Medianews 10-Q 2006 Q2 Quarterly report

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 December 31, 2005
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)

1560 Broadway, Suite 2100
Denver, Colorado	80202
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (303) 563-6360

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 Common Stock outstanding as of February 14, 2006 was 2,298,346.

*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, 2005 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
DECEMBER 31, 2005

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

2

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 4: CONTROLS AND PROCEDURES

     As of December 31, 2005, 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 CEO, President, and CFO, 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.

3

PART II — OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

     The information required by this item is filed as part of this report on Form 10-Q as Note 4 of the Notes to Condensed Consolidated Financial Statements. See Index to Financial Information on page 6 of this report on Form 10-Q.

ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     As of October 1, 2005, 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.

ITEM 6: EXHIBITS

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

4

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 thePrivate 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, the following factors: (a) increased consolidation among major retailers, bankruptcy or other events that may adversely affect business operations of major customers and depress the level of local and national advertising, (b) an economic downturn in some or all of our principal newspaper markets that may lead to decreased circulation or decreased local or national advertising, (c) a decline in general newspaper readership patterns as a result of competitive alternative media or other factors, (d) increases in newsprint costs over the level anticipated, (e) labor disputes which may cause revenue declines or increased labor costs, (f) acquisitions of new businesses or dispositions of existing businesses, (g) costs or difficulties related to the integration of businesses acquired by us may be greater than expected, (h) increases in interest or financing costs, (i) rapid technological changes and frequent new product introductions prevalent in electronic publishing, including the ongoing evolution of the Internet and (j) 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:February 14, 2006	By:	/s/Ronald A. Mayo
		Ronald A. Mayo
		Vice President, Chief Financial Officer and Duly Authorized Officer of Registrant

5

MEDIANEWS GROUP, INC.
Index to Financial Information

	Page
Item 1: Financial Statements
Condensed Consolidated Balance Sheets		7
Condensed Consolidated Statements of Operations		9
Condensed Consolidated Statements of Cash Flows		10
Notes to Condensed Consolidated Financial Statements		11
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations		20
Item 3: Quantitative and Qualitative Disclosure of Market Risk		27

6

MEDIANEWS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	(Unaudited)
	December 31, 2005			June 30, 2005
	(Dollars in thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	671		$	4,262
Accounts receivable, less allowance for doubtful accounts of $8,453 at December 31, 2005 and $6,901 at June 30, 2005		110,771			87,711
Inventories of newsprint and supplies		29,190			24,248
Prepaid expenses and other assets		13,108			17,436
TOTAL CURRENT ASSETS		153,740			133,657
PROPERTY, PLANT AND EQUIPMENT
Land		41,410			37,403
Buildings and improvements		127,863			105,352
Machinery and equipment		390,469			356,510
Construction in progress		52,479			43,602
TOTAL PROPERTY, PLANT AND EQUIPMENT		612,221			542,867
Less accumulated depreciation and amortization		(229,948	)		(210,561	)
NET PROPERTY, PLANT AND EQUIPMENT		382,273			332,306
OTHER ASSETS
Investment in unconsolidated JOAs		244,621			262,764
Equity investments		16,819			91,421
Subscriber accounts, less accumulated amortization of $156,794 at December 31, 2005 and $149,397 at June 30, 2005		42,166			49,543
Excess of cost over fair value of net assets acquired		483,572			392,748
Newspaper mastheads		76,662			76,662
Covenants not to compete and other identifiable intangible assets, less accumulated amortization of $32,277 at December 31, 2005 and $31,771 at June 30, 2005		4,649			5,175
Other		46,820			21,496
TOTAL OTHER ASSETS		915,309			899,809
TOTAL ASSETS	$	1,451,322		$	1,365,772

See notes to condensed consolidated financial statements

7

MEDIANEWS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	(Unaudited)
	December 31, 2005			June 30, 2005
	(Dollars in thousands, except share data)
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Trade accounts payable	$	21,157		$	15,045
Accrued liabilities		57,429			60,332
Unearned income		29,532			26,577
Current portion of long-term debt and obligations under capital leases		4,012			4,088
TOTAL CURRENT LIABILITIES		112,130			106,042
LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES		879,395			873,481
OTHER LIABILITIES		50,059			47,359
DEFERRED INCOME TAXES, NET		99,723			98,208
MINORITY INTEREST		218,027			153,633
PUTABLE COMMON STOCK		48,454			48,556
SHAREHOLDERS’ EQUITY
Common stock, par value $0.001; 3,150,000 shares authorized:
2,314,346 shares issued and 2,298,346 shares outstanding		2			2
Accumulated other comprehensive loss, net of taxes		(34,605	)		(33,813	)
Retained earnings		80,137			74,304
Common stock in treasury, at cost, 16,000 shares		(2,000	)		(2,000	)
TOTAL SHAREHOLDERS’ EQUITY		43,534			38,493
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,451,322		$	1,365,772

See notes to condensed consolidated financial statements

8

MEDIANEWS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

	Three Months Ended December 31,						Six Months Ended December 31,
	2005			2004			2005			2004
	(Dollars in thousands, except share data)
REVENUES
Advertising	$	163,817		$	159,189		$	317,773		$	308,213
Circulation		31,365			32,629			62,631			65,643
Other		11,043			9,798			22,393			19,413
TOTAL REVENUES		206,225			201,616			402,797			393,269
INCOME (LOSS) FROM UNCONSOLIDATED JOAS		(4,551	)		9,590			(8,270	)		14,806
COST AND EXPENSES
Cost of sales		63,841			60,964			126,057			121,725
Selling, general and administrative		100,327			93,965			198,981			189,884
Depreciation and amortization		10,393			10,108			20,665			20,217
Interest expense		13,708			12,103			27,238			24,319
Other (income) expense, net		(20	)		(36	)		1,632			5,399
TOTAL COSTS AND EXPENSES		188,249			177,104			374,573			361,544
EQUITY INVESTMENT INCOME, NET		2,565			3,113			4,424			5,237
MINORITY INTEREST		(7,807	)		(9,878	)		(14,576	)		(16,478	)
INCOME BEFORE INCOME TAXES		8,183			27,337			9,802			35,290
INCOME TAX EXPENSE		(3,434	)		(11,097	)		(4,071	)		(14,444	)
NET INCOME	$	4,749		$	16,240		$	5,731		$	20,846

See notes to condensed consolidated financial statements

9

MEDIANEWS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

	Six Months Ended December 31,
	2005			2004
	(Dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	5,731		$	20,846
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		30,001			22,309
Provision for losses on accounts receivable		4,328			4,368
Amortization of debt discount and deferred debt issuance costs		479			541
Net gain on sale of assets		(361	)		(109	)
Loss on early extinguishment of debt		—			9,236
Proportionate share of net income from unconsolidated JOAs		(24,101	)		(39,175	)
Distribution of earnings from unconsolidated JOAs		36,965			47,590
Equity investment income, net		(4,424	)		(5,237	)
Distribution of earnings from equity investments		5,640			5,511
Change in defined benefit plan assets, net of cash contributions		393			498
Deferred income tax expense		609			9,950
Change in estimated option repurchase price		250			(5,556	)
Minority interest		14,576			16,478
Distributions paid to minority interest		(9,623	)		(12,342	)
Unrealized loss on hedging activities, reclassified to earnings from accumulated other comprehensive loss		228			228
Change in operating assets and liabilities		(14,107	)		(29,029	)
NET CASH FLOWS FROM OPERATING ACTIVITIES		46,584			46,107
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in Detroit and other investments		(27,674	)		—
Business acquisitions		—			(2,879	)
Capital expenditures		(28,285	)		(21,430	)
Proceeds from the sale of assets		573			322
NET CASH FLOWS FROM INVESTING ACTIVITIES		(55,386	)		(23,987	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt		31,100			406,650
Reduction of long-term debt and other liabilities		(25,889	)		(483,450	)
Repurchase premiums and related costs associated with long-term debt		—			(8,624	)
NET CASH FLOWS FROM FINANCING ACTIVITIES		5,211			(85,424	)
DECREASE IN CASH AND CASH EQUIVALENTS		(3,591	)		(63,304	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		4,262			64,736
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	671		$	1,432

See notes to condensed consolidated financial statements

10

MEDIANEWS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL 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, 2005. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended December 31, 2005 are not necessarily indicative of the results that may be expected for future interim periods or for the year ending June 30, 2006.

Joint Operating Agencies

     A joint operating agency (“JOA”) performs the production, sales, distribution and administrative functions for two newspapers in the same market under the terms of a joint operating agreement. Editorial control and news at each of the individual newspapers, which are party to a joint operating agreement, continue to be separate and outside of a JOA. The Company, through its subsidiaries, York Newspapers, Inc., Kearns-Tribune, LLC, and The Denver Post Corporation, participates in JOAs in York, Pennsylvania, Salt Lake City, Utah, and Denver, Colorado, respectively. The editorial and related expenses ofThe Denver PostandThe Salt Lake Tribuneare incurred by the Company outside of the related JOA. 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. See Note 3: Joint Operating Agencies of the Company’s consolidated financial statements included in its June 30, 2005 Annual Report on Form 10-K for a description of the Company’s accounting for the Denver and Salt Lake City JOAs. See Note 7: Acquisitions and Other Transactions in this Form 10-Q for additional discussion on the accounting for our investment in the Detroit JOA.

     The Company’s unconsolidated JOAs (Denver and Salt Lake City) are reported as a single net amount in the accompanying consolidated statements of operations 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 subsidiaries directly attributable to the JOAs in providing editorial content and news for the Company’s newspapers party to a JOA.

     Investments in the unconsolidated JOAs are reported in the consolidated balance sheets under the line item “Investment in Unconsolidated JOAs” for the Denver and Salt Lake City JOAs (see Note 3: Denver and Salt Lake City Joint Operating Agencies for further discussion).

Guarantees

     Through its wholly-owned subsidiary, Kearns-Tribune, LLC, the Company owns a 6.0% interest in Ponderay Newsprint Company (“Ponderay”) and was a guarantor, on a several basis, on 6.0% of Ponderay’s credit facility. Ponderay’s credit facility was refinanced in December 2005. Under the terms of Ponderay’s amended facility, the Company is no longer a guarantor of Ponderay’s credit facility.

11

MEDIANEWS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

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 rates for the three-month and year to date periods presented in an interim report on Form 10-Q may vary significantly. 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.

Reclassification

     For comparability, certain prior year balances have been reclassified to conform to current reporting classifications.

NOTE 2: Comprehensive Income

     The Company’s comprehensive income consisted of the following:

	Three Months Ended December 31,					Six Months Ended December 31,
	2005		2004			2005			2004
	(Dollars in thousands)
Net income	$	4,749	$	16,240		$	5,731		$	20,846
Unrealized gain on hedging activities, net of tax		140		—			440			—
Unrealized loss on newsprint hedging activities, reclassified to earnings, net of tax		114		114			228			228
Minimum pension liability adjustment, net of tax		618		(2,273	)		(1,460	)		(2,273	)
Comprehensive income	$	5,621	$	14,081		$	4,939		$	18,801

12

MEDIANEWS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 3: Denver and Salt Lake City Joint Operating Agencies

     The following tables present the summarized results of the Denver and Salt Lake City JOAs on a combined basis. The financial information presented under the captions Salt Lake City JOA and Denver JOA is presented at 100%, with the other partners’ share of income from the related JOAs subsequently eliminated. The editorial costs, miscellaneous revenue received outside of the JOA, depreciation, amortization, and other direct costs incurred outside of the JOAs by our consolidated subsidiaries associated withThe Salt Lake TribuneandThe Denver Post,are combined in the column “Associated Revenues and Expenses.” The 20% minority interest associated withThe Denver Post through June 10, 2005 (the Company purchased the 20% minority interest on June 10, 2005) has not been reflected in the tables below.

	Three Months Ended December 31, 2005
							Associated			Total Loss from
	Salt Lake						Revenues and			Unconsolidated
	City JOA			Denver JOA			Expenses			JOAs
	(Dollars in thousands)
Income Statement Data:
Total revenues	$	38,417		$	111,631		$	113
Cost of sales		8,957			33,771			8,678
Selling, general and administrative		13,069			51,561			2,903
Depreciation and amortization		—			19,248			4,609
Other		1,589			713			248
Total costs and expenses		23,615			105,293			16,438
Net income		14,802			6,338			(16,325	)
Partners’ share of income from unconsolidated JOAs		(6,197	)		(3,169	)		—
Income (loss) from unconsolidated JOAs	$	8,605		$	3,169		$	(16,325	)	$	(4,551	)

	Six Months Ended December 31, 2005
							Associated			Total Loss from
	Salt Lake						Revenues and			Unconsolidated
	City JOA			Denver JOA			Expenses			JOAs
	(Dollars in thousands)
Income Statement Data:
Total revenues	$	75,790		$	218,646		$	242
Cost of sales		17,360			67,769			17,050
Selling, general and administrative		26,643			103,094			6,078
Depreciation and amortization		—			33,953			9,336
Other		1,576			760			149
Total costs and expenses		45,579			205,576			32,613
Net income		30,211			13,070			(32,371	)
Partners’ share of income from unconsolidated JOAs		(12,645	)		(6,535	)		—
Income (loss) from unconsolidated JOAs	$	17,566		$	6,535		$	(32,371	)	$	(8,270	)

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MEDIANEWS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

	Three Months Ended December 31, 2004
										Total Income
							Associated			from
	Salt Lake						Revenues and			Unconsolidated
	City JOA			Denver JOA			Expenses			JOAs
	(Dollars in thousands)
Income Statement Data:
Total revenues	$	38,096		$	113,383		$	122
Cost of sales		7,748			34,838			8,967
Selling, general and administrative		13,755			49,119			2,534
Depreciation and amortization		—			4,584			1,043
Other		127			70			(8	)
Total costs and expenses		21,630			88,611			12,536
Net income		16,466			24,772			(12,414	)
Partners’ share of income from unconsolidated JOAs		(6,848	)		(12,386	)		—
Income from unconsolidated JOAs	$	9,618		$	12,386		$	(12,414	)	$	9,590

	Six Months Ended December 31, 2004
										Total Income
							Associated			from
	Salt Lake						Revenues and			Unconsolidated
	City JOA			Denver JOA			Expenses			JOAs
	(Dollars in thousands)
Income Statement Data:
Total revenues	$	73,972		$	219,929		$	247
Cost of sales		15,982			69,332			17,408
Selling, general and administrative		26,347			99,207			5,059
Depreciation and amortization		—			9,328			2,092
Other		166			416			57
Total costs and expenses		42,495			178,283			24,616
Net income		31,477			41,646			(24,369	)
Partners’ share of income from unconsolidated JOAs		(13,125	)		(20,823	)		—
Income from unconsolidated JOAs	$	18,352		$	20,823		$	(24,369	)	$	14,806

     Depreciation and amortization expense increased for the three and six month periods ended December 31, 2005, as compared to the same periods in the prior year due to accelerated depreciation on certain fixed assets at the production facilities in Denver and Salt Lake City which will be retired earlier than originally expected due to the construction of new production facilities at the respective locations. The depreciation and amortization expense for the Salt Lake City fixed assets appears in the associated revenues and expenses column as the Salt Lake City JOA does not own any of the fixed assets used in its operations. Instead, each partner in the JOA owns the fixed assets used in the operations of the Salt Lake City JOA as tenants in common. See Note 3: Joint Operating Agencies of the Company’s consolidated financial statements included in its June 30, 2005 Annual Report on Form 10-K for further discussion.

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MEDIANEWS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 4: Contingent Matters

     MediaNews and Salt Lake Tribune Publishing Company (“SLTPC”) continue to be involved in litigation over SLTPC’s option (“the Option Agreement”) to acquire the assets used, held for use or usable in connection with the operation and publication ofThe Salt Lake Tribune(the “Tribune Assets”). For additional discussion on the litigation, please refer to 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, 2005. New developments in the litigation since the filing of our Annual Report on Form 10-K are included in the discussion below.

     One issue in dispute is the option exercise price. The terms of the Option Agreement specify an appraisal process for determination of the fair market value of the Tribune Assets. In this appraisal process, each party engaged an appraisal firm to value the Tribune Assets at their fair market value. Kearns Tribune’s appraisal valued the Tribune Assets at $380.0 million, whereas SLTPC’s appraisal valued the Tribune Assets at $218.0 million. Because Kearns Tribune’s and SLTPC’s appraisals were more than 10% apart, the appraisers appointed by Kearns Tribune and SLTPC were required to jointly select a third appraiser. Under the terms of the Option Agreement, the final option purchase price is based on the average of the third appraisal valuation with the closer of the first two appraisals. On June 11, 2003, the third appraiser issued its final report valuing the Tribune Assets at $331.0 million. Accordingly, the option exercise price was set at $355.5 million for the Tribune Assets. After the third appraiser’s final report was issued, SLTPC filed a lawsuit in the District Court on June 24, 2003 (the “appraisal lawsuit”), challenging the valuation performed by the third appraiser and seeking to set aside the third appraisal and the $355.5 million exercise price. SLTPC’s amended complaint in the appraisal lawsuit against MediaNews, Kearns Tribune and the third appraiser, Management Planning Inc. (“MPI”), seeks relief that includes (a) the setting aside of the third appraisal; (b) the setting aside of all three appraisals, so that an entirely new appraisal process must be conducted; or (c) alternatively, if the exercise price of $355.5 million is held to be final and binding, (i) monetary damages from the third appraiser for alleged breaches of contractual and fiduciary duties, and (ii) what SLTPC refers to as an “abatement” of the purchase price pursuant to allegations that the value of the Tribune Assets has decreased since SLTPC sought to exercise the option.

     MediaNews, Kearns Tribune and MPI filed separate motions to dismiss SLTPC’s amended complaint in the appraisal lawsuit. On October 24, 2005, the District Court granted those motions and dismissed the appraisal lawsuit, ruling that SLTPC’s allegations in its amended complaint did not set forth grounds for the invalidation of the third appraisal. SLTPC subsequently filed a motion for reconsideration or, in the alternative, for leave to file an amended complaint, which the District Court denied on December 7, 2005. SLTPC has now filed with the United States Court of Appeals for the Tenth Circuit (“the Tenth Circuit”) an appeal of the District Court’s dismissal of the appraisal lawsuit and the denial of SLTPC’s motion for leave to file an amended complaint. Briefing on that appeal is ongoing.

     If the $355.5 million option exercise price is upheld, there remains a dispute as to whether SLTPC has now waived its rights under the Option Agreement to acquire the Tribune Assets at that price. The District Court had set a date of October 10, 2003 (the “Closing Date”) for the closing to occur. On October 9, 2003, counsel for SLTPC sent a letter to counsel for MediaNews notifying the Company that SLTPC would not pay the $355.5 million option exercise price, and raised additional objections to the proposed closing documentation; accordingly, no closing occurred on October 10, 2003. The Company contends that this was SLTPC’s sole opportunity to close at the $355.5 million price, while SLTPC contends that in light of its objections, it would be entitled to another opportunity to close at that price. It is expected that any dispute over SLTPC’s opportunity for a second closing will be litigated in the main action between the parties (see discussion in the paragraph below).

     During the time in which the appraisal and exercise price issues were on appeal before the Tenth Circuit, SLTPC’s main action was stayed. In the main action, SLTPC’s pending claims against the Company and Kearns Tribune include claims for damages for breach of contract and breach of contractual duties (in the event some or all of the Tribune Assets are not transferred to SLTPC) and for interference with contract (arising out of the amendment of the JOA in 2001). The Company and Kearns Tribune have pending counterclaims against SLTPC, which include claims for damages for breaches of contract and interference with contract. Additionally, the Company and Kearns Tribune have pending counterclaims for declaratory judgment, but no damage claims against Deseret News Publishing Company (“Deseret Publishing”). Deseret Publishing has pending claims against SLTPC for damages, and claims that do not seek damages against the Company and Kearns Tribune as to the meaning and enforceability of the Option Agreement and related Management and Joint Operating Agreements. Additionally, given the District Court’s dismissal on October 24, 2005 of SLTPC’s appraisal lawsuit, it is anticipated,

15

MEDIANEWS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

depending upon the outcome of SLTPC’s appeal to the Tenth Circuit, that the main action may also encompass litigation by the parties concerning whether the Option Agreement expired when SLTPC did not exercise it on October 10, 2003 (as the Company and Kearns Tribune contend even though the appraisal process and the $355.5 million exercise price were upheld), or whether SLTPC still has the opportunity to exercise the Option Agreement (as SLTPC contends). No schedule has yet been set for the litigation of these issues.

     The Company is not in a position at this time to predict the likely outcome of this litigation. However, the Company does not believe that the litigation will have a materially adverse impact on its financial condition, results of operations, or liquidity. Approximately $0.3 million and $0.5 million, was recorded in other (income) expense, net for the three and six months ended December 31, 2005, related to the cost of defending these lawsuits. The cost of defending these lawsuits may continue to be substantial.

Other

     There have been no other material changes in the other contingent matters discussed in Note 11: Commitments and Contingencies of the Company’s Annual Report on Form 10-K for the year ended June 30, 2005.

NOTE 5: Long-Term Debt

     On September 8, 2005, the Company amended its December 30, 2003 bank credit facility (the “amended facility”). The amended facility maintains the $350.0 million revolving credit facility, the $100.0 million term loan “A” and provides for a $147.3 million term loan “B,” which was used to pay off the term loan “C” facility. The term loan “B” bears interest based upon, at the Company’s option, Eurodollar or base rates, plus a borrowing margin of 1.25% or 0.25%, respectively. Term loan “B” requires quarterly principal payments as follows: $0.4 million through December 2009; $35.2 million from March through September 2010, with the remaining balance due at maturity on December 30, 2010. Amounts repaid under the term loan “A” and “B” facilities will not be available for re-borrowing. Borrowings under the revolving facility may be repaid and re-borrowed, subject to usual and customary conditions for facilities of this nature. The revolving credit facility reduces to $250.0 million on December 30, 2008 and matures on December 30, 2009. The Company may increase the amount of the amended facility by up to $200.0 million, subject to obtaining commitments of lenders to loan such additional amounts and to usual and customary conditions. All other borrowing conditions of the bank credit facility entered into on December 30, 2003, as described in Note 6: Long-Term Debt of the Company’s June 30, 2005 Annual Report on Form 10-K, continue to apply and have not been amended. At December 31, 2005, the balances outstanding under the revolving credit portion of the bank credit facility, term loan “A” and term loan “B” were $160.6 million, $100.0 million and $146.5 million, respectively.

     The nature of the Company’s other long-term debt and related maturities has not materially changed since June 30, 2005.

     In January 1998, the Company entered into an option agreement in association with the acquisition financing related to one of its newspapers. The option entitles the holder to purchase the assets used in the publication of one of the Company’s newspaper properties, which the option holder can currently exercise or put to the Company based on a predetermined formula. At December 31 and June 30, 2005, the option repurchase price was valued at approximately $6.4 million and $6.1 million, respectively, and is recorded as a component of other long-term liabilities. The purchase price of the option can increase or decrease each quarter based on the performance of the publication because a significant component of the option repurchase formula is the twenty-four month trailing cash flows of the publication. If the option is put to the Company, the Company expects to fund the payment with available borrowings from its bank credit facility. As a result, in accordance with SFAS No. 6,Classification of Short-Term Obligations Expected to be Refinanced, the option repurchase price remains classified in the Company’s balance sheet as long-term. The option expires in January 2010 at which time, if the option remains outstanding, the Company would be required to repurchase it.

16

MEDIANEWS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 6: Employee Benefit Plans

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

	Pension Plans
	Three Months Ended December 31,						Six Months Ended December 31,
	2005			2004			2005			2004
	(Dollars in thousands)
Service cost	$	281		$	279		$	562		$	558
Interest cost		1,420			1,487			2,840			2,974
Expected return on plan assets		(1,617	)		(1,591	)		(3,234	)		(3,182	)
Amortization of deferral		104			115			208			230
Amortization of net loss		748			510			1,496			1,020
Curtailment loss		—			443			—			443
Net periodic benefit cost	$	936		$	1,243		$	1,872		$	2,043

	Other Benefits
	Three Months Ended December 31,					Six Months Ended December 31,
	2005			2004		2005			2004
	(Dollars in thousands)
Service cost	$	157		$	87	$	278		$	174
Interest cost		87			81		147			162
Amortization of deferral		(3	)		—		(6	)		—
Amortization of net loss		11			16		15			32
Curtailment loss		—			28		—			28
Other one-time adjustment		190			—		190			—
Net periodic benefit cost	$	442		$	212	$	624		$	396

Employer Contributions

     The Company expects to contribute approximately $2.0 million to $2.5 million to its pension plans in fiscal year 2006. Contributions of approximately $1.5 million have been made through December 31, 2005.

NOTE 7: Acquisitions and Other Transactions

Texas-New Mexico Newspapers Partnership

     Prior to December 26, 2005, the Company owned a 33.8% interest in the Texas-New Mexico Newspapers Partnership (the “Partnership”), which operated six daily newspapers in Texas and New Mexico. Gannett Texas L.P., a wholly-owned subsidiary of Gannett Co., Inc. (“Gannett”), owned the remaining 66.2% of the Partnership. The Company used the equity method of accounting to account for its investment in the Partnership through December 25, 2005.

     Effective December 26, 2005, MediaNews contributed to the Partnership the assets of four daily newspapers published in southern Pennsylvania and Gannett contributed assets of thePublic Opinion, published in Chambersburg, PA. Assets contributed by MediaNews includedThe Evening Sun (Hanover),theLebanon Daily News, and MediaNews’ interest in the entity that owns and publishes theYork Daily RecordandYork Sunday News, which will continue to be published under the terms of a joint operating agreement along withThe York Dispatch.

     In conjunction with the partners’ contributions of newspaper assets, the partnership agreement was amended and restated to provide, among other things, that MediaNews will have the right to appoint a majority of the members of the Partnership’s Management Committee and control the day-to-day operations of the Partnership.

17

MEDIANEWS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

As a result of the asset contributions described, MediaNews now owns approximately 59.4% of the Partnership, and Gannett owns the remaining 40.6%. Also effective December 26, 2005, the Partnership became a consolidated subsidiary of MediaNews. The transaction was accounted for as a non-monetary transaction at fair value based on an independent valuation. The Company’s contribution to the Texas-New Mexico Newspapers Partnership was treated as three separate, but simultaneous transactions: (1) a sale, whereby for accounting purposes, the Company sold to Gannett a 40.6% interest in its Pennsylvania newspapers, resulting in an immaterial non-monetary gain (pursuant to Statement of Financial Accounting Standards No. 153,Exchanges of Non-Monetary Assets),(2) the acquisition of an additional 25.6% interest in the Texas-New Mexico Newspapers Partnership and (3) the acquisition of a 59.4% interest in the Chambersburg, PA newspaper. The restructuring of the Texas-New Mexico Newspapers Partnership did not have a significant impact on the Company’s current operating results. The accounting for the business combination is preliminary and resulted in the following being recorded: approximately $50.6 million attributable to the incremental tangible net assets (primarily fixed assets) and approximately $24.4 million attributable to the incremental goodwill associated with the transaction. In addition, the Company’s equity investment balance of approximately $75.9 million was eliminated and allocated to tangible assets, goodwill and minority interest. As a result, minority interest of approximately $58.9 million has been recorded to reflect Gannett’s interest in the Partnership. The Company anticipates finalizing its purchase price allocation in the third quarter of its fiscal year 2006.

The Detroit News

     On August 3, 2005, the Company purchased the stock of The Detroit News, Inc., which included the editorial assets ofThe Detroit News, a daily newspaper published in Detroit, Michigan and a limited partnership interest in the Detroit Newspaper Partnership, L.P. (“Detroit JOA”), for approximately $25.0 million. The Company is responsible for the news and editorial content ofThe Detroit Newspursuant to a JOA agreement. In accordance with the Detroit JOA agreement, the Company receives a fixed preferred distribution each month with possible incremental distributions beginning in 2009 based on profit growth. However, to the extent that the Detroit JOA has insufficient profits to make such fixed preferred distributions, any shortfall will be carried forward. The fixed preferred distributions are as follows: $0.2 million per month during 2005; $5.0 million for calendar years 2006 and 2007; $4.0 million for 2008 and 2009; $3.0 million for 2010 and 2011; $2.0 million for 2012; and $1.9 million for all remaining years until specified amounts are paid. Under the terms of the Detroit JOA, the Company is also reimbursed for its news and editorial costs associated with publishingThe Detroit News.

     Because of the structure of the partnership and our ownership interest, our accounting for the investment in the Detroit JOA only includes the preferred distributions we receive from the Detroit JOA, which is different from our accounting for the Denver and Salt Lake City JOAs, which is discussed in Note 3. The Company’s investment in The Detroit News, Inc. is included in other long-term assets.

NOTE 8: Equity Investments (Non-JOA)

     The following table represents the summary financial data, on a combined basis, for the Company’s non-JOA equity investments (the entities represented in the table below are included at 100%). For a listing of the Company’s equity investments, see Note 2: Significant Accounting Policies and Other Matters — Investments in the Company’s consolidated financial statements included in its June 30, 2005 Annual Report on Form 10-K.

	Three Months Ended December 31,				Six Months Ended December 31,
	2005		2004		2005		2004
	(Dollars in thousands)
Total revenues	$	73,864	$	70,512	$	139,737	$	121,441
Net income	$	9,427	$	10,551	$	17,058	$	17,763

     See Note 7: Acquisitions and Other Transactions for discussion of our accounting for the Texas-New Mexico Newspapers Partnership whereby prior to December 26, 2005, the Company accounted for its interest in the partnership as an equity investment. Effective December 26, 2005, the partnership became a consolidated subsidiary of the Company.

18

MEDIANEWS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 9: Leases

     In November 2005, the Company finalized an agreement to sell its building in Long Beach, California in the fourth quarter of the Company’s fiscal year 2006 for approximately $20.0 million. The Company is in the process of evaluating its accounting for the transaction and expects to recognize a gain on the sale of the building. In conjunction with the sale of its building, the Company entered into a 15-year lease agreement for space to house its Long Beach operations. The lease term commences once the new space is ready to be occupied, which is expected to be in the fourth quarter of the Company’s fiscal year 2006. Expected minimum lease payments are as follows: fiscal years 2007 through 2009 — $0.8 million per year; fiscal years 2010 through 2011 — $0.9 million per year; and thereafter — $10.5 million cumulatively.

NOTE 10: Subsequent Events

     On February 1, 2006, MediaNews and E. W. Scripps Company (“Scripps”), completed the formation of the Colorado Publishing Company LLP. Upon formation of the Colorado Publishing Company LLP (“CPC”), MediaNews contributed substantially all of the operating assets used in the publication of the newspapers published by Eastern Colorado Publishing Company, comprised of several small daily and weekly newspapers, and Scripps contributed substantially all of the operating assets used in the publication of theDaily Cameraand theColorado Daily, both published in Boulder, Colorado. In addition to the assets contributed to CPC, MediaNews paid Scripps approximately $20.4 million to obtain its 50% interest in CPC. Scripps owns the remaining 50% interest. The management committee of CPC is comprised of four members, two of whom are appointed by MediaNews and two of whom are appointed by Scripps. Under the partnership agreement, CPC is required to make distributions to the Company equal to 50% of earnings, less working capital required by the partnership.

19

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 and six months ended December 31, 2005 and 2004, including the percentage change between periods.

	Three Months Ended December 31,						2005 vs.			Six Months Ended December 31,						2005 vs.
	2005			2004			2004			2005			2004			2004
	(Dollars in thousands)									(Dollars in thousands)
INCOME STATEMENT DATA:
Total Revenues	$	206,225		$	201,616			2.3	%	$	402,797		$	393,269			2.4	%
Income from Unconsolidated JOAs		(4,551	)		9,590			(c	)		(8,270	)		14,806			(c	)
Cost of Sales		63,841			60,964			4.7			126,057			121,725			3.6
Selling, General and Administrative		100,327			93,965			6.8			198,981			189,884			4.8
Depreciation and Amortization		10,393			10,108			2.8			20,665			20,217			2.2
Interest Expense		13,708			12,103			13.3			27,238			24,319			12.0
Other (Income) Expense, Net		(20	)		(36	)		(c	)		1,632			5,399			(c	)
Total Costs and Expenses		188,249			177,104			6.3			374,573			361,544			3.6
Equity Investment Income, Net		2,565			3,113			(17.6	)		4,424			5,237			(15.5	)
Minority Interest		(7,807	)		(9,878	)		(21.0	)		(14,576	)		(16,478	)		(11.5	)
Net Income		4,749			16,240			(c	)		5,731			20,846			(c	)
CASH FLOW DATA:
Cash Flows from:
Operating Activities	$	26,869		$	35,273					$	46,584		$	46,107
Investing Activities		(13,520	)		(19,097	)					(55,386	)		(23,987	)
Financing Activities		(14,904	)		(16,949	)					5,211			(85,424	)
NON-GAAP FINANCIAL DATA(a):
Adjusted EBITDA	$	42,057		$	46,687			(9.9	)%	$	77,759		$	81,660			(4.8	)%
Minority Interest in Adjusted EBITDA		(10,156	)		(12,899	)		(21.3	)		(19,182	)		(22,164	)		(13.5	)
Combined Adjusted EBITDA of Unconsolidated JOAs (our share)		11,208			13,023			(13.9	)		19,485			21,923			(11.1	)
EBITDA of Texas-New Mexico Newspapers Partnership (our share)(b)		2,466			2,743			(10.1	)		4,795			5,033			(4.7	)
Adjusted EBITDA Available to Company	$	45,575		$	49,554			(8.0	)%	$	82,857		$	86,452			(4.2	)%

(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, The Denver Post Corporation (“DPC”) for the three and six month periods ended December 31, 2004, and the Texas-New Mexico Newspapers Partnership beginning December 26, 2005, our less than 100% owned consolidated subsidiaries (“Minority Interest in Adjusted EBITDA”) (we acquired the minority interest in DPC in the fourth quarter of our fiscal year 2005 and restructured our interest in the Texas-New Mexico Newspapers Partnership by contributing our operations in Pennsylvania late in the second quarter of our fiscal year 2006); (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 Texas-New Mexico Newspapers Partnership through December 25, 2005 (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 Texas-New Mexico Newspapers Partnership.The Texas-New Mexico Newspapers Partnership agreement requires the partnership to make distributions equal to the earnings of the partnership before depreciation and amortization (EBITDA). Through December 25, 2005, our 33.8% share of the EBITDA of Texas-New Mexico Newspapers Partnership has been included in Adjusted EBITDA Available to Company, as it was an integral part of our cash flows from operations as defined by our debt covenants. Beginning December 26, 2005, we became the controlling partner of the Texas-New Mexico Newspapers Partnership at which time we began consolidating their results. See Note 7: Acquisitions and Other Transactions of the notes to condensed consolidated financial statements of this Form 10-Q for further discussion of the partnership restructuring.
(c)	Not meaningful.

20

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 for these two JOAs 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 JOA have not been included on a pro-rata consolidated basis). See Notes 1, 3 and 7 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 December 31,						2005 vs.			Six Months Ended December 31,						2005 vs.
	2005			2004			2004			2005			2004			2004
	(Dollars in thousands)
PRO-RATA CONSOLIDATED INCOME STATEMENT DATA:
Total Revenues	$	284,455		$	280,590			1.4	%	$	556,363		$	546,479			1.8	%
Cost of Sales		94,600			91,843			3.0			187,061			183,068			2.2
Selling, General and Administrative		136,590			129,037			5.9			272,058			259,828			4.7
Depreciation and Amortization		24,626			13,442			83.2			46,978			26,972			74.2
Interest Expense		13,762			12,156			13.2			27,345			24,413			12.0
Other (Income) Expense, Net		1,452			10			(c	)		2,967			5,667			(c	)
Total Costs and Expenses		271,030			246,488			10.0			536,409			499,948			7.3
Minority Interest		(7,807	)		(9,878	)		(21.0	)		(14,576	)		(16,478	)		(11.5	)
Net Income		4,749			16,240			(c	)		5,731			20,846			(c	)
CASH FLOW DATA (GAAP BASIS):
Cash Flows from:
Operating Activities	$	26,869		$	35,273					$	46,584		$	46,107
Investing Activities		(13,520	)		(19,097	)					(55,386	)		(23,987	)
Financing Activities		(14,904	)		(16,949	)					5,211			(85,424	)
PRO-RATA OTHER DATA(a):
Adjusted EBITDA	$	53,265		$	59,710			(10.8	)%	$	97,244		$	103,583			(6.1	)%
Minority Interest in Adjusted EBITDA		(10,156	)		(12,899	)		(21.3	)		(19,182	)		(22,164	)		(13.5	)
EBITDA of Texas-New Mexico Newspapers Partnership (our share)(b)		2,466			2,743			(10.1	)		4,795			5,033			(4.7	)
Adjusted EBITDA Available to Company	$	45,575		$	49,554			(8.0	)%	$	82,857		$	86,452			(4.2	)%

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 Texas-New Mexico Newspapers Partnership 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 Texas-New Mexico Newspapers Partnership.
(c)	Not meaningful.

21

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, and 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. 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, 2005 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 is 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 delivered to the customer or sold to home delivery independent contractors. 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.

     Our investments in unconsolidated JOAs (Denver and Salt Lake) are included in the condensed consolidated balance sheet under the line item “Investment in Unconsolidated JOAs.” The operating results of these unconsolidated JOAs are reported as a single net amount, in the accompanying financial statements in the line item “Income 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 and Six Months Ended December 31, 2005 and 2004

     Certain transactions in fiscal year 2005 had an impact on the comparisons of our results for the three and six months ended December 31, 2005 and 2004. In January 2005, we purchasedThe Park Record,a biweekly newspaper in Park City, Utah, and in June 2005, we purchased the remaining 20% of The Denver Post Corporation which we did not own. Also, in August 2005, we purchased The Detroit News, Inc. which included a limited partnership interest in the Detroit JOA. In addition, effective December 26, 2005, we restructured the Texas-New Mexico Newspapers Partnership (the “Partnership”) whereby we contributed to the Partnership our Pennsylvania newspapers,The Evening Sun(Hanover), theLebanon Daily Newsand our interest in the partnership that publishes theYork Daily RecordandYork Sunday News,which will continue to operate under the terms of a joint operating agreement along withThe York Dispatch.Our partner contributed thePublic Opinionin Chambersburg, PA. As a result of the contributions made and the amendment of the Partnership agreement, the Partnership became a 59.4% owned consolidated subsidiary of ours.

22

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Revenues

     On a same newspaper basis (after adjusting for the aforementioned fiscal year 2005 Park City acquisition and the fiscal year 2006 Texas-New Mexico Newspapers Partnership restructuring), the following changes occurred in our significant revenue categories for the three and six month periods ended December 31, 2005 as compared to the same periods in the prior year.

     Advertising Revenues.Advertising revenues increased by approximately 1.6% and 2.1%, respectively, for the three and six month periods ended December 31, 2005, as compared to the same periods in the prior fiscal year. The increase in advertising was due principally to increases in national and preprint advertising categories, as well as increases in revenues from our Internet operations, offset in part by a decrease in retail (ROP) advertising. The classified advertising category decreased slightly with increases in classified employment and classified real estate being offset by decreases in classified automotive.

     Circulation Revenues.Circulation revenues decreased by 4.4% and 4.9%, respectively, for the three and six month periods ended December 31, 2005, as compared to the same periods in the prior fiscal year. The decrease was primarily due to 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.

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 original purchase by us, 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 described above. The results for the three and six months ended December 31, 2005 were negatively impacted by the accelerated depreciation taken on certain fixed assets at the current production facilities in Denver and Salt Lake City which will be retired earlier than originally expected due to the construction of new production facilities at the respective locations. Excluding the effect of accelerated depreciation, income from unconsolidated JOAs is down compared to the same periods in the prior year. The results of the Denver JOA were negatively impacted by a soft advertising market combined with higher newsprint prices, increased circulation, promotion and delivery costs, increased costs related to the growth in its Internet operations, and increased employee benefit costs. Excluding the impact of the accelerated depreciation, the results of the Salt Lake City JOA were relatively flat year over year. While the Salt Lake City JOA experienced many of the operating expense increases that the Denver JOA did, its advertising revenue gains kept pace with these increases.

Cost of Sales

     The purchase ofThe Park Recordin fiscal year 2005 and the December 2005 Texas-New Mexico Newspapers Partnership restructuring had the net impact of increasing cost of sales by $0.9 million and $1.3 million, respectively, for the three and six month periods ended December 31, 2005 as compared to the same periods in the prior fiscal year. Excluding these transactions, cost of sales increased 3.3% and 2.5% respectively. The current year increase in cost of sales was due in part to a 7.4% and 7.1% increase in newsprint prices as compared to the same three and six month periods ended in the prior fiscal year. Our average price of newsprint was $562 and $557 per metric ton for the three and six month periods ended December 31, 2005 as compared to $523 and $520 per metric ton for the same periods in fiscal year 2005. Increases in newsprint prices were offset in part by a slight decrease in newsprint consumption. Excluding newsprint, our cost of sales remained relatively flat.

Selling, General and Administrative

     The purchase ofThe Park Recordin fiscal year 2005 and the December 2005 Texas-New Mexico Newspapers Partnership restructuring had the net impact of increasing SG&A by $0.9 million and $1.3 million for the three and six month periods ended December 31, 2005, as compared to the same periods in the prior fiscal year. Excluding these transactions, SG&A increased 5.8% and 4.1%. The current increases were primarily the result of increases in employee costs, including health care and retirement benefits, as well as increased costs associated with circulation promotion and delivery, and increased costs related to the growth in our advertising revenues and Internet operations. Expenses related to our Internet operations increased $1.4 million (37.7%) and $2.6 million (35.0%) for the three and six month periods ended December 31, 2005 as compared to the same periods in the prior fiscal year.

23

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Interest Expense

     The increase in interest expense was the result of an increase in the average debt outstanding due to borrowings related to the August 3, 2005 purchase of our interest in the Detroit JOA, the June 10, 2005 purchase of the remaining 20% of The Denver Post Corporation which we did not own, funding for our share of the cost of the new production and office facility being built in Salt Lake City, as well as an increase in the weighted average cost of debt. For the three month period ended December 31, 2005, our average debt outstanding increased $34.1 million, or 3.9%, as compared to the same period in the prior year. For the six month period ended December 31, 2005, our average debt outstanding increased $26.2 million, or 3.0%. For both the three and six month periods ended December 31, 2005, our weighted average interest rate increased 66 basis points as compared to the same periods in the prior fiscal year.

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 month period ended December 31, 2005 relate to litigation expense of $0.3 million associated with the acquisition of Kearns-Tribune, LLC (Salt Lake City), $(0.3) million related to hedging and investing activities that did not qualify for hedge accounting under SFAS No. 133, $(0.3) million gain recognized in conjunction with the contribution of our newspapers in Pennsylvania into the Texas-New Mexico Newspapers Partnership, and $0.3 million associated with various other costs that were not related to ongoing operations.

     The charges incurred for the six month period ended December 31, 2005 relate to litigation expense of $0.5 million associated with the acquisition of Kearns-Tribune, LLC (Salt Lake City), $0.6 million related to hedging and investing activities that did not qualify for hedge accounting under SFAS No. 133, $(0.3) million gain recognized in conjunction with the contribution of our newspapers in Pennsylvania into the Texas-New Mexico Newspapers Partnership, and $0.8 million associated with various other costs that were not related to ongoing 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 increased $0.5 million for the six month period ended December 31, 2005. The majority of the change is attributable to timing of payments of accounts payable and accrued liabilities and timing of distributions from our unconsolidated JOAs, as well as a reduction in distributions from our Denver JOA due to capital expenditure requirements.

     The net cash outflows related to investing activities increased by $31.4 million, primarily due to the $27.7 million investment in the Detroit JOA and other investments, combined with a $6.6 million increase in net capital expenditures. Approximately $9.9 million of the current year capital expenditures are related to our share of the cost of a new printing and office facility being constructed for the Salt Lake City JOA. In addition, capital expenditures for the six month period ended December 31, 2005 include expenditures related to the construction of a new building in San Bernardino, California and a project to implement new advertising and circulation systems Company-wide.

     The net cash flows related to financing activities increased by $90.6 million. For the six month period ended December 31, 2005, activity included normal borrowings and paydowns on long-term debt, as well as borrowings to finance the purchase of our interest in the Detroit JOA. Excluding the Detroit transaction and other investments, and refinancing costs of the new credit facility, we paid down debt of approximately $21.1 million in the most recent two quarters. Prior period activity included using cash on hand and available borrowings under the revolver portion of our credit facility to repurchase all of our outstanding 8 5/8% Senior Subordinated Notes for $208.6 million (including $8.6 million of repurchase premiums). In addition, activity in the prior period included normal borrowings and paydowns on long-term debt.

24

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Liquidity

     On September 8, 2005, we amended and restated our December 30, 2003 bank credit facility to take advantage of lower pricing available in the bank loan market. Our amended bank credit facility provides for borrowings of up to $597.3 million, consisting of a $350.0 million revolving credit facility, a $100.0 million term loan “A” and a $147.3 million term loan “B.” During the next twelve months, we will make scheduled quarterly principal payments of $0.4 million under term loan “B,” which we intend to pay from operating cash flows. Any payments on the term loan cannot be reborrowed, regardless of whether such payments are scheduled or voluntary. At December 31, 2005, the balances outstanding under the revolving credit portion of our bank credit facility, term loan “A” and term loan “B” were $160.6 million, $100.0 million and $146.5 million, respectively. As of December 31, 2005, we had $180.8 million available for future borrowings under the revolver portion of our new bank credit facility, net of $8.6 million in outstanding letters of credit.

     In January 1998, we entered into an option agreement in association with the acquisition financing related to one of our newspapers. The option, which is currently exercisable or putable based on a predetermined formula, entitles the holder to purchase the assets used in the publication of one of our daily newspapers. The option repurchase price at December 31, 2005 is valued at approximately $6.4 million and is recorded as a component of other long-term liabilities. If the option were put to us, the payment would be funded from unused commitments under our bank credit facility. As a result, in accordance with SFAS No. 6,Classification of Short-Term Obligations Expected to be Refinanced, the option repurchase price remains classified in our balance sheet as long-term.

     Stephens Media Group (“SMG”), 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), any time after January 1, 2005. If such right is exercised, SMG’s 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 SMG to exercise its put. No amounts are recorded in our financial statements related to SMG��s put right.

     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 necessary to consolidate two production facilities into one. We own a 50% interest in the Denver JOA.

     Our ability to service our debt and fund planned capital expenditures depends on our ability to generate operating cash flows in the future. Based on current levels, we believe our cash flow from operations, cash on hand and borrowings available 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 2006 will be approximately $2.0 million to $2.5 million, of which approximately $1.5 million has been made through December 31, 2005. We also expect federal and state income tax payments to increase during fiscal year 2006 as compared to fiscal year 2005 related to the impact of alternative minimum taxes.

Off-Balance Sheet Arrangements and Contractual Obligations

     Our various contractual obligations and funding commitments related to our long-term debt have changed since our Annual Report on Form 10-K for the year ended June 30, 2005 as more fully described above and in Note 5: Long-Term Debt.

     Our other contractual obligations have not materially changed from the disclosure made in our Annual Report on Form 10-K for the year ended June 30, 2005, other than as described in Note 9: Leases.

25

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Capital Expenditures

	Capital Expenditures
	Six Months Ended December 31, 2005
	(Dollars in thousands)
	Wholly-Owned		Non			Our Share of
	Subsidiaries and		Wholly-Owned			Unconsolidated
	Consolidated JOAs		Subsidiaries			JOAs		Total
Total Capital Projects	$	20,158	$	8,127		$	4,534	$	32,819
Less Minority Partners’ Share		—		(3,720	)		—		(3,720	)
Our Share of Capital Projects	$	20,158	$	4,407		$	4,534	$	29,099

Near Term Outlook

Newsprint Prices

     Newsprint suppliers continue to announce price increases. However, the timing and amount of the price increases that will take hold in the market are uncertain at this time. The January 2006 RISI (“Resource Information Systems, Inc.”) price index for 30 pound newsprint was $640 per metric ton compared to $570 per metric ton in January 2005. As a large buyer of newsprint, our cost of newsprint continues to be below the RISI price index.

26

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. In September 2005, we amended our December 30, 2003 bank credit facility to reduce our borrowing margins. No other significant terms were changed. 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 weighted average interest rate has changed from 4.42% at June 30, 2005 to 5.50% at December 31, 2005. Other than the September 30, 2005 amendment to our bank credit facility, 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, 2005.

Newsprint

     See Near Term Outlook for further discussion regarding newsprint prices.

27

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 December 31,						Six Months Ended December 31,
	2005			2004			2005			2004
	(Dollars in thousands)
NON-GAAP FINANCIAL DATA(a)
Cash Flows from Operating Activities (GAAP measure)	$	26,869		$	35,273		$	46,584		$	46,107
Net Change in Operating Assets and Liabilities		7,266			14,475			14,107			29,029
Distributions Paid to Minority Interest		4,137			4,546			9,623			12,342
Distributions of Earnings from Unconsolidated JOAs		(18,744	)		(30,126	)		(36,965	)		(47,590	)
Distributions of Earnings from Equity Investments		(2,614	)		(2,151	)		(5,640	)		(5,511	)
Interest Expense		13,708			12,103			27,238			24,319
Bad Debt Expense		(2,358	)		(2,152	)		(4,328	)		(4,368	)
Pension Expense, Net of Cash Contributions		(955	)		(190	)		(393	)		(498	)
Direct Costs of the Unconsolidated JOAs, Incurred Outside of the Unconsolidated JOAs(b)		16,325			12,414			32,371			24,369
Net Cash Related to Other (Income), Expense		(1,577	)		2,495			(4,838	)		3,461
Adjusted EBITDA		42,057			46,687			77,759			81,660
Minority Interest in Adjusted EBITDA		(10,156	)		(12,899	)		(19,182	)		(22,164	)
Combined Adjusted EBITDA of Unconsolidated JOAs (our share)		11,208			13,023			19,485			21,923
EBITDA of Texas-New Mexico Newspapers Partnership (our share)(c)		2,466			2,743			4,795			5,033
Adjusted EBITDA Available to Company	$	45,575		$	49,554		$	82,857		$	86,452

	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, The Denver Post Corporation (“DPC”) for the three and six month periods ended December 31, 2004, and the Texas-New Mexico Newspapers Partnership beginning December 26, 2005, our less than 100% owned consolidated subsidiaries (“Minority Interest in Adjusted EBITDA”) (we acquired the minority interest in DPC in the fourth quarter of our fiscal year 2005 and restructured our interest in the Texas-New Mexico Newspapers Partnership by contributing our operations in Pennsylvania late in the second quarter of our fiscal year 2006); (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 Texas-New Mexico Newspapers Partnership through December 25, 2005 (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 withThe Salt Lake TribuneandThe 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 Texas-New Mexico Newspapers Partnership.Beginning December 26, 2005, we became the controlling partner of the Texas-New Mexico Newspapers Partnership at which time we began consolidating their results (See Note 7: Acquisitions and Other Transactions of this Form 10-Q for further discussion of the partnership restructuring). The Texas-New Mexico Newspapers Partnership agreement requires the partnership to make distributions equal to the earnings of the partnership before depreciation and amortization (EBITDA). Through December 25, 2005, our 33.8% share of the EBITDA of Texas-New Mexico Newspapers Partnership 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.

28

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 December 31, 2005
				Unconsolidated JOAs
	As Presented Under			Pro-Rata		As Presented on a
	GAAP			Adjustment(1)		Pro-Rata Basis
Total Revenues	$	206,225		$	78,230	$	284,455
Income from Unconsolidated JOAs		(4,551	)		4,551		—
Cost of Sales		63,841			30,759		94,600
Selling, General and Administrative		100,327			36,263		136,590
Depreciation and Amortization		10,393			14,233		24,626
Interest Expense		13,708			54		13,762
Other (Income) Expense, Net		(20	)		1,472		1,452
Total Costs and Expenses		188,249			82,781		271,030
Net Income		4,749			—		4,749
Adjusted EBITDA(2)	$	42,057		$	11,208	$	53,265

	Six Months Ended December 31, 2005
				Unconsolidated JOAs
	As Presented Under			Pro-Rata		As Presented on a
	GAAP			Adjustment(1)		Pro-Rata Basis
Total Revenues	$	402,797		$	153,566	$	556,363
Income from Unconsolidated JOAs		(8,270	)		8,270		—
Cost of Sales		126,057			61,004		187,061
Selling, General and Administrative		198,981			73,077		272,058
Depreciation and Amortization		20,665			26,313		46,978
Interest Expense		27,238			107		27,345
Other (Income) Expense, Net		1,632			1,335		2,967
Total Costs and Expenses		374,573			161,836		536,409
Net Income		5,731			—		5,731
Adjusted EBITDA(2)	$	77,759		$	19,485	$	97,244

	Three Months Ended December 31, 2004
				Unconsolidated JOAs
	As Presented Under			Pro-Rata			As Presented on a
	GAAP			Adjustment(1)			Pro-Rata Basis
Total Revenues	$	201,616		$	78,974		$	280,590
Income from Unconsolidated JOAs		9,590			(9,590	)		—
Cost of Sales		60,964			30,879			91,843
Selling, General and Administrative		93,965			35,072			129,037
Depreciation and Amortization		10,108			3,334			13,442
Interest Expense		12,103			53			12,156
Other (Income) Expense, Net		(36	)		46			10
Total Costs and Expenses		177,104			69,384			246,488
Net Income		16,240			—			16,240
Adjusted EBITDA(2)	$	46,687		$	13,023		$	59,710

29

	Six Months Ended December 31, 2004
			Unconsolidated JOAs
	As Presented Under		Pro-Rata			As Presented on a
	GAAP		Adjustment(1)			Pro-Rata Basis
Total Revenues	$	393,269	$	153,210		$	546,479
Income from Unconsolidated JOAs		14,806		(14,806	)		—
Cost of Sales		121,725		61,343			183,068
Selling, General and Administrative		189,884		69,944			259,828
Depreciation and Amortization		20,217		6,755			26,972
Interest Expense		24,319		94			24,413
Other (Income) Expense, Net		5,399		268			5,667
Total Costs and Expenses		361,544		138,404			499,948
Net Income		20,846		—			20,846
Adjusted EBITDA(2)	$	81,660	$	21,923		$	103,583

	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 Newspaper Agency Corporation (Salt Lake City) 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 withThe Salt Lake TribuneandThe 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)	As Presented Under GAAP.Adjusted EBITDA is not a GAAP measure.

30

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 December 31,						Six Months Ended December 31,
	2005			2004			2005			2004
	(Dollars in thousands)
NON-GAAP FINANCIAL DATA(a)
Cash Flows from Operating Activities (GAAP measure)	$	26,869		$	35,273		$	46,584		$	46,107
Net Change in Operating Assets and Liabilities		7,266			14,475			14,107			29,029
Distributions Paid to Minority Interest		4,137			4,546			9,623			12,342
Distributions of Earnings from Unconsolidated JOAs		(18,744	)		(30,126	)		(36,965	)		(47,590	)
Distributions of Earnings from Equity Investments		(2,614	)		(2,151	)		(5,640	)		(5,511	)
Interest Expense		13,708			12,103			27,238			24,319
Bad Debt Expense		(2,358	)		(2,152	)		(4,328	)		(4,368	)
Pension Expense, Net of Cash Contributions		(955	)		(190	)		(393	)		(498	)
Net Cash Related to Other (Income), Expense		(1,577	)		2,495			(4,838	)		3,461
Combined Adjusted EBITDA of Unconsolidated JOAs (our share)(b)		11,208			13,023			19,485			21,923
Direct Costs of the Unconsolidated JOAs, Incurred Outside of the Unconsolidated JOAs(c)		16,325			12,414			32,371			24,369
Adjusted EBITDA		53,265			59,710			97,244			103,583
Minority Interest in Adjusted EBITDA		(10,156	)		(12,899	)		(19,182	)		(22,164	)
EBITDA of Texas-New Mexico Newspapers Partnership (our share)(d)		2,466			2,743			4,795			5,033
Adjusted EBITDA Available to Company	$	45,575		$	49,554		$	82,857		$	86,452

	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, The Denver Post Corporation (“DPC”) for the three and six month periods ended December 31, 2004, and the Texas-New Mexico Newspapers Partnership beginning December 26, 2005, our less than 100% owned consolidated subsidiaries (“Minority Interest in Adjusted EBITDA”) (we acquired the minority interest in DPC in the fourth quarter of our fiscal year 2005 and restructured our interest in the Texas-New Mexico Newspapers Partnership by contributing our operations in Pennsylvania late in the second quarter of our fiscal year 2006); (ii) increasing Adjusted EBITDA by our proportionate share of EBITDA of the Texas-New Mexico Newspapers Partnership through December 25, 2005(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 withThe Salt Lake TribuneandThe 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 Texas-New Mexico Newspapers Partnership.Beginning December 26, 2005, we became the controlling partner of the Texas-New Mexico Newspapers Partnership at which time we began consolidating their results (See Note 7: Acquisitions and Other Transactions of this Form 10-Q for further discussion of the partnership restructuring). The Texas-New Mexico Newspapers Partnership agreement requires the partnership to make distributions equal to the earnings of the partnership before depreciation and amortization (EBITDA). Through December 25, 2005, our 33.8% share of the EBITDA of Texas-New Mexico Newspapers Partnership 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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EXHIBIT INDEX

Exhibits
3.1	Third Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the registrant’s June 30, 2005 Form 10-K)
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	Amended and Restated Partnership Agreement for Texas-New Mexico Newspapers Partnership, by and between Gannett Texas L.P. and TNP Publishing, LLC dated December 25, 2005
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

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