generated by operating, investing or financing activities, or other financial statement data presented in our condensed consolidated financial statements. Adjusted EBITDA is calculated by deducting cost of sales and SG&A expense from total revenues. Adjusted EBITDA Available to Company is calculated by: (i) reducing Adjusted EBITDA by the minority interest in the Adjusted EBITDA generated from the California Newspapers Partnership and the Texas-New Mexico Newspapers Partnership, our less than 100% owned consolidated subsidiaries as well as the Connecticut newspapers (beginning March 31, 2007) (“Minority Interest in Adjusted EBITDA”); (ii) increasing Adjusted EBITDA by our proportionate share of the EBITDA of the Prairie Mountain Publishing Company (see footnote (d)). Note that pro-rata consolidation already takes into account our proportionate share of the results from our unconsolidated JOAs (Denver and Salt Lake City).
 
(b)   Combined Adjusted EBITDA of Unconsolidated JOAs. Calculated by deducting cost of sales and SG&A expense from total revenues from the Unconsolidated JOAs Pro-Rata Adjustment column presented under “— Reconciliation of Income Statement Data presented on a historical GAAP basis to Non-GAAP Income Statement Data presented on a pro-rata consolidation basis.”
 
(c)   Direct Costs of the Unconsolidated JOAs Incurred Outside of the Unconsolidated JOA. Includes the editorial costs, revenues received outside of the JOA, depreciation, amortization, and other direct costs incurred outside of the JOAs by our consolidated subsidiaries associated with The Salt Lake Tribune and The Denver Post. See Note 1: Significant Accounting Policies and Other Matters — Joint Operating Agencies and Note 3: Denver and Salt Lake City Joint Operating Agencies in the notes to our condensed consolidated financial statements for further description and analysis of this adjustment.
 
(d)   EBITDA of Prairie Mountain Publishing Company. The Prairie Mountain Publishing Company agreement requires the partnership to make distributions equal to the earnings of the partnership before depreciation and amortization (EBITDA). Our 50% share of Prairie Mountain Publishing Company has been included in Adjusted EBITDA Available to Company, as it is an integral part of our cash flows from operations as defined by our debt covenants.

27



Table of Contents


EXHIBIT INDEX
     
Exhibits    
 
   
3.1
  Fourth Amended and Restated Certificate of Incorporation
 
   
3.2
  Amended and Restated Bylaws of MediaNews Group, Inc. (incorporated by reference to Exhibit 3.2 to the registrant’s June 30, 2005 Form 10-K)
 
   
4.1
  Registration Rights Agreement dated May 20, 1994, between Affiliated Newspapers Investments, Inc. (the predecessor to the registrant) and BT Securities Corporation (incorporated by reference to Exhibit 4.3 to Form S-1/A of Affiliated Newspapers Investments, Inc., filed May 6, 1994 (File No. 33-75158))
 
   
4.2
  Indenture dated as of November 25, 2003 between MediaNews Group, Inc., as Issuer, and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.4 to the registrant’s Form 8-K filed January 14, 2004)
 
   
4.3
  Form of MediaNews Group, Inc.’s 6 7/8% Senior Subordinated Notes due 2013 (contained in the Indenture filed as Exhibit 4.4 to the registrant’s Form 8-K filed January 14, 2004)
 
   
4.4
  Indenture dated as of January 26, 2004 between MediaNews Group, Inc., as Issuer, and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.4 to the registrant’s Form 10-Q for the period ended December 31, 2003)
 
   
4.5
  Form of MediaNews Group, Inc.’s 6 3/8% Senior Subordinated Notes due 2014 (contained in the Indenture filed as Exhibit 4.4 to the registrant’s Form 10-Q for the period ended December 31, 2003)
 
   
10.1
  Seventh Amendment to Credit Agreement dated as of September 17, 2007, by and among MediaNews Group, Inc., the guarantors party thereto, the lenders named therein and Bank of America, N.A., as administrative agent.
 
   
10.2
  Shareholders’ Agreement effective as of October 19, 2007, between the Company, holders of approximately 93.1% of its Class A Common Stock and The Hearst Corporation
 
   
31.1
  Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
   
31.2
  Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
   
31.3
  Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
   
32.1
  Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
   
32.2
  Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

28


Dates Referenced Herein   and   Documents Incorporated By Reference

This 10-Q Filing   Date   Other Filings
5/6/94
5/20/94
11/25/03
12/30/03
12/31/0310-Q
1/14/048-K
1/26/04
6/30/0510-K, 10-K/A
8/2/068-K, 8-K/A
9/29/06
9/30/0610-Q
12/15/068-K
12/31/0610-Q
1/1/07
2/2/07
3/30/07
3/31/0710-Q
6/30/0710-K, 10-K/A
7/1/07
9/17/078-K
For The Period Ended9/30/07
10/1/07
10/19/078-K
10/26/07
11/1/07
Filed On / Filed As Of11/14/07
11/15/07
12/31/0710-Q
6/30/08
7/1/08
 
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