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

OR

(     ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

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.

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act).

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.

 

     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.

     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.

     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.

     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.

     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.

     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.

     See Exhibit Index for list of exhibits filed with this report.

     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.

     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.

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.

     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 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.

     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.

     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.

     The Company’s comprehensive income (loss) consisted of the following:

     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.

     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.

     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.

Components of Net Periodic Benefit Cost (Pension and Other Benefits)

     The Company has made contributions of approximately $1.9 million through September 30, 2007.

     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.

     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.

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.

     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.

     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