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UNITED STATES SECURITIES AND EXCHANGE COMMISSION 
 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended June 30, 2004
OR 
 Commission File Number 033-75156 MEDIANEWS GROUP, INC.  Delaware
(State or other jurisdiction of
incorporation or organization)
    
    76-0425553
(I.R.S. Employer Identification Number)1560 Broadway, Denver, Colorado
(Address of principal executive offices)
    
    80202
(Zip Code)
 Registrants telephone number, including area code: (303) 563-6360 Securities registered pursuant to Section 12(b) of the Act:NONE Securities registered pursuant to Section 12(g) of the Act:NONE Indicate by check mark whether the registrant (1) has filed all reports to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Item (1) Yes
[X] No [  ]; Item (2) Yes [  ]
No [X*] Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X] Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [  ] No. [X] State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was last sold, or the average bid and asked prices of such common
equity, as of the last business day of the registrants most recently completed
second fiscal quarter. Not applicable as there is no active market for our common equity. The number of shares outstanding of the registrants common stock as of
September 27, 2004 was 2,298,346. Documents Incorporated by Reference: None *The registrants duty to file reports with the Securities and Exchange
Commission has been suspended in respect of its fiscal year commencing July 1,
2004 pursuant to Section 15(d) of the Securities Exchange Act of 1934.




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Table of Contents PagePart IItem 1.
    
    Business
    
    
    3Item 2.
    
    Properties
    
    
    9Item 3.
    
    Legal Proceedings
    
    
    10Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    10Part IIItem 5.
    
    Market for the Registrants Common Equity and Related Stockholder Matters
    
    
    11Item 6.
    
    Selected Financial Data
    
    
    12Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 8.
    
    Financial Statements and Supplementary Data
    
    
    34Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    34Item 9A.
    
    Controls and Procedures
    
    
    34Item 9B.
    
    Other Information
    
    
    34Part IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    35Item 11.
    
    Executive Compensation
    
    
    36Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management
    
    
    38Item 13.
    
    Certain Relationships and Related Transactions
    
    
    40Item 14.
    
    Principal Accounting Fees and Services
    
    
    41Part IVItem 15.
    
    Exhibits and
Financial Statement Schedules
    
    
    43SignaturesAmended and Restated BylawsSecond Amendment to Credit AgreementThird Amendment to Credit AgreementAmended and Restated Joint Operating AgreementPurchase AgreementMaster Restructuring and Purchase AgreementSubsidiariesCertification Pursuant to Section 302Certification Pursuant to Section 302Certification Pursuant to Section 302Certification Pursuant to Section 906Certification Pursuant to Section 906
  2




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Item 1: Business General MediaNews Group, Inc. (MediaNews or the Company), a Delaware
Corporation, was founded in March 1985. We are one of the largest private
newspaper companies in the United States in terms of daily paid circulation. We
control 40 market dominant daily and approximately 65 non-daily newspapers in
eight states, including suburban markets in close proximity to the San
Francisco Bay area, Los Angeles, New York, Baltimore and Boston. We also own
metropolitan daily newspapers in Denver and Salt Lake City that operate under
joint operating agency (JOA) agreements. The newspapers we currently control
had combined daily and Sunday paid circulation of approximately 1.7 million and
2.2 million, respectively, as of March 31, 2004. In addition, we have a 33.8%
interest in a partnership controlled by Gannett, the largest newspaper company
in the United States. This partnership operates six daily newspapers in Texas
and New Mexico with a combined daily circulation of approximately 130,000. We have grown primarily through strategic acquisitions, partnerships and,
to a lesser extent, internal growth. One of our key strategies is geographic
clustering. This strategy involves acquiring newspapers, or partnering with
newspapers, in markets contiguous to those in which we already operate.
Clustering has allowed us to realize substantial revenue synergies and cost
efficiencies, resulting in higher operating cash flow growth at those
newspapers than they would have achieved on a stand-alone basis. Our newspapers are generally positioned in markets with limited direct
competition for local newspaper advertising. Start-ups of new daily newspapers
in suburban markets with pre-existing local newspapers are rare. We believe
that our newspaper markets, taken as a whole, have above average population and
sales growth potential. Most suburban and small city daily newspapers, such as
a majority of the newspapers we own, have the leading or sole distribution in
the markets they serve. Suburban newspapers address the specific needs of the
community by publishing a broad spectrum of local news as well as advertiser
specific editions which television, because of its broader geographic coverage,
is unwilling or unable to provide. Thus, in many communities, the local
newspaper provides a combination of social and economic services in a way that
only it can, making it attractive for both consumers and advertisers. Our
metropolitan newspapers generate significant revenues from high margin national
and employment advertising, which is strongly influenced by national and local
economic trends. On the other hand, our suburban newspapers generate the
majority of their revenues from local retail, classified and circulation sales,
which we believe are less affected by national economic trends and therefore
tend to provide a more stable base of operating cash flow. We also operate, in conjunction with our suburban newspapers, sizeable
weekly newspaper groups that target the diverse communities and advertising
opportunities that exist in and around large cities. In addition to relying on
small local retailers, local classifieds and restaurants for advertising,
suburban weekly newspapers allow us to attract a different base of advertisers
than the daily newspaper, improve our competitive positioning, reduce the
threat of competition from direct mail and shoppers (free circulars) and
achieve greater household penetration in our newspaper markets. Our largest
suburban weekly newspaper groups operate in conjunction with our San Francisco
Bay area newspapers, Los Angeles Newspapers Group and Connecticut Post. Industry Background Newspaper publishing is the oldest and largest segment of the media
industry. Newspapers address the specific needs of the communities they serve
by publishing a broad spectrum of local news as well as special editions that
are targeted to specific advertisers and readers. In most communities, the
local newspaper provides the primary voice for local news and information,
including business, sports, government and social as well as political
commentary, making a newspapers content attractive to both readers and
advertisers. We believe that the local newspapers close relationship with its
readers and local community is one of the primary reasons why newspapers remain
a dominant medium for local advertising, accounting for approximately 40% of
all local media advertising expenditures in the United States in calendar
2003.(1)   (1)
    
    Source: NAA.org Newspaper Association of America 2004 Facts About Newspapers 3




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We believe that, due to fragmentation of other
mediums, newspapers are the last mass market medium available for
advertisers to effectively reach a broad spectrum of highly attractive consumers. In addition, newspapers are
one of the few forms of mass media used by readers for both editorial and
advertising content. Independent studies have shown that 43% of Sunday
newspaper readers value advertising as much as news and editorial content.(2)
Readers of newspapers also tend to be more highly educated and have higher
incomes than non-newspaper readers, with a recent survey showing over 60% of
college graduates and 63% of households with incomes greater than $75,000 read
a daily newspaper.(1) Because of the desirable demographic and market reach of
daily newspapers, we believe that they represent the most cost-effective means
for advertisers to reach a broad and affluent spectrum of consumers. With the exception of a few of the largest cities, most cities in the
United States do not have more than one daily newspaper. In addition,
start-ups of daily newspapers that compete in a meaningful way with existing
daily newspapers are rare. Significant Transactions in Fiscal Year 2004 Acquisitions/JOA Restructurings In May 2004, we restructured our interest in Charleston Newspapers
(Charleston JOA). In exchange for $55.0 million (less a net adjustment for
50% of Charleston Newspapers net working capital, long-term employee benefits
liabilities and long-term debt) and a limited partnership interest in a newly
formed entity (Charleston Newspapers Holdings, L.P.), we contributed our
general partnership interest in Charleston Newspapers and the masthead of the
Charleston Daily Mailto Charleston Newspapers Holdings L.P. Our former
partner in Charleston Newspapers is the general partner in Charleston
Newspapers Holdings L.P. In addition, in conjunction with the restructuring,
we also agreed to continue to be responsible for the news and editorial content
of the Charleston Daily Mail.Under our agreement with Charleston Newspapers
Holdings, L.P., we are reimbursed for the cost of providing the news and
editorial content of the Charleston Daily Mailand paid a management fee. Our
limited partnership interest does not entitle us to any share of the profits or
losses of the limited partnership. Also in May 2004, we restructured our interest in The York Newspaper
Company (York JOA) through the exercise of our call option to acquire the
remaining 42.5% interest in The York Newspaper Company and the masthead of the
York Daily Recordfor approximately $38.3 million. Prior to the call option
exercise and the restructuring of our interest in the York JOA, one of our
subsidiaries, York Newspapers, Inc., was responsible for the news and editorial
content of The York Dispatch, whereas York Daily Record, Inc., the minority
partner in The York Newspaper Company, was responsible for the news and
editorial content of the York Daily Record.After the option exercise and the
restructuring of the York JOA, we became responsible for the news and editorial
content of the York Daily Recordand an affiliate of our former partner in The
York Newspaper Company became responsible for providing the news and editorial
content for The York Dispatch.However, we still own the masthead and all other
intangible and tangible assets of The York Dispatch.Under the restructured
York JOA, we reimburse the affiliate of our former partner for the cost of
providing the news and editorial content of The York Dispatch, plus a
management fee of $240,000 per year. In January 2004, we purchased for approximately $9.0 million two weekly
newspapers in southern California: the Grunion Gazetteand Downtown Gazette.
These weeklies are published in Long Beach where we own the daily newspaper. Debt Refinancings During fiscal year 2004, we took advantage of the favorable interest rate
environment and completed several refinancings. In November 2003, we completed
the sale of $300.0 million of our 6 7/8% Senior Subordinated Notes due 2013
(the 6 7/8% Notes). We applied the net proceeds from the 6 7/8% Notes and
other available funds to redeem all of our outstanding $300.0 million 8 3/4%
Senior Subordinated Notes. In December 2003, we refinanced our bank credit facility. The new
facility provided for borrowings of up to $600.0 million, consisting of a
$350.0 million revolving credit facility and $250.0 million term loan B
facility. In August 2004,   (1)
    
    Source: NAA.org Newspaper Association of America 2004 Facts About Newspapers(2)
    
    Source: Scarborough research 4




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we amended the bank credit facility. The August amendment and refinancing
maintains the revolving credit facility and provides for a $100.0 million term
loan A and a $148.8 million term loan C, both of which were used to
refinance the previous term loan B facility. The amendment and refinancing
revised maturities and lowered borrowing margins on the bank credit facility. In January 2004, we completed the sale of $150.0 million of our 6 3/8%
Senior Subordinated Notes due 2014 to refinance in part our 8 5/8% Senior
Subordinated Notes on their first call date. Until then, we used the net
proceeds from the sale to pay off the revolving portion of our credit facility
and elected to accumulate cash. On July 1, 2004, the first redemption date, we used
cash on hand and borrowings under the bank credit facility to redeem all our
outstanding $200.0 million 8 5/8% Senior Subordinated Notes. Operating Strengths and Strategies Our long-term operating strategy is to increase revenues and operating
cash flows through geographic clustering, partnerships and internal growth. Our
internal growth strategy is built on our key strengths, which include
development of new revenue streams, local news leadership, circulation growth
and prudent cost controls. In addition, we seek to drive revenue growth in our Internet operations by leveraging
our local content across a diverse array of classified advertising categories,
including employment, automotive, real estate and other Internet verticals. Geographic Clusters and Partnerships.One of our key acquisition
strategies is to acquire newspapers in markets contiguous to our own. We refer
to this strategy, which we pioneered, as clustering. Clustering enables us to
realize operating efficiencies and economic synergies, such as the sharing of
management, accounting, newsgathering, advertising and production facilities.
In addition, we seek to increase operating cash flows at acquired newspapers by
reducing labor costs, and implementing overall improvements in cost management.
Clustering also enables us to maximize revenues by selling advertising into
newspapers owned by us in contiguous markets. We believe that this strategy
allows us to achieve higher operating margins at our clustered newspapers than
we would realize from those newspapers on a stand-alone basis. The California
Newspapers Partnership (CNP), the Denver Newspaper Agency (the Denver JOA
or DNA) and the Texas-New Mexico Newspapers Partnership are all extensions of
this strategy. New Revenue Streams.We focus on developing and implementing new revenue
initiatives and exporting these initiatives across all of our newspapers. We
continue to launch niche publications and implement other revenue growth
initiatives, such as a monthly contest for the best new revenue initiative,
revenue Think Tanks with our top sales executives, TOMA (Top of Mind
Awareness) which introduces small local advertisers to the power of newspaper
advertising and SWAT programs which utilize the skills of our best sales
representatives in a sales blitz at a sister newspaper. We have also formed
strategic alliances, such as a relationship with a direct mail provider
designed to increase our share of the mid-week preprint and print and delivery
business in four of our markets, including most recently the San Francisco Bay
area. In January 2004, our Los Angeles Newspaper Group launched IMPACTO USA, a
weekend home delivered Spanish-language newspaper. IMPACTO USAis home
delivered every Saturday to over 250,000 Hispanic households in Central and
East Los Angeles, Long Beach and the San Fernando Valley under a distribution
strategy developed through the Latino Newspaper Network, a marketing and
advertising sales partnership in which we participate. In conjunction with
these programs, we utilize market research, demographic studies, zoning, strong
local market penetration and active community involvement to develop and
implement marketing programs that allow our newspapers to maximize their share
of the available advertising dollars in the market. Local News Leadership.We believe that we have assembled the largest
local newsgathering resources in our markets and we are committed to being the
leading provider of high quality local news in those markets. Each newspaper is
locally managed and sets its own news coverage and editorial policy based on
the local market. Our focus on in-depth local news coverage sets us apart from
other news sources in our markets, contributing to reader loyalty and
increasing franchise value. With the timeliness and availability of national
and world news 24 hours a day on television and the Internet, we believe that
providing in-depth local news coverage is invaluable and is what sets us apart
from other news sources, generating reader loyalty and increasing franchise
value. Additionally, our ongoing involvement in the communities in which we
operate not only strengthens our relationships with these communities but also
provides our advertisers a superior vehicle for promoting their goods and
services. Although our focus is primarily on local news, we are committed to
providing quality national and international news coverage when it is of
particular interest to the local community, such as sending embedded reporters
and photographers from our metropolitan daily newspapers to cover the war in
Iraq. 5




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The majority of our newspapers receive awards annually for excellence in
various editorial categories in their respective regions and circulation size.
For example, The Denver Postachieved the highest award for editorial
excellence, winning a Pulitzer Prize in 2000 for its coverage of the Columbine
High School tragedy. Our other newspapers have also received numerous awards
from state press associations as well as other peer organizations for their
editorial content, local news and sports coverage, and photography. In
addition, our newspapers are designed to visually attract readers through
attractive layouts and color enhancements, and in an ongoing effort to improve
quality, we have made investments in digital photography. Circulation Growth.Circulation growth is essential to maintaining and
growing the long-term franchise value at our newspapers. Accordingly, we have
and will continue to make significant investments in circulation promotion,
telemarketing and other circulation growth campaigns to increase circulation
and readership. Recently enacted telemarketing rules, including the National
Do-Not-Call Registry, are having an impact on our ability to gain subscriptions
through telemarketing; however, we are not prohibited from calling those
persons who are not registered with the registry or those persons who are, but
with whom we have had a pre-existing relationship during the prior 18 months.
Other home delivery circulation marketing programs are being implemented to
offset the impact of the reduction in telemarketing. Our management incentive
programs are designed to reward our publishers for circulation growth at their
daily newspapers. Our circulation growth strategies are focused on growing
home delivery and single copy sales, the most desired circulation types for our
advertisers. We continue to balance our commitment to circulation growth with
circulation profit by instituting programs that target the replacement of
higher churn short-term circulation orders with longer term, more profitable
circulation, thereby delivering a stable subscriber base for our advertising
customers and controlling subscriber acquisition costs. This strategy has
improved circulation profits, but may at times decrease circulation volumes in
the short-term. We are also making investments in technology to enhance
demographic targeting of potential subscribers, aimed at selling to and
retaining high quality subscribers. Cost Controls.We focus on cost control with a particular focus on
managing staffing requirements. At newspapers with collective bargaining
unions, management strives to enter into long-term agreements with small annual
increases. In addition, we further control labor costs through investments in
state-of-the-art production equipment that improve production quality and
increase operating efficiency. We are equally focused on newsprint cost
control. Each of our newspapers benefits from the discounted newsprint pricing
we obtain as one of the largest newspaper groups in the United States. We
purchase newsprint from several suppliers under arrangements resulting in what
we believe are some of the most favorable newsprint prices in the industry. We were the first newspaper company in the United States to convert all of
our newspapers to a 50-inch web width, which reduced the width of a single
newspaper page to 12.5 inches from either 13.5 inch or 13.75 inch page widths.
These conversions have permanently reduced our newsprint consumption by
approximately 8% below levels prior to conversion. While converting to the
50-inch web-width cut our newsprint costs, it also had the added benefit of
improving customer satisfaction through ease of use. Internet.MediaNews Group interactive (MNGi), our Internet subsidiary,
was established to take advantage of the increasing use of the Internet and its
advertising growth opportunities. Our mission is to use the Internet and other
electronic media to enhance and broaden our position as the leading provider of
news, information and services in our strategically located markets. We are
growing market share and extending the profitability of our local media
franchises by leveraging our extensive newsgathering resources, print and
online sales infrastructures and partnering with providers of emerging
technologies, including broadband and wireless. We expect to extend the reach
of our brands beyond our core and existing print audience to attract younger
and more diverse users. Finally, we are cultivating relationships with new and
existing advertisers by proactively addressing their needs and providing
multimedia packages reaching target customers and generating optimal results. We intend to increase our direct sales by offering more comprehensive
self-service online products in the future. We have also begun to implement
next generation classified capabilities that we believe will result in more
revenue per order, new revenue streams and significant cost savings. The
development of these products will allow us to better compete with new entrants
into on-line advertising and enhance advertiser satisfaction. In addition, we
are introducing site registration and personalization across each of our sites,
giving us the ability to integrate our online/offline databases to allow for a
very high degree of online targeted marketing including print subscription
acquisitions, email marketing and the ability to target advertising based on
the captured demographic and psychographic data. 6




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We have also made strategic Internet investments that we believe expand and
enrich our online content, which are described in more detail below.  
    
    PowerOne Media(www.poweronemedia.com), provides interactive vertical
classified advertising solutions, primarily for the newspaper industry.
PowerOne Media solutions include CarCast, Zwire!, Classified Hosting,
Employment (CareerSite), Display Ads, Franchise Solutions, Online
Dating, and Real Estate. We own approximately 16% of PowerOne Media.
    
    SeeitBuyit(www.seeitbuyit.com), is a marketing and promotional
services company focused on providing the real estate industry a
powerful listing and selling tool designed to provide a one stop
shopping marketing solution for our real estate advertising customers.
SeeitBuyit provides realtors with video photography online home tours
brochures, direct mail pieces, and other items used by realtors in
selling new and existing homes. SeeitBuyit is a wholly-owned subsidiary
of MediaNews. By being the leading provider of local news and information in our
markets, and leveraging the Internet, electronic media, emerging wireless and
broadband technologies, we believe that our newspapers are well positioned to
respond to and benefit from changes in the way advertising, news and
information are delivered to customers now and in the future. Links to our
online newspapers can be found at www.newschoice.com Superior Management.Our management team has a proven track record of
successfully acquiring, including through partnerships, approximately 70
newspapers that have been successfully integrated into our operations. Our
senior executives have spent the majority of their careers in the newspaper
industry operating, acquiring and integrating newspapers. Strategic Acquisitions.In the past we have sought to acquire newspapers
that are contiguous to our existing newspapers and that represent compelling
values based on expected operating cash flow growth from clustering synergies,
efficiencies or otherwise. We may from time to time continue to evaluate and
pursue strategic or targeted acquisitions that meet our strict acquisition
criteria, including our goal of not increasing our leverage ratio over the
long-term. Advertising and Circulation Revenues Advertising is the largest component of a newspapers revenues, followed
by circulation revenue. Advertising rates at each newspaper are established
based upon market size, circulation, readership, demographic makeup of the
market and the availability of alternative advertising media in the
marketplace. While circulation revenue is not as significant as advertising
revenue, circulation trends can impact the decisions of advertisers and
advertising rates. Advertising revenue includes Retail(local and national department stores,
specialty shops, preprinted advertising circulars and other local retailers,
direct mail and niche publications), National(national advertising accounts)
and Classifiedadvertising (employment, automotive, real estate, private party
and personals). In fiscal year 2004, classified revenue continued to be
impacted by declines in classified employment advertising due to the continued
weak labor markets in most of our newspaper markets and throughout most of the
United States. However, many of our newspapers began to see positive trends in
the second half of the fiscal year. Other revenue consists primarily of
revenue from commercial printing and the Internet. The contributions of
Retail, National, Classified, Circulation and Other revenue to total revenues
for fiscal years 2004, 2003 and 2002 are shown in the table below. Fiscal Years EndedJune 30,(1)2004
    
    2003
    
    2002Retail
    
    
    42
    %
    
    
    42
    %
    
    
    41
    %National
    
    
    6
    
    
    
    6
    
    
    
    4Classified
    
    
    26
    
    
    
    28
    
    
    
    30Circulation
    
    
    18
    
    
    
    19
    
    
    
    20Other
    
    
    8
    
    
    
    5
    
    
    
    5100
    %
    
    
    100
    %
    
    
    100
    %
  (1)
    
    Generally accepted accounting principles do not allow us to consolidate
the revenues for our JOA investments we do not control; accordingly, we
record our share of the JOAs net results in one line item, Income from
Unconsolidated JOAs. The revenue data for the JOAs we do not control
(Salt Lake City, Denver, and Charleston through May 7, 2004) are excluded
from this summary (see further discussion under Managements Discussion
and Analysis of Financial Condition and Results of Operations  Critical
Accounting Policies). 7




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Newsprint Newsprint is one of the largest costs of producing a newspaper, and the
price of newsprint is subject to changes in worldwide supply and demand. We
buy newsprint from several suppliers under arrangements that we believe provide
us with some of the most favorable long-term newsprint prices in the industry.
We also own, through Kearns-Tribune, LLC, a 6% interest in Ponderay Newsprint
Company. During fiscal years 2004, 2003, and 2002, excluding our
unconsolidated JOA operations, we consumed approximately 150,000, 154,000 and
148,000 metric tons of newsprint, respectively, and, during the same periods,
incurred newsprint expense of $72.8 million, $67.3 million and $74.8 million,
respectively. Newsprint expense as a percentage of revenue from our newspaper
operations (excluding unconsolidated JOAs) for fiscal years 2004, 2003 and
2002, was 9.8%, 9.2% and 10.6%, respectively. Newsprint expense decreased from
fiscal year 2002 through fiscal year 2003, primarily due to the decrease in the
average price per metric ton of 13% from 2002 to 2003, as a result of price
decreases that began in 2002 and continued into 2003. However, the average
price per metric ton began to increase in the second quarter of fiscal year
2003 and continued to increase throughout fiscal year 2004. For the year ended
June 30, 2004, our average price per metric ton was $485, whereas for the year
ended June 30, 2003, our average price per metric ton was $438. See
Managements Discussion and Analysis of Financial Condition and Results of
Operations  Near Term Outlook  Newsprint Prices for a discussion regarding
current newsprint pricing trends. Employee Relations As of June 30, 2004, we employed at our consolidated entities and
unconsolidated JOAs (excluding the Charleston JOA) approximately 8,000
full-time and 2,000 part-time employees, of which approximately 3,000 are
unionized (almost 2,000 of the total union employees are in Denver). There has
never been a strike or work stoppage at any of our newspapers during our
ownership, and we believe that our relations with our employees are generally
good. Seasonality and Cyclicality Newspaper companies tend to follow a distinct and recurring seasonal
pattern, with higher advertising revenues in months containing significant
events or holidays. Accordingly, the fourth calendar quarter, or our second
fiscal quarter, is generally our strongest revenue quarter of the year. Due to
generally poor weather and a lack of holidays, the first calendar quarter, or
our third fiscal quarter, is generally our weakest revenue quarter of the year. Our advertising revenues, as well as those of the newspaper industry in
general, are cyclical and dependent upon general economic conditions.
Historically, advertising revenues have increased in periods of economic growth
and declined with general national, regional and local economic downturns and
recessionary economic conditions. Competition Each of our newspapers competes for advertising revenue to varying degrees
with magazines, yellow pages, radio, television and cable television, as well
as with some weekly publications, direct mail and other advertising media,
including electronic media (Internet). Competition for newspaper advertising
is largely based upon circulation, price and the content of the newspaper. Our
suburban and small city daily newspapers are the dominant local news and
information source, with strong brand name recognition and no direct
competition from similar daily newspapers published in their markets. However,
as with most suburban small city daily newspapers, some circulation competition
exists from larger daily newspapers, which are usually published in nearby
metropolitan areas. We believe larger metropolitan daily newspapers with circulation in our
suburban newspaper markets generally do not compete in any meaningful way for
local advertising revenues, a newspapers main source of revenues. Our
suburban daily newspapers capture the largest share of local advertising as a
result of their in-depth coverage of their suburban market, providing our
readers with local stories and information that major metropolitan newspapers
are unable or unwilling to provide. In addition, we believe advertisers
generally regard newspaper advertising as a more effective method of
advertising promotions and pricing as compared to television, which is
generally used to advertise image. Most newspapers are now publishing news and other content on the Internet.
In addition, there are many sites on the Internet, which are advertising
and/or subscription supported. Many of these sites target specific types of
advertising such as employment, real estate and automotive classified.
Accordingly, we have invested and will continue to invest in our online 8




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strategy, which we believe allows us to capture our share of the
advertising dollars being spent on the Internet now and in the future. Regulation and Environmental Matters Substantially all of our facilities are subject to federal, state and
local laws concerning, among other things, emissions to the air, water
discharges, handling and disposal of waste and remediation of contaminated
sites. Compliance with these laws has not had, nor do we expect it to have, a
material effect upon our capital expenditures, net income or competitive
position. Although we believe we are in material compliance with these
requirements, we may not have been and will not at all times be in complete
compliance with all applicable requirements, and there can be no guarantee we
will not incur material costs including fines or damages, resulting from
non-compliance. Environmental laws and regulations and their interpretation have changed
rapidly in recent years and may continue to do so in the future. These may
include obligations to investigate and clean-up environmental contamination on
or from properties we currently or formerly owned or operated, or at off-site
locations where we are identified as a responsible party. Certain laws impose
strict and, under certain circumstances, joint and several liability for
investigation and clean-up costs. Environmental Assessment Reports of our
properties have identified historic activities and conditions on certain of
these properties, as well as current and historic uses of properties in
surrounding areas, which may require further study or remedial measures. No
material remedial measures are currently anticipated or planned by us with
respect to our properties. However, no assurance can be given that existing
Environmental Assessment Reports reveal all environmental liabilities, that any
prior owner of our properties did not create an environmental condition not
known to us, or that an environmental condition does not otherwise exist at any
such property which could result in incurrence of material cost. Because we deliver certain newspapers by second-class mail, we are
required to obtain permits from, and to file an annual statement of ownership
with, the United States Postal Service. 
 Item 2: Properties Our corporate headquarters are located in Denver, Colorado. The listing
below of our production and operating facilities are, in most cases, complete
newspaper production and office facilities, but the listing also includes
television and radio stations. The principal production and operating
facilities we own are located in: Alaska
    
    Massachusetts
    
    Texas
    
    CaliforniaAnchorage
    
    Pittsfield
    
    Graham
    
    Vacaville
    
    West CovinaNorth Adams
    
    
    
    Paradise
    
    ValenciaColorado
    
    Lowell
    
    Utah
    
    Hayward
    
    Long BeachDenver
    
    Fitchburg
    
    Salt Lake City
    
    Pleasanton
    
    San BernardinoSterling
    
    Devens
    
    
    
    Marin
    
    OntarioFort Morgan
    
    
    
    Vermont
    
    Eureka
    
    Woodland HillsLamar
    
    Pennsylvania
    
    Brattleboro
    
    Chico
    
    RedlandsYork
    
    Bennington
    
    VallejoConnecticut
    
    Hanover
    
    
    
    LakeportBridgeport
    
    Lebanon
    
    
    
    San MateoWoodlandUkiah
 Certain facilities located in Denver, Colorado and Oakland, Pasadena, San
Bernardino, Hayward and Pleasanton, California are operated under long-term
leases. We believe that all of our properties are generally well maintained, in
good condition and suitable for current operations. Our equipment is adequately
insured. 9




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##### Table of Contents



Item 3: Legal Proceedings MediaNews and Salt Lake City Tribune Publishing Company (SLTPC) continue
to be involved in litigation over SLTPCs option to acquire the assets used in
connection with the operation and publication of The Salt Lake Tribune. See
Note 11: Commitments and Contingencies, of the notes to our consolidated
financial statements for a description of the background of this litigation. We are also involved in other legal proceedings. Kmart Corporation
(Kmart) has commenced an adversary proceeding against us and certain of our
subsidiaries and joint operating agencies in bankruptcy court seeking the
return of certain payments received from Kmart under a critical vendor
program with respect to pre-bankruptcy balances due from Kmart. On February
24, 2004, the United States Court of Appeals for the Seventh Circuit upheld a
ruling that payments to critical vendors by Kmart related to pre-bankruptcy
balances due these vendors were improper. We are currently evaluating our
legal options with respect to Kmarts claims for return of payments received.
Our June 30, 2004 financial statements reflect an accrual for our estimated
losses associated with the critical vendor payments received from Kmart. See
Note 11: Commitments and Contingencies, of the notes to our consolidated
financial statements for a more complete description of this and other
lawsuits. 
 Item 4: Submission of Matters to a Vote of Security Holders None. 10




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##### Table of Contents



PART II 
 Item 5: Market for Registrants Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities There were no equity securities sold by us during fiscal year 2004. There
is no established public trading market for our common stock. As
of September 27, 2004, there were approximately 10 record holders of our Class A
Common Stock. We have not paid a cash dividend on our common stock and we do not
currently have plans to pay cash dividends on our common stock. In addition,
our long-term debt agreements contain covenants which, among other things,
limit our ability to pay dividends to our shareholders. We do not currently have any equity compensation plans, although an equity
compensation plan is currently being considered. 11




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##### Table of Contents



Item 6: Selected Financial Data The following table sets forth the selected historical consolidated
financial data for fiscal years 2000 through 2004, which is derived from the
consolidated financial statements of MediaNews and should be read in
conjunction with such financial statements and the related notes included
elsewhere in this Form 10-K. The selected historical consolidated financial
data of MediaNews is qualified by reference to, and should be read together
with, the consolidated financial statements of MediaNews and related notes
thereto included elsewhere in this Form 10-K and Managements Discussion and
Analysis of Financial Condition and Results of Operations. MediaNews Group, Inc. & SubsidiariesFiscal Years Ended June 30,2004(b)
    
    2003(b)
    
    2002(b)
    
    2001(b)
    
    2000(b)(Dollars in thousands)INCOME STATEMENT DATA(a):RevenuesAdvertising
    
    $
    563,496
    
    
    $
    556,016
    
    
    $
    535,687
    
    
    $
    673,737
    
    
    $
    769,976Circulation
    
    
    132,505
    
    
    
    137,445
    
    
    
    139,495
    
    
    
    144,292
    
    
    
    148,194Other
    
    
    57,828
    
    
    
    45,137
    
    
    
    35,948
    
    
    
    34,151
    
    
    
    28,936Total Revenues
    
    
    753,829
    
    
    
    738,598
    
    
    
    711,130
    
    
    
    852,180
    
    
    
    947,106Income (Loss) from Unconsolidated JOAs
    
    
    22,207
    
    
    
    25,227
    
    
    
    8,770
    
    
    
    (3,202
    )
    
    
    2,142Cost of Sales
    
    
    234,784
    
    
    
    221,888
    
    
    
    220,082
    
    
    
    297,825
    
    
    
    339,660Selling, General and Administrative
    
    
    366,636
    
    
    
    346,763
    
    
    
    324,364
    
    
    
    385,764
    
    
    
    421,825Depreciation and Amortization
    
    
    40,742
    
    
    
    40,553
    
    
    
    47,545
    
    
    
    62,593
    
    
    
    62,152Interest Expense
    
    
    57,036
    
    
    
    64,252
    
    
    
    75,302
    
    
    
    82,241
    
    
    
    75,758Gain on Sale of Newspaper Properties
    
    
    6,982
    
    
    
    27,399
    
    
    
    
    
    
    
    74,255
    
    
    
    117,621Minority Interest
    
    
    (32,237
    )
    
    
    (34,088
    )
    
    
    (32,218
    )
    
    
    (40,927
    )
    
    
    (34,092
    )Income Before Income Taxes
    
    
    43,703
    
    
    
    67,855
    
    
    
    9,883
    
    
    
    39,271
    
    
    
    124,976Net Income
    
    
    27,637
    
    
    
    40,828
    
    
    
    12,365
    
    
    
    25,227
    
    
    
    130,383CASH FLOW DATA:Capital Expenditures
    
    $
    36,483
    
    
    $
    20,669
    
    
    $
    11,323
    
    
    $
    19,611
    
    
    $
    25,505Cash Flows from:Operating Activities
    
    
    75,155
    
    
    
    102,694
    
    
    
    72,635
    
    
    
    42,001
    
    
    
    61,186Investing Activities (including Capital Expenditures)
    
    
    (19,234
    )
    
    
    (45,415
    )
    
    
    (24,008
    )
    
    
    (345,604
    )
    
    
    114,021Financing Activities
    
    
    5,472
    
    
    
    (55,965
    )
    
    
    (53,747
    )
    
    
    166,120
    
    
    
    (35,320
    )BALANCE SHEET DATA:Total Assets
    
    $
    1,397,625
    
    
    $
    1,353,048
    
    
    $
    1,323,184
    
    
    $
    1,386,884
    
    
    $
    1,138,892Long-Term Debt and Capital Leases
    
    
    928,467
    
    
    
    904,554
    
    
    
    957,090
    
    
    
    1,008,473
    
    
    
    846,808Other Long-Term Liabilities and Obligations
    
    
    26,450
    
    
    
    33,947
    
    
    
    30,462
    
    
    
    23,906
    
    
    
    17,633Total Shareholders Equity
    
    
    87,020
    
    
    
    60,008
    
    
    
    24,501
    
    
    
    22,737
    
    
    
    939NON-GAAP FINANCIAL DATA(c):Long-Term Debt and Capital Leases, Net(d)
    
    $
    863,094
    
    
    $
    897,998
    
    
    $
    945,551
    
    
    $
    996,080
    
    
    $
    683,932Adjusted EBITDA
    
    $
    152,409
    
    
    $
    169,947
    
    
    $
    166,684
    
    
    $
    168,591
    
    
    $
    185,621Minority Interest in Adjusted EBITDA
    
    
    (45,747
    )
    
    
    (49,089
    )
    
    
    (45,946
    )
    
    
    (45,647
    )
    
    
    (44,298
    )Combined Adjusted EBITDA of Unconsolidated JOAs
    
    
    39,842
    
    
    
    40,371
    
    
    
    36,006
    
    
    
    14,205
    
    
    
    4,725EBITDA of Texas-New Mexico Newspapers Partnership(e)
    
    
    10,108
    
    
    
    3,275
    
    
    
    
    
    
    
    
    
    
    
    Adjusted EBITDA Available to Company
    
    $
    156,612
    
    
    $
    164,504
    
    
    $
    156,744
    
    
    $
    137,149
    
    
    $
    146,048
   Footnotes on following two pages. 12




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(a)
    
    Significant Transactions.The income statement data is impacted by the
following significant transactions. Acquisitions Fiscal Years 2000-2004Year
    
    Date
    
    Publication
    
    Location
    
    Description
    
    Purchase Price2004
    
    01/05/04
    
    Grunion Gazetteand
    
    Long Beach, California
    
    Weekly newspapers
    
    $9.0 millionDowntown GazetteSee other transactions regarding the York JOA restructuring2003
    
    01/31/03
    
    Paradise Post
    
    Paradise, California
    
    Three times weekly newspaper, plus
    
    $13.0 millioncommercial printing10/01/02
    
    The Reporter
    
    Vacaville, California
    
    Daily morning newspaper
    
    $30.9 million10/01/02
    
    Original Apartment
    
    Los Angeles, California
    
    Free distribution apartment
    
    $10.0 millionMagazine
    
    
    
    rental magazine2002
    
    No significant acquisitions.2001
    
    05/31/01
    
    Ruidoso News
    
    Ruidoso, New Mexico
    
    Bi-weekly newspaper
    
    $3.8 million03/31/01
    
    Alamogordo Daily News
    
    Alamogordo, New Mexico
    
    Daily evening newspaper
    
    $9.5 million02/01/01
    
    Lake County Record-Bee
    
    Lakeport, California
    
    Daily morning newspaper
    
    $7.3 million01/02/01
    
    The Salt Lake Tribune
    
    Salt Lake City, Utah
    
    Daily morning newspaper JOA
    
    $200.0 million10/31/00
    
    Carlsbad Current-Argus
    
    Carlsbad, New Mexico
    
    Daily morning newspaper
    
    $7.0 million10/01/00
    
    Connecticut Post
    
    Bridgeport, Connecticut
    
    Daily morning newspaper
    
    $194.0 million2000
    
    05/06/00
    
    KTVA
    
    Anchorage, Alaska
    
    Television station; CBS affiliate
    
    $7.0 million03/01/00
    
    Nashoba Publishing
    
    Ayers, Massachusetts
    
    Six weekly newspapers and
    
    $4.2 millionthree monthly publications01/01/00
    
    Hometown Shopper
    
    Ukiah, California
    
    Shopper
    
    (1)10/31/99
    
    The Deming Headlight
    
    Deming, New Mexico
    
    Daily morning newspaper
    
    $2.0 million10/01/99
    
    Milpitas Post
    
    Milpitas, California
    
    Weekly newspaper
    
    (1)
   (1)
    
    Combined $2.7 million purchase. Dispositions Fiscal Years 2000-2004Year
    
    Date
    
    Publication
    
    Location
    
    Description
    
    Sales Price2004
    
    No significant dispositions. See other transactions regarding the Charleston JOA restructuring.2003
    
    No dispositions. See other transactions regarding the formation of Texas-New Mexico Newspapers Partnership.2002
    
    No dispositions.2001
    
    01/31/01
    
    The Lompoc Record
    
    Lompoc, California
    
    Daily evening newspaper
    
    $8.0 million,pre-tax gainof $4.6 million10/31/00
    
    Daily Nonpareil
    
    Council Bluffs, Iowa
    
    Daily evening newspaper
    
    $39.0 million,pre-tax gainof $23.6 million2000
    
    06/30/00
    
    The Express Times
    
    Easton, Pennsylvania
    
    Daily morning newspaper
    
    $145.0 million,Gloucester County Times
    
    Woodbury, New Jersey
    
    Daily evening newspaper
    
    pre-tax gain ofTodays Sunbeam
    
    Salem, New Jersey
    
    Daily morning newspaper
    
    $114.3 millionBridgeton News
    
    Bridgeton, New Jersey
    
    Daily evening newspaperNorth Jersey weeklies
    
    North Jersey, New Jersey
    
    Weekly newspapers07/31/99
    
    The Hemet Newsand
    
    Hemet and Moreno Valley,
    
    Daily and weekly
    
    $8.0 million,Moreno Valley Times
    
    California
    
    newspaper
    
    pre-tax gainof $3.3 million
 Other Transactions Fiscal Years 2000-2004Year
    
    Description2004
    
    
    In May 2004, we restructured our interest in Charleston Newspapers (Charleston JOA). In exchange for $55.0 million (net of certain
adjustments) and a limited partnership interest in a newly formed entity, Charleston Newspapers Holdings, L.P., we contributed our general
partnership interest in the Charleston JOA and the masthead of the Charleston Daily Mailto Charleston Newspapers Holdings, L.P. Our limited
partnership interest does not entitle us to any share of the profits or losses of the limited partnership. We recorded a pre-tax gain of $8.0
million as a result of this transaction.
Effective April 30, 2004, we restructured our interest in the York JOA through the exercise of our call option to acquire the remaining interest
in The York Newspaper Company and the masthead of the York Daily Recordfor approximately $38.3 million. The Adjusted EBITDA for the minority
interest in the York JOA prior to the restructuring was $6.9 million (see Managements Discussion and Analysis of Financial Condition and
Results of Operations  Reconciliation of Income Statement Data presented on a historical GAAP basis to Non-GAAP Income Statement Data Presented
on a pro-rata consolidation basis).2003
    
    
    Effective March 3, 2003, we formed the Texas-New Mexico Newspapers Partnership with Gannett. Upon formation, we recognized in fiscal year 2003
a non-monetary pre-tax gain of $27.4 million.2002
    
    
    None.
   Footnotes continue on following page. 13




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Footnotes from previous page (continued).    Other Transactions Fiscal Years 2000-2004 (continued)Year
    
    Description2001
    
    
    Effective January 23, 2001, we formed the
Denver Newspaper Agency (DNA or Denver
JOA) with E.W. Scripps (Scripps), owner of
the Rocky Mountain News. Upon formation of
DNA, MediaNews and Scripps each contributed to
DNA substantially all of their operating
assets used in the publication of The Denver
Postand the Rocky Mountain News. In addition
to the assets contributed to DNA, Scripps paid
us $60.0 million to obtain its 50% interest in
DNA. We recognized a pre-tax gain of
approximately $46.7 million related to this
transaction.
Effective October 1, 2000, Gannett contributed
the Marin Independent Journalto the
California Newspapers Partnership. Effective
with the contribution, the partners,
MediaNews, Stephens Media Group and Gannett,
interests in the California Newspapers
Partnership were adjusted to 54.23%, 26.28%
and 19.49%, respectively. Prior to the
contribution, MediaNews held a 58.8% interest
in the partnership.2000
    
    
    In fiscal year 2000, MediaNews and Garden
State Newspapers, Inc. merged, with MediaNews
as the surviving entity and the successor
issuer to Garden State Newspapers, Inc.
  (b)
    
    Prior Year Reclassifications.For comparability certain prior year
balances have been reclassified to conform to current reporting
classifications.(c)
    
    Non-GAAP Financial Data.The Non-GAAP Financial Data presented,
including Adjusted EBITDA and Adjusted EBITDA Available to Company, are
not measures of performance recognized under GAAP. However, we believe
that they are indicators and measurements of our leverage capacity and
debt service ability. Adjusted EBITDA and Adjusted EBITDA Available to
Company should not be considered as an alternative to measure
profitability, liquidity, or performance, nor should they be considered an
alternative to net income, cash flows generated by operating, investing or
financing activities, or other financial statement data presented in our
consolidated financial statements. Adjusted EBITDA is calculated by
deducting cost of sales and SG&A expense from total revenues. Adjusted
EBITDA Available to Company is calculated by: (i) reducing Adjusted EBITDA
by the minorities interest in the Adjusted EBITDA generated from the
California Newspapers Partnership, The Denver Post Corporation, and
through April 30, 2004, The York Newspaper Company, our less than 100%
owned subsidiaries (Minority Interest in Adjusted EBITDA); (ii)
increasing Adjusted EBITDA by our combined proportionate share of the
Adjusted EBITDA generated by our unconsolidated JOAs in Denver, Salt Lake
City and through May 7, 2004, Charleston (Combined Adjusted EBITDA of
Unconsolidated JOAs); and (iii) increasing Adjusted EBITDA by our
proportionate share of EBITDA from the Texas-New Mexico Newspapers
Partnership (see footnote e). See Managements Discussion and Analysis
of Financial Condition and Results of Operations  Reconciliation of GAAP
and Non-GAAP Financial Information.(d)
    
    Long-Term Debt and Capital Leases, Net as shown is net of cash and
minority interest in cash and long-term debt and includes our share of
long-term debt and capital leases in unconsolidated JOAs. Years Ended June 30,2004
    
    2003
    
    2002
    
    2001
    
    2000(Dollars in thousands)Long-Term Debt and Capital Leases per Balance Sheet
    
    $
    928,467
    
    
    $
    904,554
    
    
    $
    957,090
    
    
    $
    1,008,473
    
    
    $
    846,808Less: Cash per Balance Sheet
    
    
    (64,736
    )
    
    
    (3,343
    )
    
    
    (2,029
    )
    
    
    (7,149
    )
    
    
    (144,632
    )Less: Minority Interest Share of Cash and
Long-Term Debt and Capital Leases
    
    
    (2,829
    )
    
    
    (7,414
    )
    
    
    (13,789
    )
    
    
    (9,951
    )
    
    
    (18,244
    )Add: Our share of Long-Term Debt and Capital
Leases in Unconsolidated JOAs, net of minority
interest
    
    
    2,192
    
    
    
    4,201
    
    
    
    4,279
    
    
    
    4,707
    
    
    
    Total
    
    $
    863,094
    
    
    $
    897,998
    
    
    $
    945,551
    
    
    $
    996,080
    
    
    $
    683,932
  (e)
    
    EBITDA of Texas-New Mexico Newspapers Partnership.The Texas-New Mexico
Newspapers Partnership agreement, effective March 3, 2003, requires the
partnership to make distributions equal to the earnings of the partnership
before depreciation and amortization (EBITDA). EBITDA of Texas-New Mexico
Newspapers Partnership has been included in Adjusted EBITDA Available to
Company as it is an integral part of our cash flow from operations defined
by our debt covenants. Previously, we had included distributions from the
Texas-New Mexico Newspapers Partnership in Adjusted EBITDA Available to
Company. However, now we include our 33.8% share of the EBITDA of
Texas-New Mexico Newspapers Partnership. This change was made in order to
better conform to the definition of operating cash flows in our debt
agreements. All periods presented reflect this change. 14




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##### Table of Contents



Item 7: Managements Discussion and Analysis of Financial Condition and
Results of Operations Introduction The following analysis of the financial condition and results of
operations should be read in conjunction with the Selected Financial Data and
the consolidated financial statements of MediaNews Group, Inc. and the notes
thereto appearing elsewhere herein. Company Overview We are in the business of owning and operating daily and weekly newspapers
and Internet Web sites related thereto. Our newspapers derive their revenues
primarily from advertising and circulation. Our primary operating expenses
(before interest, depreciation and amortization) are employee salaries,
newsprint, marketing and distribution. In addition to our newspaper
operations, we own radio stations in Graham and Breckenridge, Texas and a CBS
affiliate television station in Anchorage, Alaska. However, for the fiscal
year ended June 30, 2004, the combined revenues of these non-newspaper
operations were not significant to our operations as they comprised
approximately 1.0% of our consolidated revenue. Newspaper
revenues tend to follow a distinct and recurring seasonal
pattern, with higher advertising revenues in months containing significant
events or holidays. Accordingly, the fourth calendar quarter, or our second
fiscal quarter, is generally our strongest revenue quarter of the year. Due to
generally poor weather and lack of holidays, the first calendar quarter, or our
third fiscal quarter, is generally our weakest revenue quarter of the year. Our advertising revenues, as well as those of the newspaper industry in
general, are cyclical and dependent upon general economic conditions.
Historically, advertising revenues have increased in periods of economic growth
and declined during national, regional and local economic
downturns. Critical Accounting Policies The preparation of financial statements in accordance with generally
accepted accounting principles at times requires the use of estimates and
assumptions. We make our estimates, based on historical experience, actuarial
studies and other assumptions, as appropriate, to assess the carrying values of
assets and liabilities and disclosure of contingent matters. We re-evaluate
our estimates on an ongoing basis. Actual results could differ from these
estimates. Critical accounting policies for us include revenue recognition;
accounts receivable allowances; recoverability of our long-lived assets,
including goodwill and other intangible assets, which are based on such factors
as estimated future cash flows and current fair value estimates; and pension
and retiree medical benefits, which require the use of various estimates
concerning the work force, interest rates, plan investment return, and involve
the use of advice from consulting actuaries. Our accounting for federal and
state income taxes is sensitive to interpretation of various laws and
regulations and the valuation of deferred tax assets. The notes to our
consolidated financial statements included later in this Form 10-K contain a
more complete discussion of our significant accounting policies. Advertising revenue is earned and recognized when advertisements are
published, inserted, aired or displayed and are net of provisions for estimated
rebates, credit and rate adjustments and discounts. Circulation revenue
includes home delivery subscription revenue, single copy and third party sales.
Single copy revenue is earned and recognized based on the date the publication
is delivered to the single copy outlet, net of provisions for returns. Home
delivery subscription revenue is earned and recognized when the newspaper is
delivered to the customer or sold to a home delivery independent contractor.
Amounts received in advance of an advertisement or newspaper delivery are
deferred and recorded on the balance sheet as a current liability and
recognized as revenue when earned. The operating results of our unconsolidated JOAs are reported as a single
net amount in the accompanying financial statements in the line item Income
from Unconsolidated JOAs. This line item includes:  
    
    Our proportionate share of net income from JOAs,
    
    The amortization of subscriber lists created by the original purchase
by us of the JOAs interests as the subscriber lists are attributable to
our earnings in the JOAs, and
    
    Editorial costs, miscellaneous revenue received outside of the JOA,
and other charges incurred by our consolidated subsidiaries directly
attributable to providing editorial content and news for our newspapers
party to a JOA. 15




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Operating Results We have provided below certain summary historical consolidated financial
data for fiscal years 2004, 2003 and 2002, in each case including the
percentage change between periods. For comparability, certain prior year
balances have been reclassified to conform to current reporting
classifications. Summary Historical Financial DataFiscal Years Ended June 30,2004 vs.
    
    2003 vs.2004
    
    2003
    
    2002
    
    2003
    
    2002(Dollars in thousands)INCOME STATEMENT DATA:Total Revenues
    
    $
    753,829
    
    
    $
    738,598
    
    
    $
    711,130
    
    
    
    2.1
    %
    
    
    3.9
    %Income from Unconsolidated JOAs
    
    
    22,207
    
    
    
    25,227
    
    
    
    8,770
    
    
    
    (12.0
    )
    
    
    (c
    )Cost of Sales
    
    
    234,784
    
    
    
    221,888
    
    
    
    220,082
    
    
    
    5.8
    
    
    
    0.8Selling, General and Administrative
    
    
    366,636
    
    
    
    346,763
    
    
    
    324,364
    
    
    
    5.7
    
    
    
    6.9Depreciation and Amortization
    
    
    40,742
    
    
    
    40,553
    
    
    
    47,545
    
    
    
    0.5
    
    
    
    (14.7
    )Interest Expense
    
    
    57,036
    
    
    
    64,252
    
    
    
    75,302
    
    
    
    (11.2
    )
    
    
    (14.7
    )Other (Income) Expense, Net
    
    
    17,365
    
    
    
    19,534
    
    
    
    10,941
    
    
    
    (11.1
    )
    
    
    78.5Total Costs and Expenses
    
    
    716,563
    
    
    
    692,990
    
    
    
    678,234
    
    
    
    3.4
    
    
    
    2.2Equity Investment Income, Net
    
    
    9,485
    
    
    
    3,709
    
    
    
    435
    
    
    
    
    (c)
    
    
    
    (c)Gain on Sale of Newspaper Properties
    
    
    6,982
    
    
    
    27,399
    
    
    
    
    
    
    
    
    (c)
    
    
    
    (c)Minority Interest
    
    
    (32,237
    )
    
    
    (34,088
    )
    
    
    (32,218
    )
    
    
    (5.4
    )
    
    
    5.8Net Income
    
    
    27,637
    
    
    
    40,828
    
    
    
    12,365
    
    
    
    
    (c)
    
    
    
    (c)CASH FLOW DATA:Cash Flows from:Operating Activities
    
    $
    75,155
    
    
    $
    102,694
    
    
    $
    72,635Investing Activities
    
    
    (19,234
    )
    
    
    (45,415
    )
    
    
    (24,008
    )Financing Activities
    
    
    5,472
    
    
    
    (55,965
    )
    
    
    (53,747
    )NON-GAAP FINANCIAL DATA(a):Adjusted EBITDA
    
    $
    152,409
    
    
    $
    169,947
    
    
    $
    166,684
    
    
    
    (10.3
    )%
    
    
    2.0
    %Minority Interest in Adjusted EBITDA
    
    
    (45,747
    )
    
    
    (49,089
    )
    
    
    (45,946
    )
    
    
    (6.8
    )
    
    
    6.8Combined Adjusted EBITDA of Unconsolidated JOAs
    
    
    39,842
    
    
    
    40,371
    
    
    
    36,006
    
    
    
    (1.3
    )
    
    
    12.1EBITDA of Texas-New Mexico Newspapers Partnership(b)
    
    
    10,108
    
    
    
    3,275
    
    
    
    
    
    
    
    
    (c)
    
    
    
    (c)Adjusted EBITDA Available to Company
    
    $
    156,612
    
    
    $
    164,504
    
    
    $
    156,744
    
    
    
    (4.8
    )%
    
    
    5.0
    %
   (a)
    
    Non-GAAP Financial Data.Adjusted EBITDA and Adjusted EBITDA Available
to Company are not measures of performance recognized under GAAP. However,
we believe that they are indicators and measurements of our leverage
capacity and debt service ability. Adjusted EBITDA and Adjusted EBITDA
Available to Company should not be considered as an alternative to measure
profitability, liquidity, or performance, nor should they be considered an
alternative to net income, cash flows generated by operating, investing or
financing activities, or other financial statement data presented in our
consolidated financial statements. Adjusted EBITDA is calculated by
deducting cost of sales and SG&A expense from total revenues. Adjusted
EBITDA Available to Company is calculated by: (i) reducing Adjusted EBITDA
by the minorities interest in the Adjusted EBITDA generated from the
California Newspapers Partnership, The Denver Post Corporation and through
April 30, 2004, The York Newspaper Company, our less than 100% owned
consolidated subsidiaries (Minority Interest in Adjusted EBITDA); (ii)
increasing Adjusted EBITDA by our combined proportionate share of the
Adjusted EBITDA generated by our unconsolidated JOAs in Denver, Salt Lake
City and through May 7, 2004, Charleston (Combined Adjusted EBITDA of
Unconsolidated JOAs); and (iii) increasing Adjusted EBITDA by our
proportionate share of EBITDA from the Texas-New Mexico Newspapers
Partnership (see footnote b). See Managements Discussion and Analysis of
Financial Condition and Results of Operations  Reconciliation of GAAP and
Non-GAAP Financial Information.(b)
    
    The Texas-New Mexico Newspapers Partnership Agreement.The Texas-New
Mexico Newspapers Partnership agreement, effective March 3, 2003, requires
the partnership to make distributions equal to the earnings of the
partnership before depreciation and amortization (EBITDA). EBITDA of
Texas-New Mexico Newspapers Partnership has been included in Adjusted
EBITDA Available to Company as it is an integral part of our cash flows
from operations as defined by our debt covenants. Previously, we had
included distributions from the Texas-New Mexico Newspapers Partnership in
EBITDA Available to Company. However, now we include our 33.8% share of
the EBITDA of Texas-New Mexico Newspapers Partnership. This change was
made in order to better conform to the definition of operating cash flows
in our debt agreements. All periods reflect this change. Texas-New Mexico
Newspapers Partnership revenues for our fiscal year 2004 were
approximately $79.0 million.(c)
    
    Not meaningful. 16




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##### Table of Contents



Summary Supplemental Non-GAAP Financial Data Joint operating agencies, or JOAs, represent an operating structure that
is unique to the newspaper industry. Prior to EITF 00-1 Balance Sheet and
Income Statement Display under the Equity Method of Investments in Certain
Partnerships and Other Unincorporated Joint Ventures, which eliminated the use
of pro-rata consolidation except in the extractive and construction industries,
we reported the results of our JOA interests on a pro-rata consolidated basis.
Under this method, we consolidated, on a line-item basis, our proportionate
share of the JOAs operations. Although pro-rata consolidation is no longer
considered an acceptable method for our financial reporting under GAAP, we
believe it provides a meaningful presentation of the results of our operations
and the amount of operating cash flow available to meet our debt service and
capital expenditure requirements. Our JOA agreements do not restrict cash
distributions to the owners and in general our JOAs make monthly or quarterly
distributions. We use pro-rata consolidation to internally evaluate our
performance and present it here because our bank credit agreement and the
indentures governing our senior subordinated notes define cash flows from operations for covenant
purposes using pro-rata consolidation. We also believe financial analysts and
investors use the pro-rata consolidation and the resulting Adjusted EBITDA,
combined with capital spending requirements, and leverage analysis to evaluate
our performance. This information should be used in conjunction with GAAP
performance measures in order to evaluate our overall prospects and
performance. Net income determined using pro-rata consolidation is identical
to net income determined under GAAP. In the table below, we have presented the results of operations of our
JOAs using pro-rata consolidation, including the percentage change between
periods. Our JOAs include The York Newspaper Company and Denver Newspaper
Agency and the Salt Lake City JOA for all periods presented, and Charleston
Newspapers through May 7, 2004. See Notes 2 and 3 to the consolidated
financial statements for additional discussion of the GAAP accounting for our
JOAs. For comparability, certain prior year balances have been reclassified to
conform to current reporting classifications. THE INFORMATION IN THE FOLLOWING TABLE IS NOT PRESENTED IN ACCORDANCE WITH
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND DOES NOT COMPLY WITH ARTICLE 11 OF
REGULATION S-X FOR PRO FORMA FINANCIAL DATA Summary Selected Non-GAAP Financial DataFiscal Years Ended June 30,2004 vs.
    
    2003 vs.2004
    
    2003
    
    2002
    
    2003
    
    2002(Dollars in thousands)PRO-RATA CONSOLIDATED INCOME STATEMENT DATA:Total Revenues
    
    $
    1,049,851
    
    
    $
    1,025,471
    
    
    $
    992,780
    
    
    
    2.4
    %
    
    
    3.3
    %Cost of Sales
    
    
    355,808
    
    
    
    343,012
    
    
    
    350,281
    
    
    
    3.7
    
    
    
    (2.1
    )Selling, General and Administrative
    
    
    508,656
    
    
    
    480,185
    
    
    
    447,541
    
    
    
    5.9
    
    
    
    7.3Depreciation and Amortization
    
    
    55,453
    
    
    
    55,841
    
    
    
    64,720
    
    
    
    (0.7
    )
    
    
    (13.7
    )Interest Expense
    
    
    57,258
    
    
    
    64,491
    
    
    
    75,517
    
    
    
    (11.2
    )
    
    
    (14.6
    )Other (Income) Expense, Net
    
    
    19,225
    
    
    
    18,312
    
    
    
    19,996
    
    
    
    5.0
    
    
    
    (8.4
    )Total Costs and Expenses
    
    
    996,400
    
    
    
    961,841
    
    
    
    958,055
    
    
    
    3.6
    
    
    
    0.4Gain on Sale of Newspaper Properties
    
    
    6,982
    
    
    
    27,399
    
    
    
    
    
    
    
    
    (b)
    
    
    
    (b)Minority Interest
    
    
    (26,215
    )
    
    
    (26,884
    )
    
    
    (25,278
    )
    
    
    (2.5
    )
    
    
    6.4Net Income
    
    
    27,637
    
    
    
    40,828
    
    
    
    12,365
    
    
    
    
    (b)
    
    
    
    (b)CASH FLOW DATA (GAAP BASIS):Cash Flows from:Operating Activities
    
    $
    75,155
    
    
    $
    102,694
    
    
    $
    72,635Investing Activities
    
    
    (19,234
    )
    
    
    (45,415
    )
    
    
    (24,008
    )Financial Activities
    
    
    5,472
    
    
    
    (55,965
    )
    
    
    (53,747
    )PRO-RATA OTHER DATA(a):Adjusted EBITDA
    
    $
    185,387
    
    
    $
    202,274
    
    
    $
    194,958
    
    
    
    (8.3
    )%
    
    
    3.8
    %Minority Interest in Adjusted EBITDA
    
    
    (38,883
    )
    
    
    (41,045
    )
    
    
    (38,214
    )
    
    
    (5.3
    )
    
    
    7.4EBITDA of Texas-New Mexico Newspapers Partnership
    
    
    10,108
    
    
    
    3,275
    
    
    
    
    
    
    
    
    (b)
    
    
    
    (b)Adjusted EBITDA Available to Company
    
    $
    156,612
    
    
    $
    164,504
    
    
    $
    156,744
    
    
    
    (4.8
    )%
    
    
    5.0
    %
   (a)
    
    See footnote (a) under Managements Discussion and Analysis of Financial
Condition and Results of Operations  Operating Results for discussion of
Adjusted EBITDA, EBITDA of Texas-New Mexico Newspapers Partnership and
Adjusted EBITDA Available to Company. The Minority Interest in Adjusted
EBITDA shown is calculated the same as described in footnote (a) under
Managements Discussion and Analysis of Financial Condition and Results
of Operations  Operating Results except that Minority Interest in
Adjusted EBITDA shown here on a pro-rata basis includes only the minority
interest in Adjusted EBITDA of the California Newspapers Partnership and
The Denver Post Corporation, as pro-rata consolidation factors out of the
minority interest associated with The York Newspaper Company through April
30, 2004. See Managements Discussion and Analysis of Financial
Condition and Results of Operations  Reconciliation of GAAP and Non-GAAP
Financial Information.(b)
    
    Not meaningful. 17




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##### Table of Contents



Fiscal Year 2004 Executive Overview Fiscal year 2004, like fiscal year 2003, was heavily influenced by the
tepid economic recovery at both a national and regional level. However, the
second half of fiscal year 2004 began to show signs of improvement and despite
the sluggish economy, we continued to grow advertising revenues during fiscal
year 2004. Growth from retail, national and preprint advertising was somewhat
mitigated by losses in employment and automotive classified advertising in most
of our markets. While advertising revenue grew in fiscal year 2004, circulation
revenues declined slightly as we continued to focus on growing circulation
volumes in most of our markets. The national Do-Not-Call Registry has presented
us, and the industry, with a challenge to develop new ways to attract
subscribers. In fiscal year 2004 our circulation growth strategy was largely
influenced by the increased use of longer-term lower priced subscription
offers. The decrease in revenue from this strategy is largely offset by reduced
subscriber churn and related circulation acquisition costs. The trend of
significant growth in Internet advertising revenue that began several years ago
continued as Internet related revenues increased 37% in fiscal year 2004, after
adjusting for acquisitions and dispositions. The Internet is a critical element
of our overall strategy to deliver news and information to a larger, more
diverse and younger audience, which in turn allows our advertising customers to
take advantage of our expanded market reach. During fiscal year 2004, two of our largest expenses, newsprint and
employee benefit costs, increased considerably. Excluding our unconsolidated
JOAs, our average cost per metric ton of newsprint increased from $438 to $485,
which caused cost of sales to increase over $7.0 million for fiscal year 2004.
Reduced consumption associated with decreases in classified advertising and a
shift to preprint advertising from advertising printed in the newspaper helped
to somewhat offset the impact of the price increase. Employee benefit costs
were driven by increases in health care costs and post retirement benefits.
Health care costs across the United States continued to increase during fiscal
year 2004, as well as pension and other post retirement benefit costs due to
increases in assumed health care costs and decreases associated with the
expected rate of return on the related pension assets. We continue to maintain
tight cost controls throughout our organization and seek to identify areas
where further cost control measures can be implemented. Our current year results were also impacted by several significant
transactions completed during fiscal year 2004.  
    
    We restructured our interest in the Charleston JOA for $55.0
million in cash and recorded a pre-tax gain of $8.0 million. We also
restructured our interest in The York Newspaper Company through the
exercise of our option to buy out the minority partners interest and
purchase the masthead of the York Daily Recordfor $38.3 million using
a portion of the proceeds from the Charleston Newspapers restructuring. The
net of these transactions will be a positive impact on Adjusted EBITDA
Available to Company in the future.  
    
    In January 2004, we purchased two weekly newspapers: the Grunion
Gazetteand Downtown Gazette.These weeklies are distributed in and
around Long Beach, California, where we own the daily newspaper.  
    
    We launched IMPACTO USA, a Spanish-language publication in the
Los Angeles market that is home delivered on Saturdays to 250,000
targeted households.  
    
    We launched LA.com, an Internet start-up.  
    
    We took advantage of the lower interest rates available to us in
both the bond and bank financing markets by refinancing the majority
of our long-term debt. This included refinancing our $300.0 million 8
3/4% bonds due in 2009 with $300.0 million of our 6 7/8% bonds due in
2013 and refinancing our bank credit facility in December 2003, to
take advantage of lower borrowing margins and increase the amount
available under our revolving credit facility. We again amended and
refinanced a portion of our bank credit facility in August 2004 to
take advantage of lower borrowing margins. We also sold $150.0 million
of our 6 3/8% bonds in anticipation of the retirement of $200.0 million of
our 8 5/8% bonds, which was accomplished in July 2004. If we had
completed all these refinancings as of July 1, 2003, we would have
saved approximately $16.0 million in interest expense during fiscal
year 2004. Our unconsolidated JOAs were also impacted by the challenges we mentioned
above, most notably in the area of employee benefit costs. However, on a
combined basis our Denver and Salt Lake City JOAs grew revenues and operating
results.  The Salt Lake City JOA produced strong results year over year, despite being burdened by
a significant charge related to the curtailment of a post retirement benefit
plan, which will reduce expenses in the future. Our interest in
the Salt 18




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##### Table of Contents



Lake JOA continues to be subject to litigation
by the former owners of The Salt Lake Tribune.
Results at Charleston Newspapers for the first ten months of fiscal year 2004
(prior to the restructuring of our interest) were down compared to the same ten
months of the prior year. Transactions In addition to the fiscal year 2004 transactions described earlier,
certain transactions in fiscal year 2003 had an impact on the comparisons of
our results for the years ended June 30, 2004 and 2003 and comparisons of our
results for the years ended June 30, 2003 and 2002. In fiscal year 2003, acquisition transactions that affect comparisons
include CNPs October 1, 2002 purchases of The Reporterin Vacaville,
California and the Original Apartment Magazinein southern California and the
January 31, 2003 purchase of the Paradise Postin Paradise, California. In
addition to these acquisition transactions, comparisons are also affected by
the formation of the Texas-New Mexico Newspapers Partnership effective March 3,
2003, after which we no longer consolidate the results of the New Mexico
newspaper properties that we contributed to the partnership. Our investment in
the Texas-New Mexico Newspapers Partnership is accounted for under the equity
method of accounting and the partnerships results are included in Equity
Investment Income, Net. Comparison of Fiscal Years Ended June 30, 2004 and 2003 Revenues Revenues for the years ended June 30, 2004 and 2003 were $753.8 million
and $738.6 million, respectively. The change represents an increase of $15.2
million, or 2.1%. The aforementioned transactions in fiscal years 2004 and
2003 had the net impact of increasing reported revenues by $2.0 million for the
year ended June 30, 2004 as compared to the prior year. On a same newspaper
basis (adjusting for the aforementioned fiscal year 2004 and 2003
transactions), the following changes occurred between fiscal years 2004 and
2003: Advertising Revenues.Advertising revenues increased 1.6% for the year
ended June 30, 2004, as compared to the prior year. The increase in
advertising revenue was due principally to increases in retail, national and
preprint advertising, offset in part by a slight decrease in classified
advertising. Classified employment advertising continued to be a challenge at
the majority of our newspapers in California due to the weak employment market.
Our newspapers in the San Francisco Bay Area market in particular were hard
hit by losses in employment advertising. We also experienced declines in
classified automotive advertising in some markets, offset in part by increases
in classified real estate. Beginning in the third quarter of fiscal year 2004,
we began to experience year over year improvements in classified employment
advertising in many markets which we anticipate will continue to show year over
year growth through fiscal year 2005. Circulation Revenues.Circulation revenues decreased by 1.8% for the year
ended June 30, 2004, as we have continued to grow circulation by offering
discounts to acquire new subscribers with long-term orders. The lower revenue
from selling longer-term orders at a discount is generally offset with cost
savings from writing fewer new orders. Other Revenues.Other revenues increased 18.2% for the year ended June
30, 2004, in part due to our obtaining new commercial printing contracts in
northern California. Also contributing to the increase was revenue growth from
our Internet operations, which increased 37% for the year ended June 30, 2004
as compared to the prior year. The increase in Internet revenues was a result
of new initiatives in online employment, automotive and general classified
advertising and the continued strong market acceptance of the combined print
and online packages that we offer to our advertisers. Income from Unconsolidated JOAs Income from unconsolidated JOAs for the years ended June 30, 2004 and 2003
was $22.2 million and $25.2 million, respectively. Our proportionate share of
income from the Charleston JOA was $1.1 million less in fiscal year 2004
compared to the prior year. The remaining change is due to a decrease in
income from the Denver JOA, which was partially offset by an increase
in income from the Salt
Lake City JOA. Results at the Denver and Salt Lake City JOAs were negatively
impacted by accruals for the Kmart critical vendor program (see further
discussion in Note 11: Commitments and Contingencies), while the prior year
results were positively impacted by our share of the Denver JOAs non-operating
gain of $3.8 million related to 19




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##### Table of Contents



the sale of its office building. Excluding
these two infrequent items, our share of income from the Denver Newspaper
Agency improved on a year over year basis. Cost of Sales Cost of sales for the years ended June 30, 2004 and 2003 was $234.8
million and $221.9 million, respectively. The change represents an increase of
$12.9 million, or 5.8%. The aforementioned transactions in fiscal years 2004
and 2003 had the net impact of increasing cost of sales by $2.4 million for the
year ended June 30, 2004 as compared to the prior year. Excluding the
aforementioned transactions, cost of sales increased 5.0% year-over-year on a
same newspaper basis. The current year increase in cost of sales was due in
part to a 10.7% increase in our average price per metric ton of newsprint
consumed in fiscal year 2004 as compared to the prior year. Partially
offsetting the increase in the average price was a slight decrease in newsprint
consumption. Selling, General and Administrative Selling, general and administrative (SG&A) expense for the years ended
June 30, 2004 and 2003 was $366.6 million and $346.8 million, respectively.
The change represents an increase of $19.8 million, or 5.7%. The
aforementioned transactions in fiscal years 2004 and 2003 had the net impact of
increasing SG&A by $2.6 million for the year ended June 30, 2004 as compared to
the prior year. Excluding the aforementioned transactions, SG&A increased 5.3%
year-over-year on a same newspaper basis. The current year increase is
primarily the result of large increases in health care costs and retirement
benefits, as well as increases in outside printing for niche publications,
promotional expenses, new product expenses and increased costs associated with
the revenue growth in our Internet operations, including operating expenses of
$3.1 million associated with our Internet start-up LA.com, which has had
minimal revenues since its launch in January to offset the related start-up
expenses. At the end of the first quarter of fiscal year 2005, we significantly
curtailed the expenses associated with LA.com. Interest Expense Interest expense for the years ended June 30, 2004 and 2003 was $57.0
million and $64.3 million, respectively. The change represents a decrease of
$7.3 million, or 11.2%. The decrease in interest expense was the result of a
decrease in average debt outstanding due to debt paydowns, as well as a
reduction in the weighted average cost of debt. The lower weighted average
cost of debt was a result of the combination of lower short-term interest rates
associated with our bank credit facility borrowings, the June 2003 refinancing
of our 9.0% Subordinated Promissory Note with a bank term loan, and the
November 2003 refinancing of our 8 3/4% Senior Subordinated Notes with our 6
7/8% Senior Subordinated Notes due 2013. Partially offsetting the decrease in
the weighted average cost of debt for fiscal year 2004 was an increase in
interest expense caused by temporarily paying off lower cost debt under the revolver
portion of our new bank credit agreement (LIBOR plus 1.75%) with proceeds from
the third quarter issuance of our $150.0 million 6 3/8% Senior Subordinated
Notes, which was compounded as a result of significant cash remaining
after the payoff of the revolver. The excess cash, in combination
with borrowings under the revolver portion of our bank credit
facility, was used to redeem our $200.0 million 8 5/8% Senior
Subordinated Notes on July 1, 2004 (the first redemption date). Our average debt outstanding decreased $31.4 million, or 3.3%, and
our weighted average interest rate decreased 60 basis points for the year ended
June 30, 2004, as compared to the prior year. The fiscal year 2004
refinancings are expected to further reduce our weighted average cost of
borrowings in the future. Interest expense was also impacted by net settlements related to our
interest rate swap agreements. The net settlements of our interest rate swap
agreements had the effect of decreasing interest expense by $3.0 million for
the fiscal year ended June 30, 2004 as compared to the prior year. Other (Income) Expense, Net Included in other (income) expense, net are those costs or income items
that are not related to current operations. Other (income) expense, net for
the year ended June 30, 2004 was $17.4 million. The charges incurred for the
year ended June 30, 2004 include litigation expense of $2.2 million associated
with the acquisition of Kearns-Tribune, LLC (Salt Lake City), $(4.0) million
reduction to reflect the current estimated cost to repurchase an option held by
a third party to acquire one of 20




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##### Table of Contents



our newspapers (the estimated cost of purchasing the
option fluctuates with the performance of the newspaper), $2.1 million related
to hedging activities, which did not qualify for hedge accounting under SFAS
No. 133, Accounting for Derivative Instruments and Hedging
Activities, $9.3 million for the repurchase premiums, net of unamortized premiums
associated with the early redemption of our 8 3/4% Senior Subordinated Notes, $1.0 million in costs associated with our unsuccessful bid for
Freedom Communications, Inc., $1.1 million related to the write-off of amounts
held in escrow and other prepaid acquisition costs to purchase the KTBY license in Alaska (see Note 5:
Acquisitions, Dispositions and Other Transactions), and $5.7 million, net
related to various other costs not related to current operations, including the
estimated losses associated with the critical vendor payments refund demand
received from Kmart and (see further discussion regarding Kmart critical vendor
payments in Note 11: Commitments and Contingencies). Equity Investment Income, Net Included in equity investment income, net is our share of the net income
(or loss) of our non-JOA equity investees as further described in Note 2:
Significant Accounting Policies and Other Matters of the notes to consolidated
financial statements. The $5.8 million increase in equity investment income,
net was primarily related to the equity income from the Texas-New Mexico
Newspapers Partnership, the formation of which occurred in March 2003. Net Income We reported net income for the years ended June 30, 2004 and 2003 of $27.6
million and $40.8 million, respectively. Net income for fiscal year 2004 was impacted by $9.3 million for
redemption premiums, net of unamortized premiums, that were recorded as a
result of redeeming our 8 3/4% Senior Subordinated Notes and a $7.0 million
pre-tax gain on sale of newspaper assets, primarily associated with the
Charleston Newspapers restructuring. Excluding the $9.3 million loss on early
extinguishment of debt and the $7.0 million pre-tax gain on sale, pre-tax net
income was $46.0 million for the year ended June 30, 2004. Prior year pre-tax
income was impacted by a $27.4 million non-monetary gain recognized in
conjunction with the formation of the Texas-New Mexico Newspapers Partnership.
Excluding the $27.4 million gain, fiscal year 2003 pre-tax net income was $40.5
million. Also impacting net income was an $11.0 million decrease in income tax
expense for the year ended June 30, 2004 as compared to the prior year, of
which approximately $13.9 million is related to deferred income taxes. Our
effective tax rate was 37% for the year ended June 30, 2004, as compared to 40%
for the prior year. Comparison of Fiscal Years ended June 30, 2003 and 2002 Revenues Revenues for the years ended June 30, 2003 and 2002 were $738.6 million
and $711.1 million, respectively. The change represents an increase of $27.5
million, or 3.9%. The aforementioned transactions in fiscal year 2003 had the
net impact of increasing reported revenues by $12.6 million for the year ended
June 30, 2003 as compared to the prior year. On a same newspaper basis
(adjusting for the aforementioned fiscal year 2003 transactions), the following
changes occurred between fiscal years 2003 and 2002: Advertising Revenues.Advertising revenues increased 2.5% for the year
ended June 30, 2003, as compared to the prior year. The advertising revenue
increases during fiscal year 2003 were primarily the result of increases in
national and preprint advertising, offset in part by small declines in total
classified and retail advertising. Total classified revenue was only down
slightly overall. However, of the components of classified revenue, classified
employment represented most of the decline, which was due to the continued
economic slowdown that has been experienced in the majority of our newspaper
markets and throughout the United States. We also experienced small declines in
classified automotive advertising, which were more than offset by improvements
in classified real estate advertising. Circulation Revenues.Circulation revenues remained flat during fiscal
year 2003 compared to prior year. Circulation volumes at our consolidated
subsidiaries also did not change materially between periods. Other Revenues.Other revenues increased 10.7% due principally to the
$4.3 million increase in revenues from our Internet operations for the year
ended June 30, 2003 as compared to the prior year. The increase was the result
of the continued strong market acceptance of the combined print and online
packages that we offer to our advertisers, particularly in 21




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our online retail,
automotive and employment categories, and the introduction of new products
related to automotive and obituaries. Income from Unconsolidated JOAs Income from unconsolidated JOAs for the years ended June 30, 2003 and 2002
was $25.2 million and $8.8 million, respectively. The improvement of $16.4
million for the year ended June 30, 2003, is primarily the result of improved
revenues combined with lower operating expenses at the Denver JOA, as well as a
non-operating gain recognized related to the sale of its office building.
Expenses were lower as a result of lower newsprint costs and a reduction in the
number of employees. The results of the Salt Lake City JOA and Charleston
Newspapers did not change materially between periods. Cost of Sales Cost of sales for the years ended June 30, 2003 and 2002 was $221.9
million and $220.1 million, respectively. The change represents an increase of
$1.8 million, or 0.8%. The aforementioned transactions in fiscal year 2003 had
the net impact of increasing cost of sales by $5.4 million for the year ended
June 30, 2003 as compared to the prior year. Excluding the aforementioned
transactions, cost of sales decreased 1.6% on a year over year basis. Cost of
sales was impacted by increased production costs associated with printing
certain new third party publications in northern California; however, our
overall newsprint costs declined by $7.5 million or 10.4%, which more than
offset the increase in editorial and production costs. The overall decline in
newsprint costs is comprised of a 3.1% increase in consumption, offset by a
13.1% decrease in the cost per metric ton consumed, on a year over year basis. Selling, General and Administrative Selling, general and administrative (SG&A) expense for the years ended
June 30, 2003 and 2002 was $346.8 million and $324.4 million, respectively.
The change represents an increase of $22.4 million, or 6.9%, for the year ended
June 30, 2003, as compared to the prior year. The aforementioned transactions
in fiscal year 2003 had the net impact of increasing SG&A by $6.3 million for
the year ended June 30, 2003, as compared to the prior year. Excluding the impact of the transactions described above, SG&A expense
increased 4.9%, for the year ended June 30, 2003, as compared to the prior
year. The increase in SG&A expense was due in part to a $5.4 million increase
in marketing and advertising expenses for the year ended June 30, 2003, as compared to
the prior year. Marketing and advertising expense increased as a result of the
growth in national advertising revenue and new sales initiatives that were
implemented as we sought to grow revenue from non-traditional newspaper

advertisers. Circulation expense also increased as a result of circulation
growth strategies implemented in certain highly competitive southern California
markets as well as our strategies to maintain circulation volumes in the highly
competitive market around ANG Newspapers in the San Francisco Bay area. Also
contributing to the increase in SG&A expense were increases in health insurance
and other benefits, property and casualty insurance costs, the reinstatement of
401(k) matching benefits, the lifting of salary freezes for certain groups of
employees, and increased costs associated with the revenue growth experienced
in our Internet operations. Depreciation and Amortization Depreciation and amortization expense for the years ended June 30, 2003
and 2002 was $40.6 million and $47.5 million, respectively. The change
represents a decrease of $6.9 million, or 14.7% for the year ended June 30,
2003, as compared to the prior year. The fiscal year 2003 decreases were
primarily due to certain assets becoming fully depreciated during fiscal year
2002, offset in part by increased depreciation and amortization associated with
our fiscal year 2003 acquisitions. Interest Expense Interest expense for the years ended June 30, 2003 and 2002 was $64.3
million and $75.3 million, respectively. The change represents a decrease of
$11.0 million, or 14.7%. The decrease in interest expense was due to a
decrease in our average debt outstanding, as well as a reduction in the
weighted average cost of debt. Our average debt outstanding decreased $50.4
million, or 5.1%, and our weighted average interest rate decreased 76 basis
points for the year ended June 30, 2003, as compared to the prior year. 22




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##### Table of Contents



Interest expense was also impacted by net settlements related to our
interest rate swap agreements. The net settlements of our interest rate swap
agreements had the effect of decreasing interest expense by $2.6 million for
the year ended June 30, 2003, as compared to the year ended June 30, 2002 when
our interest rate swap agreements had the effect of increasing interest expense
by $2.4 million. Other (Income) Expense, Net Included in other (income) expense, net are those costs or income items
that are not related to current operations. Other (income) expense, net for
the year ended June 30, 2003 was $19.5 million. The charges incurred for the
year ended June 30, 2003 include $3.7 million in litigation expense related to
the acquisition of Kearns-Tribune, LLC (Salt Lake City), a $5.5 million change
related to the estimated cost to repurchase an option held by a third party to
acquire one of our newspapers (the cost of repurchasing the option fluctuates
with the performance of the newspaper), a $2.7 million loss related to the jury
verdict rendered against us in the case brought by a former newsprint vendor, a
$1.8 million loss related to the impairment of goodwill associated with Alaska
Broadcasting Company, a $3.9 million loss related to the impairment of fixed
assets (land and building) at one of CNPs properties, a $1.2 million loss
related to hedging activities which did not qualify for hedge accounting under
SFAS No. 133, and a net $3.1 million for various other costs not related to
current operations. Equity Investment Income, Net Included in equity investment income, net is our share of the net income
(or loss) of our non-JOA equity investees, as further described in Note 2:
Significant Accounting Policies and Other Matters of the notes to consolidated
financial statements. The $3.3 million increase in equity investment income,
net was primarily related to the equity income from the Texas-New Mexico
Newspapers Partnership, the formation of which occurred in March 2003. Net Income We reported net income for the years ended June 30, 2003 and 2002 of $40.8
million and $12.4 million, respectively. Net income for fiscal year 2003 was impacted by a $27.4 million
non-monetary gain recognized in conjunction with the formation of the Texas-New
Mexico Newspapers Partnership. Excluding the $27.4 million non-monetary gain,
pre-tax net income was $40.5 million for the year ended June 30, 2003 as
compared to $9.9 million for the prior year. In addition to the
activity described in the preceding paragraphs, net income was impacted by
a $1.9 million increase in minority interest expense and a $29.5 million
increase in income tax expense (primarily associated with the Texas-New Mexico
Newspapers Partnership gain described earlier), of which approximately $24.2
million is related to deferred income taxes. Our effective tax rate for fiscal
year 2003 was 39.8%, as compared to (25.1%) in fiscal year 2002. The tax
benefit in fiscal year 2002 was the result of the recognition of the benefit
from previously disallowed net operating loss carryovers due to a change in
federal tax regulations. Liquidity and Capital Resources Our sources of liquidity are existing cash and other working capital, cash
flows provided from operating activities, distributions from JOAs and
partnerships and the borrowing capacity under our bank credit facility. Our
operations, consistent with the newspaper industry, require little investment
in inventory, as less than 30 days of newsprint is generally maintained on
hand. In general, our receivables have been collected on a timely basis. Cash Flow Activity Net cash flows from operating activities were $75.2 million and $102.7
million for the years ended June 30, 2004 and 2003, respectively. The $27.5
million decrease was due to a $17.5 million reduction in Adjusted EBITDA,
primarily related to a decrease in operating results related to our California
operations as well as the March 2003 formation of the Texas-New Mexico
Newspapers Partnership after which our New Mexico properties are no longer
included in cash flows from operating activities. Instead,
distributions from the Texas-New Mexico Newspapers Partnership
are included in investing activities. Also contributing to the change was a
$7.5 million decrease attributable to a change in working capital, due
principally to the timing of payments on inventory, accounts payable and
accrued liabilities, as well as an $8.4 million decrease in distributions 23




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##### Table of Contents



from unconsolidated JOAs, primarily associated with us receiving approximately $8.0
million in fiscal year 2003 related to the sale of the Denver JOAs office
building. These decreases were offset in part by a $12.1 million reduction in
interest paid. Net cash flows from investing activities were ($19.2) million and ($45.4)
million for the years ended June 30, 2004 and 2003, respectively. The $26.2
million decrease net in cash used in investing activities was primarily the
result of a net $7.8 million increase in cash flows associated with equity
investments (including a $6.4 million increase in distributions from the
Texas-New Mexico Newspapers Partnership and a $0.2 million decrease in
distributions from our investment in CIPS Marketing Group, Inc.) and a $55.4
million increase in cash proceeds from the sale of newspapers and other assets
(principally from the restructuring of our interest in the Charleston JOA),
partially offset by a $21.2 million increase in cash used for acquisitions (net
of cash contributed by minority partners), and a net $15.8 million increase in
capital expenditures. Net cash flows from financing activities were $5.5 million and $(56.0)
million for the years ended June 30, 2004 and 2003, respectively. The increase
in cash flow from financing activities is primarily the result of our
accumulating cash in the second half of fiscal year 2004 as more fully
described below. The activity for the year ended June 30, 2004 includes $291.5
million of net proceeds from the issuance of $300.0 million of our 6 7/8%
Senior Subordinated Notes due 2013, which were used along with available
borrowings to repurchase all of our outstanding 8 3/4% Senior Subordinated
Notes, for $309.5 million (including $9.5 million of repurchase
premiums and other related costs), as well as $146.9 million of net proceeds from the issuance of
$150.0 million of our 6 3/8% Senior Subordinated Notes due 2014, which were
temporarily used to pay down all outstanding borrowings on the revolver portion
of our credit facility. Because voluntary prepayments on our term loan B
facility could not be reborrowed, and because we had no outstanding borrowings
on the revolving portion of our bank credit facility, we elected to accumulate
cash through June 30, 2004 in anticipation of the redemption of our $200.0
million 8 5/8% Senior Subordinated Notes. On July 1, 2004, we used cash on
hand at June 30, 2004 and borrowings under our revolving credit agreement to
redeem the 8 5/8% Senior Subordinated Notes. Total fees and expenses paid for
our fiscal year 2004 refinancings were approximately $21.1 million. In
addition, activity for the year ended June 30, 2004 includes normal borrowings
and paydowns on long-term debt. Prior years net activity consisted primarily
of normal borrowings and borrowings to finance our fiscal year 2003
acquisitions in California. Capital Expenditures Capital ExpendituresFiscal Year 2005 Plan
    
    Fiscal Year 2004 Actual(Dollars in thousands)Wholly-
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non Wholly-Owned
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    OwnedSubsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Subsidiariesand
    
    Non Wholly-
    
    Our Share of
    
    
    
    
    
    Wholly-
    
    and
    
    Our Share ofConsolidated
    
    Owned
    
    Unconsolidated
    
    
    
    
    
    Owned
    
    Consolidated
    
    UnconsolidatedJOAs
    
    Subsidiaries
    
    JOAs
    
    Total
    
    Subsidiaries
    
    JOAs
    
    JOAs
    
    TotalTotal Capital Projects
    
    $
    46,383
    
    
    $
    17,923
    
    
    $
    2,500
    
    
    $
    66,806
    
    
    $
    29,029
    
    
    $
    7,454
    
    
    $
    4,860
    
    
    $
    41,343Less Minority
Partners Share
    
    
    
    
    
    
    (8,056
    )
    
    
    (500
    )
    
    
    (8,556
    )
    
    
    
    
    
    
    (3,324
    )
    
    
    (972
    )
    
    
    (4,296
    )$
    46,383
    
    
    $
    9,867
    
    
    $
    2,000
    
    
    $
    58,250
    
    
    $
    29,029
    
    
    $
    4,130
    
    
    $
    3,888
    
    
    $
    37,047
 Capital expenditures, net of our partners share, for fiscal year 2005
have been budgeted at approximately $58.3 million. Non-maintenance expenditures planned for fiscal year 2005 include
installation of an editorial front-end system and construction of a new
building for the Los Angeles Newspapers Group, new Company-wide advertising and
circulation systems and our share of a new printing facility in Salt Lake City,
which accounts for more than half the budget. Carryover expenditures from the
prior year of approximately $5.4 million are primarily for a front-end
editorial system at the Los Angeles Newspaper Group and an inserter in
Connecticut. Management will review the capital expenditure plan throughout
the year and will modify it as required to meet our current business needs.
Capital expenditures related to these projects are expected to be funded either
through available cash or borrowings under our bank credit facility. Liquidity at June 30, 2004 At June 30, 2004, our debt structure included our bank credit facility
which provides for borrowings of up to $600.0 million, consisting of a $350.0
million revolving credit facility and a $250.0 million term loan B facility.
Availability under the revolving credit facility will be permanently reduced by
$100.0 million in December 2008. At June 30, 2004, there 24




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##### Table of Contents



were no outstanding
borrowings under the revolver portion of the bank credit facility and there was
$341.4 million available for future borrowings, net of $8.6 million in
outstanding letters of credit. On January 26, 2004, we completed the sale of
$150.0 million of our 6 3/8% Senior Subordinated Notes due 2014 to take
advantage of the lower long-term interest rates available at the time with the
intention of using the proceeds, along with borrowings under our
revolver, to redeem our $200.0 million 8 5/8%
Senior Subordinated Notes. In anticipation of the July 1, 2004
redemption of
our $200.0 million 8 5/8% Senior Subordinated Notes and because voluntary
prepayments on term loan B could not be reborrowed, we elected to accumulate
cash at June 30, 2004. We used cash on hand and borrowings under our revolving
credit agreement to redeem our $200.0 million 8 5/8% Senior Subordinated Notes
on July 1, 2004, the first date at which they were callable. On August 30, 2004, we entered into an amendment and restatement of our
bank credit facility (the amended facility) to take advantage of better
pricing available in the bank loan market. The amended facility was entered
into to refinance our term loan B facility. The amended facility maintains
the $350.0 million revolving credit facility and provides for a $100.0 million
term loan A and a $148.8 million term loan C, both of which were used to
refinance the term loan B facility. During the next twelve months we will
make scheduled quarterly payments on term loan C of $0.4 million under the
amended facility, which we intend to pay from operating cash flows. Amounts
repaid under the term loan A and C facilities will not be available for
reborrowing, regardless of whether such payments are scheduled or voluntary. In January 1998, we entered into an option agreement in association with
the acquisition financing of the Daily Newsin Los Angeles. This option
provides the holder the right to purchase the assets used in the publication of
the Daily News, which the option holder can exercise or put such option to us
based on a predetermined formula anytime after January 31, 2003. The option
repurchase price is currently valued at approximately $11.4 million, and is
recorded as a component of other long-term liabilities. If the option were put
to us, we expect to fund the payment with available borrowings from our bank
credit facility. As a result, in accordance with SFAS No. 6, Classification of
Short-Term Obligations Expected to be Refinanced, the option repurchase price
remains classified in our balance sheet as long-term. The Denver Post Shareholder Agreement provides Media General and us with a
put and a call option, respectively, on Media Generals 20% interest in The
Denver Post Corporation. Media Generals put expired June 30, 2004 without
being exercised. Our call option became exercisable beginning July 1, 2004 and
expires June 30, 2005. The price of the call, if or when it is exercised, is
based on the appraised fair market value of The Denver Post Corporation, less
debt of The Denver Post Corporation. No amounts are recorded in our financial
statements related to the call option. We are currently evaluating our options
with respect to our right to call Media Generals 20% interest in The Denver
Post Corporation. Stephens Media Group (SMG), a 26.28% partner in the California
Newspapers Partnership (CNP), has a right to require CNP to redeem its
interest in CNP at its fair market value (plus interest through closing) any
time after January 1, 2005. If such right is exercised, SMGs interest must be
redeemed within two years of the determination of its fair market value. We
are not currently aware of any intentions on the part of SMG to exercise its
put. No amounts are recorded in our financial statements related to SMGs put
right. Our ability to service our debt and fund planned capital expenditures
depends on our ability to continue to generate operating cash flows in the
future. Based on current levels, we believe our cash flow from operations,
available cash and available borrowings under our bank credit facility will be
adequate to meet our future liquidity needs for at least the next twelve
months. We estimate minimum contributions to our
defined benefit pension plans in fiscal year 2005 will be approximately $2.0 million to $3.0
million. We also expect federal income tax payments to significantly increase
next year because of the impact of alternative minimum taxes. Distributions from Partnerships Set forth below is a description of the ownership structure and
earnings-distribution mechanism of each of our Denver and Salt Lake City JOAs,
as well as the CNP and the Texas-New Mexico Newspapers Partnership:  
    
    Through our wholly-owned subsidiary, Kearns-Tribune, LLC, we own a
50% interest in the Salt Lake City JOA. Under the agreement, 58% of the
Salt Lake City JOAs net income, less their working capital needs and
other minor adjustments, is apportioned to Kearns-Tribune, LLC on a
monthly basis and is distributed (generally) weekly. 25




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##### Table of Contents




    
    Our 80% owned subsidiary, The Denver Post Corporation, owns 50% of
The Denver Newspaper Agency, LLP. Under the Denver Newspaper Agency JOA
agreement, the partnership is required to distribute 50% of its monthly
EBITDA (and other funds available for distribution), less working
capital required by the partnership, to The Denver Post Corporation.  
    
    Through our wholly-owned subsidiary, West Coast MediaNews LLC, we own
a 54.23% interest in the California Newspapers Partnership (CNP).
Under the terms of the partnership agreement, we are entitled to monthly
distributions of the partnerships EBITDA, less working capital required
and debt service payments, in proportion to our partnership interest
(total CNP debt, excluding the debt and capital leases we contributed to
the partnership, is $1.9 million at June 30, 2004 of which our share is
$1.0 million).  
    
    Through our wholly-owned subsidiary, New Mexico-Texas MediaNews LLC,
we own a 33.8% interest in the Texas-New Mexico Newspapers Partnership.
Pursuant to the partnership agreement, the partnership management
committee is required to determine the amount of earnings (before
depreciation and amortization) or other partnership funds available for
distribution for each accounting period and distribute (generally
monthly) 33.8% of such funds to New Mexico-Texas MediaNews LLC. Off-Balance Sheet Arrangements Our share of long-term debt in unconsolidated JOAs (Denver and Salt Lake
City) was approximately $2.7 million at June 30, 2004. Through our wholly-owned subsidiary, Kearns-Tribune, LLC, we own a 6.0%
interest in Ponderay Newsprint Company (Ponderay) and are also guarantors on
a several basis of 6.0% of up to $125.0 million Ponderays credit facility,
which is due April 12, 2006. The guarantee could be triggered by Ponderays
failure to meet any or all of its bank covenants at which time we could be
liable for our portion or 6.0% of the guarantee. Our share of the guarantee
was approximately $5.3 million at June 30, 2004, which is not recorded in our
financial statements. Contractual Obligations The following table represents our contractual obligations as of June 30,
2004: Less than
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    1 Year
    
    1-3 Years
    
    3-5 Years
    
    5 Years(Dollars in thousands)Long-Term Debt(1)
    
    $
    921,634
    
    
    $
    5,083
    
    
    $
    9,403
    
    
    $
    8,899
    
    
    $
    898,249Capital Lease Obligations, Net of
Imputed Interest
    
    
    6,833
    
    
    
    195
    
    
    
    449
    
    
    
    557
    
    
    
    5,632Operating Leases(2)
    
    
    27,378
    
    
    
    5,655
    
    
    
    8,709
    
    
    
    6,110
    
    
    
    6,904Purchase Obligations(3)
    
    
    234,636
    
    
    
    78,196
    
    
    
    82,363
    
    
    
    57,352
    
    
    
    16,725Other Long-Term Liabilities Reflected on
the Balance Sheet under GAAP(4)
    
    
    26,885
    
    
    
    435
    
    
    
    4,005
    
    
    
    1,798
    
    
    
    20,647Total
    
    $
    1,217,366
    
    
    $
    89,564
    
    
    $
    104,929
    
    
    $
    74,716
    
    
    $
    948,157
  (1)
    
    Does not reflect our August 30, 2004 amended credit facility. At June 30,
2004, and as reflected in the preceding table, maturities related to the
credit facility in effect at that date were as follows: Fiscal years 2005
through 2009  $2.5 million each year and thereafter  $236.3 million.
Under the August 30, 2004 amended credit facility, maturities will be as
follows: Fiscal year 2005 through 2007  $1.5 million each year; Fiscal
year 2008  $11.5 million; Fiscal year 2009  $26.5 million; and
thereafter  $206.3 million.  (2)
    
    Includes a significant operating lease commitment entered into on July 1,
2004 in Salt Lake City.  (3)
    
    Purchase obligations primarily include commitments to purchase newsprint
and our share of the commitments to construct a new printing facility for
the Salt Lake JOA. One of our newsprint contracts requires us to purchase
newsprint at a floating price based on RISI (Resource Information Systems,
Inc.). For purposes of this disclosure we used the RISI price as of August
2004. It is difficult to predict the price of newsprint over the term of
the contract.  (4)
    
    Reflected on the balance sheet in Other Liabilities (long-term) at June
30, 2004 is $11.4 million related to the amount accrued to repurchase an
option held by a third party to purchase the assets used in the
publication of one of our newspaper properties. The option was
exercisable beginning in January 2003; however it is included in Other
Liabilities (long-term) because if the option is put to us, we expect to
fund the payment with available borrowings from our bank credit facility. 26




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##### Table of Contents



Near Term Outlook Newsprint Prices In January 2004, newsprint suppliers announced a $50 per metric ton price
increase to be effective February 1, 2004. Effective May 1, 2004, $25 of the
February 1, 2004 price increase was implemented. In July 2004, newsprint
suppliers announced another $50 per metric ton increase to be effective
September 1, 2004. We are not currently paying the September 1 price increase
and are uncertain as to whether all or part of the price increase will be
implemented in the near term as North American newsprint consumption continues
to trail the prior year. The August 2004 RISI (Resource Information Systems,
Inc., a company that provides economic analysis and forecasts of paper markets)
price index for 30 pound newsprint was $545 per metric ton as compared to $495
in August 2003. Recently Issued Accounting Standards See Note 2: Significant Accounting Policies and Other Matters  Recently
Issued Accounting Standards, of the notes to our consolidated financial
statements. 27




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##### Table of Contents



Item 7A: Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risk arising from changes in interest rates
associated with our bank debt, which includes our bank term loan and bank
credit facility. The following table provides information about our debt obligations that
are sensitive to changes in interest rates. The table presents principal cash
flows and related weighted-average interest rates by expected maturity dates.
The table below has been impacted for the July 1, 2004 repurchase of our $200.0
million 8 5/8% Senior Subordinated Notes due 2011 and the August 30, 2004
refinancing of our credit agreement. Weighted-average variable rates are based
on implied forward rates as derived from appropriate annual spot rate
observations as of the reporting date. Interest Rate Sensitivity
Principal or Notional Amount by Expected Maturity
Average Interest or Swap Rate Years Ended June 30,
    
    
    
    
    
    
    
    
    
    Fair Value20042005
    
    2006
    
    2007
    
    2008
    
    2009
    
    Thereafter
    
    Total
    
    (Liability)(Dollars in thousands)LiabilitiesLong-Term Debt including
Current PortionFixed Rate
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    466,193
    
    
    $
    446,193
    
    
    $
    (420,100
    )(g)Average Interest Rate(e)
    
    
    7.71
    %
    
    
    7.71
    %
    
    
    7.71
    %
    
    
    7.71
    %
    
    
    7.71
    %
    
    
    7.71
    %Variable Rate(f)
    
    $
    1,488
    
    
    $
    1,488
    
    
    $
    1,488
    
    
    $
    11,488
    
    
    $
    26,488
    
    
    $
    356,310
    
    
    $
    398,750
    
    
    $
    (398,750
    )Average Interest Rate(e) (f)
    
    
    3.13
    %
    
    
    3.13
    %
    
    
    3.13
    %
    
    
    3.13
    %
    
    
    3.13
    %
    
    
    3.13
    %Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    844,943
    (a)
   (a)
    
    The long-term debt (including current portion) of $844.9 million from
the Market Risk table above differs from total long-term debt of $921.6
million reported in Note 6: Long-Term Debt of the notes to the
consolidated financial statements due to the following (in millions): $
    844.9
    
    Balance per table above199.4
    
    (b)(150.0
    )
    (c)27.3
    
    (d)$
    921.6
    
    Total per Note 6: Long-Term Debt
  (b)
    
    Impact of the July 1, 2004 repurchase of our 8 5/8% Senior
Subordinated Notes due 2011, which relieved the $199.4 million June 30,
2004 balance.(c)
    
    We redeemed the 8 5/8% Senior Subordinated Notes with cash on hand
and $150.0 million in available borrowings under the revolver portion of
our credit facility.(d)
    
    Relates to various notes payable due through 2013. The Market Risk
table above excludes these long-term obligations as we could not
practicably estimate fair value due to the lack of quoted market prices
for these types of instruments and our inability to estimate the fair
value without incurring the excessive costs of obtaining an appraisal.(e)
    
    Our $200.0 million 8 5/8% Senior Subordinated Notes were redeemed
July 1, 2004 with cash on hand and available borrowings from our bank
credit facility (see footnotes b and c), the effect of which was taken
into consideration in determining an average interest rate for fiscal
years 2005 through 2009 and thereafter.(f)
    
    Reflects our August 30, 2004 amended credit facility, which reduced
interest rates and revised maturities. The assumed interest rate is
based on LIBOR plus 1.5%. See Note 15: Subsequent Events for further
discussion.(g)
    
    The fair market value shown above includes the 6 7/8% and 6 3/8%
Senior Subordinated Notes, and excludes the 8 5/8% Senior Subordinated
Notes that were redeemed on July 1, 2004 (see footnote b). The fair
market value of the 8 5/8% Senior Subordinated Notes at June 30, 2004
was $208.6 million. 28




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##### Table of Contents



DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K includes forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. Forward-looking statements contained herein and elsewhere in this
annual report on Form 10-K are based on current expectations. Such statements
are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995.The terms expect, anticipate, intend,
believe, and project and similar words or expressions are intended to
identify forward-looking statements. These statements speak only as of the date
of this Annual Report on Form 10-K. These forward-looking statements are
subject to certain risks and uncertainties that could cause actual results andevents to differ materially from those anticipated and should be viewed with
caution. Potential risks and uncertainties that could adversely affect our
ability to obtain these results, and in most instances are beyond our control,
include, without limitation, the following factors: (a) increased consolidation
among major retailers, bankruptcy or other events that may adversely affect
business operations of major customers and depress the level of local and
national advertising, (b) an economic downturn in some or all of our principal
newspaper markets that may lead to decreased circulation or decreased local or
national advertising, (c) a decline in general newspaper readership patterns as
a result of competitive alternative media or other factors, (d) increases in
newsprint costs over the level anticipated, (e) labor disputes which may cause
revenue declines or increased labor costs, (f) acquisitions of new businesses
or dispositions of existing businesses, (g) costs or difficulties related to
the integration of businesses acquired by us may be greater than expected, (h)
increases in interest or financing costs, (i) rapid technological changes and
frequent new product introductions prevalent in electronic publishing,
including the ongoing evolution of the Internet and (j) other unanticipated
events and conditions. It is not possible to foresee or identify all such
factors. We make no commitment to update any forward-looking statement or to
disclose any facts, events, or circumstances after the date hereof that may
affect the accuracy of any forward-looking statements. 29




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##### Table of Contents



Reconciliation of GAAP and Non-GAAP Financial Information The following tables have been provided to reconcile the Non-GAAP
financial information (Adjusted EBITDA and Pro-Rata Consolidated Income
Statement Data) presented in the Selected Consolidated Financial Data, and
Managements Discussion and Analysis of Financial Condition and Results of
Operations sections of this annual report on Form 10-K to their most directly
comparable GAAP measures (Cash Flows from Operating Activities and GAAP Income
Statement Data). Reconciliation of Cash Flows from Operating Activities (GAAP measure) to
Adjusted EBITDA (non-GAAP measure). Years Ended June 30,2004
    
    2003
    
    2002
    
    2001
    
    2000(Dollars in thousands)NON-GAAP FINANCIAL DATA(a)Cash Flows from Operating Activities (GAAP measure)
    
    $
    75,155
    
    
    $
    102,694
    
    
    $
    72,635
    
    
    $
    42,001
    
    
    $
    61,186Net Change in Operating Assets and Liabilities
    
    
    16,082
    
    
    
    8,619
    
    
    
    459
    
    
    
    25,504
    
    
    
    13,532Distributions paid to minority interest
    
    
    36,176
    
    
    
    38,765
    
    
    
    43,406
    
    
    
    39,747
    
    
    
    39,118Distributions from unconsolidated JOAs
    
    
    (75,204
    )
    
    
    (83,621
    )
    
    
    (58,449
    )
    
    
    (38,070
    )
    
    
    (3,900
    )Interest Expense
    
    
    57,036
    
    
    
    64,252
    
    
    
    75,302
    
    
    
    82,241
    
    
    
    75,758Bad Debt Expense
    
    
    (7,405
    )
    
    
    (9,632
    )
    
    
    (10,213
    )
    
    
    (10,916
    )
    
    
    (10,859
    )Pension Income (Expense), Net of Cash Contributions
    
    
    (1,082
    )
    
    
    (31
    )
    
    
    (1,172
    )
    
    
    5,948
    
    
    
    2,802Direct Costs of the Unconsolidated JOAs, Incurred
Outside of the Unconsolidated JOAs(b)
    
    
    46,997
    
    
    
    43,411
    
    
    
    43,211
    
    
    
    16,403
    
    
    
    514Net Cash Related to Other (Income), Expense
    
    
    4,654
    
    
    
    5,490
    
    
    
    1,505
    
    
    
    5,733
    
    
    
    7,470Adjusted EBITDA
    
    
    152,409
    
    
    
    169,947
    
    
    
    166,684
    
    
    
    168,591
    
    
    
    185,621Minority Interest in Adjusted EBITDA
    
    
    (45,747
    )
    
    
    (49,089
    )
    
    
    (45,946
    )
    
    
    (45,647
    )
    
    
    (44,298
    )Combined Adjusted EBITDA of Unconsolidated JOAs
    
    
    39,842
    
    
    
    40,371
    
    
    
    36,006
    
    
    
    14,205
    
    
    
    4,725EBITDA of Texas-New Mexico Newspapers Partnership(c)
    
    
    10,108
    
    
    
    3,275
    
    
    
    
    
    
    
    
    
    
    
    Adjusted EBITDA Available to Company
    
    $
    156,612
    
    
    $
    164,504
    
    
    $
    156,744
    
    
    $
    137,149
    
    
    $
    146,048
   (a)
    
    Non-GAAP Financial Data.Adjusted EBITDA and Adjusted EBITDA Available
to Company are not measures of performance recognized under GAAP. However,
we believe that they are indicators and measurements of our leverage
capacity and debt service ability. Adjusted EBITDA and Adjusted EBITDA
Available to Company should not be considered as an alternative to measure
profitability, liquidity, or performance, nor should they be considered an
alternative to net income, cash flows generated by operating, investing or
financing activities, or other financial statement data presented in our
consolidated financial statements. Adjusted EBITDA is calculated by
deducting cost of sales and SG&A expense from total revenues. Adjusted
EBITDA Available to Company is calculated by: (i) reducing Adjusted EBITDA
by the minorities interest in the Adjusted EBITDA generated from the
California Newspapers Partnership, The Denver Post Corporation, and
through April 30, 2004, The York Newspaper Company, our less than 100%
owned consolidated subsidiaries (Minority Interest in Adjusted EBITDA);
(ii) increasing Adjusted EBITDA by our combined proportionate share of the
Adjusted EBITDA generated by our unconsolidated JOAs in Denver, Salt Lake
City and through May 7, 2004, Charleston (Combined Adjusted EBITDA of
Unconsolidated JOAs); and (iii) increasing Adjusted EBITDA by our
proportionate share of EBITDA of the Texas-New Mexico Newspapers
Partnership (see footnote (c)).(b)
    
    Direct Costs of Unconsolidated JOAs.Direct Costs of the Unconsolidated
JOAs, Incurred Outside of the Unconsolidated JOAs includes the editorial
costs, publishing related revenues, depreciation, amortization, and other
direct costs incurred outside of the JOAs by our consolidated subsidiaries
associated with The Salt Lake Tribune, The Denver Post,
and through May 7,
2004, the Charleston Daily Mail. See Note 3: Joint Operating Agencies in
the footnotes to our consolidated financial statements for further
description and analysis of this adjustment.(c)
    
    The Texas-New Mexico Newspapers Partnership.The Texas-New Mexico
Newspapers Partnership agreement, effective March 3, 2003, requires the
partnership to make distributions equal to the earnings of the partnership
before depreciation and amortization (EBITDA). EBITDA of Texas-New Mexico
Newspapers Partnership has been included in Adjusted EBITDA Available to
Company as it is an integral part of our cash flows from operations as
defined by our debt covenants. Previously we had included distributions
from the Texas-New Mexico Newspapers Partnership in Adjusted EBITDA
Available to Company. However, now we include our 33.8% share of the
EBITDA of Texas New-Mexico Newspapers Partnership. This change was made in
order to better conform to the definition of operating cash flows in our
debt agreements. All periods presented reflect this change. 30




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##### Table of Contents



Reconciliation of Cash Flows from Operating Activities (GAAP measure) to
Adjusted EBITDA presented on a pro-rata consolidated basis (non-GAAP measure). Years Ended June 30,2004
    
    2003
    
    2002(Dollars in thousands)NON-GAAP FINANCIAL DATA(a)Cash Flows from Operating Activities (GAAP measure)
    
    $
    75,155
    
    
    $
    102,694
    
    
    $
    72,635Net Change in Operating Assets and Liabilities
    
    
    16,082
    
    
    
    8,619
    
    
    
    459Distributions paid to minority interest
    
    
    36,176
    
    
    
    38,765
    
    
    
    43,406Distributions from unconsolidated JOAs
    
    
    (75,204
    )
    
    
    (83,621
    )
    
    
    (58,449
    )Interest Expense
    
    
    57,036
    
    
    
    64,252
    
    
    
    75,302Bad Debt Expense
    
    
    (7,405
    )
    
    
    (9,632
    )
    
    
    (10,213
    )Pension Expense, Net of Cash Contributions
    
    
    (1,082
    )
    
    
    (31
    )
    
    
    (1,172
    )Net Cash Related to Other (Income), Expense
    
    
    4,654
    
    
    
    5,490
    
    
    
    1,505Combined Adjusted EBITDA of Unconsolidated JOAs(b)
    
    
    39,842
    
    
    
    40,371
    
    
    
    36,006Direct Costs of the Unconsolidated JOAs, Incurred
Outside of the JOAs(c)
    
    
    46,997
    
    
    
    43,411
    
    
    
    43,211Minority Interest in Adjusted EBITDA of The York
Newspaper Company(d)
    
    
    (6,864
    )
    
    
    (8,044
    )
    
    
    (7,732
    )Adjusted EBITDA
    
    
    185,387
    
    
    
    202,274
    
    
    
    194,958Minority Interest in Adjusted EBITDA
    
    
    (38,883
    )
    
    
    (41,045
    )
    
    
    (38,214
    )EBITDA of Texas-New Mexico Newspapers Partnership
    
    
    10,108
    
    
    
    3,275
    
    
    
    Adjusted EBITDA Available to Company
    
    $
    156,612
    
    
    $
    164,504
    
    
    $
    156,744
   (a)
    
    Non-GAAP Financial Data.Adjusted EBITDA and Adjusted EBITDA Available
to Company are not measures of performance recognized under GAAP.
However, we believe that they are indicators and measurements of our
leverage capacity and debt service ability. Adjusted EBITDA and Adjusted
EBITDA Available to Company should not be considered as an alternative to
measure profitability, liquidity, or performance, nor should they be
considered an alternative to net income, cash flows generated by
operating, investing or financing activities, or other financial statement
data presented in our consolidated financial statements. Adjusted EBITDA
is calculated by deducting cost of sales and SG&A expense from total
revenues. Adjusted EBITDA Available to Company is calculated by: (i)
reducing Adjusted EBITDA by the minorities interest in the Adjusted
EBITDA generated from the California Newspapers Partnership and The Denver
Post Corporation, our less than 100% owned consolidated subsidiaries
(Minority Interest in Adjusted EBITDA) and (ii) increasing Adjusted
EBITDA by our proportionate share of EBITDA of the Texas-New Mexico
Newspapers Partnership. Note that pro-rata consolidation already takes
into account our share of the results from our unconsolidated JOAs and
factors out the minority interest associated with The York Newspaper
Company through April 30, 2004.(b)
    
    Combined Adjusted EBITDA of Unconsolidated JOAs.Combined Adjusted
EBITDA of Unconsolidated JOAs is calculated as total revenues, less cost
of sales and SG&A expense from the Unconsolidated JOAs Pro-Rata Adjustment
column presented that follows under  Reconciliation of Income Statement
Data presented on a historical GAAP basis to Non-GAAP Income Statement
Data presented on a pro-rata consolidation basis.(c)
    
    Direct Costs of Unconsolidated JOAs.Direct Costs of the Unconsolidated
JOAs, Incurred Outside of the Unconsolidated JOAs includes the editorial
costs, publishing related revenues, depreciation, amortization, and other
direct costs incurred outside of the JOAs by our consolidated subsidiaries
associated with The Salt Lake Tribune, The Denver Post,and
through May 7,
2004 the Charleston Daily Mail. See Note 3: Joint Operating Agencies in
the footnotes to our consolidated financial statements for further
description and analysis of this adjustment.(d)
    
    Minority Interest in Adjusted EBITDA of The York Newspaper Company.
Minority Interest in Adjusted EBITDA of The York Newspaper Company is
calculated as total revenues, less cost of sales and SG&A expense from the
Adjustment to Eliminate 42.5% Minority Interest in York JOA column
presented that follows under  Reconciliation of Income Statement Data
presented on a historical GAAP basis to Non-GAAP Income Statement Data
presented on a pro-rata consolidation basis. 31




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Reconciliation of Income Statement Data presented on a historical GAAP basis to
Non-GAAP Income Statement Data presented on a pro-rata consolidation basis. See footnotes (1) and (2) at the end of these reconciliations for a
description of the adjustments made. See footnote (a) on the preceding page
for a description of our method of calculating Adjusted EBITDA. All amounts
shown in the following reconciliations are in thousands. Year Ended June 30, 2004Adjustment toEliminate 42.5%
    
    UnconsolidatedAs Presented
    
    Minority Interest
    
    JOAs Pro-Rata
    
    As Presented onUnder GAAP
    
    in York JOA(1)
    
    Adjustment(2)
    
    a Pro-Rata BasisTotal Revenues
    
    $
    753,829
    
    
    $
    (15,280
    )
    
    $
    311,302
    
    
    $
    1,049,851Income from Unconsolidated JOAs
    
    
    22,207
    
    
    
    
    
    
    
    (22,207
    )
    
    
    Cost of Sales
    
    
    234,784
    
    
    
    (3,192
    )
    
    
    124,216
    
    
    
    355,808Selling, General and Administrative
    
    
    366,636
    
    
    
    (5,224
    )
    
    
    147,244
    
    
    
    508,656Depreciation and Amortization
    
    
    40,742
    
    
    
    (500
    )
    
    
    15,211
    
    
    
    55,453Interest Expense
    
    
    57,036
    
    
    
    (78
    )
    
    
    300
    
    
    
    57,258Other (Income) Expense, Net
    
    
    17,365
    
    
    
    (264
    )
    
    
    2,124
    
    
    
    19,225Total Costs and Expenses
    
    
    716,563
    
    
    
    (9,258
    )
    
    
    289,095
    
    
    
    996,400Gain on Sale of Newspaper Properties
    
    
    6,982
    
    
    
    
    
    
    
    
    
    
    
    6,982Minority Interest
    
    
    (32,237
    )
    
    
    6,022
    
    
    
    
    
    
    
    (26,215
    )Net Income
    
    
    27,637
    
    
    
    
    
    
    
    
    
    
    
    27,637Adjusted EBITDA
    
    $
    152,409
    
    
    $
    (6,864
    )
    
    $
    39,842
    
    
    $
    185,387
 Year Ended June 30, 2003Adjustment toEliminate 42.5%
    
    UnconsolidatedAs Presented
    
    Minority Interest
    
    JOAs Pro-Rata
    
    As Presented on aUnder GAAP
    
    in York JOA(1)
    
    Adjustment(2)
    
    Pro-Rata BasisTotal Revenues
    
    $
    738,598
    
    
    $
    (17,584
    )
    
    $
    304,457
    
    
    $
    1,025,471Income from Unconsolidated JOAs
    
    
    25,227
    
    
    
    
    
    
    
    (25,227
    )
    
    
    Cost of Sales
    
    
    221,888
    
    
    
    (3,542
    )
    
    
    124,666
    
    
    
    343,012Selling, General and Administrative
    
    
    346,763
    
    
    
    (5,998
    )
    
    
    139,420
    
    
    
    480,185Depreciation and Amortization
    
    
    40,553
    
    
    
    (526
    )
    
    
    15,814
    
    
    
    55,841Interest Expense
    
    
    64,252
    
    
    
    (106
    )
    
    
    345
    
    
    
    64,491Other (Income) Expense, Net
    
    
    19,534
    
    
    
    (207
    )
    
    
    (1,015
    )
    
    
    18,312Total Costs and Expenses
    
    
    692,990
    
    
    
    (10,379
    )
    
    
    279,230
    
    
    
    961,841Gain on Sale of Newspaper Properties
    
    
    27,399
    
    
    
    
    
    
    
    
    
    
    
    27,399Minority Interest
    
    
    (34,088
    )
    
    
    7,204
    
    
    
    
    
    
    
    (26,884
    )Net Income
    
    
    40,828
    
    
    
    
    
    
    
    
    
    
    
    40,828Adjusted EBITDA
    
    $
    169,947
    
    
    $
    (8,044
    )
    
    $
    40,371
    
    
    $
    202,274
 32




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##### Table of Contents



Year Ended June 30, 2002Adjustment toEliminate 42.5%
    
    UnconsolidatedAs Presented
    
    Minority Interest
    
    JOAs Pro-Rata
    
    As Presented onUnder GAAP
    
    in York JOA(1)
    
    Adjustment(2)
    
    a Pro-Rata BasisTotal Revenues
    
    $
    711,130
    
    
    $
    (17,252
    )
    
    $
    298,902
    
    
    $
    992,780Income from Unconsolidated JOAs
    
    
    8,770
    
    
    
    
    
    
    
    (8,770
    )
    
    
    Cost of Sales
    
    
    220,082
    
    
    
    (3,730
    )
    
    
    133,929
    
    
    
    350,281Selling, General and Administrative
    
    
    324,364
    
    
    
    (5,790
    )
    
    
    128,967
    
    
    
    447,541Depreciation and Amortization
    
    
    47,545
    
    
    
    (575
    )
    
    
    17,750
    
    
    
    64,720Interest Expense
    
    
    75,302
    
    
    
    (149
    )
    
    
    364
    
    
    
    75,517Other (Income) Expense, Net
    
    
    10,941
    
    
    
    (69
    )
    
    
    9,124
    
    
    
    19,996Total Costs and Expenses
    
    
    678,234
    
    
    
    (10,313
    )
    
    
    290,134
    
    
    
    958,055Minority Interest
    
    
    (32,218
    )
    
    
    6,940
    
    
    
    
    
    
    
    (25,278
    )Net Income
    
    
    12,365
    
    
    
    
    
    
    
    
    
    
    
    12,365Adjusted EBITDA
    
    $
    166,684
    
    
    $
    (7,732
    )
    
    $
    36,006
    
    
    $
    194,958
   (1)
    
    Adjustment to Eliminate 42.5% Minority Interest in York JOA.Eliminates
The York Newspaper Company JOA minority partners 42.5% share from the
individual line items with a corresponding adjustment to GAAP minority
interest through April 30, 2004. Effective April 30, 2004, we acquired the
minority interest in The York Newspaper Company. The difference between
the minority interest adjustment provided in the reconciliation of Cash
Flows from Operating Activities (GAAP measure) to Adjusted EBITDA
presented on a pro-rata consolidated basis (non-GAAP measure) and the
pro-rata minority interest adjustment above is that certain items
(Depreciation and Amortization, Interest Expense and Other (Income)
Expense, Net) are excluded from Minority Interest in Adjusted EBITDA.(2)
    
    Unconsolidated JOAs Pro-Rata Adjustment.The adjustment to pro-rata
consolidate our unconsolidated JOAs includes our proportionate share, on a
line item basis of the income statements of our unconsolidated JOAs. Our
interest in the earnings of the Salt Lake City JOA is 58%, while our
interests in Denver Newspaper Agency and Charleston Newspapers
(through May
7, 2004) are 50%. This adjustment also includes the editorial costs,
publishing related revenues, depreciation, amortization, and other direct
costs incurred outside of the JOAs by our consolidated subsidiaries
associated with The Salt Lake Tribune, The Denver Post, and the Charleston
Daily Mail(through May 7, 2004). See Note 3: Joint Operating Agencies in
the footnotes to our consolidated financial statements for further
description and analysis of the components of this adjustment. Our share
of the Adjusted EBITDA for the Charleston JOA for the year ended June 30,
2004 was $2.9 million and is included in the Adjusted EBITDA related to
the Unconsolidated JOAs Pro-Rata Adjustment column. 33




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##### Table of Contents



Item 8: Financial Statements and Supplementary Data The response to this item is filed as a separate part of this report (see
page 43). 
 Item 9: Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure None 
 Item 9A: Controls and Procedures We carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive Officer,
President, and Chief Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures as defined in Rules
15d-15(e) of the Securities Exchange Act of 1934 as of June 30, 2004. Based
upon that evaluation, the Chief Executive Officer, President, and Chief
Financial Officer concluded that our disclosure controls and procedures were
effective to provide reasonable assurance that material information regarding
us and our subsidiaries required to be disclosed by us in the reports filed or
submitted by us under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission rules and forms. Based on this evaluation, we have determined that
there have been no changes in our internal controls over financial reporting
during the quarter ended June 30, 2004 that materially affected or are
reasonably likely to materially affect our internal controls over financial
reporting. The Companys management, including the CEO, President, and CFO, does not
expect that our disclosure controls or our internal controls will prevent all
errors and all fraud. A control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Our disclosure
controls and procedures are designed to provide reasonable assurance of
achieving their objectives. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within the company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons or by collusion of two or more people. The design of any
system of controls also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions;
over time, controls may become inadequate because of changes in conditions, or
the degree of compliance with the policies or procedures may deteriorate.
Because of the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be detected. 
 Item 9B: Other
Information None 34




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##### Table of Contents



PART III 
 Item 10: Directors and Executive Officers of the Registrant Set forth below are the names, ages and titles and a brief account of the
business experience of each person who is a director, executive officer or
other significant employee of ours. Name
    
    Age
    
    TitleRichard B. Scudder
    
    
    91
    
    
    Chairman of the Board and DirectorWilliam Dean Singleton
    
    
    53
    
    
    Vice Chairman and Chief Executive Officer and DirectorJoseph J. Lodovic, IV
    
    
    43
    
    
    PresidentGerald E. Grilly
    
    
    57
    
    
    Executive Vice President and Chief Operating OfficerAnthony F. Tierno
    
    
    59
    
    
    Senior Vice President of OperationsRonald A. Mayo
    
    
    43
    
    
    Vice President and Chief Financial OfficerJames L. McDougald
    
    
    51
    
    
    TreasurerMichael J. Koren
    
    
    37
    
    
    Vice President and ControllerSteven M. Barkmeier
    
    
    43
    
    
    Vice President TaxEric J. Grilly
    
    
    33
    
    
    President, MediaNews Group InteractivePatricia Robinson
    
    
    62
    
    
    SecretaryJean L. Scudder
    
    
    50
    
    
    DirectorHowell E. Begle, Jr.
    
    
    60
    
    
    Director
 Each director is elected annually and serves until the next annual meeting
of shareholders or until his/her successor is duly elected and qualified. Our
directors are not compensated for their service as directors. They do,
however, receive reimbursement of expenses incurred from the attendance at
Board of Directors meetings. Please see Item 13: Certain Relationships and
Related Transactions for a description of consulting payments made to Mr.
Scudder. Our executive officers are appointed by and serve at the pleasure of
the Board of Directors. Business Experience Richard B. Scudderhas served as Chairman of the Board and a Director of
MediaNews since 1985. William Dean Singletonhas served as Vice Chairman and Chief Executive
Officer and a Director of MediaNews since 1985. He is also the Publisher of
The Denver Posteffective February 2001 and the Publisher of The Salt Lake
Tribuneeffective August 2002. Joseph J. Lodovic, IV, has served as President of MediaNews since February
2001. Prior thereto, he served as Executive Vice President and Chief Financial
Officer from 1993 to February 2001. Mr. Lodovic has been with MediaNews since
1987. Gerald E. Grillyhas served as Executive Vice President and Chief
Operating Officer of MediaNews since February 2001. Prior thereto he served as
President, Publisher and Chief Executive Officer of The Denver Post Corporation
from November 1998 to February 2001. Mr. Gerald Grilly was employed by
McClatchy Company from 1979 to October 1998, most recently as President of
McClatchy Companys The Newspaper Network from 1993 to October 1998. Anthony F. Tiernohas served as Senior Vice President of Operations since
February 2001. Prior thereto, he served as Executive Vice President and Chief
Operating Officer of MediaNews from 1993 to February 2001. Mr. Tierno has been
with MediaNews since its inception in 1985. Ronald A. Mayohas served as Vice President and Chief Financial Officer
since February 2001. Prior thereto, he served as Vice President Finance and
Controller from September 1994 to February 2001. James L. McDougaldhas served as Treasurer since September 1994. Prior
thereto, he was Controller for MediaNews from 1988 to 1994. Michael J. Korenhas served as Vice President and Controller since July
2001. From 1991 to 2001, Mr. Koren was employed by Ernst & Young LLP, most
recently as a Senior Manager. 35




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##### Table of Contents



Steven M. Barkmeierhas served as Vice President Tax since July 2004.
Prior thereto, he served as Director of Tax from November 1995 to June 2004. Eric J. Grillyhas served as President of MediaNews Group Interactive
since October 2002. Prior thereto, he served as Vice President of MediaNews
Group Interactive from October 2000 to October 2002. From May 1999 to October
2000, Mr. Eric Grilly was Vice President of Interactive Media of The Denver
Post Corporation and from June 1998 to May 1999, Mr. Eric Grilly was the Vice
President of Sales at Nando Media, the Interactive Media division of McClatchy
Newspapers. Mr. Eric Grilly is the son of Mr. Gerald E. Grilly. Patricia Robinsonhas served as Secretary of MediaNews since 1986. Ms.
Robinson is the sister of Mr. William Dean Singleton. Jean L. Scudderhas served as a Director of MediaNews since July 1998.
Ms. Scudder is the daughter of Mr. Richard B. Scudder. Howell E. Begle, Jr.has served as a Director of MediaNews since November
1996. Mr. Begle is Of Counsel to Hughes Hubbard & Reed LLP, which law firm
is counsel of MediaNews and its affiliates. Audit Committee Financial Expert We are not a listed issuer as defined in Rule 10A-3 under the Exchange Act
and therefore are not required to have an audit committee comprised of
independent directors; our board of directors acts as our audit committee.
Additionally, we do not have an audit committee financial expert, as that term
is defined by Item 401(h) of Regulation S-K. Code of Ethics We have adopted a code of ethics that applies to all employees and
officers of MediaNews. You may obtain a copy of our code of ethics, without
charge, by request directed to Ronald A. Mayo, at MediaNews Group, Inc., 1560
Broadway, Suite 2100, Denver, CO 80202, (303) 563-6464. 
 Item 11: Executive Compensation The following table sets forth the cash compensation paid or payable to
Mr. Singleton and each of the other four most highly compensated executive
officers whose direct or allocated cash compensation exceeded $100,000 for
services rendered to MediaNews in fiscal year 2004. We do not have long-term
compensation or stock option plans for our executives or employees. However,
during fiscal year 2003, we adopted the non-qualified MediaNews Group
Supplemental Executive Retirement Plan, or the 2003 Plan, which does not
qualify as a long-term incentive plan as defined in Instruction 7 (iii) to Item
402(a)(3) of Regulation S-K. This plan has been offered to certain of our
eligible corporate executives. The 2003 Plan allows participants to defer a
portion of their compensation, including bonuses, if any, on a pre-tax basis.
There is no company match on these deferrals; however, the deferrals earn a
return based on notional investment elections made by the individual
participants. In addition, we may at our discretion, elect to make
contributions to the participants accounts based on a comparison of our actual
profits to budgeted profits during each fiscal year. Any such contribution is
subject to vesting, which is generally ten years from the date of participation
in the plan. In addition to the 2003 Plan, in fiscal year 2004 we implemented
an executive retiree medical benefit plan. The retiree medical benefit plan
provides for full health care coverage during retirement for the participants
in the 2003 plan. There are minimum age and years of service criteria for
eligibility for benefits under this plan. We are currently evaluating
compensation of certain senior executives and expect to make changes to
increase their bonuses and to provide a long-term compensation plan for these
executives in fiscal year 2005. None of our executive officers have an
employment agreement with us except Messrs. Singleton and Lodovic. In
conjunction with performing the compensation evaluation, we expect to revise
the employment agreements of Messrs. Singleton and Lodovic described below. 36




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##### Table of Contents



Annual CompensationAll OtherName and Principal Position
    
    Fiscal Year
    
    Salary
    
    Bonus
    
    Compensation(a)William Dean Singleton
    
    
    2004
    
    
    $
    872,250
    
    
    $
    150,000
    
    
    $
    115,933Vice Chairman, Chief Executive Officer
    
    
    2003
    
    
    
    830,250
    
    
    
    200,000
    
    
    
    118,1682002
    
    
    
    810,000
    
    
    
    150,000
    
    
    
    41,302Joseph J. Lodovic, IV
    
    
    2004
    
    
    $
    574,950
    
    
    $
    150,000
    
    
    $
    47,140President
    
    
    2003
    
    
    
    547,350
    
    
    
    200,000
    
    
    
    64,2282002
    
    
    
    534,000
    
    
    
    150,000
    
    
    
    4,900Gerald E. Grilly
    
    
    2004
    
    
    $
    538,050
    
    
    $
    113,750
    
    
    $
    15,398Executive Vice President &
    
    
    2003
    
    
    
    512,500
    
    
    
    175,000
    
    
    
    53,119Chief Operating Officer
    
    
    2002
    
    
    
    500,000
    
    
    
    132,500
    
    
    
    1,497Anthony F. Tierno
    
    
    2004
    
    
    $
    322,875
    
    
    $
    61,250
    
    
    $
    19,164Senior Vice President of Operations
    
    
    2003
    
    
    
    307,500
    
    
    
    42,500
    
    
    
    29,5172002
    
    
    
    300,000
    
    
    
    20,000
    
    
    
    29,971Eric J. Grilly
    
    
    2004
    
    
    $
    206,500
    
    
    $
    83,500
    
    
    $
    10,213President, MediaNews Group Interactive
    
    
    2003
    
    
    
    187,500
    
    
    
    75,000
    
    
    
    17,8422002
    
    
    
    175,000
    
    
    
    27,500
    
    
    
    388
   (a)
    
    Included in All Other Compensation are amounts earned under the
deferred compensation plans described above. Employment and Other Agreements Under the terms of Mr. Singletons Employment Agreement, which was amended
and renewed effective March 15, 2000, Mr. Singleton is currently entitled to
receive cash compensation at an annual rate of not less than $939,000 at July
1, 2004, subject to annual increase of not less than 5% by the Board of
Directors. In addition, Mr. Singleton is entitled to receive a bonus of up to
$200,000 for each fiscal year based on a comparison of our actual profits to
budgeted profits during such fiscal year. Other discretionary bonuses may be
paid which are not part of his Employment Agreement, if approved by the Board
of Directors. Mr. Singletons employment agreement expires on December 31,
2009, but will be automatically renewed for successive one-year terms unless
either party gives notice terminating the Employment Agreement at least 120
days prior to the expiration of the existing term. Mr. Singletons Employment
Agreement contains a five-year non-compete covenant for all geographical areas
in which newspapers are owned or circulated by us or our subsidiaries in
material quantities (currently or in the future). From 1996 through 2002,
MediaNews advanced a total of $1.5 million to the Singleton Irrevocable Trust
(see Item 12: Security Ownership of Certain Beneficial Owners and Management)
to fund premiums on cash surrender life insurance policies covering Mr.
Singleton and his wife. The advances are recorded in our consolidated balance
sheet as a component of other long-term assets. Advances will be repaid when
the policy is surrendered or earlier at Mr. Singletons option. No interest is
charged to Mr. Singleton on these advances. No funding by MediaNews of this
insurance coverage has occurred subsequent to July 2002. The cash surrender
value life insurance policies were originally purchased in order to mitigate
the impact of estate taxes that may be due on MediaNews stock held in the
Singleton Revocable Trust as a result of the death of Mr. Singleton and his
wife and the resulting need for us to repurchase such shares to provide
liquidity in the Singleton Revocable Trust. Mr. Singleton and MediaNews will
continue to evaluate the need for this insurance coverage as a result of recent
changes in estate tax laws. Mr. Lodovics Employment Agreement with us was entered into effective
March 15, 2000. At July 1, 2004, Mr. Lodovic was entitled to receive cash
compensation at an annual rate of not less than $624,000, subject to annual
increase of not less than 5% by the Board of Directors. In addition, Mr.
Lodovic is also entitled to receive a bonus of up to $200,000 for each fiscal
year based on a comparison of our actual profits to budgeted profits during
such year. Other discretionary bonuses may also be paid which are not part of
his employment agreement, if approved by the Board of Directors. Mr. Lodovics
employment agreement expires on December 31, 2009, but will be
automatically renewed for successive one-year terms unless either party gives
notice terminating the Employment Agreement at least 120 days prior to the
expiration of the existing term. Mr. Lodovics Employment Agreement entitles
him an appropriate opportunity to participate in any stock options, stock ownership or similar plan, which
we may adopt in the future for our executives. Mr. Lodovics
Employment Agreement contains a five-year non-compete covenant for all
geographical areas in which newspapers are owned or circulated by us or our
subsidiaries in material quantities (currently or in the future). It also
entitles Mr. Lodovic, upon termination of his employment
following December 31, 2009, by mutual agreement, or as a result of
breach by the Company or certain other circumstances, to put to us at a price of 100% of the then fair
market value all shares of common 37




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##### Table of Contents



stock (or rights to acquire the same) which he owns. We also have a
call under Mr. Lodovics Employment Agreement to acquire,
and Mr. Lodovic has a right to put,
such shares, following
termination of his employment under other circumstances, at a price equal to a percentage of fair market value, which increases to 100% on December 31, 2009 (at June 30,
2004, Mr. Lodovic is entitled to 70% of the fair market value).  Performance of the put or the call
will be deferred if it causes a default under any debt existing at the time of
exercise. Performance of the put or call (if exercised before January 1, 2010)
will also be deferred if our leverage ratio, as defined, is above 3:1.
Performance of the put would be deferred as of June 30, 2004 based on our
leverage ratio. Compensation Committee Interlocks and Insider Participation Decisions regarding annual compensation of executives other than Messrs.
Singleton and Lodovic are made by Mr. Singleton and Mr. Lodovic. In addition,
our Board of Directors is responsible for approving Mr. Singletons and Mr.
Lodovics Employment Agreements, including their compensation. The Board of
Directors of MediaNews does not have a compensation committee. 
 Item 12: Security Ownership of Certain Beneficial Owners and Management The authorized capital stock of MediaNews consists of 3,000,000 shares of
Class A common stock, $0.001 par value, 2,314,346 shares of which are issued of
which 2,298,346 are outstanding and 16,000 are held in treasury; we have not
declared or paid any cash dividends on our common stock in the past and we do
not currently have plans to pay common stock cash dividends. Our current long-term
debt agreements limit our ability to pay such dividends. We do not currently have any equity compensation plans, although an equity
compensation plan is currently being considered. The following table sets forth the number and percentage of shares of our
common stock currently issued and outstanding and beneficially owned by (i)
each person known to us to be the beneficial owner of more than 5.0% of any
class of our equity securities; (ii) each executive officer as defined in Item
402(a)(3) of Regulation S-K; and (iii) all directors and executive officers of
MediaNews as a group. Amount and Natureof Beneficial
    
    Percentage ofOwnership(a) Class
    
    Ownership ofA Common Stock
    
    Class A Common StockWilliam Dean Singleton(b),(c),(l),(m)
    
    
    254,858.9900
    
    
    
    11.09
    %Howell E. Begle, Jr.(b),(d),(l),(m)
    
    
    786,426.5100
    
    
    
    34.22
    %Patricia Robinson(b),(e),(l),(m)
    
    
    786,426.5100
    
    
    
    34.22
    %Joseph J. Lodovic, IV(b),(f)
    
    
    58,199.0000
    
    
    
    2.53
    %Jean L. Scudder(g),(k)
    
    
    384,065.1200
    
    
    
    16.71
    %Charles Scudder(h),(k)
    
    
    260,321.3750
    
    
    
    11.32
    %Elizabeth A. Difani(h),(i),(k)
    
    
    219,073.4575
    
    
    
    9.53
    %Carolyn Miller(h),(j),(k)
    
    
    177,825.5475
    
    
    
    7.74
    %All directors and executives as a group(n)
    
    
    2,140,770.0000
    
    
    
    93.14
    %
   (a)
    
    Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. Except as indicated by footnote, the
persons named in the tables above have sole voting and investment power
with respect to all shares of capital stock indicated as beneficially
owned by them.(b)
    
    The address of each such person is: c/o Mr. Howell E. Begle, Jr.,
Trustee, 1775 I Street N.W., Suite 600, Washington, D.C. 20006. Mr.
Begle is Of Counsel to Hughes Hubbard & Reed LLP, which law firm is
counsel to us.(c)
    
    These shares are held by a revocable trust for the benefit of the
children of Mr. Singleton (the Singleton Revocable Trust), for which
trust Mr. Begle and Mr. Singleton are trustees.(d)
    
    Includes all shares for which Mr. Begle has sole voting power under the
Singleton Family Voting Trust Agreement for MediaNews (the Singleton
Family Voting Trust Agreement for MediaNews) and shared investment power,
as a trustee for an irrevocable trust for the benefit of Mr. Singletons
children (the Singleton Irrevocable Trust). Also includes all shares of
common stock held by the Singleton Revocable Trust for which Mr. Begle is
a trustee.    38




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##### Table of Contents



Footnotes continued from previous page.   (e)
    
    These shares are held by the Singleton Irrevocable Trust for which Ms.
Robinson serves as a trustee and as to which she has shared investment
power. Ms. Robinson is Mr. Singletons sister.(f)
    
    Legal ownership of 50% of such shares is held by the Singleton Family
Voting Trust. Legal ownership of the remaining 50% of such shares is held
by the Scudder Family Voting Trust.(g)
    
    Includes 123,743.745 shares of common stock held by a trust for the
benefit of two of Ms. Scudders nephews, for which trust Ms. Scudder
serves as the sole trustee. Also includes 74,504 shares of common stock
held for the benefit of Ms. Scudders son, Benjamin Fulmer, and daughter,
Nina Fulmer, for which Ms. Scudder also serves as the sole trustee. Does
not include the shares held by Charles Scudder, Elizabeth Difani, as
trustee and/or custodian for certain of her children, or Carolyn Miller,
as trustee and/or custodian for certain of her minor children, with
respect to which Ms. Scudder has sole voting power pursuant to the Scudder
Family Voting Trust Agreement for MediaNews (the Scudder Family Voting
Trust Agreement). Charles Scudder, Elizabeth Difani and Carolyn Miller
are siblings of Ms. Scudder; all four are the children of Mr. Richard B.
Scudder.(h)
    
    Sole voting power with respect to these shares is held by Ms. Scudder
pursuant to the Scudder Family Voting Trust Agreement. See note (g)
above.(i)
    
    Ms. Difani holds 132,299.6658 shares as trustee and/or custodian for
certain of her children. Sole voting power with respect to all
219,073.4575 shares is held by Ms. Scudder pursuant to the Scudder Family
Voting Trust Agreement. See note (g) above.(j)
    
    Ms. Miller holds 118,550.365 shares as trustee for certain of her
children. Sole voting power with respect to all 177,825.5475 shares is
held by Ms. Scudder pursuant to the Scudder Family Voting Trust Agreement.
See note (g) above.(k)
    
    The address of each person is: c/o Jean L. Scudder, 193 Old Kents Hill
Road, Readfield, Maine 04355.(l)
    
    Indicates shared voting power.(m)
    
    Indicates shared investment power.(n)
    
    No directors or officers of MediaNews beneficially own any shares in
MediaNews except Mr. Singleton, Ms. Scudder, Mr. Begle, Ms. Robinson and
Mr. Lodovic. Scudder Family Voting Trust Agreement for MediaNews The children of Richard B. Scudder, which includes Charles A. Scudder,
Carolyn S. Miller, Elizabeth H. Difani and Jean L. Scudder, respectively, and
Joseph J. Lodovic, IV have entered into the Scudder Family Voting Trust
Agreement for MediaNews (the Scudder Family Voting Trust) in accordance with
which all shares of our common stock held by Charles Scudder, Carolyn Miller,
Elizabeth A. Difani, Jean L. Scudder and 50% of those shares held by Joseph J.
Lodovic, IV, were transferred to the Scudder Family Voting Trust for MediaNews.
Under the Scudder Family Voting Trust for MediaNews, Jean L. Scudder (the
Scudder Trustee) exercises all voting rights (subject to the consent of
shareholders holding 50% of the common stock held by the Scudder Family Voting
Trust for MediaNews on such matters as election of directors, mergers,
dissolution or reorganization of MediaNews, sale, exchange or pledge of all or
substantially all of the assets of MediaNews and acquisition or divestiture by
MediaNews of any newspaper venture) and substantially all other rights to which
such shareholders would otherwise be entitled until January 31, 2010, subject
to extension by written agreement of one or more beneficiaries of the Scudder
Family Voting Trust Agreement for MediaNews and the Scudder Trustee. Singleton Family Voting Trust Agreement for MediaNews The Singleton Irrevocable Trust, the Singleton Revocable Trust and Joseph
J. Lodovic, IV have entered into the Singleton Family Voting Trust Agreement
for MediaNews (the Singleton Family Voting Trust Agreement for MediaNews) in
accordance with which all shares of our common stock held by the Singleton
Irrevocable Trust and the remaining 50% of those shares held by Joseph J.
Lodovic, IV were transferred to the Singleton Family Voting Trust for MediaNews
and the shares of our common stock held by the Singleton Revocable Trust will
be transferred to the Singleton Family Voting Trust for MediaNews upon the
death or incapacity of Mr. Singleton. Under the Singleton Family Voting Trust
Agreement for MediaNews, the Singleton Trustees exercise all voting and
substantially all other rights to which such shareholders would otherwise be
entitled until January 31, 2010, subject to extension by written agreement of
one or more beneficiaries of the Singleton Family Voting Trust Agreement for
MediaNews. 39




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MediaNews Shareholders Agreement The Singleton Revocable Trust, the Singleton Irrevocable Trust, the
Singleton Family Voting Trust for MediaNews, the Scudder Family Voting Trust
for MediaNews, certain of the beneficiaries of such trusts, Joseph J. Lodovic,
IV and MediaNews entered into a Shareholders Agreement (the MediaNews
Shareholders Agreement) which provides, among other things, that action by
the Board of Directors with respect to such matters as the declaration of
dividends, redemption of capital stock, certain capital expenditures, mergers
or consolidation, and incurring indebtedness requires the unanimous approval of
all Directors then serving on the Board of Directors or approval by the holders
of 75% of the shares of common stock entitled to vote on such matters. The MediaNews Shareholders Agreement also provides that until the earlier
of (i) the date on which none of our 6 7/8% Senior Subordinated Notes due
October 1, 2013, and our 6 3/8% Senior Subordinated Notes due April 1, 2014 are
outstanding, or (ii) when MediaNews Leverage Ratio (as defined in the
indenture relating to our 6 3/8% Senior Subordinated Notes) is less than 3:1,
no shareholder may sell, transfer, pledge or otherwise encumber their shares or
their interest in their shares, of our common stock to any third party (except
certain permitted transfers to family members and other shareholders), without
the consent of all our shareholders or unless all shares of common stock then
outstanding are sold in a single transaction or a contemplated sale to a third
party. If any shareholder desires to sell or transfer his shares to us or the
other shareholders without an identified third party buyer, then such
shareholder may offer to sell his shares to us at fair market value determined
by appraisal, or if we decline to purchase such shares, such shareholder may
offer to sell his shares to the remaining shareholders at fair market value. 
 Item 13: Certain Relationships and Related Transactions Management Services We are a party to a consulting agreement, renewable annually, with Mr.
Scudder, which agreement requires us to make annual payments of $250,000. In
connection with his consulting services, we provide Mr. Scudder with the use of
a car, which is also used for personal purposes. The only cost to us for
providing this car during the last fiscal year and currently has been the cost
of insurance and minimal car maintenance. We also pay the salary for an
administrative assistant for Mr. Scudder. We are a party to a management agreement with CNP, which agreement
provides us with a management fee of 1.25% of CNPs revenues, thereby reducing
our total corporate overhead, the effect of which is a reduction of the impact
minority interest expense has on our consolidated statement of operations. MediaNews Services, Inc. (MediaNews Services), which was wholly owned by
Mr. Singleton, Jean L. Scudder, Charles Scudder, Elizabeth A. Difani and
Carolyn Miller until July 1, 2004, provided certain personnel and related
services to us at cost through December 31, 2003. After December 31, 2003,
these services are no longer provided by MediaNews Services and are now
performed directly by the Company. Effective July 1, 2003, MediaNews began consolidating MediaNews Services,
an affiliate of MediaNews, for financial reporting purposes. In December 2003,
MediaNews Services purchased a new airplane (to replace its existing airplane)
for $14.4 million and financed the purchase with a loan secured by the new
airplane. The new airplane and related loan were recorded on the financial
statements of MediaNews Services as of December 31, 2003. We have guaranteed
50% of this loan. The airplane that was replaced was sold to a third party in
March 2004 for a gain of $0.8 million. The airplane owned by MediaNews
Services is used by us and we reimburse MediaNews Services for the cost of
maintaining and operating the airplane. Effective July 1, 2004, ownership of
MediaNews Services was transferred to MediaNews. Other In August 2004, MediaNews purchased Mr. Gerald Grillys residence in
Colorado for $2.7 million (subject to adjustment to reflect the gross proceeds
received by MediaNews upon its resale of the house) in conjunction with his
relocation to Los Angeles, California. Mr. Grillys relocation was requested by
MediaNews. We are actively marketing the residence. 40




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MediaNews uses Hughes Hubbard & Reed LLP as one of its legal counsel. Mr.
Howell Begle, who is general counsel and a board member of MediaNews, is Of
Counsel to Hughes Hubbard & Reed LLP. 
 Item 14: Principal Accounting Fees and Services The following table presents fees incurred for services provided by Ernst
& Young LLP for fiscal years 2004 and 2003. All audit and non-audit services for which we engaged the independent
auditor to perform and were required to be pre-approved were pre-approved by
our board of directors, which acts as our audit committee. The board of
directors considers, among other things, the possible effect of the performance
of such services on the auditors independence in order to ensure that the
provision of such services does not impair the auditors independence. Years Ended June 30,2004
    
    2003(Dollars in thousands)Audit Fees(a)
    
    $
    617
    
    
    $
    469Audit-Related Fees(b)
    
    
    121
    
    
    
    125Tax Fees(c)
    
    
    5
    
    
    
    58Total
    
    $
    743
    
    
    $
    652
   (a)
    
    Fees for professional services incurred by the auditors to comply
with Generally Accepted Auditing Standards, reviews of the Companys
filings with the Securities Exchange Commission, and comfort letters.(b)
    
    Fees for professional services which principally include services
in connection with employee benefit plan audits, due diligence and
consultation related to mergers and acquisitions, internal control
reviews, attest services not required by statute or regulation, and
consultation concerning financial accounting and reporting standards.(c)
    
    Fees for professional services for tax compliance, tax advice and
tax planning. These services include assistance regarding federal and
state tax compliance, return preparation and tax audits. 41




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AVAILABLE INFORMATION MediaNews consummated exchange offers for its 6 7/8% Senior Subordinated
Notes due 2013 and its 6 3/8% Senior Subordinated Notes due 2014 in April 2004.
Because the exchange offers were registered under the Securities Act of 1933,
MediaNews became subject to the reporting requirements of the Securities
Exchange Act of 1934 upon effectiveness of the registration statements for the
exchange offer. Our duty to file reports with the Commission has been suspended
in respect of our fiscal year commencing July 1, 2004 pursuant to Section 15(d)
of the Securities Exchange Act of 1934. However, the indentures governing our
Senior Subordinated Notes require that we continue to file quarterly, annual
and, if applicable, current reports on Form 8-K, with the Commission on a
voluntary basis. You can inspect and copy our annual, quarterly and current reports and
other information filed with or furnished to the Commission at the public
reference facilities of the Commission in Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549. You can also obtain copies of these materials from
the public reference section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Please call the Commission at
1-800-SEC-0330 for further information on the public reference rooms. The
Commission also maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission (http://www.sec.gov). Copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K, and amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are
available free of charge through our Internet site www.medianewsgroup.com as
soon as reasonably practicable after we electronically file the material with,
or furnish it to, the Securities and Exchange Commission. 42




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PART IV 
 Item 15: Exhibits and Financial Statement Schedules (a) Financial Statements  1.
    
    The list of financial statements contained in the accompanying
Index to Consolidated Financial Statements and Schedule Covered by
Report of Independent Registered Public Accounting Firm is filed as a
part of this Report (see page 44).2.
    
    Financial Statement ScheduleThe financial statement schedule contained in the accompanying Index to
Consolidated Financial Statements and Schedule Covered by Report of
Independent Registered Public Accounting Firm is filed as a part of this
Report (see page 44).3.
    
    ExhibitsThe exhibits listed in the accompanying Index to exhibits are filed as a
part of this Annual Report (see page 79). 43




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MEDIANEWS GROUP, INC. Index to Consolidated Financial Statements and Schedule Covered by Report of Independent Registered Public Accounting Firm
 The following financial statements of the registrant and its subsidiaries
required to be included in Items 8 and 15(a)(1) are listed below: PageReport of Independent Registered Public Accounting Firm
    
    
    45Consolidated Balance Sheets as of June 30, 2004 and 2003
    
    
    46Consolidated Statements of Operations for the Fiscal Years Ended June30, 2004, 2003 and 2002
    
    
    48Consolidated Statements of Changes in Shareholders Equity for theFiscal Years Ended June 30, 2004, 2003 and 2002
    
    
    49Consolidated Statements of Cash Flows for the Fiscal Years Ended June30, 2004, 2003 and 2002
    
    
    50Notes to Consolidated Financial Statements
    
    
    51
 The following financial statement schedule of the registrant and its
subsidiaries required to be included in Item 15(a)(2) is listed below: Schedule II Valuation and Qualifying Accounts
    
    
    82
 All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and therefore have
been omitted or the information is presented in the consolidated financial
statements or related notes. 44




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors
MediaNews Group, Inc. We have audited the accompanying consolidated balance sheets of MediaNews
Group, Inc. and subsidiaries as of June 30, 2004 and 2003, and the related
consolidated statements of operations, statements of changes in shareholders
equity and cash flows for each of the three years in the period ended June 30,
2004. Our audits also included the financial statement schedule listed in the
accompanying index to consolidated financial statements. These financial
statements and schedule are the responsibility of the Companys management.
Our responsibility is to express an opinion on these financial statements and
schedule based on our audits. We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of MediaNews Group, Inc. and subsidiaries at June 30, 2004 and 2003, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended June 30, 2004, in conformity with U.S.
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein. /s/ ERNST & YOUNG LLPErnst & Young LLP
 September 24, 2004
Denver, Colorado 45




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MEDIANEWS GROUP, INC. & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30,2004
    
    2003(Dollars in thousands)ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    64,736
    
    
    $
    3,343Trade accounts receivable, less allowance for
doubtful accounts of $9,131 and $9,393, at June 30,
2004 and 2003, respectively
    
    
    77,877
    
    
    
    79,049Other receivables
    
    
    4,048
    
    
    
    6,101Inventories of newsprint and supplies
    
    
    16,526
    
    
    
    14,334Prepaid expenses and other assets
    
    
    8,280
    
    
    
    8,654Income taxes receivable
    
    
    
    
    
    
    468TOTAL CURRENT ASSETS
    
    
    171,467
    
    
    
    111,949PROPERTY, PLANT AND EQUIPMENTLand
    
    
    37,226
    
    
    
    39,954Buildings and improvements
    
    
    104,993
    
    
    
    111,180Machinery and equipment
    
    
    342,661
    
    
    
    312,817Construction in progress
    
    
    7,110
    
    
    
    2,940TOTAL PROPERTY, PLANT AND EQUIPMENT
    
    
    491,990
    
    
    
    466,891Less accumulated depreciation and amortization
    
    
    (184,614
    )
    
    
    (165,754
    )NET PROPERTY, PLANT AND EQUIPMENT
    
    
    307,376
    
    
    
    301,137OTHER ASSETSInvestment in unconsolidated JOAs
    
    
    179,846
    
    
    
    221,640Equity investments
    
    
    92,681
    
    
    
    93,343Subscriber accounts, less accumulated amortization
of $134,487 and $118,572 at June 30, 2004 and 2003,
respectively
    
    
    63,980
    
    
    
    79,320Excess of cost over fair value of net assets acquired
    
    
    418,600
    
    
    
    381,199Newspaper mastheads
    
    
    139,266
    
    
    
    145,781Covenants not to compete and other identifiable
intangible assets, less accumulated amortization of
$30,745 and $29,622 at June 30, 2004 and 2003,
respectively
    
    
    5,011
    
    
    
    4,547Other
    
    
    19,398
    
    
    
    14,132TOTAL OTHER ASSETS
    
    
    918,782
    
    
    
    939,962TOTAL ASSETS
    
    $
    1,397,625
    
    
    $
    1,353,048
 See notes to consolidated financial statements 46




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MEDIANEWS GROUP, INC. & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30,2004
    
    2003(Dollars in thousands, except share data)LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESTrade accounts payable
    
    $
    7,180
    
    
    $
    9,914Accrued employee compensation
    
    
    33,801
    
    
    
    29,807Accrued interest
    
    
    17,055
    
    
    
    14,762Other accrued liabilities
    
    
    14,775
    
    
    
    22,248Income taxes payable
    
    
    2,599
    
    
    
    Unearned income
    
    
    26,281
    
    
    
    24,975Current portion of long-term debt and obligations under capital leases
    
    
    5,278
    
    
    
    3,171TOTAL CURRENT LIABILITIES
    
    
    106,969
    
    
    
    104,877OBLIGATIONS UNDER CAPITAL LEASES
    
    
    6,638
    
    
    
    6,833LONG-TERM DEBT
    
    
    916,551
    
    
    
    894,550OTHER LIABILITIES
    
    
    26,450
    
    
    
    33,947DEFERRED INCOME TAXES, NET
    
    
    88,913
    
    
    
    77,845MINORITY INTEREST
    
    
    165,084
    
    
    
    174,988SHAREHOLDERS EQUITYCommon stock, par value $0.001; 3,000,000 shares authorized:2,314,346 shares issued and 2,298,346 shares outstanding
    
    
    2
    
    
    
    2Additional paid-in capital
    
    
    3,631
    
    
    
    3,631Accumulated other comprehensive loss, net of taxes:Unrealized loss on hedging
    
    
    (2,089
    )
    
    
    (4,264
    )Minimum pension liability
    
    
    (17,887
    )
    
    
    (15,087
    )Retained earnings
    
    
    105,363
    
    
    
    77,726Common stock in treasury, at cost, 16,000 shares
    
    
    (2,000
    )
    
    
    (2,000
    )TOTAL SHAREHOLDERS EQUITY
    
    
    87,020
    
    
    
    60,008TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    1,397,625
    
    
    $
    1,353,048
 See notes to consolidated financial statements 47




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MEDIANEWS GROUP, INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended June 30,2004
    
    2003
    
    2002(Dollars in thousands, except share data)REVENUESAdvertising
    
    $
    563,496
    
    
    $
    556,016
    
    
    $
    535,687Circulation
    
    
    132,505
    
    
    
    137,445
    
    
    
    139,495Other
    
    
    57,828
    
    
    
    45,137
    
    
    
    35,948TOTAL REVENUES
    
    
    753,829
    
    
    
    738,598
    
    
    
    711,130INCOME FROM UNCONSOLIDATED JOAS
    
    
    22,207
    
    
    
    25,227
    
    
    
    8,770COSTS AND EXPENSESCost of sales
    
    
    234,784
    
    
    
    221,888
    
    
    
    220,082Selling, general and administrative
    
    
    366,636
    
    
    
    346,763
    
    
    
    324,364Depreciation and amortization
    
    
    40,742
    
    
    
    40,553
    
    
    
    47,545Interest expense
    
    
    57,036
    
    
    
    64,252
    
    
    
    75,302Other (income) expense, net
    
    
    17,365
    
    
    
    19,534
    
    
    
    10,941TOTAL COSTS AND EXPENSES
    
    
    716,563
    
    
    
    692,990
    
    
    
    678,234EQUITY INVESTMENT INCOME, NET
    
    
    9,485
    
    
    
    3,709
    
    
    
    435GAIN ON SALE OF NEWSPAPER PROPERTIES
    
    
    6,982
    
    
    
    27,399
    
    
    
    MINORITY INTEREST
    
    
    (32,237
    )
    
    
    (34,088
    )
    
    
    (32,218
    )INCOME BEFORE INCOME TAXES
    
    
    43,703
    
    
    
    67,855
    
    
    
    9,883INCOME TAX BENEFIT (EXPENSE)
    
    
    (16,066
    )
    
    
    (27,027
    )
    
    
    2,482NET INCOME
    
    $
    27,637
    
    
    $
    40,828
    
    
    $
    12,365NET INCOME PER COMMON SHARE:Net income per common share
    
    $
    12.02
    
    
    $
    17.76
    
    
    $
    5.38Weighted average number of shares outstanding
    
    
    2,298,346
    
    
    
    2,298,346
    
    
    
    2,298,346
 See notes to consolidated financial statements 48




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MEDIANEWS GROUP, INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY AccumulatedAdditional
    
    Other
    
    
    
    
    
    Common
    
    TotalCommon
    
    Paid-In
    
    Comprehensive
    
    Retained
    
    Stock in
    
    ShareholdersStock
    
    Capital
    
    Loss
    
    Earnings
    
    Treasury
    
    Equity(Dollars in thousands)BALANCE AT JUNE 30, 2001
    
    $
    2
    
    
    $
    3,631
    
    
    $
    (3,429
    )
    
    $
    24,533
    
    
    $
    (2,000
    )
    
    $
    22,737Comprehensive income:Unrealized loss on
hedging activities, net
of tax benefit of $2,695
    
    
    
    
    
    
    
    
    
    
    (3,280
    )
    
    
    
    
    
    
    
    
    
    
    (3,280
    )Unrealized loss on
hedging activities,
reclassified to
earnings, net of tax
benefit of $174
    
    
    
    
    
    
    
    
    
    
    228
    
    
    
    
    
    
    
    
    
    
    
    228Minimum pension
liability adjustment,
net of tax benefit of
$5,466
    
    
    
    
    
    
    
    
    
    
    (7,549
    )
    
    
    
    
    
    
    
    
    
    
    (7,549
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,365
    
    
    
    
    
    
    
    12,365Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,764BALANCE AT JUNE 30, 2002
    
    
    2
    
    
    
    3,631
    
    
    
    (14,030
    )
    
    
    36,898
    
    
    
    (2,000
    )
    
    
    24,501Comprehensive income:Unrealized gain on
hedging activities, net
of tax expense of $1,075
    
    
    
    
    
    
    
    
    
    
    1,548
    
    
    
    
    
    
    
    
    
    
    
    1,548Unrealized loss on
hedging activities,
reclassified to
earnings, net of tax
benefit of $348
    
    
    
    
    
    
    
    
    
    
    669
    
    
    
    
    
    
    
    
    
    
    
    669Minimum pension
liability adjustment,
net of tax benefit of
$5,600
    
    
    
    
    
    
    
    
    
    
    (7,538
    )
    
    
    
    
    
    
    
    
    
    
    (7,538
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,828
    
    
    
    
    
    
    
    40,828Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,507BALANCE AT JUNE 30, 2003
    
    
    2
    
    
    
    3,631
    
    
    
    (19,351
    )
    
    
    77,726
    
    
    
    (2,000
    )
    
    
    60,008Comprehensive income:Unrealized gain on
hedging activities, net
of tax expense of $194
    
    
    
    
    
    
    
    
    
    
    291
    
    
    
    
    
    
    
    
    
    
    
    291Unrealized loss on
hedging activities,
reclassified to
earnings, net of tax
benefit of $1,300
    
    
    
    
    
    
    
    
    
    
    1,884
    
    
    
    
    
    
    
    
    
    
    
    1,884Minimum pension liability
adjustment, net of tax
benefit of $1,867
    
    
    
    
    
    
    
    
    
    
    (2,800
    )
    
    
    
    
    
    
    
    
    
    
    (2,800
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,637
    
    
    
    
    
    
    
    27,637Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,012BALANCE AT JUNE 30, 2004
    
    $
    2
    
    
    $
    3,631
    
    
    $
    (19,976
    )
    
    $
    105,363
    
    
    $
    (2,000
    )
    
    $
    87,020
 See notes to consolidated financial statements 49




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MEDIANEWS GROUP, INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended June 30,2004
    
    2003
    
    2002(Dollars in thousands)CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    27,637
    
    
    $
    40,828
    
    
    $
    12,365Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation
    
    
    25,554
    
    
    
    23,771
    
    
    
    26,352Amortization
    
    
    19,584
    
    
    
    20,914
    
    
    
    25,446Loss on early extinguishment of debt
    
    
    9,292
    
    
    
    
    
    
    
    Gain, net of losses, on sale of newspaper assets
    
    
    (6,931
    )
    
    
    (28,620
    )
    
    
    (398
    )Impairment loss
    
    
    
    
    
    
    5,715
    
    
    
    Provision for losses on accounts receivable
    
    
    7,405
    
    
    
    9,632
    
    
    
    10,213Amortization of debt discount
    
    
    934
    
    
    
    1,231
    
    
    
    2,145Minority interest
    
    
    32,237
    
    
    
    34,088
    
    
    
    32,218Distributions paid to minority interest
    
    
    (36,176
    )
    
    
    (38,765
    )
    
    
    (43,406
    )Proportionate share of net income from unconsolidated JOAs
    
    
    (69,204
    )
    
    
    (68,638
    )
    
    
    (51,981
    )Distributions from unconsolidated JOAs
    
    
    75,204
    
    
    
    83,621
    
    
    
    58,449Equity investment income, net
    
    
    (9,485
    )
    
    
    (3,709
    )
    
    
    (435
    )Deferred income tax expense
    
    
    11,443
    
    
    
    25,362
    
    
    
    1,178Change in defined benefit plan assets, net of cash contributions
    
    
    1,082
    
    
    
    31
    
    
    
    1,172Change in estimated option repurchase price
    
    
    (3,491
    )
    
    
    5,993
    
    
    
    2,325Unrealized loss on hedging activities, reclassified to earnings
from accumulated other comprehensive loss
    
    
    3,184
    
    
    
    1,017
    
    
    
    402Unrealized (gain) loss on swaps
    
    
    2,968
    
    
    
    (1,158
    )
    
    
    (2,951
    )Change in operating assets and liabilities:Accounts receivable
    
    
    (6,446
    )
    
    
    (7,583
    )
    
    
    (4,161
    )Inventories
    
    
    (2,113
    )
    
    
    (3,665
    )
    
    
    4,349Prepaid expenses and other assets
    
    
    2,253
    
    
    
    2,910
    
    
    
    (433
    )Accounts payable and accrued liabilities
    
    
    (4,886
    )
    
    
    1,339
    
    
    
    (873
    )Unearned income
    
    
    1,341
    
    
    
    (401
    )
    
    
    587Change in other assets and liabilities, net
    
    
    (6,231
    )
    
    
    (1,219
    )
    
    
    72NET CASH FLOWS FROM OPERATING ACTIVITIES
    
    
    75,155
    
    
    
    102,694
    
    
    
    72,635CASH FLOWS FROM INVESTING ACTIVITIES:Investment in unconsolidated JOAs
    
    
    
    
    
    
    
    
    
    
    (12,416
    )Distributions from equity investments
    
    
    10,638
    
    
    
    4,360
    
    
    
    1,448Investments in equity investments
    
    
    (50
    )
    
    
    (1,592
    )
    
    
    (2,280
    )Proceeds from the sale of newspapers and other assets
    
    
    56,733
    
    
    
    1,314
    
    
    
    3,840Business acquisitions, net of cash acquired
    
    
    (50,072
    )
    
    
    (53,006
    )
    
    
    (3,277
    )Cash contributed by partners for business acquisitions
    
    
    
    
    
    
    24,178
    
    
    
    Capital expenditures
    
    
    (36,483
    )
    
    
    (20,669
    )
    
    
    (11,323
    )NET CASH FLOWS FROM INVESTING ACTIVITIES
    
    
    (19,234
    )
    
    
    (45,415
    )
    
    
    (24,008
    )CASH FLOWS FROM FINANCING ACTIVITIES:Issuance of long-term debt, net of issuance costs
    
    
    523,983
    
    
    
    113,143
    
    
    
    66,994Reduction of long-term debt and other liabilities
    
    
    (509,046
    )
    
    
    (169,108
    )
    
    
    (120,741
    )Repurchase
premiums and related costs associated with long-term debt
    
    
    (9,465
    )
    
    
    
    
    
    
    NET CASH FLOWS FROM FINANCING ACTIVITIES
    
    
    5,472
    
    
    
    (55,965
    )
    
    
    (53,747
    )INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    61,393
    
    
    
    1,314
    
    
    
    (5,120
    )CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    
    3,343
    
    
    
    2,029
    
    
    
    7,149CASH AND CASH EQUIVALENTS AT END OF YEAR
    
    $
    64,736
    
    
    $
    3,343
    
    
    $
    2,029
 See notes to consolidated financial statements 50




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MEDIANEWS GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1: Basis of Presentation MediaNews Group, Inc. (MediaNews or the Company), through its
subsidiaries, publishes daily and non-daily newspapers serving markets in eight
states. The Company also owns four radio stations and one television station;
the combined revenues of these non-newspaper operations comprise approximately
1.0% of the Companys consolidated revenue and are not considered significant
to the Companys operations. Note 2: Significant Accounting Policies and Other Matters Significant accounting policies for the Company involve its assessment of
the recoverability of its long-lived assets, including goodwill and other
intangible assets, which is based on such factors as estimated future cash
flows and current fair value estimates. The Companys accounting for pension
and retiree medical benefits requires the use of estimates concerning the work
force, interest rates, plan investment return, and involves the use of advice
from consulting actuaries. The Companys accounting for federal and state
income taxes is sensitive to interpretation of various laws and regulations and
assumptions on the realization of deferred tax assets. Use of Estimates The preparation of financial statements in accordance with generally
accepted accounting principles, at times, requires the use of estimates and
assumptions. The Company uses estimates, based on historical experience,
actuarial studies and other assumptions, as appropriate, to assess the carrying
values of its assets and liabilities and disclosure of contingent matters. The
Company re-evaluates its estimates on an ongoing basis. Actual results could
differ from these estimates. Principles of Consolidation All intercompany accounts have been eliminated. Reclassifications For comparability, certain prior year balances have been reclassified to
conform to current reporting classifications. Joint Operating Agencies A joint operating agency (JOA) performs the production, sales,
distribution and administrative functions for two or more newspapers in the
same market under the terms of a joint operating agreement. Editorial control
and news at each of the individual newspapers, which are a party to a joint
operating agreement, continue to be separate and outside of a JOA. The Company,
through its subsidiaries, York Newspapers, Inc., Charleston Publishing Company
(through May 7, 2004), Kearns-Tribune, LLC, and The Denver Post Corporation,
participates in JOAs in York, Pennsylvania, Charleston, West Virginia, Salt
Lake City, Utah, and Denver, Colorado, respectively. (See Note 3: Joint
Operating Agencies regarding the restructuring of the York and Charleston
JOAs). The editorial and related expenses of The Denver Post, The Salt Lake
Tribuneand The York Dispatch, are incurred by the Company outside the related
JOA. The Charleston JOA, on the other hand, accounted for and paid the
editorial expenses for both newspapers within the JOA. The Company controls the
York JOA prior and subsequent to the 2004 restructuring and, accordingly,
consolidates its results. The editorial costs associated with the York Daily
Record, the other newspaper in the York JOA, were not included in the Companys
results prior to May 1, 2004, since this newspaper was not owned by MediaNews.
However, under the restructured York JOA, the Company now owns the York Daily
Record.Therefore, subsequent to the restructuring, the York Daily Records
results are included with the Companys. The operating results from the Companys unconsolidated JOAs are reported
as a single net amount in the accompanying financial statements in the line
item Income from Unconsolidated JOAs. This line item includes: 51




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
    
    The Companys proportionate share of net income from JOAs,  
    
    The amortization of subscriber lists created by the original purchase
by the Company of the JOAs interests as the subscriber lists are
attributable to the Companys earnings in the JOAs, and  
    
    Editorial costs, miscellaneous revenue received outside of the JOA,
and other charges incurred by the Companys consolidated subsidiaries
directly attributable to the JOAs providing editorial content and news
for the Companys newspapers party to the JOAs. Investments in unconsolidated JOAs are included in the consolidated
balance sheet under the line item Investment in Unconsolidated JOAs, for the
JOAs the Company does not control (See Note 3: Joint Operating Agencies for
further discussion). Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. Trade Accounts Receivable Trade accounts receivable are generally from advertisers, commercial
printing customers, single copy newspaper outlets, newspaper subscribers and
independent newspaper delivery contractors. The Company extends unsecured
credit to most of its customers. Credit limits, setting and maintaining credit
standards and managing the overall quality of the credit portfolio is largely
decentralized (maintained and managed at the individual newspaper locations).
The Company maintains an allowance for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments. The
allowance for doubtful accounts is based on both the aging of accounts
receivable at period end and specific identification. Inventories Inventories, which largely consist of newsprint, are valued at the lower
of cost or market. Cost is generally determined using the first-in, first-out
method. Investments The Company has made the following strategic investments, which are
accounted for under the equity method (for those investments in which the
Company has less than 20% ownership, the Company accounts for these under the
equity method as the Company has seats on the board and, therefore, has
significant influence and ties to the entity beyond the Companys invested
capital):  
    
    PowerOne Media, LLC, a company that provides software tools and hosts
classified advertising for daily and weekly newspapers throughout the
United States. PowerOne Media, LLC merged with CareerSite (see below) in
September 2003. After the merger, the Companys ownership of the
combined entity was approximately 16.0%,  
    
    Employment Specialists, LLC, (operating as CareerSite) an Internet
based employment classified advertising application (merged with
PowerOne Media, LLC in September 2003),  
    
    CIPS Marketing Group, Inc., a total market coverage delivery service
in Los Angeles (50% ownership interest),
    
    Gallup Independent Company, publisher of the Gallup Independentin
Gallup, New Mexico (approximately 38% ownership interest),  
    
    Ponderay Newsprint Company, a minority investment in a newsprint mill
held by Kearns-Tribune, LLC. In addition to its investment, the Company
is guarantor for 6.0% of up to $125.0 million in long-term debt owed by
Ponderay and due on April 12, 2006 (6.0% ownership interest and one seat
on the board). The Company has no amounts related to the guarantee
recorded in its financial statements in accordance with FASB
Interpretation No. 45, 52




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Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others.The guarantee arose from Ponderays April 12,
2000 amended and restated credit agreement that replaced a previous
credit facility which had been used to finance the construction of its
newsprint mill. The guarantee could be triggered by Ponderays failure
to meet any or all of its bank covenants, at which time the Company
could be liable for its portion of the guarantee. At June 30, 2004, the
Companys share of the guarantee is $5.3 million. The debt is
collateralized by a deed of trust on Ponderays real property and a
mortgage on all of Ponderays other assets, and  
    
    Texas-New Mexico Newspapers Partnership, a minority investment in
this partnership, which was formed on March 3, 2003 (33.8% ownership
interest). See Note 5: Acquisitions, Dispositions and Other
Transactions for further discussion. These investments are included in the consolidated balance sheet as a
component of long-term assets under the caption Equity investments. See Note
14: Equity investments (Non-JOA) for further information. Property, Plant and Equipment Property, plant, and equipment are recorded at cost. Buildings and
machinery and equipment are depreciated using the straight-line method over the
expected useful lives of individual assets. Buildings and improvements are
depreciated over the lesser of 40 years or the term of the lease and machinery
and equipment is depreciated over 3 to 20 years. Goodwill and Other Intangible Assets The Company accounts for goodwill and other intangible assets under the
Financial Accounting Standards Board (FASB) Statement of Financial Accounting
Standards (SFAS) No. 142, Goodwill and Other Intangible Assets(SFAS No.
142). Under the standard, excess of cost over fair value of net assets
acquired (goodwill) and other indefinite life intangibles (primarily mastheads)
are not amortized, but instead are periodically reviewed for impairment. All
other intangibles with a finite useful life continue to be amortized over their
estimated useful lives. Subscriber accounts are amortized using the
straight-line method over periods ranging from 8 to 15 years with a weighted
average remaining life based on the date of acquisitions of approximately 8
years. Other finite identified intangibles are being amortized over periods
not exceeding 10 years. As a result of an indicator of impairment identified at the Companys
subsidiary, Alaska Broadcasting Company, during fiscal year 2003, the Company
tested the related carrying value of goodwill for impairment under SFAS No.
142, Goodwill and Other Intangible Assets. Based on the Companys evaluation,
all of the recorded goodwill was determined to be impaired. As a result, a
write down of $1.8 million was recorded in other (income) expense, net during
the fiscal year ended June 30, 2003. In addition, as required by SFAS No. 142,
the Company performed an annual impairment test for goodwill and mastheads as
of July 1, 2004. There was no impairment of intangible assets noted as a
result of this test. Another impairment test will be performed July 1, 2005,
unless unexpected events or circumstances arise that require the Company to
test for impairment sooner. Estimated amortization expense for the next five years is as follows at
June 30, 2004 (in thousands): 2005
    
    $
    15,8602006
    
    
    13,6902007
    
    
    10,8082008
    
    
    7,1882009
    
    
    4,075
 Long-Lived Assets FASB SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets(SFAS No. 144), addresses financial accounting and reporting for the
impairment or disposal of long-lived assets. The carrying value of long-lived
assets is reviewed annually. If at any time the facts or circumstances at any
of the Companys individual newspaper or other operations indicate the
impairment of long-lived asset values as a result of a continual decline in
performance or as a result of 53




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fundamental changes in a market, a determination
is made as to whether the carrying value of the long-lived assets exceeds
estimated realizable value. For purposes of this determination, estimated
realizable value is evaluated based on values placed on comparable assets,
generally based on a multiple of revenue and/or operating profit (revenues less
cost of sales and selling, general and administrative expenses); however, other
valuation methods may be used. As a result of an indicator of impairment
identified at one of the properties of the California Newspapers Partnership,
the Company determined that at June 30, 2003 the carrying value of an operating
facility exceeded estimated realizable value based on the expected proceeds
from the impending sale of the related assets. Accordingly, an impairment loss
of $3.9 million was recorded in other (income) expense, net for the year ended
June 30, 2003 to adjust the long-lived assets to the estimated realizable value
of $2.0 million. The long-lived asset was sold during fiscal year 2004 and the
amount for which it sold did not materially differ from the adjusted net book
value. Debt Discount Debt discount is amortized in a manner that results in a constant rate of
interest over the life of the related debt and is included as a component of
interest expense. Income Taxes The Company accounts for income taxes utilizing the liability method of
accounting for income taxes. Under the liability method, deferred income taxes
are recognized for the tax consequences of temporary differences by applying
enacted statutory tax rates applicable to differences between the financial
statement carrying amount and the tax basis of existing assets and liabilities. Advertising Costs The Company expenses all advertising costs as incurred. Advertising costs
included in the consolidated statement of operations for the fiscal years ended
June 30, 2004, 2003 and 2002, were approximately $1.2 million, $0.5 million and
$0.8 million, respectively. Revenue Recognition Advertising revenue is earned and recognized when advertisements are
published, inserted, aired or displayed and are net of provisions for estimated
rebates, credit and rate adjustments and discounts. Circulation revenue
includes single copy and home delivery subscription revenue. Single copy
revenue is earned and recognized based on the date the publication is delivered
to the single copy outlet, net of provisions for returns. Home delivery
subscription revenue net of discounts is earned and recognized when the
newspaper is delivered to the customer or sold to a home delivery independent
contractor. Amounts received in advance of an advertisement or newspaper
delivery are deferred and recorded on the balance sheet as a current liability
to be recognized into income when the revenue has been earned. Disclosures about Segments of an Enterprise and Related Information The Company conducts business in one reporting segment and determined its
reporting segment based on the individual operations that the chief operating
decision maker reviews for purposes of assessing performance and making
operating decisions. The individual operations have been aggregated into one
segment because management believes they have similar economic characteristics,
products, services, customers, production processes and distribution methods.
The Company believes that aggregating the operations into one segment helps
users understand the Companys performance and assess its prospects. The
Companys newspaper operations, individually and in the aggregate, generally
trend in the same direction because they are impacted by the same economic
trends. The newspapers operating performance are most affected by newsprint
prices and the health of the national economy, particularly conditions within
the retail, employment, real estate and automotive markets. While an individual
newspaper may perform better or worse than the Companys newspapers as a whole
due to specific conditions at that newspaper or within its local economy, such
variances generally do not significantly affect the overall operating
performance of the newspapers. 54




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Comprehensive Income Under
FASB SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities (SFAS No. 133), the Companys newsprint and interest rate swap
agreements on its variable rate debt were recorded at fair value and changes in
the value of such contracts, net of income taxes, were reported in
comprehensive income. As of June 30, 2004, the Company had no outstanding
newsprint or interest rate swap agreements; however, amounts related to
terminated newsprint swap agreements remain in comprehensive income due to the
Companys determination that the hedges became ineffective prior to the
expiration of the original term of the agreements. The amounts in accumulated
other comprehensive loss related to these ineffective hedges are being
amortized and charged to other (income) expense, net over the remainder of the
original terms of the agreements as the forecasted transactions originally
contemplated in the hedging agreements continue to be probable of occurring.
See Note 10: Hedging Activities for further discussion. Comprehensive income
for the Company also includes a minimum pension liability adjustment related to
one of the Companys pension plans and a pension plan at one of the Companys
unconsolidated JOAs. See Note 8: Employee Benefit Plans for further discussion.
For purposes of calculating income taxes related to comprehensive income, the
Company uses its combined statutory rate for federal and state income taxes. Dividends The Company has not paid a dividend on its common stock and does not
currently plan to pay cash dividends on its common stock. Employees Certain employees of the Companys newspapers are employed under
collective bargaining agreements. Recently Issued Accounting Standards In January 2003, the FASB issued Interpretation No. 46 Consolidation of
Variable Interest Entities(FIN No. 46). FIN No. 46 clarifies the
application of Accounting Research Bulletin No. 51, Consolidated Financial
Statements, to certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. In December 2003, the FASB
issued a revised FIN No. 46. Under the revision, for variable interest
entities that existed prior to December 31, 2003, the effective date for
non-public entities is the beginning of the first annual reporting period
beginning after December 15, 2004, which for the Company is July 1, 2005. The
Company does not believe that the revised FIN No. 46 will have a material
impact on its financial position or results of operations; however, the Company
is still in the process of evaluating the revised rules under FIN No. 46. In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity
(SFAS No. 150), which addresses how to classify and measure
certain financial instruments with characteristics of both liabilities (or
assets in some circumstances) and equity. SFAS No. 150s requirements apply to
issuers classification and measurement of freestanding financial instruments,
including those that comprise more than one option or forward contract. SFAS
No. 150, as it relates to non-controlling interests in limited-life
subsidiaries, has been deferred by the FASB for an indefinite period. The
Company will evaluate the impact of the provisions related to non-controlling
interests in limited-life subsidiaries if and when the provisions are
finalized. Adoption of the applicable provisions of SFAS No. 150 on July 1,
2003 did not impact the Companys financial position and results of operations. In December 2003, the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (the Act) was signed into law. The Act introduces a
prescription drug benefit under Medicare (Medicare Part D) as well as a federal
subsidy to sponsors of retiree health care benefit plans that provide a benefit
that is at least actuarially equivalent to Medicare Part D. Two of the
Companys subsidiaries and the corporate entity have postretirement benefit
plans which offer a prescription drug benefit and therefore under FASB SFAS No.
106, Employers Accounting for Postretirement Benefits Other Than Pensions
(SFAS No. 106),the plans accumulated postretirement benefit obligations
would be required to be remeasured as a result of the Act. However, on January
12, 2004, the FASB issued a FASB Staff Position on SFAS No. 106 (FSP-SFAS No.
106-1) which permitted sponsors to make a one-time election to defer
accounting for the effects of the Act and the disclosures related to the plans
required by FASB SFAS No. 132 (revised 2003), Employers Disclosures about
Pensions and Other Postretirement Benefits(see further discussion which
follows),until authoritative guidance on the accounting for the federal 55




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subsidy is issued or until certain other events that would require
remeasurement occur at which time accounting for the Acts effects on the plans
would be required. At that time, the Company elected to defer accounting for
the effects of the Act under FSP-SFAS No. 106-1. In May 2004, the FASB issued
FSP-SFAS No. 106-2, Accounting and Disclosure Requirements Related to the
Medicare Prescription Drug, Improvement and Modernization Act of 2003,which
supersedes FSP-SFAS No. 106-1, and provides authoritative guidance on the
accounting for the Act and is effective for the interim or annual period
beginning after June 15, 2004, which for the Company is July 1, 2005. In
accordance with FSP-SFAS No. 106-2, the Company has concluded that the Act is
not significant to the Companys postretirement benefit plans; therefore, the
effects of the Act shall be incorporated in the June 30, 2005 measurement of
plan obligations. In December 2003, the FASB issued revised SFAS No. 132, Employers
Disclosures about Pensions and Other Postretirement Benefits(SFAS No. 132).
The revised SFAS No. 132 requires additional disclosures about the assets,
obligations, cash flows and net periodic benefit cost of defined benefit
pension plans and other defined benefit postretirement plans. Adoption of the
provisions of revised SFAS No. 132 impacted disclosures only and will not
impact the Companys financial position or results of operations. See Note 8:
Employee Benefit Plans. Note 3: Joint Operating Agencies The Company through its 80%-owned subsidiary, The Denver Post Corporation,
owns the masthead of The Denver Postand a 50% interest in the Denver
Newspaper Agency (DNA or the Denver JOA), which publishes The Denver Post
and the Rocky Mountain News,under the terms of a JOA agreement.DNA is the
managing entity of the JOA agreement between The Denver Post Corporation and
E.W. Scripps Company (owner of the Rocky Mountain News). Under the terms of the
JOA agreement, DNA is responsible for performing all the business functions of
The Denver Postand the Rocky Mountain News,including advertising and
circulation sales, production and distribution. News and editorial costs
related to The Denver Postare incurred outside of the Denver JOA and are the
sole responsibility of the Company. Conversely, E.W. Scripps Company is solely
responsible for the news and editorial costs of the Rocky Mountain News.In
addition to the Companys proportionate share of income from DNA, the editorial
costs, miscellaneous revenues outside of the JOA, depreciation of editorial
assets owned outside of the JOA, and other direct costs of The Denver Postare
included in the line item Income from Unconsolidated JOAs. The Company, through its wholly-owned subsidiary, Kearns-Tribune, LLC,
owns the masthead of The Salt Lake Tribuneand a 50% ownership interest in the
Newspaper Agency Corporation (the Salt Lake City JOA). The Salt Lake City
JOA is the managing entity of the JOA agreement between Kearns-Tribune, LLC and
the Deseret News Publishing Company (owner of the Deseret Morning News). Under
the terms of this JOA agreement, the Salt Lake City JOA is responsible for
performing all the business functions of The Salt Lake Tribuneand the Deseret
Morning News,including advertising and circulation sales, production and
distribution; however, the Salt Lake City JOA
does not own any of the fixed assets used in its operations. Instead,
each partner owns the fixed assets used in the operations of the Salt Lake City
JOA as tenants in common, outside of the JOA agreement. Therefore, the related
depreciation expense is also recorded outside of the JOA. News and editorial
costs related to The Salt Lake Tribuneare incurred outside of the Salt Lake
City JOA and are the sole responsibility of Kearns-Tribune, LLC. Conversely,
Deseret News Publishing Company is solely responsible for the news and
editorial costs of the Deseret Morning News.While Kearns-Tribune, LLC owns
50% of the Salt Lake City JOA, net income of the Salt Lake City JOA is
distributed 58% to Kearns-Tribune, LLC and 42% to the Deseret News Publishing
Company principally because The Salt Lake Tribunehas greater circulation than
the Deseret Morning Newsand, therefore, is responsible for a greater portion
of the operating cash flows generated by the Salt Lake City JOA. The Company
records its proportionate share of the results of the Salt Lake City JOA along
with the operations of Kearns-Tribune, LLC, consisting principally of editorial
costs, miscellaneous revenues outside of the JOA, amortization of intangibles,
depreciation of fixed assets, and other direct costs of The Salt Lake Tribune,
in the line item Income from Unconsolidated JOAs. Prior to May 7, 2004, the Company, through its wholly-owned subsidiary,
Charleston Publishing Company, owned the masthead of the Charleston Daily Mail
and a 50% interest in Charleston Newspapers (the Charleston JOA), which
publishes the Charleston Gazette(morning) and Charleston Daily Mail(evening)
six days a week and the Sunday Gazette-Mail, under the terms of a JOA
agreement. The managerial responsibility for the news and editorial functions
are completely separate from the JOA; accordingly, the Company was responsible
for the news and editorial content of the Charleston Daily Mail. However,
related editorial expenses were incurred and paid within the Charleston JOA.
As a result, all editorial expenses of the three Charleston JOA publications
were included in the Companys proportionate share of income from Charleston
Newspapers, which is included in Income from Unconsolidated JOAs. Amortization
of intangibles and other direct costs associated with the JOA incurred by
Charleston Publishing Company were also included in Income from 56




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Unconsolidated JOAs. On May 7, 2004, the Company restructured its
ownership interest in the Charleston JOA. In exchange for $55.0 million in
cash (less a net adjustment of approximately $3.5 million for 50% of Charleston
Newspapers working capital, long-term employee benefit liabilities and
long-term debt) and a limited partnership interest in a newly formed entity
(Charleston Newspapers Holdings, L.P.), the Company contributed its general
partnership interest in Charleston Newspapers and the masthead of the
Charleston Daily Mailto Charleston Newspapers Holdings, L.P. In addition, in
conjunction with the restructuring, the Company agreed to continue to be
responsible for the news and editorial content of the Charleston Daily Mail.
Under its agreement with Charleston Newspapers Holdings, L.P., the Company will
be reimbursed for the cost of providing the news and editorial content of the
Charleston Daily Mailand will be paid a management fee. The Companys limited
partnership interest does not entitle the Company to any share of the profits
or losses of the limited partnership. As a result of the restructuring
transaction, the Company recorded a pre-tax gain of approximately $8.0 million
in its fourth quarter of fiscal year 2004 and wrote off $10.6 million of net
intangible assets. Prior to May 1, 2004, the Company, through its wholly-owned subsidiary,
York Newspapers, Inc. (YNI), owned the masthead of The York Dispatch, a daily
evening newspaper, as well as a 57.5% interest in The York Newspaper Company
(the York JOA). York Daily Record, Inc. (YDR) owned the remaining 42.5% in
the York JOA and the masthead of the York Daily Record. Under the terms of the
York JOA agreement, the York JOA was responsible for all newspaper publishing
operations, other than news and editorial, including production, sales,
distribution and administration, of The York Dispatch, the York Daily Record, a
daily morning newspaper, and the York Sunday News. Because YNI had the
controlling interest and was the controlling partner of the York JOA, the
operations of the JOA were consolidated with those of the Company, with a
minority interest reflected for YDRs interest in the York JOA. Prior to May
1, 2004, the operating results of the York JOA did not include the editorial
costs associated with the publication of the York Daily Recordsince the
Company did not own the newspaper and the costs were incurred outside of the
JOA. Effective April 30, 2004, the Company restructured its interest in the York
JOA through the exercise of its call option to acquire the remaining 42.5%
interest in The York Newspaper Company and the masthead of the York Daily
Recordfor approximately $38.3 million. As a result of the option exercise and
the restructuring of the York JOA, the Company became responsible for the news
and editorial content of the York Daily Recordand an affiliate of YDR became
responsible for providing the news and editorial content for The York Dispatch.
However, the Company still owns the masthead and all other tangible and
intangible assets of The York Dispatch.Under the restructured JOA, the
Company is entitled to all of the profits and losses of the York JOA and
reimburses the affiliate of the former partner for the cost of providing
editorial and news content in The York Dispatchplus a management fee of
$240,000 per year. The transaction was accounted for under the purchase method
of accounting. Approximately $4.6 million of the $38.3 million transaction
price was attributable to purchasing the remaining minority interest in The
York Newspaper Company, $5.3 million was attributable to identifiable
intangible assets ($3.2 million of which was related to the York Daily Record
masthead; the remainder was associated with subscriber and advertiser lists)
and $28.4 million was recorded as goodwill. The following tables present the summarized results for the fiscal years
ended June 30, 2004, 2003 and 2002 of the Companys unconsolidated JOAs, along
with related balance sheet data at June 30, 2004 and 2003, on a combined basis.
The Salt Lake City JOA data has been presented separately because, as of June
30, 2004, it is a significant investee of the Company as determined in
accordance with Rule 3-09 of Regulation S-X. The Salt Lake City JOA and Other
Unconsolidated JOA information (which includes the Denver JOA for all periods
presented and the Charleston JOA through May 7, 2004), is presented at 100%,
with the other partners share of income from the related JOAs subsequently
eliminated. The editorial costs, miscellaneous revenues received outside of
the JOA, depreciation, amortization, and other direct costs incurred outside of
the JOAs by our consolidated subsidiaries associated with The Salt Lake
Tribune, The Denver Post,and the Charleston Daily Mailare included in the
line Associated Revenues and Expenses. The 20% minority interest associated
with The Denver Posthas not been reflected in the following tables. 57




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Year Ended June 30, 2004Total IncomeOther
    
    Associated
    
    fromSalt Lake
    
    Unconsolidated
    
    Revenues and
    
    UnconsolidatedCity JOA
    
    JOAs
    
    Expenses
    
    JOAs(Dollars in thousands)Income
Statement Data:Total revenues
    
    $
    139,673
    
    
    $
    459,102
    
    
    $
    560Cost of sales
    
    
    31,650
    
    
    
    145,895
    
    
    
    32,911Selling, general and administrative
    
    
    53,482
    
    
    
    212,446
    
    
    
    10,001Depreciation and amortization
    
    
    
    
    
    
    21,630
    
    
    
    4,396Other
    
    
    214
    
    
    
    4,103
    
    
    
    249Total costs and expenses
    
    
    85,346
    
    
    
    384,074
    
    
    
    47,557Net income (loss)
    
    
    54,327
    
    
    
    75,028
    
    
    
    (46,997
    )Partners share of income from
unconsolidated JOAs
    
    
    (22,637
    )
    
    
    (37,514
    )
    
    
    Income from unconsolidated JOAs
    
    $
    31,690
    
    
    $
    37,514
    
    
    $
    (46,997
    )
    
    $
    22,207
 June 30, 2004
    
    June 30, 2003Other
    
    
    
    
    
    OtherSalt Lake
    
    Unconsolidated
    
    Salt Lake City
    
    UnconsolidatedCity JOA
    
    JOAs
    
    JOA
    
    JOAs(Dollars in thousands)Balance
Sheet Data:Current assets
    
    $
    18,021
    
    
    $
    67,602
    
    
    $
    15,060
    
    
    $
    85,047Non-current assets
    
    
    20,240
    
    
    
    175,452
    
    
    
    18,970
    
    
    
    194,489Current liabilities
    
    
    22,464
    
    
    
    42,710
    
    
    
    20,697
    
    
    
    47,900Non-current liabilities
    
    
    7,017
    
    
    
    13,677
    
    
    
    3,638
    
    
    
    22,950
 Year Ended June 30, 2003Total IncomeOther
    
    Associated
    
    fromSalt Lake
    
    Unconsolidated
    
    Revenues and
    
    UnconsolidatedCity JOA
    
    JOAs
    
    Expenses
    
    JOAs(Dollars in thousands)Income
Statement Data:Total revenues
    
    $
    128,636
    
    
    $
    458,068
    
    
    $
    690Cost of sales
    
    
    29,620
    
    
    
    151,926
    
    
    
    31,523Selling, general and administrative
    
    
    46,672
    
    
    
    207,914
    
    
    
    8,393Depreciation and amortization
    
    
    
    
    
    
    23,361
    
    
    
    4,132Other
    
    
    65
    
    
    
    196
    
    
    
    53Gain on sale of assets
    
    
    
    
    
    
    (1,715
    )
    
    
    Total costs and expenses
    
    
    76,357
    
    
    
    381,682
    
    
    
    44,101Net income (loss)
    
    
    52,279
    
    
    
    76,386
    
    
    
    (43,411
    )Partners share of income from
unconsolidated JOAs
    
    
    (21,834
    )
    
    
    (38,193
    )
    
    
    Income from unconsolidated JOAs
    
    $
    30,445
    
    
    $
    38,193
    
    
    $
    (43,411
    )
    
    $
    25,227
 58




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Year Ended June 30, 2002Total IncomeOther
    
    Associated
    
    fromSalt Lake
    
    Unconsolidated
    
    Revenues and
    
    UnconsolidatedCity JOA
    
    JOAs
    
    Expenses
    
    JOAs(Dollars in thousands)Income
Statement Data:Total revenues
    
    $
    127,743
    
    
    $
    447,358
    
    
    $
    974Cost of sales
    
    
    32,055
    
    
    
    169,144
    
    
    
    30,765Selling, general and administrative
    
    
    43,317
    
    
    
    196,536
    
    
    
    5,576Depreciation and amortization
    
    
    
    
    
    
    26,994
    
    
    
    4,253Other
    
    
    
    
    
    
    11,790
    
    
    
    3,591Total costs and expenses
    
    
    75,372
    
    
    
    404,464
    
    
    
    44,185Net income (loss)
    
    
    52,371
    
    
    
    42,894
    
    
    
    (43,211
    )Partners share of income from
unconsolidated JOAs
    
    
    (21,837
    )
    
    
    (21,447
    )
    
    
    Income from unconsolidated JOAs
    
    $
    30,534
    
    
    $
    21,447
    
    
    $
    (43,211
    )
    
    $
    8,770
 Note 4: Investment in California Newspapers Partnership On March 31, 1999, through its wholly-owned subsidiary, West Coast
MediaNews LLC, the Company formed the California Newspapers Partnership (CNP)
with Stephens Media Group (SMG), previously known as Donrey Newspapers LLC,
and The Sun Company of San Bernardino California (Gannett). MediaNews, SMG and
Gannetts interests in the California Newspapers Partnership are 54.23%, 26.28%
and 19.49%, respectively. The Company is the controlling partner and,
therefore, the operations of the partnership are consolidated with those of the
Company with minority interest reflected for SMGs and Gannetts interests in
the partnership. At the formation of CNP, the Company also contributed long-term debt with
a remaining balance of $6.6 million to the partnership. However, in accordance
with the partnership agreement, the Company remains liable for the contributed
debt. All principal and interest payments associated with this debt are
charged to the MediaNews capital account of CNP as a distribution.
Approximately $1.0 million, $2.1 million and $2.3 million of principal and
interest payments were made in fiscal years 2004, 2003 and 2002, respectively,
by CNP on behalf of the Company. The California Newspapers Partnership is governed by a management
committee. The management committee consists of seven members. MediaNews is
entitled to appoint four of the members on the management committee, SMG is
entitled to appoint two, and Gannett is entitled to appoint one. Decisions of
the management committee are by majority vote, except that unanimous votes are
required for certain actions, including asset transfers or sales, asset
acquisitions, incurrence of debt and certain material changes in the
partnership business. The California Newspapers Partnership agreement also contains transfer of
interests restrictions. None of the partners were able to transfer their
interests before January 1, 2004, and after that date, transfers may be made
only subject to the right of first offer of the remaining partners to effect
the purchase of the transferring partners interest. In addition, where no
partner exercises its right of first offer, any sale of a partners interest
must include the right for the remaining partners to tag-along and sell their
interests to the third-party buyer at the same price. After January 1, 2005,
MediaNews has the right to require the other partners to sell their interests
to any third party to which MediaNews sells its interest. SMG has a separate right to require CNP to purchase its interest in the
partnership at fair market value anytime after January 1, 2005. Upon
notification of the exercise of this right and obtaining a valuation of the
partnership interest, CNP has two years to complete the
purchase. The minority interest liability reflects the fair market value of the net
assets at the time they were contributed to the California Newspapers
Partnership by SMG and Gannett, plus the minority partners share of earnings,
net of distributions 59




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since inception. CNP made cash distributions to the
Company in the amount of $34.5 million, $35.3 million and $41.7 million in
fiscal years 2004, 2003 and 2002, respectively. Note 5: Acquisitions, Dispositions and Other Transactions Acquisitions Fiscal Year 2004 In May 2004, the Company restructured its interest in the York JOA and
acquired the masthead and the other identifiable intangible assets of the York
Daily Recordas discussed in Note 3: Joint Operating Agencies. In January 2004, the Company purchased two weekly newspapers; the Grunion
Gazetteand Downtown Gazette,both published in Long Beach, California for $9.0
million. The Company also owns and operates the Press-Telegram, a daily
newspaper published in Long Beach. The purchase was not material to the
Companys financial position or results of operations. Fiscal Year 2003 Effective January 31, 2003, CNP acquired substantially all of the
operating assets used in the publication of the Paradise Post,a newspaper
published three times weekly in Paradise, California, plus related publications
and a large commercial printing business. The purchase price of approximately
$13.0 million consisted of $11.75 million of cash and estimated transaction
costs, net of working capital, plus future payments under covenants not to
compete with a discounted value of approximately $1.2 million. Contributions
from the partners in CNP were used to fund the acquisition. The Companys cash
portion of the acquisition was approximately $6.4 million and was funded with
borrowings under the Companys bank credit facility. Approximately $7.2
million of the purchase price was attributable to tangible assets (primarily
fixed assets), $1.3 million was attributable to identifiable intangible assets
($0.1 million, subscriber lists; $1.2 million, covenants not to compete) and $4.5 million
was recorded as goodwill. Paradise is in close proximity to the Companys
newspaper operations in Chico, California. Effective October 1, 2002, CNP acquired substantially all of the operating
assets used in the publication of the Original Apartment Magazine, a free
distribution apartment rental magazine. The Original Apartment Magazineis
published every two weeks in three different zones: Los Angeles/San Fernando,
Orange County, and the Inland Empire and had monthly distribution of
approximately 296,000 copies at the date of acquisition. The purchase price
was $10.0 million, plus an additional earnout of up to $6.0 million dependent
on future operating performance. Contributions from the partners in CNP were
used to fund the acquisition. The Companys cash portion of the acquisition
was $5.4 million and was funded with borrowings under the Companys bank credit
facility. Approximately $0.3 million of the purchase price was attributable to
tangible assets (primarily fixed assets), $3.5 million was attributable to
identifiable intangible assets ($1.0 million, mastheads; $2.3 million,
subscriber lists; $0.2 million, covenants not to compete) and $6.2 million was
recorded as goodwill. The Original Apartment Magazineis operated in
conjunction with the Los Angeles Newspaper Group. Effective September 30,
2003, the seller earned $2.3 million of the potential earnout which was paid in
November 2003. The $2.3 million earnout payment made in fiscal year 2004 has
been recorded as an adjustment to goodwill. An earnout potential of $3.0
million remains at June 30, 2004 of which the Company believes $2.5 million
will be earned and paid out in fiscal year 2005. Effective October 1, 2002, CNP acquired substantially all of the operating
assets used in the publication of The Reporter, a morning daily newspaper and
Valu-Pack, a total market coverage product, both published in Vacaville,
California. At the date of purchase, the newspaper had daily and Sunday paid
circulation of approximately 18,000 and 20,000, respectively. The purchase
price of $30.9 million included $30.0 million of cash and estimated transaction
costs, net of working capital, plus future payments under a covenant not to
compete with a discounted value of $0.9 million. Contributions from the
partners in CNP were used to fund the acquisition. The Companys cash portion
of the acquisition was $16.3 million and was funded with borrowings under the
Companys bank credit facility. Approximately $3.5 million of the purchase
price was attributable to tangible assets (primarily fixed assets), $6.8
million was attributable to identifiable intangible assets ($0.8 million,
mastheads; $5.1 million, subscriber lists; $0.9 million, covenants not to
compete) and $20.6 million was recorded as 60




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goodwill. Vacaville is in close
proximity to the Companys newspaper operations in Vallejo and the Alameda
Newspapers Group, in California. Fiscal Year 2002 There were no significant acquisitions in fiscal year 2002. Dispositions Fiscal Year 2004 In May 2004, MediaNews restructured its interests in the Charleston JOA as
discussed in Note 3: Joint Operating Agencies. Fiscal Years 2003 and 2002 There were no dispositions in fiscal years 2003 and 2002. Other Transactions Fiscal Year 2004 The Companys subsidiary, Alaska Broadcasting Company (or ABC), owns the
license rights to KTVA, an Anchorage, Alaska affiliate of CBS. ABC participates,
and is the manager, in a Joint Sales Agreement (or JSA) with KTBY, an
affiliate of Fox Broadcasting, owned by Piedmont Television Holdings LLC (or
Piedmont). By the terms of the JSA and a shared services agreement, ABC
performs certain production, sales and administrative functions of both
stations. Responsibility for programming at the individual stations is separate
and remains with the respective licensees. In September 2003, the Company entered into an agreement to purchase the
KTBY license and all the operating assets of KTBY from Piedmont for $4.5
million and as of June 30, 2004 has paid $1.0 million of the purchase price
into an escrow account. The purchase of the KTBY license is subject to FCC
(Federal Communications Commission) approval. No FCC approval has been
received for the transaction, nor does it appear that approval will be obtained
prior to September 30, 2004 when the JSA and purchase agreements
becomes terminable by Piedmont. Upon
the termination of the purchase agreement, the $1.0 million in escrow will be
forfeited to Piedmont. Piedmont
has informed the Company that they do not intend to extend the JSA and
that they intend to take over KTBY upon termination of the purchase
agreement. The Company has the right to make an additional $250,000 escrow
payment to extend the JSA and purchase agreement to December 31, 2004. The
Company has elected not to make the additional escrow payment to extend the purchase agreement because it is unlikely
that FCC authorization for the transaction can be obtained during the three-month extension.
Because it is probable that the escrow deposit will be forfeited, it was
written-off along with $0.1 million of other prepaid acquisition
costs as of June 30, 2004. The impact of unwinding the JSA is not
expected to have a material impact on the carrying value of the assets and
liabilities of ABC; accordingly no adjustments have been made to these balances
in the June 30, 2004 financial statements. Fiscal Year 2003 Effective March 3, 2003, MediaNews and Gannett Co., Inc. (Gannett)
formed the Texas-New Mexico Newspapers Partnership. MediaNews contributed
substantially all the assets and operating liabilities of the Las Cruces
Sun-News, The Daily Times(Farmington), Carlsbad Current-Argus, Alamogordo
Daily News, and The Deming Highlight, as well as all the weekly and other
publications published by these daily newspapers, in exchange for a 33.8%
interest in the Texas-New Mexico Newspapers Partnership. Gannett contributed
the El Paso Times, located in El Paso, Texas, in exchange for its 66.2%
controlling partnership interest. As a result, effective March 3, 2003,
MediaNews no longer consolidates the operations of the entities it contributed
to the partnership and began accounting for its share of the operations of the
Texas-New Mexico Newspapers Partnership under the equity method of accounting.
The formation of the partnership was a non-monetary transaction. The Companys
contribution to the Texas-New Mexico Newspapers Partnership was treated as two
separate, but simultaneous events: (1) a sale, whereby for accounting purposes,
the Company sold to Gannett a 66.2% interest in its New Mexico properties,
resulting in the Company recording a non-monetary gain of approximately $27.4
million in 61




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fiscal year 2003 (pursuant to EITF 01-2, Interpretations of APB
Opinion No. 29), and (2) the acquisition of a 33.8% interest in the
partnership. Except for the non-monetary recognized gain, the formation of the
Texas-New Mexico Newspapers Partnership did not have a significant impact on
the Companys results. Fiscal Year 2002 There were no other significant transactions in fiscal year 2002. Note 6: Long-Term Debt Long-term debt consisted of the following: June 30,2004
    
    2003(Dollars in thousands)New Bank Credit Facility (Revolving
Portion)
    
    (I)
    
    $
    
    
    
    $
    New Bank Term Loan B
    
    (I)
    
    
    248,750
    
    
    
    Bank Term Loans (A and B)
    
    (II)
    
    
    
    
    
    
    247,000Bank Credit Facility (Revolving Portion)
    
    (III)
    
    
    
    
    
    
    129,900Various Notes, payable through 2013
    
    (IV)
    
    
    27,303
    
    
    
    15,6788.75% Senior Subordinated Notes, due
2009
    
    (V)
    
    
    
    
    
    
    300,1808.625% Senior Subordinated Notes, due
2011
    
    (VI)
    
    
    199,388
    
    
    
    199,3276.875% Senior Subordinated Notes, due
2013
    
    (VII)
    
    
    297,513
    
    
    
    6.375% Senior Subordinated Notes, due
2014
    
    (VIII)
    
    
    148,680
    
    
    
    York Newspaper Companys Debt
    
    (IX)
    
    
    
    
    
    
    5,455921,634
    
    
    
    897,540Less current portion of long-term debt
    
    
    
    
    
    
    (5,083
    )
    
    
    (2,990
    )$
    916,551
    
    
    $
    894,550
   I.
    
    On December 30, 2003, the Company refinanced its bank
credit facility. The new bank credit facility provides for
borrowings of up to $600.0 million, consisting of a $350.0
million revolving credit facility and a $250.0 million term
loan B facility (See Note 15: Subsequent Events regarding
the amendment and restatement of the December 30, 2003 Credit
Agreement which refinanced term loan B). The final maturity
of the revolving credit facility is December 30, 2009, and
the final maturity of the term loan B facility was December
30, 2010. Prior to the maturity date of the revolving
facility, borrowings under the revolving facility are
permitted to be borrowed, repaid and reborrowed without
premium or penalty (other than customary breakage costs).
Amounts repaid under the term loan B facility were not
available for reborrowing. The new bank credit facility is
guaranteed by the Companys subsidiaries (with certain
exceptions) and secured by first priority liens and security
interests in all of the capital stock (or other ownership
interests) of each of the Companys and the guarantors
subsidiaries (with certain exceptions) and its interest in the Texas-New
Mexico Partnership. The Company has agreed to pledge its
interest in the Denver JOA to secure the new bank credit
facility (subject to certain limitations). The new bank
credit facility contains a number of covenants that, among
other things, restrict the Companys ability and its
subsidiaries ability to dispose of assets, incur additional
indebtedness, pay dividends or make capital contributions,
create liens on assets, make investments, make acquisitions
and engage in mergers or consolidations. In addition, the new
bank credit facility requires compliance with certain
financial ratios, including a maximum consolidated debt to
consolidated operating cash flow ratio, a maximum
consolidated senior debt to consolidated operating cash flow
ratio and a minimum consolidated operating cash flow to
consolidated fixed charges ratio. At June 30, 2004, the
Company was in compliance with all such covenants.
Borrowings under the new bank credit facility bear interest
at rates based upon, at the Companys option, either 1) the
base rate (the higher of (a) the Federal Funds Rate plus 1/2
of 1% and (b) Bank of Americas prime rate) or 2) Eurodollar
rate plus a spread based on the Companys leverage ratio. On
the revolver portion of the new bank credit facility,
Eurodollar borrowing margins vary from 1.125% to 2.00% and
base 62




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rate borrowing margins vary from 0.125% to 1.00%. On the
term loan B facility, Eurodollar borrowing margins varied
from 1.75% to 2.00% and base rate borrowing margins varied from
0.75% to 1.00%. At June 30, 2004, borrowing margins on the
revolver portion of the new bank credit facility were set at
1.75% and 0.75% for the Eurodollar and base rate borrowings,
respectively; borrowing margins on the term loan B facility
were set at 2.00% and 1.00%, respectively, for the Eurodollar
and base rate borrowings. In addition to interest, the Company
pays an annual commitment fee of 0.25% to 0.375% on the unused
portion of the commitment based on the Companys leverage
ratio. The annual commitment fee is currently set at 0.375%.
The Company incurred debt issuance costs of $3.8 million
related to the $600.0 million new bank credit facility. These
debt issuance costs have been capitalized as a deferred charge,
and are being amortized on a straight-line basis over the term
of the new bank credit facility as a component of amortization
expense.II.
    
    On December 30, 2003, the Company refinanced its former
bank term loans A and B with its new bank credit facility
described in I. above. The following describes the
significant terms and conditions of term loans A and B
prior to the refinancing.Borrowings under the former bank credit facility bore interest
at rates based upon, at the Companys option, Eurodollar or
prime rates plus a spread based on the Companys leverage
ratio. Prime borrowing margins varied from 1.125% to 0.25% and
Eurodollar borrowing margins varied from 2.375% to 1.125%.III.
    
    On December 30, 2003, the Company refinanced its former
bank credit facility with its new bank credit facility
described in I. above. The following describes the
significant terms and conditions of the revolving portion of
the former bank credit facility prior to the refinancing.Interest on borrowings under the bank credit facility was based
upon, at the Companys option, Eurodollar or prime rates plus a
spread based on the Companys leverage ratio. Prime borrowing
margins varied from 1.125% to 0.25% and Eurodollar borrowing
margins varied from 2.375% to 1.125%. In addition to interest,
the Company paid an annual commitment fee of 0.5% to 0.25% on
the unused portion of the commitment based on the Companys
leverage ratio.IV.
    
    In connection with various acquisitions, the Companys
subsidiaries have issued notes payable to prior owners and
assumed certain debt obligations. The notes payable and
other debt obligations bear interest at rates ranging from
0.0% to 10%. The notes bearing interest at below market
rates have been discounted at rates ranging from 8.0% to
12.0%, which reflects the prevailing rate at the date of
acquisition. The majority of these notes and other debt
obligations are unsecured obligations of the Company.V.
    
    In the second quarter of fiscal year 2004, the Company
repurchased and redeemed all of its outstanding $300.0
million 8.75% Senior Subordinated Notes (or 8.75% Notes)
with the net proceeds from the sale of the $300.0 million,
6.875% Senior Subordinated Notes due 2013 (see VII) and other
available funds. The Company paid $9.5 million in premiums
and related costs associated with the redemption of the 8.75% Notes. These premiums, net of unamortized original
issue premiums, are included in other (income) expense,
net.VI.
    
    In March 1999, Garden State, the predecessor issuer of
MediaNews Group, Inc., issued $200.0 million of 8.625% Senior
Subordinated Notes due 2011, or 8.625% Notes. Interest
accruing on the 8.625% Notes is payable semi-annually, in
arrears on January 1 and July 1. On July 1, 2004, the
Company repurchased all of the outstanding borrowings under
the 8.625% Notes using the net proceeds of its 6.375% Notes,
together with cash on hand and borrowings under the new bank
credit facility. The Company paid $9.2 million in premiums
and related costs associated with the redemption of the 8.625% Notes
which will be charged to other (income) expense, net in
the first quarter of fiscal year 2005.VII.
    
    On November 25, 2003, the Company completed the sale of
$300.0 million of its 6.875% Senior Subordinated Notes due
2013 (or 6.875% Notes) in a private placement. The 6.875%
Notes issued in the private placement were subsequently
exchanged for Notes having identical terms through an
exchange offer registered with the Securities and Exchange
Commission. The Company applied the net proceeds of $291.5
million from the sale of the 6.875% Notes and other available
funds to repurchase all of its outstanding $300.0 million
8.75% Notes described in V. 63




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above. Proceeds from the sale of
the 6.875% Notes were reduced by an original issue discount
of $2.6 million and debt issuance costs of $6.0 million. The
Company has reduced the principal amount of the 6.875% Notes
by the amount of the original issue discount and is
amortizing the discount as a component of interest expense
using the effective interest method. The debt issuance costs
have been capitalized as a deferred charge, and are being
amortized on a straight-line basis over the term of the
6.875% Notes as a component of amortization expense. The
indebtedness evidenced by the 6.875% Notes is subordinated
and junior in right of payment to obligations under the new
bank credit facility and related term loans (on August 30,
2004, the amended and restated
credit facility, term loan B was refinanced with term loans
A and C  See Note 15: Subsequent Events). No principal
payments are required on the 6.875% Notes until October 1,
2013, at which time all outstanding principal and interest is
due and payable. Semi-annual interest payments are due and
payable on October 1 and April 1 of each year. The 6.875%
Notes are general unsecured obligations of the Company ranking
equal in right of payment with the existing 8.625% Notes (until
the July 1, 2004 repurchase) and the 6.375% Notes described in
VI and VIII.VIII.
    
    On January 26, 2004, the Company completed the sale of
$150.0 million of its 6.375% Senior Subordinated Notes due
2014 (or 6.375% Notes) in a private placement. The 6.375%
Notes issued in the private placement were subsequently
exchanged for Notes having identical terms through an
exchange offer registered with the Securities and Exchange
Commission. The Company ultimately used the proceeds of the
sale of $146.9 million, together with cash on hand and
borrowings under the new bank credit facility to repurchase
all of its outstanding $200.0 million 8.625% Notes on July 1,
2004. However, prior to the repurchase of the 8.625% Notes,
proceeds were used to pay down all amounts outstanding on the
revolver portion of the Companys bank credit facility.
Proceeds from the sale of the 6.375% Notes were reduced by an
original issue discount of $1.4 million and debt issuance
costs of $1.8 million. The principal amount of the 6.375%
Notes has been reduced by the amount of the original issuance
discount, which is being amortized as a component of interest
expense using the effective interest method. The debt
issuance costs have been capitalized as a deferred charge and
are being amortized on a straight-line basis over the term of
the 6.375% Notes as a component of amortization expense. The
indebtedness evidenced by the 6.375% Notes is subordinated
and junior in right of payment to obligations under the new
bank credit facility and related term loans (on August 30,
2004, the amended and restated credit facility, term loan B
was refinanced with term loans A and C  See Note 15:
Subsequent Events). No principal payments are required until
April 1, 2014, at which time all outstanding principal and
interest is due and payable. Semi-annual interest payments
are due and payable on January 1 and July 1 of each year.
The 6.375% Notes are general unsecured obligations of the
Company ranking equal in right of payment with the 8.625% Notes (until the July 1, 2004 repurchase) and the
6.875% Notes.IX.
    
    In conjunction with the Companys restructuring of the
York JOA and acquiring the 42.5% of the York JOA it did not
own, the Company paid in full the outstanding revolving
credit note and term bank loan, as well as the outstanding
promissory note of The York Newspaper Company. Maturities of long-term debt for the next five fiscal years and thereafter
beginning with the fiscal year ended June 30, 2005 are shown below (in
thousands). As ofJune 30, 20042005
    
    $
    5,0832006
    
    
    4,6762007
    
    
    4,7272008
    
    
    4,5232009
    
    
    4,376Thereafter
    
    
    898,249$
    921,634
 The above table does not reflect the August 30, 2004 amendment and
restatement of the December 30, 2003 Credit Agreement. The change in
maturities resulting from the August 30, 2004 amendment does not materially
affect the maturity schedule above (see Note 15: Subsequent Events). 64




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Interest paid during the fiscal years ended June 30, 2004, 2003, and 2002
was approximately $52.7 million, $64.8 million, and $75.6 million,
respectively. An immaterial amount of interest was capitalized during the
fiscal years 2004 and 2003, and no interest was capitalized during fiscal year
2002. Letters of credit have been issued in favor of an insurance company
providing workers compensation insurance coverage to the Company and its
subsidiaries totaling approximately $8.6 million as of June 30, 2004. The fair market value of the 8.625% Notes, 6.875% Notes and 6.375% Notes
at June 30, 2004 was approximately $208.6 million, $284.3 million and $135.8
million, respectively. The carrying value of the Companys bank debt, which
has interest rates tied to prime or the Eurodollar, approximates its fair
value. Management cannot practicably estimate the fair value of the remaining
long-term debt because of the lack of quoted market prices for these types of
securities and its inability to estimate the fair value without incurring the
excessive costs of obtaining an appraisal. The carrying amount represents its
original issue price net of remaining original issue discounts, if applicable. At times, the Company has entered into interest rate swap agreements to
reduce its exposure to the uncertainty of short-term interest rate fluctuations
associated with its outstanding bank debt. Most recently, the Company had
entered into swap agreements that swapped fixed-rate interest payments for
variable interest rate payments based on current pricing. The Company entered
into these swaps to mitigate the effects of a protracted and slow economic
recovery and to take advantage of the current low interest rates available
under a variable rate instrument. As of June 30, 2004, the Company has no
outstanding interest rate swap agreements. However, during fiscal years 2004,
2003, and 2002 net settlements of the interest rate swap agreements were recorded as
adjustments to interest expense. These fixed to variable interest rate swaps
did not qualify for hedge accounting, and therefore, changes in their fair
value were recognized in other (income) expense, net in the period of change.
As a result of marking these derivative instruments to market, a loss of $3.0
million and a gain of approximately $1.2 million and $3.0 million was
recognized in other (income) expense, net for the years ended June 30, 2004,
2003 and 2002, respectively. The net cash settlements of the Companys
interest rate swap agreements had the effect of decreasing interest expense by
$3.0 million and $2.6 million for the years ended June 30, 2004 and 2003, as
compared to the year ended June 30, 2002 when the Companys interest rate swap
agreements had the effect of increasing interest expense by $2.4 million. Note 7: Leases The California Newspapers Partnership leases assets under capital leases.
Assets under capital leases and related accumulated amortization are included
in property, plant and equipment in the accompanying consolidated balance
sheets at June 30, as follows: 2004
    
    2003(Dollars in thousands)Building and equipment
    
    $
    6,950
    
    
    $
    6,950Accumulated amortization
    
    
    (3,471
    )
    
    
    (3,237
    )Assets under capital leases, net
    
    $
    3,479
    
    
    $
    3,713
 Amortization on capital lease assets is included with depreciation expense
in the accompanying financial statements. 65




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The Company and its subsidiaries also lease certain facilities and
equipment under operating leases, some of which contain renewal or escalation
clauses. Rent expense was approximately $6.1 million, $5.2 million and $4.5
million for the fiscal years ended June 30, 2004, 2003, and 2002, respectively.
Contingent rentals are not significant. Future minimum payments on capital
and operating leases are as follows at June 30, 2004: Capital
    
    OperatingLeases
    
    Leases(Dollars in thousands)2005
    
    $
    937
    
    
    $
    5,6552006
    
    
    933
    
    
    
    4,4092007
    
    
    931
    
    
    
    3,6442008
    
    
    931
    
    
    
    3,0792009
    
    
    931
    
    
    
    2,355Thereafter
    
    
    9,309
    
    
    
    415Total minimum lease payments
    
    
    13,972
    
    
    $
    19,557Less amount representing interest
    
    
    (7,139
    )Present value of net future lease
payments
    
    $
    6,833
 On July 1, 2004, the Company entered into a significant operating lease
commitment related to the offices of The Salt Lake Tribune,for which the
future minimum lease payments are as follows: Fiscal years 2006 through 2009 
$0.3 million each year and thereafter  $6.5 million. These amounts are not
included in the above future minimum operating lease payments. Note 8: Employee Benefit Plans Pension and Post-Retirement Plans In conjunction with the fiscal year 1998 acquisitions of The Sunin
Lowell, Massachusetts and the Daily Newsin Los Angeles, California, the
Company assumed non-contributory defined benefit pension plans, which covered
substantially all the employees at the acquired newspapers. Shortly after the
acquisition of Daily News, the Company elected to freeze the plan assumed in
conjunction with that acquisition. Accordingly, all current service cost under
that plan has been terminated. Participants in the plan assumed in conjunction
with the acquisition of The Suncontinue to accrue benefits associated with
current services, based on years of service and estimated compensation prior to
retirement. In December 1997, the Company combined The Sunspension plan with
the frozen pension plan of its subsidiary, New England Newspapers, Inc. The Denver Postsponsors two non-contributory defined benefit pension
plans, which cover substantially all its current employees. Both plans provide
benefits based on employees years of service and compensation during the years
immediately preceding retirement. The Denver Postalso sponsors
post-retirement health care and life insurance plans that provide certain union
employees and their spouses with varying amounts of subsidized medical coverage
upon retirement and, in some instances, continued life insurance benefits until
age 65, if the employee retires prior to age 65. Due to the formation of DNA on
January 23, 2001, obligations related to the employees of The Denver Postwho
became employees of DNA were transferred to DNAs pension plans along with an
amount of net pension asset actuarially determined to fund the obligation. The
Denver Posteditorial employees, terminated vested employees and retired
employees will continue to be covered by the two non-contributory plans
sponsored by The Denver Postas discussed above. The transfer of obligations
and related assets occurred during fiscal years 2002 and 2001. The Companys funding policy for all plans is to make at least the minimum
annual contributions required by the Employee Retirement Income Security Act of
1974. Effective December 31, 2003, the New England Newspapers, Inc., Daily News
and one of The Denver Postplans were merged into one plan: the MediaNews Plan.
The Denver PostGuild (union) pension plan remains as a separate plan and a
nonqualified pension plan was also created as a result of the plan merger. 66




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In March 2003, the Company assumed obligations associated with a
post-retirement health care plan that provides certain former Kearns-Tribune,
LLC employees with subsidized medical coverage upon retirement in return for a
$1.6 million payment from the former owner of Kearns-Tribune, LLC. Effective July 1, 2003, the Company adopted an executive retiree medical
benefit plan, which provides for full health care coverage during the
retirement for the eligible participants (corporate officers). There are
minimum age and years of service criteria for eligibility for benefits under
this plan. The following tables provide a reconciliation of benefit obligations, plan
assets and funded status of the Companys pension and other defined benefit
plans, as of June 30, 2004 and 2003. The tables also provide the components of
net periodic pension cost associated with those plans for fiscal years ended
2004 and 2003. Pension Plans
    
    Other Benefits2004
    
    2003
    
    2004
    
    2003(Dollars in thousands)Change in Benefit ObligationBenefit Obligation at Beginning of Year
    
    $
    93,832
    
    
    $
    83,429
    
    
    $
    5,561
    
    
    $
    2,951Service Cost
    
    
    1,143
    
    
    
    947
    
    
    
    331
    
    
    
    Interest Cost
    
    
    5,688
    
    
    
    5,912
    
    
    
    326
    
    
    
    211Amendments
    
    
    64
    
    
    
    
    
    
    
    
    
    
    
    Actuarial Loss (Gain)
    
    
    3,335
    
    
    
    9,169
    
    
    
    (216
    )
    
    
    1,333Assumption of Kearns-Tribune Post-Retirement Health Plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,526Benefits Paid
    
    
    (5,874
    )
    
    
    (5,625
    )
    
    
    (507
    )
    
    
    (460
    )Benefit Obligation at End of Year
    
    $
    98,188
    
    
    $
    93,832
    
    
    $
    5,495
    
    
    $
    5,561Change in Plan AssetsFair Value of Plan Assets at Beginning of Year
    
    $
    77,944
    
    
    $
    81,755
    
    
    $
    
    
    
    $
    Actual Return on Plan Assets
    
    
    8,539
    
    
    
    1,754
    
    
    
    
    
    
    
    Company Contributions
    
    
    778
    
    
    
    60
    
    
    
    507
    
    
    
    460Benefits Paid
    
    
    (5,874
    )
    
    
    (5,625
    )
    
    
    (507
    )
    
    
    (460
    )Fair Value of Plan Assets at End of Year
    
    $
    81,387
    
    
    $
    77,944
    
    
    $
    
    
    
    $
    Reconciliation of Funded StatusFunded Status
    
    $
    (16,801
    )
    
    $
    (15,888
    )
    
    $
    (5,495
    )
    
    $
    (5,561
    )Unrecognized Net Loss
    
    
    37,674
    
    
    
    37,442
    
    
    
    1,117
    
    
    
    1,426Unrecognized Prior Service Cost
    
    
    4,376
    
    
    
    4,774
    
    
    
    
    
    
    
    (2
    )Net Prepaid (Accrued) Cost
    
    $
    25,249
    
    
    $
    26,328
    
    
    $
    (4,378
    )
    
    $
    (4,137
    )Assumptions as of June 30Discount Rate
    
    
    6.25
    %
    
    
    6.25
    %
    
    
    6.25
    %
    
    
    6.25
    %Expected Return on Plan Assets
    
    
    8.0
    %
    
    
    9.0
    %
    
    
    
    
    
    
    Rate of Compensation Increase
    
    
    3.0
    %
    
    
    3.0
    %
    
    
    
    
    
    
    Components of Net Periodic CostService Cost
    
    $
    1,143
    
    
    $
    947
    
    
    $
    331
    
    
    $
    Interest Cost
    
    
    5,688
    
    
    
    5,912
    
    
    
    326
    
    
    
    211Expected Return on Plan Assets
    
    
    (7,041
    )
    
    
    (7,734
    )
    
    
    
    
    
    
    Amortization of Deferral
    
    
    462
    
    
    
    458
    
    
    
    (2
    )
    
    
    (2
    )Recognized Net Actuarial Gain
    
    
    1,608
    
    
    
    508
    
    
    
    93
    
    
    
    Net Periodic Cost
    
    $
    1,860
    
    
    $
    91
    
    
    $
    748
    
    
    $
    209Amounts Recognized in the Consolidated Balance Sheets Consist of:Prepaid Benefit Cost
    
    $
    13,979
    
    
    $
    24,890
    
    
    $
    
    
    
    $
    Accrued Benefit Cost
    
    
    (16,356
    )
    
    
    (21,270
    )
    
    
    (4,378
    )
    
    
    (4,137
    )Intangible Asset
    
    
    659
    
    
    
    442
    
    
    
    
    
    
    
    Accumulated Other Comprehensive Loss(1)
    
    
    26,967
    
    
    
    22,266
    
    
    
    
    
    
    
    Net Prepaid (Accrued) Cost
    
    $
    25,249
    
    
    $
    26,328
    
    
    $
    (4,378
    )
    
    $
    (4,137
    )Separate Disclosure for Pension Plans with Accumulated Benefit
Obligation and Projected Benefit Obligation in Excess of Plan
AssetsProjected Benefit Obligation
    
    $
    70,733
    
    
    $
    55,002
    
    
    
    N/A
    
    
    
    N/AAccumulated Benefit Obligation
    
    $
    69,451
    
    
    $
    54,652
    
    
    
    N/A
    
    
    
    N/AFair Value of Plan Assets
    
    $
    53,094
    
    
    $
    38,302
    
    
    
    N/A
    
    
    
    N/A
   (1)
    
    The Companys share of minimum pension liability at DNA (which is
unconsolidated) is included as a component of accumulated other
comprehensive loss in the Companys consolidated balance sheet; however,
because the Company does not consolidate the related pension plan, the
obligation has been excluded from the table. Also, accumulated other
comprehensive loss as shown here differs from the accumulated other
comprehensive loss as reflected in the consolidated balance sheet and
consolidated statements of changes in shareholders equity as the
consolidated statements reflect the minimum pension liability net of tax. 67




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The
Companys estimates of payments to beneficiaries of its pension plans
and other benefits are as follows for each fiscal year ended June 30 (in
thousands): 2005
    
    $
    6,6002006
    
    
    6,6802007
    
    
    6,8002008
    
    
    6,9002009
    
    
    6,9802010  2014
    
    
    35,270
 The Companys pension plan allocations at June 30, 2004 and 2003 were as
follows: Plan AssetsTargetAllocations
    
    Years Ended June 30,2005
    
    2004
    
    2003Asset Category:Equity securities
    
    
    70.0
    %
    
    
    62.9
    %
    
    
    57.4
    %Debt securities
    
    
    20.0
    
    
    
    35.2
    
    
    
    40.0Other
    
    
    10.0
    
    
    
    1.9
    
    
    
    2.6Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 The Companys investment policy is to maximize the total rate of return on
plan assets to meet the long-term funding obligations of the plan. Plan assets
are invested using a combination of active management and passive investment
strategies. Risk is controlled through diversification among multiple asset
classes, managers, styles and securities. Risk is further controlled both at
the manager and asset level by assigning return targets and evaluating
performance against these targets. U.S. equity securities include common stocks
of large, medium, and small companies which are predominately U.S. based.
Fixed-income securities primarily include securities issued or guaranteed by
the U.S. government, mortgage-backed securities and corporate debt obligations. The assumptions used in determining the Companys pension and
postretirement benefit obligation can differ from the actual results. As a
result of these differences, as well as other external economic factors, the
assumptions used are periodically revised and updated. The differences between
actual and assumed experience, and the related changes in assumptions, give
rise to actuarial gains and losses in the preceding table, which are recognized
over the expected service period of active participants. The majority of the
current year differences are related to the expected versus actual return on
plan assets, which increased the minimum pension liability that is reflected in
other comprehensive income. The discount rate used to determine the Companys
future pension obligations is based upon an index of securities with various
maturities rated Aa or better as of the respective measurement dates. The
increase in compensation levels assumption is based on actual past experience
and near-term outlook. The expected long-term rate of return on plan assets is
based upon the weighted average expected rate of return and capital market
forecasts for each asset class employed. The Company expects to contribute approximately $2.0 million
to $3.0 million to its defined benefit pension plans in fiscal year 2005. Assumed health care cost trend rates can have a significant effect on the
amounts reported for the health care plans. A one-percentage-point change in
assumed health care cost trend rates would have the following effect: 1-Percentage
    
    1-PercentagePoint Increase
    
    Point DecreaseEffect on total of service and interest cost components
    
    $
    97,000
    
    
    $
    85,000Effect on postretirement benefit obligation
    
    $
    417,000
    
    
    $
    365,000
 The July 1, 2004 assumed trend rate for the increases in health care costs
for its post-retirement plans was 10% trending down over five years to an
ultimate rate of 5%. The Companys policy is to fund the cost of providing
postretirement health care and life insurance benefits when they are entitled
to be received. 68




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Deferred Compensation Plan The Company sponsors several deferred compensation plans, which are
offered to certain employees (principally corporate officers, newspaper
publishers and operational executives). The plans allow participants to defer a
portion of their compensation, including bonuses if any on a pre-tax basis.
Participants in one plan are eligible for a Company match based on their
deferrals into the plan, while participants of another plan are eligible for a
discretionary Company contribution award based on operating results. The
Company match and discretionary awards are subject to vesting, over a period of
ten years from the date of participation in the plans. No vesting occurs until
the participant has completed three or five full years in the plan (depending
on the specific plan), after which time the participant is 30% or 50% vested;
the residual vesting occurs evenly over the remaining period at 10% per year.
The unvested portion of the Company match is subject to early withdrawal
penalties. The compensation deferrals and Company match earn a return based on
notional investment elections made by the individual participants. The
discretionary Company contribution awards earn a return equal to the Companys
cost of borrowing under its revolving credit agreement, which it may use to
fund payments on the deferred compensation obligations. These deferred
compensation obligations are recorded in the Companys consolidated balance
sheets as a component of Other Liabilities at the vested value of the
deferred compensation, plus the applicable return on investment, and amounted
to $4.5 million and $3.4 million at June 30, 2004 and 2003, respectively. In
some cases, the Company has made investments in cash surrender value life
insurance policies, which may be used at the Companys discretion to fund its
deferred compensation liability. The Companys investments in cash surrender
value life insurance policies are recorded in the Companys consolidated
balance sheets as a component of Other Assets and amounted to $3.0 million
and $2.2 million at June 30, 2004 and 2003, respectively. Other Retirement Plans The Company and several of its newspaper properties participate in
retirement/savings plans, and in addition, contribute to several multi-employer
plans on behalf of certain union-represented employee groups. The majority of
the Companys full-time employees are covered by one of these plans. Total
expense for these plans in the fiscal years ended June 30, 2004, 2003, and
2002, was approximately $4.1 million, $3.6 million, and $2.4 million,
respectively. Note 9: Income Taxes The income tax provision (benefit) for each of the three years ended June
30, 2004, 2003 and 2002, consists of the following: Years Ended June 30,2004
    
    2003
    
    2002(Dollars in thousands)Current:State
    
    $
    579
    
    
    $
    553
    
    
    $
    1,295Federal
    
    
    4,044
    
    
    
    1,112
    
    
    
    (4,955
    )Deferred:State
    
    
    (143
    )
    
    
    7,854
    
    
    
    (5,726
    )Federal
    
    
    11,586
    
    
    
    17,508
    
    
    
    6,904Net provision (benefit)
    
    $
    16,066
    
    
    $
    27,027
    
    
    $
    (2,482
    )
 69




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A reconciliation between the actual income tax expense (benefit) for
financial statement purposes and income taxes computed by applying the
statutory Federal income tax rate to financial statement income before income
taxes is as follows: Years Ended June 30,2004
    
    2003
    
    2002Statutory federal income tax rate
    
    
    35
    %
    
    
    35
    %
    
    
    35
    %Effect of:State income tax net of federal benefit
    
    
    1
    
    
    
    8
    
    
    
    (11
    )Utilization of net operating losses
    
    
    
    
    
    
    
    
    
    
    (55
    )Book/tax basis difference associated
with acquisitions and non-deductible
acquisition costs
    
    
    (2
    )
    
    
    1
    
    
    
    7Minority interests
    
    
    
    
    
    
    1
    
    
    
    (4
    )Change in valuation allowance
    
    
    3
    
    
    
    (7
    )
    
    
    Other, net
    
    
    
    
    
    
    1
    
    
    
    3Financial statement effective tax rate
    
    
    37
    %
    
    
    39
    %
    
    
    (25
    )%
 Components of the long-term deferred tax assets and liabilities are as follows: June 30,2004
    
    2003(Dollars in thousands)Deferred tax assets:Net operating losses and other credits
    
    $
    22,891
    
    
    $
    29,876Deferred employee compensation
    
    
    4,175
    
    
    
    4,659Notes payable
    
    
    3,799
    
    
    
    7,227Hedging activities
    
    
    689
    
    
    
    2,340Option accrual
    
    
    3,776
    
    
    
    4,789Other
    
    
    3,437
    
    
    
    5,48738,767
    
    
    
    54,378Valuation allowance
    
    
    (2,478
    )
    
    
    (3,884
    )Deferred tax assets
    
    
    36,289
    
    
    
    50,494Deferred tax liabilities:Fixed assets
    
    
    19,856
    
    
    
    16,954Intangibles
    
    
    39,655
    
    
    
    27,939Partnership interests and equity investments
    
    
    65,691
    
    
    
    81,797Pension assets
    
    
    
    
    
    
    1,649Deferred tax liabilities
    
    
    125,202
    
    
    
    128,339Net deferred tax liabilities
    
    $
    88,913
    
    
    $
    77,845
 At June 30, 2004, for financial reporting purposes, the Company has
approximately $30.9 million of net operating loss carryforwards (NOLs) for
federal tax reporting purposes available to offset its future taxable income,
which expire in 2019 through 2022 and $4.6 million of alternative minimum tax
credit carryforwards. The Company also has approximately $101.8 million of
state NOLs and approximately $3.4 million of state tax credits available to
offset future state taxable income. The state NOLs expire in 2005 through
2019; the state tax credits expire beginning in 2005. The Company projects it will generate taxable income sufficient to utilize
substantially all of the net operating loss carryovers before they expire;
however, because of several uncertainties surrounding its projections, and the
resulting uncertainty as to whether all of the net operating loss carryovers
will be used before they expire, the Company has established a valuation
allowance at each period end based upon its estimate of net operating loss and
state tax credit carryovers that are more likely than not to expire unused. The Company made net state and federal income tax payments of
approximately $1.8 million, $0.6 million, and $0.7 million, during fiscal years
2004, 2003, and 2002, respectively. 70




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Note 10: Hedging Activities At times, the Company has entered into newsprint and interest rate swap
agreements. As of June 30, 2004, the Company had no outstanding newsprint or
interest rate swap agreements. The Company did have two newsprint swap agreements: one with Enron North
America Corp. (Enron) and the other with Mirant Americas Energy Marketing, LP
(Mirant). Both newsprint hedges were designated at contract inception as
cash flow hedges under SFAS No. 133 and recorded at fair value with changes in
the value of such contracts, net of income taxes, reported in comprehensive
income. The periodic net settlements made under the newsprint swap agreements
were reflected in operations in the period the newsprint was consumed. Both
newsprint swap agreements were subsequently determined to be ineffective hedges
when the swap counterparties became invalid due to bankruptcy and the hedges
were terminated prior to the original term of the agreements. The Company
accounted for the early termination of the swaps in accordance with SFAS No.
133, which required the Company to record a liability and a charge to
comprehensive income to reflect the fair value of the derivative instrument as
of the date prior to that which the hedge was deemed ineffective. Since a
liquid market for the swap agreements did not exist, the valuation of the swap
was based on a discounted cash flow model and projected future newsprint
prices. The valuation required significant judgment and was subject to
assumptions, most notably estimates of future newsprint prices. The original
term of the newsprint swap agreement with Enron expired in December 2009; the
swap was determined to be ineffective the date Enron filed bankruptcy (during
the Companys fiscal year 2002). The original term of the newsprint swap
agreement with Mirant expired in May 2005; the swap was determined to be
ineffective the date Mirant filed bankruptcy (during the Companys fiscal year
2004). The amounts in accumulated other comprehensive loss related to these
ineffective hedges are being amortized and charged to other (income) expense,
net over the remainder of the original terms of the swap agreements as the
forecasted transactions originally contemplated in the hedging arrangements
continued to be probable of occurring. The Enron newsprint swap is being
amortized on a straight-line basis. The Mirant newsprint swap was amortized
ratably based on the difference between the floating price (based on the
Resource Information Systems, Inc. RISI price index) and the fixed price of
$615.50 per metric ton using nominal metric tons of 6,250 per quarter. At June
30, 2004, no amounts remained in other comprehensive income related to the
Mirant newsprint swap. Approximately $3.2 million and $1.0 million was
reclassified from accumulated other comprehensive loss to earnings for the
years ended June 30, 2004 and 2003 related to these terminated swaps. The
Company did not record any liabilities associated with the termination of the
swaps, except as required by SFAS No. 133. See Note 11: Commitments and
Contingencies for further discussion regarding the settlement of a lawsuit with
Enron and a lawsuit filed by Mirant. See Note 6: Long-Term Debt for further discussion regarding the Companys
interest rate swaps. Note 11: Commitments and Contingencies Commitments The Company currently has a contract to purchase 48,000 metric tons a
year, at a variable price based on the RISI price index for 30 pound newsprint.
This contract expires in December 2009; however, the Company is currently
negotiating a new contract. The Company owns 80% and Media General, Inc. owns 20% of The Denver Post
Corporation. The Denver Post Shareholder Agreement provides Media General with
a put option and MediaNews with a call option, on Media Generals 20% interest
in The Denver Post Corporation. The Media General put option expired June 30,
2004. MediaNews call option can be exercised beginning July 1, 2004 and
expires June 30, 2005. The price of the call, if or when it is exercised, is
based on the appraised fair market value of The Denver Post Corporation, less
debt of The Denver Post Corporation. The Company is currently evaluating its
options with respect to its right to call Media Generals 20% interest in The
Denver Post Corporation. In fiscal year 1998, in exchange for $2.4 million, the Company granted an
option to a third party to purchase substantially all the assets used in the
publication of one of the Companys newspaper properties, which the third party
can exercise or put to the Company based on a predetermined formula. At June
30, 2004, the option repurchase price was valued at $11.4 million and is
recorded as a component of other long-term liabilities. Changes 71




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##### Table of Contents



in the estimated option repurchase price are recorded as a component of
other (income) expense, net. If the purchase option is put to the Company (the
put became exercisable on January 31, 2003 and expires in 2010), the option
repurchase price is due and payable in full. If the option were put to the
Company, the Company expects to fund the payment with available borrowings from
its bank credit facility. As a result, in accordance with SFAS No. 6,
Classification of Short-Term Obligations Expected to be Refinanced,the option
repurchase price remains classified in the Companys balance sheet as
long-term. As part of the employment agreement, one of the Companys employees has
the right, upon termination of his employment under certain circumstances, to
put all shares of any class of equity securities he owns to the Company, if the
shares have not been registered on a national or international securities
exchange. The Company also has the right to call all shares of any class of
equity securities this employee owns in the Company, if the employee is
terminated under certain circumstances. The price of the put and the call is
based on the fair market value of the common stock of MediaNews, excluding any
adjustment for minority interest at the time the put or call is exercised. The
price payable under the put is equal to a percentage of fair market value,
which increases up to 100% on December 31, 2009 (at June 30, 2004, the employee
is entitled to 70% of the fair market value). Performance of the put or the
call will be deferred if it causes a default under any debt existing at the
time of the exercise. Performance of the put or call (if exercised before
January 1, 2010) will also be deferred if our leverage ratio, as defined, is
above 3:1. Performance of the put would be deferred as of June 30, 2004 based
on the Companys leverage ratio. As of June 30, 2004, the employee owns 58,199
shares of MediaNews Class A Common Stock. The Company has entered into contractual commitments with regard to the
construction of a printing facility for the Salt Lake City JOA. At June 30,
2004, the Company is committed to approximately $32.9 million, for the new
printing facility, of which the Company expects to pay $29.7 million in fiscal
year 2005 and $3.2 million in fiscal year 2006. Contingencies Prior to and since the Companys acquisition of Kearns-Tribune, LLC
(Kearns Tribune) and The Salt Lake Tribunein January 2001, the Company has
been involved in various legal actions with Salt Lake Tribune Publishing
Company (SLTPC), the holder of an option (the Option Agreement) to acquire
the Tribune Assets (defined as all of the assets used, held for use or usable
in connection with the operation and publication of The Salt Lake Tribune).
Kearns-Tribune holds certain assets used in connection with the operation and
publication of The Salt Lake Tribune.As of the date of this report, the
Company continues to be involved in litigation with SLTPC, primarily concerning
the option to purchase the Tribune Assets, the option exercise price, and any
damages related to the option exercise. The following is a summary of the
ongoing Kearns Tribune litigation as of June 30, 2004: On May 31, 2002, the United States District Court for the District of Utah
(District Court) issued an Order for Summary Judgment ruling that SLTPC held
a valid and enforceable option to purchase the Tribune Assets owned by Kearns
Tribune. However, the District Court also ruled that one of the key components
of the Tribune Assets, stock in the Salt Lake City JOA, was subject to an
anti-alienation provision contained in a Joint Operating Agreement (JOA)
between Kearns Tribune and Deseret News Publishing Company (Deseret
Publishing). The anti-alienation provision precludes the sale, assignment or
transfer of the Salt Lake City JOA stock by either party to the JOA absent a
waiver or modification of the provision. Subsequent to the court ruling,
Deseret Publishing notified SLTPC that it would not waive or modify the
anti-alienation provision or consent to the sale or transfer of the Salt Lake
City JOA stock to SLTPC. The District Court certified for immediate appeal to
the United States Court of Appeals for the Tenth Circuit the question of
whether the anti-alienation provision contained in the Joint Operating
Agreement is enforceable, as the District Court held in its Summary Judgment
Order, or is instead void as against public policy. The United States Court of
Appeals for the Tenth Circuit affirmed the District Court ruling that the stock
of the Salt Lake City JOA could not be transferred without the consent of
Deseret Publishing. However, the Tenth Circuit remanded to the District Court
for further proceedings on the issue of whether the Tribune Assets other than
the stock of the Salt Lake City JOA could be sold and transferred to SLTPC and
remedies could be fashioned that addressed an exclusion of the Salt Lake City
JOA stock from the transfer of the Tribune Assets. Potential remedies
identified by the Tenth Circuit included: 1) an order of specific performance
transferring all the Tribune Assets that can be transferred without triggering
the share transfer restriction; 2) damages to compensate SLTPC for the Salt
Lake City JOA stock not being transferred; or 3) equitable relief if a damage
award would be insufficient to remedy the failure to transfer the Salt Lake
City JOA stock. In its opinion, the Tenth Circuit also 72




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##### Table of Contents



stated that the District Court could avoid equitable relief altogether and
simply award damages to SLTPC if it is found that Kearns Tribune is liable for
failing to perform under the Option Agreement. Subsequent to the Tenth Circuits ruling, SLTPC filed a motion for partial
summary judgment seeking a ruling that, at the Closing specified in the Option
Agreement, the Company is obligated under the Option Agreement to transfer all
Tribune Assets except for the Salt Lake City JOA stock. On June 25, 2003, the
District Court granted this motion. Based upon this ruling, the District Court
also reinstated claims by SLTPC against the Company and Deseret Publishing that
a 2001 amendment of the JOA interfered with SLTPCs rights under the Option
Agreement. Regarding SLTPCs exercise of the option, still reserved for trial
is the question of whether, in an event those Tribune Assets (excluding the
Salt Lake City JOA stock) are not transferred, SLTPC is entitled to an order
that the Company specifically perform under the Option Agreement and transfer
those Tribune Assets, or limited to a damages remedy. Also remaining for
decision at trial is the issue of what additional remedies SLTPC might be
entitled to if all Tribune Assets except for the Salt Lake City JOA stock are
transferred. A trial date was set for November 3, 2003, but was
vacated by the District Court in light of the dispute (discussed
below in the next paragraph) over the exercise price should SLTPC
acquire the Tribune Assets. There is no trial date currently set. Another issue in dispute is the exercise price should SLTPC acquire the
Tribune Assets. The terms of the Option Agreement specify an appraisal process
for determination of the fair market value of the Tribune Assets. In this
appraisal process, each party engaged an appraisal firm to value the Tribune
Assets at their fair market value. The Companys appraisal valued the Tribune
Assets at $380.0 million, whereas SLTPCs appraisal valued the Tribune Assets
at $218.0 million. Because the Companys and SLTPCs appraisals were more than
10% apart, the appraisers appointed by the Company and SLTPC were required to
jointly select a third appraiser. Under the terms of the Option Agreement, the
final option purchase price is based on the average of the third appraisal
valuation with the closer of the first two appraisals. On June 11, 2003, the
third appraiser issued its final report valuing the Tribune Assets at $331.0
million. Since the third appraisers valuation is closer to the Companys
appraisal, under the Option Agreement those two appraisals were averaged
together for an exercise price of $355.5 million for the Tribune Assets. After
the third appraisers final report was issued, SLTPC filed a lawsuit in the
District Court challenging the valuation performed by the third appraiser and
seeking to set aside the third appraisal and the $355.5 exercise price. On
August 28, 2003, the District Court ruled that
the appraisal process constituted an arbitration under the Federal Arbitration
Act (FAA) and that any challenge must therefore be made under the procedures
set forth in the FAA. The available grounds for challenging an arbitration
under the FAA include fraud, corruption, or bias on the part of the arbitrator,
the arbitrator exceeding his powers, or a result that was reached in manifest
disregard of controlling law. SLTPC has filed a motion seeking under these
FAA procedures to set aside the appraisal process and the $355.5 million
exercise price, which the District Court denied on October 2,
2003. The District Court also dismissed SLTPCs lawsuit seeking to set aside the
appraisal. SLTPC has appealed those rulings to the Tenth Circuit.
Subsequent to its rulings, the District Court set a date of
October 10, 2003 for the closing to occur. On October 9, 2003,
counsel for SLTPC sent a letter to counsel for MediaNews notifying the Company
that SLTPC would not pay the $355.5 million option exercise price, and raised
additional objections to the proposed closing documentation. Accordingly, no
closing occurred on October 10, 2003. MediaNews subsequently filed a summary
judgment motion on the grounds that the option expired, without being
exercised. The District Court denied that motion without prejudice,
pending the outcome of the Consolidated Tenth Circuit appeals as to
which oral argument will be heard on September 27, 2004. With
respect to the previously scheduled (and now vacated) November 3, 2003 trial, in
addition to the issues regarding the exercise of the option as discussed above,
SLTPCs pending claims against the Company and Kearns Tribune included claims
for damages for breach of contract and breach of contractual duties (in the
event some or all of the Tribune Assets are not transferred to SLTPC) and for
interference with contract (arising out of the amendment of the JOA in 2001).
The Company and Kearns Tribune had pending counterclaims against SLTPC, which
included claims for damages for breaches of contract and interference with
contract. Additionally, the Company and Kearns Tribune had pending counter
claims for declaratory judgment, but no damage claims against Deseret
Publishing. Deseret Publishing had claims against SLTPC for damages, and
claims that did not seek damages against the Company and Kearns Tribune as to
the meaning and enforceability of the Option, Management and Joint Operating
Agreements. As noted above, it is anticipated that if there are any claims,
for damages or otherwise, arising out of a Closing prior to trial, those were
to be included in the November 3, 2003 trial. The main action is
now stayed pending resolution of SLTPCs appeals (discussed
below) of various issues related to the appraisal process and the 73




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option exercise price. There is now effectively also a stay in the Companys declaratory judgment action pending
before the District Court, which seeks a ruling that the individuals who
control SLTPC do not have any rights as individuals (separate from their
corporate entity, SLTPC) to purchase or otherwise acquire the Tribune Assets.
The District Court denied without prejudice motions to dismiss and for partial summary judgment
filed by the defendants. In this same pending declaratory judgment action, the defendants filed a motion
asking the District Judge to make disclosures relating to his possible recusal.
This motion followed similar motions in the underlying litigation, in which the
District Judge made certain disclosures and declined to recuse himself. On
November 5, 2003, the defendants filed a petition for a writ of mandamus in the
Tenth Circuit Court of Appeals, directing the District Judge. The court
ordered MediaNews and Kearns Tribune to file a response, which has been filed.
The petition was denied by the Tenth Circuit. SLTPC has filed two appeals with the United States Court of Appeals for
the Tenth Circuit, which have been consolidated, seeking to overturn the
District Courts decisions that the appraisal process constituted an
arbitration under the FAA, that any challenge of the $355.5 million option
exercise price must be made under the procedures set forth in the FAA, and that
SLTPC had not stated sufficient grounds under the FAA to overturn the $355.5
million option exercise price. The oral argument for the consolidated appeals
will take place on September 27, 2004. In January 2002, certain controlling members of SLTPC filed a separate
lawsuit in Colorado State Court in Denver in their individual capacities. The
lawsuit names all the same defendants, arises from same underlying facts, and
seeks overlapping equitable relief and compensatory and punitive damages as the
original federal case filed in Utah in the District Court. The Company and the
other defendants filed motions seeking to have this lawsuit dismissed or, in
the alternative, stayed pending resolution of the federal action. On February
21, 2002, the Colorado court granted the defendants motion to stay the
Colorado action until the Utah federal court action has been resolved. In
January 2003, the Colorado plaintiffs filed a motion to have the stay lifted,
which was denied by the Colorado court. Thus, the Colorado action remains
stayed until completion of the Utah case. The Company is not in a position at this time to predict the likely
outcome of this litigation. However, the Company does not believe that the
litigation will have a materially adverse impact on its financial condition,
results of operations, or liquidity. Approximately $2.2 million, $3.7 million
and $3.4 million, respectively, was recorded in other (income) expense, net for
the fiscal years ended June 30, 2004, 2003 and 2002, related to the cost of
defending these lawsuits. The cost of defending these lawsuits has been and
may continue to be substantial; however based on the current status of this
litigation, the Company believes that its future legal fees relating to this
litigation will be substantially lower than historical costs. Other In November 2001, one of the Companys former newsprint vendors brought a
lawsuit against the Company seeking damages relating to the Companys alleged
breach of a newsprint agreement between the vendor and the Company. In April
2003, a jury verdict was rendered against the Company for $2.7 million. An
accrual for the judgment was included in accrued liabilities and other (income)
expense, net. On December 31, 2003, the Company agreed to settle this lawsuit
for $1.4 million and entered into a three year newsprint purchase agreement to
purchase 60,000 metric tons of newsprint from this vendor (a minimum of 20,000
metric tons per year) at an agreed upon adjusted index price, as a part of the
settlement. The $1.4 million settlement paid in January 2004 was charged
against the $2.7 million accrual established for the initial jury verdict. The
difference between the damages awarded by the initial jury verdict of $2.7
million and the $1.4 million settlement will be relieved proportionate (on a
per metric ton basis) to the Companys newsprint purchases under the new
newsprint purchase agreement, as the Company is only relieved from its
remaining obligation, in respect of the settlement over time, as it purchases
newsprint from the vendor under the purchase agreement. At June 30, 2004, the
remaining obligation is $1.2 million. 74




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MediaNews terminated a newsprint swap with Enron North America Corp.
(Enron) effective February 6, 2002. Enron informed MediaNews that it
disagreed with MediaNews method of determining the amount due with respect to
the early termination of the swap. In May 2003, Enron filed a lawsuit in U.S.
Bankruptcy Court for the Southern District of New York against the Company
seeking damages and declaratory relief. In December 2003, the Company agreed to
settle its lawsuit with Enron. Settlement under the agreement did not have a
material impact on the financial condition or results of operations of the
Company. MediaNews sent a notice terminating its newsprint swap agreement with
Mirant Americas Energy Marketing, LP (or Mirant)
effective September 5, 2003. In October 2003, Mirant filed a lawsuit in U.S.
Bankruptcy Court for the Northern District of Texas against the Company seeking
enforcement of the automatic stay provision of the bankruptcy code, seeking to
assess sanctions, and seeking declaratory relief (the Motion). On September
1, 2004, the U.S. Bankruptcy Court for the Northern District of Texas denied
Mirants Motion. MediaNews has not recorded any liability associated with the
termination of this swap, except as required by SFAS No. 133, at the time the
swap was deemed to be an ineffective hedge. In January 2004, Kmart Corporation (Kmart) commenced an adversary
proceeding against the Company and certain of its subsidiaries and joint
operating agencies in bankruptcy court seeking the return of certain payments
received from Kmart under a critical vendor program with respect to
pre-bankruptcy balances due from Kmart. On February 24, 2004, the United
States Court of Appeals for the Seventh Circuit upheld a ruling that payments
to critical vendors by Kmart related to pre-bankruptcy balances due these
vendors were improper. The Company is currently evaluating its legal options
with respect to Kmarts claims for return of payments received. At June 30,
2004, the Company has accrued for its estimated losses associated with the
critical vendor payments received from Kmart. A series of class action lawsuits were filed against entities involved in
the electronic display of articles (Database Entities) that had previously
appeared in newspapers and magazines (collectively, Media Entities) and had
been authored by individuals who were not employees of the Media Entities.
These lawsuits alleged that the Database Entities infringed upon the copyrights
owned by the freelance authors. The lawsuits were consolidated into a single
action in the Southern District of New York, In re Literary Works in Electronic
Databases Copyright Litigation, MDL No. 1379, Consolidated Case No. 00 Civ.
8049 GBD (S.D.N.Y. 2000). MediaNews had licensed articles from its various
newspapers to one or more of the Database Entities. Although the Company is
not a party to this litigation, various Media Entities have asserted claims for
indemnification against the Company in respect of their potential liability in
this litigation. In 2004, the Database Entities negotiated a draft settlement
of these consolidated actions, and have invited MediaNews to participate in the
settlement process. The settlement provides for a claims settlement process in
which a claims administrator would determine the responsibility of the
participants taking into account such factors as the availability of defenses,
the existence of a copyright registration, the date on which the relevant
article was originally published, the amount received by the author of the
freelance article for the original publication and the total amount of claims
that are compensated. The Company is currently considering whether to
participate in the settlement process. The Company is unable as this time to
estimate its exposure, if any, in this matter. The Company is involved in other litigation arising in the ordinary course
of business. In managements opinion, the outcome of these legal proceedings
will not have a material adverse impact on its financial condition, results of
operations, or liquidity. Note 12: Related Party Transactions The Company is party to a consulting agreement, renewable annually, with
Mr. Richard B. Scudder, the Chairman of the Board of MediaNews, which requires
annual payments of $250,000. From
1996 through July 2002, the Company advanced to the Singleton Irrevocable Trust
funds to pay the premiums on cash surrender value life insurance policies
covering Mr. William Dean Singleton, the Vice Chairman of the Board and Chief
Executive Officer of MediaNews, and his wife. The Singleton Revocable Trust
benefits Mr. Singletons children. The amount advanced as of June 30, 2004 and
2003 was $1.5 million. Advances will be repaid when the policy is surrendered or earlier at Mr.
Singletons option. No interest is charged on these advances. 75




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The Company uses Hughes Hubbard & Reed LLP as one of its legal counsel.
Mr. Howell E. Begle, Jr., a board member and general counsel of the Company, is
Of Counsel to Hughes Hubbard & Reed LLP. The Company is party to a management agreement with the California
Newspapers Partnership, which provides MediaNews with a management fee of 1.25%
of revenues and thereby reduces the Companys total corporate overhead, the
effect of which is a reduction of the impact minority interest expense has on
its consolidated statement of operations. Note 13: Other (Income) Expense, Net Included in other (income) expense, net are the following items: Years Ended June 30,2004
    
    2003
    
    2002(In millions)Change in estimated option repurchase price
    
    $
    (4.0
    )
    
    $
    5.5
    
    
    $
    1.8Lawsuit settlement-newsprint vendor
    
    
    
    
    
    
    2.7
    
    
    
    Impairment loss
    
    
    
    
    
    
    5.7
    
    
    
    Hedging, net
    
    
    2.1
    
    
    
    (1.2
    )
    
    
    (2.5
    )Bank fees
    
    
    0.4
    
    
    
    0.5
    
    
    
    0.7Salt Lake ownership litigation
    
    
    2.2
    
    
    
    3.7
    
    
    
    3.4Denver JOA formation and transition costs
    
    
    
    
    
    
    
    
    
    
    3.0Freedom acquisition bid
    
    
    1.0
    
    
    
    
    
    
    
    Bond repurchase premiums, net
    
    
    9.3
    
    
    
    
    
    
    
    Write-off of KTBY escrow and other prepaid acquisition costs
    
    
    1.1
    
    
    
    
    
    
    
    Other
    
    
    5.3
    
    
    
    2.6
    
    
    
    4.5$
    17.4
    
    
    $
    19.5
    
    
    $
    10.9
 Note 14: Equity Investments (Non-JOA) The following table represents the summary financial data, on a combined
basis, for the Companys non-JOA equity investments (the entities represented
in the table below are included at 100%). Only fiscal year 2004 is presented
as it is the only year that equity investments were material to the Companys
financial statements. Year EndedJune 30, 2004(In thousands)Current assets
    
    $
    58,924Non-Current assets
    
    
    216,640Current liabilities
    
    
    29,723Non-Current liabilities
    
    
    92,967Total revenues
    
    
    266,865Net Income
    
    
    30,260
 Note 15: Subsequent Events Long-Term Debt As described in Note 6: Long Term Debt, the Company repurchased on July 1,
2004, all of the outstanding borrowings under its 8.625% Notes. On August 30, 2004, the Company entered into an amendment and restatement
of its December 30, 2003 bank credit facility (the amended facility). The
amended facility maintains the $350.0 million revolving credit facility 76




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and
provides for a $100.0 million term loan A and a $148.8 million term loan C,
both of which were used to refinance the $250.0 million term loan B facility.
The term loan A bears interest at rates based upon, at the Companys option,
Eurodollar or base rates, plus a borrowing margin based on the Companys
leverage ratio. The Eurodollar and base rate borrowing margins on term loan
A are set at 1.50% and 0.50%, respectively, for the first 12 months after
which borrowings will bear interest at the Eurodollar or base rate, at the
Companys option, plus a borrowing margin based on the pricing grid used for
the revolving credit facility. Term loan A requires quarterly principal
payments as follows: $5.0 million beginning in March 2008 through December
2008; $7.5 million from March 2009 through December 2009; and $12.5 million
from March 2010 through September 2010, with the remaining balance due at
maturity on December 30, 2010. The term loan C bears interest based upon, at
the Companys option, Eurodollar or base rates, plus a borrowing margin of 1.5%
or 0.5%, respectively. Term loan C requires quarterly principal payments as
follows: $0.4 million beginning in September 2004 through December 2009,
increasing to $35.1 million from March through September 2010, with the
remaining balance due at maturity on December 30, 2010. Amounts repaid under
the term loan A and C facilities will not be available for re-borrowing.
The Company incurred debt issuance costs of $0.3 million related to the amended
facility. All other borrowing conditions of the December 30, 2003 described in
Note 6: Long-Term Debt continue to apply and have not been amended. Other In August 2004, the Company purchased the Colorado residence of Mr. Gerald
Grilly (the Companys Chief Operating Officer) for $2.7 million (subject to
adjustment to reflect the gross proceeds received by MediaNews upon its resale
of the house) in conjunction with his relocation to Los Angeles, California.
Mr. Grillys relocation was requested by MediaNews. The Company is actively
marketing the residence. 77




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SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MEDIANEWS GROUP, INC.Date:  September 27, 2004
    By:
    /S/ Ronald A. MayoRonald A. MayoVice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant in the capacities and on the dates indicated. SIGNATURE
    
    TITLE
    
    DATE/S/ Richard B. Scudder
(Richard B. Scudder)
    
    Chairman and Director
    
    September 27, 2004/S/ Jean L. Scudder
(Jean L. Scudder)
    
    Director
    
    September 27, 2004/S/ Howell E. Begle, Jr.
(Howell E. Begle, Jr.)
    
    Director
    
    September 27, 2004/S/ William Dean Singleton
(William Dean Singleton)
    
    Vice Chairman, Chief Executive Officer
and Director (Chief Executive Officer)
    
    September 27, 2004/S/ Joseph J. Lodovic, IV
(Joseph J. Lodovic, IV)
    
    President
    
    September 27, 2004/S/ Ronald A. Mayo
(Ronald A. Mayo)
    
    Vice President and Chief Financial Officer
    
    September 27, 2004/S/ Michael J. Koren
(Michael J. Koren)
    
    Vice President and Controller
(Principal Accounting Officer)
    
    September 27, 2004
 Supplemental Information to be Furnished with Reports Filed
Pursuant to Section 15(d) of the Act by Registrants Which Have Not
Registered Securities Pursuant to Section 12 of the Act No annual report or proxy material has been sent to our security holders. We
will furnish to our security holders an annual report subsequent to this
filing. 78




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EXHIBIT INDEX Exhibits3.1
    
    Second Restated and Amended Certificate of Incorporation
(incorporated by reference to Exhibit 3.1 to the registrants Form 8-K
filed January 14, 2004)3.2
    
    Amended and Restated Bylaws of MediaNews Group, Inc.4.1
    
    Registration Rights Agreement dated May 20, 1994, between
Affiliated Newspapers Investments, Inc. (the predecessor to the
registrant) and BT Securities Corporation (incorporated by reference to
Exhibit 4.3 to Form S-1/A of Affiliated Newspapers Investments,
Inc., filed May 6, 1994 (File No. 33-75158)).4.2
    
    Form of Indenture dated as of March 16, 1999 between Garden State
Newspapers, Inc., the predecessor of MediaNews Group, Inc., as Issuer,
and The Bank of New York as Trustee (incorporated by reference to
Exhibit 4.1 to the registrants Form S-4 filed May 28, 1999 (File No. 333-79665))4.3
    
    Form of MediaNews Group, Inc. 8 5/8% Senior Subordinated Notes due
2011, Series B (contained in the Indenture filed as Exhibit 4.1)4.4
    
    Indenture dated as of November 25, 2003 between MediaNews Group,
Inc., as Issuer, and The Bank of New York, as Trustee (incorporated by
reference to Exhibit 4.4 to the registrants Form 8-K filed January 14,
2004)4.5
    
    Registration Rights Agreement dated as of November 25, 2003 between
MediaNews Group, Inc., as Issuer and Deutsche Bank Securities, Inc.,
Banc of America Securities LLC, Wachovia Capital Markets, LLC, BNY
Capital Markets, Inc., Fleet Securities, Inc. and McDonald Investments,
Inc., (incorporated by reference to Exhibit 4.2 to the registrants Form 10-Q
for the period ended December 31, 2003)4.6
    
    Form of MediaNews Group, Inc.s 6 7/8% Senior Subordinated Notes
due 2013 (contained in the Indenture filed as Exhibit 4.4 to the
registrants Form 8-K filed January 14, 2004)4.7
    
    Indenture dated as of January 26, 2004 between MediaNews Group,
Inc., as Issuer, and The Bank of New York, as Trustee (incorporated by
reference to Exhibit 4.4)4.8
    
    Registration Rights Agreement dated as of January 26, 2004 between
MediaNews Group, Inc. as Issuer and Deutsche Bank Securities Inc., Banc
of America Securities LLC, Wachovia Capital Markets, LLC, Credit
Lyonnais Securities (USA) Inc., and Stephens Inc. (incorporated by
reference to Exhibit 4.5 to the registrants Form 10-Q for the period
ended December 31, 2003)4.9
    
    Form of MediaNews Group, Inc.s 6 3/8% Senior Subordinated Notes
due 2014 (contained in the Indenture filed as Exhibit 4.7)10.1
    
    Credit Agreement dated as of December 30, 2003 by and among
MediaNews Group, Inc., the guarantors named therein, the lenders named
therein, and Bank of America, N.A., as administrative agent (the
Credit Agreement) (incorporated by reference to Exhibit 10.1 to the
registrants Form 8-K filed January 14, 2004)10.2
    
    First Amendment to Credit Agreement, dated as of January 20, 2004,
by and among MediaNews Group, Inc., the guarantors named therein, the
lenders named therein and Bank of America, N.A., as administrative
agent (incorporated by reference to Exhibit 10.12 to the registrants
Form S-4 filed February 23, 2004)
 79




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EXHIBIT INDEX (continued) Exhibits (continued)10.3
    
    Second Amendment to Credit Agreement, dated as of April 16, 2004,
by and among MediaNews Group, Inc., the guarantors named therein, the
lenders named therein and Bank of America, N.A., as administrative
agent10.4
    
    Third Amendment to Credit Agreement, dated as of August 30, 2004,
by and among MediaNews Group, Inc., the guarantors named therein, the
lenders named therein and Bank of America, N.A., as administrative
agent10.5
    
    Amended and Restated Shareholders Agreement of MediaNews Group,
Inc. by and among MediaNews Group, Inc. and the shareholders named
therein, effective as of January 31, 2000, and amended and restated as
of March 16, 2004 (incorporated by reference to Exhibit 10.7 to the
registrants Form S-4/A (File No. 333-113028), filed March 18, 2004)10.6
    
    Employment Agreement dated March 15, 2000 between MediaNews and
William Dean Singleton (incorporated by reference to Exhibit 10.4 to
the registrants Form 10-Q for the period ended March 31, 2000)10.7
    
    Employment Agreement dated March 15, 2000 between MediaNews and
Joseph J. Lodovic IV (incorporated by reference to Exhibit 10.19 to the
registrants Form 10-Q for the period ended March 31, 2000)10.8
    
    Amended and Restated Joint Operating Agreement, dated as of April
30, 2004 by and between York Newspapers, Inc., York Newspapers
Holdings, Inc., The York Newspaper Company, York Newspapers Holdings,
L.P. and York Dispatch Publishing Company, LLC10.9
    
    Third Amended and Restated Shareholders Agreement dated as of June
30, 1999 among the shareholders of Denver Newspapers, Inc. (now known
as The Denver Post Corporation) (incorporated by reference to Exhibit
10.19 to the registrants Form S-4/A filed July 12, 1999)10.10
    
    Singleton Family Voting Trust Agreement for MediaNews Group, Inc.
dated January 31, 2000 (incorporated by reference to Exhibit 10.21 to
the registrants Form 10-Q for the period ended March 31, 2000)10.11
    
    Scudder Family Voting Trust Agreement for MediaNews Group, Inc.
dated January 31, 2000 (incorporated by reference to Exhibit 10.22 to
the registrants Form 10-Q for the period ended March 31, 2000)10.12
    
    Amendment and Restatement of Agreement, by and between
Kearns-Tribune, LLC and Deseret News Publishing Company, dated as of
January 2, 2001 (incorporated by reference to Exhibit 10.10 to the
registrants Form S-4 filed February 23, 2004)10.13
    
    Option Purchase Agreement between Garden State Newspapers, Inc.,
the predecessor of MediaNews Group, Inc., and Greenco, Inc., dated as
of January 30, 1998 (incorporated by reference to Exhibit 10.13 to the
registrants Form S-4 filed February 23, 2004)10.14
    
    Joint Operating Agreement by and between The Denver Post
Corporation, Eastern Colorado Production Facilities, Inc., The Denver
Newspaper Agency LLP and The Denver Publishing Company, dated as of May
11, 2000 (incorporated by reference to Exhibit 10.14 to the
registrants Form S-4 filed February 23, 2004)
 80




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EXHIBIT INDEX (continued) Exhibits (continued)10.15
    
    First Amendment to the Joint Operating Agreement by and among The
Denver Post Corporation, Eastern Colorado Production Facilities, Inc.,
The Denver Newspaper Agency LLP and The Denver Publishing Company,
dated January 22, 2001 (incorporated by reference to Exhibit 10.15 to
the registrants Form S-4 filed February 23, 2004)10.16
    
    Limited Liability Partnership Agreement of The Denver Newspaper
Agency LLP dated as of January 22, 2001 (incorporated by reference to
Exhibit 10.16 to the registrants Form S-4 filed February 23, 2004)10.17
    
    Amended and Restated Partnership Agreement for Texas-New Mexico
Newspapers Partnership, by and among Gannett Texas L.P. and New
Mexico-Texas MediaNews LLC, dated March 21, 2003 (incorporated by
reference to Exhibit 10.17 to the registrants Form S-4 filed February
23, 2004)10.18
    
    Second Amended and Restated Partnership Agreement for California
Newspapers Partnership, a Delaware General Partnership, by and among
West Coast MediaNews LLC; Donrey Newspapers LLC; The Sun Company of San
Bernardino, California; California Newspapers, Inc.; Media WestSBC,
Inc. and MediaWestCNI, Inc., dated as of May 30, 2003 (incorporated by
reference to Exhibit 10.18 to the registrants Form S-4 filed February
23, 2004)10.19
    
    Tax Agreement among MediaNews Group, Inc., Denver Newspapers, Inc.
and Media General, Inc., dated as of June 30, 1999 (incorporated by
reference to Exhibit 10.19 to the registrants Form S-4/A filed July
12, 1999)10.20
    
    Purchase Agreement, dated as of April 30, 2004, between Buckner
News Alliance, Inc., MediaNews Group, Inc., York Newspapers Holdings,
LLC, MediaNews Group Interactive and York Daily Record LLC and related side letter10.21
    
    Master Restructuring and Purchase Agreement, dated as of May 7,
2004, among Daily Gazette Company, MediaNews Group, Inc., Charleston
Publishing Company and Charleston Newspapers21.1
    
    Subsidiaries of MediaNews Group, Inc.31.1
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.3
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 81




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MEDIANEWS GROUP, INC. AND SUBSIDIARIES
SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
FISCAL YEARS ENDED JUNE 30, 2004, 2003 AND 2002 Balance at
    
    Additions Charged
    
    Net
    
    Acquisitions
    
    Balance atBeginning of Period
    
    to Expense, Net
    
    Deductions
    
    (Dispositions), Net
    
    End of Period(In thousands)YEAR ENDED JUNE 30, 2004Reserves and allowances deducted from asset accounts:Allowance for doubtful accounts
    
    $
    9,393
    
    
    $
    7,405
    
    
    $
    (7,668
    )
    
    $
    1
    
    
    $
    9,131YEAR ENDED JUNE 30, 2003Reserves and allowances deducted from asset accounts:Allowance for doubtful accounts
    
    $
    10,669
    
    
    $
    9,632
    
    
    $
    (10,694
    )
    
    $
    (214
    )
    
    $
    9,393YEAR ENDED JUNE 30, 2002Reserves and allowances deducted from asset accounts:Allowance for doubtful accounts
    
    $
    10,923
    
    
    $
    10,213
    
    
    $
    (10,467
    )
    
    $
    
    
    
    $
    10,669
 See notes to consolidated financial statements. 82