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FORM 10-Q UNITED STATES
SECURITIES AND EXCHANGE COMMISSION    (Mark One)x
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended June 27, 2004ORo
    
    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
    
    (I.R.S. Employerincorporation or organization)
    
    Identification Number)
 900 North Tucker Boulevard, St. Louis, Missouri 63101
(Address of principal executive offices) (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 o
   Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes x
    
    No o
 Indicate the number of shares outstanding of each of the issuers classes
of common stock, as of the latest practicable date. Class
    
    Outstanding 8/2/04Common Stock
    
    
    9,877,029Class B Common Stock
    
    
    11,736,592
    -1-




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TABLE OF CONTENTS  Part I. FINANCIAL INFORMATIONItem 1. FINANCIAL STATEMENTSCONDENSED CONSOLIDATED STATEMENTS OF INCOMECONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMECONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITIONCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSItem 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSItem 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKItem 4. CONTROLS AND PROCEDURESPart II. OTHER INFORMATIONItem 1. LEGAL PROCEEDINGSItem 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIESItem 6. EXHIBITS AND REPORTS ON FORM 8-KSIGNATURESEXHIBIT INDEX302 Certification of President and CEO302 Certification of Senior Vice President and CFO906 Certification of President and CEO906 Certification of Senior Vice President and CFO    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) Second Quarter Ended
    
    Six Months EndedJune 27,
    
    June 29,
    
    June 27,
    
    June 29,2004
    
    2003
    
    2004
    
    2003OPERATING REVENUES:AdvertisingRetail
    
    $
    30,996
    
    
    $
    29,977
    
    
    $
    58,825
    
    
    $
    56,537National
    
    
    6,940
    
    
    
    7,536
    
    
    
    13,101
    
    
    
    14,357Classified
    
    
    35,510
    
    
    
    31,766
    
    
    
    67,757
    
    
    
    60,852Subtotal
    
    
    73,446
    
    
    
    69,279
    
    
    
    139,683
    
    
    
    131,746Preprints
    
    
    17,166
    
    
    
    15,803
    
    
    
    31,384
    
    
    
    29,535Total advertising
    
    
    90,612
    
    
    
    85,082
    
    
    
    171,067
    
    
    
    161,281Circulation
    
    
    20,464
    
    
    
    20,297
    
    
    
    41,032
    
    
    
    40,493Other
    
    
    1,977
    
    
    
    1,733
    
    
    
    3,689
    
    
    
    3,570Total operating revenues
    
    
    113,053
    
    
    
    107,112
    
    
    
    215,788
    
    
    
    205,344OPERATING EXPENSES:Payroll and other personnel expenses
    
    
    46,569
    
    
    
    44,718
    
    
    
    92,928
    
    
    
    90,073Newsprint expense
    
    
    12,086
    
    
    
    11,091
    
    
    
    23,122
    
    
    
    21,094Depreciation
    
    
    3,760
    
    
    
    3,702
    
    
    
    7,496
    
    
    
    7,384Amortization
    
    
    1,201
    
    
    
    1,105
    
    
    
    2,393
    
    
    
    2,210Other expenses
    
    
    30,777
    
    
    
    27,140
    
    
    
    58,885
    
    
    
    52,434Total operating expenses
    
    
    94,393
    
    
    
    87,756
    
    
    
    184,824
    
    
    
    173,195Equity in earnings of Tucson newspaper partnership
    
    
    4,276
    
    
    
    4,222
    
    
    
    8,193
    
    
    
    8,368Operating income
    
    
    22,936
    
    
    
    23,578
    
    
    
    39,157
    
    
    
    40,517Interest income
    
    
    1,108
    
    
    
    922
    
    
    
    2,267
    
    
    

    1,857Interest expense
    
    
    (4,946
    )
    
    
    (5,274
    )
    
    
    (9,640
    )
    
    
    (10,732
    )Net gain (loss) on marketable securities
    
    
    (55
    )
    
    
    33
    
    
    
    497
    
    
    
    58Net loss on investments
    
    
    0
    
    
    
    (342
    )
    
    
    (42
    )
    
    
    (1,126
    )Net other income (expense)
    
    
    4
    
    
    
    (3
    )
    
    
    8
    
    
    
    18INCOME BEFORE PROVISION FOR INCOME
TAXES
    
    
    19,047
    
    
    
    18,914
    
    
    
    32,247
    
    
    
    30,592PROVISION FOR INCOME TAXES
    
    
    6,855
    
    
    
    7,003
    
    
    
    11,739
    
    
    
    11,328MINORITY INTEREST IN NET EARNINGS OF
SUBSIDIARIES
    
    
    396
    
    
    
    483
    
    
    
    657
    
    
    
    780NET INCOME
    
    $
    11,796
    
    
    $
    11,428
    
    
    $
    19,851
    
    
    $
    18,484
 (Continued) -2-




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Second Quarter Ended
    
    Six Months EndedJune 27,
    
    June 29,
    
    June 27,
    
    June 29,2004
    
    2003
    
    2004
    
    2003BASIC EARNINGS PER SHARE OF STOCK:Basic earnings per share
    
    $
    0.55
    
    
    $
    0.53
    
    
    $
    0.92
    
    
    $
    0.87Weighted average number of shares outstanding
    
    
    21,589
    
    
    
    21,382
    
    
    
    21,565
    
    
    
    21,364DILUTED EARNINGS PER SHARE OF STOCK:Diluted earnings per share
    
    $
    0.54
    
    
    $
    0.53
    
    
    $
    0.91
    
    
    $

    0.86Weighted average number of shares outstanding
    
    
    21,828
    
    
    
    21,579
    
    
    
    21,841
    
    
    
    21,521
 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) Second Quarter Ended
    
    Six Months EndedJune 27,
    
    June 29,
    
    June 27,
    
    June 29,2004
    
    2003
    
    2004
    
    2003NET INCOME
    
    $
    11,796
    
    
    $
    11,428
    
    
    $
    19,851
    
    
    $
    18,484OTHER COMPREHENSIVE INCOME (LOSS),
NET OF TAX:Unrealized holding gains (losses) on marketable
securities arising during the period
    
    
    (1,456
    )
    
    
    211
    
    
    
    (1,048
    )
    
    
    346Realized (gains) losses arising during the period
    
    
    34
    
    
    
    (21
    )
    
    
    (308
    )
    
    
    (37
    )Other comprehensive income items
    
    
    (1,422
    )
    
    
    190
    
    
    
    (1,356
    )
    
    
    309COMPREHENSIVE INCOME
    
    $
    10,374
    
    
    $
    11,618
    
    
    $
    18,495
    
    
    $
    18,793
 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) June 27,
    
    Dec. 28,2004
    
    2003ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    50,232
    
    
    $
    27,552Marketable securities
    
    
    150,409
    
    
    
    148,644Trade accounts receivable (less allowance for doubtful
accounts of $3,197 and $3,843)
    
    
    51,621
    
    
    
    54,700Inventory
    
    
    11,512
    
    
    
    7,566Income taxes receivable
    
    
    0
    
    
    
    7,097Prepaid expenses and other
    
    
    9,323
    
    
    
    9,171Total current assets
    
    
    273,097
    
    
    
    254,730PROPERTIES:Land
    
    
    9,707
    
    
    
    9,758Buildings
    
    
    73,184
    
    
    
    73,192Machinery and equipment
    
    
    158,584
    
    
    
    156,425Construction in progress
    
    
    2,459
    
    
    
    1,256Total
    
    
    243,934
    
    
    
    240,631Less accumulated depreciation
    
    
    131,708
    
    
    
    124,550Properties  net
    
    
    112,226
    
    
    
    116,081INTANGIBLE AND OTHER ASSETS:Goodwill
    
    
    811,837
    
    
    
    811,409Intangible assets - net of accumulated amortization
    
    
    36,720
    
    
    
    37,217Restricted cash and investments
    
    
    62,310
    
    
    
    54,810Other
    
    
    37,788
    
    
    
    35,426Total intangible and other assets
    
    
    948,655
    
    
    
    938,862TOTAL
    
    $
    1,333,978
    
    
    $
    1,309,673
 (Continued) -5-




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PULITZER INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited  In thousands, except share data) June 27,
    
    Dec. 28,2004
    
    2003LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Trade accounts payable
    
    $
    11,102
    
    
    $
    9,995Salaries, wages and commissions
    
    
    13,880
    
    
    
    15,595Interest payable
    
    
    3,717
    
    
    
    3,582Pension obligations
    
    
    1,356
    
    
    
    1,356Income taxes payable
    
    
    3,851
    
    
    
    0Other
    
    
    11,462
    
    
    
    9,766Total current liabilities
    
    
    45,368
    
    
    
    40,294LONG-TERM DEBT
    
    
    306,000
    
    
    
    306,000PENSION OBLIGATIONS
    
    
    6,992
    
    
    
    5,239POSTRETIREMENT AND POSTEMPLOYMENT
BENEFIT OBLIGATIONS
    
    
    64,850
    
    
    
    61,265OTHER LONG-TERM LIABILITIES
    
    
    44,295
    
    
    
    45,431COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITY:Preferred stock, $.01 par value; 100,000,000 shares authorized;
Issued and outstanding  noneCommon stock, $.01 par value; 100,000,000 shares authorized;
Issued 9,868,790 in 2004 and 9,682,134 in 2003
    
    
    99
    
    
    
    97Class B common stock, convertible, $.01 par value; 100,000,000
Shares authorized; issued  11,736,592 in 2004 and
11,834,592 in 2003
    
    
    117
    
    
    
    118Additional paid-in capital
    
    
    389,040
    
    
    
    384,291Retained earnings
    
    
    489,100
    
    
    
    477,437Accumulated other comprehensive loss
    
    
    (11,507
    )
    
    
    (10,151
    )Total
    
    
    866,849
    
    
    
    851,792Unamortized restricted stock grants
    
    
    (323
    )
    
    
    (303
    )Treasury stock  at cost; 1,191 and 1,061 shares of common
stock in 2004 and 2003, respectively, and 0 shares of
Class B common stock in 2004 and 2003
    
    
    (53
    )
    
    
    (45
    )Total stockholders equity
    
    
    866,473
    
    
    
    851,444TOTAL
    
    $
    1,333,978
    
    
    $
    1,309,673
 (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) Six Months EndedJune 27,
    
    June 29,2004
    
    2003CASH FLOWS FROM OPERATING ACTIVITIES:Net Income
    
    $
    19,851
    
    
    $
    18,484Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation
    
    
    7,496
    
    
    
    7,384Amortization
    
    
    2,393
    
    
    
    2,210Stock-based compensation
    
    
    820
    
    
    
    611Deferred income taxes
    
    
    (1,297
    )
    
    
    1,606Net gain on sale of assets
    
    
    (497
    )
    
    
    (58
    )Net loss on investments
    
    
    42
    
    
    
    1,126Changes in current assets and liabilities (net of the effects of the
purchase and sale of properties) which provided (used) cash:Trade accounts receivable
    
    
    3,114
    
    
    
    3,291Inventory
    
    
    (3,946
    )
    
    
    1,771Other assets
    
    
    (491
    )
    
    
    (2,178
    )Trade accounts payable and other liabilities
    
    
    7,523
    
    
    
    3,378Income taxes (receivable)/payable
    
    
    10,948
    
    
    
    3,454NET CASH FROM OPERATING ACTIVITIES
    
    
    45,956
    
    
    
    41,079CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures
    
    
    (3,686
    )
    
    
    (6,689
    )Purchase of newspaper properties and distribution businesses,
net of cash acquired
    
    
    (2,330
    )
    
    
    (2,991
    )Purchases of marketable securities
    
    
    (227,670
    )
    
    
    (131,675
    )Sales of marketable securities
    
    
    223,068
    
    
    
    127,973Return of capital in (investment in) joint ventures and limited
partnerships
    
    
    (857
    )
    
    
    (1,534
    )Increase in restricted cash and investments
    
    
    (7,500
    )
    
    
    (7,500
    )Discretionary funding of retirement obligations
    
    
    0
    
    
    
    (10,837
    )NET CASH FROM INVESTING ACTIVITIES
    
    
    (18,975
    )
    
    
    (33,253
    )CASH FLOWS FROM FINANCING ACTIVITIES:Dividends paid
    
    
    (8,188
    )
    
    
    (7,683
    )Proceeds from exercise of stock options
    
    
    3,397
    
    
    
    1,921Proceeds from employee stock purchase plan
    
    
    498
    
    
    
    1,188Purchase of treasury stock
    
    
    (8
    )
    
    
    (12
    )NET CASH FROM FINANCING ACTIVITIES
    
    
    (4,301
    )
    
    
    (4,586
    )NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    22,680
    
    
    
    3,240CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    
    27,552
    
    
    
    81,517CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    50,232
    
    
    $
    84,757
 (Continued) -7-




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Six Months EndedJune 27,
    
    June 29,2004
    
    2003SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid (received) during the period for:Interest paid
    
    $
    9,810
    
    
    $
    10,781Interest received
    
    
    (2,112
    )
    
    
    (1,529
    )Income taxes paid
    
    
    8,954
    
    
    
    6,488Income tax refunds
    
    
    (7,046
    )
    
    
    (208
    )SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:Increase in dividends payable and decrease in retained earnings
    
    $
    0
    
    
    $
    3,855Issuance of restricted stock grants
    
    $
    120
    
    
    $
    0
 See notes to condensed consolidated financial statements.
    
    (Concluded)
 -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
2004, the Companys fiscal year began on December 29, 2003 and will end on
December 26, 2004. For 2003, the Companys fiscal year began on December 30,
2002 and ended on December 28, 2003. 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 Tucson newspaper partnership (TNI). 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 consolidated financial position as of June 27, 2004 and December
28, 2003 and the results of operations and cash flows for the three-month and
six-month periods ended June 27, 2004 and June 29, 2003. 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 28,
2003. 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: Second Quarter Ended
    
    Six Months EndedJune 27,
    
    June 29,
    
    June 27,
    
    June 29,2004
    
    2003
    
    2004
    
    2003(In thousands)Weighted average shares outstanding (Basic EPS)
    
    
    21,589
    
    
    
    21,382
    
    
    
    21,565
    
    
    
    21,364Common stock equivalents
    
    
    239
    
    
    
    197
    
    
    
    276
    
    
    
    157Weighted average shares outstanding and
Common stock equivalents (Diluted EPS)
    
    
    21,828
    
    
    
    21,579
    
    
    
    21,841
    
    
    
    21,521
 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 596,750 and 521,335 shares for the three month period ended
June 27, 2004 and June 29, 2003, respectively, and 544,889 and 294,432 shares
of common stock for the six month period ended June 27, 2004 and June 29, 2003,
respectively, 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 respective three and six
month periods. 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 June 27, 2004, 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 Employee Compensation The Company has two stock-based
employee compensation plans. The Company accounts for those plans under the
recognition and measurement principals of Accounting Principles Board Opinion
No. 25 (APB 25), Accounting for Stock Issued to Employees, and related
interpretations. 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 2004 and 2003. 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 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. Second Quarter Ended
    
    Six Months EndedJune 27,
    
    June 29,
    
    June 27,
    
    June 29,2004
    
    2003
    
    2004
    
    2003(In thousands, except earnings per share)Net income, as reported
    
    $
    11,796
    
    
    $
    11,428
    
    
    $
    19,851
    
    
    $
    18,484Add: Stock-based
compensation expense
included in reported net
income, net of related tax
effects
    
    
    303
    
    
    
    192
    
    
    
    547
    
    
    
    382Deduct: Total stock-based
compensation expense
determined under fair value
based method for all awards,
net of related tax effect
    
    
    (1,357
    )
    
    
    (1,224
    )
    
    
    (2,670
    )
    
    
    (2,461
    )Pro forma net income
    
    $
    10,742
    
    
    $
    10,396
    
    
    $
    17,728
    
    
    $
    16,405Pro forma earnings per share:Basic -  as reported
    
    $
    0.55
    
    
    $
    0.53
    
    
    $
    0.92
    
    
    $
    0.87Basic - pro forma
    
    $
    0.50
    
    
    $
    0.49
    
    
    $
    0.82
    
    
    $
    0.77Pro forma earnings per share:Diluted - as reported
    
    $
    0.54
    
    
    $
    0.53
    
    
    $
    0.91
    
    
    $
    0.86Diluted - pro forma
    
    $
    0.49
    
    
    $
    0.48
    
    
    $
    0.81
    
    
    $
    0.76
 New Accounting Pronouncements- In December 2003, the Medicare
Prescription Drug, Improvement and Modernization Act of 2003 (the Act) was
signed into law. The Act introduced a prescription drug benefit under Medicare
(Medicare Part D) and a federal subsidy to sponsors of retiree health care
benefit plans that provide a benefit that is at least actuarially equivalent
(as that term is defined in the Act) to Medicare Part D. FASB Staff Position
106-1, Accounting and Disclosure Requirements Related to the Medicare
Prescription Drug, Improvement and Modernization Act of 2003(FSP 106-1),
which is effective for interim or annual financial statements for fiscal years
which ended after December 7, 2003, permits a sponsor of a postretirement
health care plan that provides a prescription drug benefit to make a one-time
election to defer accounting for the effects of the Act. The Company decided to recognize the effects of the Act on the Companys
accumulated postretirement benefit obligation (APBO) and postretirement
benefit costs initially in the first quarter of 2004. The Company has
concluded that it qualifies for the subsidy under the Act since the
prescription drug benefits provided under the Companys postretirement
healthcare plans generally require lower premiums from covered retirees and
have lower deductibles than the benefits provided in Medicare Part D and,
therefore, are actuarially equivalent to or better than the benefits provided
under the Act. In addition, the Company does not anticipate any material
change in the participation rate or per capita claims costs as a result of the
Act. -10-




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The Company estimates that the provisions of the Act will lower the APBO
by approximately $12 million which is being treated as a negative prior service
cost that is being amortized beginning on March 8, 2004. This amortization
will result in a $1.3 million reduction to the APBO and postretirement benefit
costs in 2004, against which no income tax provision will be made in accordance
with the Act. Specific authoritative guidance on the accounting for the federal
subsidy is pending, and that guidance, when issued, could require the Company
to change previously reported information. The Condensed Consolidated
Statements of Income incorporate expense reductions of $0.4 million and $0.5
million for the respective second quarter and first six month periods of 2004,
against which no income tax provision has been made. 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 2003
consolidated financial statements to conform with the presentation made in
2004. 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 Star
and 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: June 27,
    
    Dec. 28,2004
    
    2003(In thousands)Current assets
    
    $
    14,314
    
    
    $
    15,935Current liabilities
    
    $
    9,327
    
    
    $
    9,315Partners equity
    
    $
    4,987
    
    
    $
    6,620
 Second Quarter Ended
    
    Six Months EndedJune 27,
    
    June 29,
    
    June 27,
    
    June 29,2004
    
    2003
    
    2004
    
    2003(In thousands)Operating revenues
    
    $
    27,733
    
    
    $
    26,360
    
    
    $
    54,779
    
    
    $
    53,840Operating income
    
    $
    8,552
    
    
    $
    8,444
    
    
    $
    16,386
    
    
    $
    16,736Companys share of operating income
before depreciation, amortization, and
general and administrative expense (1)
    
    $
    4,276
    
    
    $
    4,222
    
    
    $
    8,193
    
    
    $
    8,368
  (1)
    
    Star Publishing depreciation, amortization, and general and
administrative expenses associated with the Companys operation and
administration of TNI are reported as operating expenses on the Companys
condensed consolidated statements of income. In aggregate, these amounts
totaled $386,000 and $601,000 for the second quarter of 2004 and 2003,
respectively, and $1.2 million and $1.3 million for the first six months
of 2004 and 2003, respectively. 3. ACQUISITION OF PROPERTIES In the first six months of 2004, Pulitzer Inc. subsidiaries acquired
businesses, principally weekly newspapers and niche publications that
complement the daily newspaper operations of Pulitzer Newspapers, Inc. and its
subsidiaries (PNI) in Coos Bay, Oregon and Bloomington, Illinois, and St.
Louis newspaper distribution businesses for an -11-




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aggregate price of approximately $2.3 million. In the first six months of
2003 Pulitzer Inc. subsidiaries acquired businesses, principally weekly
newspapers and newspaper distribution businesses, totaling $3.0 million. The
pro forma results of these acquisitions were not material and, therefore, are
not presented. Subsequent Event On July 2, 2004, PNI acquired two weekly newspapers serving the Santa Ynez
Valley, which complement PNIs Central Coast Newspaper operations in Santa
Barbara County, California. The purchase price and pro forma results of
operations of this acquisition are not material to the condensed consolidated
financial statements of the Company and, therefore, are not included herein. 4. GOODWILL AND OTHER INTANGIBLE ASSETS Changes in the carrying amounts of goodwill and other intangible assets of
the Company for the six months ended June 27, 2004 were as follows: OtherIntangible(In thousands)
    
    Goodwill
    
    AssetsBalance at December 28, 2003
    
    $
    811,409
    
    
    $
    37,217Additions during the period
    
    
    428
    
    
    
    1,896Amortization expense
    
    
    0
    
    
    
    (2,393
    )Balance at June 27, 2004
    
    $
    811,837
    
    
    $
    36,720
 Other intangible assets at June 27, 2004 and December 28, 2003 were as
follows: Accumulated
    
    Net(In thousands)
    
    Cost
    
    Amortization
    
    CostJune 27, 2004Other intangible assets:Advertising base
    
    $
    33,865
    
    
    $
    8,314
    
    
    $
    25,551Subscriber lists
    
    
    23,480
    
    
    
    15,424
    
    
    
    8,056Long-term pension asset
    
    
    1,260
    
    
    
    0
    
    
    
    1,260Non-compete agreements and other
assets
    
    
    6,744
    
    
    
    4,891
    
    
    
    1,853Total other intangible assets
    
    $
    65,349
    
    
    $
    28,629
    
    
    $
    36,720December 28, 2003Other intangible assets:Advertising base
    
    
    33,552
    
    
    
    7,487
    
    
    
    26,065Subscriber lists
    
    
    23,300
    
    
    
    14,040
    
    
    
    9,260Long-term pension asset
    
    
    1,260
    
    
    
    0
    
    
    
    1,260Non-compete agreements and other
assets
    
    
    5,341
    
    
    
    4,709
    
    
    
    632Total other intangible assets
    
    $
    63,453
    
    
    $
    26,236
    
    
    $
    37,217
 Pretax amortization expense of other intangible assets for the second
quarter and first six months ended June 27, 2004 was $1.2 million and $2.4
million, respectively, and annually over the next six years is estimated to be:
$4.8 million for 2004, $4.7 million for 2005, $4.5 million for 2006, $2.5
million for 2007, and $2.0 million for 2008 and 2009.  5.
    
    COMPONENTS OF PENSION AND OTHER BENEFIT PLANS NET PERIODIC
BENEFIT COSTS The Company has 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. -12-




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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 plan obligations. The pension cost components for the Companys pension and postretirement
plans are as follows: Pension Benefits
    
    Other BenefitsSecond Quarter EndedJune 27,
    
    June 29,
    
    June 27,
    
    June 29,2004
    
    2003
    
    2004
    
    2003(In thousands)Service cost for benefits earned during the period
    
    $
    1,225
    
    
    $
    1,092
    
    
    $
    710
    
    
    $
    582Interest cost on projected benefit obligation
    
    
    2,331
    
    
    
    2,323
    
    
    
    1,621
    
    
    
    1,670Expected return on plan assets
    
    
    (2,776
    )
    
    
    (2,466
    )
    
    
    (284
    )
    
    
    (192
    )Amortization of prior service cost
    
    
    78
    
    
    
    78
    
    
    
    0
    
    
    
    3Amortization of transition obligation
    
    
    0
    
    
    
    14
    
    
    
    0
    
    
    
    0Amortization of loss
    
    
    364
    
    
    
    100
    
    
    
    135
    
    
    
    90Cost for special termination benefits
    
    
    0
    
    
    
    32
    
    
    
    0
    
    
    
    0Net periodic pension cost
    
    $
    1,222
    
    
    $
    1,173
    
    
    $
    2,182
    
    
    $
    2,153
 Pension Benefits
    
    Other BenefitsSix Months EndedJune 27,
    
    June 29,
    
    June 27,
    
    June 29,2004
    
    2003
    
    2004
    
    2003(In thousands)Service cost for benefits earned during the period
    
    $
    2,450
    
    
    $
    2,184
    
    
    $
    1,422
    
    
    $
    1,164Interest cost on projected benefit obligation
    
    
    4,662
    
    
    
    4,646
    
    
    
    3,378
    
    
    
    3,340Expected return on plan assets
    
    
    (5,552
    )
    
    
    (4,932
    )
    
    
    (568
    )
    
    
    (384
    )Amortization of prior service cost
    
    
    156
    
    
    
    156
    
    
    
    0
    
    
    
    6Amortization of transition obligation
    
    
    0
    
    
    
    28
    
    
    
    0
    
    
    
    0Amortization of loss
    
    
    728
    
    
    
    200
    
    
    
    417
    
    
    
    180Cost for special termination benefits
    
    
    0
    
    
    
    64
    
    
    
    0
    
    
    
    0Net periodic pension cost
    
    $
    2,444
    
    
    $
    2,346
    
    
    $
    4,649
    
    
    $
    4,306
 Based on the Companys forecast at June 27, 2004, the Company expects to
contribute $1.4 million to its pension plans and $6.5 million to its
postretirement plans in 2004. 6. COMMITMENTS AND CONTINGENCIES Capital Commitments As of June 27, 2004, the Company had construction and equipment
commitments of approximately $4.2 million. Investment Commitments As of June 27, 2004, the Company had an unfunded capital contribution
commitment of approximately $3.8 million related to its investment in a limited
partnership not associated with or involved in the Companys operations. 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 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 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 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 Merger and Spin-off are
collectively referred to as the Broadcast Transaction. Old Pulitzers historical basis in its newspaper publishing and related
new media assets and liabilities has been carried over to the Company. The
Broadcast Transaction represents a reverse-spin transaction and, accordingly,
the Companys results of operations for periods prior to the consummation of
the Broadcast Transaction are identical to the historical results previously
reported by Old Pulitzer. 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 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 Merger Agreement. Internal Revenue Services Matters In October 2001 the Internal Revenue Service (IRS) formally proposed
that Old Pulitzers taxable income 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 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. Accordingly, if the IRS were
completely successful in its assertion, the Companys indemnification
obligation would be approximately $29.3 million, plus applicable interest. Any
such income tax indemnification payment would be recorded as an adjustment to
additional paid-in capital, and any related interest expense would be reflected
as a component of net income in the period recognized. Notwithstanding the IRS
proposed adjustment, the Company does not believe that Old Pulitzer realized
any taxable gain in connection with the Spin-off, and it has not accrued any
liability in connection with this issue. 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 Companys 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 Merger Agreement, the Company
is entitled to any refunds recovered from the IRS as a result of these refund
claims, but it has not recorded a receivable for these refund claims inasmuch
as the IRS could deny all or a portion thereof. Any income tax refunds would be
recorded as an adjustment to additional paid-in-capital, and any related
interest received would be reflected as a component of net income in the period
recognized. 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 Companys refund claims 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 Companys
refund claims 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. -14-




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While there can be no assurance that the Company will completely prevail
in its position with respect to the issue of Old Pulitzers taxable gain as a
result of the Spin-off, the Company firmly believes that the IRS position is
not supported by the facts or applicable legal authority and intends to
vigorously contest the IRS proposed adjustment. Similarly, with respect to the
Companys refund claims for the December 1997 and 1998 and March 1999 tax
years, the Company believes that the position underlying its refund claims is
supported by the facts and applicable legal authority, although there can be no
assurance that the IRS will approve all or any portion of these refund claims.
Discussions between the Companys representatives and the IRS regarding these
proceedings are ongoing. 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 Subsidiary 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 that PD LLC has an increase in
the tax basis of its assets as a result of Heralds recognizing taxable income
from certain transactions effected under the agreement governing the
contributions of Pulitzer Inc. and one of its subsidiaries and Herald to PD LLC
or the Operating Agreement or from the transactions effected in connection with
the organization of DS LLC, 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. Upon the 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 will 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. Legal Contingencies The Company has settled the lawsuit filed in the Missouri Circuit Court,
Twenty-Second Judicial Circuit (City of St. Louis, Missouri), against Pulitzer
Inc., PD LLC, and Suburban Journals LLC (Defendants) which was described in
the Companys Annual Report on Form 10-K for the year ended December 28, 2003
and the Companys Quarterly Report on Form 10-Q for the quarter ended March 28,
2004. The lawsuit was brought by a group of 33 -15-




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##### Table of Contents



independent carriers (the Plaintiffs) engaged in the business of
delivering the Post-Dispatchpursuant to home delivery contracts involving 44
carrier routes. The lawsuit has been settled with a payment by PD LLC of
approximately $1.5 million. 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: Second Quarter Ended
    
    Six Months EndedJune 27,
    
    June 29,
    
    June 27,
    
    June 29,2004
    
    2003
    
    2004
    
    2003(In thousands)Combined St. Louis operations
    
    $
    79,889
    
    
    $
    77,292
    
    
    $
    153,271
    
    
    $
    148,241Pulitzer Newspapers, Inc.
    
    
    33,164
    
    
    
    29,820
    
    
    
    62,517
    
    
    
    57,103Total
    
    $
    113,053
    
    
    $
    107,112
    
    
    $
    215,788
    
    
    $
    205,344
 ****** -16-




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Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS Statements 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 are
subject to risks, uncertainties and other factors which could cause actual
results to differ materially from those 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 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 second quarter and first six months of 2004, the Companys
St. Louis operations contributed approximately 71 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 38 weekly papers and various
niche publications that focus on providing local news and editorial content to
the communities that they serve, and have a combined average weekly
distribution of approximately 1.2 million to approximately 0.6 million unique
households. 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 65 weekly newspapers,
shoppers and niche publications. The Companys revenues are derived primarily from advertising and
circulation, which have respectively averaged approximately 78 percent and 20
percent of total revenue over the last five years. Advertising rates and rate
structures and resulting revenues vary among publications based on, among other
things, circulation, type of advertising, local market conditions and
competition. The Companys operating revenues are significantly influenced by a number
of factors, including overall advertising expenditures, the appeal of
newspapers in comparison to other forms of advertising, the performance of -17-




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the Company in comparison to its competitors in specific markets, the
strength of the national economy, and general economic conditions and
population changes in the markets served by the Company. 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. Acquisition of Properties In the first six months of 2004, Pulitzer Inc. subsidiaries acquired
businesses, principally weekly newspapers and niche publications that
complement the daily newspaper operations of PNI in Coos Bay, Oregon and
Bloomington, Illinois, and St. Louis newspaper distribution businesses for an
aggregate price of approximately $2.3 million. In the first six months of 2003
Pulitzer Inc. subsidiaries acquired businesses, principally weekly newspapers
and newspaper distribution businesses, totaling $3.0 million. The pro forma
results of these acquisitions were not material and, therefore, are not
presented. Subsequent Event On July 2, 2004, PNI acquired two weekly newspapers serving the Santa Ynez
Valley, which complement PNIs Central Coast Newspaper operations in Santa
Barbara County, California. The purchase price and pro forma results of
operations of this acquisition are not material to the condensed consolidated
financial statements of the Company and, therefore, are not included herein. 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 28, 2003. SECOND QUARTER ENDED JUNE 27, 2004 COMPARED WITH SECOND QUARTER ENDED JUNE 29,
2003 Executive Overview Operating revenue increased 5.5 percent to $113.1 million for the second
quarter of 2004 versus $107.1 million in 2003, reflecting a 6.5 percent
increase in advertising revenue and a 0.8 percent increase in circulation
revenue. The advertising revenue increase resulted, principally, from (a) a
5.4 percent increase in retail advertising revenue, including retail preprints,
reflecting gains from smaller local advertisers, growth in the healthcare,
grocery and financial categories, and revenues from Local Values, the
Post-Dispatchsdirect mail initiative; and (b) an 11.8 percent increase in
classified advertising, reflecting a 17.0 percent increase in help wanted
advertising, a 13.6 percent increase in real estate advertising, and a 9.4
percent increase in automotive advertising. The retail and classified
advertising revenue increases were partially offset by a 6.9 percent decrease
in national advertising, including national preprints, principally due to
weakness in the pharmaceutical, packaged goods and travel categories. Operating expenses for the second quarter of 2004 increased 7.6 percent to
$94.4 million from $87.8 million in the second quarter of 2003, principally due
to (a) a $1.5 million expense related to the settlement of independent home
delivery carrier litigation in St. Louis, (b) increased labor and employee
benefit costs, (c) increased newsprint expense, principally as a result of
higher newsprint prices compared to the second quarter of 2003, (d) incremental
operating expenses from PNI newspaper acquisitions, and (e) distribution and
production expenses related to Local Values. These expense increases were
partially offset by decreased bad debt expense resulting from the favorable
resolution of Kmart related pre-petition bankruptcy claims and collection
issues. Second quarter 2004 operating income decreased to $22.9 million, or 2.7
percent, from $23.6 million in the second quarter of 2003. Second quarter 2004 net income increased to $11.8 million, or $0.54 per
diluted share, compared to $11.4 million, or $0.53 per diluted share for the
second quarter of 2003. The increase in 2004 net income was principally due to
(a) increased advertising revenue, (b) decreased interest expense resulting
from the Companys interest rate swap contracts, and (c) the absence of
carrying value adjustments to non-operating investments during the second -18-




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quarter of 2004 compared to $0.3 million in carrying value adjustments to
non-operating investments in the prior year. Operating Results Operating revenue for the second quarter of 2004 increased to $113.1
million, or 5.5 percent, from $107.1 million in the second quarter of 2003.
Retail advertising revenue, including retail preprints, increased 5.4 percent
to $46.9 million in the second quarter of 2004 from $44.5 million in the prior
year. The increase was driven, in part, by an 11.8 percent increase in retail
advertising revenue from small to mid-size advertisers in St. Louis and a 9.3
percent increase in retail advertising revenue from PNI (approximately
one-third of the PNI increase resulted from 2004 and 2003 acquisitions). These
increases were partially offset by weakness in the department store, furniture
and home improvement categories in St. Louis. Retail preprint revenue
increased 9.4 percent due, in part, to preprint revenue related to the
Post-Dispatchs direct mail initiative in St. Louis. National advertising revenue, including national preprints, decreased 6.9
percent in the second quarter of 2004, to $8.2 million compared to $8.8 million
in 2003. The decrease resulted, principally, from weakness in the
pharmaceutical, telecommunication, and travel categories in St. Louis,
partially offset by increased revenue from the national automotive category. Second quarter 2004 classified advertising revenue increased 11.8 percent
to $35.5 million from $31.8 million in 2003. Demand for classified advertising
continues to be broad-based, with each major classified revenue category
increasing compared to the comparable quarter in 2003. Real estate, help wanted
and automotive classified revenue categories reported year-over-year revenue
increases of 13.6 percent, 17.0 percent and 9.4 percent, respectively. The
Companys classified advertising revenue percentage changes for the second
quarter of 2004 versus the comparable period of 2003 are summarized in the
table below: Pulitzer
    
    St. Louis
    
    PNIClassified advertising revenueSecond Quarter 2004 vs.
    
    percentage change from comparableSecond Quarter 2003
    
    prior year periodAutomotive
    
    
    +9.4
    %
    
    
    +9.9
    %
    
    
    +7.6
    %Help Wanted
    
    
    +17.0
    %
    
    
    +10.6
    %
    
    
    +38.8
    %Real Estate
    
    
    +13.6
    %
    
    
    +6.9
    %
    
    
    +30.4
    %Total Classified
    
    
    +11.8
    %
    
    
    +8.0
    %
    
    
    +22.9
    %
 Circulation revenues increased $0.2 million, or 0.8 percent, in the second
quarter of 2004. Other publishing revenues increased $0.2 million, or 14.1
percent, due principally to increased commercial printing revenue. Operating expense increased 7.6 percent in the second quarter of 2004 to
$94.4 million compared to $87.8 million in the second quarter of 2003. Labor
and employee benefits costs increased 4.1 percent, reflecting increased salary
and benefit expense, and a one-time payment related to the settlement of a
labor contract in St. Louis. These increases were partially offset by a 2.3
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. Newsprint expense increased 9.0 percent in the second quarter of 2004 to
$12.1 million from $11.1 million in the second quarter of 2003, resulting,
principally, from an 8.5 percent increase in newsprint prices and higher
newsprint consumption associated principally with PNIs 2004 and 2003
acquisitions. Depreciation and amortization expense increased 3.2 percent to $5.0
million in the second quarter of 2004 compared to $4.8 million in the second
quarter of 2003. Equity in earnings of Tucson newspaper partnership (TNI) increased 1.3
percent to $4.3 million from $4.2 million in the second quarter of 2004 due,
principally, to increased classified revenue (principally employment and -19-




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automotive), and higher preprint revenue. These revenue increases were
partially offset by increased newsprint expense and postage expense. Second quarter 2004 operating income decreased 2.7 percent to $22.9
million from $23.6 million in the second quarter of 2003. Non-Operating Items Interest expense, net of interest income, decreased in the second quarter
to $3.8 million from $4.4 million in the same quarter of 2003, principally due
to savings from the Companys interest rate swaps and higher yields on invested
funds. The effective income tax rate for the second quarter of 2004 decreased
to 36.0 percent from 37.0 percent in the second quarter of 2003 due,
principally, to postretirement expense reductions associated with the 2003
Medicare Prescription Drug, Improvement and Modernization Act (the Act)
against which no income tax provision has been made in accordance with the Act. Net Income For the second quarter 2004 the Company reported net income of $11.8
million, or $0.54 per diluted share, compared to $11.4 million, or $0.53 per
diluted share, in the comparable quarter of 2003. SIX MONTHS ENDED JUNE 27, 2004 COMPARED WITH SIX MONTHS ENDED JUNE 29, 2003 Executive Overview Operating revenue increased 5.1 percent to $215.8 million for the first
six months of 2004 versus $205.3 million in the comparable 2003 period,
reflecting a 6.1 percent increase in advertising revenue and a 1.3 percent
increase in circulation revenue. The advertising revenue increase resulted,
principally, from (a) a 4.7 percent increase in retail advertising revenue,
including retail preprints, reflecting gains from smaller local advertisers and
revenues from Local Values, the Post-Dispatchsdirect mail initiative; and (b)
an 11.3 percent increase in classified advertising. The retail and classified
advertising revenue increases were partially offset by a 6.3 percent decrease
in national advertising, including national preprints, principally due to
weakness in the pharmaceutical and travel categories, and tough comparisons
with prior year results. Operating expenses for the first six months of 2004 increased 6.7 percent
to $184.8 million from $173.2 million in the first six months of 2003,
principally due to (a) increased labor and employee benefit costs, (b) a $1.5
million expense related to the settlement of independent home delivery carrier
litigation in St. Louis, (c) increased newsprint expense, principally as a
result of higher newsprint prices compared to the second quarter of 2003, (d)
incremental operating expenses from PNI newspaper acquisitions, and (e)
distribution, production and promotion expenses related to Local Values. These
expense increases were partially offset by decreased bad debt expense resulting
from improved collection experience and the favorable resolution of Kmart
related pre-petition bankruptcy claims and collection issues. Operating income
for the first six months of 2004 decreased to $39.2 million, or 3.4 percent,
from $40.5 million in the first six months of 2003. Net income for the first six months of 2004 increased to $19.9 million, or
$0.91 per diluted share, compared to $18.5 million, or $0.86 per diluted share,
for the first six months of 2003. The increase in 2004 net income was
principally due to (a) increased advertising revenue, (b) decreased interest
expense resulting from the Companys interest rate swap contracts, (c) carrying
value adjustments to non-operating investments of $42,000 during the first six
months of 2004 compared to $1.1 million in carrying value adjustments to
non-operating investments in the prior year, and (d) gains on marketable
securities of $0.5 million in the first six months of 2004 compared to gains of
$58,000 in the first six months of 2003. Operating Results Operating revenue for the first six months of 2004 increased 5.1 percent
to $215.8 million from $205.3 million in the first six months of 2003. Retail
advertising revenue, including retail preprints, increased 4.7 percent to $87.6
million in the first six months of 2004 from $83.7 million in the comparable
2003 period. The increase was driven, in part, by a 12.4 percent increase in
retail advertising revenue from small to mid-size advertisers in St. Louis and
a 7.5 percent increase in retail revenue from PNI (approximately 40 percent of
the PNI increase resulted from 2004 and 2003 acquisitions). These increases
were partially offset by weakness in the department store category in St.
Louis. Retail preprint revenue increased 6.1 percent due, in part, to preprint
revenue related to the Post-Dispatchsdirect mail initiative in St. Louis,
which was launched on March 1, 2004. -20-




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National advertising revenue, including national preprints, decreased 6.3
percent in the first six months of 2004, to $15.7 million compared to $16.8
million in 2003. The decrease resulted, principally, from weakness in the
pharmaceutical, telecommunication, and travel categories in St. Louis and tough
comparisons with prior year results. Classified advertising revenue during the first six months of 2004
increased 11.3 percent to $67.8 million from $60.9 million in 2003. Each major
classified revenue category increased during the comparable 2003 period. Real
estate, help wanted and automotive classified revenue categories reporting
year-over-year revenue increases of 15.0 percent, 14.2 percent and 7.9 percent,
respectively. The Companys classified advertising revenue percentage changes
for the first six months of 2004 versus the comparable period of 2003 are
summarized in the table below: Pulitzer
    
    St. Louis
    
    PNIFirst six months of
    
    Classified advertising revenue2004 vs. First six
    
    percentage change from comparablemonths of 2003
    
    prior year periodAutomotive
    
    
    +7.9
    %
    
    
    +8.5
    %
    
    
    +5.7
    %Help Wanted
    
    
    +14.2
    %
    
    
    +8.5
    %
    
    
    +35.2
    %Real Estate
    
    
    +15.0
    %
    
    
    +8.5
    %
    
    
    +31.8
    %Total Classified
    
    
    +11.3
    %
    
    
    +7.9
    %
    
    
    +21.7
    %
 Circulation revenues increased $0.5 million, or 1.3 percent, in the first
six months of 2004. Other publishing revenues increased $0.1 million, or 3.3
percent. Operating expense increased 6.7 percent in the first six months of 2004 to
$184.8 million compared to $173.2 million in the first six months 2003. Labor
and employee benefits costs increased 3.2 percent, reflecting increased salary
and increased healthcare and pension benefit costs, partially offset by a 2.4
percent reduction in FTEs. Newsprint expense increased 9.6 percent in the first six months of 2004 to
$23.1 million from $21.1 million in the comparable 2003 period, principally
from an 8.9 percent increase in newsprint prices and higher newsprint
consumption associated with PNIs 2004 and 2003 acquisitions. Depreciation and amortization expense increased 3.1 percent to $9.9
million in the first six months of 2004 compared to $9.6 million in the
comparable 2003 period. Equity in earnings of TNI decreased 2.1 percent to $8.2 million in the
first six months of 2004 from $8.4 million in the first six months of 2003 due,
principally, to increased newsprint expense. Operating income for the first six months of 2004 decreased 3.4 percent to
$39.2 million from $40.5 million in the first six months of 2003. Non-Operating Items Interest expense, net of interest income, decreased in the first six
months of 2004 to $7.4 million from $8.9 million in the comparable period of
2003, principally due to savings from the Companys interest rate swaps and
higher yields on invested funds. The effective income tax rate for the first
six months of 2004 decreased to 36.4 percent from 37.0 percent in the first six
months of 2003 due, principally, to postretirement expense reductions
associated with the Act against which no income tax provision has been made in
accordance with the Act. Net Income For the first six months of 2004 the Company reported net income of $19.9
million, or $0.91 per diluted share, compared to $18.5 million, or $0.86 per
diluted share, in the comparable period of 2003. -21-




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LIQUIDITY AND CAPITAL RESOURCES As of June 27, 2004, the Company had an unrestricted cash and marketable
securities balance of $200.6 million compared to $176.2 million as of December
28, 2003. The increase resulted principally from an increase in net income for
the first six months of 2004, the receipt of 2003 income tax refunds, the
absence, in 2004, of discretionary contributions to fund the Companys
retirement obligations, and lower expenditures for capital projects in 2004
compared to the comparable 2003 period. At both June 27, 2004 and December 28, 2003, 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 $62.3 million as of June 27,
2004. The Loan Agreements and the Operating Agreement provide for a $3.75
million quarterly increase in the minimum reserve balance through May 1, 2010,
when the amount will total $150.0 million. There is no requirement for the
Company to maintain the reserve balance subsequent to May 1, 2010. The Company expects to spend approximately $10.0 million to $12.0 million
on property, plant and equipment in 2004. As of June 27, 2004, the Company had
capital commitments for buildings and equipment replacements of approximately
$4.2 million. In addition, as of June 27, 2004, the Company had an unfunded
capital contribution commitment of approximately $3.8 million related to its
investment in a limited partnership 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,PD LLC has purchased a number of distribution businesses
from independent carriers and dealers over the past four years, and it may
continue to purchase additional distribution businesses from time to time in
the future. As of June 27, 2004, PD LLC owned approximately 70 percent of its
circulation routes covering approximately 70 percent of the Post-Dispatchs
daily home delivery and approximately 75 percent of 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 the Company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 June 27, 2004, the Company had repurchased under this authority 1,000,000
shares of Class B common stock and 532,987 shares of common stock for a
combined purchase price of $62.2 million, leaving $37.8 million in remaining
share repurchase authority. 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 six months of 2004 was
$46.0 million compared to $41.1 million in 2003. The increase resulted
principally from 2003 income tax refunds received in 2004 and increased net
income, partially offset by increased inventory balances, principally
newsprint. Cash used for investing activities during the first six months of 2004 was
$19.0 million compared to $33.3 million used in the first six months 2003. The
Company made no discretionary contributions to fund retirement obligations
during the first six months of 2004 compared to a $10.8 million contribution in
the first six months of 2003. In addition, capital expenditures decreased by
$3.0 million in the first six months of 2004 to $3.7 million from $6.7 million
in 2003. Cash used for financing activities during the first six months of 2004 was
$4.3 million compared to $4.6 million used in the first six months of 2003. The
decrease in cash used was due to increased proceeds from the exercise of -22-




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stock options and proceeds from employee stock purchase plans, partially
offset by increased dividend payments in the first six months of 2004 versus
2003. OTHER Pursuant to an Amended and Restated Agreement and Plan of Merger, dated as
of May 25, 1998 (the 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 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 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 Merger and Spin-off are
collectively referred to as the Broadcast Transaction. Old Pulitzers historical basis in its newspaper publishing and related
new media assets and liabilities has been carried over to the Company. The
Broadcast Transaction represents a reverse-spin transaction and, accordingly,
the Companys results of operations for periods prior to the consummation of
the Broadcast Transaction are identical to the historical results previously
reported by Old Pulitzer. Merger Agreement Indemnification 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 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 Merger Agreement. Internal Revenue Services Matters In October 2001 the Internal Revenue Service (IRS) formally proposed
that Old Pulitzers taxable income 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 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. Accordingly, if the IRS were
completely successful in its assertion, the Companys indemnification
obligation would be approximately $29.3 million, plus applicable interest. Any
such income tax indemnification payment would be recorded as an adjustment to
additional paid-in capital, and any related interest expense would be reflected
as a component of net income in the period recognized. Notwithstanding the IRS
proposed adjustment, the Company does not believe that Old Pulitzer realized
any taxable gain in connection with the Spin-off, and it has not accrued any
liability in connection with this issue. 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 Companys 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 Merger Agreement, the Company
is entitled to any refunds recovered from the IRS as a result of these refund
claims, but it has not recorded a receivable for these refund claims inasmuch
as the IRS could deny all or a portion thereof. Any income tax refunds would be
recorded as an adjustment to additional paid-in-capital, and any related
interest received would be reflected as a component of net income in the period
recognized. 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 Companys refund claims 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 -23-




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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
Companys refund claims 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. While there can be no assurance that the Company will completely prevail
in its position with respect to the issue of Old Pulitzers taxable gain as a
result of the Spin-off, it firmly believes that the IRS position is not
supported by the facts or applicable legal authority and intends to vigorously
contest the IRS proposed adjustment. Similarly, with respect to the Companys
refund claims for the December 1997 and 1998 and March 1999 tax years, the
Company believes that the position underlying its refund claims is supported by
the facts and applicable legal authority, although there can be no assurance
that the IRS will approve all or any portion of these refund claims.
Discussions between the Companys representatives and the IRS regarding these
proceedings are ongoing. 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 Subsidiary 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 that PD LLC has an increase in
the tax basis of its assets as a result of Heralds recognizing taxable income
from certain transactions effected under the agreement governing the
contributions of Pulitzer Inc. and one of its subsidiaries and Herald to PD LLC
or the Operating Agreement or from the transactions effected in connection with
the organization of DS LLC, 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. Upon the 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 will 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. -24-




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Legal Contingencies The Company has settled the lawsuit filed in the Missouri Circuit Court,
Twenty-Second Judicial Circuit (City of St. Louis, Missouri), against Pulitzer
Inc., PD LLC, and Suburban Journals LLC (Defendants) which was described in
the Companys Annual Report on Form 10-K for the year ended December 28, 2003
and the Companys Quarterly Report on Form 10-Q for the quarter ended March 28,
2004. The lawsuit was brought by a group of 33 independent carriers (the
Plaintiffs) engaged in the business of delivering the Post-Dispatchpursuant
to home delivery contracts involving 44 carrier routes. The lawsuit has been
settled with a payment by PD LLC of approximately $1.5 million. 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 2003, the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (the Act) was signed into law. The Act introduced
a prescription drug benefit under Medicare (Medicare Part D) and a federal
subsidy to sponsors of retiree health care benefit plans that provide a benefit
that is at least actuarially equivalent (as that term is defined in the Act) to
Medicare Part D. FASB Staff Position 106-1, Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug, Improvement and
Modernization Act of 2003(FSP 106-1), which is effective for interim or
annual financial statements for fiscal years which ended after December 7,
2003, permits a sponsor of a postretirement health care plan that provides a
prescription drug benefit to make a one-time election to defer accounting for
the effects of the Act. The Company decided to recognize the effects of the Act on the Companys
accumulated postretirement benefit obligation (APBO) and postretirement
benefit costs initially in the first quarter of 2004. The Company has
concluded that it qualifies for the subsidy under the Act since the
prescription drug benefits provided under the Companys postretirement
healthcare plans generally require lower premiums from covered retirees and
have lower deductibles than the benefits provided in Medicare Part D and,
therefore, are actuarially equivalent to or better than the benefits provided
under the Act. In addition, the Company does not anticipate any material
change in the participation rate or per capita claims costs as a result of the
Act. The Company estimates that the provisions of the Act will lower the APBO
by approximately $12 million which is being treated as a negative prior service
cost that is being amortized beginning on March 8, 2004. This amortization
will result in a $1.3 million reduction to the APBO and postretirement benefit
costs in 2004, against which no income tax provision will be made in accordance
with the Act. Specific authoritative guidance on the accounting for the federal
subsidy is pending, and that guidance, when issued, could require the Company
to change previously reported information. The Condensed Consolidated
Statements of Income incorporate expense reductions of $0.4 million and $0.5
million for the respective second quarter and first six month periods of 2004,
against which no income tax provision has been made. -25-




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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 12.3 percent to 16.0 percent of operating expenses over the last
five years. Based on the Companys current level of newspaper operations,
expected annual newsprint consumption for 2004 is estimated to be in the range
of 103,000 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 last five years, 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, 2004 pre-tax income would
change by approximately $103,000, assuming annual newsprint consumption of
103,000 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 June 27, 2004, the Company had $306.0 million of outstanding debt
pursuant to the Loan. 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. -26-




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Item 4. CONTROLS AND PROCEDURES 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. Based upon that evaluation, 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 that have materially affected, or a reasonably
likely to materially affect, the Companys internal control over financial
reporting. -27-




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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. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES
OF EQUITY SECURITIES None reportable. -28-




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Item 6. EXHIBITS AND REPORTS ON FORM 8-K  (a)
    
    The following exhibits are filed as part of this report: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 June 27, 2004.31.2
    
    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 June 27, 2004.32.1
    
    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
June 27, 2004.32.2
    
    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 June 27,
2004.(b)
    
    Reports on Form 8-K.On April 16, 2004, the Company filed a Current Report on Form 8-K
reporting under Item 12, Results of Operations and Financial
Condition, furnishing its (i) press release which announced its
consolidated financial results for the first quarter ended March
28, 2004, and contained information regarding the Companys full
year 2004 base earnings guidance (as defined therein) and (ii)
statistical report for the period and 13 weeks ended March 28,
2004.On July 20, 2004, the Company filed a Current Report on Form 8-K
reporting under Item 12, Results of Operations and Financial
Condition, furnishing its (i) press release which announced its
consolidated financial results for the second quarter ended June
27, 2004, and contained information regarding the Companys full
year 2004 base earnings guidance (as defined therein) and (ii)
statistical report for the period and 26 weeks ended June 27, 2004.On July 23, 2004, the Company filed a Current Report on Form 8-K
reporting under Item 5, Other Events and Regulation FD Disclosure,
furnishing a press release of the St. Louis Post-Dispatch LLC, a
subsidiary of the Company, dated July 20, 2004, which announced the
settlement of a lawsuit brought by a group of independent St. Louis
Post-Dispatch home delivery carriers. The settlement was
consummated on July 23, 2004. 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: August 6, 2004
    
    
    
    /s/ Alan G. Silverglat(Alan G. Silverglat)Senior Vice President-Finance andChief Financial Officer(on behalf of the Registrant andas principal financial officer)
 -29-




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EXHIBIT INDEX  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 June 27, 2004.31.2
    
    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
June 27, 2004.32.1
    
    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
June 27, 2004.32.2
    
    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 June 27, 2004. -30-