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FORM 10-Q UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
   (Mark One) þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 27, 2005 OR o
    
    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 1-14541   PULITZER INC.    Delaware
    
    43-1819711(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
Identification Number)
 900 North Tucker Boulevard, St. Louis, Missouri 63101
(Address of principal executive offices) (zip code) (314) 340-8000
(Registrants telephone number, including area code) No Changes
(Former name, former address and former fiscal year, if changed since last report)   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. Yes /x /       No / / Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Exchange Act). Yes /x/       No / / Indicate the number of shares outstanding of each of the issuers classes
of common stock, as of the latest practicable date. Class
    
    Outstanding 4/22/05Common Stock
    
    
    10,386,943Class B Common Stock
    
    
    11,468,998
   -1-




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TABLE OF CONTENTS  Part I. FINANCIAL INFORMATIONItem 1. FINANCIAL STATEMENTSItem 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL            CONDITION AND RESULTS OF OPERATIONSItem 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT            MARKET RISKPart II. OTHER INFORMATIONItem 1. LEGAL PROCEEDINGSItem 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSItem 6. EXHIBITSSIGNATURESCertification Pursuant to Section 302Certification Pursuant to Section 302Certification Pursuant to 18 U.S.C. Section 1350Certification Pursuant to 18 U.S.C. Section 1350    Table of Contents  
 Part I. FINANCIAL INFORMATION 
 Item 1. FINANCIAL STATEMENTS PULITZER INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited  In thousands, except earnings per share) First Quarter EndedMarch 27,
    
    
    March 28,2005
    
    
    2004OPERATING REVENUES:Advertising
Retail
    
    $
    27,837
    
    
    $
    27,829National
    
    
    6,209
    
    
    
    6,161Classified
    
    
    33,337
    
    
    
    32,247Subtotal
    
    
    67,383
    
    
    
    66,237Preprints
    
    
    17,094
    
    
    
    14,218Total advertising
    
    
    84,477
    
    
    
    80,455Circulation
    
    
    19,917
    
    
    
    20,568Other
    
    
    1,749
    
    
    
    1,712Total operating revenues
    
    
    106,143
    
    
    
    102,735OPERATING EXPENSES:Payroll and other personnel expenses
    
    
    47,460
    
    
    
    46,359Newsprint expense
    
    
    10,989
    
    
    
    11,036Depreciation
    
    
    3,624
    
    
    
    3,736Amortization
    
    
    1,234
    
    
    
    1,192Other expenses
    
    
    30,529
    
    
    
    28,108Total operating expenses
    
    
    93,836
    
    
    
    90,431Equity in earnings of Tucson newspaper partnership
    
    
    4,462
    
    
    
    3,917Operating income
    
    
    16,769
    
    
    
    16,221Interest income
    
    
    1,819
    
    
    
    1,159Interest expense
    
    
    (5,348
    )
    
    
    (4,694
    )Net gain on marketable securities
    
    
    0
    
    
    
    552Net loss on investments
    
    
    (79
    )
    
    
    (42
    )Net other income
    
    
    8
    
    
    
    4INCOME BEFORE PROVISION FOR INCOME
TAXES
    
    
    13,169
    
    
    
    13,200PROVISION FOR INCOME TAXES
    
    
    5,910
    
    
    
    4,884MINORITY INTEREST IN NET EARNINGS OF
SUBSIDIARIES
    
    
    253
    
    
    
    261NET INCOME
    
    $
    7,006
    
    
    $
    8,055
 (Continued) -2-




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First Quarter EndedMarch 27,
    
    
    March 28,2005
    
    
    2004BASIC EARNINGS PER SHARE OF STOCK:Basic earnings per share
    
    $
    0.32
    
    
    $
    0.37Weighted average number of shares outstanding
    
    
    21,593
    
    
    
    21,541DILUTED EARNINGS PER SHARE OF STOCK:Diluted earnings per share
    
    $
    0.32
    
    
    $
    0.37Weighted average number of shares outstanding
    
    
    22,138
    
    
    
    21,855
 See notes to condensed consolidated financial statements. (Concluded) -3-




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PULITZER INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited- In thousands) First Quarter EndedMarch 27,
    
    
    March 28,2005
    
    
    2004NET INCOME
    
    $
    7,006
    
    
    $
    8,055OTHER COMPREHENSIVE INCOME (LOSS),
NET OF TAX:Unrealized holding gains (losses) on marketable
securities arising during the period
    
    
    (619
    )
    
    
    408Realized gains arising during the period
    
    
    0
    
    
    
    (342
    )Other comprehensive (loss) income items
    
    
    (619
    )
    
    
    66COMPREHENSIVE INCOME
    
    $
    6,387
    
    
    $
    8,121
 See notes to condensed consolidated financial statements. -4-




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PULITZER INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited- In thousands) March 27,
    
    
    Dec. 26,2005
    
    
    2004ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    110,297
    
    
    $
    58,152Marketable securities
    
    
    121,122
    
    
    
    149,156Trade accounts receivable (less allowance for doubtful
Accounts of $3,797 and $3,710)
    
    
    52,520
    
    
    
    60,105Inventory
    
    
    9,950
    
    
    
    8,479Prepaid expenses and other
    
    
    15,019
    
    
    
    21,660Total current assets
    
    
    308,908
    
    
    
    297,552PROPERTIES:Land
    
    
    9,982
    
    
    
    9,982Buildings
    
    
    74,509
    
    
    
    74,450Machinery and equipment
    
    
    148,047
    
    
    
    147,566Construction in progress
    
    
    1,131
    
    
    
    877Total
    
    
    233,669
    
    
    
    232,875Less accumulated depreciation
    
    
    125,797
    
    
    
    122,251Properties  net
    
    
    107,872
    
    
    
    110,624INTANGIBLE AND OTHER ASSETS:Goodwill
    
    
    821,782
    
    
    
    817,362Intangible assets  net of accumulated amortization
    
    
    33,214
    
    
    
    34,279Restricted cash and investments
    
    
    73,560
    
    
    
    69,810Other
    
    
    54,752
    
    
    
    57,035Total intangible and other assets
    
    
    983,308
    
    
    
    978,486TOTAL
    
    $
    1,400,088
    
    
    $
    1,386,662
 (Continued) -5-




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PULITZER INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited- In thousands, except share data) March 27,
    
    
    Dec. 26,2005
    
    
    2004LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Trade accounts payable
    
    $
    12,915
    
    
    $
    12,499Salaries, wages and commissions
    
    
    15,101
    
    
    
    22,121Interest payable
    
    
    6,305
    
    
    
    3,944Pension obligations
    
    
    1,365
    
    
    
    1,365Income taxes payable
    
    
    1,410
    
    
    
    1,612Deferred revenue
    
    
    11,010
    
    
    
    9,883Other
    
    
    4,317
    
    
    
    3,750Total current liabilities
    
    
    52,423
    
    
    
    55,174LONG-TERM DEBT
    
    
    306,000
    
    
    
    306,000PENSION OBLIGATIONS
    
    
    16,284
    
    
    
    15,795POSTRETIREMENT AND POSTEMPLOYMENT
BENEFIT OBLIGATIONS
    
    
    55,422
    
    
    
    54,129OTHER LONG-TERM LIABILITIES
    
    
    61,670
    
    
    
    57,415COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITY:Preferred stock, $.01 par value; 100,000,000 shares authorized;
Issued and outstanding  none
    
    
    0
    
    
    
    0Common stock, $.01 par value; 100,000,000 shares authorized;
Issued 10,380,086 in 2005 and 10,044,697 in 2004
    
    
    104
    
    
    
    100Class B common stock, convertible, $.01 par value; 100,000,000
Shares authorized; issued  11,468,998 in 2005 and
11,660,942 in 2004
    
    
    115
    
    
    
    117Additional paid-in capital
    
    
    402,570
    
    
    
    394,528Retained earnings
    
    
    507,817
    
    
    
    505,153Accumulated other comprehensive loss
    
    
    (2,043
    )
    
    
    (1,424
    )Total
    
    
    908,563
    
    
    
    898,474Unamortized restricted stock grants
    
    
    (21
    )
    
    
    (72
    )Treasury stock  at cost; 5,137 shares of common
stock in 2005 and 2004 and 0 shares of
Class B common stock in 2005 and 2004
    
    
    (253
    )
    
    
    (253
    )Total stockholders equity
    
    
    908,289
    
    
    
    898,149TOTAL
    
    $
    1,400,088
    
    
    $
    1,386,662
 (Concluded) See notes to condensed consolidated financial statements. -6-




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PULITZER INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited- In thousands) Three Months EndedMarch 27,
    
    
    March 28,2005
    
    
    2004CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    7,006
    
    
    $
    8,055Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation
    
    
    3,624
    
    
    
    3,736Amortization
    
    
    1,234
    
    
    
    1,192Stock-based compensation
    
    
    296
    
    
    
    407Deferred income taxes
    
    
    4,960
    
    
    
    (667
    )Net gain on sale of assets
    
    
    0
    
    
    
    (552
    )Net loss on investments
    
    
    79
    
    
    
    42Changes in current assets and liabilities (net of the effects of the
purchase and sale of properties) which provided (used) cash:Trade accounts receivable
    
    
    7,585
    
    
    
    7,222Inventory
    
    
    (1,471
    )
    
    
    (2,890
    )Prepaid and other assets
    
    
    7,967
    
    
    
    (3,582
    )Trade accounts payable, deferred revenue and other liabilities
    
    
    (1,102
    )
    
    
    1,828Income taxes payable
    
    
    801
    
    
    
    12,508NET CASH FROM OPERATING ACTIVITIES
    
    
    30,979
    
    
    
    27,299CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures
    
    
    (893
    )
    
    
    (1,222
    )Purchase of newspaper properties and distribution businesses,
net of cash acquired
    
    
    (4,589
    )
    
    
    (704
    )Purchases of marketable securities
    
    
    (6,710
    )
    
    
    (164,245
    )Sales of marketable securities
    
    
    33,361
    
    
    
    159,028Net return of capital from investments in limited partnership
    
    
    1,293
    
    
    
    566Increase in restricted cash and investments
    
    
    (3,750
    )
    
    
    (3,750
    )NET CASH FROM INVESTING ACTIVITIES
    
    
    18,712
    
    
    
    (10,327
    )CASH FLOWS FROM FINANCING ACTIVITIES:Dividends paid
    
    
    (4,342
    )
    
    
    (4,089
    )Proceeds from exercise of stock options
    
    
    6,518
    
    
    
    2,387Proceeds from employee stock purchase plan
    
    
    278
    
    
    
    251Purchase of treasury stock
    
    
    0
    
    
    
    (8
    )NET CASH FROM FINANCING ACTIVITIES
    
    
    2,454
    
    
    
    (1,459
    )NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    52,145
    
    
    
    15,513CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    
    58,152
    
    
    
    27,552CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    110,297
    
    
    $
    43,065
 (Continued) -7-




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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid (received) during the period for:Interest paid
    
    $
    3,140
    
    
    $
    3,139Interest received
    
    
    (1,349
    )
    
    
    (1,243
    )Income taxes paid
    
    
    7
    
    
    
    10Income tax refunds
    
    
    0
    
    
    
    (7,000
    )
 (Concluded) See notes to condensed consolidated financial statements. -8-




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PULITZER INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Fiscal Year Pulitzer Inc. and its subsidiaries and affiliated entities (the Company)
fiscal year ends on the last Sunday of the calendar year. For 2005, the Companys fiscal year began
on December 27, 2004 and will end on December 25, 2005. For 2004, the Companys fiscal year began
on December 29, 2003 and ended on December 26, 2004. Basis of Consolidation The condensed consolidated financial statements include the accounts
of Pulitzer Inc. and its subsidiary companies, all of which are wholly-owned except for Pulitzer
Inc.s (together with another subsidiary) 95 percent interest in the results of operations of the
St. Louis Post-Dispatch LLC (PD LLC) and STL Distribution Services LLC (DS LLC), a distribution
company serving the St. Louis market, and 50 percent interest in the results of operations of TNI
Partners (TNI), the Tucson newspaper partnership between Star Publishing and Gannett. All
significant intercompany transactions have been eliminated from the condensed consolidated
financial statements. Interim Adjustments In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the Companys condensed consolidated financial position as
of March 27, 2005 and December 26, 2004 and the results of operations and cash flows for the
three-month periods ended March 27, 2005 and March 28, 2004. These condensed consolidated financial
statements should be read in conjunction with the audited consolidated financial statements and
related notes thereto included in the Companys Annual Report on Form 10-K for the fiscal year
ended December 26, 2004. Consolidated results of operations and cash flows for interim periods are
not necessarily indicative of the results to be expected for the full year. Earnings Per Share of Stock Basic earnings per share of stock is computed using the weighted
average number of common and Class B common shares outstanding during the applicable period.
Diluted earnings per share of stock is computed using the weighted average number of common and
Class B common shares outstanding and common stock equivalents (primarily outstanding stock
options). Weighted average shares used in the calculation of basic and diluted earnings per share
are summarized as follows: First Quarter EndedMarch 27,
    
    
    March 28,2005
    
    
    2004(In thousands)Weighted average shares outstanding (Basic EPS)
    
    
    21,593
    
    
    
    21,541Common stock equivalents
    
    
    545
    
    
    
    314Weighted average shares outstanding and
Common stock equivalents (Diluted EPS)
    
    
    22,138
    
    
    
    21,855
 Common stock equivalents included in the diluted earnings per share calculation were
determined using the treasury stock method. Under the treasury stock method, outstanding stock
options are dilutive when the average market price of the Companys common stock exceeds the option
exercise price during a period. In addition, proceeds from the assumed exercise of dilutive
options along with the related tax benefit are assumed to be used to repurchase common shares at
the average market price of such stock during the period. Options to purchase 531,028 shares for
the quarter ended March 28, 2004 were not included in the computation of diluted earnings per share
because the options respective exercise prices were greater than the average market price of the
common stock during the period. For the quarter ended March 27, 2005, the average market price of
the common stock was greater than all of the options respective exercise prices. Financing Arrangements In December 2001 and August 2003 the Company executed
fixed-to-floating interest rate swap contracts in the current combined amount of $150.0 million.
The swap contracts mature with the Companys debt on April 28, 2009. The Company accounts for all
swaps as fair value hedges and employs the short cut method. These interest rate swap contracts
have the effect of converting the interest cost for $150.0 million of the Companys debt from fixed
rate to variable rate. As of March 27, 2005, approximately 49 percent of the Companys long-term
interest cost was subject to variable rates. -9-




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In October 2002 the Company terminated other swap contracts totaling $75.0 million, resulting
in a net gain of $5.0 million. The Company initially recognized the $5.0 million cash receipt,
representing the increased fair value of the long-term debt at the date of the swap terminations,
as an increase in long-term liabilities with subsequent, ratable amortization as a reduction of
interest expense over the remaining life of the original interest rate swap contracts which would
have expired on April 28, 2009. Stock-Based Compensation The Company has a stock-based employee compensation plans. The
Company accounts for this plan under the recognition and measurement principles of Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees(APB 25), and related
interpretations. No stock-based employee compensation cost is reflected in net income for Company
stock option plans as all options granted under those plans had an exercise price equal to the fair
market value of the underlying common stock on the date of grant. The following table illustrates
the effect on net income and earnings per share if the Company had applied the fair value
recognition provisions of the Financial Accounting Standards Board (FASB) Statement No. 123,
Accounting for Stock-Based Compensation(SFAS No. 123), to stock-based employee compensation. The
Company has estimated the fair value of its option grants by using the binomial options pricing
model. First Quarter EndedMarch 27,
    
    
    March 28,2005
    
    
    2004(In thousands, exceptearnings per share)Net income, as reported
    
    $
    7,006
    
    
    $
    8,055Add: Stock-based compensation
expense included in reported net
income, net of related tax effects
    
    
    214
    
    
    
    244Deduct: Total stock-based
compensation expense determined
under fair value based method for
all awards, net of related tax
effects
    
    
    (907
    )
    
    
    (1,313
    )Pro forma net income
    
    $
    6,313
    
    
    $
    6,986Pro forma earnings per share:Basic   as reported
    
    $
    0.32
    
    
    $
    0.37Basic  pro forma
    
    $
    0.29
    
    
    $
    0.32Pro forma earnings per share:Diluted  as reported
    
    $
    0.32
    
    
    $
    0.37Diluted  pro forma
    
    $
    0.29
    
    
    $
    0.32
 Stock-based compensation cost associated with restricted stock grants, restricted stock
awards, and stock options granted to certain TNI employees, is reflected in net income for 2005 and
2004. New Accounting Pronouncements In December 2004 FASB issued SFAS No. 123-Revised, Accounting for Stock-Based Compensation
(SFAS No. 123R). This Statement supersedes APB 25, and its related implementation guidance. This
statement was originally effective as of the beginning of the first interim or annual reporting
period that begins after June 15, 2005. On April 14, 2005, the Securities and Exchange Commission
(the SEC) announced the adoption of a rule that defers the required effective date of SFAS No.
123R. The SEC rule provides that SFAS No. 123R is now effective for registrants as of the beginning
of the first fiscal year beginning after June 15, 2005, instead of at the beginning of the first
quarter after June 15, 2005 (as prescribed originally by the FASB statement). In addition, SFAS No.
123R amends SFAS No. 95, Statement of Cash Flows, to require that excess tax benefits be reported
as a financing cash inflow rather than as a reduction of taxes paid. SFAS No. 123R establishes standards for accounting for transactions in which an entity
exchanges its equity instruments for goods and services (primarily accounting transactions in which
an entity obtains employee services in share-based payment transactions, such as stock options).
SFAS No. 123R requires a public entity to measure the cost of employee services received in
exchange for an equity instrument based on the grant-date fair value of the -10-




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award. In general, the cost will be recognized over the period during which an employee is
required to provide the service in exchange for the award (usually the vesting period). The
fair-value-based methods in SFAS No. 123R are similar to the fair-value-based method in SFAS No.
123 in most respects. In March 2005 the SEC issued Staff Accounting Bulletin 107, Share Based
Payment(SAB 107), to provide public companies additional guidance in applying the provisions of
SFAS No. 123R. Among other things, SAB 107 describes the SECs staff expectations in determining
the assumptions that underlie the fair value estimates and discusses the interaction of SFAS No.
123R with certain existing SEC guidance. The Company has not determined which transition
alternative it will elect upon adoption of SFAS No. 123R and, as a result, the effect of this
adoption on the Companys consolidated financial condition or results of operations is not known at
this time. Based upon shares outstanding at December 26, 2004 and assuming no new grants,
significant forfeiture activity, or modifications, the Company estimates the after-tax 2005
fullyear impact of expensing stock options in accordance with SFAS No. 123R to be approximately
$3.6 million. In December 2004 FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets(SFAS No. 153).
This pronouncement amends APB No. 29, Accounting for Nonmonetary Transactions(APB 29). SFAS No.
153 is effective for nonmonetary exchanges occurring in fiscal periods beginning after June 15,
2005. SFAS No. 153 eliminates the exception for nonmonetary exchanges of similar productive assets
present in APB 29 and replaces it with a general exception for exchanges of nonmonetary assets that
do not have commercial substance (i.e., transactions that are not expected to result in significant
changes in the cash flows of the reporting entity). The adoption of SFAS No. 153 did not have a
material impact on the condensed consolidated financial statements. Use of Estimates The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and reported amounts of
revenues and expenses during the reporting period. Actual results may differ from those estimates. Reclassifications Certain reclassifications have been made to the 2004 condensed
consolidated financial statements to conform with the presentation made in 2005. OTHER On November 21, 2004, Pulitzer Inc. confirmed that it was engaged in the process of exploring
a range of strategic alternatives to enhance shareholder value, including a possible sale of the
company (the Strategic Review Process). On January 29, 2005, Pulitzer Inc. entered into an
Agreement and Plan of Merger (the Lee Merger Agreement) with Lee Enterprises, Incorporated, a
Delaware corporation (Lee), and LP Acquisition Corp., a Delaware corporation and wholly-owned
subsidiary of Lee. See Note 8 for a discussion of the Lee Merger Agreement. 2. TUCSON NEWSPAPER PARTNERSHIP In Tucson, Arizona, a separate partnership, TNI, acting as agent for the Companys
subsidiary, Star Publishing Company (Star Publishing), and Gannett Co. Inc. (Gannett), is
responsible for printing, delivery, advertising, and circulation of the Arizona Daily Star(the
Star)and the Tucson Citizen (the Citizen). TNI collects all of the receipts and income
relating to the Starand the Citizenand pays all operating expenses incident to the partnerships
operations and publication of the newspapers. Each newspaper is solely responsible for its own
news and editorial content. Net pretax income or net pretax loss of TNI is allocated equally to
Star Publishing and Gannett. The Companys 50 percent share of TNIs operating results is reported
as Equity in earnings of Tucson newspaper partnership in the accompanying condensed consolidated
statements of income. Summarized financial information for TNI is as follows: March 27,
    
    
    Dec. 26,2005
    
    
    2004(In thousands)Current assets
    
    $
    18,058
    
    
    $
    16,811Current liabilities
    
    $
    8,293
    
    
    $
    9,031Partners equity
    
    $
    9,765
    
    
    $
    7,780
 -11-




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First Quarter EndedMarch 27,
    
    
    March 28,2005
    
    
    2004(In thousands)Operating revenues
    
    $
    28,672
    
    
    $
    27,046Operating income
    
    $
    8,924
    
    
    $
    7,834Companys share of operating income
before depreciation, amortization, and
general and administrative expense (1)
    
    $
    4,462
    
    
    $
    3,917
  (1)
    Star Publishings depreciation, amortization, and general and administrative expenses
associated with the operation and administration of TNI are reported as operating expenses in
the Companys condensed consolidated statements of income. In aggregate, these amounts totaled
$813,000 and $765,000 for the first quarter of 2005 and 2004, respectively. 3. ACQUISITION OF PROPERTIES In the first quarter of 2005, Pulitzer Inc. subsidiaries acquired newspaper distribution
businesses for an aggregate price of approximately $4.6 million. In the first quarter of 2004,
Pulitzer Inc. subsidiaries acquired businesses, principally weekly newspapers and niche
publications that complement Pulitzer Newspapers, Inc. and its subsidiaries (the PNI Group)
daily newspaper operations in Coos Bay, Oregon and Bloomington, Illinois, for an aggregate price of
approximately $0.7 million. The pro forma results of these acquisitions were not material and,
therefore, are not presented. 4. GOODWILL AND OTHER INTANGIBLE ASSETS Changes in the carrying amounts of goodwill and other intangible assets of the Company
for the three months ended March 27, 2005 were as follows: OtherIntangible(In thousands)
    
    Goodwill
    
    
    AssetsBalance at December 26, 2004
    
    $
    817,362
    
    
    $
    34,279Additions during the period
    
    
    4,420
    
    
    
    169Amortization expense
    
    
    0
    
    
    
    (1,234
    )Balance at March 27, 2005
    
    $
    821,782
    
    
    $
    33,214
 Other intangible assets at March 27, 2005 and December 26, 2004 were as follows: Accumulated
    
    
    Net(In thousands)
    
    Cost
    
    
    Amortization
    
    
    CostMarch 27, 2005Other intangible assets:Advertising base
    
    $
    34,872
    
    
    $
    9,604
    
    
    $
    25,268Subscriber lists
    
    
    24,171
    
    
    
    17,544
    
    
    
    6,627Long-term pension asset
    
    
    1,063
    
    
    
    0
    
    
    
    1,063Non-compete agreements and other
assets
    
    
    5,428
    
    
    
    5,172
    
    
    
    256Total other intangible assets
    
    $
    65,534
    
    
    $
    32,320
    
    
    $
    33,214December 26, 2004Other intangible assets:Advertising base
    
    $
    34,872
    
    
    $
    9,173
    
    
    $
    25,699Subscriber lists
    
    
    24,002
    
    
    
    16,836
    
    
    
    7,166Long-term pension asset
    
    
    1,063
    
    
    
    0
    
    
    
    1,063Non-compete agreements and other
    
    
    5,428
    
    
    
    5,077
    
    
    
    351Total other intangible assets
    
    $
    65,365
    
    
    $
    31,086
    
    
    $
    34,279
 -12-




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Pretax amortization expense of other intangible assets for the first quarter ended March 27,
2005 was $1.2 million and annually over the next six years is estimated to be: $4.8 million for
2005, $4.6 million for 2006, $2.6 million for 2007, $2.1 million for 2008 and 2009, and $2.0
million for 2010. 5. COMPONENTS OF PENSION AND OTHER BENEFIT PLANS NET PERIODIC
BENEFIT COSTS The Company and its subsidiaries have several funded and unfunded noncontributory defined
benefit pension plans that together cover a significant portion of its employees. Benefits under
the plans are generally based on salary and years of service. The Companys liability and related
expense for benefits under the plans are recorded over the service period of active employees based
upon annual actuarial calculations. Plan funding strategies are influenced by tax regulations.
Plan assets consist primarily of domestic and foreign corporate equity securities, government and
corporate bonds, and cash. In addition, the Company provides retiree medical and life insurance benefits under varying
postretirement plans at several of its operating locations. The level and adjustment of
participant contributions vary depending on the specific postretirement plan. In addition, PD LLC
provides postemployment disability benefits to certain employee groups prior to retirement at the
St. Louis Post-Dispatch (Post-Dispatch). The Companys liability and related expense for
benefits under the postretirement plans are recorded over the service period of active employees
based upon annual actuarial calculations. The Company accrues postemployment disability benefits
when it becomes probable that such benefits will be paid and when sufficient information exists to
make reasonable estimates of the amounts to be paid. The Company uses a September 30 measurement date for all of its pension and postretirement
medical plan obligations. The cost components for the Companys pension and postretirement medical plans are as follows: PostretirementPension Benefits
    
    
    Medical BenefitsFirst Quarter EndedMarch 27,
    
    
    March 28,
    
    
    March 27,
    
    
    March 28,2005
    
    
    2004
    
    
    2005
    
    
    2004(In thousands)Service cost for benefits earned during the period
    
    $
    1,427
    
    
    $
    1,225
    
    
    $
    731
    
    
    $
    712Interest cost on projected benefit obligation
    
    
    2,372
    
    
    
    2,331
    
    
    
    1,554
    
    
    
    1,757Expected return on plan assets
    
    
    (2,760
    )
    
    
    (2,776
    )
    
    
    (479
    )
    
    
    (284
    )Amortization of prior service cost
    
    
    77
    
    
    
    78
    
    
    
    (72
    )
    
    
    0Amortization of loss
    
    
    569
    
    
    
    364
    
    
    
    139
    
    
    
    282Net periodic cost
    
    $
    1,685
    
    
    $
    1,222
    
    
    $
    1,873
    
    
    $
    2,467
 Based on the Companys forecast at March 27, 2005, the Company expects to contribute $1.4
million to its pension plans and $5.7 million to its postretirement plans in 2005. 6. COMMITMENTS AND CONTINGENCIES Capital Commitments As of March 27, 2005, the Company had construction and equipment commitments of approximately
$1.2 million. Investment Commitments As of March 27, 2005, the Company had unfunded capital contribution commitments of up to $3.7
million related to limited partnerships and other companies in which it is an investor. Merger Agreement Indemnification -13-




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Pursuant to an Amended and Restated Agreement and Plan of Merger, dated as of May 25, 1998
(the HTV Merger Agreement), by and among Pulitzer Inc., Pulitzer Publishing Company (Pulitzer
Inc.s predecessor) (Old Pulitzer) and Hearst-Argyle Television, Inc. (Hearst-Argyle) on March
18, 1999, Hearst-Argyle acquired, through the merger (the HTV Merger) of Old Pulitzer with and
into Hearst-Argyle, Old Pulitzers television and radio broadcasting operations (collectively, the
Broadcasting Business) in exchange for the issuance to Old Pulitzers stockholders of 37,096,774
shares of Hearst-Argyles Series A common stock. Old Pulitzers Broadcasting Business consisted of
nine network-affiliated television stations and five radio stations owned and operated by Pulitzer
Broadcasting Company and its wholly owned subsidiaries. Prior to the HTV Merger, Old Pulitzers
newspaper publishing and related new media businesses were contributed to Pulitzer Inc. in a
tax-free spin-off to Old Pulitzer stockholders (the Spin-off). The HTV Merger and Spin-off are
collectively referred to as the Broadcast Transaction. Pursuant to the Merger Agreement, Pulitzer Inc. is obligated to indemnify Hearst-Argyle
against losses related to: (i) on an after tax basis, certain tax liabilities, including (A) any
transfer tax liability attributable to the Spin-off, (B) with certain exceptions, any tax liability
of Old Pulitzer, or any subsidiary of Old Pulitzer attributable to any tax period (or portion
thereof) ending on or before the closing date of the HTV Merger, including tax liabilities
resulting from the Spin-off, and (C) any tax liability of Pulitzer Inc. or any subsidiary of
Pulitzer Inc.; (ii) liabilities and obligations under any employee benefit plans not assumed by
Hearst-Argyle; and (iii) certain other matters as set forth in the HTV Merger Agreement. Internal Revenue Service Matters In October 2001 the Internal Revenue Service (IRS) formally proposed that the taxable income
of Old Pulitzer for the tax year ended March 18, 1999 be increased by approximately $80.4 million
based on its assertion that Old Pulitzer was required to recognize a taxable gain in that amount as
a result of the Spin-off. Under the HTV Merger Agreement, the Company is obligated to indemnify
Hearst-Argyle against any tax liability attributable to the Spin-off and has the right to control
any proceedings relating to the determination of Old Pulitzers tax liability for such tax period.
In January 2002, the Company filed a formal written protest of the IRS proposed adjustment with
the IRS Appeals Office. On August 30, 2002, the Company, on behalf of Old Pulitzer, filed with the IRS amended federal
corporate income tax returns for the tax years ended December 1997 and 1998 and March 1999 in which
tax refunds in the aggregate amount of approximately $8.1 million, plus interest, were claimed.
These refund claims were based on the contention that Old Pulitzer was entitled to deduct certain
fees and expenses which it had not previously deducted and which Old Pulitzer had incurred in
connection with its investigation of several strategic alternatives and potential transactions
prior to its decision to proceed with the Broadcast Transaction. Under the HTV Merger Agreement,
the Company is entitled to any refunds recovered from the IRS as a result of these claims. In late 2003 the IRS Appeals Officer initially indicated that he would sustain substantially
the entire amount of the IRS proposed adjustment of Old Pulitzers taxable gain as a result of the
Spin-off. He further indicated that the refund claims filed by the Company on behalf of Old
Pulitzer for the December 1997 and 1998 and March 1999 tax years had been referred to the IRS
Examination Division for review. Subsequently, the Companys representatives furnished the IRS
Appeals Officer with additional information in support of the Companys position on the issue of
Old Pulitzers taxable gain as a result of the Spin-off and also requested, in view of this
additional information, that this issue be referred back to the IRS Examination Division for
consideration concurrently with the refund claims filed by the Company on behalf of Old Pulitzer
for the December 1997 and 1998 and March 1999 tax years. In July 2004, the IRS Appeals Officer
agreed to release jurisdiction over all issues relating to Old Pulitzers consolidated federal
income tax liability for the December 1997 and 1998 and March 1999 tax years back to the IRS
Examination Division. After July 2004 the Companys representatives engaged in a number of substantive discussions
with representatives of the IRS Examination Division seeking to resolve the above-described issues.
In January 2005, these discussions culminated in an agreement in principle under which the
Companys liability for Old Pulitzers net consolidated federal income tax deficiency (excluding
applicable interest) for 1998 and the tax year ended March 18, 1999, after taking into account the
effects of the refund claims, is not expected to exceed $200,000. This agreement in principle is
subject to the execution of a definitive agreement with the IRS and review by the U.S.
Congressional Joint Committee on Taxation. As a result of this agreement in principle, the Company
recorded in fiscal 2004 an adjustment of $375,000 (inclusive of related costs) to additional
paid-in capital in order to reflect its obligation to indemnify Hearst-Argyle for Old Pulitzers
liability for tax and interest for 1998 and the tax year ended March 18, 1999. -14-




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PD LLC Operating Agreement On May 1, 2000, Pulitzer Inc. and The Herald Company, Inc. (Herald) completed the transfer
of their respective interests in the assets and operations of the Post-Dispatchand certain related
businesses to a new joint venture (the Venture), known as PD LLC. Pulitzer Inc. is the managing
member of PD LLC. Under the terms of the operating agreement governing PD LLC (the Operating
Agreement), Pulitzer Inc. and another subsidiary hold a 95 percent interest in the results of
operations of PD LLC and Herald holds a 5 percent interest. Heralds 5 percent interest is
reported as Minority Interest in Net Earnings of Subsidiaries in the consolidated statements of
income. Also, under the terms of the Operating Agreement, Herald received on May 1, 2000 a cash
distribution of $306.0 million from PD LLC (the Initial Distribution). This distribution was
financed by a $306.0 million borrowing by PD LLC (the Loan). Pulitzer Inc.s entry into the
Venture was treated as a purchase for accounting purposes. During the first ten years of its term, PD LLC is restricted from making distributions (except
under specified circumstances), capital expenditures and member loan repayments unless it has set
aside out of its cash flow a reserve equal to the product of $15.0 million and the number of years
since May 1, 2000, but not in excess of $150.0 million (the Reserve). PD LLC is not required to
maintain the Reserve after May 1, 2010. On May 1, 2010, Herald will have a one-time right to
require PD LLC to redeem Heralds interest in PD LLC, together with Heralds interest, if any, in
another limited liability company in which Pulitzer Inc. is the managing member and which is
engaged in the business of delivering publications and products in the greater St. Louis
metropolitan area (DS LLC). The May 1, 2010 redemption price for Heralds interest will be
determined pursuant to a formula yielding an amount which will result in the present value to May
1, 2000 of the after-tax cash flows to Herald (based on certain assumptions) from PD LLC, including
the Initial Distribution and the special distribution described below, if any, and from DS LLC,
being equal to $275.0 million. In the event the transactions effectuated in connection with either the formation of the
Venture and the Initial Distribution or the organization of DS LLC are recharacterized by the IRS
as a taxable sale by Herald, with the result in either case that the tax basis of PD LLCs assets
increases and Herald is required to recognize taxable income as a result of such
recharacterization, Herald generally will be entitled to receive a special distribution from PD LLC
in an amount that corresponds, approximately, to the present value of the after-tax benefit to the
members of PD LLC of the tax basis increase. The adverse financial effect of any such special
distribution to Herald on PD LLC (and thus the Company) will be partially offset by the current and
deferred tax benefits arising as a consequence of the treatment of the transactions effectuated in
connection with the formation of the Venture and the Initial Distribution or the organization of DS
LLC as a taxable sale by Herald. The Company has been advised that the IRS, in the course of
examining the 2000 consolidated federal income tax return in which Herald was included, has
requested certain information and documents relating to the transactions effectuated in connection
with the formation of the Venture and the Initial Distribution. The Company expects to participate
in the formulation of Heralds response to this IRS request for information and documents. Upon termination of PD LLC and DS LLC, which will be on May 1, 2015 (unless Herald exercises
the redemption right described above), Herald will be entitled to the liquidation value of its
interests in PD LLC and DS LLC, to be paid in cash by Pulitzer Inc. That amount would be equal to
the amount of Heralds capital accounts, after allocating the gain or loss that would result from a
cash sale of PD LLC and DS LLCs assets for their fair market value at that time. Heralds share
of such gain or loss generally will be 5 percent, but will be reduced (but not below 1 percent) to
the extent that the present value to May 1, 2000 of the after-tax cash flows to Herald from PD LLC
and from DS LLC, including the Initial Distribution, the special distribution described above, if
any, and the liquidation amount (based on certain assumptions), exceeds $325.0 million. The actual amount payable to Herald either on May 1, 2010 or upon the termination of PD LLC
and DS LLC on May 1, 2015 will depend on such variables as future cash flows, the amounts of any
distributions to Herald prior to such payment, PD LLC and DS LLCs rate of growth and market
valuations of newspaper properties. While the amount of such payment cannot be predicted with
certainty, Pulitzer Inc. currently estimates (assuming a 5 percent annual growth rate in Heralds
capital accounts, no special distribution as described above and consistent newspaper property
valuation multiples) that the amount of such payment would not exceed $100 million. Pulitzer Inc.
further believes that it will be able to finance such payment either from available cash reserves
or with the proceeds of a debt issuance. The redemption of Heralds interest in PD LLC either on
May 1, 2010 or upon termination of PD LLC in 2015 is expected to generate significant deferred tax
benefits to the Company as a consequence of the resulting increase in the tax basis of the assets
owned by PD LLC and DS LLC and the related depreciation and amortization deductions. -15-




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Legal Contingencies On March 17, 2005, a group of independent delivery carriers engaged in the business of
delivering the Post-Dispatchpursuant to home delivery contracts (the Plaintiffs) filed a lawsuit
against Pulitzer Inc., PD LLC, and Suburban Journals of Greater St. Louis LLC (the Defendants) in
Missouri Circuit Court, 22nd Judicial Circuit (City of St. Louis, Missouri). The
Plaintiffs seek unspecified damages in excess of $25,000 plus punitive damages in an unspecified
amount. The Plaintiffs Petition sets forth three claims for relief. First, the Petition alleges
that the decision to purchase the Suburban Journals with its separate delivery system and separate
carriers breached the Plaintiffs exclusive territorial delivery rights under the Plaintiffs
contracts with PD LLC. The Petition further alleges that PD LLC and Suburban Journals of Greater
St. Louis LLC are alter egos of Pulitzer Inc., and that Pulitzer Inc. on its own and through its
control, ownership and authority over its alter egos, violated the exclusive territories of the
Plaintiffs. Finally, the Petition alleges that the purchase of the Suburban Journals and certain
other conduct constitute a tortious interference with the Plaintiffs contractual rights. The
Defendants will deny any liability, intend to vigorously defend the lawsuit and believe they have
meritorious defenses. While the ultimate outcome of litigation can not be predicted with certainty,
management, based on its understanding of the facts, does not believe that the ultimate outcome of
this litigation will have a material adverse effect on the Companys consolidated financial
position. A litigation settlement reserve relating to the potential settlement cost of this lawsuit
and related matters is included in Current Liabilities  Other on the Companys condensed
consolidated statements of financial position at March 27, 2005 and December 26, 2004. For additional legal information, see Note 8  Lee Merger Agreement. The Company has been involved, from time to time, in various claims and lawsuits incidental to
the ordinary course of its business, including such matters as libel, slander and defamation
actions, complaints alleging discrimination, and product distribution practices. While the ultimate
outcome of litigation cannot be predicted with certainty, management, based on its understanding of
the facts, does not believe the ultimate resolution of these matters will have a material adverse
effect on the Companys consolidated financial position or results of operations. However,
depending upon the period of resolution, such effects could be material to the consolidated
financial results of an individual period. 7. OPERATING REVENUES The Companys consolidated operating revenues consist of the following: First Quarter EndedMarch 27, 2005
    
    
    March 28, 2004(In thousands)Combined St. Louis operations
    
    $
    74,260
    
    
    $
    73,382Pulitzer Newspapers, Inc.
    
    
    31,883
    
    
    
    29,353Total
    
    $
    106,143
    
    
    $
    102,735
 8. LEE MERGER AGREEMENT On January 29, 2005, Pulitzer Inc. entered into the Lee Merger Agreement with Lee and LP
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Lee (the Purchaser).
The Lee Merger Agreement provides for the Purchaser to be merged with and into Pulitzer Inc. (the
Lee Merger), with Pulitzer Inc. as the surviving corporation. Each share of Pulitzer Inc.s
common stock and Class B common stock outstanding immediately prior to the effective time of the
Lee Merger will be converted into the right to receive from the surviving corporation in cash,
without interest, an amount equal to $64.00 per share. The total enterprise value of Pulitzer Inc.
under the Lee Merger Agreement is approximately $1.46 billion based upon a value of $64.00 per
share. The Lee Merger will effect a change of control of Pulitzer Inc. At the effective time of the
Lee Merger and as a result of the Lee Merger, Pulitzer Inc. will become an indirect, wholly-owned
subsidiary of Lee, the directors of the Purchaser will become the directors of the surviving
corporation, and the officers of the Purchaser will become the officers of the surviving
corporation. -16-




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Consummation of the Lee Merger is subject to customary conditions, including the adoption of the
Lee Merger Agreement by the required vote of the Companys stockholders. On February 22, 2005,
Pulitzer Inc. and Lee received from the Federal Trade Commission notification of early termination
of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 as amended.
The proposed transaction will be submitted to Pulitzer Inc.s stockholders for their consideration,
and Pulitzer Inc. will file with the SEC a definitive proxy statement to be used to solicit the
stockholders approval of the proposed transaction, as well as other relevant documents concerning
the proposed transaction. The Lee Merger Agreement includes customary representations, warranties and covenants by
Pulitzer Inc., including covenants (i) to cause a stockholders meeting to be called and held as
soon as reasonably practicable to vote on the adoption of the Lee Merger Agreement, (ii) to cease
immediately any discussions and negotiations with respect to an alternate acquisition proposal,
(iii) not to solicit any alternate acquisition proposal and, with certain exceptions, not to enter
into discussions concerning or furnish information in connection with any alternate acquisition
proposal, and (iv) subject to certain exceptions, for Pulitzer Inc.s board of directors not to
withdraw or modify its recommendation that the stockholders vote to adopt the Lee Merger Agreement.
The Lee Merger Agreement contains certain termination rights for both Pulitzer Inc. and Lee and
further provides that, upon termination of the Lee Merger Agreement under specified circumstances,
Pulitzer Inc. may be required to pay Lee a fee of up to $55 million. On April 27, 2005, the plaintiffs in the shareholder litigation pending in The Court of
Chancery of the State of Delaware in New Castle County captioned In Re Pulitzer Inc.
Shareholder Litigation, Civil Action No. 1063-N (the Consolidated Action) filed a
consolidated and amended class action complaint (the Amended Complaint). The Amended Complaint
purports to be a class action brought on behalf of all public
stockholders of Pulitzer Inc. common stock other than the defendants
(Pulitzer Inc., and the members of its board of directors) and any related or affiliated party. The
Amended Complaint asserts, among other things, that: (i) the defendants have breached their
fiduciary and other common law duties in connection with the Lee Merger Agreement; (ii) the
defendants have failed to maximize stockholder value by, among other things, benefiting themselves
at the expense of Pulitzer Inc.s public stockholders and (iii) defendants have disseminated to
Pulitzer Inc.s public stockholders incomplete, inaccurate and/or misleading information concerning
the Lee Merger and matters relevant to an informed decision on their investment in Pulitzer Inc.,
in that the disclosure is materially incomplete or misleading with respect to, among other things,
the following: (a) the background of the [Lee] Merger; (b) the compensation and/or other benefits
that certain officers and directors of Pulitzer [Inc.] will receive in connection with the [Lee]
Merger; (c) the advisors retained by [Pulitzer Inc.] in connection with the [Lee] Merger and the
fees paid by Pulitzer [Inc.] to those advisors; and (d) the analyses performed by Goldman Sachs.
Plaintiffs seek a preliminary and permanent injunction against the Lee Merger, as well as monetary
damages. The Company believes the allegations in the Amended Complaint are without merit. Pulitzer Inc. has agreed to pay the attorneys fees and expenses incurred in defending the
members of its board of directors in this or related legal actions, and each member of the board
of directors has undertaken and agreed to repay his or her share of such fees and other expenses if
it shall be ultimately determined that he or she is not entitled to be indemnified by Pulitzer Inc. The boards of directors of Pulitzer Inc. and Lee have unanimously approved the Lee Merger
Agreement. The Lee Merger is expected to close by the end of the second calendar quarter of 2005. In conjunction with Pulitzer Inc.s Strategic Review Process, the Company entered into
transaction-related and retention incentive agreements with certain executive officers and other
key employees aggregating up to approximately $11.8 million. Payment of these incentives is
contingent upon consummation of a transaction involving the sale or merger of the Company (which
for this purpose includes the Lee Merger). On December 28, 2004, the Company terminated its non-qualified deferred compensation plan and
distributed the participants account balances aggregating approximately $5.6 million. The Lee Merger Agreement provides that the Company will (i) convert outstanding vested options
and restricted stock units into cash (with an estimated total net cost of approximately $40.1
million); (ii) convert outstanding unvested options and restricted stock units into cash (with an
estimated total net cost of approximately $11.9 million); and (iii) seek to terminate the split
dollar life insurance arrangements maintained with five current and former executives (with an
estimated total cost of up to approximately $6.3 million (approximately $4.3 million of which is
included in the policies cash values)). The Lee Merger Agreement also provides for the conversion
of the Pulitzer Inc. Supplemental Executive Benefit Pension Plan (the Supplemental Plan) into an
individual account plan which would be liquidated on May 1, 2008 or earlier under certain
circumstances. The aggregate amount of the initial individual account balances will be
approximately equal to the amount of the Supplemental Plan liability reflected on the Companys
financial statements (exclusive of potential severance-related enhancements that may be -17-




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triggered under the Pulitzer Inc. Executive Transition Plan adopted in 2001 and related
agreements (the Executive Transition Plan)). Under the Lee Merger Agreement, certain consulting
agreements will terminate upon the consummation of the Lee Merger with a final terminating payment
of approximately $0.7 million. The Company is contractually committed to make contingent payments totaling an estimated $16.2
million for financial advisory, legal, consulting and other professional services provided in
connection with the Strategic Review Process and the Lee Merger, all of which are contingent upon
consummation of the Lee Merger. Severance and severance-related obligations may arise in conjunction with the Lee Merger,
including, without limitation, obligations under the Executive Transition Plan, which provides
severance and other payments and benefits upon termination of a participating executives
employment with the Company in conjunction with a change in control. The Lee Merger will constitute
a change in control for purposes of the Executive Transition Plan. The effective tax rates for the first quarters of 2005 and 2004 were 44.9 percent and 37.0
percent, respectively. The increase in the first quarter 2005 effective tax rate resulted,
principally, from the non-deductibility of certain previously
recorded expenditures associated with the Lee Merger and
the related reduction of certain deferred tax assets, (approximately $1.0 million). * * * * * * -18-




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Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS Statements included in this Quarterly Report on Form 10-Q concerning the Companys business
outlook or future economic performance, anticipated profitability, revenues, expenses or other
financial items, together with other statements that are not historical facts, are forward-looking
statements as that term is defined under the Federal Securities Laws. Forward-looking statements
also include those statements relating to the expected completion and timing of the Lee Merger (as
defined below) and other information related to the Lee Merger. Forward-looking statements are
based on current management expectations and are subject to risks, uncertainties and other factors,
many of which are beyond our ability to control or predict and which could cause actual results or
events to differ materially from those anticipated or stated in such statements. Such risks,
uncertainties and other factors include, but are not limited to, industry cyclicality, the seasonal
nature of the business, changes in pricing or other actions by competitors or suppliers (including
newsprint suppliers), outcome of labor negotiations, capital or similar requirements, and general
economic conditions, any of which may impact advertising and circulation revenues and various types
of expenses, as well as other risks detailed in the Companys filings with the Securities and
Exchange Commission including this Quarterly Report on Form 10-Q. Although the Company believes
that the expectations reflected in forward-looking statements are reasonable, it cannot guarantee
future results, levels of activity, performance or achievements. Accordingly, investors are
cautioned not to place undue reliance on any such forward-looking statements, and the Company
disclaims any obligation to update the information contained herein or to publicly announce the
result of any revisions to such forward-looking statements, or to make any other forward-looking
statements, to reflect future events or developments. GENERAL Pulitzer Inc. (together with its subsidiaries and affiliated entities, the Company) is a
newspaper publishing company with integrated Internet operations in 14 United States markets, the
largest of which is St. Louis, Missouri. For the first quarter of 2005, the Companys St. Louis
operations contributed approximately 70 percent of reported revenue. Pulitzer Inc. is the successor to the company founded by the first Joseph Pulitzer in 1878 to
publish the original St. Louis Post-Dispatch(the Post-Dispatch). The Company and its
predecessors have operated continuously since 1878 with the involvement of the Pulitzer family.
Michael E. Pulitzer, a grandson of the founder, currently serves as Chairman of the Board of the
Company. The Companys newspaper holdings include operations in St. Louis, Missouri, where its
subsidiary, St. Louis Post-Dispatch LLC (PD LLC), publishes the Post-Dispatch, the only major
daily newspaper serving the greater St. Louis metropolitan area, and in Tucson, Arizona, where its
subsidiary, Star Publishing Company (Star Publishing), publishes the Arizona Daily Star(the
"Star). In Tucson, Star Publishing shares, on an equal basis, the combined results of the Starand
the Tucson Citizen(the Citizen),published by the Gannett Co., Inc. (Gannett). The St. Louis newspaper operations include the Suburban Journals (the Suburban Journals),
acquired by Suburban Journals of Greater St. Louis LLC in August 2000. The Suburban Journals are a
group of 36 weekly papers and various niche publications that focus on providing local news and
editorial content to the communities that they serve and have an average unduplicated circulation
of approximately 0.7 million resulting in the delivery of approximately 1.2 million copies per
week. As a result of the May 1, 2000 transaction that created PD LLC, PD LLC operates the
Post-Dispatch.Pulitzer Inc. and one of its subsidiaries hold a 95 percent interest in the results
of PD LLC operations. Prior to May 1, 2000, Pulitzer Inc. shared the operating profits and losses
of the Post-Dispatchon a 50-50 basis with The Herald Company, Inc. (Herald). Pulitzer Inc.s wholly owned subsidiary, Pulitzer Newspapers, Inc., and its subsidiaries
(collectively, PNI) publish 12 dailies that serve markets in the Midwest, Southwest and West, as
well as more than 75 weekly newspapers, shoppers and niche publications. The Companys revenues are derived primarily from advertising and circulation, which have
respectively averaged 78.9 percent and 19.3 percent of total revenue over the five years ending
December 2004. Advertising -19-




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rates and rate structures and resulting revenues vary among publications based on, among other
things, circulation, type of advertising, local market conditions and competition. Company publications compete for readership and advertising revenues in varying degrees with
other metropolitan, suburban, neighborhood and national newspapers and other publications as well
as with television, radio, cable, Internet, and other new-media technologies, direct mail, yellow
page directories, billboards and other news and advertising media. Competition for advertising is
based on audience size and composition, circulation levels, readership demographics, price and
advertiser results. Competition for circulation is generally based on the content, journalistic
quality and price of the publication. Competition for circulation and advertising may include some
or all of the following: paid suburban daily newspapers, independently owned community newspapers
and shoppers, yellow pages and direct mail advertisers. The community newspapers and shoppers and
direct mail companies generally target selected geographic markets throughout their respective
distribution areas. The Companys business tends to be seasonal, with peak revenues and profits generally
occurring in the fourth and, to a lesser extent, second quarters of each year as a result of
increased advertising activity during the Christmas and spring holiday periods. The first quarter
is historically the weakest quarter for revenues and profits. Lee Merger Agreement On January 29, 2005, Pulitzer Inc. entered into an Agreement and Plan of Merger (the Lee
Merger Agreement) with Lee Enterprises, Incorporated, a Delaware corporation (Lee), and LP
Acquisition Corp., a Delaware corporation and an indirect wholly-owned subsidiary of Lee (the
Purchaser). The Lee Merger Agreement provides for the Purchaser to be merged with and into
Pulitzer Inc. (the Lee Merger), with Pulitzer Inc. as the surviving corporation. Each share of
Pulitzer Inc.s common stock and Class B common stock outstanding immediately prior to the
effective time of the Lee Merger will be converted into the right to receive from the surviving
corporation in cash, without interest, an amount equal to $64.00 per share. The total enterprise
value of Pulitzer Inc. under the Lee Merger Agreement is approximately $1.46 billion based upon a
value of $64.00 per share. The Lee Merger will effect a change of control of Pulitzer Inc. At the effective time of the
Lee Merger and as a result of the Lee Merger, Pulitzer Inc. will become an indirect, wholly-owned
subsidiary of Lee, the directors of the Purchaser will become the directors of the surviving
corporation, and the officers of the Purchaser will become the officers of the surviving
corporation. Consummation of the Lee Merger is subject to customary conditions, including the adoption of
the Lee Merger Agreement by the required vote of the Companys stockholders. On February 22, 2005,
Pulitzer Inc. and Lee received from the Federal Trade Commission notification of early termination
of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 as amended.
The proposed transaction will be submitted to Pulitzer Inc.s stockholders for their consideration,
and Pulitzer Inc. will file with the SEC a definitive proxy statement to be used to solicit the
stockholders approval of the proposed transaction, as well as other relevant documents concerning
the proposed transaction. The Lee Merger Agreement includes customary representations, warranties and covenants by
Pulitzer Inc., including covenants (i) to cause a stockholders meeting to be called and held as
soon as reasonably practicable to vote on the adoption of the Lee Merger Agreement, (ii) to cease
immediately any discussions and negotiations with respect to an alternate acquisition proposal,
(iii) not to solicit any alternate acquisition proposal and, with certain exceptions, not to enter
into discussions concerning or furnish information in connection with any alternate acquisition
proposal, and (iv) subject to certain exceptions, for Pulitzer Inc.s board of directors not to
withdraw or modify its recommendation that the stockholders vote to adopt the Lee Merger Agreement.
The Lee Merger Agreement contains certain termination rights for both Pulitzer Inc. and Lee and
further provides that, upon termination of the Lee Merger Agreement under specified circumstances,
Pulitzer Inc. may be required to pay Lee a fee of up to $55 million. On April 27, 2005, the plaintiffs in the shareholder litigation pending in The Court of Chancery of
the State of Delaware in New Castle County captioned In Re Pulitzer Inc. Shareholder
Litigation, Civil Action No. 1063-N (the Consolidated Action) filed a consolidated and
amended class action complaint (the Amended Complaint). The Amended Complaint purports to be a
class action brought on behalf of all public stockholders of Pulitzer
Inc. common stock other than the defendants (Pulitzer Inc., and the
members of its board of directors) and any related or affiliated party. The Amended Complaint
asserts, among other things, that: (i) the defendants have breached their fiduciary and other
common law duties in connection with the Lee Merger Agreement; (ii) the defendants have failed to
maximize stockholder value by, among other things, benefiting themselves at the expense of Pulitzer
Inc.s public stockholders and (iii) defendants have disseminated to Pulitzer Inc.s public
stockholders incomplete, inaccurate and/or misleading information concerning -20-




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the Lee Merger and matters relevant to an informed decision on their investment in Pulitzer Inc.,
in that the disclosure is materially incomplete or misleading with respect to, among other things,
the following: (a) the background of the [Lee] Merger; (b) the compensation and/or other benefits
that certain officers and directors of Pulitzer [Inc.] will receive in connection with the [Lee]
Merger; (c) the advisors retained by [Pulitzer Inc.] in connection with the [Lee] Merger and the
fees paid by Pulitzer [Inc.] to those advisors; and (d) the analyses performed by Goldman Sachs.
Plaintiffs seek a preliminary and permanent injunction against the Lee Merger, as well as monetary
damages. The Company believes the allegations in the Amended Complaint are without merit. Pulitzer Inc. has agreed to pay the attorneys fees and expenses incurred in defending the
members of its board of directors in this or related legal actions, and each member of the board
of directors has undertaken and agreed to repay his or her share of such fees and other expenses if
it shall be ultimately determined that he or she is not entitled to be indemnified by Pulitzer Inc. The boards of directors of Pulitzer Inc. and Lee have unanimously approved the Lee Merger
Agreement. The Lee Merger is expected to close by the end of the second calendar quarter of 2005. Acquisition of Properties In the first quarter of 2005, Pulitzer Inc. subsidiaries acquired newspaper distribution
businesses for an aggregate price of approximately $4.6 million. In the first quarter of 2004,
Pulitzer Inc. subsidiaries acquired businesses, principally weekly newspapers and niche
publications that complement Pulitzer Newspapers, Inc. and its subsidiaries (the PNI Group)
daily newspaper operations in Coos Bay, Oregon and Bloomington, Illinois, for an aggregate price of
approximately $0.7 million. The pro forma results of these acquisitions were not material and,
therefore, are not presented. Critical Accounting Policies The Company regularly reviews its selection and application of significant accounting policies
and related financial disclosures. The application of these accounting policies requires that
management make estimates and judgments. The estimates that affect the application of the most
critical accounting policies and require the most significant judgments are outlined in
Managements Discussion and Analysis of Financial Condition and Results of Operations  Critical
Accounting Policies  contained in our Annual Report on Form 10-K for the year ended December 26,
2004. FIRST QUARTER ENDED MARCH 27, 2005 COMPARED WITH FIRST QUARTER ENDED MARCH 28, 2004 Executive Overview Operating revenue increased 3.3 percent to $106.1 million for the first quarter of 2005 versus
$102.7 million in 2004, reflecting a 5.0 percent increase in advertising revenue partially offset
by a 3.2 percent decrease in circulation revenue. The advertising increase resulted from: (a) a 6.0
percent increase in retail advertising revenue, including retail preprints, reflecting strong
growth in retail at PNI and increased preprint revenues from Local Values, the Post-Dispatchs
direct mail initiative, partially offset by weakness in the major department store category in St.
Louis and advertising revenue shifts related to the earlier observation of the Easter holiday in
2005 compared to 2004; (b) a 3.4 percent increase in classified, reflecting a 12.5 percent increase
in recruitment advertising and a 1.2 percent increase in real estate advertising, partially offset
by a 5.7 percent decrease in automotive advertising; and (c) a 6.3 percent increase in national
revenue, including national preprints, principally from strength in the telecommunication,
pharmaceutical and packaged goods categories. The 3.2 percent circulation revenue decrease in the
first quarter of 2005 resulted, principally, from lower Sunday circulation at the Post-Dispatchand
the absence of favorable circulation adjustments processed in St. Louis during the first quarter of
2004. Operating expense for the first quarter of 2005 increased 3.8 percent to $93.8 million,
principally due to: (a) expenses associated with the exploration of a range of strategic
alternatives to enhance shareholder value, including expenses related to the Lee Merger; and (b)
increased postage, production, and marketing expense related to Local Values. Equity in the earnings of TNI increased 13.9 percent to $4.5 million in the first quarter of
2005 from $3.9 million in the comparable 2004 period. TNI operating revenue increased 6.0 percent
for the first quarter of 2005. Advertising revenue increased 7.9 percent due, principally, to
strength in classified advertising revenue, primarily in -21-




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the employment category, and increased retail run-of-press and preprint advertising revenue.
TNI operating expense increased 3.0 percent due, in part, to price-related increases in newsprint
expense and increased postage expense. First-quarter 2005 operating income increased to $16.8 million, or 3.4 percent, from $16.2
million in the first quarter of 2004 reflecting the revenue and expense fluctuations previously
discussed as well as the increase in the equity earnings from TNI. First-quarter 2005 net income decreased to $7.0 million, or $0.32 per diluted share, compared
to $8.1 million, or $0.37 per diluted share, for the first quarter of 2004. This decrease in 2005
net income was principally due to $1.4 million in additional income tax expense related to the
non-deductibility of certain expenses associated with the Lee Merger, partially offset by increased
deductions associated with the 2004 American Jobs Creations Act. Operating Results Operating revenue for the first quarter of 2005 increased to $106.1 million, or 3.3 percent,
from $102.7 million in the first quarter of 2004. Advertising revenue increased by 5.0 percent in
the first quarter of 2005 to $84.5 million from $80.5 million in the comparable 2004 quarter.
Retail advertising revenue, including retail preprints, increased 6.0 percent to $43.1 million in
the first quarter of 2005 from $40.7 million in the comparable period of the prior year. The
increase was driven, in part, by thirteen weeks of Local Values revenue in 2005 versus three weeks
in 2004 (Local Values, a direct mail product of the Post-Dispatch, was launched in March 2004).
Additionally, PNI retail advertising revenue, including preprints, increased 6.6 percent. These
revenue increases were partially offset by weakness in the major department store category in St.
Louis and advertising revenue shifts related to the earlier observation of the Easter holiday in
2005 compared to 2004. Retail preprint revenue increased 19.0 percent in the first quarter of
2005, with increases of 26.3 percent in St. Louis and 4.3 percent at PNI. National advertising revenue, including national preprints, increased 6.3 percent in the first
quarter of 2005, to $8.0 million compared to $7.5 million in the first quarter of 2004. The
increase resulted, principally, from strength in the telecommunication, pharmaceutical, and
packaged goods categories in St. Louis. National advertising revenue increased 4.8 percent in St.
Louis and 32.0 percent at PNI (although on a smaller base) in the first quarter of 2005. First-quarter 2005 classified advertising revenue increased 3.4 percent to $33.3 million from
$32.2 million in the first quarter of 2004. Help wanted and real estate increases were partially
offset by weakness in the automotive category. The Companys classified advertising revenue
percentage changes for the first quarter of 2005 versus the comparable period of 2004 are
summarized in the table below: TotalPulitzer
    
    St. Louis
    
    PNIClassified advertising revenueFirst-Quarter 2005 vs. First-Quarter
    
    percentage change from comparable2004
    
    prior-year periodHelp Wanted
    
    +12.5%
    
    +4.9%
    
    +37.1%Automotive
    
    -5.7%
    
    -5.3%
    
    -7.0%Real Estate
    
    +1.2%
    
    -7.6%
    
    +20.9%Total Classified
    
    +3.4%
    
    -1.7%
    
    +17.3%
 Circulation revenues decreased 3.2 percent, in the first quarter of 2005 to $19.9 million from
$20.6 million in the first quarter of 2004. The circulation revenue decrease resulted, principally,
from lower Sunday circulation at the Post-Dispatchand the absence of favorable circulation
adjustments processed in St. Louis during the first quarter of 2004. Other publishing revenues
increased 2.2 percent to $1.7 million in the first quarter of 2005. Operating expense increased 3.8 percent in the first quarter of 2005 to $93.8 million compared
to $90.4 million in the first quarter of 2004. Labor related costs increased 2.4 percent,
reflecting inflationary increases in salary and benefit expense. These increases were partially
offset by a 1.6 percent reduction in full-time equivalent employees (FTEs) related to improved
production and distribution efficiencies in St. Louis and operating efficiencies at PNI resulting
from the combination of certain weekly and daily newspaper operations. -22-




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Newsprint expense decreased 0.4 percent for the first quarter of 2005 compared to the same
period of 2004. Newsprint price increases of 8.6 percent were offset by a reduction in consumption
principally associated with decreased Sunday circulation and lower advertising linage at the
Post-Dispatch. Other operating expenses increased 8.6 percent to $30.5 million in the first quarter of 2005
from $28.1 million in the comparable quarter of the prior year due, principally, to: (a) expenses
associated with the exploration of a range of strategic alternatives to enhance shareholder value,
including expenses associated with the Lee Merger Agreement; and (b) increased postage, production,
and marketing expense related to Local Values. Depreciation and amortization expense decreased $0.1 million to $4.9 million in the first
quarter of 2005 compared to the comparable period of 2004. Equity in earnings of TNI increased 13.9 percent to $4.5 million from $3.9 million in the
first quarter of 2005 due, primarily, to increased advertising revenue (principally classified and
preprint revenue). These revenue increases were partially offset by price related increases in
newsprint and increased postage expense. First-quarter 2005 operating income increased 3.4 percent to $16.8 million from $16.2 million
in the first quarter of 2004. Non-Operating Items Interest expense, net of interest income, for the first quarter of 2005 was unchanged at $3.5
million compared to the comparable quarter of 2004. Reduced savings from the Companys interest
rate swaps were offset by higher levels of and yields from invested funds. There was no gain or loss on the sale of marketable securities in the first quarter of 2005.
Results for the first quarter of 2004 included a pretax gain of $0.6 million on the sale of
marketable securities. Results for the first quarters of 2005 and 2004 included pretax charges of $79,000 and
$42,000, respectively, to adjust the carrying value of certain non-operating investments. The effective tax rates for the first quarters of 2005 and 2004 were 44.9 percent and 37.0
percent, respectively. The increase in the first quarter 2005 effective tax rate resulted,
principally, from the non-deductibility of certain expenditures associated with the Lee Merger and
the related reduction of certain previously recorded deferred tax assets, (approximately $1.0 million), partially
offset by manufacturing tax incentives associated with the 2004 American Jobs Creations Act. Net Income For the first quarter 2005, the Company reported net income of $7.0 million, or $0.32 per
diluted share, compared to $8.1 million, or $0.37 per diluted share, in the comparable quarter of
2004. LIQUIDITY AND CAPITAL RESOURCES As of March 27, 2005, the Company had an unrestricted cash and marketable securities balance
of $231.4 million compared to $207.3 million as of December 26, 2004. At both March 27, 2005 and December 26, 2004, the Company had $306.0 million of outstanding
debt pursuant to a loan agreement between PD LLC and a group of institutional lenders led by
Prudential Capital Group (the Loan). The aggregate principal amount of the Loan is payable on
April 28, 2009, and bears interest at an annual rate of 8.05 percent. The agreements with respect to the Loan (the Loan Agreements) contain certain covenants and
conditions, including the maintenance of cash flow and various other financial ratios, minimum net
worth requirements and limitations on the incurrence of other debt. In addition, the Loan
Agreements and the PD LLC Operating Agreement (the Operating Agreement) require that PD LLC
maintain a minimum reserve balance consisting of cash and investments in U.S. government
securities, totaling approximately $73.6 million as of March 27, 2005. The Loan Agreements and the
Operating Agreement provide for a $3.75 million quarterly increase in the minimum reserve balance
through May 1, 2010, by which time the amount will total $150.0 million. There is no requirement
for the Company to maintain the reserve balance subsequent to May 1, 2010. -23-




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The Company expects to spend approximately $10.0 million to $12.0 million on property, plant
and equipment in 2005. As of March 27, 2005, the Company had capital commitments for buildings and
equipment replacements of approximately $1.2 million. In addition, as of March 27, 2005, the
Company had an unfunded capital contribution commitment of approximately $3.7 million related to
its investment in several limited partnerships and companies not associated with or involved in the
Companys operations. In order to build a stronger, more direct relationship with the readers of the Post-Dispatch
and increased circulation,PD LLC has purchased a number of distribution businesses from
independent carriers and dealers over the past six years, and, subject to the provisions of the Lee
Merger Agreement, it may continue to purchase additional distribution businesses from time to time
in the future. As of March 27, 2005, PD LLC owned circulation routes covering approximately 73
percent of the Post-Dispatchsaverage home delivery and approximately 82 percent of average single
copy distribution in the newspapers designated market. The Companys Board of Directors previously authorized the repurchase of up to $100.0 million
of Pulitzer Inc.s outstanding capital stock. The Companys repurchase program provides for the
purchase of both common and Class B common shares in either the open market or in privately
negotiated transactions. As of March 27, 2005, the Company had repurchased under this authority
1,000,000 shares of Class B common stock and 536,933 shares of common stock for a combined purchase
price of $62.4 million, leaving $37.6 million in remaining share repurchase authority. The Lee
Merger Agreement restricts the acquisition by the Company of shares of its capital stock except as
otherwise contemplated thereunder or as consented to by Lee. The Company generally expects to generate sufficient cash from operations to cover capital
expenditures, working capital requirements, stock repurchases, and dividend payments. Cash flows
from operations are dependent upon, among other things, the continued acceptance of newspaper
advertising at current or increased levels and the availability of raw materials, principally
newsprint. CASH FLOWS Cash flow from operations is the Companys primary source of liquidity. Cash provided from
operating activities for the first three months of 2005 was $31.0 million compared to $27.3 million
in 2004. The increase resulted, principally, from an increase in deferred income taxes resulting,
primarily, from increased business acquisitions in the first quarter of 2005 compared to the same
period of 2004 and the payment of deferred compensation balances, which decreased taxable income
and taxes payable. This increase was partially offset by a decrease in net income for the first
three months of 2005 compared with the comparable 2004 period. Cash provided from investing activities during the first three months of 2005 was $18.7
million compared to $10.3 million used in the first three months 2004. The Company had $26.7
million in net sales of marketable securities in 2005 compared to $5.2 million in net purchases of
marketable securities in the first three months of 2004, resulting in a $31.9 million increase in
cash flows from investing activities in 2005. This increase was partially offset by $3.9 million
increase in cash used to purchase newspaper distribution businesses in St. Louis in the first three
months of 2005. Cash provided from financing activities during the first three months of 2005 was $2.5 million
compared to $1.5 million used in the first three months of 2004. The increase in cash flows was
principally due to a $4.1 million increase in proceeds from the exercise of stock options. OTHER Merger Agreement Indemnification Pursuant to an Amended and Restated Agreement and Plan of Merger, dated as of May 25, 1998
(the HTV Merger Agreement), by and among Pulitzer Inc., Pulitzer Publishing Company (Pulitzer
Inc.s predecessor) (Old Pulitzer) and Hearst-Argyle Television, Inc. (Hearst-Argyle) on March
18, 1999, Hearst-Argyle acquired, through the merger (the HTV Merger) of Old Pulitzer with and
into Hearst-Argyle, Old Pulitzers television and radio broadcasting operations (collectively, the
Broadcasting Business) in exchange for the issuance to Old Pulitzers stockholders of 37,096,774
shares of Hearst-Argyles Series A common stock. Old Pulitzers Broadcasting Business consisted of
nine network-affiliated television stations and five radio stations owned and operated by Pulitzer
Broadcasting Company and its wholly owned subsidiaries. Prior to the HTV Merger, Old Pulitzers
newspaper publishing and related new media businesses were contributed to the Company in a tax-free
spin-off to Old Pulitzer stockholders (the Spin-off). The HTV Merger and Spin-off are
collectively referred to as the Broadcast Transaction. -24-




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Pursuant to the HTV Merger Agreement, Pulitzer Inc. is obligated to indemnify Hearst-Argyle
against losses related to: (i) on an after tax basis, certain tax liabilities, including (A) any
transfer tax liability attributable to the Spin-off, (B) with certain exceptions, any tax liability
of Old Pulitzer, or any subsidiary of Old Pulitzer attributable to any tax period (or portion
thereof) ending on or before the closing date of the HTV Merger, including tax liabilities
resulting from the Spin-off, and (C) any tax liability of Pulitzer Inc. or any subsidiary of
Pulitzer Inc.; (ii) liabilities and obligations under any employee benefit plans not assumed by
Hearst-Argyle; and (iii) certain other matters as set forth in the HTV Merger Agreement. Internal Revenue Service Matters In October 2001 the Internal Revenue Service (IRS) formally proposed that the taxable income
of Old Pulitzer for the tax year ended March 18, 1999 be increased by approximately $80.4 million
based on its assertion that Old Pulitzer was required to recognize a taxable gain in that amount as
a result of the Spin-off. Under the HTV Merger Agreement, the Company is obligated to indemnify
Hearst-Argyle against any tax liability attributable to the Spin-off and has the right to control
any proceedings relating to the determination of Old Pulitzers tax liability for such tax period.
In January 2002, the Company filed a formal written protest of the IRS proposed adjustment with
the IRS Appeals Office. On August 30, 2002, the Company, on behalf of Old Pulitzer, filed with the IRS amended federal
corporate income tax returns for the tax years ended December 1997 and 1998 and March 1999 in which
tax refunds in the aggregate amount of approximately $8.1 million, plus interest, were claimed.
These refund claims were based on the contention that Old Pulitzer was entitled to deduct certain
fees and expenses which it had not previously deducted and which Old Pulitzer had incurred in
connection with its investigation of several strategic alternatives and potential transactions
prior to its decision to proceed with the Broadcast Transaction. Under the HTV Merger Agreement,
the Company is entitled to any refunds recovered from the IRS as a result of these claims. In late 2003 the IRS Appeals Officer initially indicated that he would sustain substantially
the entire amount of the IRS proposed adjustment of Old Pulitzers taxable gain as a result of the
Spin-off. He further indicated that the refund claims filed by the Company on behalf of Old
Pulitzer for the December 1997 and 1998 and March 1999 tax years had been referred to the IRS
Examination Division for review. Subsequently, the Companys representatives furnished the IRS
Appeals Officer with additional information in support of the Companys position on the issue of
Old Pulitzers taxable gain as a result of the Spin-off and also requested, in view of this
additional information, that this issue be referred back to the IRS Examination Division for
consideration concurrently with the refund claims filed by the Company on behalf of Old Pulitzer
for the December 1997 and 1998 and March 1999 tax years. In July 2004, the IRS Appeals Officer
agreed to release jurisdiction over all issues relating to Old Pulitzers consolidated federal
income tax liability for the December 1997 and 1998 and March 1999 tax years back to the IRS
Examination Division. After July 2004 the Companys representatives engaged in a number of substantive discussions
with representatives of the IRS Examination Division seeking to resolve the above-described issues.
In January 2005, these discussions culminated in an agreement in principle under which the
Companys liability for Old Pulitzers net consolidated federal income tax deficiency (excluding
applicable interest) for 1998 and for the tax year ended March 18, 1999, after taking into account
the effects of the refund claims, is not expected to exceed $200,000. This agreement in principle
is subject to execution of a definitive agreement with the IRS and review by the U.S. Congressional
Joint Committee on Taxation. As a result of this agreement in principle, the Company recorded in
fiscal 2004 an adjustment of $375,000 (inclusive of related costs) to additional paid-in capital in
order to reflect its obligation to indemnify Hearst-Argyle for Old Pulitzers liability for tax and
interest for 1998 and the tax year ended March 18, 1999. PD LLC Operating Agreement On May 1, 2000, Pulitzer Inc. and The Herald Company, Inc. (Herald) completed the transfer
of their respective interests in the assets and operations of the Post-Dispatchand certain related
businesses to a new joint venture (the Venture), known as PD LLC. Pulitzer Inc. is the managing
member of PD LLC. Under the terms of the operating agreement governing PD LLC (the Operating
Agreement), Pulitzer Inc. and another subsidiary hold a 95 percent interest in the results of
operations of PD LLC and Herald holds a 5 percent interest. Heralds 5 percent interest is
reported as Minority Interest in Net Earnings of Subsidiaries in the consolidated statements of
income. Also, under the terms of the Operating Agreement, Herald received on May 1, 2000 a cash
distribution of $306.0 million from PD LLC (the Initial Distribution). This distribution was
financed by a $306.0 million borrowing by PD LLC (the Loan). Pulitzer Inc.s entry into the
Venture was treated as a purchase for accounting purposes. -25-




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During the first ten years of its term, PD LLC is restricted from making distributions (except
under specified circumstances), capital expenditures and member loan repayments unless it has set
aside out of its cash flow a reserve equal to the product of $15.0 million and the number of years
since May 1, 2000, but not in excess of $150.0 million (the Reserve). PD LLC is not required to
maintain the Reserve after May 1, 2010. On May 1, 2010, Herald will have a one-time right to
require PD LLC to redeem Heralds interest in PD LLC, together with Heralds interest, if any, in
another limited liability company in which Pulitzer Inc. is the managing member and which is
engaged in the business of delivering publications and products in the greater St. Louis
metropolitan area (DS LLC). The May 1, 2010 redemption price for Heralds interest will be
determined pursuant to a formula yielding an amount which will result in the present value to May
1, 2000 of the after-tax cash flows to Herald (based on certain assumptions) from PD LLC, including
the Initial Distribution and the special distribution described below, if any, and from DS LLC,
being equal to $275.0 million. In the event the transactions effectuated in connection with either the formation of the
Venture and the Initial Distribution or the organization of DS LLC are recharacterized by the IRS
as a taxable sale by Herald, with the result in either case that the tax basis of PD LLCs assets
increases and Herald is required to recognize taxable income as a result of such
recharacterization, Herald generally will be entitled to receive a special distribution from PD LLC
in an amount that corresponds, approximately, to the present value of the after-tax benefit to the
members of PD LLC of the tax basis increase. The adverse financial effect of any such special
distribution to Herald on PD LLC (and thus the Company) will be partially offset by the current and
deferred tax benefits arising as a consequence of the treatment of the transactions effectuated in
connection with the formation of the Venture and the Initial Distribution or the organization of DS
LLC as a taxable sale by Herald. The Company has been advised that the IRS, in the course of
examining the 2000 consolidated federal income tax return in which Herald was included, has
requested certain information and documents relating to the transactions effectuated in connection
with the formation of the Venture and the Initial Distribution. The Company expects to participate
in the formulation of Heralds response to this IRS request for information and documents. Upon termination of PD LLC and DS LLC, which will be on May 1, 2015 (unless Herald exercises
the redemption right described above), Herald will be entitled to the liquidation value of its
interests in PD LLC and DS LLC, to be paid in cash by Pulitzer Inc. That amount would be equal to
the amount of Heralds capital accounts, after allocating the gain or loss that would result from a
cash sale of PD LLC and DS LLCs assets for their fair market value at that time. Heralds share
of such gain or loss generally will be 5 percent, but will be reduced (but not below 1 percent) to
the extent that the present value to May 1, 2000 of the after-tax cash flows to Herald from PD LLC
and from DS LLC, including the Initial Distribution, the special distribution described above, if
any, and the liquidation amount (based on certain assumptions), exceeds $325.0 million. The actual amount payable to Herald either on May 1, 2010 or upon the termination of PD LLC
and DS LLC on May 1, 2015 will depend on such variables as future cash flows, the amounts of any
distributions to Herald prior to such payment, PD LLC and DS LLCs rate of growth and market
valuations of newspaper properties. While the amount of such payment cannot be predicted with
certainty, Pulitzer Inc. currently estimates (assuming a 5 percent annual growth rate in Heralds
capital accounts, no special distribution as described above and consistent newspaper property
valuation multiples) that the amount of such payment would not exceed $100 million. Pulitzer Inc.
further believes that it will be able to finance such payment either from available cash reserves
or with the proceeds of a debt issuance. The redemption of Heralds interest in PD LLC either on
May 1, 2010 or upon termination in 2015 is expected to generate significant deferred tax benefits
to the Company as a consequence of the resulting increase in the tax basis of the assets owned by
PD LLC and DS LLC and the related depreciation and amortization deductions. Legal Contingencies On March 17, 2005, a group of independent delivery carriers engaged in the business of
delivering the Post-Dispatchpursuant to home delivery contracts (the Plaintiffs) filed a lawsuit
against Pulitzer Inc., PD LLC, and Suburban Journals of Greater St. Louis LLC (the Defendants) in
Missouri Circuit Court, 22nd Judicial Circuit (City of St. Louis, Missouri). The
Plaintiffs seek unspecified damages in excess of $25,000 plus punitive damages in an unspecified
amount. The Plaintiffs Petition sets forth three claims for relief. First, the Petition alleges
that the decision to purchase the Suburban Journals with its separate delivery system and separate
carriers breached the Plaintiffs exclusive territorial delivery rights under the Plaintiffs
contracts with PD LLC. The Petition further alleges that PD LLC and Suburban Journals of Greater
St. Louis LLC are alter egos of Pulitzer Inc., and that Pulitzer Inc. on its own and through its
control, ownership and authority over its alter egos, violated the exclusive territories of the
Plaintiffs. Finally, the Petition alleges that the purchase of the Suburban Journals and certain
other conduct constitute a tortious interference with the Plaintiffs contractual rights. The
Defendants will deny any liability, intend to vigorously defend the lawsuit and believe they have
meritorious defenses. While the ultimate outcome of litigation -26-




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can not be predicted with certainty, management, based on its understanding of the facts, does
not believe that the ultimate outcome of this litigation will have a material adverse effect on the
Companys consolidated financial position. A litigation settlement reserve relating to the
potential settlement cost of this lawsuit and related matters is included in Current Liabilities 
Other on the Companys condensed consolidated statements of financial position at March 27, 2005
and December 26, 2004. For additional legal information, see General  Lee Merger Agreement. The Company has been involved, from time to time, in various claims and lawsuits incidental to
the ordinary course of its business, including such matters as libel, slander and defamation
actions, complaints alleging discrimination, and product distribution practices. While the ultimate
outcome of litigation cannot be predicted with certainty, management, based on its understanding of
the facts, does not believe the ultimate resolution of these matters will have a material adverse
effect on the Companys consolidated financial position or results of operations. However,
depending upon the period of resolution, such effects could be material to the consolidated
financial results of an individual period. New Accounting Pronouncements In December 2004 FASB issued SFAS No. 123-Revised, Accounting for Stock-Based Compensation
(SFAS No. 123R). This Statement supersedes APB 25, and its related implementation guidance. This
statement was originally effective as of the beginning of the first interim or annual reporting
period that begins after June 15, 2005. On April 14, 2005, the Securities and Exchange Commission
(the SEC) announced the adoption of a rule that defers the required effective date of SFAS No.
123R. The SEC rule provides that SFAS No. 123R is now effective for registrants as of the beginning
of the first fiscal year beginning after June 15, 2005, instead of at the beginning of the first
quarter after June 15, 2005 (as prescribed originally by the FASB statement). In addition, SFAS No.
123R amends SFAS No. 95, Statement of Cash Flows, to require that excess tax benefits be reported
as a financing cash inflow rather than as a reduction of taxes paid. SFAS No. 123R establishes standards for accounting for transactions in which an entity
exchanges its equity instruments for goods and services (primarily accounting transactions in which
an entity obtains employee services in share-based payment transactions, such as stock options).
SFAS No. 123R requires a public entity to measure the cost of employee services received in
exchange for an equity instrument based on the grant-date fair value of the award. In general, the
cost will be recognized over the period during which an employee is required to provide the service
in exchange for the award (usually the vesting period). The fair-value-based methods in SFAS No.
123R are similar to the fair-value-based method in SFAS No. 123 in most respects. In March 2005 the
SEC issued Staff Accounting Bulletin 107, Share Based Payment(SAB 107), to provide public
companies additional guidance in applying the provisions of SFAS No. 123R. Among other things, SAB
107 describes the SECs staff expectations in determining the assumptions that underlie the fair
value estimates and discusses the interaction of SFAS No. 123R with certain existing SEC guidance.
The Company has not determined which transition alternative it will elect upon adoption of SFAS No.
123R and, as a result, the effect of this adoption on the Companys consolidated financial
condition or results of operations is not known at this time. Based upon shares outstanding at
December 26, 2004 and assuming no new grants, significant forfeiture activity, or modifications,
the Company estimates the after-tax 2005 fullyear impact of expensing stock options in accordance
with SFAS No. 123R to be approximately $3.6 million. In December 2004 FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets(SFAS No. 153).
This pronouncement amends APB No. 29, Accounting for Nonmonetary Transactions(APB 29). SFAS No.
153 is effective for nonmonetary exchanges occurring in fiscal periods beginning after June 15,
2005. SFAS No. 153 eliminates the exception for nonmonetary exchanges of similar productive assets
present in APB 29 and replaces it with a general exception for exchanges of nonmonetary assets that
do not have commercial substance (i.e., transactions that are not expected to result in significant
changes in the cash flows of the reporting entity). The adoption of SFAS No. 153 did not have a
material impact on the condensed consolidated financial statements. -27-




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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK Newsprint The primary raw material used in the Companys operations is newsprint, representing 12.0
percent to 15.7 percent of operating expenses over the annual fiscal periods of 2000 to 2004. Based
on the Companys current level of newspaper operations, expected annual newsprint consumption for
2005 is estimated to be in the range of 102,000 metric tonnes. Historically, newsprint has been
subject to significant price fluctuations from year to year, unrelated in many cases to general
economic conditions. In the annual fiscal periods of 2000 to 2004, the Companys average annual
cost per metric tonne of newsprint has varied from its lowest price by approximately 27.8 percent.
For every one dollar change in the Companys average annual cost per metric tonne of newsprint,
2005 pre-tax income would change by approximately $102,000, assuming annual newsprint consumption
of 102,000 metric tonnes. The Company attempts to obtain the best price available by combining
newsprint purchases for its different newspaper locations with those of other newspaper companies.
The Company considers its relationship with newsprint producers to be good. The Company has not
entered into derivative contracts for newsprint. Loan/Swaps At March 27, 2005, the Company had $306.0 million of outstanding debt pursuant to the Loan
(described under the heading PD LLC Operating Agreement in Item 2 Managements Discussion and
Analysis of Financial Condition and Results of Operations of this Report). The Loan bears
interest at a fixed annual rate of 8.05 percent. The Company is a party to two interest rate swap contracts that convert a portion of the
Companys fixed rate debt to a variable rate. The interest rate swaps have a combined $150.0
million notional amount and mature on April 28, 2009. Under the terms of the agreements, the
Company pays interest at a variable rate based upon LIBOR plus a combined adjustment average of
3.3392 percent and receives interest at a fixed rate of 8.05 percent. The floating interest rates
re-price semiannually. The Company accounts for the swaps as fair value hedges and employs the
short cut method. These transactions result in approximately 49 percent of the Companys long-term
interest cost being subject to variable interest rates. Changes in market interest rates may cause the Company to incur higher or lower net interest
expense. For example, for every 1.0 percent change in the variable interest rates associated with
the Companys interest rate swaps, the Companys annual interest expense would change by
approximately $1.5 million. -28-




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Item 4. CONTROLS AND PROCEDURES In response to the material weakness described in Item 9A. Controls and Procedures in
the Companys 2004 Annual Report on Form 10-K the Company
(i) restated its
Consolidated Statements of Cash Flows for the fiscal years ended December 28, 2003 and December 29,
2002 to classify discretionary contributions to its pension and post-retirement medical benefit
trusts in those years as a component of Cash Flows From Operating
Activities and (ii) classified
its discretionary contributions to those trusts in fiscal year 2004 as a component of Cash Flows
From Operating Activities in its Consolidated Statements of Cash Flows for the fiscal year ended
December 26, 2004, (iii) the Company has enhanced its internal control over financial reporting by
performing a thorough review of FASB Statement No. 95, Statement of Cash Flows, and a periodic
review of a wider variety of technical accounting literature. Based on the foregoing, the
Companys management has concluded that the material weakness has been remediated and its
disclosure controls and procedures are now effective. As of the end of the period covered by this report, the Companys management, including the
President and Chief Executive Officer and Senior Vice President-Finance and Chief Financial
Officer, carried out an evaluation of the effectiveness of the design and operation of the
Companys disclosure controls and procedures. The Companys President and Chief Executive Officer
and Senior Vice President-Finance and Chief Financial Officer concluded that the Companys
disclosure controls and procedures are effective in alerting them to material information, on a
timely basis, required to be included in the Companys periodic SEC filings. During the period
covered by this report, there have been no significant changes in the Companys internal control
over financial reporting, except as described above, that have materially affected, or are
reasonably likely to materially affect, the Companys internal control over financial reporting. -29-




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Part II. OTHER INFORMATION 
 Item 1. LEGAL PROCEEDINGS Please see Note 6 Commitments and Contingencies to the condensed consolidated financial
statements included in Part I, Item 1 of this Form 10-Q. 
 Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None reportable. -30-




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Item 6. EXHIBITS The following exhibits are filed as part of this report:  2.1
    Agreement and Plan of Merger dated as of January 29, 2005 among Lee
Enterprises, Incorporated,
LP Acquisition Corp. and Pulitzer Inc. *31.1
    Certification by Robert C. Woodworth, President and Chief Executive Officer of
Pulitzer Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, in connection
with Pulitzer Inc.s Quarterly Report on Form 10-Q for the quarter ended March 27,
2005.31.2
    Certification by Alan G. Silverglat, Senior Vice President-Finance and Chief
Financial Officer of Pulitzer Inc., pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002, in connection with Pulitzer Inc.s Quarterly Report on Form 10-Q for the
quarter ended March 27, 2005.32.1
    Certification by Robert C. Woodworth, President and Chief Executive Officer of
Pulitzer
Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, in connection with Pulitzer Inc.s Quarterly Report on
Form 10-Q for the quarter ended March 27, 2005.32.2
    Certification by Alan G. Silverglat, Senior Vice President-Finance
and Chief Financial Officer of Pulitzer Inc., pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in
connection with Pulitzer Inc.s Quarterly Report on Form 10-Q for the quarter ended
March 27, 2005.  *
    Incorporated by reference from Pulitzer Inc.s Current Report on Form 8-K filed with the
Securities and Exchange Commission on February 3, 2005. All other items of this report are not applicable for the current quarter. 
 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. PULITZER INC.
(Registrant)Date: May 2, 2005
    
    /s/ Alan G. SilverglatAlan G. Silverglat
Senior Vice President-Finance and
Chief Financial Officer
(on behalf of the Registrant and
as principal financial officer)
 -31-




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EXHIBIT INDEX  2.1
    Agreement and Plan of Merger dated as of January 29,
2005 among Lee Enterprises, Incorporated, LP Acquisition Corp. and
Pulitzer Inc.*31.1
    Certification by Robert C. Woodworth, President and Chief Executive Officer of
Pulitzer
Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, in connection with
Pulitzer Inc.s Quarterly Report on Form 10-Q for the quarter ended March 27, 2005.31.2
    Certification by Alan G. Silverglat, Senior Vice President-Finance and Chief
Financial Officer of
Pulitzer Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, in connection
with
Pulitzer Inc.s Quarterly Report on Form 10-Q for the quarter ended March 27, 2005.32.1
    Certification by Robert C. Woodworth, President and Chief Executive Officer of
Pulitzer
Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, in connection with Pulitzer Inc.s Quarterly Report on
Form 10-Q for the quarter ended March 27, 2005.32.2
    Certification by Alan G. Silverglat, Senior Vice President-Finance and Chief
Financial Officer of
Pulitzer Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, in connection with Pulitzer Inc.s Quarterly
Report on Form 10-Q for the quarter ended March 27, 2005.*
    Incorporated by reference from Pulitzer Inc.s Current
Report on Form 8-K filed with the Securities and Exchange
Commission on February 3, 2005. -32-