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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, 2006
OR [  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 Commission File Number 033-75156 MEDIANEWS GROUP, INC.  Delaware
    
    76-0425553(State or other jurisdiction of
    
    (I.R.S. Employer Identification Number)incorporation or organization)101 W. Colfax, Denver, Colorado
    
    80202(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (303) 954-6360 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 if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act. Yes [  ] No [X] Indicate by check mark if the registrant is not required to file reports to Section 13 or
Section 15(d) of the Act. Yes [X] No [  ] 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 a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large
accelerated filer in Rule 12b-2 of the Exchange Act.  Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). 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 26, 2006 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, 2006 pursuant to Section 15(d) of the
Securities Exchange Act of 1934. The registrant is filing this Annual Report on Form 10-K on a
voluntary basis.




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Table of Contents PagePart IItem 1.
    
    Business
    
    
    3Item 1A.
    
    Risk Factors
    
    
    11Item 1B.
    
    Unresolved Staff Comments
    
    
    14Item 2.
    
    Properties
    
    
    14Item 3.
    
    Legal Proceedings
    
    
    15Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    15Part IIItem 5.
    
    Market for the Registrant's Common Equity and Related Stockholder Matters and Issuer Purchases of Equity
    
    
    16Item 6.
    
    Selected Financial Data
    
    
    17Item 7.
    
    Management's Discussion and Analysis of Financial Condition and Results of Operation
    
    
    20Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    38Item 8.
    
    Financial Statements and Supplementary Data
    
    
    40Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    40Item 9A.
    
    Controls and Procedures
    
    
    40Item 9B.
    
    Other Information
    
    
    40Part IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    41Item 11.
    
    Executive Compensation
    
    
    43Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management
    
    
    46Item 13.
    
    Certain Relationships and Related Transactions
    
    
    48Item 14.
    
    Principal Accountant Fees and Services
    
    
    49Part IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    51Signatures
    
    
    
    
    90Fifth Amendment to Credit AgreementAmendment and Restatement of AgreementLimited Liability Company Operating AgreementSecond Amended and Restated Partnership AgreementThird Amended and Restated Partnership 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 privately owned newspaper companies in the United States in
terms of daily paid circulation. We publish 54 market dominant daily and approximately 80 non-daily
newspapers in 12 states, including suburban markets in close proximity to the San Francisco Bay
area, San Jose, Los Angeles, New York, Baltimore and Boston. We also own metropolitan daily
newspapers in Denver, Salt Lake City and Detroit that operate under joint operating agency (JOA)
agreements. The newspapers we currently control had combined daily and Sunday paid circulation of
approximately 2.6 million and 2.9 million, respectively, as of March 31, 2006 (including the daily
circulation of the San Jose Mercury Newsand Contra Costa Timesin California, which were acquired
on August 2, 2006, and The Monterey County Heraldin California and the St. Paul Pioneer Pressin
Minnesota, which we began managing on August 2, 2006  see further discussion under Recent
Transactions). 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 infrequent. 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 a 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 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. On the other hand, our metropolitan newspapers generate significant print
revenues from high margin national and employment advertising, which is strongly influenced by
national and local economic conditions and trends. In conjunction with several of our daily newspapers, we operate sizeable weekly newspaper
groups that extend our reach and advertising opportunities in and around our daily newspaper
markets. Suburban weekly newspapers allow us to attract a different base of advertisers than our
paid daily newspapers, such as small local retailers, local classifieds and restaurants, which
improves our competitive positioning, reduces the threat of competition from direct mail and
shoppers (free circulars) and achieves 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. 3




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The following sets forth our paid daily newspapers: California
    
    MassachusettsDaily News,Los Angeles, CA
    
    The Sun,Lowell, MAPress-Telegram,Long Beach, CA
    
    The Berkshire Eagle,Pittsfield, MAThe Monterey County Herald,Monterey, CA(a)
    
    Sentinel & Enterprise,Fitchburg, MACalifornia Newspapers Partnership  54.23%-owned partnership
    
    North Adams Transcript,North Adams, MASan Gabriel Valley Newspaper Group, CASan Gabriel Valley Tribune,West Covina, CA
    
    MichiganPasadena Star-News,Pasadena, CA
    
    The Detroit News,Detroit, MI (JOA)(b)Whittier Daily News,Whittier, CAThe Sun,San Bernardino, CA
    
    MinnesotaInland Valley Daily Bulletin,Ontario, CA
    
    St. Paul Pioneer Press,St. Paul, MN(a)ANG Newspapers, San Francisco Bay Area, CAOakland Tribune,Oakland, CA
    
    UtahTri-Valley Herald,Pleasanton, CA
    
    The Salt Lake Tribune,Salt Lake City, UT (JOA)The Daily Review,Hayward, CAThe Argus,Fremont, CA
    
    VermontAlameda Times-Star,Alameda, CA
    
    Brattleboro Reformer,Brattleboro, VTSan Mateo County Times,San Mateo, CA
    
    Bennington Banner,Bennington, VTMarin Independent Journal,Marin, CAEnterprise-Record/Oroville Mercury-Register,Chico & Oroville, CA
    
    West VirginiaTimes-Herald,Vallejo, CA
    
    Charleston Daily Mail,Charleston, WV(b)Times-Standard,Eureka, CAThe Reporter,Vacaville, CA
    
    Texas-New Mexico Newspapers Partnership  59.4%-owned partnershipDaily Democrat,Woodland, CA
    
    TexasThe Ukiah Daily Journal,Ukiah, CA
    
    El Paso Times,El Paso, TXRedlands Daily Facts,Redlands, CA
    
    New MexicoLake County Record-Bee,Lakeport, CARed Bluff Daily News,Red Bluff, CA
    
    Las Cruces Sun-News,Las Cruces, NMThe Daily Times,Farmington, NMSan Jose Mercury News,San Jose, CA
    
    Carlsbad Current-Argus,Carlsbad, NMContra Costa Times,Walnut Creek, CA
    
    Alamogordo Daily News,Alamogordo, NMThe Deming Headlight,Deming, NMColorado
    
    PennsylvaniaThe Denver Post,Denver, CO (JOA)
    
    York Daily Record & The York Dispatch,York, PA (JOA)Prairie Mountain Publishing Company, CO- 50%-owned partnership
    
    Lebanon Daily News,Lebanon, PAThe Fort Morgan Times,Fort Morgan, CO
    
    The Evening Sun,Hanover, PAJournal-Advocate,Sterling, CO
    
    Public Opinion,Chambersburg, PALamar Daily News,Lamar, CODaily Camera, Boulder, COConnecticutConnecticut Post,Bridgeport, CT
   (a)
    
    We manage these newspapers for The Hearst Corporation (see additional discussion under Recent
Transactions).(b)
    
    We are responsible only for editorial and news content. 4




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Industry Background Newspaper publishing is the oldest and largest segment of the media industry. Newspapers
address the specific needs of readers and advertisers in 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 the community is one of the primary reasons why
newspapers remain a dominant medium for local advertising, accounting for approximately 42% of all
local media advertising expenditures in the United States in calendar 2005.(1) We believe that, due to continuing fragmentation of other advertising mediums, newspapers are
one of the last mass market mediums available for advertisers. In addition, newspapers are one of
the few forms of mass media used by readers for both editorial and advertising content. Readers of
newspapers also tend to be more highly educated and have higher incomes than non-newspaper readers,
with a recent survey showing approximately 56% of college graduates and 58% of households with
incomes greater than $75,000 read a daily newspaper.(1) Because of the desirable
demographics and mass 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. Recent Transactions  Acquisitions  San Jose Mercury News, Contra Costa Times, The Monterey County Herald and St. Paul Pioneer Press On April 26, 2006, MediaNews Group, Inc. and The McClatchy Company (McClatchy) entered into
a Stock and Asset Purchase Agreement (the MediaNews Purchase Agreement) pursuant to which we
agreed to purchase the Contra Costa Timesand the San Jose Mercury Newsand related publications
and Web sites for $736.8 million. We consummated the purchase from McClatchy on August 2, 2006
through the California Newspapers Partnership (CNP), a 54.23%-owned subsidiary. The acquisition,
including fees, was funded in part with contributions of $340.1 million from our partners in CNP.
Our share of the acquisition, including fees, was approximately $403.0 million and was funded with
borrowings under a new term loan C and our existing bank revolver. See further discussion of our
amended bank credit facility under Recent Transactions  Debt. On April 26, 2006, The Hearst Corporation (Hearst) and McClatchy entered into a Stock and
Asset Purchase Agreement (the Hearst Purchase Agreement) pursuant to which Hearst agreed to
purchase The Monterey County Heraldand the St. Paul Pioneer Pressand related publications and Web
sites for $263.2 million. Hearst and McClatchy consummated such purchase on August 2, 2006. On
August 2, 2006, we entered into an agreement with Hearst (the MediaNews/Hearst Agreement)
pursuant to which (i) Hearst agreed to make an equity investment of up to $299.4 million (subject
to adjustment under certain circumstances) in us (such investment will not include any governance
or economic rights or interest in our publications in the San Francisco Bay area) and (ii) we
agreed to purchase from Hearst The Monterey County Heraldand the St. Paul Pioneer Presswith a
portion of the Hearst equity investment. The equity investment will afford Hearst an equity
interest of approximately 30% (subject to adjustment in certain circumstances) in our publications
outside the San Francisco Bay area. The equity investment by Hearst in us is subject to regulatory
approval, and a review is currently underway by the Antitrust Division of the Department of
Justice. The Antitrust Division has requested information and documents in connection with this
review, and we are in the process of responding to the request. We have agreed to manage The
Monterey County Heraldand the St. Paul Pioneer Pressduring the period of ownership by Hearst,
with us retaining all the net cash flows from these newspapers as a management fee. We also agreed
that at the election of MediaNews or Hearst, we will purchase The Monterey County Heraldand the
St. Paul Pioneer Pressfrom Hearst for $263.2   (1)
    
    Source: Newspaper Association of America 5




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million (plus reimbursement to Hearst for its cost of funds with respect to its purchase of
such newspapers) if for any reason Hearsts equity investment in us is not consummated within six
months. We would need to obtain additional financing to fund this purchase. If necessary, we
currently intend to fund the purchase price of the St. Paul Pioneer Pressand The Monterey County
Heraldthrough equity investments from other sources or debt issued by a newly formed holding
company that would be the parent company of MediaNews. A portion of the purchase price related to
The Monterey County Heraldwould be funded by one or more partners as described below. On April 26, 2006, we also entered into an agreement (the Stephens/Gannett Contribution
Agreement) with Gannett Co., Inc. (Gannett) and S.F. Holding Corporation (Stephens), formerly
Stephens Media Group, pursuant to which Gannett and Stephens agreed to contribute their pro rata
share of the initial purchase price (plus estimated transaction fees and expenses) of The Monterey
County Heraldfor a total ranging between approximately $27.4 million and $38.4 million depending
on whether The Monterey County Heraldis purchased by the California Newspapers Partnership or, if
necessary, a new partnership between us and Stephens, to be owned 67.36% by us and 32.64% by
Stephens. Debt On September 8, 2005, we amended our December 30, 2003 bank credit facility (the amended
facility). The amended facility maintained the $350.0 million revolving credit facility, the
$100.0 million term loan A and provided for a $147.3 million term loan B, which was used to pay
off a term loan C facility. On August 2, 2006, we entered into another amendment of the amended
facility. The August 2, 2006 amendment was entered into in order to create a new $350.0 million
term loan C facility and to authorize us to purchase the Contra Costa Times, San Jose Mercury
News, The Monterey County Heraldand the St. Paul Pioneer Press. The $350.0 million term loan C
facility was funded on August 2, 2006 and, used along with borrowings under our revolver, to pay
our portion of the purchase price of the Contra Costa Timesand the San Jose Mercury News. The term loan B bears interest based upon, at the Companys option, Eurodollar or base
rates, plus a borrowing margin of 1.25% or 0.25%, respectively. Term loan B requires quarterly
principal payments as follows: $0.4 million through December 2009; $35.2 million from March through
September 2010, with the remaining balance due at maturity on December 30, 2010. Term loan C
bears interest based upon, at the Companys option, Eurodollar, plus a borrowing margin of 1.75%,
or base rate, plus a borrowing margin of 0.75%. Term loan C requires quarterly principal
payments as follows: $0.875 million through June 2012; and $82.25 million from June 2012 through
March 2013, with the remaining balance due at maturity on August 2, 2013. Amounts repaid under the
term loans are not available for re-borrowing. Borrowings under the revolving facility may be
repaid and re-borrowed, subject to usual and customary conditions for facilities of this nature.
The revolving credit facility reduces to $250.0 million on December 30, 2008 and matures on
December 30, 2009. Other Transactions Texas-New Mexico Newspapers Partnership Effective December 26, 2005, we restructured the Texas-New Mexico Newspapers Partnership
(TNMP) whereby we contributed to TNMP our Pennsylvania newspapers, The Evening Sun(Hanover), the
Lebanon Daily Newsand our interest in the partnership that publishes the York Daily Recordand
York Sunday News, which will continue to operate under the terms of a JOA agreement along with The
York Dispatch. Our partner, Gannett, contributed The Public Opinionin Chambersburg, Pennsylvania.
As a result of the contributions and the amendment of the TNMP
agreement, TNMP became a 59.4% owned consolidated subsidiary of ours. Prairie Mountain Publishing Company On February 1, 2006, we formed the Prairie Mountain Publishing Company (PMP) with E.W.
Scripps Company (Scripps). Upon formation of PMP, we contributed substantially all of the
operating assets used in the publication of the newspapers published by Eastern Colorado Publishing
Company comprised of several small daily and weekly newspapers published in eastern Colorado, and
Scripps contributed substantially all of the operating assets used in the publication of the Daily
Cameraand the Colorado Daily, both published in Boulder, Colorado. In addition to the assets
contributed to PMP, we paid Scripps approximately $20.4 million to obtain our 50% interest in PMP.
Scripps owns the remaining interest in 6




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PMP. As a result of the partnership formation, we no longer consolidate the operations of
Eastern Colorado Publishing Company and now account for our share of the operations of PMP under
the equity method of accounting. Detroit Effective August 3, 2005, we purchased the editorial assets of The Detroit News,published in
Detroit, Michigan, and a 5% limited partnership interest in the Detroit JOA for approximately $25.0
million. We are responsible for the news and editorial content of The Detroit Newsfor which we
receive a fixed monthly preferred distribution with possible incremental distributions beginning in
2009 based on profit growth. Under the terms of the Detroit JOA agreement, we are reimbursed for
our news and editorial costs. Because of the structure of the partnership and our ownership
interest, we account for our investment in the Detroit JOA on the cost basis. Operating Strengths and Strategies Our long-term operating strategy is to increase revenues and operating profit 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 acquisition of the San Jose
Mercury Newsand Contra Costa Timesis a continuation of this strategy. The California Newspapers
Partnership (CNP), the Texas-New Mexico Newspapers Partnership and Prairie Mountain Publishing
Company are also 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. Launching niche publications is one of
our key initiatives. For example, in Denver, we launched YourHub.com, a zoned weekly, distributed
in the newspaper, which is published from content created on the Internet by people in the
community. We also launched Flipside,an entertainment publication in York, targeting 18 to 34
year olds in that market.We have 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 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. Our Los Angeles Newspaper Group publishes IMPACTO USA, a weekend home delivered
Spanish-language newspaper. IMPACTO USAis home delivered every Saturday to over 250,000 targeted
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 us to maximize our share of the
available advertising dollars in the market whether in print or online. An expansion of our zoning
strategy is YourHub.com, described above, which publishes separate community editions. YourHub.com
has over 40 online zones, along with 15 editorial and 10 advertising zoned editions of YourHub.com
which are distributed weekly in both Denver newspapers on Thursday. 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 trusted 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. To foster reader interaction and participation,
we introduced citizen journalism with YourHub.com in Denver whereby local 7




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news content and photos are submitted directly by readers. In Denver, we have also introduced
Podcasts in which The Denver Poststop headlines, presented in an audio version, can be downloaded
from the newspapers Web site, www.denverpost.com, onto a digital audio device, such as an iPod,
and listened to on the go. 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 products or 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. Our newspapers are designed to visually attract readers through attractive layouts and color
enhancements and have received numerous awards from state press associations as well as other peer
organizations for their editorial content, local news and sports coverage, and photography. The
majority of our newspapers receive awards annually for excellence in various editorial categories
in their respective regions and circulation size. Circulation Growth. We believe circulation growth is essential to maintaining and growing the
long-term franchise value of 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. Our circulation growth strategies are focused on
growing home delivery and single copy sales, the most desired circulation types for our
advertisers. We also design our management incentive programs to reward our publishers for
circulation growth at their daily newspapers. Changes in the 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 orders. While growing
circulation volumes is important, we continue to balance this with an eye on circulation profit by
instituting programs that target the replacement of higher churn short-term circulation orders with
lower cost, longer term circulation orders, thereby delivering a stable subscriber base for our
advertising customers and controlling subscriber acquisition costs. In the past, this strategy has
improved circulation profits, but in some cases decreased circulation home delivery volumes in the
short-term. Throughout the industry, circulation has been a challenging area. According to an
analysis completed by the Newspaper Association of America, the industry as a whole reported a
decline in total circulation by 2.5% while Sunday declined by 3.1% for the six month period ending
March 31, 2006 as compared to the same period a year ago. Sunday circulation at our newspapers
declined by less than 1% after excluding Denver JOA and a few of our papers in the very
competitive Los Angeles market where management made the decision to continue bringing circulation
down. The individual paid circulation on Sunday for this same group increased by nearly 1%. We
continue to implement technology to enhance demographic targeting of potential subscribers aimed at
acquiring and retaining what our advertisers consider to be high quality subscribers. We have also
started offering electronic replica editions to subscribers at several of our papers. This meets
the needs of customers who prefer an electronic edition and also saves the cost of printing and
delivering those newspapers. Cost Controls.We focus on cost control with particular attention on managing staffing
requirements. At newspapers with collective bargaining agreements, 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. Our investments, such as a new production and office facility in
Salt Lake City and in Denver, not only will cut costs through the implementation of 48 web width
and shorter cut-off on the new presses as well as lower staffing levels, but will also make
significant improvements to the reproduction and color quality of the newspapers. The Salt Lake
City facility became operational in the spring of 2006; the production facility in Denver is
expected to be fully operational in January 2008. We are equally focused on newsprint cost control and are reducing the web width to 48 on the
majority of our presses resulting in newsprint volume savings of 4%. In addition to volume
savings, 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. Internet.MediaNews Group interactive (MNGi), our Internet subsidiary, drives the
interactive media business of our Company and manages the centralized technology infrastructure
that supports each of our local sites. Our strategy 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 local media markets. Our interactive operations are growing market share and extending the
profitability of 8




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our local media franchises by leveraging our extensive newsgathering resources, print and
online sales infrastructures and partnering with providers of emerging technologies and industry
leaders, including Internet portals, broadband and wireless. We expect to extend the reach of our
brands beyond our core and existing print audience to attract a younger and more diverse audience.
Finally, we are cultivating relationships with new and existing advertisers by proactively
addressing their needs by providing multimedia packages, among other things. We launched a significant new alliance with Yahoo! Hot Jobs which provides employers more
visibility and distribution for their job postings and provides job seekers the most comprehensive
database of employment listings in each of our local markets. This relationship with Yahoo! Hot
Jobs allows us to offer the best value and cutting-edge products for both our advertisers and
customers. We recently began exploring additional national distribution opportunities and
platforms to increase the distribution of our advertising and news content while expanding the
value we provide our customers online. To expand our direct sales channels, we are adding several comprehensive online self-service
products to facilitate customer orders. 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 online advertising and enhance advertiser satisfaction. Our search strategy launched in 2006 enables us to better understand the intent of our users
and thus better deliver relevant content. 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 higher 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. Finally, in 2007, we plan to launch a wireless strategy that will extend our ability to
deliver our content to customers where, how and when they want it. 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 80 newspapers that have been successfully integrated
into our operations. All of 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 and partnerships 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 volume 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 brand advertising accounts), Classifiedadvertising (employment, automotive,
real estate and private party) and Interactive(online components of Retail, National and
Classified Advertising). Other revenue consists primarily of revenue from commercial printing.
The contributions of Retail, National, Classified, Interactive, Circulation and Other revenue to
total revenues are shown in the following table. 9




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##### Table of Contents



Fiscal Years EndedJune 30,(1)2006
    
    2005
    
    2004Retail
    
    
    42
    %
    
    
    42
    %
    
    
    42
    %National
    
    
    6
    
    
    
    6
    
    
    
    6Classified
    
    
    27
    
    
    
    26
    
    
    
    27Interactive
    
    
    5
    
    
    
    4
    
    
    
    3Circulation
    
    
    16
    
    
    
    17
    
    
    
    17Other
    
    
    4
    
    
    
    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 (Salt Lake
City, Denver and Charleston through May 7, 2004) net results in one line item, Income from
Unconsolidated JOAs. The revenue data for the JOAs we do not control (Salt Lake City, Denver,
Charleston and Detroit) are excluded from this summary (see further discussion under
Managements Discussion and Analysis of Financial Condition and Results of Operations 
Critical Accounting Policies). Newsprint Newsprint is one of the largest costs of producing a newspaper. We buy newsprint from several
suppliers under arrangements that we believe provide us with some of the most favorable newsprint
prices in the industry. Newsprint prices began increasing during fiscal year 2003 and this trend
continued through fiscal year 2006. To combat this, we have begun implementing cost-cutting
measures such as decreasing our newspapers to 48 web width and using lighter weight newsprint.
During fiscal years 2006 and 2005, excluding our unconsolidated JOA operations, we consumed
approximately 146,000 metric tons of newsprint, and in 2004 we consumed approximately 150,000
metric tons of newsprint. During fiscal years 2006, 2005 and 2004, we incurred newsprint expense
of $83.6 million, $77.4 million and $72.8 million, respectively. Newsprint expense as a percentage
of revenue from our newspaper operations (excluding unconsolidated JOAs) for fiscal years 2006,
2005 and 2004, was 10.1%, 9.9% and 9.8%, respectively. Our average price per metric ton was $574
during fiscal year 2006, compared to $528 and $485 during fiscal years 2005 and 2004, respectively.
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, 2006, we employed at our consolidated entities and unconsolidated JOAs in
Denver and Salt Lake City approximately 8,400 full-time and 1,700 part-time employees, of which
approximately 3,000 are unionized (approximately 1,800 of the total union employees are in Denver).
There has never been a significant 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, broadcast television and cable television, as well as with some weekly
publications, direct mail and other advertising media, 10




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##### Table of Contents



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 advertising 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 strategy,
which we believe allows us to capture our share of the locally available 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
may not at all times be in complete compliance with all applicable requirements, and there can be
no guarantee that 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 own 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 1A. Risk Factors Advertising Revenues  We depend on advertising revenues that are affected by a number of factors,
many of which are beyond our control. The primary source of our revenue is advertising. Our advertising revenues are affected by:  
    
    the health of the economy in the areas where our newspapers are distributed and in the nation as a whole,
    
    the circulation of our newspapers,
    
    our editorial content,
    
    the demographic makeup of the population where our newspapers are distributed, 11




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##### Table of Contents




    
    fluctuations in our competitors price of advertising, and
    
    the activities of our competitors, including increased competition from other
advertising mediums, including network, cable and satellite television, the Internet, radio
and weekly newspapers. Paid Circulation The newspaper publishing industry continues to experience some circulation decline with
several factors contributing: (a) the ongoing impact of the federally imposed do-not-call lists
(now three years old), which limits telemarketing of subscription home delivery sales; (b) the
increased scrutiny of, and limitations on, the bulk/third-party sales that had been a source of
circulation growth; (c) rule changes by the Audit Bureau of Circulation; and (d) the Internet,
which creates competition for readers time and may not count as paid circulation if the reader is
viewing our newspapers Web sites. We have taken steps to meet each of these challenges, including
strengthening practices aimed at compliance with industry-wide accepted procedures in circulation
reporting. Nonetheless, ongoing decline in paid circulation could have a material effect on the
rate and volume of our advertising revenue. Newsprint Costs  Increases in newsprint costs could adversely affect our financial results. Newsprint is a basic commodity and its price is sensitive to the worldwide balance of supply
and demand. However, the demand for newsprint can change quickly, resulting in wide swings in its
price. Increases in newsprint prices can adversely impact our financial results to the extent such
increases are not offset by increased advertising revenues. See Managements Discussion and
Analysis of Financial Condition and Results of Operations  Near Term Outlook  Newsprint Prices. Competition  Competition could have a material adverse effect on us. Our revenue depends primarily upon the sale of advertising and, to a lesser degree, paid
circulation. Our competitors for advertising and circulation include local and regional
newspapers, magazines, yellow pages, radio and television broadcast, cable television, direct mail,
electronic media (including the Internet) and other communications and advertising media which
operate in our markets. Some of our competitors are larger and have greater financial resources
than we do. The extent and nature of our competition in any particular newspaper market is in
large part determined by the location and demographics of the market and the number of media
alternatives in that market. Competition for newspaper advertising is largely based upon
circulation, price, and the content of the newspaper. Full Implementation of Operating Strategy  Failure to implement our operating strategy could have
a material adverse effect on us. Our future financial performance and success are dependent in large part upon our ability to
successfully implement our business strategy. We cannot assure you that we will be able to
successfully implement our business strategy or be able to improve our operating results. In
particular, we cannot assure you that we will be able to maintain circulation of our publications,
obtain new sources of advertising revenues, generate additional revenues by building on the brand
names of our publications or raise the cover or subscription prices of our publications without
causing a decline in circulation. Senior Management Our ability to maintain our competitive position is dependent on the services of our senior
management team. If we were unable to retain the existing senior management personnel, develop
future senior management within our company or attract other qualified senior management personnel,
our business would be adversely affected. Employee Benefits Health insurance costs have increased significantly faster than inflation on an annual basis
over the past few years. We also anticipate that in the future, the cost of health care will
continue to escalate, causing an increase to our expenses and employee contributions. If we are
unable to negotiate favorable health insurance rates, it could adversely affect our results. 12




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##### Table of Contents



Self-Insurance and Deductibles on Workers Compensation Insurance Under our workers compensation insurance program, we are responsible for the first $500,000
per occurrence; otherwise, we have statutory unlimited insurance
coverage for workers compensation losses. The final cost of many of these claims may not be known for several years.
We continuously review the adequacy of our insurance coverage, which we currently believe to be
appropriate in light of the cost of insurance coverage and the type of risk being insured. The workers compensation insurance liability does not include the claims of our independent
contractors. We believe these claims are covered under our general liability insurance (discussed
below). However, if it is later determined that the independent contractors are covered under
workers compensation insurance, our exposure (and liability) could be significantly greater than
we have currently estimated. Other Insurance Exposure, including Earthquake Coinsurance and Deductibles and Caps on General
Liability, Property and Other Insurance Lines Our
general liability, property and other insurance lines have
deductibles ranging from $100,000 to $500,000. We also have specific
earthquake coverage which has a deductible of the lesser of $250,000
per incident, or 5% of the value of the insured property. The maximum insured loss under the earthquake coverage is $70.0 million for our existing locations,
and $25.0 million for the properties acquired in August 2006. We are effectively controlled by two shareholder groups. William Dean Singleton, the Scudder family, and their respective family trusts, have the power
to vote approximately 93% of our outstanding common stock. These shareholder groups are entitled
to elect all of the members of our Board of Directors, and to otherwise control us, including
decisions with respect to mergers, liquidations and asset acquisitions and dispositions. There are
no independent directors on our Board. However, we are considering expanding the Board and
possibly adding an independent director in the future, although there is no assurance such action
will be taken. We are not required to and may not comply with certain Board of Directors and Audit Committee
requirements of the Sarbanes-Oxley Act of 2002. Our Board of Directors currently consists of four members: two members of the Scudder family,
William Dean Singleton, our Chief Executive Officer, and Howell E. Begle, Jr., Of Counsel to Hughes
Hubbard & Reed, LLP, which law firm is our counsel. The Board does not have a separate audit
committee. No member of the Board has been elected, or is anticipated to be elected, to represent
the interests of our creditors. However, we are considering expanding the Board and possibly
adding an independent director in the future, although there is no assurance such action will be
taken. Our business could suffer if we are unsuccessful in negotiating new collective bargaining
agreements. Portions of our workforce (and portions of the workforces at our JOAs) are represented by
labor unions. The collective bargaining agreements covering these employees expire periodically.
While we and our partners in our JOAs have in the past been successful in negotiating collective
bargaining agreements on terms acceptable to us, and we believe that we and our partners currently
have satisfactory relationships with labor unions and our employees who are represented by labor
unions, no assurance can be given that we or our partners will be successful in any future
negotiations with these unions. Currently, several of the collective bargaining agreements
covering our employees and employees of our JOAs have expired. We or our JOAs, as applicable, and
the employees that were covered by these agreements are currently continuing to operate under the
terms of the expired agreements. Substantial Leverage  Our substantial indebtedness could have a material adverse effect on our
financial health and prevent us from fulfilling our obligations. We have a significant amount of indebtedness. Subject to the restrictions contained in our
indebtedness agreements, we may incur additional indebtedness from time to time to finance
acquisitions, to make capital expenditures, to fund working capital and for general business
purposes. 13




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##### Table of Contents



Our substantial indebtedness could have important consequences. For example, it could:  
    
    require us to dedicate a substantial portion of our cash flow from operations to
payments on our indebtedness, thereby reducing the availability of our cash flow to fund
working capital, capital expenditures or other general corporate purposes,
    
    impair our ability to obtain additional financing for, among other things, working
capital, capital expenditures, acquisitions or other general corporate purposes, or
    
    limit our flexibility to adjust to changing business and market conditions, and make us
more vulnerable to a downturn in general economic conditions as compared to our competitors
that have any less debt. In addition, our failure to comply with the financial and other restrictive covenants
contained in our indebtedness agreements could result in an event of default under such
indebtedness, which, if not cured or waived, could have a material adverse effect on us. If we
cannot meet or refinance our obligations when they are due, we may have to sell assets, reduce
capital expenditures or take other actions, which could have a material adverse effect on us. We cannot assure you that our business will generate sufficient cash flow from operations or
that future borrowings will be available to us under our credit facility or otherwise in an amount
sufficient to enable us to pay our indebtedness, or to fund our other liquidity needs. In
addition, we may need to refinance all or a portion of our indebtedness, on or before maturity. 
 Item 1B. Unresolved Staff Comments Not applicable. 
 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
    
    Minnesota
    
    Texas
    
    CaliforniaAnchorage
    
    St. Paul (a)
    
    El Paso
    
    Vacaville
    
    San JoseGraham
    
    Paradise
    
    Walnut CreekColorado
    
    New Mexico
    
    
    
    Hayward
    
    ConcordDenver
    
    Las Cruces
    
    Utah
    
    Pleasanton
    
    Monterey (a)Carlsbad
    
    Salt Lake City
    
    Marin
    
    West CovinaConnecticut
    
    Farmington
    
    Murray
    
    Eureka
    
    ValenciaBridgeport
    
    Alamogordo
    
    
    
    Chico
    
    Long BeachVermont
    
    Oroville
    
    San BernardinoMassachusetts
    
    Pennsylvania
    
    Brattleboro
    
    Vallejo
    
    OntarioPittsfield
    
    York
    
    Bennington
    
    Lakeport
    
    Woodland HillsNorth Adams
    
    Hanover
    
    
    
    San Mateo
    
    RedlandsLowell
    
    Lebanon
    
    
    
    WoodlandFitchburg
    
    Chambersburg
    
    
    
    UkiahDevens
   (a)
    
    We manage these newspapers for The Hearst Corporation. Certain facilities located in Denver, Colorado and Long Beach, Oakland, Pasadena, 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. 14




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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. We are also involved in other legal proceedings. See Note
11: Commitments and Contingencies of the consolidated financial statements for a description of the
background of this litigation and other lawsuits. 
 Item 4: Submission of Matters to a Vote of Security Holders None. 15




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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 2006. There is no established
public trading market for our common stock. As of June 30, 2006, there were approximately 9 record holders of our Class A Common Stock.
No shares of Class B Common Stock are outstanding. We have never paid a cash dividend on our common stock. In conjunction with an investment by
Hearst in the Company (if approved by the Department of Justice), we anticipate paying a dividend
to the Class A shareholders of approximately $25.0 million with a portion of the proceeds from the
Hearst investment. In addition, our long-term debt agreements contain covenants which, among other
things, limit our ability to pay dividends to our shareholders. 16




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##### Table of Contents



Item 6: Selected Financial Data The table below presents selected historical consolidated financial data. The following data should be read in conjunction with Item 7: Managements Discussion and
Analysis of Financial Condition and Results of Operations and our consolidated financial
statements and notes thereto included elsewhere in this Annual Report on Form 10-K. MediaNews Group, Inc. & SubsidiariesFiscal Years Ended June 30,2006
    
    2005
    
    2004
    
    2003
    
    2002(Dollars in thousands)INCOME STATEMENT DATA(a):RevenuesAdvertising
    
    $
    660,389
    
    
    $
    610,060
    
    
    $
    582,689
    
    
    $
    570,163
    
    
    $
    545,715Circulation
    
    
    130,829
    
    
    
    129,344
    
    
    
    132,505
    
    
    
    137,445
    
    
    
    139,495Other
    
    
    44,658
    
    
    
    39,875
    
    
    
    38,635
    
    
    
    30,990
    
    
    
    25,920Total Revenues
    
    
    835,876
    
    
    
    779,279
    
    
    
    753,829
    
    
    
    738,598
    
    
    
    711,130Income (Loss) from Unconsolidated JOAs
    
    
    (23,298
    )
    
    
    23,291
    
    
    
    22,207
    
    
    
    25,227
    
    
    
    8,770Cost of Sales
    
    
    260,939
    
    
    
    242,653
    
    
    
    234,784
    
    
    
    221,888
    
    
    
    220,082Selling, General and Administrative
    
    
    417,602
    
    
    
    382,180
    
    
    
    366,636
    
    
    
    346,763
    
    
    
    324,364Depreciation and Amortization
    
    
    44,067
    
    
    
    40,598
    
    
    
    40,742
    
    
    
    40,553
    
    
    
    47,545Interest Expense
    
    
    55,564
    
    
    
    49,481
    
    
    
    57,036
    
    
    
    64,252
    
    
    
    75,302Gain on Sale of Newspaper Properties
    
    
    1,129
    
    
    
    114
    
    
    
    6,982
    
    
    
    28,797
    
    
    
    Minority Interest
    
    
    (35,033
    )
    
    
    (29,334
    )
    
    
    (32,237
    )
    
    
    (34,088
    )
    
    
    (32,218
    )Income Before Income Taxes
    
    
    4,960
    
    
    
    59,970
    
    
    
    43,703
    
    
    
    69,253
    
    
    
    9,883Net Income
    
    
    1,077
    
    
    
    39,880
    
    
    
    26,737
    
    
    
    38,312
    
    
    
    12,365CASH FLOW DATA:Capital Expenditures
    
    $
    47,501
    
    
    $
    51,312
    
    
    $
    36,483
    
    
    $
    20,669
    
    
    $
    11,323Cash Flows from:Operating Activities(b)
    
    
    71,508
    
    
    
    92,944
    
    
    
    76,455
    
    
    
    89,759
    
    
    
    66,629Investing Activities (including Capital Expenditures)(b)
    
    
    (64,454
    )
    
    
    (92,669
    )
    
    
    (20,534
    )
    
    
    (32,480
    )
    
    
    (18,002
    )Financing Activities
    
    
    (10,892
    )
    
    
    (60,749
    )
    
    
    5,472
    
    
    
    (55,965
    )
    
    
    (53,747
    )BALANCE SHEET DATA:Total Assets
    
    $
    1,427,783
    
    
    $
    1,365,772
    
    
    $
    1,369,170
    
    
    $
    1,323,148
    
    
    $
    1,291,886Long-Term Debt and Capital Leases
    
    
    867,893
    
    
    
    877,569
    
    
    
    928,467
    
    
    
    904,554
    
    
    
    957,090Other Long-Term Liabilities and Obligations
    
    
    28,774
    
    
    
    47,359
    
    
    
    26,450
    
    
    
    33,947
    
    
    
    30,462Putable Common Stock
    
    
    40,899
    
    
    
    48,556
    
    
    
    
    
    
    
    
    
    
    
    Total Shareholders Equity
    
    
    59,520
    
    
    
    38,493
    
    
    
    61,006
    
    
    
    34,894
    
    
    
    1,903NON-GAAP FINANCIAL DATA (c):Long-Term Debt and Capital Leases, Net(d)
    
    $
    882,833
    
    
    $
    875,512
    
    
    $
    863,094
    
    
    $
    897,998
    
    
    $
    945,551Adjusted EBITDA
    
    $
    157,335
    
    
    $
    154,446
    
    
    $
    152,409
    
    
    $
    169,947
    
    
    $
    166,684Minority Interest in Adjusted EBITDA
    
    
    (46,541
    )
    
    
    (41,152
    )
    
    
    (45,747
    )
    
    
    (49,089
    )
    
    
    (45,946
    )Combined Adjusted EBITDA of Unconsolidated JOAs
    
    
    27,909
    
    
    
    38,097
    
    
    
    39,842
    
    
    
    40,371
    
    
    
    36,006EBITDA of Texas-New Mexico Newspapers Partnership and
Prairie Mountain Publishing Company(e)
    
    
    5,681
    
    
    
    9,610
    
    
    
    10,108
    
    
    
    3,275
    
    
    
    Adjusted EBITDA Available to Company
    
    $
    144,384
    
    
    $
    161,001
    
    
    $
    156,612
    
    
    $
    164,504
    
    
    $
    156,744
   Footnotes on following two pages. 17




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Footnotes from previous page.   (a)
    
    Significant Transactions.The income statement data is impacted by the following significant
transactions. Acquisitions Fiscal Years 2002-2006Year
    
    Date
    
    Publication
    
    Location
    
    Description
    
    Purchase Price2006
    
    08/03/05
    
    Detroit News
    
    Detroit, Michigan
    
    Daily morning newspaper
    
    $  25.0 million(editorial only) and limitedDetroit JOA partnership interestSee Other Transactions (below) regarding the Prairie Mountain Publishing Company
formation and Texas-New Mexico Newspapers Partnership restructuring2005
    
    01/04/05
    
    The Park Record
    
    Park City, Utah
    
    Three times weekly newspaper
    
    $  8.0 million2004
    
    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,
    
    $  13.0 millionplus commercial printing10/01/02
    
    The Reporter
    
    Vacaville, California
    
    Daily morning newspaper
    
    $  30.9 million10/01/02
    
    Original Apartment
    
    Los Angeles, California
    
    Free distribution apartment rental
    
    $  10.0 million,Magazine
    
    
    
    magazine
    
    plus $  4.9million inearnouts2002
    
    No significant acquisitions.
 Dispositions Fiscal Years 2002-2006Year2006
    
    No dispositions. See Other Transactions regarding the Prairie Mountain Publishing Company formation and Texas-New Mexico Newspapers Partnership restructuring.2005
    
    No dispositions.2004
    
    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.
 Other Transactions Fiscal Years 2002-2006Year
    
    Description2006
    
    Effective February 1, 2006, we formed the Prairie Mountain Publishing Company (PMP) with E.W. Scripps
(Scripps). Upon formation of PMP, we contributed substantially all of the operating assets of Eastern Colorado
Publishing Company, comprised of several small daily and weekly newspapers, and Scripps contributed substantially
all of the operating assets of the Daily Cameraand the Colorado Daily, both published in Boulder, Colorado. In
addition to the assets contributed to PMP, we paid Scripps $20.4 million to obtain our 50% interest in PMP.Effective December 26, 2005, we contributed assets of our four daily newspapers published in southern Pennsylvania
(The Evening Sun (Hanover), the Lebanon Daily Newsand our interest in the entity that publishes the York Daily
Recordand York Sunday News, which will continue to be published under the terms of a joint operating agreement
along with The York Dispatch) and Gannett contributed assets of the Public Opinion, published in Chambersburg, PA
into the Texas-New Mexico Newspapers Partnership. As a result of the contributions (our ownership percentage went
from 33.8% to 59.4%) and amended and restated partnership agreement, we are now the controlling partner and
accordingly began consolidating the results of the Texas-New Mexico Newspapers Partnership effective December 26,
2005.2005
    
    In June 2005, we purchased the remaining 20% of The Denver Post Corporation which we did not own for $45.9 million.2004
    
    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.2003
    
    Effective March 3, 2003, we formed the Texas-New Mexico Newspapers Partnership with Gannett. We contributed
assets of our daily newspapers published in New Mexico (Las Cruces Sun-News, The Daily Times (Farmington),
Carlsbad Current-Argus, Alamogordo Daily Newsand The Deming Headlight) and Gannett contributed the El Paso Times.
Upon formation, we recognized in fiscal year 2003 a non-monetary pre-tax gain of $28.8 million and began
accounting for our 33.8% interest in the partnership under the equity method of accounting.2002
    
    None.
   Footnotes continue on following page. 18




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##### Table of Contents



Footnotes from previous page (continued).   (b)
    
    Prior Year Revision/Reclassification.For comparability certain prior year balances have been
reclassified to conform to current reporting classifications. In particular, the statements
of cash flows have been revised for the years ended June 30, 2005, 2004, 2003 and 2002 to
reclassify the distribution of net income from equity investments from net cash flows from
investing activities to net cash flows from operating activities and to reflect distributions
in excess of net income from unconsolidated JOAs and equity investments as cash flows from
investing activities in accordance with Statement of Financial Accounting Standards No.
95, Statement of Cash Flows. For the years ended June 30, 2005, 2004, 2003 and 2002, the revision
increased (decreased) the reported net cash flows from investing activities by $6.0 million,
($1.3) million, $12.9 million and $6.0 million,
respectively, with an offsetting change in net
cash flows from operating activities.(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 Texas-New Mexico Newspapers Partnership (beginning
December 26, 2005), The Denver Post Corporation (through June 10, 2005), and The York
Newspaper Company (through April 30, 2004), 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 (through December 25, 2005) and our proportionate share of
EBITDA of the Prairie Mountain Publishing Company (beginning February 1, 2006) (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 30,2006
    
    2005
    
    2004
    
    2003
    
    2002(Dollars in thousands)Long-Term Debt and Capital
Leases per Balance Sheet
    
    $
    867,893
    
    
    $
    877,569
    
    
    $
    928,467
    
    
    $
    904,554
    
    
    $
    957,090Less: Cash per Balance Sheet
    
    
    (424
    )
    
    
    (4,262
    )
    
    
    (64,736
    )
    
    
    (3,343
    )
    
    
    (2,029
    )Less: Minority Interest
Share of Cash and Long-Term
Debt and Capital Leases
    
    
    (846
    )
    
    
    (216
    )
    
    
    (2,829
    )
    
    
    (7,414
    )
    
    
    (13,789
    )Add: Our share of Long-Term
Debt and Capital Leases in
Unconsolidated JOAs, net of
minority interest
    
    
    16,210
    (1)
    
    
    2,421
    (1)
    
    
    2,192
    
    
    
    4,201
    
    
    
    4,279Total
    
    $
    882,833
    
    
    $
    875,512
    
    
    $
    863,094
    
    
    $
    897,998
    
    
    $
    945,551
   (1)
    
    Excludes our share of the Denver JOA lease (related to the construction of a new building) of
approximately $41.7 million and $18.4 million at June 30, 2006 and 2005, respectively, which
we expect will be terminated in the second quarter of our fiscal year 2007.(e)
    
    EBITDA of Texas-New Mexico Newspapers Partnership and Prairie Mountain Publishing Company.
The Texas-New Mexico Newspapers Partnership and the Prairie Mountain Publishing Company
agreements require the partnerships to make distributions equal to the earnings of the
partnership before depreciation and amortization (EBITDA). From March 3, 2003 through
December 25, 2005, our 33.8% share of the EBITDA of Texas-New Mexico Newspapers Partnership
and beginning February 1, 2006, our 50% share of the EBITDA of Prairie Mountain Publishing
Company, have been included in Adjusted EBITDA Available to Company as they are an integral
part of our cash flow from operations defined by our debt covenants. Beginning December 26,
2005, we became the controlling partner of the Texas-New Mexico Newspapers Partnership at
which time we began consolidating its results. See Note 4: Investments in California
Newspapers Partnership and Texas-New Mexico Newspapers Partnership and Note 5: Acquisitions,
Dispositions and Other Transactions of the notes to the consolidated financial statements of
this Annual Report on Form 10-K for further discussion of the Texas-New Mexico Newspapers
Partnership restructuring and the Prairie Mountain Publishing Company formation. 19




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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 Item 6: Selected Financial Data and the consolidated financial statements of
MediaNews Group, Inc. and the notes thereto appearing elsewhere in this Annual Report on Form 10-K. Company Overview We are in the business of publishing 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 depreciation and amortization) are employee compensation,
newsprint, marketing and distribution. In addition to our newspaper and related Internet
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, 2006, the combined
revenues of these non-newspaper operations were not significant to our operations as they comprised
less than 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; pension and
retiree medical benefits, which require the use of various estimates concerning the work force,
interest rates and plan investment return, and involve the use of advice from consulting actuaries;
and reserves for the self-insured portion of our workers compensation programs, which are based on
such factors as claims growth and also involve 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 Annual Report on 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, 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 sold and delivered to the customer or sold to a home
delivery independent contractor. Amounts received in advance of an advertising run date or
newspaper delivery are deferred and recorded on the balance sheet as a current liability (Unearned
Income) and recognized as revenue when earned. 20




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##### Table of Contents



The operating results of our unconsolidated JOAs (Denver, Salt Lake City and, through May 7,
2004, Charleston) are reported as a single net amount in the accompanying financial statements in
the line item Income from Unconsolidated JOAs. This line item includes:  
    
    Our proportionate share of net income from JOAs,
    
    The amortization of subscriber lists created by the original purchase, as the subscriber
lists are attributable to our earnings in the JOAs, and
    
    Editorial costs, miscellaneous revenue received outside of the JOA, and other charges
incurred by our consolidated subsidiaries directly attributable to providing editorial content and
news for our newspapers party to a JOA. 21




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##### Table of Contents



Operating Results We have provided below certain summary historical consolidated financial data for fiscal years
2006, 2005 and 2004, in each case including the percentage change between periods. Summary Historical Financial DataFiscal Years Ended June 30,2006 vs.
    
    2005 vs.2006
    
    2005
    
    2004
    
    2005
    
    2004(Dollars in thousands)INCOME STATEMENT DATA:Total Revenues
    
    $
    835,876
    
    
    $
    779,279
    
    
    $
    753,829
    
    
    
    7.3
    %
    
    
    3.4
    %Income (Loss) from Unconsolidated JOAs
    
    
    (23,298
    )
    
    
    23,291
    
    
    
    22,207
    
    
    
    (d
    )
    
    
    4.9Cost of Sales
    
    
    260,939
    
    
    
    242,653
    
    
    
    234,784
    
    
    
    7.5
    
    
    
    3.4Selling, General and Administrative
    
    
    417,602
    
    
    
    382,180
    
    
    
    366,636
    
    
    
    9.3
    
    
    
    4.2Depreciation and Amortization
    
    
    44,067
    
    
    
    40,598
    
    
    
    40,742
    
    
    
    8.5
    
    
    
    (0.4
    )Interest Expense
    
    
    55,564
    
    
    
    49,481
    
    
    
    57,036
    
    
    
    12.3
    
    
    
    (13.2
    )Other (Income) Expense, Net
    
    
    1,440
    
    
    
    8,669
    
    
    
    17,365
    
    
    
    (83.4
    )
    
    
    (50.1
    )Total Costs and Expenses
    
    
    779,612
    
    
    
    723,581
    
    
    
    716,563
    
    
    
    7.7
    
    
    
    1.0Equity Investment Income, Net
    
    
    5,898
    
    
    
    10,201
    
    
    
    9,485
    
    
    
    (42.2
    )
    
    
    7.5Gain on Sale of Newspaper Properties
    
    
    1,129
    
    
    
    114
    
    
    
    6,982
    
    
    
    (d
    )
    
    
    (d
    )Minority Interest
    
    
    (35,033
    )
    
    
    (29,334
    )
    
    
    (32,237
    )
    
    
    19.4
    
    
    
    (9.0
    )Net Income
    
    
    1,077
    
    
    
    39,880
    
    
    
    26,737
    
    
    
    (d
    )
    
    
    (d
    )CASH FLOW DATA:Cash Flows from:Operating Activities(a)
    
    $
    71,508
    
    
    $
    92,944
    
    
    $
    76,455Investing Activities(a)
    
    
    (64,454
    )
    
    
    (92,669
    )
    
    
    (20,534
    )Financing Activities
    
    
    (10,892
    )
    
    
    (60,749
    )
    
    
    5,472NON-GAAP FINANCIAL DATA (b):Adjusted EBITDA
    
    $
    157,335
    
    
    $
    154,446
    
    
    $
    152,409
    
    
    
    1.9
    %
    
    
    1.3
    %Minority Interest in Adjusted EBITDA
    
    
    (46,541
    )
    
    
    (41,152
    )
    
    
    (45,747
    )
    
    
    13.1
    
    
    
    (10.0
    )Combined Adjusted EBITDA of Unconsolidated JOAs
    
    
    27,909
    
    
    
    38,097
    
    
    
    39,842
    
    
    
    (26.7
    )
    
    
    (4.4
    )EBITDA of Texas-New Mexico Newspapers
Partnership and Prairie Mountain Publishing
Company (c)
    
    
    5,681
    
    
    
    9,610
    
    
    
    10,108
    
    
    
    (40.9
    )
    
    
    (4.9
    )Adjusted EBITDA Available to Company
    
    $
    144,384
    
    
    $
    161,001
    
    
    $
    156,612
    
    
    
    (10.3
    )%
    
    
    2.8
    %
   (a)
    
    Prior Year Revision/Reclassification. For comparability, certain prior year balances have
been reclassified to conform to current reporting classifications. In particular, the
statements of cash flows have been revised for the years ended June 30, 2005 and 2004 to
reclassify the distribution of earnings from equity investments from net cash flows from
investing activities to net cash flows from operating activities and to reflect distributions
in excess of net income from unconsolidated JOAs and equity investments as cash flows from
investing activities in accordance with Statement of Financial Accounting
Standards No. 95, Statement of Cash Flows. For the year ended June 30, 2005, the revision increased the reported
net cash flows from investing activities and decreased the reported net cash flows from
operating activities by $6.0 million. For the year ended June 30, 2004, the revision
decreased the reported net cash flows from investing activities and increased the reported net
cash flow from operating activities by $1.3 million.(b)
    
    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
Texas-New Mexico Newspapers Partnership (beginning December 26, 2005), The Denver Post
Corporation (through June 10, 2005) and The York Newspaper Company (through April 30, 2004),
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
(through December 25, 2005) and our proportionate share of EBITDA of the Prairie Mountain
Publishing Company (beginning February 1, 2006) (see footnote c). See Managements Discussion
and Analysis of Financial Condition and Results of Operations  Reconciliation of GAAP and
Non-GAAP Financial Information.(c)
    
    The Texas-New Mexico Newspapers Partnership Agreement and Prairie Mountain Publishing
Company.The Texas-New Mexico Newspapers Partnership and Prairie Mountain Publishing Company
agreements require the partnership to make distributions equal to the earnings of the
partnership before depreciation and amortization (EBITDA). Through December 25, 2005, our
33.8% share of the EBITDA of Texas-New Mexico Newspapers Partnership and beginning February 1,
2006, our 50% share of the EBITDA of Prairie Mountain Publishing Company have been included in
Adjusted EBITDA Available to Company as they are an integral part of our cash flows from
operations as defined by our debt covenants. Beginning December 26, 2005, we became the
controlling partner of the Texas-New Mexico Newspapers Partnership at which time we began
consolidating its results. See Note 4: Investments in California Newspapers Partnership and
Texas-New Mexico Newspapers Partnership and Note 5: Acquisitions, Dispositions and Other
Transactions of the notes to the consolidated financial statements of this Annual Report on
Form 10-K for further discussion of the Texas-New Mexico Newspapers Partnership restructuring
and the Prairie Mountain Publishing Company formation.(d)
    
    Not meaningful. 22




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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 in Denver and Salt Lake City do not restrict cash
distributions to the owners and in general our Denver and Salt Lake City JOAs make monthly
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 in Denver and Salt
Lake City, York through April 30, 2004, and Charleston through May 7, 2004 using pro-rata
consolidation, including the percentage change between periods (the operations of the Charleston
JOA subsequent to May 7, 2004 and the Detroit JOA have not been included on a pro-rata
consolidation basis). See Notes 2 and 3 to the consolidated financial statements for additional
discussion of the GAAP accounting for our JOAs. THE INFORMATION IN THE FOLLOWING TABLE IS NOT PRESENTED IN ACCORDANCE WITH
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND DOES NOT COMPLY WITH ARTICLE 11
OF REGULATION S-X FOR PRO FORMA FINANCIAL DATA Summary Selected Non-GAAP Financial DataFiscal Years Ended June 30,2006 vs.
    
    2005 vs.2006
    
    2005
    
    2004
    
    2005
    
    2004(Dollars in thousands)PRO-RATA CONSOLIDATED INCOME STATEMENT DATA:Total Revenues
    
    $
    1,132,423
    
    
    $
    1,081,754
    
    
    $
    1,049,851
    
    
    
    4.7
    %
    
    
    3.0
    %Cost of Sales
    
    
    381,763
    
    
    
    362,456
    
    
    
    355,808
    
    
    
    5.3
    
    
    
    1.9Selling, General and Administrative
    
    
    565,416
    
    
    
    526,755
    
    
    
    508,656
    
    
    
    7.3
    
    
    
    3.6Depreciation and Amortization
    
    
    92,261
    
    
    
    54,021
    
    
    
    55,453
    
    
    
    70.8
    
    
    
    (2.6
    )Interest Expense
    
    
    55,827
    
    
    
    49,679
    
    
    
    57,258
    
    
    
    12.4
    
    
    
    (13.2
    )Other (Income) Expense, Net
    
    
    4,190
    
    
    
    9,854
    
    
    
    19,225
    
    
    
    (57.5
    )
    
    
    (48.7
    )Total Costs and Expenses
    
    
    1,099,457
    
    
    
    1,002,765
    
    
    
    996,400
    
    
    
    9.6
    
    
    
    0.6Gain on Sale of Newspaper Properties
    
    
    1,129
    
    
    
    114
    
    
    
    6,982
    
    
    
    (c
    )
    
    
    (c
    )Minority Interest
    
    
    (35,033
    )
    
    
    (29,334
    )
    
    
    (26,215
    )
    
    
    19.4
    
    
    
    11.9Net Income
    
    
    1,077
    
    
    
    39,880
    
    
    
    26,737
    
    
    
    (c
    )
    
    
    (c
    )CASH FLOW DATA (GAAP BASIS):Cash Flows from:Operating Activities(a)
    
    $
    71,508
    
    
    $
    92,944
    
    
    $
    76,455Investing Activities(a)
    
    
    (64,454
    )
    
    
    (92,669
    )
    
    
    (20,534
    )Financial Activities
    
    
    (10,892
    )
    
    
    (60,749
    )
    
    
    5,472PRO-RATA OTHER DATA(b):Adjusted EBITDA
    
    $
    185,244
    
    
    $
    192,543
    
    
    $
    185,387
    
    
    
    (3.8
    )%
    
    
    3.9
    %Minority Interest in Adjusted EBITDA
    
    
    (46,541
    )
    
    
    (41,152
    )
    
    
    (38,883
    )
    
    
    13.1
    
    
    
    5.8EBITDA of Texas-New Mexico Newspapers
Partnership and Prairie Mountain Publishing
Company
    
    
    5,681
    
    
    
    9,610
    
    
    
    10,108
    
    
    
    (40.9
    )
    
    
    (4.9
    )Adjusted EBITDA Available to Company
    
    $
    144,384
    
    
    $
    161,001
    
    
    $
    156,612
    
    
    
    (10.3
    )%
    
    
    2.8
    %
   (a)
    
    See footnote (a) under Managements Discussion and Analysis of Financial Condition and
Results of Operations  Operating Results for discussion of Prior Year
Revision/Reclassification.(b)
    
    See footnote (b) 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 Prairie Mountain Publishing Company and Adjusted
EBITDA Available to Company. The Minority Interest in Adjusted EBITDA shown is calculated the
same as described in footnote (b) 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 (through June
10, 2005), 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.(c)
    
    Not meaningful. 23




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##### Table of Contents



Fiscal Year 2006 Executive Overview In fiscal year 2006, we continued to grow advertising revenue. We saw growth in national,
preprint, employment and real estate classified advertising in most of our markets. While
advertising revenue grew, circulation revenue declined slightly. The trend of significant growth
in Internet advertising revenue continued as Internet-related revenues increased 38.4% in fiscal
year 2006, after adjusting for acquisitions and dispositions. The Internet is a critical element
of our overall strategy to expand our audience by delivering 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 2006, newsprint and employee benefit costs, two of our largest expenses,
continued their trend from fiscal year 2005 and increased at a higher rate as compared to other
operating expenses. Excluding our unconsolidated JOAs, our average cost per metric ton of newsprint
increased almost 8.7% in fiscal year 2006 and 8.9% in fiscal year 2005, which correspondingly
increased cost of sales by $4.6 million and $5.5 million during the respective fiscal years.
Reduced consumption associated with decreases in retail advertising volumes, a shift to preprint
advertising from advertising printed in the newspaper, and small circulation declines helped to
somewhat offset the impact of newsprint price increases. 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 2006. Pension and other post retirement benefit
costs increased due to increases in assumed health care costs and lower discount rates. We also saw
increased spending related to our Internet initiatives. We continue to maintain tight cost
controls throughout our organization and seek to identify areas where further cost control measures
can be implemented. Transactions Our current year results were also impacted by the following transactions completed during
fiscal year 2006:  
    
    In August 2005, we purchased The Detroit News, Inc. which included a limited partnership
interest in the Detroit JOA.
    
    In September 2005, we amended our bank credit facility to refinance a portion of our
long-term debt and reduce certain interest rate margins charged under the bank credit
facility.
    
    Effective December 26, 2005, we restructured the Texas-New Mexico Newspapers Partnership
whereby we contributed to the partnership our Pennsylvania newspapers: The Evening Sun
(Hanover), the Lebanon Daily Newsand our interest in the partnership that publishes the
York Daily Recordand York Sunday News, which continues to operate under the terms of a
joint operating agreement along with The York Dispatch. Gannett, our partner in the
Texas-New Mexico Newspapers Partnership, contributed the Public Opinionin Chambersburg,
PA. As a result of the contributions and amendment and restatement of the partnership
agreement, the Texas-New Mexico Newspapers Partnership became a 59.4%-owned consolidated
subsidiary of ours.
    
    In February 2006, the Prairie Mountain Publishing Company was formed after which we no
longer consolidate the results of Eastern Colorado Publishing Company and account for our
investment in Prairie Mountain Publishing Company under the equity method of accounting.
We own 50% of Prairie Mountain Publishing Company. In addition to the fiscal year 2006 transactions described above, certain transactions in
fiscal years 2005 and 2004 had an impact on the comparisons of our results for the years ended June
30, 2006, 2005 and 2004. In fiscal year 2005, transactions that affect comparisons include the following:  
    
    In January 2005, we purchased The Park Recordpublished in Park City, Utah.
    
    We took advantage of the lower interest rates available to us in both the bond and bank
financing markets by refinancing a portion of our long-term debt. We amended and refinanced
a portion of our bank credit facility in August 2004 to take advantage of lower borrowing
margins. We also retired $200.0 million of our 8 5/8% bonds in July 2004 with proceeds of
our January 2004 issuance of $150.0 million 6 3/8% bonds and cash on hand.
    
    In June 2005, we purchased the 20% of The Denver Post Corporation which we did not own
for approximately $45.9 million. 24




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In fiscal year 2004, transactions that affect comparisons include the following:  
    
    We restructured our interest in the Charleston JOA in exchange 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.
    
    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 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 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. Comparison of Fiscal Years Ended June 30, 2006 and 2005  Revenues On a same newspaper basis (after adjusting for the aforementioned fiscal year 2005 Park City
acquisition, the fiscal year 2006 Detroit acquisition, Texas-New Mexico Newspapers Partnership
restructuring and Prairie Mountain Publishing Company formation), the following changes occurred in
our significant revenues categories for the year ended June 30, 2006 as compared to the prior year. Advertising Revenues.Advertising revenues increased by approximately 1.7% for the year ended
June 30, 2006 as compared to the prior year. The increase in advertising revenue was due
principally to increases in national and preprint advertising categories, as well as increases in
revenues from our Internet operations, offset in part by a decrease in retail (ROP, run of press)
advertising. The classified advertising category remained relatively flat with increases in
classified employment and classified real estate being offset by decreases in classified
automotive. Circulation Revenues.Circulation revenues decreased 4.9% for the year ended June 30, 2006 as
compared to the prior year. The decrease was primarily due to home delivery pricing pressures at
most of our newspapers, which resulted in our offering greater discounts to acquire new and retain
existing subscribers, in order to help achieve our home delivery volume goals. Income from Unconsolidated JOAs As noted in our discussion of critical accounting policies, income from unconsolidated JOAs
(Denver and Salt Lake City) includes our proportionate share of net income from those JOAs, the
amortization of subscriber lists created by the original purchase, editorial costs, miscellaneous
revenue and other charges directly attributable to providing editorial content and news for
newspapers party to a JOA. The following discussion takes into consideration all of the associated
revenues and expenses described above. The results for the year ended June 30, 2006 were
negatively impacted by the accelerated depreciation taken on certain fixed assets at production
facilities in Denver and Salt Lake City which have been or will be retired earlier than originally
expected due to the construction or completion of new production facilities at their respective
locations. Excluding depreciation and amortization which were significantly impacted by the effect
of accelerated depreciation, income from unconsolidated JOAs in Denver and Salt Lake City was down
approximately $11.8 million or 32.2% compared to the prior year. The results of the Denver JOA
were negatively impacted by a soft advertising market combined with higher newsprint prices,
increased circulation, promotion and delivery costs, and increased employee benefit costs.
Excluding the impact of the accelerated depreciation, the results of the Salt Lake City JOA were
relatively flat year over year. While the Salt Lake City JOA experienced many of the same
operating expense increases that the Denver JOA did, its advertising revenue gains mostly kept pace
with these expense increases. 25




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##### Table of Contents



Cost of Sales The purchase of The Park Recordin fiscal year 2005, the December 2005 Texas-New Mexico
Newspapers Partnership restructuring and the February 2006 formation of Prairie Mountain Publishing
Company had the net impact of increasing cost of sales by $12.9 million for the year ended June 30,
2006 as compared to the prior year. Excluding these transactions, cost of sales increased 2.3%.
The increase was driven by an 8.7% increase in newsprint prices as compared to the same period in
prior year. Our average price of newsprint was $574 per metric ton for the year ended June 30,
2006 as compared to $528 per metric ton for the prior year. Increases in newsprint prices were
offset in part by decreases in newsprint consumption of approximately 4.4% for the year ended June
30, 2006. Also impacting cost of sales were increased costs in our production and mailroom
departments related to commercial printing and increased preprint volumes. Selling, General and Administrative The purchase of The Park Recordin fiscal year 2005, the December 2005 Texas-New Mexico
Newspapers Partnership restructuring and the February 2006 formation of Prairie Mountain Publishing
Company had the net impact of increasing SG&A by $20.4 million for the year ended June 30, 2006 as
compared to the prior year. Excluding these transactions, SG&A increased 3.9%. The current year
increases were primarily the result of increases in employee costs, including health care and
retirement benefits, as well as increased costs associated with circulation promotion and delivery
(primarily fuel due to increased gas prices), and increased costs related to the growth in our
advertising revenues and Internet operations. Expenses related to our Internet operations
increased $5.0 million for the year ended June 30, 2006 as compared to the prior year, which was
more than offset by Internet revenue growth of 38.4%. Interest Expense The increase in interest expense was the result of an increase in the average debt
outstanding, as well as an increase in the weighted average cost of debt. Significant borrowings
impacting the year over year comparison related to the August 3, 2005 purchase of our interest in
the Detroit JOA, the June 10, 2005 purchase of the remaining 20% of The Denver Post Corporation
which we did not own, funding for our share of the cost of the new production and office facility
built in Salt Lake City, and the cash investment associated with the formation of the Prairie
Mountain Publishing Company. For the year ended June 30, 2006, our average debt outstanding
increased $34.9 million, or 4.0%, and our weighted average interest rate increased 64 basis points
as compared to the prior year. Other (Income) Expense, Net We include expenses and income items that are not related to current operations in other
(income) expense, net. The charges incurred for the year ended June 30, 2006 relate to litigation expense of $1.3
million associated with the acquisition of Kearns-Tribune, LLC (Salt Lake City), $0.8 million
related to hedging and investing activities that did not qualify for hedge accounting under SFAS
No. 133, $(2.0) million related to our contractual return on our investment in the Detroit JOA,
$0.2 million in bank fees and $1.1 million associated with various other items that were not
related to ongoing 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 $4.3 million decrease in equity
investment income, net is largely due to the December 25, 2005 restructuring of the Texas-New
Mexico Newspapers whereby as a result of the restructuring, we no longer account for our interest
in the Texas-New Mexico Newspapers Partnership under the equity method of accounting and instead
consolidate the partnerships results. Net Income Net income for fiscal year 2006 was negatively impacted by the loss from unconsolidated JOAs
which was caused by the accelerated depreciation taken on certain fixed assets at production
facilities in Denver and Salt Lake City which have 26




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##### Table of Contents



been or will be retired earlier than originally expected due to the construction or completion
of new production facilities at their respective locations. Excluding
the impact of accelerated depreciation at the Denver and Salt Lake
JOAs, pre-tax net income declined $6.8 million. Our effective tax rate was 78% for the
year ended June 30, 2006, as compared to 34% for the year ended
June 30, 2005. The effective tax rate was higher in fiscal year
2006 due to the contribution of our eastern Colorado newspapers to
Prairie Mountain Publishing Company which caused a change in how we
account for the related book/tax basis differences, an increase in
the valuation allowances for state tax NOL carryforwards, and
recurring non-deductible expenses that had a larger impact on the
effective income tax rate in fiscal year 2006 due to lower pre-tax
book income in fiscal year 2006 compared to the prior year. Comparison of Fiscal Years Ended June 30, 2005 and 2004  Revenues On a same newspaper basis (after adjusting for the aforementioned fiscal year 2005 Park City
and fiscal year 2004 Gazette transactions), the following changes occurred in our significant
revenues categories for the year ended June 30, 2005 as compared to the prior year. Advertising Revenues. Advertising revenues increased by approximately 4.1% for the year ended
June 30, 2005 as compared to the prior year. The increase in advertising revenue was due
principally to increases in national of 6.1%, classified of 3.7% and preprints of 9.6%, as well as
a $7.8 million or 40.5% increase in revenues from our Internet operations, offset in part by a
small decrease in retail ROP (run of press) advertising of 1.9%. The growth in preprint revenues
was due to a trend of major retail advertisers shifting from ROP advertising and into preprint
advertising. For the year ended June 30, 2005, employment and real estate classified advertising
increased at the majority of our newspapers. These gains, however, were somewhat offset by
declines in classified automotive advertising. Circulation Revenues. Circulation revenues decreased by approximately 3.0% for the year ended
June 30, 2005 as compared to the prior year. The decrease was primarily due to pricing pressures
at some of our newspapers, as well as competition from other non-newspaper media sources, which
resulted in greater discounts in order to acquire new and retain existing subscribers and help
achieve our home delivery volume goals. Income from Unconsolidated JOAs As noted in our discussion of critical accounting policies, income from unconsolidated JOAs
(Denver, Salt Lake City, and through May 7, 2004, Charleston) includes our proportionate share of
net income from those JOAs, the amortization of subscriber lists created by the original purchase,
editorial costs, miscellaneous revenue and other charges directly attributable to providing
editorial content and news for our newspapers party to a JOA. The following discussion takes into
consideration all of the associated revenues and expenses described above. The aforementioned
Charleston restructuring had the net impact of decreasing income from unconsolidated JOAs by $1.3
million for the year ended June 30, 2005. Excluding the impact of the Charleston restructuring,
the increase for the year ended June 30, 2005 was due to improved net income at both the Denver and
Salt Lake JOAs. Cost of Sales The aforementioned purchase of The Park Recordin fiscal year 2005, the fiscal year 2004 York
restructuring and weekly newspaper purchases had the net impact of increasing cost of sales by $3.8
million for the year ended June 30, 2005, as compared to the prior year. Excluding these
transactions, cost of sales for the year increased 1.7%. The current year increase in cost of
sales was due in part to an 8.9% increase in our average price per metric ton of newsprint consumed
for the year ended June 30, 2005, as compared to the prior year. Our average price was
approximately $528 per metric ton for the year ended June 30, 2005, as compared to $485 per metric
ton for prior year. Partially offsetting the impact of higher newsprint prices was a small
decrease in our newsprint consumption. Selling, General and Administrative The transactions described above had the net impact of increasing SG&A by $2.7 million for the
year ended June 30, 2005, as compared to the prior year. Excluding these transactions, SG&A
increased 3.5%. The current year increase was primarily the result of increases in employee costs,
including health care and retirement benefits, the curtailment of a pension plan at one of our
subsidiaries, as well as increased costs directly associated with the growth in our advertising
revenues and Internet operations. Expenses related to our Internet operations increased $2.1
million, or 15.0%, for the year ended June 30, 2005. 27




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##### Table of Contents



Interest Expense Interest expense for fiscal year 2005 decreased $7.6 million as a result of a $48.4 million,
or 5.3% reduction, in our average debt outstanding to $864.9 million, as well as a 42 basis point
reduction in our weighted average interest rate to 5.59%. The lower weighted average cost of debt
was a result of the November 2003 refinancing of our 8 3/4% Senior Subordinated Notes with our 6
7/8% Senior Subordinated Notes, the restructuring of our bank credit agreement (December 2003 and
August 2004) and the July 2004 repurchase of our 8 5/8% Senior Subordinated Notes funded out of
proceeds from our 6 3/8% Senior Subordinated Notes (issued in January 2004) and borrowings from our
bank credit facility. Savings from our various refinancing efforts were offset in part by
increases in LIBOR over the prior year (the average daily one month rate for LIBOR increased 125
basis points, for the year ended June 30, 2005 as compared to the same period in prior year). The
interest rates under our bank credit facility are based on LIBOR, plus a borrowing margin based on
our leverage ratio. Interest expense was also favorably impacted in the prior year 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 year ended
June 30, 2004. We had no interest rate swap agreements during fiscal year 2005. Excluding the
impact of the interest rate swaps in the prior year, our weighted average interest rate decreased
by approximately 74 basis points for the year ended June 30, 2005. Other (Income) Expense, Net We include expenses and income items that are not related to current operations in other
(income) expense, net. We incurred charges for the year ended June 30, 2005 related to litigation
expense of $0.8 million associated with the acquisition of Kearns-Tribune, LLC (Salt Lake City),
$(5.8) million reduction in the estimated cost to repurchase an option held by a third party to
acquire one of our newspapers, $9.2 million of repurchase premiums and unamortized discount
associated with the early redemption of our 8 5/8% Senior Subordinated Notes, $0.4 million related
to hedging activities that did not qualify for hedge accounting under SFAS No. 133, $0.7 million in
bank fees and $3.4 million related to various other costs that were not related to ongoing
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 $0.7 million increase in equity
investment income, net was primarily related to an increase in equity income from PowerOne mostly
due to a gain on sale recognized by PowerOne from the sale of one of its product lines. Operating
results also improved at CIPS. The increases at PowerOne and CIPS were partially offset by
decreases in income from our other equity investments. Net Income Net income for fiscal year 2005 was negatively impacted by $9.2 million for redemption
premiums and unamortized discounts associated with the early redemption of our 8 5/8% Senior
Subordinated Notes. Excluding the $9.2 million loss on early extinguishment of debt, pre-tax net
income was $69.2 million for the year ended June 30, 2005. Prior year pre-tax income 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. Our effective tax rate was 34%
for the year ended June 30, 2005, as compared to 39% for the year ended June 30, 2004. Liquidity and Capital Resources Our sources of liquidity are 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;
however, from time to time, we increase our newsprint inventories in anticipation of price
increases. In general, our receivables have been collected on a timely basis. 28




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##### Table of Contents



Cash Flow Activity The decrease in net cash flows from operating activities of $21.4 million for the year ended
June 30, 2006, was largely attributable to a $12.6 million increase in
distributions paid to minority interests, a $32.0 million
decrease in distributions of net income from unconsolidated JOAs and
equity investments, offset in part by a $29.8 million change in
cash flows from operating assets and liabilities due to timing. The net cash outflows related to investing activities decreased by $28.2 million. The
significant changes between fiscal year 2006 and 2005 are as follows. In fiscal year 2006, we had
combined investments of $47.9 million related to the Detroit JOA, Prairie Mountain Publishing
Company, and other small investments, as compared to combined investments of $58.6 million in the
prior year (primarily the purchase of the remaining minority interest in The Denver Post
Corporation and the Park City acquisition). In addition, the fiscal year 2006 change was impacted
by a net $13.8 million increase in distributions in excess of net income from unconsolidated JOAs,
equity investments and other unconsolidated subsidiaries, and a $3.8 million decrease in capital expenditures. However, total cash distributions from unconsolidated JOAs (components of
operating and investing cash flows) decreased by $15.1 million year over year. Approximately $15.3
million of the 2006 capital expenditures are related to our share of the cost of a new printing and
office facility being constructed for the Salt Lake City JOA. In addition, capital expenditures
for the year ended June 30, 2006 include expenditures related to the construction of a new building
in San Bernardino, California and the ongoing project to implement new advertising and circulation
systems company-wide. The net cash outflows related to financing activities decreased by $49.9 million for the year
ended June 30, 2006. Activity included normal borrowings and paydowns on long-term debt, as well
as borrowings to finance the purchases of our interest in the Detroit JOA, our 50% interest in the
Prairie Mountain Publishing Company and to fund our share of the new production and office facility
in Salt Lake City, contributions related to certain equity investments and refinancing costs of the
September 8, 2005 amended credit facility. Excluding the aforementioned items we paid down debt of
approximately, $70.1 million for the year ended June 30, 2006. In addition to normal borrowings
and paydowns on long-term debt, prior period activity included using cash on hand and available
borrowings under the revolver portion of our credit facility to repurchase all of our outstanding 8
5/8% Senior Subordinated Notes for $208.6 million (including $8.6 million of repurchase premiums). Capital Expenditures Capital ExpendituresFiscal Year 2007 Plan
    
    Fiscal Year 2006 Actual(Dollars in thousands)Wholly-
    
    Non Wholly-
    
    Our Share of
    
    
    
    
    
    Wholly-
    
    Non Wholly-
    
    Our Share ofOwned
    
    Owned
    
    Unconsolidated
    
    
    
    
    
    Owned
    
    Owned
    
    UnconsolidatedSubsidiaries
    
    Subsidiaries
    
    JOAs
    
    Total
    
    Subsidiaries
    
    Subsidiaries
    
    JOAs
    
    TotalTotal Capital Projects
    
    $
    24,262
    
    
    $
    14,448
    
    
    $
    17,930
    
    
    $
    56,640
    
    
    $
    32,496
    
    
    $
    15,005
    
    
    $
    16,858
    
    
    $
    64,359Less Minority
Partners Share
    
    
    
    
    
    
    (6,441
    )
    
    
    
    
    
    
    (6,441
    )
    
    
    
    
    
    
    (6,817
    )
    
    
    
    
    
    
    (6,817
    )$
    24,262
    
    
    $
    8,007
    
    
    $
    17,930
    
    
    $
    50,199
    
    
    $
    32,496
    
    
    $
    8,188
    
    
    $
    16,858
    
    
    $
    57,542
 Non-maintenance expenditures planned for fiscal year 2007 include costs for leasehold
improvements and furniture and fixtures related to Corporate and our Internet groups move, a
redundant data center as well as other infrastructure software and equipment for our Internet
group, and certain production facility improvements and various other technology infrastructure
improvements throughout the Company. Carryover expenditures from the prior year of which our share
(net of minority interest) is approximately $12.5 million are primarily for new Company-wide
advertising and circulation systems, front-end editorial systems for the Alameda Newspapers Group
and our share of remaining costs related to the new printing and office facility in Salt Lake City.
Planned expenditures related to our share of unconsolidated JOAs
include the new production and office
facilities in Denver. Management reviews the capital expenditure plan throughout the year and
adjusts it as required to meet our current business needs and performance. Capital expenditures
related to these projects are expected to be funded either through available cash or borrowings
under our bank credit facility. The capital expenditures plan above excludes the capital budget
for our August 2, 2006 acquisitions (see Note 16: Subsequent Events for further discussion of the
acquisition). 29




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##### Table of Contents



Liquidity at June 30, 2006 On April 26, 2006, we entered into a Stock and Asset Purchase Agreement (the MediaNews
Purchase Agreement) with The McClatchy Company (McClatchy) pursuant to which we agreed to
purchase the Contra Costa Timesand the San Jose Mercury Newsand related publications and Web
sites for $736.8 million. We consummated such purchase from McClatchy on August 2, 2006 through
the California Newspapers Partnership, a 54.23% owned subsidiary. Our cash portion of the
acquisition, including fees, was approximately $403.0 million and was funded with borrowings from
our revolver and proceeds from a new term loan C of our amended bank credit facility. The
acquisition, including fees, was funded in part with contributions of $340.1 million from our
partners in the California Newspapers Partnership. See further discussion regarding term loan C
below. On April 26, 2006, The Hearst Corporation (Hearst) and McClatchy entered into a Stock and
Asset Purchase Agreement (the Hearst Purchase Agreement) pursuant to which Hearst agreed to
purchase The Monterey County Heraldand the St. Paul Pioneer Pressand related publications and Web
sites for $263.2 million. Hearst and McClatchy consummated such purchase on August 2, 2006. On
August 2, 2006, we entered into an agreement with Hearst (the MediaNews/Hearst Agreement)
pursuant to which (i) Hearst agreed to make an equity investment in us of up to $299.4 million
(subject to adjustment under certain circumstances). Such investment will not include any
governance or economic rights or interest in our publications in the San Francisco Bay Area and
(ii) we agreed to purchase from Hearst The Monterey County Heraldand the St. Paul Pioneer Press
with a portion of the proceeds from the Hearst equity investment. The equity investment will
afford Hearst an equity interest of approximately 30% (subject to adjustment in certain
circumstances) in our publications outside the San Francisco Bay area. Hearst will also be
provided certain approval rights with respect to our publications outside the San Francisco Bay
area. The equity investment by Hearst in the Company is subject to regulatory approval, and a
review is currently underway by the Antitrust Division of the Department of Justice. The Antitrust
Division has requested information and documents in connection with this review, and we are in the
process of responding to this request. We have agreed to manage The Monterey County Heraldand the
St. Paul Pioneer Pressduring the period of ownership by Hearst, with us retaining all the net cash
flows from these newspapers as a management fee. We have also agreed that at the election of
MediaNews or Hearst, we will purchase The Monterey County Heraldand the St. Paul Pioneer Press
from Hearst for $263.2 million (plus reimbursement of Hearsts cost of funds in respect of its
purchase of such newspapers) if for any reason Hearsts equity investment in us is not consummated
within six months, which may be extended by agreement of both parties. We would need to obtain
additional financing to fund this purchase, if required. We will consolidate the financial
statements of these two properties commencing August 2, 2006. If necessary, we currently intend to
fund the purchase of the St. Paul Pioneer Pressand The Monterey County Heraldthrough equity
investments from other sources or debt issued by a newly formed holding company that would be the
parent company of MediaNews. Proceeds from The Monterey County Heraldcontribution to CNP or
separate Stephens partnership would also be available to fund the Hearst purchase. On April 26, 2006, we entered into an agreement with Gannett and S.F. Holding Corporation (the
Stephens/Gannett Contribution Agreement) pursuant to which Gannett and S.F. Holding Corporation
(Stephens) will contribute their pro rata share of the purchase price (plus estimated transaction
fees and expenses) of The Monterey County Herald, for a total ranging between approximately $27.4
million and $38.4 million, depending on whether The Monterey County Heraldis purchased by the
California Newspapers Partnership or a partnership between us and Stephens, to be owned 67.36% by
us and 32.64% by Stephens. On June 30, 2006, our debt structure included our amended and restated bank credit facility
which provides for borrowings of up to $597.3 million, consisting of a $350.0 million revolving
credit facility, a $100.0 million term loan A and a $147.3 million term loan B. Any payments
on the term loans cannot be reborrowed, regardless of whether such payments are scheduled or
voluntary. On June 30, 2006, the balances outstanding under the revolving credit portion of the
bank credit facility, term loan A and term loan B were $146.6 million, $100.0 million and
$145.8 million, respectively, and we had $193.0 million available for future borrowings, net of
$10.4 million in outstanding letters of credit. In July 2006, we sold our office building in Long Beach, California for approximately $20.0
million. We expect to recognize a gain on the sale of the building. In conjunction with the sale of our building, we
entered into a 15-year lease agreement for space to house our Long Beach operations. The lease
term commences once the new space is ready to be occupied, which is expected to be in the second
quarter of our fiscal year 2007. Expected minimum lease payments are as follows: fiscal years
2007 through 2009  $0.8 million per year; fiscal years 2010 through 2011  $0.9 million per
year; and thereafter  $10.5 million cumulatively. 30




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##### Table of Contents



On August 2, 2006, we amended our existing bank credit facility. The amendment was entered
into in order to create a new $350.0 million term loan C facility and to authorize us to purchase
the Contra Costa Times, San Jose Mercury News, The Monterey County Heraldand the St. Paul Pioneer
Press. The amended facility maintains the $350.0 million revolving credit facility, the $100.0
million term loan A, the $147.3 million term loan B and provides for the $350.0 million term
loan C facility which was borrowed on August 2, 2006 and used to pay our portion of the purchase
price for the Contra Costa Timesand the San Jose Mercury Newsalong with the additional borrowings
under our revolving credit facility. The term loan C bears interest based upon, at the Companys
option, Eurodollar, plus a borrowing margin of 1.75%, or base rate, plus a borrowing margin of
0.75%. The term loan C requires quarterly principal payments as follows: $0.875 million through
June 2012; and $82.25 million from June 2012 through March 2013, with the remaining balance due at
maturity on August 2, 2013. Amounts repaid under term loan C are not available for re-borrowing. In September 2005, the management committee of the Denver JOA authorized the incurrence of up
to $150.0 million of debt by the Denver JOA to finance furniture, fixtures and computers for its
new building and new presses and related equipment and building costs related to the consolidation
of two existing production facilities into one for the Denver JOA. We own a 50% interest in the
Denver JOA. As of June 30, 2006, our share of the debt incurred by the Denver JOA for the items
mentioned was approximately $14.0 million. See Off-Balance Sheet Arrangements for further
information regarding our share of long-term debt in Denver. In January 1998, we entered into an option agreement in association with the acquisition
financing of one of our newspaper properties. This option provides the holder the right to
purchase the assets used in the publication of the newspaper, 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 at June 30, 2006 is valued at approximately $6.6 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. If the option is not
exercised, we must repurchase it on January 30, 2010. S.F. Holding Corporation (Stephens), 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,
Stephens 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 Stephens to exercise its put. No
amounts are recorded in our financial statements related to Stephens 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 2007
will be approximately $8.5 million to $9.0 million (including the required contributions for the
plans assumed in conjunction with our August 2, 2006 acquisition). We 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
provisions of our Denver, Salt Lake City and Detroit JOAs, as well as the CNP, the Texas-New Mexico
Newspapers Partnership and Prairie Mountain Publishing Company partnership agreements:  
    
    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 paid to Kearns-Tribune, LLC and
is distributed (generally) weekly.
    
    Through our wholly-owned subsidiary, The Denver Post Corporation, we own 50% of The
Denver Newspaper Agency, LLP. Under the Denver Newspaper Agency JOA agreement, the
partnership is required to distribute 50% of 31




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##### Table of Contents



its monthly EBITDA (and other funds available for distribution), less working capital
required by the partnership and payments under its separate credit agreements, to The Denver
Post Corporation.
    
    Through our wholly-owned subsidiary, The Detroit News, Inc., we own a limited partnership
interest in Detroit Newspaper Partnership, L.P. Under the Detroit JOA agreement, the
partnership is required to make fixed preferred distributions to us monthly, as well as
reimburse us for our news and editorial costs. The fixed preferred distributions are as
follows: $5.0 million for years 2006 and 2007; $4.0 million for years 2008 and 2009; $3.0
million for years 2010 and 2011; $2.0 million for the year 2012; and $1.9 million for all
remaining years. Beginning in 2009, we may receive incremental distributions based on
profit growth of the Detroit JOA.
    
    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 in
proportion to our partnership interest, less working capital required and debt service
payments (total CNP debt, excluding the debt and capital leases we contributed to the
partnership, is $1.2 million at June 30, 2006 of which our share is $0.7 million).
    
    Through our wholly-owned subsidiary, New Mexico-Texas MediaNews LLC, we own a 59.4%
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) 59.4% of such
funds to New Mexico-Texas MediaNews LLC.
    
    Through our wholly-owned subsidiary, Eastern Colorado Publishing Company, we own 50% of
the Prairie Mountain Publishing Company. Under the Prairie Mountain Publishing Company
partnership agreement, monthly distributions equal to 50% of EBITDA (and other funds
available for distribution), less working capital required by the partnership, are required
to be made to Eastern Colorado Publishing Company. Off-Balance Sheet Arrangements Our share of long-term debt in unconsolidated JOAs (Denver) was approximately $16.2 million at
June 30, 2006 (excludes approximately $41.7 million at
June 30, 2006 for our share of the Denver JOA construction lease related to a new building to
consolidate the Denver JOA operations). We expect the Denver JOA will
terminate the construction lease in the second quarter of our fiscal year 2007. 32




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##### Table of Contents



Contractual Obligations The following table represents our contractual obligations as of June 30, 2006: Less than
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    1 Year
    
    1-3 Years
    
    3-5 Years
    
    5 Years(Dollars in thousands)Long-Term Debt(1)
    
    $
    861,923
    
    
    $
    3,926
    
    
    $
    41,843
    
    
    $
    356,459
    
    
    $
    459,695Capital Lease Obligations, Net of
Imputed Interest
    
    
    5,970
    
    
    
    207
    
    
    
    519
    
    
    
    645
    
    
    
    4,599Operating Leases
    
    
    41,135
    
    
    
    6,865
    
    
    
    10,655
    
    
    
    4,147
    
    
    
    19,468Purchase Obligations(2)
    
    
    116,922
    
    
    
    41,972
    
    
    
    56,492
    
    
    
    15,243
    
    
    
    3,215Other Long-Term Liabilities Reflected on
the Balance Sheet under GAAP(3)
    
    
    28,774
    
    
    
    
    
    
    
    2,496
    
    
    
    9,406
    
    
    
    16,872Total
    
    $
    1,054,724
    
    
    $
    52,970
    
    
    $
    112,005
    
    
    $
    385,900
    
    
    $
    503,849
  (1)
    
    Does not reflect our August 2, 2006 amended credit facility which provided for a new term
loan C. Maturities related to the new term loan C facility are as follows: Fiscal years
2007 through 2011  $3.5 million each year; and thereafter  $329.0 million.  (2)
    
    Purchase obligations primarily include commitments to purchase newsprint. One of our
newsprint contracts requires us to purchase newsprint at market. For purposes of this
disclosure we used the market price as of June 2006. It is difficult to predict the price of
newsprint over the term of the contract.  (3)
    
    Reflected on the balance sheet in Other Liabilities (long-term) at June 30, 2006 is $6.6
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. Near Term Outlook  Newsprint Prices Newsprint suppliers last announced a price increase for August 2006. However, the timing and
amount of the price increase has and continues to vary widely among newsprint purchasers and
suppliers, and we believe that such increase is unlikely to hold. The August 2006 RISI (Resource
Information Systems, Inc.) price index for 30 pound newsprint was $663 per metric ton compared to
$612 per metric ton in August 2005. As a large buyer of newsprint, our cost of newsprint continues
to be below the RISI price index. 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. 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). 33




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Reconciliation of Cash Flows from Operating Activities (GAAP measure) to Adjusted EBITDA
(non-GAAP measure). Years Ended June 30,2006
    
    2005
    
    2004
    
    2003
    
    2002(Dollars in thousands)NON-GAAP FINANCIAL DATA(a)Cash Flows from Operating Activities (GAAP measure)
    
    $
    71,508
    
    
    $
    92,944
    
    
    $
    76,455
    
    
    $
    89,759
    
    
    $
    66,629Net Change in Operating Assets and Liabilities
    
    
    (4,132
    )
    
    
    25,678
    
    
    
    20,126
    
    
    
    8,619
    
    
    
    459Distributions Paid to Minority Interest
    
    
    40,782
    
    
    
    28,167
    
    
    
    36,176
    
    
    
    38,765
    
    
    
    43,406Distributions of Net Income from Unconsolidated JOAs
    
    
    (44,120
    )
    
    
    (71,878
    )
    
    
    (66,828
    )
    
    
    (66,326
    )
    
    
    (50,995
    )Distributions of Net Income from Equity Investments
    
    
    (5,228
    )
    
    
    (9,511
    )
    
    
    (9,676
    )
    
    
    (4,360
    )
    
    
    (1,448
    )Interest Expense
    
    
    55,564
    
    
    
    49,481
    
    
    
    57,036
    
    
    
    64,252
    
    
    
    75,302Bad Debt Expense
    
    
    (9,893
    )
    
    
    (8,065
    )
    
    
    (7,405
    )
    
    
    (9,632
    )
    
    
    (10,213
    )Pension Income (Expense), Net of Cash Contributions
    
    
    (2,427
    )
    
    
    (1,463
    )
    
    
    (1,082
    )
    
    
    (31
    )
    
    
    (1,172
    )Direct Costs of the Unconsolidated JOAs, Incurred
Outside of the Unconsolidated JOAs(b)
    
    
    46,318
    
    
    
    44,286
    
    
    
    42,352
    
    
    
    39,226
    
    
    
    35,367Net Cash Related to Other (Income), Expense
    
    
    8,963
    
    
    
    4,807
    
    
    
    5,255
    
    
    
    9,675
    
    
    
    9,349Adjusted EBITDA
    
    
    157,335
    
    
    
    154,446
    
    
    
    152,409
    
    
    
    169,947
    
    
    
    166,684Minority Interest in Adjusted EBITDA
    
    
    (46,541
    )
    
    
    (41,152
    )
    
    
    (45,747
    )
    
    
    (49,089
    )
    
    
    (45,946
    )Combined Adjusted EBITDA of Unconsolidated JOAs
    
    
    27,909
    
    
    
    38,097
    
    
    
    39,842
    
    
    
    40,371
    
    
    
    36,006EBITDA of Texas-New Mexico Newspapers Partnership
and Prairie Mountain Publishing
Company (c)
    
    
    5,681
    
    
    
    9,610
    
    
    
    10,108
    
    
    
    3,275
    
    
    
    Adjusted EBITDA Available to Company
    
    $
    144,384
    
    
    $
    161,001
    
    
    $
    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, the
Texas-New Mexico Newspapers Partnership (beginning December 26, 2005), The Denver Post
Corporation (through June 10, 2005) and The York Newspaper Company (through April 30, 2004),
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
(through December 25, 2005) and our proportionate share of EBITDA of the Prairie Mountain
Publishing Company (beginning February 1, 2006) (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,
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,but excludes depreciation and amortization and other expense not
related to continuing operations as these costs are not included in Adjusted EBITDA. 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 and Prairie Mountain Publishing Company.The
Texas-New Mexico Newspapers Partnership agreement, effective March 3, 2003, and the Prairie
Mountain Publishing Company agreement, effective February 1, 2006, require the partnerships to
make distributions equal to the earnings of the partnership before depreciation and
amortization (EBITDA). From March 3, 2003 through December 25, 2005, our 33.8% share of the
EBITDA of Texas-New Mexico Newspapers Partnership and, beginning February 1, 2006, our 50%
share of the EBITDA of Prairie Mountain Publishing Company have been included in Adjusted
EBITDA Available to Company as they are an integral part of our cash flows from operations as
defined by our debt covenants. Beginning December 26, 2005, we became the controlling partner
of the Texas-New Mexico Newspapers Partnership at which time we began consolidating its
results. See Note 4: Investments in California Newspapers Partnership and Texas-New Mexico
Newspapers Partnership and Note 5: Acquisitions, Dispositions and Other Transactions of the
notes to the consolidated financial statements of this Form 10-K for further discussion of the
Texas-New Mexico Newspapers Partnership restructuring and the Prairie Mountain Publishing
Company formation. 34




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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 30,2006
    
    2005
    
    2004(Dollars in thousands)NON-GAAP FINANCIAL DATA(a)Cash Flows from Operating Activities (GAAP measure)
    
    $
    71,508
    
    
    $
    92,944
    
    
    $
    76,455Net Change in Operating Assets and Liabilities
    
    
    (4,132
    )
    
    
    25,678
    
    
    
    20,126Distributions Paid to Minority Interest
    
    
    40,782
    
    
    
    28,167
    
    
    
    36,176Distributions of Net Income from Unconsolidated JOAs
    
    
    (44,120
    )
    
    
    (71,878
    )
    
    
    (66,828
    )Distributions of Net Income from Equity Investments
    
    
    (5,228
    )
    
    
    (9,511
    )
    
    
    (9,676
    )Interest Expense
    
    
    55,564
    
    
    
    49,481
    
    
    
    57,036Bad Debt Expense
    
    
    (9,893
    )
    
    
    (8,065
    )
    
    
    (7,405
    )Pension Income Expense, Net of Cash Contributions
    
    
    (2,427
    )
    
    
    (1,463
    )
    
    
    (1,082
    )Direct Costs of the Unconsolidated JOAs, Incurred Outside of the JOAs (c)
    
    
    46,318
    
    
    
    44,286
    
    
    
    42,352Combined Adjusted EBITDA of Unconsolidated JOAs(b)
    
    
    27,909
    
    
    
    38,097
    
    
    
    39,842Minority Interest in Adjusted EBITDA of the York Newspaper Company (d)
    
    
    
    
    
    
    
    
    
    
    (6,864
    )Net Cash Related to Other (Income), Expense
    
    
    8,963
    
    
    
    4,807
    
    
    
    5,255Adjusted EBITDA
    
    
    185,244
    
    
    
    192,543
    
    
    
    185,387Minority Interest in Adjusted EBITDA
    
    
    (46,541
    )
    
    
    (41,152
    )
    
    
    (38,883
    )EBITDA of Texas-New Mexico Newspapers Partnership and Prairie Mountain Publishing
Company
    
    
    5,681
    
    
    
    9,610
    
    
    
    10,108Adjusted EBITDA Available to Company
    
    $
    144,384
    
    
    $
    161,001
    
    
    $
    156,612
   (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
Texas-New Mexico Newspapers Partnership (beginning December 26, 2005), and The Denver Post
Corporation (through June 10, 2005), 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 and Prairie
Mountain Publishing Company. 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,
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,but excludes depreciation and amortization and other expense not related to
continuing operations as these costs are not included in Adjusted EBITDA. 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 through April 30, 2004 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. 35




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##### Table of Contents



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, 2006UnconsolidatedAs Presented
    
    JOAs Pro-Rata
    
    As Presented onUnder GAAP
    
    Adjustment(2)
    
    a Pro-Rata BasisTotal Revenues
    
    $
    835,876
    
    
    $
    296,547
    
    
    $
    1,132,423Loss from Unconsolidated JOAs
    
    
    (23,298
    )
    
    
    23,298
    
    
    
    Cost of Sales
    
    
    260,939
    
    
    
    120,824
    
    
    
    381,763Selling, General and Administrative
    
    
    417,602
    
    
    
    147,814
    
    
    
    565,416Depreciation and Amortization
    
    
    44,067
    
    
    
    48,194
    
    
    
    92,261Interest Expense
    
    
    55,564
    
    
    
    263
    
    
    
    55,827Other (Income) Expense, Net
    
    
    1,440
    
    
    
    2,750
    
    
    
    4,190Total Costs and Expenses
    
    
    779,612
    
    
    
    319,845
    
    
    
    1,099,457Gain on Sale of Newspaper Properties
    
    
    1,129
    
    
    
    
    
    
    
    1,129Minority Interest
    
    
    (35,033
    )
    
    
    
    
    
    
    (35,033
    )Net Income
    
    
    1,077
    
    
    
    
    
    
    
    1,077Adjusted EBITDA(3)
    
    $
    157,335
    
    
    $
    27,909
    
    
    $
    185,244
 Year Ended June 30, 2005UnconsolidatedAs Presented
    
    JOAs Pro-Rata
    
    As Presented onUnder GAAP
    
    Adjustment(2)
    
    a Pro-Rata BasisTotal Revenues
    
    $
    779,279
    
    
    $
    302,475
    
    
    $
    1,081,754Income from Unconsolidated JOAs
    
    
    23,291
    
    
    
    (23,291
    )
    
    
    Cost of Sales
    
    
    242,653
    
    
    
    119,803
    
    
    
    362,456Selling, General and Administrative
    
    
    382,180
    
    
    
    144,575
    
    
    
    526,755Depreciation and Amortization
    
    
    40,598
    
    
    
    13,423
    
    
    
    54,021Interest Expense
    
    
    49,481
    
    
    
    198
    
    
    
    49,679Other (Income) Expense, Net
    
    
    8,669
    
    
    
    1,185
    
    
    
    9,854Total Costs and Expenses
    
    
    723,581
    
    
    
    279,184
    
    
    
    1,002,765Minority Interest
    
    
    (29,334
    )
    
    
    
    
    
    
    (29,334
    )Net Income
    
    
    39,880
    
    
    
    
    
    
    
    39,880Adjusted EBITDA(3)
    
    $
    154,446
    
    
    $
    38,097
    
    
    $
    192,543
 36




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##### Table of Contents



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
    
    
    26,737
    
    
    
    
    
    
    
    
    
    
    
    26,737Adjusted EBITDA(3)
    
    $
    152,409
    
    
    $
    (6,864
    )
    
    $
    39,842
    
    
    $
    185,387
   (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.(3)
    
    Adjusted EBITDA.Adjusted EBITDA is a non-GAAP measure. 37




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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 loans 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. 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 Value20062007
    
    2008
    
    2009
    
    2010
    
    2011
    
    Thereafter
    
    Total
    
    (Liability)(Dollars in thousands)LiabilitiesLong-Term Debt including Current
Portion
Fixed Rate
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    446,813
    
    
    $
    446,813
    
    
    $
    403,125Average Interest Rate
    
    
    8.64
    %
    
    
    8.64
    %
    
    
    8.64
    %
    
    
    8.64
    %
    
    
    8.64
    %
    
    
    8.64
    %Variable Rate
    
    $
    4,973
    
    
    $
    14,973
    
    
    $
    29,973
    
    
    $
    317,404
    
    
    $
    98,817
    
    
    $
    332,500
    
    
    $
    798,640
    
    
    $
    798,640Average Interest Rate(c)
    
    
    6.83
    %
    
    
    6.83
    %
    
    
    6.83
    %
    
    
    6.83
    %
    
    
    6.83
    %
    
    
    6.83
    %Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,245,453
    (a)
   (a)
    
    The long-term debt (including current portion) of $1,245.4 million from the Market
Risk table above differs from total long-term debt of $861.9 million reported in Note 6:
Long-Term Debt of the notes to the consolidated financial statements due to the following
(in millions): $
    1,245.4
    
    
    Balance per table above22.8
    
    
    (b)(406.3
    )
    
    (c)$
    861.9
    
    
    Total per Note 6: Long-Term Debt
 (b)
    
    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.(c)
    
    Reflects our August 2, 2006 amended credit facility, which provided for a new
$350.0 million term loan C, which we used along with borrowings under our revolver of
$56.3 million to fund our August 2, 2006 acquisition. See Note 16: Subsequent Events of
the notes to the consolidated financial statements for further discussion. 38




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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 and events to differ
materially from those anticipated and should be viewed with caution. Potential risks and
uncertainties that could adversely affect our ability to obtain these results, and in most
instances are beyond our control, include, without limitation, the following factors: (a) increased
consolidation among major retailers, bankruptcy or other events that may adversely affect business
operations of major customers and depress the level of local and national advertising, (b) an
economic downturn in some or all of our principal newspaper markets that may lead to decreased
circulation or decreased local or national advertising, (c) a decline in general newspaper
readership patterns as a result of competitive alternative media or other factors, (d) increases in
newsprint costs over the level anticipated, (e) labor disputes which may cause revenue declines or
increased labor costs, (f) acquisitions of new businesses or dispositions of existing businesses,
(g) costs or difficulties related to the integration of businesses acquired by us may be greater
than expected, (h) increases in interest or financing costs, (i) rapid technological changes and
frequent new product introductions prevalent in electronic publishing, including increased
competition from Internet advertising and news sites 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. 39




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Item 8: Financial Statements and Supplementary Data The response to this item is filed as a separate part of this report. See Item 15: Exhibits
and Financial Statement Schedules. 
 Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None 
 Item 9A: Controls and Procedures As of June 30, 2006, 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. Based upon that
evaluation, the Chief Executive Officer, President, and Chief Financial Officer concluded that our
disclosure controls and procedures were sufficiently effective to provide reasonable assurance that
material information regarding us and/or our subsidiaries required to be disclosed by us in 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. During the fourth quarter of our fiscal year 2006, there were no changes in our internal
control over financial reporting that materially affected, or are reasonably likely to materially
affect, our internal controls over financial reporting. The Companys management, including the CEO, President, and CFO, does not expect that our
disclosure controls or our internal controls will prevent all errors and all fraud. A control
system, no matter how well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the benefits of controls must
be considered relative to their costs. Our disclosure controls and procedures are designed to
provide reasonable assurance of achieving their objectives. Because of the inherent limitations in
all control systems, no evaluation of controls can provide absolute assurance that all control
issues and instances of fraud, if any, within the company have been detected. These inherent
limitations include the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple errors or mistakes. 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 40




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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
    
    
    93
    
    
    Chairman of the Board and DirectorWilliam Dean Singleton
    
    
    55
    
    
    Vice Chairman and Chief Executive Officer and DirectorJoseph J. Lodovic, IV
    
    
    45
    
    
    PresidentSteven B. Rossi
    
    
    57
    
    
    Executive Vice President and Chief Operating OfficerAnthony F. Tierno
    
    
    61
    
    
    Senior Vice President of OperationsEric J. Grilly
    
    
    35
    
    
    President, MediaNews Group Interactive; Senior Vice
President MediaNewsRonald A. Mayo
    
    
    45
    
    
    Vice President and Chief Financial OfficerJames L. McDougald
    
    
    53
    
    
    TreasurerMichael J. Koren
    
    
    39
    
    
    Vice President and ControllerSteven M. Barkmeier
    
    
    45
    
    
    Vice President TaxElizabeth A. Gaier
    
    
    41
    
    
    Senior Vice President of New Business DevelopmentCharles M. Kamen
    
    
    58
    
    
    Vice President Human ResourcesDavid M. Bessen
    
    
    52
    
    
    Vice President and Chief Information OfficerPatricia Robinson
    
    
    64
    
    
    SecretaryJean L. Scudder
    
    
    52
    
    
    DirectorHowell E. Begle, Jr.
    
    
    62
    
    
    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, the
Publisher of The Salt Lake Tribuneeffective August 2002, and the Publisher of the York Daily
Recordand York Sunday Newseffective May 2004. Joseph J. Lodovic, IVhas 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. Steven B. Rossihas served as Executive Vice President and Chief Operating Officer of
MediaNews since September 2006. Prior thereto he served as Senior Vice President and Chief
Financial Officer of Knight Ridder Inc. from January 2005 until its acquisition by The McClatchy
Company in June 2006. He previously served as President/Newspaper Division of Knight Ridder from
2001 to 2004 and Senior Vice President/Operations of Knight Ridder from 1998 to 2001. 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. Eric J. Grillyhas served as President of MediaNews Group Interactive since October 2002 and
as Senior Vice President of MediaNews Group since September 2006. Prior thereto, he served as Vice
President of MediaNews Group Interactive 41




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##### Table of Contents



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. Mr. Eric Grilly is the son of Mr.
Gerald E. Grilly who served as Executive Vice President and Chief Operating Officer of MediaNews
from February 2001 through August 2006. 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. 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. Elizabeth A. Gaierhas served as Senior Vice President of New Business Development since
January 2006. Prior thereto, she served as Vice President of New Business Development from
November 2001 to January 2006. Prior thereto she served as Director of Advertising at the Ventura
County Starfrom 2000 to 2001. Charles M. Kamenhas served as Vice President Human Resources for MediaNews Group since he
joined the Company in April 2000. David M. Bessenhas served as Vice President and Chief Information Officer since November
2005. Prior thereto, he served as Director of Information Services for Copley Press from 1996 to
2005. 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 to 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., 101 West Colfax, Suite 1100, Denver, CO 80202, (303) 954-6360. 42




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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 2006. None of our
executive officers have an employment agreement with us except Messrs. Singleton and Lodovic. Annual Compensation
    
    Long Term CompensationRestricted Stock
    
    All OtherName and Principal Position
    
    Fiscal Year
    
    Salary
    
    Bonus
    
    Awards (a)
    
    Compensation (b)William Dean Singleton
    
    
    2006
    
    
    $
    1,010,625
    
    
    $
    250,000
    
    
    $
    588,745
    
    
    $
    159,988Vice Chairman, Chief Executive Officer
    
    
    2005
    
    
    
    962,475
    
    
    
    450,000
    
    
    
    
    
    
    
    196,4272004
    
    
    
    872,250
    
    
    
    150,000
    
    
    
    
    
    
    
    115,933Joseph J. Lodovic, IV
    
    
    2006
    
    
    $
    671,700
    
    
    $
    250,000
    
    
    $
    353,320
    
    
    $
    80,785President
    
    
    2005
    
    
    
    639,600
    
    
    
    400,000
    
    
    
    
    
    
    
    60,3162004
    
    
    
    574,950
    
    
    
    150,000
    
    
    
    
    
    
    
    47,140Gerald E. Grilly (c)
    
    
    2006
    
    
    $
    614,375
    
    
    $
    81,250
    
    
    $
    659,190
    
    
    $
    50,367Executive Vice President &
    
    
    2005
    
    
    
    589,375
    
    
    
    157,500
    
    
    
    
    
    
    
    64,509Chief Operating Officer
    
    
    2004
    
    
    
    538,050
    
    
    
    113,750
    
    
    
    
    
    
    
    15,398Anthony F. Tierno
    
    
    2006
    
    
    $
    373,013
    
    
    $
    5,000
    
    
    $
    1,334,075
    
    
    $
    24,105Senior Vice President of Operations
    
    
    2005
    
    
    
    358,750
    
    
    
    42,500
    
    
    
    
    
    
    
    30,4142004
    
    
    
    322,875
    
    
    
    61,250
    
    
    
    
    
    
    
    19,164Eric J. Grilly
    
    
    2006
    
    
    $
    271,050
    
    
    $
    75,000
    
    
    $
    156,950
    
    
    $
    9,896President, MediaNews Group Interactive
    
    
    2005
    
    
    
    256,250
    
    
    
    95,500
    
    
    
    
    
    
    
    23,3552004
    
    
    
    206,500
    
    
    
    83,500
    
    
    
    
    
    
    
    10,213
   (a)
    
    Reflects the value of restricted stock units calculated by multiplying the number of
units granted times the fair value as defined and calculated in accordance with the RSU
plan document on the date of the grant. The number of restricted stock units held by each
of the named executive officers at June 30, 2006 and the dollar value of such units are as
follows: Mr. Singleton, 1,613 units, $390,346; Mr. Lodovic, 968 units, $234,256; Mr.
Gerald E. Grilly, 1,806 units, $437,052; Mr. Tierno, 3,655 units, $884,510; Mr. Eric J.
Grilly, 430 units, $104,060. Fair market value of the RSU grants fluctuates with our
performance and the performance of certain of our peers in the newspaper industry.(b)
    
    Included in All Other Compensation are amounts earned under the deferred compensation
plans described below.(c)
    
    Effective August 31, 2006, Mr. Grilly retired from MediaNews. In connection therewith,
Mr. Grilly will receive severance of $1.25 million payable over three years, $150,000 bonus
associated with the August 2, 2006 acquisition,as well as $250,000 in connection with the
Companys long-term compensation plans. 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 also award discretionary bonuses to executive officers who are not covered by employment
agreements based on completion of individual performance criteria determined on an annual basis. Effective June 29, 2005, we adopted the Career Restricted Stock Unit Plan (RSU Plan)
intended to encourage retention and reward performance of selected senior management over a
significant period of time. The RSU plan is administered by our board of directors (or a
designated committee). The RSU Plan provides for the award to members of senior management selected
by our board (or committee) for participation in the Plan of such number of restricted stock units
(RSUs) at such 43




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##### Table of Contents



time or times as determined by our board (or committee) in its discretion. Each RSU
represents the right to receive one share of our new class of common stock, Class B (which is
non-voting and does not pay dividends, but which is convertible into Class A in certain
circumstances), subject to vesting and other requirements. RSUs granted to a participant vest upon
the later to occur of:  
    
    the earlier of (x) the completion of 20 years of continuous service with us or our
affiliates or (y) attainment of age 67 while still employed by us or our affiliates; or
    
    the date on which the participant (a) has completed at least five years of participation
in RSU Plan and (b) has a combined age and years of continuous service with us or our
affiliates of at least 72. RSUs fully vest upon the occurrence of a Change in Control (as defined) and vest pro rata in
the event of the participants death, disability or termination of employment by us without cause.
Any RSUs not so vested are forfeited upon the participants termination of employment, unless
otherwise determined by the board (or committee) in its sole discretion. Shares of our Class B common stock will be issued to holders of vested RSUs upon the earliest
of the participants separation from service, the participants disability and the occurrence of a
Qualified Change in Control (as defined). Recipients of shares issued pursuant to RSUs have the right to require us to repurchase a
number of shares at their then fair market value (as determined by formula outlined in the RSU
plan) that is sufficient to enable them to pay taxes due in connection with such issuance, provided
that our board of directors may suspend such right at any time. At any time following the
six-month anniversary of the date of issuance of shares of such Class B common stock, we have the
right to repurchase such shares at their then fair market value (as determined by formula outlined
in the RSU plan). Such repurchase rights will terminate if we consummate an initial public
offering of our common stock. The issuance of up to 150,000 shares of our Class B common stock is authorized under the RSU
Plan. RSU grants have been awarded to the following executive officers in fiscal years 2006 and
2007: Mr. William Dean Singleton, Mr. Joseph J. Lodovic, IV, Mr. Anthony F. Tierno, Mr. Ronald A.
Mayo, Mr. James L McDougald, Mr. Charles M. Kamen, Mr. Eric J. Grilly and Ms. Elizabeth A. Gaier.
Mr. Gerald E. Grilly and Mr. Stephen M. Hesse received RSU grants in fiscal year 2006. Equity Compensation Plan Information As of June 30, 2006, the number of shares of our Class B common stock to be issued upon
exercise of securities issued under our Career RSU Plan (which is our only equity compensation
plan) and the number of shares reserved for future issuance thereunder was as follows: (a)
    
    (b)
    
    (c)Number of securities remainingNumber of securities to
    
    Weighted-average
    
    available for the future issuancebe issued upon exercise
    
    exercise price of
    
    under equity compensationof outstanding options,
    
    outstanding options,
    
    plans (excluding securitiesPlan Category
    
    warrants and rights
    
    warrants and rights
    
    reflected in column (a))Equity compensation
plans approved by
security holders
    
    
    - 0 -
    
    
    $
    - 0 -
    
    
    
    139,895Equity compensation
plans not approved
by security holders
    
    
    - 0 -
    
    
    $
    - 0 -
    
    
    
    - 0 -
 44




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##### Table of Contents



Employment and Other Agreements Under the terms of Mr. Singletons Employment Agreement, which was amended and restated
effective July 1, 2005, Mr. Singleton is currently entitled to receive cash compensation at an
annual rate of $1,035,300, subject to annual increase of not less than 5%, and a one-time cash
bonus of $100,000, which was paid in June 2005. In addition, Mr. Singleton is entitled to receive
an annual cash bonus of up to $500,000 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 is 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. Additionally, Mr. Singletons Employment
Agreement may be terminated prior to the expiration of the existing term under certain
circumstances. Mr. Singleton is entitled to severance payments if his employment terminates for
certain reasons. In addition, if the Employment Agreement terminates by expiration at the end of
the initial term or any renewal term, Mr. Singleton is entitled to receive a cash payment equal to
his base annual salary in effect immediately prior to termination, plus an amount equal to the
maximum annual bonus he is eligible to earn. Under Mr. Singletons Employment Agreement, he is
eligible to participate in equity ownership and incentive plans established for executive
personnel. Mr. Singletons Employment Agreement also provides for him to be reimbursed for the
annual premium (up to a maximum premium of $100,000 per year) on up to $40 million of term life
insurance insuring his spouse as part of his estate planning. Mr. Singletons Employment Agreement
contains a two-year non-compete covenant for all geographical areas in which newspapers are owned
or managed by us and or our subsidiaries with paid print circulation in excess of 25,000 at the
time of termination of the Employment Agreement; provided, however that the ownership of up to 5%
of any class of publicly traded securities of any entity shall not be deemed to be a violation. In
the event of his disability, Mr. Singleton has the right to require MediaNews to purchase his
common stock from time to time during his lifetime in an aggregate amount not to exceed $1.0
million in any fiscal year. At June 30, 2006, the total estimated cost (determined actuarially) of
the repurchase would be $26.8 million and such amount is recorded as a component of Putable Common
Stock on our balance sheet. 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 spouse and the resulting need for us to repurchase such shares to
provide liquidity in the Singleton Revocable Trust. Mr. Lodovics Employment Agreement was amended and restated effective July 1, 2005. Mr.
Lodovic is currently entitled to receive cash compensation at an annual rate of $688,200, subject
to annual increase of not less than 5%, and a one-time cash bonus of $100,000, which was paid in
June 2005. In addition, Mr. Lodovic is also entitled to receive an annual cash bonus of up to
$400,000 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 is 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. Additionally, Mr. Lodovics Employment Agreement may be terminated prior to the
expiration of the existing term under certain circumstances. Mr. Lodovic is entitled to severance
payments if his employment terminates for certain reasons. In addition, if the Employment
Agreement terminates by expiration at the end of the initial term or any renewal term, Mr. Lodovic
is entitled to receive a cash payment equal to his base annual salary in effect immediately prior
to termination, plus an amount equal to the maximum annual bonus he is eligible to earn. Under Mr.
Lodovics Employment Agreement, he is also eligible to participate in equity ownership and
incentive plans established for executive personnel. Mr. Lodovics Employment Agreement contains a
two-year non-compete covenant for all geographical areas in which newspapers are owned or
circulated by us or our subsidiaries with paid print circulation in excess of 25,000 at the time of
termination of the Employment Agreement; provided, however that the ownership of up to 5% of any
class of publicly traded securities of any entity shall not be deemed to be a violation. Mr.
Lodovic is also party to a Shareholder Agreement with the Company. The Shareholder Agreement
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 (as determined by formula outlined in the Shareholder
Agreement) shares of Class A and B common stock which he owns. We also have a call under Mr.
Lodovics Shareholder Agreement to acquire, and Mr. Lodovic has a right to put, such shares
following termination of his employment under other 45




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circumstances, at a price equal to a percentage of fair market value (as determined by formula
outlined in the Shareholder Agreement), which increases to 100% on December 31, 2009 (at June 30,
2006, Mr. Lodovic is entitled to 80% of the fair market value). As of June 30, 2006, the value of
Mr. Lodovics put, as calculated per terms of the Shareholder Agreement, was estimated to be $14.1
million and is recorded as a component of Putable Common Stock on our balance sheet. In the
event of his disability, Mr. Lodovic has the right to require MediaNews to purchase his common
stock from time to time during his lifetime in an aggregate amount not to exceed $1.0 million in
any fiscal year. 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. 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 and 150,000 shares of Class B common stock, $0.001 par value, none
of which are issued or outstanding at June 30, 2006. We have not declared or paid any cash
dividends on our common stock in the past. Our current long-term debt agreements place limits on
our ability to pay dividends. In conjunction with an investment by Hearst in the Company (if
approved by the Department of Justice), we anticipate paying a dividend to the Class A Shareholders
of approximately $25.0 million with a portion of the proceeds from the Hearst investment. 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 Nature of
    
    Percentage ofBeneficial Ownership(a)
    
    Ownership ofClass A 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 H. 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. 46




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(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 at June 30,
2005 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 H. 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. 47




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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 issuance of capital stock, declaration of
dividends, redemption of capital stock, certain capital expenditures, mergers or consolidation, and
incurring certain 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 Class A 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 to the Company and 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. Richard Scudder, which
agreement requires us to make annual payments of $300,000. In connection with his consulting
services, Mr. Scudder participates in our medical plans at no cost to him and we provide Mr.
Scudder with the use of a car, which is also used for personal purposes. The cost to us for
providing this car during the last fiscal year and currently has been the cost of insurance and
maintenance. We also pay the compensation for an administrative assistant for Mr. Scudder. We are a party to a management agreement with CNP, which prior to being amended as described
below, provided 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. In connection with the August 2, 2006 acquisition of
the Contra Costa Timesand the San Jose Mercury News, and the related contribution of those
publications into the California Newspapers Partnership, the CNP management agreement was revised.
Effective August 2, 2006, the revised agreement provides for annual management fees of $5.4
million, subject to annual adjustments based on actual costs and the operating performance of CNP. In addition, in connection with the restructuring of the Texas-New Mexico Newspapers
Partnership, the Company as managing controlling partner is provided an annual management fee of
$75,000 by the partnership, subject to annual adjustments. Other 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. 48




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Item 14: Principal Accountant Fees and Services The following table presents fees incurred for services provided by Ernst & Young LLP. 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 30,2006
    
    2005
    
    2004(Dollars in thousands)Audit Fees(a)
    
    $
    618
    
    
    $
    563
    
    
    $
    617Audit-Related Fees(b)
    
    
    18
    
    
    
    2
    
    
    
    121Tax Fees(c)
    
    
    2
    
    
    
    65
    
    
    
    5Total
    
    $
    638
    
    
    $
    630
    
    
    $
    743
   (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. 49




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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 offers. Our duty to file reports with the Commission has been suspended in respect of our
fiscal year commencing July 1, 2006 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 Reports 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. The information on our Web site is
not incorporated by reference to, or as part of, this Report on Form 10-K. 50




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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 52).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 52).3.
    
    ExhibitsThe exhibits listed in the accompanying Index to exhibits are filed as a part of this
Annual Report (see page 52). 51




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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
    
    
    53Consolidated Balance Sheets as of June 30, 2006 and 2005
    
    
    54Consolidated Statements of Operations for the Fiscal Years Ended June
30, 2006, 2005 and 2004
    
    
    56Consolidated Statements of Changes in Shareholders Equity for the
Fiscal Years Ended June 30, 2006, 2005 and 2004
    
    
    57Consolidated Statements of Cash Flows for the Fiscal Years Ended June
30, 2006, 2005 and 2004
    
    
    58Notes to Consolidated Financial Statements
    
    
    59
 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
    
    
    94
 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. 52




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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, 2006 and 2005, 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, 2006. 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. We were not engaged to perform an audit of the Companys internal control over
financial reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management,
and 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, 2006 and 2005, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended June 30, 2006, 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 25, 2006
Denver, Colorado 53




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MEDIANEWS GROUP, INC. & SUBSIDIARIES 
 CONSOLIDATED BALANCE SHEETS June 30,2006
    
    2005(Dollars in thousands)ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    424
    
    
    $
    4,262Trade accounts receivable, less allowance for doubtful
accounts of $9,282 and $6,901, at June 30, 2006 and 2005,
respectively
    
    
    93,705
    
    
    
    82,284Other receivables
    
    
    12,327
    
    
    
    5,427Inventories of newsprint and supplies
    
    
    21,289
    
    
    
    24,248Prepaid expenses and other assets
    
    
    11,954
    
    
    
    14,616Income taxes receivable
    
    
    
    
    
    
    2,820TOTAL CURRENT ASSETS
    
    
    139,699
    
    
    
    133,657PROPERTY, PLANT AND EQUIPMENTLand
    
    
    41,871
    
    
    
    37,403Buildings and improvements
    
    
    131,336
    
    
    
    105,352Machinery and equipment
    
    
    397,949
    
    
    
    356,510Construction in progress
    
    
    57,657
    
    
    
    43,602TOTAL PROPERTY, PLANT AND EQUIPMENT
    
    
    628,813
    
    
    
    542,867Less accumulated depreciation and amortization
    
    
    (249,588
    )
    
    
    (210,561
    )NET PROPERTY, PLANT AND EQUIPMENT
    
    
    379,225
    
    
    
    332,306OTHER ASSETSInvestment in unconsolidated JOAs (Denver and Salt Lake City)
    
    
    228,925
    
    
    
    262,764Equity investments
    
    
    54,457
    
    
    
    91,421Subscriber accounts, less accumulated amortization of
$161,776 and $149,397 at June 30, 2006 and 2005,
respectively
    
    
    39,365
    
    
    
    49,543Excess of cost over fair value of net assets acquired
    
    
    424,161
    
    
    
    392,748Newspaper mastheads
    
    
    101,829
    
    
    
    76,662Covenants not to compete and other identifiable intangible
assets, less accumulated amortization of $34,506 and $31,771
at June 30, 2006 and 2005, respectively
    
    
    15,656
    
    
    
    5,175Other
    
    
    44,466
    
    
    
    21,496TOTAL OTHER ASSETS
    
    
    908,859
    
    
    
    899,809TOTAL ASSETS
    
    $
    1,427,783
    
    
    $
    1,365,772
 See notes to consolidated financial statements 54




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MEDIANEWS GROUP, INC. & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30,2006
    
    2005(Dollars in thousands, except share data)LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESTrade accounts payable
    
    $
    19,526
    
    
    $
    15,045Accrued employee compensation
    
    
    33,299
    
    
    
    34,772Accrued interest
    
    
    11,690
    
    
    
    10,428Other accrued liabilities
    
    
    19,486
    
    
    
    15,132Unearned income
    
    
    31,715
    
    
    
    26,577Income taxes payable
    
    
    4,193
    
    
    
    Current portion of long-term debt and obligations under capital leases
    
    
    4,133
    
    
    
    4,088TOTAL CURRENT LIABILITIES
    
    
    124,042
    
    
    
    106,042OBLIGATIONS UNDER CAPITAL LEASES
    
    
    5,763
    
    
    
    5,969LONG-TERM DEBT
    
    
    857,997
    
    
    
    867,512OTHER LIABILITIES
    
    
    28,774
    
    
    
    47,359DEFERRED INCOME TAXES, NET
    
    
    103,349
    
    
    
    98,208MINORITY INTEREST
    
    
    207,439
    
    
    
    153,633PUTABLE COMMON STOCK
    
    
    40,899
    
    
    
    48,556SHAREHOLDERS EQUITYCommon stock, par value $0.001; 3,150,000 shares authorized:2,314,346 shares issued and 2,298,346 shares outstanding
    
    
    2
    
    
    
    2Additional paid-in capital
    
    
    
    
    
    
    Accumulated other comprehensive loss, net of taxes:Unrealized loss on hedging
    
    
    (1,588
    )
    
    
    (2,330
    )Minimum pension liability
    
    
    (19,932
    )
    
    
    (31,483
    )Retained earnings
    
    
    83,038
    
    
    
    74,304Common stock in treasury, at cost, 16,000 shares
    
    
    (2,000
    )
    
    
    (2,000
    )TOTAL SHAREHOLDERS EQUITY
    
    
    59,520
    
    
    
    38,493TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    1,427,783
    
    
    $
    1,365,772
 See notes to consolidated financial statements 55




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MEDIANEWS GROUP, INC. & SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended June 30,2006
    
    2005
    
    2004(Dollars in thousands, except share data)REVENUESAdvertising
    
    $
    660,389
    
    
    $
    610,060
    
    
    $
    582,689Circulation
    
    
    130,829
    
    
    
    129,344
    
    
    
    132,505Other
    
    
    44,658
    
    
    
    39,875
    
    
    
    38,635TOTAL REVENUES
    
    
    835,876
    
    
    
    779,279
    
    
    
    753,829INCOME (LOSS) FROM UNCONSOLIDATED JOAS
    
    
    (23,298
    )
    
    
    23,291
    
    
    
    22,207COSTS AND EXPENSESCost of sales
    
    
    260,939
    
    
    
    242,653
    
    
    
    234,784Selling, general and administrative
    
    
    417,602
    
    
    
    382,180
    
    
    
    366,636Depreciation and amortization
    
    
    44,067
    
    
    
    40,598
    
    
    
    40,742Interest expense
    
    
    55,564
    
    
    
    49,481
    
    
    
    57,036Other (income) expense, net
    
    
    1,440
    
    
    
    8,669
    
    
    
    17,365TOTAL COSTS AND EXPENSES
    
    
    779,612
    
    
    
    723,581
    
    
    
    716,563EQUITY INVESTMENT INCOME, NET
    
    
    5,898
    
    
    
    10,201
    
    
    
    9,485GAIN ON SALE OF NEWSPAPER PROPERTIES
    
    
    1,129
    
    
    
    114
    
    
    
    6,982MINORITY INTEREST
    
    
    (35,033
    )
    
    
    (29,334
    )
    
    
    (32,237
    )INCOME BEFORE INCOME TAXES
    
    
    4,960
    
    
    
    59,970
    
    
    
    43,703INCOME TAX EXPENSE
    
    
    (3,883
    )
    
    
    (20,090
    )
    
    
    (16,966
    )NET INCOME
    
    $
    1,077
    
    
    $
    39,880
    
    
    $
    26,737
 See notes to consolidated financial statements 56




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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, 2003
    
    $
    2
    
    
    $
    3,631
    
    
    $
    (19,351
    )
    
    $
    52,612
    
    
    $
    (2,000
    )
    
    $
    34,894Comprehensive 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,737
    
    
    
    
    
    
    
    26,737Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,112BALANCE AT JUNE 30, 2004
    
    
    2
    
    
    
    3,631
    
    
    
    (19,976
    )
    
    
    79,349
    
    
    
    (2,000
    )
    
    
    61,006Adjustment for putable
common stock
    
    
    
    
    
    
    (3,631
    )
    
    
    
    
    
    
    (44,925
    )
    
    
    
    
    
    
    (48,556
    )Comprehensive income:Unrealized loss on
hedging activities, net
of tax benefit of $426
    
    
    
    
    
    
    
    
    
    
    (697
    )
    
    
    
    
    
    
    
    
    
    
    (697
    )Unrealized loss on
hedging activities,
reclassified to earnings,
net of tax benefit of
$348
    
    
    
    
    
    
    
    
    
    
    456
    
    
    
    
    
    
    
    
    
    
    
    456Minimum pension liability
adjustment, net of tax
benefit of $10,168
    
    
    
    
    
    
    
    
    
    
    (13,596
    )
    
    
    
    
    
    
    
    
    
    
    (13,596
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,880
    
    
    
    
    
    
    
    39,880Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26,043
    )BALANCE AT JUNE 30, 2005
    
    
    2
    
    
    
    
    
    
    
    (33,813
    )
    
    
    74,304
    
    
    
    (2,000
    )
    
    
    38,493Adjustment for putable
common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,657
    
    
    
    
    
    
    
    7,657Comprehensive income:Unrealized gain on
hedging activities, net
of tax benefit of $153
    
    
    
    
    
    
    
    
    
    
    286
    
    
    
    
    
    
    
    
    
    
    
    286Unrealized loss on
hedging activities,
reclassified to earnings,
net of tax benefit of
$348
    
    
    
    
    
    
    
    
    
    
    456
    
    
    
    
    
    
    
    
    
    
    
    456Minimum pension liability
adjustment, net of tax
expense of $9,310
    
    
    
    
    
    
    
    
    
    
    11,551
    
    
    
    
    
    
    
    
    
    
    
    11,551Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,077
    
    
    
    
    
    
    
    1,077Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,370BALANCE AT JUNE 30, 2006
    
    $
    2
    
    
    $
    
    
    
    $
    (21,520
    )
    
    $
    83,038
    
    
    $
    (2,000
    )
    
    $
    59,520
 See notes to consolidated financial statements 57




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##### Table of Contents



MEDIANEWS GROUP, INC. & SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended June 30,2006
    
    2005
    
    2004Revised
    
    Revised(Dollars in thousands)CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    1,077
    
    
    $
    39,880
    
    
    $
    26,737Adjustments to reconcile net income to net cash provided by operating
activities:Depreciation
    
    
    43,248
    
    
    
    25,834
    
    
    
    25,554Amortization
    
    
    20,901
    
    
    
    18,953
    
    
    
    19,584Loss on early extinguishment of debt
    
    
    
    
    
    
    9,236
    
    
    
    9,292Net loss (gain), on sale of newspaper assets
    
    
    (1,097
    )
    
    
    437
    
    
    
    (6,931
    )Provision for losses on accounts receivable
    
    
    9,893
    
    
    
    8,065
    
    
    
    7,405Amortization of debt discount
    
    
    935
    
    
    
    1,051
    
    
    
    934Minority interest
    
    
    35,033
    
    
    
    29,334
    
    
    
    32,237Distributions paid to minority interest
    
    
    (40,782
    )
    
    
    (28,167
    )
    
    
    (36,176
    )Proportionate share of net income from unconsolidated JOAs
    
    
    (44,120
    )
    
    
    (71,878
    )
    
    
    (69,204
    )Distributions of net income from unconsolidated JOAs(a)
    
    
    44,120
    
    
    
    71,878
    
    
    
    66,828Equity investment income, net
    
    
    (5,898
    )
    
    
    (10,201
    )
    
    
    (9,485
    )Distributions of net income from equity investments(b)
    
    
    5,228
    
    
    
    9,511
    
    
    
    9,676Deferred income tax expense (benefit)
    
    
    (4,545
    )
    
    
    17,728
    
    
    
    16,387Change in defined benefit plan liabilities, net of cash contributions
    
    
    2,427
    
    
    
    1,463
    
    
    
    1,082Change in estimated option repurchase price
    
    
    500
    
    
    
    (5,306
    )
    
    
    (3,491
    )Unrealized loss on hedging activities, reclassified to earnings from
accumulated other comprehensive loss
    
    
    456
    
    
    
    804
    
    
    
    3,184Unrealized (gain) loss on swaps
    
    
    
    
    
    
    
    
    
    
    2,968Change in operating assets and liabilities:Accounts receivable
    
    
    (18,564
    )
    
    
    (13,356
    )
    
    
    (6,446
    )Inventories
    
    
    4,026
    
    
    
    (7,632
    )
    
    
    (2,113
    )Prepaid expenses and other assets
    
    
    4,599
    
    
    
    (4,301
    )
    
    
    808Accounts payable and accrued liabilities
    
    
    10,406
    
    
    
    6,374
    
    
    
    (7,485
    )Unearned income
    
    
    2,881
    
    
    
    173
    
    
    
    1,341Change in other assets and liabilities, net
    
    
    784
    
    
    
    (6,936
    )
    
    
    (6,231
    )NET CASH FLOWS FROM OPERATING ACTIVITIES
    
    
    71,508
    
    
    
    92,944
    
    
    
    76,455CASH FLOWS FROM INVESTING ACTIVITIES:Investments in equity investments
    
    
    (575
    )
    
    
    (250
    )
    
    
    (50
    )Proceeds from the sale of newspapers and other assets
    
    
    746
    
    
    
    483
    
    
    
    56,733Business acquisitions, net of cash acquired
    
    
    (47,905
    )
    
    
    (58,607
    )
    
    
    (50,072
    )Capital received from unconsolidated subsidiaries
    
    
    1,379
    
    
    
    
    
    
    
    Distributions in excess of net income from JOAs(a)
    
    
    28,148
    
    
    
    15,531
    
    
    
    8,376Distributions in excess of net income from equity investments(b)
    
    
    1,254
    
    
    
    1,486
    
    
    
    962Capital expenditures
    
    
    (47,501
    )
    
    
    (51,312
    )
    
    
    (36,483
    )NET CASH FLOWS FROM INVESTING ACTIVITIES
    
    
    (64,454
    )
    
    
    (92,669
    )
    
    
    (20,534
    )CASH FLOWS FROM FINANCING ACTIVITIES:Issuance of long-term debt, net of issuance costs
    
    
    66,350
    
    
    
    464,250
    
    
    
    523,983Reduction of long-term debt and other liabilities
    
    
    (77,242
    )
    
    
    (516,375
    )
    
    
    (509,046
    )Repurchase premiums and related costs associated with long-term debt
    
    
    
    
    
    
    (8,624
    )
    
    
    (9,465
    )NET CASH FLOWS FROM FINANCING ACTIVITIES
    
    
    (10,892
    )
    
    
    (60,749
    )
    
    
    5,472INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    (3,838
    )
    
    
    (60,474
    )
    
    
    61,393CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    
    4,262
    
    
    
    64,736
    
    
    
    3,343CASH AND CASH EQUIVALENTS AT END OF YEAR
    
    $
    424
    
    
    $
    4,262
    
    
    $
    64,736
   (a)
    
    Total distributions from unconsolidated JOAs were $72.3 million, $87.4 million and $75.2
million for fiscal years 2006, 2005 and 2004, respectively.(b)
    
    Total distributions from equity investments were $6.5 million, $11.0 million and $10.6
million for fiscal years 2006, 2005 and 2004, respectively. See notes to consolidated financial statements 58




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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 twelve states, including the impact of the
Companys August 2, 2006 acquisition discussed in Note 16: Subsequent Events. The Company also
owns four radio stations and one television station; the combined revenues of these non-newspaper
operations comprise less than 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 workers compensation obligation involves estimating ultimate claims payouts for open claims
and involves the use of advice and analysis of 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 significant intercompany accounts have been eliminated. Revisions/Reclassifications For comparability, certain prior year balances have been reclassified to conform to current
reporting classifications. In particular, the statements of cash flows have been revised for the
years ended June 30, 2005 and 2004, to reclassify the
distribution of net income from equity
investments from net cash flows from investing activities to net cash flows from operating
activities and to reflect distributions in excess of net income from unconsolidated JOAs and equity
investments as cash flows from investing activities in accordance
with Statement of Financial Accounting Standards (SFAS)
No. 95, Statement of Cash Flows. For the year ended June 30, 2005, the
revision increased the reported net cash flows from investing activities and decreased the reported
net cash flows from operating activities by $6.0 million. For the year ended June 30, 2004, the
revision decreased the reported net cash flows from investing activities and increased the reported
net cash flows from operating activities by $1.3 million. 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 newspaper party to a joint operating
agreement continue to be separate and outside of a JOA. As of June 30, 2006, the Company, through
its partnerships and subsidiaries, participates in JOAs in Denver, Colorado, Salt Lake City, Utah,
York, Pennsylvania, Detroit, Michigan and Charleston, West Virginia. 59




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The operating results from the Companys unconsolidated JOAs (Denver, Salt Lake City and,
through May 7, 2004, Charleston) are reported as a single net amount in the accompanying financial
statements in the line item Income from Unconsolidated JOAs. This line item includes:  
    
    The Companys proportionate share of net income from JOAs,
    
    The amortization of subscriber lists created by the original purchase, as the subscriber
lists are attributable to the Companys earnings in the JOAs, and
    
    Editorial costs, miscellaneous revenue received outside of the JOA, and other charges
incurred by the Companys consolidated subsidiaries directly attributable to the JOAs
providing editorial content and news for the Companys newspapers party to the JOAs. The Companys investments in the Denver and Salt Lake City JOAs are included in the
consolidated balance sheet under the line item Investment in Unconsolidated JOAs. See Note 3:
Joint Operating Agencies for additional discussion of our accounting for each JOA operation in
which the Company participates. 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):  
    
    Prairie Mountain Publishing Company, partnership that publishes the former Eastern
Colorado Publishing Company newspapers (comprised of several small daily and weekly
newspapers) and the Daily Cameraand Colorado Daily, both published in Boulder, Colorado
(50% ownership interest).
    
    PowerOne Media, LLC, a company that provides software tools and hosts classified
advertising for daily and weekly newspapers throughout the United States (16% ownership
interest),
    
    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 the
Companys subsidiary, Kearns-Tribune, LLC (6.0% ownership interest and one seat on the
board). 60




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##### Table of Contents




    
    Texas-New Mexico Newspapers Partnership through December 25, 2005, which was formed on
March 3, 2003 (the Company held a minority interest of 33.8% through December 25, 2005).
Effective December 26, 2005, as a result of contributions to the partnership and an
amendment and restatement of the partnership agreement, the Company owns 59.4% of the
partnership and consolidates its results after such date. See
Note 4: Investments in California Newspapers Partnership and
Texas-New Mexico Newspapers Partnership for further discussion.
    
    Hometown Values, acquired in July 2005, advertising coupon magazine for small local
businesses mailed to 16 different targeted community zones along the Wasatch front in Utah
(50% ownership interest). 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 SFAS No. 142, Goodwill and
Other Intangible Assets. 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 9 years. Other finite lived
intangibles are being amortized over periods not exceeding 15 years. In addition, as required by SFAS No. 142, the Company performed an annual impairment test for
goodwill and mastheads as of July 1, 2006. There was no impairment of intangible assets noted as a
result of these tests. Another impairment test will be performed July 1, 2007, 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, 2006
(excluding the impact of August 2, 2006 acquisition transactions discussed in Note 16: Subsequent
Events) (in thousands): 2007
    
    $
    12,2312008
    
    
    8,6232009
    
    
    5,5462010
    
    
    4,8102011
    
    
    4,443
 Long-Lived Assets SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets,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 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. 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. 61




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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. 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 determines 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. A
newspapers operating performance is 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 year over year performance comparisons of the
Company. While the Company, in addition to its newspapers, operates four radio stations and one
television station, these non-newspaper operations are not significant to the Companys operations
as they comprise less than 1.0% of our consolidated revenue. Comprehensive Income Under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities(SFAS
No. 133), the Companys newsprint swap agreements 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, 2006 and 2005 and 2004, the Company had no
outstanding newsprint agreements; however, amounts previously recorded in
other comprehensive income related to a terminated newsprint swap agreement remained in other
comprehensive income at June 30, 2006 due to the Companys determination that the hedge became
ineffective prior to the expiration of the original term of the agreement. The amount in
accumulated other comprehensive loss related to the ineffective hedge
is being amortized and
charged to other (income) expense, net over the original term of the agreement as the forecasted
newsprint purchase transactions originally contemplated in the hedging agreement continued to be
probable of occurring. Also included in
comprehensive income are the changes in fair value of interest rate swap agreements at one of the
Companys unconsolidated JOAs. 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 (at June 30, 2005, two of the Companys pension plans
had other comprehensive income) 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. Stock Based Compensation The
Company accounts for its Career Restricted Stock Unit
(RSU) plan under
SFAS No. 123 (R)
, Share
Based Payments. SFAS No. 123 (R) requires all
share-based payments to employees be recognized in the income
statement based on their fair values. The Company determines the fair value of the units
granted based on the RSU plan document and recognizes compensation
expense over the vesting period of the grant. See Note 15:
Career Restricted Stock Unit Plan for further discussion. 62




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##### Table of Contents



Dividends The Company has never paid a dividend on its common stock. The Company may pay a dividend in
connection with future equity financing from The Hearst Corporation. See Note 16: Subsequent
Events for further discussion regarding a possible equity investment
in the Company by The Hearst Corporation. The Companys long-term debt agreements contain covenants which, among other things, limit
the amount the Company can pay in dividends to its shareholders. Employees Certain employees of the Companys newspapers are employed under collective bargaining
agreements. Recently Issued Accounting Standards In July 2006, the FASB issued Interpretation No. 48 (FIN 48), Accounting for Uncertainty in
Income Taxes, an interpretation of FASB Statement No. 109, effective for fiscal years beginning
after December 15, 2006. FIN 48 creates a single model to address uncertainty in tax positions,
prescribes the minimum recognition threshold, and provides guidance on derecognition, measurement,
classification, interest and penalties, accounting in interim periods, disclosure and transition.
FIN 48 also has expanded disclosure requirements, which include a tabular rollforward of the
beginning and ending aggregate unrecognized tax benefits, as well as specific detail related to tax
uncertainties for which it is reasonably possible the amount of unrecognized tax benefit will
significantly increase or decrease within twelve months. The adoption of FIN 48 is not expected to
have a material impact on the Companys financial statements. Note 3: Joint Operating Agencies  Denver JOA The Company through its wholly-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), a partnership which publishes The Denver Postand 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, distribution and
administration. 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
Denver JOA agreement expires in 2051, unless otherwise extended. Salt Lake City JOA The Company, through its wholly-owned subsidiary, Kearns-Tribune, LLC, owns The Salt Lake
Tribuneand a 58% profit interest in the Newspaper Agency Company LLC (NAC or the Salt Lake City
JOA). Although the Company has a majority of the Salt Lake City JOAs profit interests, under the
operating agreement for that entity, each of the Company and Deseret News Publishing Company (our
partner in the Salt Lake JOA) have an equal representation on that entitys management committee.
The Salt Lake City JOA is the managing entity under 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, beginning July 1, 2006, most of those assets are owned by its
affiliate, Salt Lake Newspapers Production Facilities, LLC (SLNPF), 58% of which entity is owned
directly by the Company and 42% of which entity is owned by Deseret News Publishing Company. SLNPF
leases those assets to the Salt Lake JOA; however, management of SLNPF is shared equally between
Kearns-Tribune and Deseret News Publishing Company. Certain other assets used in the operations of the Salt Lake City JOA are owned solely by Deseret
News Publishing Company, which leases those assets directly to the Salt Lake City
JOA, and certain other assets are owned jointly 63




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by Kearns- Tribune, LLC and Deseret News
Publishing Company, as tenants in common. Prior to July 1, 2006, Kearns-Tribune, LLC and Deseret
News Publishing Company owned the fixed assets as joint tenants in common and did not charge lease
payments to the Salt Lake City 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.The Company records its 58% share of the results of the operations of
the Salt Lake City JOA along with the operations of Kearns-Tribune, LLC, which consists 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. The Salt Lake City JOA expires in 2020, unless otherwise
extended. York JOA 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, the York Sunday News,
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 $256,653 per year, indexed annually for inflation.
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 Recordmasthead; the
remainder was associated with subscriber and advertiser lists) and $28.4 million was recorded as
goodwill. The York JOA expires in 2024, unless otherwise extended. See Note 2: Significant
Accounting Policies and Other Matters  Joint Operating Agencies and Note 4: Investments in
California Newspapers Partnership and Texas-New Mexico Newspapers Partnership for further
discussion of the contribution of York to the Texas-New Mexico Newspapers Partnership. Charleston JOA Prior to May 7, 2004, the Company, through its wholly-owned subsidiary, Charleston Publishing
Company, owned the masthead of the Charleston Daily Mailand 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 was completely
separate from the JOA; accordingly, the Company was only 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 prior to the restructuring of
ownership. Amortization of intangibles and other direct costs associated with the JOA incurred by
Charleston Publishing Company were also included in Income from 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. 64




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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 is reimbursed for the cost of providing the
news and editorial content of the Charleston Daily Mailand is 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. The Charleston JOA expires in 2024, unless
otherwise extended. Detroit JOA On August 3, 2005, the Company purchased the stock of The Detroit News, Inc., which included
the editorial assets of The Detroit News, a daily newspaper published in Detroit, Michigan, and a
limited partnership interest in the Detroit Newspaper Partnership, L.P. (Detroit JOA), for
approximately $25.0 million. The Company is responsible for the news and editorial content of The
Detroit Newspursuant to a JOA agreement. In accordance with the Detroit JOA agreement, the
Company receives a fixed preferred distribution each month with possible incremental distributions
beginning in 2009 based on profit growth. However, such distributions can be suspended to the
extent that the Detroit JOA has insufficient profits to make such fixed preferred distributions.
Any shortfall in distributions will be carried forward and made when sufficient profits are
available. The fixed preferred distributions are as follows: $0.2 million per month during
calendar year 2005; $5.0 million for calendar years 2006 and 2007; $4.0 million for 2008 and 2009;
$3.0 million for 2010 and 2011; $2.0 million for 2012; and $1.9 million for all remaining years
until specified amounts are paid. Under the terms of the Detroit JOA, the Company is also
reimbursed for its news and editorial costs associated with publishing The Detroit News. The
Detroit JOA expires in 2025, unless otherwise extended. Because of the structure of the partnership and our ownership interest, our accounting for the
investment in the Detroit JOA only includes the preferred distributions we receive from the Detroit
JOA, which is different from our accounting for the Denver and Salt Lake City JOAs. The Companys
investment in The Detroit News, Inc. is included in other long-term assets. Unconsolidated JOA Summarized Results The following tables present the summarized results of the Companys unconsolidated JOAs in
Denver and Salt Lake City and through May 7, 2004, the JOA in Charleston, on a combined basis,
along with related balance sheet data. The Salt Lake City JOA data has been presented separately
because, as of June 30, 2006, it is a significant investee of the Company as determined in
accordance with Rule 3-09 of Regulation S-X. Beginning in fiscal year 2005, The Denver JOA data is
no longer combined with the Charleston JOA data as a result of the May 2004 Charleston JOA
restructuring. The fiscal year 2004 income statement data combines the Denver JOA and the
Charleston JOA in the column Other Unconsolidated JOAs. The Salt Lake City JOA, Denver JOA and
Other Unconsolidated JOA information 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 subsidiaries associated with The Salt Lake Tribune, The Denver Post,and through
May 7, 2004, the Charleston Daily Mailare included in the line Associated Revenues and Expenses.
The 20% minority interest associated with The Denver Postthrough June 10, 2005 has not been
reflected in the following tables. 65




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Year Ended June 30, 2006Total IncomeAssociated
    
    fromSalt Lake
    
    Denver
    
    Revenues and
    
    UnconsolidatedCity JOA
    
    JOA
    
    Expenses
    
    JOAs(Dollars in thousands)Income Statement Data:Total revenues
    
    $
    149,041
    
    
    $
    419,055
    
    
    $
    484Cost of sales
    
    
    34,222
    
    
    
    132,893
    
    
    
    34,530Selling, general and administrative
    
    
    55,017
    
    
    
    207,263
    
    
    
    12,272Depreciation and amortization
    
    
    
    
    
    
    56,225
    
    
    
    20,082Other
    
    
    2,643
    
    
    
    922
    
    
    
    1,019Total costs and expenses
    
    
    91,882
    
    
    
    397,303
    
    
    
    67,903Net income
    
    
    57,159
    
    
    
    21,752
    
    
    
    (67,419
    )Partners share of income from
unconsolidated JOAs
    
    
    (23,914
    )
    
    
    (10,876
    )
    
    
    Income from unconsolidated JOAs
    
    $
    33,245
    
    
    $
    10,876
    
    
    $
    (67,419
    )
    
    $
    (23,298
    )
 Year Ended June 30, 2005Total IncomeAssociated
    
    fromSalt Lake
    
    Denver
    
    Revenues and
    
    UnconsolidatedCity JOA
    
    JOA
    
    Expenses
    
    JOAs(Dollars in thousands)Income Statement Data:Total revenues
    
    $
    146,904
    
    
    $
    433,183
    
    
    $
    527Cost of sales
    
    
    32,440
    
    
    
    134,488
    
    
    
    33,744Selling, general and administrative
    
    
    53,638
    
    
    
    204,792
    
    
    
    11,069Depreciation and amortization
    
    
    
    
    
    
    18,468
    
    
    
    4,189Other
    
    
    2,485
    
    
    
    (341
    )
    
    
    112Total costs and expenses
    
    
    88,563
    
    
    
    357,407
    
    
    
    49,114Net income
    
    
    58,341
    
    
    
    75,776
    
    
    
    (48,587
    )Partners share of income from
unconsolidated JOAs
    
    
    (24,351
    )
    
    
    (37,888
    )
    
    
    Income from unconsolidated JOAs
    
    $
    33,990
    
    
    $
    37,888
    
    
    $
    (48,587
    )
    
    $
    23,291
 66




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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
    
    
    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, 2006
    
    June 30, 2005Salt Lake
    
    
    
    
    
    Salt Lake CityCity JOA
    
    Denver JOA
    
    JOA
    
    Denver JOA(Dollars in thousands)Balance Sheet Data:Current assets
    
    $
    15,800
    
    
    $
    64,352
    
    
    $
    20,349
    
    
    $
    67,467Non-current assets
    
    
    14,589
    
    
    
    221,399
    
    
    
    10,825
    
    
    
    188,627Current liabilities
    
    
    24,589
    
    
    
    50,396
    
    
    
    25,686
    
    
    
    51,533Non-current liabilities(1)
    
    
    7,043
    
    
    
    135,069
    
    
    
    7,124
    
    
    
    55,853
   (1)
    
    The June 30, 2006 and 2005 amounts for the Denver JOA includes the Denver JOA lease
(related to the construction of a new building) which is expected to be terminated in the second quarter of the Companys
fiscal year 2007. Depreciation and amortization expense increased significantly for the year ended June 30,
2006, as compared to the same periods in the prior year due to accelerated depreciation on certain
fixed assets at the production facilities in Denver and Salt Lake City which will be or have been
retired earlier than originally expected due to the construction of new production facilities at
the respective locations. The depreciation and amortization expense for the Salt Lake City fixed
assets appears in the associated revenues and expenses column as the Salt Lake City JOA does not
own any of the fixed assets used in its operations. Instead, each partner in the JOA owns the
fixed assets used in the operations of the Salt Lake City JOA and, effective July 1, 2006, leases
them to the Salt Lake City JOA through SLNPF. Note 4: Investments in California Newspapers Partnership and Texas-New Mexico Newspapers Partnership 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 S.F. Holding Corporation, formerly
Stephens Media Group, (Stephens), and The Sun Company of San Bernardino California (Gannett).
MediaNews, Stephens 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 Stephens 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 67




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distribution. Approximately $0.9 million, $0.8 million and $1.0 million of principal and
interest payments were made in fiscal years 2006, 2005 and 2004, 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. 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. Stephens 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 Company is not currently aware of any intentions on the part of Stephens to exercise its put. The minority interest liability reflects the fair market value of the net assets at the time
they were contributed to CNP by Stephens and Gannett, plus the minority partners share of
earnings, net of distributions since inception. CNP made cash distributions to the Company in the
amount of $34.2 million, $33.4 million and, $34.5 million in fiscal years 2006, 2005, and 2004,
respectively. On April 26, 2006, the Company entered into an agreement with Gannett and Stephens (the
Stephens/Gannett Contribution Agreement) pursuant to which Gannett and/or Stephens agreed to
contribute their pro rata share of the initial purchase price (plus estimated transactions fees and
expenses) of The Monterey County Heraldfor a total ranging between $27.4 million and $38.4 million
depending on whether The Monterey County Heraldis purchased by CNP or a possible new partnership
between the Company and Stephens, which would be owned 67.36% by the Company and 32.64% by
Stephens. Texas-New Mexico Newspapers Partnership Effective March 3, 2003, MediaNews and Gannett Co., Inc. (Gannett) formed the Texas-New
Mexico Newspapers Partnership (TNMP). 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 TNMP.
Gannett contributed the El Paso Times, located in El Paso, Texas, in exchange for its 66.2%
controlling partnership interest. Accordingly, MediaNews accounted for its share of the operations
of TNMP under the equity method of accounting. However, effective December 26, 2005, MediaNews
contributed to TNMP the assets of four daily newspapers published in southern Pennsylvania and
Gannett contributed assets of the Public Opinion, published in Chambersburg, PA. Assets
contributed by MediaNews included The Evening Sun(Hanover),the Lebanon Daily News, and MediaNews
interest in the entity that owns and publishes the York Daily Recordand York Sunday News, which
will continue to be published under the terms of a joint operating agreement along with The York
Dispatch. In conjunction with the partners contributions of newspaper assets to TNMP, the partnership
agreement was amended and restated to provide, among other things, that MediaNews will have the
right to appoint a majority of the members of TNMPs Management Committee and control the
day-to-day operations of TNMP. In addition, MediaNews now owns approximately 59.4% of TNMP, and
Gannett owns the remaining 40.6%. Effective December 26, 2005, in conjunction with the change in
ownership and management, TNMP became a consolidated subsidiary of MediaNews. The contributions to
TNMP described in the paragraph above were accounted for as a non-monetary transaction at fair
value based on an independent valuation. The restructuring of TNMP described above was treated as
three separate, but simultaneous transactions: (1) a sale, whereby for accounting purposes, the
Company sold to Gannett a 40.6% interest in its Pennsylvania newspapers, resulting in a $0.3
million non-monetary gain (pursuant to Statement of Financial Accounting Standards No. 153,
Exchanges of Non-Monetary Assets),(2) the acquisition of an additional 25.6% interest in TNMP and
(3) the acquisition 68




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of a 59.4% interest in the
Chambersburg, PA newspaper. As a result of the business combination,
and the consolidation of the Texas-New Mexico Newspapers Partnership,
the Company recorded the following: $86.0 million in intangible
assets, $52.2 million in net tangible assets, $59.5 million
to reflect Gannetts minority interest, and eliminated its
previous $76.2 million equity investment in the Texas-New Mexico
Newspapers Partnership. The accounting for the business combination is still preliminary. The minority interest liability reflects the fair market value of the net assets of Gannetts
share of TNMP, plus the minority partners share of earnings, net of distributions since December
26, 2005. TNMP made cash distributions to the Company in the amount of $12.0 million since the
change in control of the partnership on December 26, 2005. Prior to the TNMP restructuring,
distributions were recorded as a component of equity investment. Note 5: Acquisitions, Dispositions and Other Transactions Acquisitions Fiscal Year 2006 See Note 4: Investment in California Newspapers Partnership and Texas-New Mexico Newspapers
Partnership for discussion of the Texas-New Mexico Partnership restructuring and Other Transactions
- Fiscal Year 2006below for discussion of the formation of the Prairie Mountain Publishing Company
and Note 3: Joint Operating Agencies for discussion of our purchase of The Detroit News. Fiscal Year 2005 On January 4, 2005, the Company entered into a Stock Purchase Agreement pursuant to which the
Company purchased all of the outstanding common stock of Diversified Suburban Newspapers, Inc.
(Diversified), the publisher of The Park Record,in Park City, Utah. The Singleton Family
Revocable Trust owned 50% of the outstanding stock of Diversified at the time of purchase. The
purchase price was approximately $8.0 million (plus transaction costs of $0.2 million), subject to
adjustment to reflect final working capital balances. The Company has allocated the purchase price
as follows: $0.8 million tangible assets (primarily fixed assets), $3.6 million identifiable
intangible assets ($2.0 million, masthead; $0.4 million, subscriber list; $1.2 million, advertiser
list) and $3.8 million was recorded as goodwill. An additional $1.7 million of goodwill was
recorded as the offset to the deferred tax liability established in association with the difference
between the book and tax basis in the Diversified common stock at the date of the transaction. The
Company received a fairness opinion on the purchase price. The transaction was unanimously
approved by the disinterested directors of the Company. The Singleton Family Revocable Trust holds 254,858.99 shares of the Companys Class A Common
Stock, representing 11.09% of total shares of Class A Common Stock outstanding. Mr. William Dean
Singleton, Vice Chairman, Chief Executive Officer and a director of the Company and Mr. Howell
Begle, Assistant Secretary, General Counsel and a director of the Company, are trustees of The
Singleton Family Revocable Trust. Mr. Singleton is a beneficiary of The Singleton Family Revocable
Trust. During fiscal year 2005, the Company purchased several small weekly publications in its
existing newspaper markets for an aggregate purchase price of approximately $2.1 million. The
estimated fair market value of assets acquired reflects managements current best estimate and is
subject to change in the final allocation of the purchase price. 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 $9.3 million. Approximately $0.2 million of
the purchase price was attributable to 69




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tangible assets, $2.5 million was attributable to identifiable intangible assets and $6.6
million was recorded as goodwill. The Company also owns and operates the Press-Telegram, a daily
newspaper published in Long Beach. Dispositions Fiscal Year 2006 See Note 4: Investment in California Newspapers Partnership and Texas-New Mexico Newspapers
Partnership for discussion of the Texas-New Mexico Newspapers Partnership restructuring and Fiscal
Year 2006  Other Transactions below for discussion of the formation of the Prairie Mountain
Publishing Company. Fiscal Year 2005 There were no dispositions in fiscal year 2005. Fiscal Year 2004 In May 2004, MediaNews restructured its interests in the Charleston JOA as discussed in Note
3: Joint Operating Agencies. Other Transactions Fiscal Year 2006 Prairie Mountain Publishing Company On February 1, 2006, MediaNews and E. W. Scripps Company (Scripps) completed the formation
of the Prairie Mountain Publishing Company LLP (formerly named Colorado Publishing Company LLP).
Upon formation of the Prairie Mountain Publishing Company LLP (PMP), MediaNews contributed
substantially all of the operating assets used in the publication of the newspapers published by
Eastern Colorado Publishing Company, comprised of several small daily and weekly newspapers, and
Scripps contributed substantially all of the operating assets used in the publication of the Daily
Cameraand the Colorado Daily, both published in Boulder, Colorado. In addition to the assets
contributed to PMP, MediaNews paid Scripps approximately $20.4 million to obtain its 50% interest
in PMP. Scripps owns the remaining 50% interest. The management committee of PMP is comprised of
four members, two of whom are appointed by MediaNews and two of whom are appointed by Scripps.
Under the partnership agreement, PMP is required to make distributions to the Company equal to 50%
of earnings, less working capital required by the partnership. The Companys contribution to PMP
was treated as two separate, but simultaneous transactions: (1) a sale, whereby for accounting
purposes, the Company sold to Scripps a 50% interest in Eastern Colorado Publishing Company,
resulting in a $0.8 million non-monetary gain (pursuant to Statement of Financial Accounting
Standards No. 153, Exchanges of Nonmonetary Assets) and approximately $16.6 million of assets were
reclassified to equity investments, and (2) the acquisition of a 50% interest in the newspapers
contributed to PMP by Scripps. As a result, effective February 1, 2006, MediaNews no longer
consolidates the operations of Eastern Colorado Publishing Company contributed to PMP and began
accounting for its share of the operations of PMP under the equity method of accounting. Texas-New Mexico Newspapers Partnership See Note 4: Investment in California Newspapers Partnership and Texas-New Mexico Newspapers
Partnership for discussion of the Texas-New Mexico Newspapers Partnership restructuring. Fiscal Year 2005 On June 10, 2005, the Company acquired for approximately $45.9 million the remaining 20% of
The Denver Post Corporation which it did not own. 70




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Fiscal Year 2004 The Companys subsidiary, Alaska Broadcasting Company (or ABC), owns the license rights to
KTVA, an Anchorage, Alaska affiliate of CBS Broadcasting. Until September 30, 2004, ABC
participated, and was 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
former JSA and a shared services agreement, ABC performed certain production, sales and
administrative functions of both stations. Responsibility for programming at the individual
stations was separate and remained with the respective licensees. The Company also entered into an agreement to purchase the KTBY license and all the operating
assets of KTBY from Piedmont for $4.5 million and had paid $1.0 million of the purchase price into
an escrow account. The purchase of the KTBY license was subject to FCC (Federal Communications
Commission) approval. Effective September 30, 2004, the Company elected not to extend the JSA and
purchase agreement, and as a result, the agreements were terminated. Upon the termination of the
purchase agreement, the $1.0 million in escrow was forfeited to Piedmont. The escrow deposit was
written-off along with $0.1 million of other prepaid acquisition costs as of June 30, 2004. The termination of the JSA has not had a material impact on operations or the carrying value
of the assets and liabilities of ABC. Note 6: Long-Term Debt Long-term debt consisted of the following: June 30,2006
    
    2005(Dollars in thousands)Bank Credit Facility (Revolving Portion)
    
    
    (I
    )
    
    $
    146,550
    
    
    $
    152,700Bank Term Loan A
    
    
    (I
    )
    
    
    100,000
    
    
    
    100,000Bank Term Loan B
    
    
    (I
    )
    
    
    145,790
    
    
    
    Bank Term Loan C
    
    
    (I
    )
    
    
    
    
    
    
    147,263Various Notes, payable through 2013
    
    (II)
    
    
    22,770
    
    
    
    24,9706.875% Senior Subordinated Notes, due 2013
    
    (III)
    
    
    297,925
    
    
    
    297,7126.375% Senior Subordinated Notes, due 2014
    
    (IV)
    
    
    148,888
    
    
    
    148,780861,923
    
    
    
    871,425Less current portion of long-term debt
    
    
    
    
    
    
    (3,926
    )
    
    
    (3,913
    )$
    857,997
    
    
    $
    867,512
 71




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##### Table of Contents



I.
    
    On December 30, 2003, the Company refinanced its bank credit facility. The credit facility
provided 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. On August 30, 2004, the
Company entered into an amendment and restatement of the December 30, 2003 bank credit
facility which refinanced term loan B with a $100.0 million term loan A and a $148.8
million term loan C. On September 8, 2005, the Company entered into another amendment of
its December 30, 2003 bank credit facility in order to reduce borrowing margins. The
amendment provided for a $147.3 million term loan B, which was used to refinance term loan
C. The revolving credit facility reduces to $250.0 million on December 30, 2008 and
matures on December 30, 2009. The Company may increase the amount of the amended facility
by up to $200.0 million, subject to obtaining commitments of lenders to loan such additional
amounts and to usual and customary conditions. 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 loans A and B are not available for reborrowing. The 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 Newspapers Partnership. The Company
also has pledged its interest in the Denver JOA to secure the bank credit facility (subject
to certain limitations). The 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 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,
2006, the Company was in compliance with all such covenants. Borrowings under the 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. At
June 30, 2006, Eurodollar borrowing margins varied from 0.75% to 1.00% and base rate
borrowing margins were 0% on the revolver portion of the bank credit facility. At June 30,
2006, borrowing margins on the revolver portion of the bank credit facility were set at
1.00% and 0.00% for the Eurodollar and base rate borrowings, respectively. The term loan
A bears interest at rates based upon, at the Companys option, Eurodollar or base rates
(derived from prime), plus a borrowing margin based on the Companys leverage ratio. The
Eurodollar and base rate borrowing margins on term loan A 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. At June 30, 2006, borrowing margins on
term loan A were set at 1.00% and 0.00% for Eurodollar and base rate borrowings,
respectively. 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. Term loan B bears interest based upon, at the
Companys option, Eurodollar or base rates, plus a borrowing margin of 1.25% or 0.25%,
respectively. At June 30, 2006, borrowing margins were set at 1.25% and 0.25%,
respectively, for the Eurodollar and base rate borrowings. Term loan B requires quarterly
principal payments as follows: $0.4 million through December 2009, increasing to $35.2
million from March through September 2010, with the remaining balance due at maturity on
December 30, 2010. 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%. At June 30, 2006, the Company
had $193.0 million available under the credit facility for future borrowings, net of $10.4
million in outstanding letters of credit. The Company incurred debt issuance costs of $3.8
million related to the December 31, 2003 $600.0 million bank credit facility, and another
$0.3 million related to the amended 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 bank credit facility as a component of amortization expense. The Company amended
the facility again in August 2006 adding a $350.0 million term loan C. See Note 16:
Subsequent Events for a complete discussion of the new terms of the amended credit
agreement.II.
    
    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 7.0%. The notes bearing
interest at below market rates have been discounted at rates ranging from 8.5% to 10.5%,
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. 72




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III.
    
    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). 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. 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 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
bank credit facility and related term loans. 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 6.375% Notes.IV.
    
    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). The Company ultimately used the
proceeds of the sale of $146.9 million to temporarily prepay all borrowings under the
revolver portion of the bank credit facility. Such prepayment was reborrowed and used,
along with cash on hand, to repurchase all of the Companys $200.0 million 8.625% Notes on
July 1, 2004. 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. 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 6.875% Notes. Maturities of long-term debt for the next five fiscal years and thereafter are shown below (in
thousands). As ofJune 30, 20062007
    
    $
    3,9262008
    
    
    13,4952009
    
    
    28,3482010
    
    
    259,3122011
    
    
    97,147Thereafter
    
    
    459,695$
    861,923
 Interest paid during the fiscal years ended June 30, 2006, 2005, and 2004 was approximately
$55.2 million, $55.4 million and $52.7 million, respectively. Approximately $2.0 million and $0.7
million of interest was capitalized during fiscal years 2006 and 2005, respectively. An immaterial
amount of interest was capitalized during fiscal year 2004. 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 $10.4
million as of June 30, 2006. The fair market value of the 6.875% Notes and 6.375% Notes at June 30, 2006 was approximately
$272.2 million and $130.9 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
the 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.
In fiscal year 2004, the Company had swap 73




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agreements that swapped fixed-rate interest payments for variable interest rate payments based
on current pricing. At June 30, 2006 and 2005, the Company had no outstanding interest rate swap
agreements. However, during fiscal year 2004, 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 was recognized in other (income) expense, net for the
year ended June 30, 2004. The net cash settlements of the Companys interest rate swap agreements
had the effect of decreasing interest expense by $3.0 million for the year ended June 30, 2004. Note 7: Leases The California Newspapers Partnership leases assets under capital leases. One of the capital
leases was renegotiated during fiscal year 2005 resulting in an adjustment to the asset and the
corresponding liability of approximately $0.5 million. 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: 2006
    
    2005(Dollars in thousands)Building and equipment
    
    $
    6,406
    
    
    $
    6,422Accumulated amortization
    
    
    (3,882
    )
    
    
    (3,688
    )Assets under capital leases, net
    
    $
    2,524
    
    
    $
    2,734
 Amortization on capital lease assets is included with depreciation expense in the accompanying
financial statements. 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 $7.8
million, $8.2 million and $6.1 million during fiscal years 2006, 2005, and 2004, respectively.
Contingent rentals are not significant. Future minimum payments on capital and operating leases,
excluding the acquisition transaction on August 2, 2006, are as follows at June 30, 2006: Capital
    
    OperatingLeases
    
    Leases(Dollars in thousands)2007
    
    $
    853
    
    
    $
    6,8652008
    
    
    867
    
    
    
    6,0342009
    
    
    867
    
    
    
    4,6212010
    
    
    867
    
    
    
    2,4042011
    
    
    867
    
    
    
    1,743Thereafter
    
    
    6,936
    
    
    
    19,468Total minimum lease payments
    
    
    11,257
    
    
    $
    41,135Less amount representing interest
    
    
    (5,287
    )Present value of net future lease payments
    
    $
    5,970
 74




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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. The Suns
plan was combined with the frozen plan of New England Newspapers, Inc., a wholly owned subsidiary
of the Company. In addition, 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. Until April 1, 2005, participants in the plan assumed in
conjunction with the acquisition of The Suncontinued to accrue benefits associated with current
services, based on years of service and estimated compensation prior to retirement. Effective
April 1, 2005, the Company froze the defined benefit plan benefits and recognized a curtailment
loss of approximately $0.4 million. 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 continue to be covered by the two
non-contributory plans sponsored by The Denver Postas discussed above. 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 Newsand one of The
Denver Postplans were merged into one master 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. During the fourth quarter of fiscal year 2006, the Company offered early retirement and
severance to certain employees of The Denver Post. In conjunction with the early retirement and
severance offers, the Company recognized a small curtailment loss and a small amount related to
special termination benefits. The Company sponsors a post-retirement health care plan for certain former and current
Kearns-Tribune, LLC employees that provided subsidized medical coverage for former employees who
retired prior to January 1, 2005. Effective January 1, 2005, the Company no longer provides
post-retirement health care coverage for the majority of Kearns-Tribune, LLC employees retiring
after that date. In conjunction with the partial freeze of this plan, the Company recognized a
small curtailment loss. Effective July 1, 2003, the Company adopted an executive retiree medical benefit plan, which
provides for 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 Company has additional post-employment agreements and obligations, none of which are
material individually or in aggregate. 75




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##### Table of Contents



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. The tables also
provide the components of net periodic pension cost associated with those plans as of June 30. Pension Plans
    
    Other Benefits2006
    
    2005
    
    2004
    
    2006
    
    2005
    
    2004(Dollars in thousands)Change in Benefit ObligationBenefit Obligation at Beginning
of Year
    
    $
    111,182
    
    
    $
    98,188
    
    
    $
    93,832
    
    
    $
    4,880
    
    
    $
    5,495
    
    
    $
    5,561Service Cost
    
    
    1,125
    
    
    
    1,038
    
    
    
    1,143
    
    
    
    557
    
    
    
    434
    
    
    
    331Interest Cost
    
    
    5,679
    
    
    
    5,927
    
    
    
    5,688
    
    
    
    295
    
    
    
    327
    
    
    
    326Amendments
    
    
    160
    
    
    
    (720
    )
    
    
    64
    
    
    
    49
    
    
    
    (128
    )
    
    
    Other Adjustments
    
    
    307
    
    
    
    
    
    
    
    
    
    
    
    2,032
    
    
    
    
    
    
    
    Actuarial Loss (Gain)
    
    
    (10,257
    )
    
    
    12,561
    
    
    
    3,335
    
    
    
    2,715
    
    
    
    (650
    )
    
    
    (216
    )Benefits Paid
    
    
    (5,836
    )
    
    
    (5,812
    )
    
    
    (5,874
    )
    
    
    (536
    )
    
    
    (598
    )
    
    
    (507
    )Benefit Obligation at End of Year
    
    $
    102,360
    
    
    $
    111,182
    
    
    $
    98,188
    
    
    $
    9,992
    
    
    $
    4,880
    
    
    $
    5,495Change in Plan AssetsFair Value of Plan Assets at
Beginning of Year
    
    $
    82,580
    
    
    $
    81,387
    
    
    $
    77,944
    
    
    $
    
    
    
    $
    
    
    
    $
    Actual Return on Plan Assets
    
    
    7,304
    
    
    
    4,949
    
    
    
    8,539
    
    
    
    
    
    
    
    
    
    
    
    Company Contributions
    
    
    1,945
    
    
    
    2,056
    
    
    
    778
    
    
    
    536
    
    
    
    598
    
    
    
    507Benefits Paid
    
    
    (5,836
    )
    
    
    (5,812
    )
    
    
    (5,874
    )
    
    
    (536
    )
    
    
    (598
    )
    
    
    (507
    )Fair Value of Plan Assets at End
of Year
    
    $
    85,993
    
    
    $
    82,580
    
    
    $
    81,387
    
    
    $
    
    
    
    $
    
    
    
    $
    Reconciliation of Funded StatusFunded Status
    
    $
    (16,367
    )
    
    $
    (28,602
    )
    
    $
    (16,801
    )
    
    $
    (9,992
    )
    
    $
    (4,880
    )
    
    $
    (5,495
    )Unrecognized Net Loss
    
    
    34,770
    
    
    
    48,893
    
    
    
    37,674
    
    
    
    2,953
    
    
    
    397
    
    
    
    1,117Unrecognized Prior Service Cost
    
    
    2,929
    
    
    
    3,494
    
    
    
    4,376
    
    
    
    (136
    )
    
    
    (149
    )
    
    
    Net Prepaid (Accrued) Cost
    
    $
    21,332
    
    
    $
    23,785
    
    
    $
    25,249
    
    
    $
    (7,175
    )
    
    $
    (4,632
    )
    
    $
    (4,378
    )Assumptions as of June 30Discount Rate
    
    
    6.25
    %
    
    
    5.25
    %
    
    
    6.25
    %
    
    
    6.25
    %
    
    
    5.25
    %
    
    
    6.25
    %Expected Return on Plan Assets
    
    
    8.00
    %
    
    
    8.00
    %
    
    
    8.00
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ARate of Compensation Increase
    
    
    3.00
    %
    
    
    3.00
    %
    
    
    3.00
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AComponents of Net Periodic CostService Cost
    
    $
    1,125
    
    
    $
    1,038
    
    
    $
    1,143
    
    
    $
    557
    
    
    $
    434
    
    
    $
    331Interest Cost
    
    
    5,679
    
    
    
    5,927
    
    
    
    5,688
    
    
    
    295
    
    
    
    326
    
    
    
    326Expected Return on Plan Assets
    
    
    (6,466
    )
    
    
    (6,369
    )
    
    
    (7,041
    )
    
    
    
    
    
    
    
    
    
    
    Amortization of Deferral
    
    
    416
    
    
    
    440
    
    
    
    462
    
    
    
    (13
    )
    
    
    (6
    )
    
    
    (2
    )Recognized Net Actuarial Loss
    
    
    2,990
    
    
    
    2,040
    
    
    
    1,608
    
    
    
    31
    
    
    
    70
    
    
    
    93Curtailment Loss and Special
Termination Benefits
    
    
    347
    
    
    
    443
    
    
    
    
    
    
    
    49
    
    
    
    27
    
    
    
    Net Periodic Cost
    
    $
    4,091
    
    
    $
    3,519
    
    
    $
    1,860
    
    
    $
    919
    
    
    $
    851
    
    
    $
    748Amounts Recognized in the
Consolidated Balance Sheets
Consist of:Prepaid Benefit Cost
    
    $
    11,783
    
    
    $
    
    
    
    $
    13,979
    
    
    $
    
    
    
    $
    
    
    
    $
    Accrued Benefit Cost
    
    
    (16,530
    )
    
    
    (27,545
    )
    
    
    (16,356
    )
    
    
    (7,174
    )
    
    
    (4,632
    )
    
    
    (4,378
    )Intangible Asset
    
    
    26
    
    
    
    3,271
    
    
    
    659
    
    
    
    
    
    
    
    
    
    
    
    Accumulated Other
Comprehensive Loss(1)
    
    
    26,053
    
    
    
    48,059
    
    
    
    26,967
    
    
    
    
    
    
    
    
    
    
    
    Net Prepaid (Accrued) Cost
    
    $
    21,332
    
    
    $
    23,785
    
    
    $
    25,249
    
    
    $
    (7,174
    )
    
    $
    (4,632
    )
    
    $
    (4,378
    )Separate Disclosure for Pension
Plans with Accumulated Benefit
Obligation and Projected Benefit
Obligation in Excess of Plan
AssetsProjected Benefit Obligation
    
    $
    73,093
    
    
    $
    111,182
    
    
    $
    70,733
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AAccumulated Benefit Obligation
    
    $
    72,574
    
    
    $
    110,124
    
    
    $
    69,451
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AFair Value of Plan Assets
    
    $
    56,044
    
    
    $
    82,580
    
    
    $
    53,094
    
    
    
    N/A
    
    
    
    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 shareholders equity as
the consolidated statements reflect the minimum pension liability net of tax. 76




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##### Table of Contents



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): Pension Plans
    
    Other Benefits2007
    
    $
    6,540
    
    
    $
    9002008
    
    
    6,540
    
    
    
    9402009
    
    
    6,550
    
    
    
    9602010
    
    
    6,760
    
    
    
    1,0002011
    
    
    6,850
    
    
    
    1,0002012  2016
    
    
    36,710
    
    
    
    4,700
 The Companys pension plan allocations at June 30 were as follows: Target
    
    Plan AssetsAllocations
    
    Years Ended June 30,2007
    
    2006
    
    2005Asset Category:Equity securities
    
    
    70.0
    %
    
    
    70.0
    %
    
    
    66.5
    %Debt securities
    
    
    20.0
    
    
    
    19.3
    
    
    
    29.3Other
    
    
    10.0
    
    
    
    10.7
    
    
    
    4.2Total
    
    
    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. 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. Other includes
certain real estate investments. 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 Company increasing the discount rate used, which decreased 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 and only applies to The Denver Postpension
plans. 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 $3.0 million to $4.0 million to its defined
benefit pension plans in fiscal year 2007, excluding the impact of our August 2, 2006 acquisitions
discussed in Note 16: Subsequent Events. 77




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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 (in thousands): 1-Percentage
    
    1-PercentagePoint Increase
    
    Point DecreaseEffect on total of service and interest cost components
    
    $
    125
    
    
    $
    105Effect on postretirement benefit obligation
    
    $
    799
    
    
    $
    698
 The July 1, 2006 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. Deferred Compensation Plan The Company sponsors several nonqualified 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 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 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 $7.3 million and $5.8 million at June 30, 2006 and 2005,
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 $5.2
million and $3.9 million at June 30, 2006 and 2005, 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, 2006, 2005 and 2004, was
approximately $4.9 million, $4.6 million and $4.1 million, respectively. Note 9: Income Taxes The income tax provision consists of the following: Years Ended June 30,2006
    
    2005
    
    2004(Dollars in thousands)Current:State
    
    $
    1,249
    
    
    $
    1,331
    
    
    $
    579Federal
    
    
    7,179
    
    
    
    1,031
    
    
    
    Deferred:State
    
    
    (19
    )
    
    
    1,167
    
    
    
    (43
    )Federal
    
    
    (4,526
    )
    
    
    16,561
    
    
    
    16,430Net provision
    
    $
    3,883
    
    
    $
    20,090
    
    
    $
    16,966
 78




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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 30,2006
    
    2005
    
    2004Statutory federal income tax rate
    
    
    35
    %
    
    
    35
    %
    
    
    35
    %Effect of:State income tax net of federal benefit
    
    
    16
    
    
    
    3
    
    
    
    1Dividends received deduction
    
    
    (4
    )
    
    
    (4
    )
    
    
    (1
    )Book/tax basis difference associated
with acquisitions and non-deductible
acquisition costs
    
    
    12
    
    
    
    
    
    
    
    (2
    )Expenses not deductible for tax purposes
    
    
    12
    
    
    
    1
    
    
    
    2Other, net
    
    
    7
    
    
    
    (1
    )
    
    
    4Financial statement effective tax rate
    
    
    78
    %
    
    
    34
    %
    
    
    39
    %
 Components of the long-term deferred tax assets and liabilities are as follows: June 30,2006
    
    2005(Dollars in thousands)Deferred tax assets:Net operating losses and other credits
    
    $
    19,529
    
    
    $
    25,991Deferred employee compensation
    
    
    8,760
    
    
    
    5,379Notes payable
    
    
    2,445
    
    
    
    2,599Pensions
    
    
    1,831
    
    
    
    9,531Option accrual
    
    
    1,371
    
    
    
    1,178Bad debts
    
    
    1,640
    
    
    
    1,357Other
    
    
    1,392
    
    
    
    2,00936,968
    
    
    
    48,044Valuation allowance
    
    
    (3,822
    )
    
    
    (4,837
    )Deferred tax assets
    
    
    33,146
    
    
    
    43,207Deferred tax liabilities:Fixed assets
    
    
    16,009
    
    
    
    21,152Intangibles
    
    
    83,736
    
    
    
    50,460Partnership interests and equity investments
    
    
    36,750
    
    
    
    69,803Deferred tax liabilities
    
    
    136,495
    
    
    
    141,415Net deferred tax liabilities
    
    $
    103,349
    
    
    $
    98,208
 On February 1, 2006, MediaNews contributed assets including permanent difference goodwill to
Prairie Mountain Publishing Company, LLP (PMP). The basis of those contributed assets became a component
of the Companys equity investment in PMP. The Company has provided for deferred taxes on the
entire investment balance including the goodwill portion that was treated as a permanent difference
prior to the contribution. As a result, MediaNews recognized
$0.7 million deferred tax expense, the impact of which is
included in the rate reconciliation above in the line item
book/tax basis difference associated with acquisitions and
non-deductible acquisition costs. The State of Texas enacted a new franchise tax law on May 18, 2006. This new tax law will
apply to MediaNews beginning in its fiscal year 2008. Fixed assets depreciation, intangible
amortization, and partnership flowthrough are no longer included in the calculation of taxes under
the new statute. MediaNews recognized a state tax benefit of $0.9 million for the elimination of
Texas deferred tax liability net of federal tax impact. This benefit had the impact of decreasing
the Companys effective state income tax rate net of
federal benefit in the rate reconciliation above. At June 30, 2006, for financial reporting purposes, the Company has approximately $9.8 million
of net operating loss carryforwards (NOLs) for federal tax reporting purposes available to offset
its future taxable income, which expire in 2019 through 2025 and $8.9 million of alternative
minimum tax credit carryforwards. The Company also has approximately
$106.7 million of state NOLs
and approximately $4.6 million of state tax credits available to offset future state taxable 79




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income. The state NOLs expire in 2006 through 2025; the state tax credits expire beginning in
2006. During fiscal year 2006, the Company recorded $0.9 million
of deferred tax expense related to the Companys state NOLs. The
expense resulted from the net increase in valuation allowances to
reflect state tax attributes that are more likely than not to go
unrecognized. This activity had the impact of increasing the
Companys effective state income tax rate net of federal benefit
in the rate reconciliation above. The
impact on the rate reconciliation varies annually based on the
relative size of the non-deductible expenses in comparison to the
pre-tax book income. In fiscal year 2006, expenses not deductible for
tax purposes had the impact of increasing the Companys federal
income taxes by $0.6 million. The Company projects it will generate taxable income sufficient to utilize substantially all
of the federal 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 $1.2 million, $3.7 million and $1.8 million, during fiscal years 2006, 2005, and 2004, respectively. Note 10: Hedging Activities At times, the Company has entered into newsprint and interest rate swap agreements. As of
June 30, 2006, the Company had no outstanding newsprint or interest rate swap agreements. The Company had 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 fair 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. The 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 hedges were deemed
ineffective. Since a liquid market for the swap agreements did not exist, the valuations of the
swaps were based on a discounted cash flow model and projected future newsprint prices. The
valuations required significant judgment and were 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 on 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 original terms of the swap agreements as the forecasted newsprint purchase transactions
originally contemplated in the hedging arrangements continue to be probable of occurring. By the
end of fiscal year 2005, all accumulated other comprehensive income related to the Mirant swap had
been fully amortized. 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. Approximately $0.8 million was
reclassified from accumulated other comprehensive loss to earnings for each of the years ended June
30, 2006 and 2005 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
Mirant over termination of the newsprint swap agreement. See Note 6: Long-Term Debt for further discussion regarding the Companys interest rate
swaps. 80




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Note 11: Commitments and Contingencies  Commitments In December 2004, the Company entered into a contract with a newsprint vendor to purchase
newsprint based on market price beginning January 1, 2005 (24,000 metric tons for calendar year
2005) and continuing through December 31, 2009 (36,000 metric tons per year for calendar years 2006
- 2009). In December 2005, the Company entered into a contract with a newsprint vendor to purchase
3,150 metric tons of newsprint based on market price beginning December 2005 and continuing through
December 31, 2009. 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, 2006, the option repurchase price was valued at $6.6 million
and is recorded as a component of other long-term liabilities. Changes in the estimated option
repurchase price are recorded as a component of other (income) expense, net. The purchase price of
the option can increase or decrease significantly each period based on the performance of the
publication because a significant component of the option repurchase formula is the twenty-four
month trailing cash flows of the publication. If the 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. The Company is party to a Shareholder Agreement with the Companys President. The Shareholder
Agreement entitles the President, 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 the Company at a price of 100% of the then fair market value (as determined by formula outlined
in the Shareholder Agreement) shares of common stock which he owns. The Company also has a call
under the Shareholder Agreement to acquire, and the President 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 (as determined by formula outlined in the Shareholder Agreement), which
increases to 100% on December 31, 2009 (at June 30, 2006, the President has 58,199 shares of Class
A common stock and is entitled to 80% of the fair market value). As of June 30, 2006 and 2005, the
value of the Presidents put, as calculated per terms of the Shareholder Agreement, was estimated
to be $14.1 million and $21.0 million, respectively, and is recorded as component of Putable
Common Stock on the Companys balance sheet. In the event of his disability, the President also
has the right to require MediaNews to purchase his common stock from time to time during his
lifetime in an aggregate amount not to exceed $1.0 million in any fiscal year. Effective July 1, 2005, the Company amended the employment agreement of Mr. William Dean
Singleton, the Companys Vice Chairman of the Board and Chief Executive Officer. Under the amended
employment agreement, Mr. Singleton has the right, in the event of his disability, to require
MediaNews to purchase his common stock from time to time during his lifetime in an aggregate amount
not to exceed $1.0 million in any fiscal year. At June 30, 2006 and 2005, the total estimated cost
(determined actuarially) of the repurchase would be $26.8 million and $27.6 million, respectively,
and such amount is recorded as a component of Putable Common Stock on the Companys balance
sheet. The Company had entered into contractual commitments with regard to the construction of a
printing and office facility for the Salt Lake City JOA. As of June 30, 2006, the facilities were
operational; however, there are contractual holdbacks and allowances of approximately $2.5 million
that remain which are due for work that has been completed and remains subject to testing. 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 81




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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, 2006: 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 was
enforceable, as the District Court held in its Summary Judgment Order. 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 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, Kearns Tribune 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 Kearns Tribune 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. One issue in dispute is the option exercise price. The terms of the Option Agreement specify
an appraisal process for determination of the fair market value of the Tribune Assets. In this
appraisal process, each party engaged an appraisal firm to value the Tribune Assets at their fair
market value. MediaNews appraisal valued the Tribune Assets at $380.0 million, whereas SLTPCs
appraisal valued the Tribune Assets at $218.0 million. Because Kearns Tribunes and SLTPCs
appraisals were more than 10% apart, the appraisers appointed by Kearns Tribune and SLTPC were
required to jointly select a third appraiser. Under the terms of the Option Agreement, the final
option purchase price is based on the average of the two closest of the three appraisals. On June
11, 2003, the third appraiser issued its final report valuing the Tribune Assets at $331.0 million.
Accordingly, the option exercise price was set at $355.5 million for the Tribune Assets. After
the third appraisers final report was issued, SLTPC filed a lawsuit in the District Court on June
24, 2003 (the appraisal lawsuit), challenging the valuation performed by the third appraiser and
seeking to set aside the third appraisal and the $355.5 million exercise price. 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 District Court subsequently denied SLTPCs motion under the FAA procedures seeking to set aside
the appraisal, and, as a consequence of its arbitration rulings, also dismissed the appraisal
lawsuit. SLTPC appealed the District Courts rulings to the Tenth Circuit, and on November 30,
2004, the Tenth Circuit reversed the District Courts rulings. While taking no position on the
merits of the dispute as to the finality of the third appraisal and the validity of the $355.5
million exercise price, the Tenth Circuit held 82




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that the Option Agreements appraisal procedure did not constitute arbitration within the
meaning of the FAA. The Tenth Circuit accordingly reinstated SLTPCs appraisal lawsuit. In the reinstated appraisal lawsuit, SLTPC filed an amended complaint against MediaNews,
Kearns Tribune and the third appraiser, Management Planning Inc. (MPI), seeking relief that
includes (a) the setting aside of the third appraisal; or (b) alternatively, if the exercise price
of $355.5 million is held to be final and binding, (i) monetary damages from the third appraiser
for alleged breaches of contractual and fiduciary duties, and (ii) what SLTPC refers to as an
abatement of the purchase price pursuant to allegations that the value of the Tribune Assets has
decreased since SLTPC sought to exercise the option. MediaNews and Kearns Tribune and MPI filed
separate motions to dismiss SLTPCs amended complaint in the appraisal lawsuit. On October 24,
2005, the District Court granted those motions and dismissed the appraisal lawsuit, ruling that
SLTPCs allegations in its amended complaint did not set forth grounds for the invalidation of the
third appraisal. SLTPC subsequently filed a motion for reconsideration or, in the alternative, for
leave to file a second amended complaint, which the District Court denied on December 7, 2005.
SLTPC appealed to the United States Court of Appeals for the Tenth Circuit (the Tenth Circuit).
On July 19, 2006, the Court of Appeals reversed the District Court, holding that SLTPC had set
forth grounds for invalidation of the third appraisal by alleging that MPI had (a) used the wrong
definition of Fair Market Value; (b) failed to consider relevant evidence; and (c) failed to comply
with professional appraisal standards. The Court of Appeals remanded the case to the District
Court for further proceedings to determine if those allegations could be sustained. On August 3,
2006, MediaNews and Kearns Tribune filed a Petition for Rehearing, asking the Court of Appeals to
reconsider whether the second and third allegations (failure to consider relevant evidence and
failure to comply with professional appraisal standards) were sufficient to challenge the third
appraisal. The Court of Appeals ordered SLTPC to respond to the Petition for Rehearing but has not
yet ruled on it. If the $355.5 million option exercise price is upheld, there remains a dispute as to whether
SLTPC has now waived its rights under the Option Agreement to acquire the Tribune Assets at that
price. The District Court had set a date of October 10, 2003 (the Closing Date) for the closing
to occur. On October 9, 2003, counsel for SLTPC sent a letter to counsel for MediaNews and Kearns
Tribune notifying Kearns Tribune 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 and Kearns Tribune contend that this was SLTPCs sole
opportunity to close at the $355.5 million price, while SLTPC contends that in light of its
objections, it would be entitled to another opportunity to close at that price. It is expected
that any dispute over SLTPCs opportunity for a second closing will be litigated in the main action
between the parties (see discussion in the paragraph below). During the time in which the appraisal and exercise price issues were on appeal before the
Tenth Circuit, SLTPCs main action was stayed. In the main action, SLTPCs pending claims against
MediaNews and Kearns Tribune include claims for specific performance damages for breach of contract
(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). MediaNews and Kearns Tribune have
pending counterclaims against SLTPC, which include claims for damages for breaches of contract,
breach of fiduciary duty, interference with contract, negligence and conversion. Additionally,
MediaNews and Kearns Tribune have pending counterclaims for declaratory judgment, but no damage
claims against Deseret News Publishing Company (Deseret Publishing). Deseret Publishing has
pending claims against SLTPC for damages, and claims that do not seek damages against Kearns
Tribune as to the meaning and enforceability of the Option Agreement and related Management and
Joint Operating Agreements. Additionally, it is anticipated, depending upon the outcome of the
appraisal lawsuit, that the main action may also encompass litigation by the parties concerning
whether the Option Agreement expired when SLTPC did not exercise it on October 10, 2003 (as the
Company and Kearns Tribune have contended), or whether SLTPC still has the opportunity to exercise
the Option Agreement (as SLTPC contends). No schedule has yet been set for the litigation of these
issues. In related litigation, the Company and Kearns Tribune filed a declaratory judgment against
certain members of the McCarthey family who own a majority interest in SLTPC, seeking a ruling that
the defendants do not have any rights as individuals (separate from their corporate entity, SLTPC)
to purchase or otherwise acquire the Tribune Assets. The defendants have asserted contract, tort
and equitable claims based on an alleged oral agreement that they contend gives them the right as
individuals (separate from their corporate entity, SLTPC) to purchase the Tribune Assets at a price
established through a different appraisal methodology than that employed by MPI. The defendants
have also filed a third-party complaint naming as defendants various individuals and entities,
including AT&T, Deseret Publishing, and Dirks Van Essen, one of the three appraisers of the Tribune
Assets. The Company, Kearns Tribune and all of the third-party defendants filed 83




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motions seeking summary judgment on all claims. On April 24, 2006, the District Court granted
those motions. The McCartheys have appealed, and the case is not yet fully briefed on appeal. 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 $1.3
million, $0.8 million and $2.2 million, respectively, was recorded in other (income) expense, net
for the fiscal years ended June 30, 2006, 2005 and 2004, related to the cost of defending these
lawsuits. The cost of defending these lawsuits has been and may continue to be substantial. Other MediaNews sent a notice terminating its newsprint swap agreement with Mirant Americas Energy
Marketing, LP (Mirant) effective September 5, 2003. In March 2005, Mirant filed a lawsuit in
U.S. District Court for the Southern District of New York against the Company alleging breach of
contract and seeking damages in connection with the swap termination in the amount of approximately
$2.0 million, plus interest, costs and attorneys fees. In March 2006, such motion was denied. In
August 2006, the Company reached a settlement agreement with Mirant. Settlement terms under the
agreement were accounted for as of June 30, 2006 and did not have a material impact on the
financial condition or results of operations of the Company. 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 electronic display 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 settlement of these consolidated actions, and MediaNews
agreed 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. Settlement under the agreement could be significant; however, the Company
has not been provided sufficient information to be able to estimate its potential exposure to
settling its share of the asserted claims. In May 2004, the Company restructured its interests in Charleston Newspapers (Charleston
JOA) and The York Newspaper Company (York JOA). The Company and the other participants in such
restructurings subsequently received civil investigative demands from the Department of Justice and
provided responsive information and documents concerning the recent restructurings of the
Charleston and York JOAs. After discussions with the Antitrust Division staff in 2005, the Company
proposed potential amendments to the agreements governing the York JOA to clarify the rights and
obligations of the parties to provide for additional performance based compensation to the manager
of The York Dispatchunder certain circumstances. The proposed amendments remain under review at
the Antitrust Division. The Company anticipates that any such amendments would not be material to
its future operating results. With respect to the Charleston JOA, the Antitrust Division staff continued their investigation
in 2005 and 2006. While this investigation remains open, the Company does not anticipate any
action by the Antitrust Division would materially affect its future operating results. 84




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See Note 16: Subsequent Events regarding a lawsuit filed July 14, 2006 alleging antitrust
violations based on the Companys purchase of certain California newspapers from The McClatchy
Company and The Hearst Corporations proposed investment in the Companys non-Bay area assets and
the review of the equity investment by Hearst in the Company by the Antitrust Division of the
Department of Justice. The Company owns certain life insurance policies received in conjunction with an acquisition.
In fiscal year 2006, the Company determined one of the policies, with a face value of $5.0 million,
relates to an individual who passed away in 2002. While the Company believes it is entitled to the
$5.0 million face value proceeds, the Company will record the proceeds when collection is assured. 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 $300,000. 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 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.
The Singleton Revocable Trust benefits Mr. Singletons children. The amount advanced as of June
30, 2006 and 2005 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. See Note 11:
Commitments and Contingencies for further discussion of Mr. Singletons amended employment
agreement. The Company has an employment and shareholder agreement with the Companys President. See
Note 11: Commitments and Contingencies for further discussion. 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 prior to being amended as described below provided MediaNews with a management fee of 1.25%
of revenues and thereby reducing 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.
In connection with the acquisition of the Contra Costa Timesand the San Jose Mercury News, and the
related contribution of those publications into the California Newspapers Partnership, the CNP
management agreement was revised. Effective August 2, 2006, the revised agreement calls for annual
management fees of $5.4 million, subject to annual adjustments based on actual costs and the
operating performance of CNP. In addition, in connection with the restructuring of the Texas-New Mexico Newspapers
Partnership, the Company as managing controlling partner is provided an annual management fee of
$75,000 by the partnership, subject to annual adjustment. In
August 2004, the Company purchased the Colorado residence of
Mr. Gerald Grilly (the Companys Chief Operating Officer
at the time) for $2.7 million in conjunction with his relocation
to Los Angeles, California. Mr. Grillys relocation was
requested by MediaNews. In May 2005, the Company sold the residence
for $2.5 million. See Note 5: Acquisitions, Dispositions and Other Transactions regarding the Companys purchase
of The Park Recordin Park City, Utah. 85




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Note 13: Other (Income) Expense, Net Included in other (income) expense, net are the following items: Years Ended June 30,2006
    
    2005
    
    2004(In millions)Change in estimated option repurchase price
    
    $
    
    
    
    $
    (5.8
    )
    
    $
    (4.0
    )Hedging, net
    
    
    0.8
    
    
    
    0.4
    
    
    
    2.1Bank fees
    
    
    0.2
    
    
    
    0.7
    
    
    
    0.4Salt Lake ownership litigation
    
    
    1.3
    
    
    
    0.8
    
    
    
    2.2Freedom acquisition bid
    
    
    
    
    
    
    
    
    
    
    1.0Debt redemption premiums and write-off of
deferred debt costs
    
    
    
    
    
    
    9.2
    
    
    
    9.3Write-off of KTBY escrow and other prepaid
acquisition costs
    
    
    
    
    
    
    
    
    
    
    1.1Preferred return on Detroit JOA investment
    
    
    (2.0
    )
    
    
    
    
    
    
    Other
    
    
    1.1
    
    
    
    3.4
    
    
    
    5.3$
    1.4
    
    
    $
    8.7
    
    
    $
    17.4
 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%). Years Ended June 30,2006
    
    2005
    
    2004(In thousands)Current assets
    
    $
    64,123
    
    
    $
    57,894
    
    
    $
    58,924Non-current assets
    
    
    167,986
    
    
    
    192,164
    
    
    
    216,640Current liabilities
    
    
    35,854
    
    
    
    30,117
    
    
    
    29,723Non-current liabilities
    
    
    47,492
    
    
    
    67,404
    
    
    
    92,967Total revenues
    
    
    257,185
    
    
    
    257,816
    
    
    
    266,865Net income
    
    
    27,405
    
    
    
    35,605
    
    
    
    30,260
 See Note 4: Investments in California Newspapers Partnership and Texas-New Mexico Newspapers
Partnership for discussion of our accounting for the Texas-New Mexico Newspapers Partnership
whereby prior to December 26, 2005, the Company accounted for its interest in the partnership as an
equity investment. Effective December 26, 2005, the partnership became a consolidated subsidiary
of the Company. The Texas-New Mexico Newspapers Partnership results are reflected in the above
table through December 25, 2005. Also, beginning February 1, 2006, the results of Prairie Mountain
Publishing Company are included above (discussed further in Note 5: Acquisitions, Dispositions and
Other Transactions). Note 15: Career Restricted Stock Unit Plan Effective June 29, 2005, the Company adopted a Career Restricted Stock Unit (RSU) Plan
intended to encourage retention and reward performance of selected senior management of the Company
and its affiliates over a significant period of time. The RSU Plan is administered by the Companys board of directors (or a designated committee).
The RSU Plan provides for the award to members of senior management selected by the board (or
committee) for participation in the Plan of such number of restricted stock units (RSUs) at such
time or times as determined by the board (or committee) in its discretion. Each RSU represents the
right to receive one share of the Companys new class of Class B common stock (which is non- 86




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voting
and does not pay dividends, but which is convertible into Class A in certain circumstances),
subject to vesting and other requirements. RSUs granted to a participant vest upon the later to
occur of:  
    
    the earlier of (x) the completion of 20 years of continuous service with the Company or
its affiliates or (y) attainment of age 67 while still employed by the Company or its
affiliates; or
    
    the date on which the participant (a) has completed at least five years of participation
in the RSU Plan and (b) has a combined age and years of continuous service with the Company
and or affiliates of at least 72. RSUs also fully vest upon the occurrence of a Change in Control (as defined) and vest pro
rata in the event of the participants death, disability or termination of employment by the
Company without cause. Any RSUs not so vested are forfeited upon the participants termination of
employment, unless otherwise determined by the board (or committee) in its sole discretion. Shares of the Companys Class B common stock are issued to holders of vested RSUs upon the
earliest of the participants separation from service, the participants disability and the
occurrence of a Qualified Change in Control (as defined). Recipients of shares issued pursuant to RSUs have the right to require the Company to
repurchase a number of shares at their then fair market value (as determined by formula outlined in
the RSU plan) that is sufficient to enable them to pay taxes due in connection with such issuance,
provided that the board of directors may suspend such right at any time. At any time following the
six-month anniversary of the date of issuance of shares of such Class B common stock, the Company
has the right to repurchase such shares at their then fair market value (as determined by formula
outlined in the RSU plan). Such repurchase rights will terminate if the Company consummates an
initial public offering. The issuance of up to 150,000 shares of the Companys Class B common stock is authorized under
the RSU Plan. RSU grants of 10,105 units were made July 14, 2005 to certain executive officers of
the Company, the fair value of which was approximately
$3.7 million. Approximately $0.6 million was recognized in
selling, general and administrative expense in fiscal year 2006 (the
tax benefit related thereto was $0.2 million). None of the
grants have vested. As of June 30, 2006, the total compensation
cost related to nonvested grants not yet recognized was
$3.1 million and is expected to be recognized over a weighted
average period of 6 years. Note 16: Subsequent Events Acquisition On August 2, 2006, MediaNews and The McClatchy Company (McClatchy) consummated the closing
under the Stock and Asset Purchase Agreement dated as of April 26, 2006, between the Company and
McClatchy, pursuant to which California Newspapers Partnership, a 54.23% subsidiary of the Company,
purchased the Contra Costa Timesand the San Jose Mercury Newsand related publications and Web
sites for $736.8 million. The acquisition, including fees, was funded in part with contributions
of $340.1 million from the Companys partners in CNP. The Companys share of the acquisition,
including fees, was approximately $403.0 million and was funded with borrowings under a new term
loan C and its existing bank revolver (see Note 16: Subsequent Events  Credit Agreement
Amendment) On August 2, 2006, Hearst and McClatchy consummated the closing under the Stock and Asset
Purchase Agreement dated as of April 26, 2006, between Hearst and McClatchy, pursuant to which
Hearst purchased The Monterey County Heraldand the St. Paul Pioneer Pressand related publications
and Web sites for $263.2 million. Hearst Stock Purchase Agreement On August 2, 2006, MediaNews and The Hearst Corporation (Hearst) entered into a Stock
Purchase Agreement (the MediaNews/Hearst Agreement) pursuant to which (i) Hearst agreed to make
an equity investment of up to $299.4 million (subject to adjustment under certain circumstances) in
the Company (such investment will not include any governance or economic rights or interest in the
Companys publications in the San Francisco Bay area) and (ii) the Company has agreed to purchase
from Hearst The Monterey County Heraldand the St. Paul Pioneer Presswith a portion of the Hearst
equity investment in the Company. The equity investment will afford Hearst an equity interest of
approximately 30% (subject to adjustment in certain circumstances) in the Company after excluding
its economic interest in the San Francisco Bay area newspapers. The equity investment by Hearst in
the Company is subject to antitrust review, currently underway by the Antitrust Division of the
Department of Justice. The Antitrust Division has requested information and documents in 87




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connection with this review, and the Company is in the process of responding to the request. The
Company has agreed to manage The Monterey County Heraldand the St. Paul Pioneer Pressduring the
period of their ownership by Hearst, with the Company retaining all the net cash flows from these
newspapers as a management fee. The Company also agreed that at the election of MediaNews or
Hearst, the Company will purchase The Monterey County Heraldand the St. Paul Pioneer Press, if
requested, from Hearst for $263.2 million (plus reimbursement of Hearsts cost of funds in respect
of its purchase of such newspapers) if for any reason Hearsts equity investment in the Company is
not consummated within six months. The Company would need to obtain additional financing to fund
this purchase, if required. Litigation On July 14, 2006, an individual filed suit against the Company in California alleging
antitrust violations based on the Companys purchase of certain California newspapers from
McClatchy and Hearsts proposed investment in the Companys non-Bay area assets. The individual
sought a temporary restraining order enjoining the Company from acquiring these newspapers and
enjoining Hearsts proposed investment in the Companys non-Bay area assets, which the court denied
in full on July 28, 2006. The Company is contesting all of the individuals substantive claims
vigorously. Trial is scheduled for February 2007. If the Company loses on one or more counts, it
could be required to divest one or more of the acquired
newspapers, and/or the Hearst investment in the Companys non-Bay area assets could be
enjoined. In addition, if the Company loses on any count, it may have to pay the complainants
reasonable legal costs as provided by statute. Credit Agreement Amendment On August 2, 2006, the Company entered into an amendment to its December 30, 2003 bank credit
facility (the amended facility). The amended facility was entered into in order to authorize a
new $350.0 million term loan C facility and to approve the purchase of the Contra Costa Times,
San Jose Mercury News, The Monterey County Heraldand the St. Paul Pioneer Pressby the Company. The amended facility maintains the $350.0 million revolving credit facility, the $100.0
million term loan A, the $147.3 million term loan B facility, and provides for the $350.0
million term loan C facility, which was borrowed on August 2, 2006 and used, along with
borrowings under the Companys bank revolver of
$56.3 million, to fund the remainder of its portion of the purchase price for
the Contra Costa Timesand the San Jose Mercury Newsand the related fees to amend the facility. Term loan C bears interest based upon, at the Companys option, Eurodollar, plus a borrowing
margin of 1.75%, or base rate, plus a borrowing margin of .75%. Term loan C requires quarterly
principal payments as follows: $0.875 million through June 2012; and $82.25 million from June 2012
through March 2013, with the remaining balance due at maturity on August 2, 2013. Amounts repaid
under the term loan C facility will not be available for re-borrowing. The amended facility also contained certain definitional changes used in calculating the
maximum consolidated debt to consolidated operating cash flow ratio as well as increasing the
maximum coverage ratio for certain future periods. The
Company paid approximately $4.6 million to amend the facility, which included $1.0 million
for the lender to back-stop the commitment for the borrowing. Commitments On August 24, 2006, in connection with the previously described series of transactions
involving MediaNews, Hearst and McClatchy, the Company awarded bonuses to certain of its officers
and employees in the aggregate amount of approximately $1.9 million. On August 24, 2006, the Company and Gerald E. Grilly, Executive Vice President and Chief
Operating Officer of the Company, agreed that Mr. Grilly would retire from the Company effective
August 31, 2006. In connection therewith, Mr. Grilly will receive severance of $1.25 million
payable over three years, $150,000 bonus associated with the August 2, 2006 acquisition as well as
$250,000 in connection with the Companys long-term compensation plans. 88




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Building Sale In July 2006, the Company sold its office building in Long Beach, California for approximately
$20.0 million. The Company expects to recognize a gain on the sale of the building. In conjunction with the sale of the
building, the Company entered into a 15-year lease agreement for space to house its Long Beach
operations. The lease term commences once the new space is ready to be occupied, which is expected
to be in the second quarter of the Companys fiscal year 2007.
The expected minimum lease payments are included in the disclosure of
future minimum payments for operating leases in Note 7: Leases. Original Apartment Magazine In
September 2006, the California Newspapers Partnership agreed to sell
the Original Apartment Magazine for $14.0 million plus a
potential earnout of $1.0 million based on increases in the
Original Apartment Magazines revenue over a twelve month
period ending August 2007. The expected closing date is
September 29, 2006. 89




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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 26, 2006
    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 26, 2006/S/ Jean L. Scudder
(Jean L. Scudder)
    
    Director
    
    September 26, 2006/S/Howell E. Begle, Jr.
(Howell E. Begle, Jr.)
    
    Director
    
    September 26, 2006/S/William Dean Singleton
(William Dean Singleton)
    
    Vice Chairman, Chief Executive Officer
and Director (Chief Executive Officer)
    
    September 26, 2006/S/ Joseph J. Lodovic, IV
(Joseph J. Lodovic, IV)
    
    President
    
    September 26, 2006/S/ Ronald A. Mayo
(Ronald A. Mayo)
    
    Vice President and Chief Financial
Officer
    
    September 26, 2006/S/ Michael J. Koren
(Michael J. Koren)
    
    Vice President and Controller
(Principal Accounting Officer)
    
    September 26, 2006
 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. 90




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EXHIBIT INDEX Exhibits2.1
    
    Stock and Asset Purchase Agreement dated as of April 26, 2006, between MediaNews Group,
Inc. and The McClatchy Company (incorporated by reference to Exhibit 99.1 to the
registrants Form 8-K filed May 1, 2006)2.2
    
    Stock and Asset Purchase Agreement dated as of April 26, 2006, between The Hearst
Corporation and The McClatchy Company (incorporated by reference to Exhibit 99.2 to the
registrants Form 8-K filed May 1, 2006)3.1
    
    Third Amended and Restated Certificate of Incorporation (incorporated by reference to
Exhibit 3.1 to the registrants June 30, 2005 Form 10-K)3.2
    
    Amended and Restated Bylaws of MediaNews Group, Inc. (incorporated by reference to
Exhibit 3.2 to the registrants June 30, 2005 Form 10-K)4.1
    
    Registration Rights Agreement dated May 20, 1994, between Affiliated Newspapers
Investments, Inc. (the predecessor to the registrant) and BT Securities Corporation
(incorporated by reference to Exhibit 4.3 to Form S-1/A of Affiliated Newspapers
Investments, Inc., filed May 6, 1994 (File No. 33-75158))4.2
    
    Indenture dated as of November 25, 2003 between MediaNews Group, Inc., as Issuer, and The
Bank of New York, as Trustee (incorporated by reference to Exhibit 4.4 to the registrants
Form 8-K filed January 14, 2004)4.3
    
    Form of MediaNews Group, Inc.s 6 7/8% Senior Subordinated Notes due 2013 (contained in
the Indenture filed as Exhibit 4.4 to the registrants Form 8-K filed January 14, 2004)4.4
    
    Indenture dated as of January 26, 2004 between MediaNews Group, Inc., as Issuer, and The
Bank of New York, as Trustee (incorporated by reference to Exhibit 4.4 to the registrants
From 10-Q for the period ended December 31, 2003)4.5
    
    Form of MediaNews Group, Inc.s 6 3/8% Senior Subordinated Notes due 2014 (contained in
the Indenture filed as Exhibit 4.4 to the registrants Form 10-Q for the period ended
December 31, 2003)10.1
    
    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)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 agent (incorporated by reference to Exhibit 10.3 to the registrants
June 30, 2004 Form 10-K)10.4
    
    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 agent (incorporated by reference to Exhibit 10.4 to the registrants
June 30, 2004 Form 10-K)10.5
    
    Fourth Amendment to Credit Agreement, dated as of September 8, 2005, 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 10.5 to the
registrants June 30, 2005 Form 10-K)10.6
    
    Fifth amendment to Credit Agreement dated as of June 28, 2006, by and among MediaNews
Group, Inc., the guarantors party thereto, the lenders named therein and Bank of America,
N.A., as administrative agent10.7
    
    Sixth Amendment to Credit Agreement dated as of August 2, 2006, by and among MediaNews
Group, Inc., the guarantors party thereto, the lenders named therein and Bank of America,
N.A., as administrative agent (incorporated by reference to Exhibit 99.2 to the registrants
Form 8-K filed August 8, 2006)10.8
    
    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)
 91




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EXHIBIT INDEX (continued) Exhibits(continued)10.9
    
    Amendment to the Amended and Restated Shareholders Agreement of MediaNews Group, Inc.
dated as of June 30, 2005, 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 June 30, 2005 Form 10-K)10.10
    
    Employment Agreement dated July 1, 2005 between MediaNews and William Dean Singleton
(incorporated by reference to Exhibit 99.2 to the registrants Form 8-K filed July 5, 2005)10.11
    
    Employment Agreement dated July 1, 2005 between MediaNews and Joseph J. Lodovic IV
(incorporated by reference to Exhibit 99.3 to the registrants Form 8-K filed July 5, 2005)10.12
    
    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, LLC (incorporated by
reference to Exhibit 10.8 to the registrants June 30, 2004 Form 10-K)10.13
    
    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)10.14
    
    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)10.15
    
    Amendment and Restatement of Agreement, by and between Kearns-Tribune, LLC and Deseret
News Publishing Company, dated as of July 1, 200610.16
    
    Limited Liability Company Operating Agreement of Newspaper Agency Company, LLC dated as
of July 1, 200610.17
    
    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)10.18
    
    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)10.19
    
    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)10.20
    
    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)10.21
    
    Second Amended and Restated Partnership Agreement for Texas-New Mexico Newspapers
Partnership, a Delaware general partnership, by and among Gannett Texas L.P. and Northwest
New Mexico Publishing Company10.22
    
    Third Amended and Restated Partnership Agreement for California Newspapers Partnership,
a Delaware General Partnership, by and among West Coast MediaNews LLC; Stephens California
Media; The Sun Company of San Bernardino, California; California Newspapers, Inc.; Media
WestSBC, Inc. and Media WestCNI, Inc., dated as of August 2, 200610.23
    
    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 letter (incorporated by reference to Exhibit 10.20 to the
registrants June 30, 2004 Form 10-K)
 92




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EXHIBIT INDEX (continued) Exhibits(continued)10.24
    
    Master Restructuring and Purchase Agreement, dated as of May 7, 2004, among Daily
Gazette Company, MediaNews Group, Inc., Charleston Publishing Company and Charleston
Newspapers (incorporated by reference to Exhibit 10.21 to the registrants June 30, 2004
Form 10-K)10.25
    
    Stock Purchase Agreement dated January 4, 2005, by and among MediaNews Group, Inc., as
purchaser, and The Singleton Family Revocable Trust and Peter Bernhard, as sellers
(incorporated by reference to Exhibit 10.1 to the registrants Form 10-Q for the period
ended December 31, 2004)10.26
    
    MediaNews Group, Inc. Career RSU Plan (incorporated by reference to Exhibit 99.1 to the
registrants Form 8-K filed July 5, 2005)10.27
    
    Shareholder Agreement dated as of July 1, 2005, as amended as of September 22, 2005, by
and among MediaNews Group, Inc. and Joseph J. Lodovic, IV (incorporated by reference to
Exhibit 10.24 to the registrants June 30, 2005 Form 10-K)10.28
    
    Agreement dated April 26, 2006 between MediaNews Group, Inc. and The Hearst Corporation
(incorporated by reference to Exhibit 99.3 to the registrants Form 8-K filed May 1, 2006)10.29
    
    Agreement dated April 26, 2006 between MediaNews Group, Inc., Gannett Co., Inc., and
Stephens Group, Inc. (incorporated by reference to Exhibit 99.4 to the registrants Form 8-K
filed May 1, 2006)10.30
    
    Stock Purchase Agreement dated as of August 2, 2006 between MediaNews Group, Inc. and
The Hearst Corporation (incorporated by reference to Exhibit 99.1 to the registrants Form
8-K filed August 8, 2006)21.1
    
    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
 93




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##### Table of Contents



MEDIANEWS GROUP, INC. AND SUBSIDIARIES 
 SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
 FISCAL YEARS ENDED JUNE 30, 2006, 2005 AND 2004
 Balance at
    
    Additions
    
    
    
    
    
    AcquisitionsBeginning of
    
    Charged to
    
    Net
    
    (Dispositions),
    
    Balance atPeriod
    
    Expense, Net
    
    Deductions
    
    Net
    
    End of Period(In thousands)YEAR ENDED JUNE 30, 2006Reserves and allowances deducted from asset accounts:Allowance for doubtful accounts
    
    $
    6,901
    
    
    $
    9,893
    
    
    $
    (8,091
    )
    
    $
    579
    
    
    $
    9,282YEAR ENDED JUNE 30, 2005Reserves and allowances deducted from asset accounts:Allowance for doubtful accounts
    
    $
    7,625
    
    
    $
    8,065
    
    
    $
    (8,874
    )
    
    $
    85
    
    
    $
    6,901YEAR ENDED JUNE 30, 2004Reserves and allowances deducted from asset accounts:Allowance for doubtful accounts
    
    $
    7,887
    
    
    $
    7,405
    
    
    $
    (7,668
    )
    
    $
    1
    
    
    $
    7,625
 See notes to consolidated financial statements. 94