**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-Q**





(Mark
      One)




**x**
              **Quarterly
                  Report Pursuant to Section 13 or 15 (d) of the Securities
                  Exchange Act of
                  1934**
  **For
      the quarterly period ended June 30, 2007**





**or**





** ̈**
            **Transition
                Report Pursuant to Section 13 or 15 (d) of the Securities
                Exchange Act of 1934**





**For
      the transition period
      from
      to**





**Commission
      File Number: 333-112246**





**Morris
      Publishing Group, LLC**


**Morris
      Publishing Finance Co.***


**(Exact
      name of Registrants as specified in their charters)**








**Georgia**
            
            **58-1445060****Georgia**
            
            **20-0183044****(State
                of organization)**
            
            **(I.R.S.
                Employer Identification Numbers)****725
                Broad Street Augusta, Georgia**
            
            **30901****(Address
                of principal executive offices)**
            
            **(Zip
                Code)**





**(706)
      724-0851**


**(Registrants’
      Telephone number)**





Indicate
      by check mark whether the Registrants (1) have filed all reports required
      to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
      1934 during the preceding 12 months (or for such shorter period that the
      Registrant was required to file such reports), and (2) have been subject to
      such filing requirements for the past 90 days.





**Yes   ̈                                     No  x**





Indicate
      by check mark whether the Registrants are large accelerated filers, accelerated
      filers, or non-accelerated filers. See definition of “accelerated filer and
      large accelerated filer” in Rule 12b-2 of the Exchange Act. Check
      one:





**Large
                Accelerated Filer**  
            
            **Accelerated
                Filer**  
            
            **Non-Accelerated
                Filer**  **x**





Indicate
      by check mark whether the Registrant Morris Publishing Group, LLC is a shell
      company (as defined in Rule 12b-2 of the Exchange Act).





**Yes   ̈                                    No  x**





Indicate
      by check mark whether the Registrant Morris Publishing Finance Co. is a shell
      company (as defined in Rule 12b-2 of the Exchange Act).





**Yes  x                                    No   ̈**





*
            Morris
                Publishing Finance Co. meets the conditions set forth in General
                Instruction H (1) (a) and (b) of Form 10-Q and is therefore
                filing this form with the reduced disclosure
                format.








**MORRIS
      PUBLISHING GROUP, LLC**


**MORRIS
      PUBLISHING FINANCE CO.**


**QUARTERLY
      REPORT**


**FOR
      THE QUARTERLY PERIOD ENDED JUNE 30, 2007**





**TABLE
      OF CONTENTS**





**Page****FORWARD
                  LOOKING STATEMENTS**
              1PART
                  I.**Item
                  1.      Financial
                  Statements:**Unaudited
                  condensed consolidated balance sheets as of June 30,
                  2007 and December 31, 2006
              2Unaudited
                  condensed consolidated statements of income for the
                  three and six month periods ended June 30, 2007 and
                  2006
              3Unaudited
                  condensed consolidated statements of cash flows for
                  the six month periods ended June 30, 2007 and 2006
              4Notes
                    to unaudited condensed consolidated financial
                    statements
              5Item
                  2.     Management’s
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              11Item
                  3.      Quantitative and
                  Qualitative Disclosures about Market Risk
              28Item
                  4.      Controls and
                  Procedures
              28**PART
                  II.**
              ****Item
                  1.      Legal
                  Proceedings.
              29Item
                  1A.   Risk Factors
              29Item
                  2.      Unregistered
                  Sales of Equity Securities and Use of Proceeds.
              29Item
                  3.      Defaults Upon
                  Senior Securities.
              29Item
                  4.      Submission of
                  Matters to a Vote of Security Holders.
              29Item
                  5.      Other
                  Information
              29Item
                  6.      Exhibits
              29


Morris
      Publishing Group, LLC is a wholly owned subsidiary of Morris Communications
      Company, LLC, a privately held media company. Morris Publishing Finance Co.,
      a
      wholly owned subsidiary of Morris Publishing Group, LLC, was incorporated in
      2003 for the sole purpose of serving as a co-issuer of our senior subordinated
      notes in order to facilitate the offering. Morris Publishing Finance Co. does
      not have any operations or assets of any kind and will not have any revenues.
      In
      this report, “Morris Publishing,” “we,” “us” and “our” refer to Morris
      Publishing Group, LLC and its subsidiaries. “Morris Communications” refers to
      Morris Communications Company, LLC.





***Table
          of Contents***






**FORWARD
      LOOKING STATEMENTS**





This
      report contains forward-looking statements. These statements relate to future
      periods and include statements regarding our anticipated performance. You may
      find discussions containing such forward-looking statements in “Management’s
      Discussion and Analysis of Financial Condition and Results of Operations” in
      Item 7 of this report.





Generally,
      the words “anticipates,” “believes,” “expects,” “intends,” “estimates,”
“projects,” “plans” and similar expressions identify forward-looking statements.
      These forward-looking statements involve known and unknown risks, uncertainties
      and other important factors that could cause our actual results, performance
      or
      achievements or industry results, to differ materially from any future results,
      performance or achievements expressed or implied by these forward-looking
      statements.





Although
      we believe that these statements are based upon reasonable assumptions, we
      can
      give no assurance that these statements will be realized. Given these
      uncertainties, prospective investors are cautioned not to place undue reliance
      on these forward-looking statements. These forward-looking statements are made
      as of the date of this report. We assume no obligation to update or revise
      them
      or provide reasons why actual results may differ. Important factors that could
      cause our actual results to differ materially from our expectations include,
      without limitation:






              increases
                  in financing, labor, health care and/or other costs, including
                  costs of
                  raw materials, such as
                  newsprint;






              general
                  economic or business conditions, either nationally, regionally
                  or in the
                  individual markets in which we conduct business (and, in particular,
                  the
                  Jacksonville, Florida market), may deteriorate and have an adverse
                  impact
                  on our advertising or circulation revenues or on our business
                  strategy;






              other
                  risks and uncertainties.






-1-
 ***Table
          of Contents***






**PART
      I**





**ITEM
      1.  FINANCIAL STATEMENTS**





**Morris
                Publishing Group, LLC**
            ********
            ****
            ****
            ****
            ****
            ******Unaudited
                condensed consolidated balance sheets**
            ****
            
            ****
            ****
            
            ********
            
            ****
            ****
            
            ********
            **June
                30,**
            ****
            ****
            **December
                31,**
            ******(Dollars
                in thousands)**
            
            **2007**
            
            
            **2006****ASSETS**CURRENT
                ASSETS:Cash
                and cash equivalents
            
            $
            7,764
            
            
            $
            6,964Accounts
                receivable, net of allowance for doubtful accounts of $2,887 and
                $2,625 at
                June 30, 2007 and December 31, 2006 , respectively
            
            
            49,225
            
            
            
            58,236Inventories
            
            
            5,730
            
            
            
            4,030Deferred
                income taxes, net
            
            
            2,119
            
            
            
            2,248Prepaid
                and other current assets
            
            
            1,661
            
            
            
            1,065Total
                current assets
            
            
            66,499
            
            
            
            72,543NET
                PROPERTY AND EQUIPMENT
            
            
            142,850
            
            
            
            144,117OTHER
                ASSETS:Goodwill
            
            
            188,394
            
            
            
            188,394Intangible
                assets, net of accumulated amortization of $6,206 and $63,961at June
                30,
                2007 and December 31, 2006, respectively
            
            
            9,895
            
            
            
            12,267Deferred
                loan costs and other assets, net of accumulated amortization of loan
                costs
                of $5,465 and $4,669 at June 30, 2007 and December 31, 2006,
                respectively
            
            
            10,883
            
            
            
            11,522Total
                other assets
            
            
            209,172
            
            
            
            212,183Total
                assets
            
            $
            418,521
            
            
            $
            428,843**LIABILITIES
                AND MEMBER'S DEFICIENCY IN ASSETS**CURRENT
                LIABILITIES:Accounts
                payable
            
            $
            8,844
            
            
            $
            10,399Current
                maturities of long-term debt
            
            
            6,563
            
            
            
            2,188Accrued
                interest
            
            
            9,437
            
            
            
            9,427Due
                to Morris Communications
            
            
            1,739
            
            
            
            1,326Deferred
                revenues
            
            
            18,610
            
            
            
            16,649Accrued
                employee costs
            
            
            11,740
            
            
            
            12,916Other
                accrued liabilities
            
            
            2,644
            
            
            
            1,556Total
                current liabilities
            
            
            59,577
            
            
            
            54,461LONG-TERM
                DEBT, less current portion
            
            
            515,438
            
            
            
            521,813DEFERRED
                INCOME TAXES, less current portion
            
            
            16,817
            
            
            
            18,406POSTRETIREMENT
                BENEFITS DUE TO MORRIS COMMUNICATIONS
            
            
            26,554
            
            
            
            25,948OTHER
                LONG-TERM LIABILITIES
            
            
            3,942
            
            
            
            3,750Total
                liabilities
            
            
            622,328
            
            
            
            624,378COMMITMENTS
                AND CONTINGENCIES (NOTE 6)MEMBER'S
                DEFICIENCY IN ASSETSMember's
                deficit
            
            
            (206,645
            )
            
            
            (172,382
            )Loan
                payable to (receivable from) Morris Communications, net
            
            
            2,838
            
            
            
            (23,153
            )Total
                member's deficiency in assets
            
            
            (203,807
            )
            
            
            (195,535
            )Total
                liabilities and member's deficiency in assets
            
            $
            418,521
            
            
            $
            428,843*See
                notes to consolidated financial statements.*






-2-
 ***Table
          of Contents***





**Morris
                Publishing Group, LLC**
            ********
            
            ****
            ****
            
            ****
            ****
            
            ****
            ****
            
            ******Unaudited
                condensed consolidated statements of income**
            ****
            
            ****
            ****
            
            ****
            ****
            
            ****
            ****
            
            ********
            
            ****
            ****
            
            ********
            **Three
                months ended June 30,**
            ****
            ****
            **Six
                months ended June 30,**
            ******(Dollars
                in thousands)**
            
            **2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**NET
                OPERATING REVENUES:Advertising
            
            $
            91,993
            
            
            $
            98,988
            
            
            $
            178,763
            
            
            $
            191,361Circulation
            
            
            16,976
            
            
            
            17,259
            
            
            
            33,801
            
            
            
            34,803Other
            
            
            3,966
            
            
            
            4,018
            
            
            
            8,063
            
            
            
            8,027Total
                net operating revenue
            
            
            112,935
            
            
            
            120,265
            
            
            
            220,627
            
            
            
            234,191OPERATING
                EXPENSES:Labor
                and employee benefits
            
            
            45,192
            
            
            
            43,400
            
            
            
            90,194
            
            
            
            87,432Newsprint,
                ink and supplements
            
            
            11,886
            
            
            
            14,925
            
            
            
            24,841
            
            
            
            29,689Other
                operating costs (excluding depreciation and amortization)
            
            
            33,229
            
            
            
            32,019
            
            
            
            66,925
            
            
            
            64,027Depreciation
                and amortization expense
            
            
            4,960
            
            
            
            5,193
            
            
            
            10,282
            
            
            
            10,474Total
                operating expenses
            
            
            95,267
            
            
            
            95,537
            
            
            
            192,242
            
            
            
            191,622Operating
                income
            
            
            17,668
            
            
            
            24,728
            
            
            
            28,385
            
            
            
            42,569OTHER
                EXPENSES (INCOME):Interest
                expense, including amortization of debt issuance costs
            
            
            9,437
            
            
            
            9,171
            
            
            
            18,756
            
            
            
            18,171Interest
                income
            
            
            (1
            )
            
            
            (1
            )
            
            
            (4
            )
            
            
            (68
            )Other,
                net
            
            
            (48
            )
            
            
            (46
            )
            
            
            (92
            )
            
            
            (57
            )Total
                other expenses, net
            
            
            9,388
            
            
            
            9,124
            
            
            
            18,660
            
            
            
            18,046INCOME
                BEFORE INCOME TAXES
            
            
            8,280
            
            
            
            15,604
            
            
            
            9,725
            
            
            
            24,523PROVISION
                FOR INCOME TAXES
            
            
            3,333
            
            
            
            5,883
            
            
            
            3,990
            
            
            
            9,465NET
                INCOME
            
            $
            4,947
            
            
            $
            9,721
            
            
            $
            5,735
            
            
            $
            15,058*See
                notes to condensed consolidated financial statements.*
            
            ****
            
            
            
            ****
            
            
            
            ****
            
            
            
            ****





-3-
 ***Table
          of Contents***






**Morris
                Publishing Group, LLC****Unaudited
                condensed consolidated statements of cash flows****Six
                months ended June 30,****(Dollars
                in thousands)**
            
            **2007**
            
            
            **2006**OPERATING
                ACTIVITIES:Net
                income
            
            $
            5,735
            
            
            $
            15,058Adjustments
                to reconcile net income to cash provided by operating
                activities:Depreciation
                and amortization
            
            
            10,282
            
            
            
            10,474Deferred
                income taxes
            
            
            (1,460
            )
            
            
            (1,167
            )Amortization
                of debt issuance costs
            
            
            797
            
            
            
            810Loss
                (gain) on sale and disposal of fixed assets, net
            
            
            17
            
            
            
            (17
            )Changes
                in assets and liabilities, net of effects of businesses
                acquired:Accounts
                receivable
            
            
            9,011
            
            
            
            3,823Inventories
            
            
            (1,700
            )
            
            
            258Prepaids
                and other current assets
            
            
            (595
            )
            
            
            (328
            )Other
                assets
            
            
            (158
            )
            
            
            (181
            )Accounts
                payable
            
            
            (1,555
            )
            
            
            (1,446
            )Accrued
                employee costs
            
            
            (1,176
            )
            
            
            (712
            )Accrued
                interest
            
            
            10
            
            
            
            19Due
                to Morris Communications
            
            
            413
            
            
            
            1,537Deferred
                revenues and other liabilities
            
            
            3,050
            
            
            
            1,437Postretirement
                obligations due to Morris Communications
            
            
            606
            
            
            
            845Other
                long-term liabilities
            
            
            187
            
            
            
            114Net
                cash provided by operating activities
            
            
            23,464
            
            
            
            30,524INVESTING
                ACTIVITIES:Capital
                expenditures
            
            
            (6,712
            )
            
            
            (2,365
            )Restricted
                cash released from escrow
            
            
            -
            
            
            
            6,780Net
                proceeds from sale of property and equipment
            
            
            130
            
            
            
            99Acquisitions
                of businesses
            
            
            (75
            )
            
            
            -Net
                cash (used in) provided by investing activities
            
            
            (6,657
            )
            
            
            4,514FINANCING
                ACTIVITIES:Proceeds
                from revolving credit facility
            
            
            26,000
            
            
            
            34,000Repayments
                on revolving credit facility
            
            
            (28,000
            )
            
            
            (37,000
            )Advances
                on loan receivable from Morris Communications
            
            
            (14,007
            )
            
            
            (20,850
            )Net
                cash used in financing activities
            
            
            (16,007
            )
            
            
            (23,850
            )NET
                INCREASE IN CASH AND CASH EQUIVALENTS
            
            
            800
            
            
            
            11,188CASH
                AND CASH EQUIVALENTS, beginning of period
            
            
            6,964
            
            
            
            12,458CASH
                AND CASH EQUIVALENTS, end of period
            
            $
            7,764
            
            
            $
            23,646SUPPLEMENTAL
                DISCLOSURES OF CASH FLOW INFORMATIONInterest
                paid
            
            $
            17,949
            
            
            $
            17,343Income
                taxes paid to Morris Communications
            
            
            5,505
            
            
            
            10,632Accrued
                capital expenditures
            
            
            -
            
            
            
            22Dividends
                applied against loan receivable from Morris Communications
            
            
            40,000
            
            
            
            15,000*See
                notes to consolidated financial statements.*






-4-
 ***Table
          of Contents***






**MORRIS
      PUBLISHING GROUP, LLC**


**Notes
      to condensed consolidated financial statements (unaudited)**


**(Dollars
      in thousands)**


**1.**
              **Basis
                  of Presentation and Change in Significant Accounting
                  Policies**




***Basis
        of presentation***– The accompanying condensed consolidated financial
        statements furnished herein reflect all adjustments, which in the opinion
        of
        management, are necessary for the fair presentation of the Company’s financial
        position and results of operations. All such adjustments are of a normal
        recurring nature. Results of operations for the three and six month interim
        periods in 2007 are not necessarily indicative of results expected for the
        full
        year. While certain information and footnote disclosures normally included
        in
        financial statements prepared in accordance with accounting principles generally
        accepted in the United States of America (“GAAP”) have been condensed or
        omitted, the Company believes that the disclosures herein are adequate to
        keep
        the information presented from being misleading. These condensed consolidated
        financial statements should be read in conjunction with the audited consolidated
        financial statements and the notes thereto for the year ended December 31,
        2006.
        The accounting policies that are employed are the same as those shown in
        Note 1
        to the consolidated financial statements as of December 31, 2006 and 2005
        and
        for each of three years ended December 31, 2006.


**2.**
                **Transactions
                    with Morris
                    Communications**
 ***Management
        fee***– The Company was charged with a management fee by Morris
        Communications in an amount equal to 4% of the total net operating revenue,
        as
        defined in the management agreement. These management fees totaled $4,497
        and
        $4,770 for the three months ended June 30, 2007 and 2006, respectively, and
        $8,831 and $9,368 for the six months ended June 30, 2007 and 2006, respectively.
        This expense compensates Morris Communications for corporate services and
        costs
        incurred on behalf of the Company, including executive, legal, secretarial,
        tax,
        internal audit, risk management, employee benefit administration, airplane
        usage
        and other support services. The Company has recorded this management fee
        within
        other operating costs in the accompanying financial statements.
 
 ***Technology
        and shared services fee****–* The Company was charged
        with a technology and shared services fee from Morris Communications, as
        defined
        in the management agreement. This fee is based upon the lesser of 2.5% of
        total
        net operating revenue of the Company or the actual technology costs applicable
        to the Company based upon usage. The technology and shared services fees
        paid to
        Morris Communications, which was based upon 2.5% of the total net operating
        revenue of the Company, totaled $2,810 and $2,973 for the three months ended
        June 30, 2007 and 2006, respectively, and $5,519 and $5,854 for the six months
        ended June 30, 2007 and 2006, respectively. The Company has recorded this
        management fee within other operating costs in the accompanying financial
        statements.
 
 ***Employees’
        401(k) plan***– The Company participates in Morris Communications’
401(k) plan. Under this plan, contributions by employees to
        the 401(k) plan are
        matched (up to 5% of pay) by Morris Communications. Expenses were allocated
        to
        the Company based on specific identification of employer matching contributions
        of $1,056 and $1,077 for the three months ended June 30, 2007 and 2006,
        respectively, and $2,148 and $2,160 for the six months ended June 30, 2007
        and
        2006, respectively.
 
 ***Retiree
        health care benefits***– The Company participates in Morris
        Communications’ retiree health care plan, which provides certain health care
        benefits for eligible retired employees and their dependents. The plan requires
        the Company to be separately liable for its portion of the postretirement
        health
        benefit obligation. Accordingly, the Company and Morris Communications have
        completed a formal actuarial valuation of the postretirement obligation for
        the
        Company as of and for the year ended December 31, 2006.


-5-
 ***Table
          of Contents***






Under
        Morris Communications’ plan, full-time employees who were hired before January
        1, 1992 and retire after ten years of service are eligible for these benefits.
        Full-time employees hired on or after January 1, 1992 must have 25 years
        of
        service to be eligible. Generally, this plan pays a percentage of most medical
        expenses (reduced for any deductible) after payments made by government programs
        and other group coverage. This plan is unfunded. Lifetime benefits under
        the
        plan are limited to $100 per employee. Expenses related to this plan have
        been
        allocated to the Company based on total headcount. The expenses allocated
        to the
        Company, and the related contributions recorded were $303 and $423 for the
        three
        months ended June 30, 2007 and 2006, respectively, and $606 and $845 for
        the six
        months ended June 30, 2007 and 2006, respectively.
 
 The
        Company was also allocated its portion of the postretirement health benefit
        obligation. The amounts allocated to the Company, based on total headcount
        were
        $26,554 and $25,948 as of June 30, 2007 and December 31, 2006,
        respectively.
 
 The
        Medicare Prescription Drug, Improvement, and Modernization Act of 2003 provided
        a federal subsidy which began in 2006 to postretirement medical plans that
        provide prescription drug benefits to retirees. The subsidy provides plan
        sponsors 28% of individual retirees’ annual prescription drug costs (in dollars)
        between $250 and $5,000 for retirees who are eligible for but opt out of
        Medicare Part D Prescription coverage.
 
 This
        subsidy, when integrated with current claim costs, had the effect of decreasing
        liabilities and costs reported under the current accounting guidance for
        plans
        that were at least actuarially equivalent to the Medicare Part D benefit.
        The
        Company has reflected the effect of this subsidy in the accompanying financial
        statements.
 
 The
        following is an estimate of the Company’s net periodic benefit cost for all of
        2007:





**2007**Service
                  cost
              
              $
              514Interest
                  cost
              
              
              1,409Net
                  periodic benefit cost
              
              
              1,923Less:
                  employee contributions
              
              
              (711
              )Estimated
                  net benefit expense
              
              $
              1,212


***Health
        and Disability Plan–*** The Company has participated in Morris
        Communications’ health and disability plan for active employees. Accordingly,
        Morris Communications has allocated to the Company certain expenses associated
        with the payment of current obligations and the estimated amounts incurred
        but
        not yet reported. The expense allocated to the Company based on the total
        headcount, was $4,013 and $2,863 for the three months ended June 30, 2007
        and
        2006, respectively, and $7,648 and $6,032 for the six months ended June 30,
        2007
        and 2006, respectively.
 
 The
        Company was also allocated its portion of the health and disability obligation.
        The amounts allocated to the Company, based on total headcount, were $2,484
        and
        $2,076 as of June 30, 2007 and December 31, 2006, respectively. The Company
        has
        recorded this liability within accrued employee costs in the accompanying
        financial statements.
 
 **Workers’
        Compensation Expense–** The Company has participated in Morris
        Communications’ workers’ compensation self-insurance plan. Accordingly, Morris
        Communications has allocated to the Company certain expenses associated with
        the
        payment of current obligations and the estimated amounts incurred but not
        yet
        reported. The expenses allocated to the Company, based on a percentage of
        total
        salaries expense, were $829 and $770 for the three months ended June 30,
        2007
        and 2006, respectively, and $1,601 and $1,539 for the six months ended June
        30,
        2007 and 2006, respectively.






-6-
 ***Table
          of Contents***


***Loan
        receivable from Morris Communications***– Under the Company’s
        indenture related to the senior subordinated notes, the Company is permitted
        to
        loan up to $40 million at any one time to Morris Communications or any of
        its
        wholly owned subsidiaries outside the Publishing Group, solely for purposes
        of
        funding its working capital, capital expenditures and acquisition requirements.
        The Company is also permitted to invest in or lend an additional $20 million
        at
        any one time outstanding to Morris Communications or any other Person(s),
        as
        defined in the debt indenture.
 
 The
        interest-bearing portion of all loans from the Company to Morris Communications
        bear the same rate as the borrowings under the Credit Agreement (for the
        three
        month period ended June 30, 2007, this rate was LIBOR (adjusted to the nearest
        1/16th) + 1.00%). The Company distinguishes between intercompany transactions
        incurred in the ordinary course of business and settled on a monthly basis
        (which do not bear interest) and those of a more long-term nature that are
        subject to an interest accrual. Interest is accrued on the average outstanding
        long-term balance each month.
 
 Given
        the
        historical practice of Morris Publishing and Morris Communications settling
        a
        significant portion of the outstanding loan receivable balance with a dividend,
        this arrangement is considered in substance a capital distribution transaction
        and is classified as contra-equity within member’s deficit. In addition,
        interest accrued on this loan receivable is reported as contra-equity within
        member’s deficiency in assets for the periods presented.
 
 The
        Company has classified the outstanding $(2,838) and $23,153 loan
        (payable)/receivable balances, net of the $4,838 and $3,579 in accumulated
        interest accrued on these receivables, as of June 30, 2007 and December 31,
        2006, respectively, as part of member’s deficiency in assets.
 
 During
        the three month periods ended June 30, 2007 and 2006, the Company reported
        the
        $716 and $476, respectively, in accrued loan receivable interest as
        contra-equity. The average interest rate for the three month periods ended
        June
        30, 2007 and 2006 was 6.2917% and 6.0417%, respectively, on average loan
        receivable balances of $44,979 and $32,484, respectively.
 
 During
        the six month periods ended June 30, 2007 and 2006, the Company reported
        the
        $1,259 and $1,011, respectively, in accrued loan receivable interest as
        contra-equity. The average interest rate for the six month periods ended
        June
        30, 2007 and 2006 was 6.2708% and 5.8125%, respectively, on average loan
        receivable balances of $38,853 and $34,624, respectively.
 
 ***Restricted
        payments***– The Company is permitted under its debt arrangement to
        make restricted payments, which includes dividends and loans to affiliates
        in
        excess of the permitted limits described above, up to the sum of (1) 100%
        of the
        Company’s cumulative consolidated income before interest, taxes, depreciation
        and amortization (“Consolidated EBITDA”, as defined in the indenture) earned
        subsequent to the debt’s August 2003 issue date less (2) 140% of the
        consolidated interest expense of the Company for such period.
 
 On
        June
        30, 2007 and March 31, 2006, the Company declared and recorded dividends
        of $40
        million and $15 million, respectively, to Morris Communications, in effect,
        reducing the loan receivable from Morris Communications by the dividend amounts.
        At June 30, 2007, the Company had approximately $70.5 million available for
        future restricted payments under the credit indenture.
 
 ***Restricted
        cash released from escrow***– Cash held in escrow was comprised of
        proceeds from the 2005 sale of the Company’s former Savannah newspaper facility
        which the Company elected to be deposited into an escrow account in order
        to
        potentially fund other acquisitions by the Company or Parent through a
        tax-deferred Section 1031 exchange. The Parent acquired $5,280 in qualified
        replacement property during the first quarter of 2006 with the reductions
        in the
        restricted escrow account being offset by an increase in loan receivable
        from
        Morris Communications. The remaining $1,500 in escrow became unrestricted
        to the
        Company on the March 27, 2006


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expiration
        date for the tax-deferred exchange.
  **3.**
                    **Recently
                        Issued Accounting
                        Standards**
 The
          Company will be required to adopt the Financial Accounting Standards Board’s
          (“FASB”)  Statement of Financial Accounting Standards (“SFAS”) No.
          157, *“Fair Value Measurements”* (“SFAS 157”) for the fiscal year
          beginning January 1, 2008. SFAS 157 provides a single definition of fair
          value
          and a hierarchical framework for measuring it, as well as establishing
          additional disclosure requirements about the use of fair value to measure
          assets
          and liabilities. The Company is in the process of evaluating the impact
          of SFAS
          157 on its results of operations and financial position.
 
 In
        February 2007 FASB issued SFAS No. 159, *“The Fair Value Option for Financial
        Assets and Liabilities”* (“SFAS 159”). SFAS 159 provides the option to
        report certain financial assets and liabilities at fair value, with the intent
        to mitigate volatility in financial reporting that can occur when related
        assets
        and liabilities are recorded on different bases and is effective for fiscal
        years beginning after November 15, 2007. The Company is in the process of
        evaluating the impact of SFAS 159, if elected, on its results of operations
        and
        financial position.
 
 In
        September 2006, the FASB issued SFAS No. 158, *“Employers’ Accounting for
        Defined Benefit Pension and Other Postretirement Plans”*(“SFAS No. 158”),
        an amendment of FASB Statements No. 87, 88, 106 and 132(R). SFAS No. 158
        requires the recognition of the funded status of a retiree health plan in
        the
        statement of financial position, requires that changes in the funded status
        be
        recognized through comprehensive income, changes the measurement date for
        defined benefit plan assets and obligations to the entity’s fiscal year-end and
        expands disclosures. The recognition and disclosures under SFAS No. 158 are
        required as of the end of the fiscal year ending after June 15, 2007, while
        the
        new measurement date is effective for fiscal years ending after December
        15,
        2008.  SFAS No. 158 requires that previously disclosed but
        unrecognized gains/losses, prior service costs, and transition obligations
        of a
        retiree health plan be recognized at adoption of SFAS No. 158 as a component
        of
        shareholder’s equity in accumulated other comprehensive income, net of
        applicable income taxes.
 
 The
        measurement date for the Company’s retiree health plan obligations is currently
        the Company’s fiscal year-end so a change in measurement date is not needed. Had
        SFAS No. 158 been adopted at December 31, 2006, the Company’s accumulated other
        comprehensive income would have decreased by $1,016, in effect, increasing
        the
        member's deficit by $1,016.
 
 In
        July
        2006, the FASB issued Interpretation No. 48, *“Accounting for Uncertainty in
        Income Taxes”* (“FIN No. 48”), effective for fiscal years beginning after
        December 15, 2006. Under FIN No. 48, companies are required to make explicit
        disclosures about uncertainties in their income tax positions, including
        a
        detailed roll forward of tax benefits taken that do not qualify for financial
        statement recognition. Under FIN No. 48, the recognition of a tax benefit
        would
        only occur when it is “more-likely-than-not” that the position would be
        sustained in a dispute with the taxing authority in the “court of last resort.”
The adoption of FIN No. 48 had no impact on the Company.
  **4.**
                **Long-Term
                    Debt**
  At
        June
        30, 2007 and December 31, 2006, total debt was $522 million and $524 million,
        respectively, with $47 million and $49 million outstanding on the $175 million
        revolving credit facility, respectively.
 
 At
        June
        30, 2007, the interest rate on the Tranche A term loan outstanding was 6.375%
        and the weighted average interest rate on the revolver was 6.375%. The average
        interest rate on the debt outstanding was approximately 6.734% and 6.679%
        at
        June 30, 2007 and December 31, 2006, respectively. The commitment fee on
        the
        unborrowed funds available under the revolver was 0.375% at June 30, 2007
        and
        December 31, 2006.


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On
      July
      3, 2007, the Company, as borrower, entered into an Amendment
      No. 1 under the Credit Agreement dated as of December 14, 2005(the
“Credit Agreement”). The Credit Agreement contains financial covenants requiring
      the Company to meet certain financial tests on an on-going basis, including
      minimum interest coverage ratio, minimum fixed charge coverage ratio, and
      maximum cash flow ratios, based upon consolidated financial results of Morris
      Communications and substantially all of its subsidiaries (including the
      Company). The amendment relaxes these financial tests for an 18 month period
      from and including June 30, 2007 through but excluding December 31,
      2008.




Without
      either an improvement in the Morris Communications consolidated financial
      results in 2008 or a reduction of the Company’s indebtedness, the Company is at
      risk of failing to meet one or more of the financial covenants as of December
      31, 2008, in which event the Company would be unable to borrow on the revolver
      and may be required to prepay the entire principal due under the Credit
      Agreement.  The Company intends to carefully monitor the consolidated
      financial results and to take any necessary steps to avoid default, which steps
      may include (i) further amendments or refinancing of the Credit Agreement,
      which
      could increase the Company’s cost of capital, or (ii) the sale or transfer of a
      portion of the assets within the Morris Communications consolidated group to
      third parties or to affiliates with the sales proceeds being used to reduce
      the
      Company’s indebtedness.




At
      June
      30, 2007, the Company could borrow and use for general corporate purposes
      approximately $85 million under the Company’s most restrictive covenants which
      were from the senior bank credit facility and the Company was in compliance
      with
      all covenants under its debt arrangements.




**5.**
              **Goodwill
                  and Other Intangible
                  Assets**
  Goodwill
        is the excess of cost over fair market value of tangible net assets acquired.
        Goodwill is not presently amortized but tested for impairment annually or
        when
        the facts or circumstances at any of the Company’s reporting units indicate a
        possible impairment of goodwill as a result of a continual decline in
        performance or as a result of fundamental changes in a market in accordance
        with
        SFAS No. 142, “Goodwill and Other Intangible Assets”.
 
 Other
        intangible assets acquired consist primarily of mastheads and licenses on
        various acquired properties, customer lists, as well as other assets. Other
        intangible assets acquired (mastheads and domain names) which have indefinite
        lives and are not currently amortized, are tested for impairment annually
        or
        when facts or circumstances indicate a possible impairment of the intangible
        assets as a result of a continual decline in performance or as a result of
        fundamental changes in a market.
 
 Certain
        other intangible assets acquired (subscriber lists, non-compete agreements
        and
        other assets) are amortized over their estimated useful lives (from 5 to
        20
        years).
 
 During
        December 2006, the Company performed the required impairment tests of goodwill
        and the indefinite-lived intangible assets, which resulted in no
        impairments.
 
 Amortization
        expense of other intangible assets totaled $1,040 and $1,391 for the three
        months ended June 30, 2007 and 2006, respectively, and $2,452 and $2,781
        for the
        six months ended June 30, 2007 and 2006, respectively.
 
 The
        remaining expense for the last six months of 2007 and for the four succeeding
        years for the existing definite-lived intangible assets is as
        follows:


**Debt
                Maturities**2007
            
            
            11,5002008
            
            
            16,5002009
            
            
            16,500Thereafter
            
            
            497,500Total
            
            $
            542,000







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 ***Table
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Changes
      in the carrying amounts of goodwill and other intangible assets of the Company
      for the six months ended June 30, 2007 were as follows:





**Other****intangible****Goodwill**
            
            **assets**Balance
                at December 31, 2006
            $
            188,394
            
            $
            12,267Additions
            
            -
            
            
            80Amortization
                expense
            
            -
            
            
            (2,452
            )Balance
                at June 30, 2007
            $
            188,394
            
            $
            9,895





Other
      finite-lived and
      indefinite-lived intangible assets at June 30, 2007 and December 31, 2006 were
      as follows:




**Accumulated**
              
              
              **Net****Cost**
              
              
              **amortization**
              
              
              **cost****June
                  30, 2007:****Finite-lived
                  intangible assets**Subscriber
                  lists*
              
              $
              10,372
              
              
              $
              5,272
              
              
              $
              5,100Non-compete
                  agreements and other assets
              
              
              61
              
              
              
              43
              
              
              
              18Total
                  finite-lived intangible assets
              
              
              10,433
              
              
              
              5,315
              
              
              
              5,118**Indefinite-lived
                  intangible assets**Newspaper
                  mastheads
              
              
              4,656
              
              
              
              
              
              
              
              4,656Domain
                  names
              
              
              121
              
              
              
              
              
              
              
              121Total
                  Indefinite-lived intangible assets
              
              
              4,777
              
              
              
              
              
              
              
              4,777Total
                  other intangible assets
              
              $
              15,210
              
              
              $
              5,315
              
              
              $
              9,895**
                  Eliminated $60,207 in fully amortized assets***December
                  31, 2006:****Finite-lived
                  intangible assets**Subscriber
                  lists
              
              $
              70,579
              
              
              $
              63,033
              
              
              $
              7,546Non-compete
                  agreements and other assets
              
              
              61
              
              
              
              37
              
              
              
              24Total
                  finite-lived intangible assets
              
              
              70,640
              
              
              
              63,070
              
              
              
              7,570**Indefinite-lived
                  intangible assets**Newspaper
                  mastheads
              
              
              4,656
              
              
              
              
              
              
              
              4,656Domain
                  names
              
              
              41
              
              
              
              
              
              
              
              41Total
                  Indefinite-lived intangible assets
              
              
              4,697
              
              
              
              
              
              
              
              4,697Total
                  other intangible assets
              
              $
              75,337
              
              
              $
              63,070
              
              
              $
              12,267




**6.**
              **Commitments
                  and
                  Contingencies**


The
      Company and its subsidiaries are parties to several claims and lawsuits arising
      in the course of their normal business activities. Although the ultimate outcome
      of these suits cannot be ascertained at this time, it is the opinion of
      management that these matters, when resolved, will not have a material effect
      on
      the Company’s condensed consolidated financial statements.





-10-
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**ITEM
        2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION AND RESULTS OF OPERATIONS**
 
 The
        following discussion should be read in conjunction with our unaudited condensed
        consolidated financial statements as of and for the three and six month periods
        ended June 30, 2007 and 2006 and with our consolidated financial statements
        for
        the year ended December 31, 2006 filed onForm 10-K.
 
 **Overview**
 
 Morris
        Publishing owns and operates 27 daily newspapers as well as nondaily newspapers,
        city magazines and free community publications in the Southeast, Midwest,
        Southwest and Alaska.
 
 While
        most of our revenue is generated from advertising and circulation from our
        newspaper operations, we also print and distribute periodical publications
        and
        operate commercial printing operations in conjunction with our newspapers.
        In
        addition, our newspaper operations generate revenues from both print and
        online
        media formats.
 
 Linage,
        rate and mix of advertisement are the primary components of advertising revenue.
        The advertising rate depends largely on our market reach, primarily through
        circulation, online page views and market penetration. The number of copies
        sold
        and the amount charged to our customers are the primary components of
        circulation revenue. Our other revenue consists primarily of commercial printing
        and other online revenue.
 
 During
        the first six months of 2007, advertising and circulation revenue represented
        81.0% and 15.3%, respectively, of our total net operating revenue. Our
        advertising revenue consisted of 51.7% in retail, 5.9% in national and 42.4%
        in
        classified. Online advertising revenue, included in all advertising categories
        above, represented 10.4% of our total six month 2007 advertising revenue,
        up
        from 7.9% from last year.
 
 Employee
        and newsprint costs are the primary costs at each newspaper. Our operating
        performance is affected by newsprint prices, which historically have fluctuated.
        Newsprint costs have represented 10 - 15% of total operating expenses.
        Historically, newsprint has been subject to significant price fluctuations
        from
        year to year, unrelated in many cases to general economic trends. Supply
        and
        demand has typically controlled pricing. We believe that current and future
        sources of newsprint will be sufficient to meet our current and anticipated
        requirements.
 
 We
        continue to see overall declines in circulation at our newspapers which is
        consistent with the industry as a whole. We continue to focus on circulation
        retention efforts through lengthened subscriptions periods, new payment methods,
        and increased service levels.
 
 In
        addition, we view our industry’s currently changing landscape as a great
        opportunity, with many of our current strategic initiatives embracing these
        changes to continue to move us forward. While we continue to focus on our
        core
        business, we are aggressively pursuing innovation as the key to move our
        newspapers into a portfolio-model business with a wide variety of products
        focusing on meeting the changing needs of our core newspaper consumers and
        customers in all of our markets and helping us to remain the informational
        leaders in the communities we serve.
 
 -11-
 ***Table
            of Contents***
   **Critical
        accounting policies and estimates**
 
 Critical
        accounting policies are those that are most significant to the portrayal
        of our
        financial position and results of operations and require difficult, subjective
        and complex judgments by management in order to make estimates about the
        effect
        of matters that are inherently uncertain. The preparation of these financial
        statements requires us to make estimates and judgments that affect the reported
        amounts in our condensed consolidated financial statements. We evaluate our
        estimates on an on-going basis, including those related to our allowances
        for
        bad debts, asset impairments, post-retirement benefits, self-insurance and
        casualty, management fees, income taxes and commitments and contingencies.
        We
        base our estimates
        on historical experience and on various other assumptions that we believe
        to be
        reasonable under the circumstances, the results of which form the basis for
        making judgments about the carrying values of assets and liabilities. Although
        actual results have historically been reasonably consistent with management’s
        expectations, the actual results may differ from these estimates or our
        estimates may be affected by different assumptions or conditions.
 
 We
        believe there have been no significant changes during the quarter ended June
        30,
        2007 to the items that we disclosed as our critical accounting policies and
        estimates herein and in the Management’s Discussion and Analysis of Financial
        Condition and Results of Operations in our annual report dated December 31,
        2006
        filed with the Securities and Exchange Commission on Form
        10-K.
 
 **Information
        availability**
 
 Our
        quarterly reports on Form 10-Q, annual reports on Form 10-K, current reports
        on
        Form 8-K and all amendments to those reports are available free of charge
        on our
        Web site, morris.com , as soon as feasible after such reports are
        electronically filed with or furnished to the Securities and Exchange
        Commission. In addition, information regarding corporate governance at Morris
        Publishing and our parent, Morris Communications, is also available on our
        Web
        site. The information on our Web site is not incorporated by reference into,
        or
        as part of, this Report on Form 10-Q.
 
 **Financial
        summary for the three months ended June 30, 2007 compared to June 30,
        2006**
 
 Compared
        to the second quarter last year, operating income was $17.7 million, down
        $7.0
        million, or 28.5%, with total operating revenue of $112.9 million, down $7.3
        million, or 6.1%, and total operating costs of $95.3 million, down $0.3 million,
        or 0.3%.
 
 During
        the second quarter of 2007, advertising and circulation revenue represented
        81.5% and 15.0%, respectively, of our total net operating revenue. Our
        advertising revenue consisted of 52.3% in retail, 5.2% in national and 42.5%
        in
        classified.
 
 Advertising
        revenue for the quarter was $92.0 million, a decrease of $7.0 million, or
        7.1%,
        from last year, with retail, national and classified advertising revenue
        down
        1.1%, 26.8% and 10.7%, respectively.
 
 Since
        the
        second quarter of last year, we have acquired or introduced several non-daily
        publications in five of our existing markets to better serve changing reader
        and
        advertising needs. Excluding the $1.0 million in advertising revenue from
        these
        publications, our total advertising revenue was down $8.0 million, or 8.1%,
        with
        retail and classified advertising down 2.7% and 11.3%,
        respectively.
 
 In
        addition, our second quarter results continue to reflect the industry’s shift
        from print and insert advertising to online advertising. Compared to the
        second
        quarter last year, print advertising was $61.4 million, down $9.0 million,
        or
        12.8%, and insert advertising was $17.5 million, down $0.1 million, or
        0.6%.
  Online
        advertising revenue, included in all advertising categories above, was $9.8
        million, up $1.8 million, or 22.6%, due to the strength in the classified
        employment and retail advertising categories. Online advertising revenue
        represented 10.6% of our total second quarter 2007 advertising revenue, up
        from
        8.0% last year, with total page views, a key measure of interest in our Web
        sites, up 11.3% and traffic from new visitors up 25.3%.
 
 -12-
 ***Table
            of Contents***
   Our
        second quarter advertising results also exhibit that from time to time, each
        individual newspaper may perform better or worse than our newspaper group
        as a
        whole due to certain local or regional conditions. The material variances
        in the
        advertising categories listed above and at each newspaper are discussed in
        more
        detail herein and in our results of operations summary, which
        follows.
  The
        cyclical downturn in the Florida real estate market has adversely impacted
        not
        only the classified real estate category, but also many of our other advertising
        categories dependent on the housing industry. During the second quarter of
        2007,
        our Florida daily newspapers, which account for approximately 33.0% of our
        total
        advertising revenue, contributed 99.9% of our net decline in total advertising
        revenue. We expect the downtown our Florida markets to continue into
        the third quarter of this year.
 
 Advertising
        revenue in Jacksonville, our largest newspaper, was down $6.6 million, or
        19.7%,
        with a steep decline in all of the print and insert categories. For comparison
        purposes, revenue from our Jacksonville newspaper and the nine newly independent
        Jacksonville *Sun* weeklies, herein, are combined for both periods
        presented.
 
 As
        for
        our other Florida newspapers, Winter Haven was down $0.3 million, or 24.5%,
        primarily due to the weakness in the retail print and classified print
        categories, and St. Augustine was down $0.1 million, or 5.1%, with declines
        in
        all print and insert categories.
 
 In
        Savannah, our newspaper’s advertising revenue was down $0.5 million or 6.9%,
        with weakness in all print and insert categories. The gains from
        telecommunications and real estate were offset by the declines from banks,
        groceries, and employment.
 
 Our
        Athens newspaper’s advertising revenue was down $0.4 million, or 10.4%, with a
        strong decline in the classified print and retail print categories. The majority
        of the declines were from the hospital, auto, banking, employment, and real
        estate sectors.
 
 In
        addition, advertising revenue from our Lubbock and Amarillo newspapers was
        down
        1.6% and 1.2%, respectively, or, together, down $0.2 million, due to declines
        in
        the national print category. The decline in the national category was from
        the
        movie sector and last year’s non-recurring Medicare insurance
        advertising.
 
 Topeka
        was down $0.1 million, or 1.1%, due to weakness in the retail print and
        classified print categories, offset somewhat by the strength in the retail
        inserts and all of the online categories.
 
 Augusta’s
        advertising revenue was up $0.2 million, or 2.1%, with the strength in the
        retail online and classified online categories offset somewhat by a significant
        decline in the national print category. The strength from the department
        store,
        wireless, electronics and home improvement sectors, were offset by declines
        in
        the employment, auto and legal sectors.
 
 Advertising
        revenue for *Bluffton Today,* our free distribution daily newspaper, was
        up $0.2 million, or 20.5%, with significant gains in the retail specialty
        publications produced and distributed by Bluffton, but not a part of the
        main
        newspaper.
 
 Total
        combined advertising revenue from our other 17 daily newspapers was flat
        with
        the prior year, with the declines in Kenai, Brainerd, Hannibal, Holland,
        Independence and Shawnee offset by gains in Conway, Ardmore, Pittsburg, Newton,
        Grand Island, Juneau and Dodge City.
 
 Advertising
        revenue from all of our non-daily publications, excluding the Jacksonville
        Sun
        weeklies, was up $0.8 million, or 12.9%, due to the acquisition or introduction
        since the second quarter of last year of publications in five of our existing
        markets. These publications include the Barnwell (S.C.), Sylvania (Ga.),
        Hampton
        County (S.C.), Edgefield (S.C.), North Augusta (S.C.), Richmond Hill (Ga.),
        and
        Effingham (Ga.) newspapers, and the Athens' (Ga.)  *County
        Publications*, Lubbock's (Tex.)  *Frenship Today* and St.
        Augustine's (Fla.) *Eco Latino* publications. Excluding these
        publications, advertising revenue from our non-dailies was down $0.2 million,
        or
        4.1%.
  
 -13-
 ***Table
            of Contents***
 
 During
        the second quarter of 2007, circulation revenue was $17.0 million, down $0.3
        million, or 1.6%, from the same period last year, with the decline in
        Jacksonville contributing all of the decrease.
  Other
        income was $4.0 million, down slightly less than $0.1 million, or 1.3%, with
        decreases in commercial printing revenue and other online revenue.
 
 Total
        labor and employee benefit costs were up $1.8 million, or 4.1%, newsprint,
        ink
        and supplements costs were down $3.0 million, or 20.4%, and other operating
        costs, excluding depreciation and amortization, were up $1.2 million, or
        3.8%.
        Depreciation and amortization expense was down $0.3 million, or
        4.5%.
 
 Excluding
        the $1.1 million in total operating costs from our recently introduced or
        acquired publications, total operating costs were down $1.4 million, or 1.5%,
        with labor and employee benefit costs up 2.6%, newsprint, ink and supplements
        costs down 20.9%, and other operating costs, excluding depreciation and
        amortization, up 2.6%.
 
 Interest
        and loan amortization expense increased by $0.3 million, or 2.9%, due to
        short-term interest rate increases.
 
 On
        June
        30, 2007, we declared and recorded a $40 million dividend to Morris
        Communications, in effect, offsetting the loan receivable from Morris
        Communications by the dividend amounts.
 
 Our
        effective tax rate was 40.3% for the second quarter of 2007, compared to
        37.7%
        for the same quarter last year.
 
 Net
        income for the second quarter of 2007 was $4.9 million, down $4.8 million
        from
        $9.7 million during the same period last year.
 
 **Current
        initiatives and subsequent events**
 
 *Enhancing
        our Web sites to complement our daily newspapers*
 
 The
        rollout of *Yahoo! HotJobs* is now complete at all of our daily
        newspapers’ Web sites.
 
 *Yahoo!’s
        “*Search Services” has been launched at our Lubbock newspaper, allowing the
        newspaper’s Web site users to search the internet using *Yahoo!’s “*Web
        Search”. In addition, *Yahoo!*’s “Content Matched Ads” are now on all of
        Lubbock’s Web content pages and *Yahoo!’s “* Sponsored Search Ads” (text
        ads based on keywords) are on all of Lubbock’s search results pages, with
        Lubbock’s users having access to *Yahoo!* advertisers, both locally and
        nationally.  In August, Lubbock began sharing in the revenue generated
        from these ads, soon to be followed by our remaining daily newspapers’ Web
        sites.
 
 Our
        Augusta newspaper is currently in the test cross-selling phase of the
        implementation of *Yahoo!’s*“Graphical Ads Platform”. This platform, upon
        its full implementation in the fourth quarter of 2008, will give *Yahoo!*
        and each newspaper consortium member the opportunity to cross-sell each other’s
        online ad inventory pursuant to specific sales rules. *Yahoo!* will
        become the sole provider of the ad serving technology for each member
        newspaper’s Web sites, with each local newspaper Web site exclusively and solely
        utilizing *Yahoo!* to sell, reserve and display graphical ads.
*Yahoo!* and each member newspaper will have complete control
        over their
        own ad inventory (including the right to set pricing for that
        inventory).
 
 As
        the
        implementation of**the various *Yahoo!*technologies at our
        daily newspaper's Web sites continues, we view our affiliation in the newspaper
        consortium with*Yahoo!* as a very strategic move from both a revenue and
        growth in audience perspective.
   -14-
 ***Table
            of Contents***
   *Growing
        advertising revenue*
 
 o
              *Skirt!*magazines
 
 Since
        our
        2003 acquisition of the original Charleston magazine, we have expanded
*Skirt!* and now circulate the magazine in eight southeastern markets.
        *Skirt!* is a free monthly magazine for women which feature eye-catching
        graphics and layout, with essays and articles designed to attract women,
        a major
        consumer segment.
 Morris
        currently owns and publishes the magazines in six Southeastern markets and
        has
        licensed it in two other Southeastern markets.
 
 During
        July of 2007, we entered into agreements to license *Skirt!* magazine for
        the Memphis, Boston, Houston and Richmond markets and are currently pursuing
        opportunities in other markets.
 
 Each
        licensing agreement provides us with a one time licensing fee, plus periodic
        royalty fees, based on a percentage of advertising revenues. We believe that
        these licensing arrangements will facilitate the magazine's expansion, in
        turn
        attracting more national advertising exposure and sales.
 
 o
              Jacksonville’s*Sun*publications
 
 Since
        the
        end of 2006, Jacksonville transitioned its geographically-zoned*Sun*
        publications to nine individual products created for separate communities
        within
        the larger market area. The*Sun's*content and format was enhanced and
        the publications are now published up to three times a week. Web sites were
        created for many of these publications, on which, we anticipated that much
        of
        the content will be reader provided.
 
 The
        intent was to provide a marketplace for the smaller local advertiser; however,
        gains from this new strategy have been slower developing than anticipated,
        with
        the aggregate Sun’s total advertising revenue down slightly from last
        year.
 
 While
        the
        aggregate *Sun’s* retail advertising revenue results mirrored the
        performance of our Jacksonville newspaper, the aggregate *Sun’s*
        classified advertising revenue results were well ahead of the second quarter
        last year. While the addition of a Sunday edition and ad rate increases
        contributed most of the aggregate*Sun’s* classified gains, many real
        estate and automotive classified advertisers increased advertising in the
        *Sun*community markets where they do business, versus not spending at
        all for the Jacksonville market as a whole.
 
 *Focusing
        on cost control.*
 
 In
        Savannah, we have reviewed how we produce and distribute our products, and
        have
        made several changes to improve and reduce costs.
  In
        Jacksonville, leveraging what we learned in Savannah, we have identified
        similar
        areas for improvement in its product distribution. We have also initiated
        a
        process to outsource ad building to an alternate site.
  Additionally,
        upon reviewing our distribution route structures, we have identified less
        profitable routes that will either be combined with other Morris owned
        newspapers or eliminated altogether.
 
 We
        expect
        the cost savings from these efforts to materialize in the fourth quarter;
        ramping up to full scale the first of next year.
  *Centralizing
        operations to support multiple publications.*
 
 In
        addition, Jacksonville’s “retention telemarketing services” and “subscriber
        services” are being relocated to the Morris Customer Call Center in Augusta.
        This will reduce circulation costs by leveraging the Shared Services Center’s
        current programs that have been performing these duties for our other
        newspapers.
 
 -15-
 ***Table
            of Contents***
   **Results
        of operations for the three months ended June 30, 2007 compared to June 30,
        2006**
 
 ***Net
        operating revenue.*** The table below presents the total net
        operating revenue and related statistics for the three month periods ended
        June
        30, 2007 and 2006:
 
 **(Dollars
                  in thousands)**
              
              **Three
                  months ended June 30,**
              
              
              **Percentage
                  change****2007**
              
              
              **2006**
              
              
              **2007
                  vs. 2006****Net
                  operating revenues**AdvertisingRetail
              
              $
              48,132
              
              
              $
              48,664
              
              
              
              (1.1
              %)National
              
              
              4,815
              
              
              
              6,575
              
              
              
              (26.8
              %)Classified
              
              
              39,046
              
              
              
              43,749
              
              
              
              (10.7
              %)Total
                  advertising revenues
              
              
              91,993
              
              
              
              98,988
              
              
              
              (7.1
              %)Circulation
              
              
              16,976
              
              
              
              17,259
              
              
              
              (1.6
              %)Other
              
              
              3,966
              
              
              
              4,018
              
              
              
              (1.3
              %)Total
                  net operating revenues
              
              $
              112,935
              
              
              $
              120,265
              
              
              
              (6.1
              %)
 
 Retail
        advertising revenue:
 
 Retail
        advertising revenue was $48.1 million, down $0.5 million, or 1.1%, from the
        same
        period last year.
 
 Insert
        retail revenue was $15.9 million, flat with the second quarter last year;
        while
        print retail advertising revenue was $26.5 million, down $1.6 million, or
        5.7%.
        Retail advertising revenue from specialty products printed by us, but not
        a part
        of main newspaper product, was $3.1 million, up $0.3 million, or 10.8%. Retail
        online revenue was $2.7 million, up $0.8 million, or 41.1%, from the second
        quarter last year.
 
 Our
        Jacksonville newspaper’s retail advertising revenue was down $1.0 million, or
        8.3%, due to the unfavorable comparisons with last year and the declines
        from
        retailers dependent on the housing industry. During the second quarter of
        2006,
        Jacksonville was up $1.1 million, or 9.8%, from the prior year, due to the
        strength from home improvement, department and discount stores and a major
        retailer’s grand opening.
 
 As
        for
        our other Florida newspapers, Winter Haven was down $0.2 million, or 26.1%,
        and
        St. Augustine was down $0.1 million, or 5.9%, with the gains in the local
        retail
        sector offset by losses in major department stores and national retail
        sectors.
 
 In
        Savannah, our newspaper’s retail advertising revenue was down $0.1 million, or
        2.6%; with the losses from the banking, grocery and home improvement sectors
        offset somewhat by the gains in the telecommunications sector.
 
 In
        addition, retail advertising revenue from our Lubbock, Athens and Amarillo
        newspapers was down 0.6%, 4.3% and 1.4%, respectively, or, together, down
        $0.2
        million. Topeka was up slightly from the prior year.
 
 Bluffton’s
        retail advertising revenue was up $0.1 million, or 33.3%, with strength in
        the
        specialty publications and print categories.
 
 Augusta
        was up $0.2 million, or 3.3%, with strength in the online category.
 
 Total
        retail advertising revenue from our other 17 daily newspapers was flat with
        last
        year, with the solid gain in Juneau offset by the declines in Kenai and
        Independence.
 
 -16-
 ***Table
            of Contents***
   Excluding
        the $0.8 million in retail advertising revenue from our recently acquired
        or
        introduced publications, retail advertising for the non-daily publications
        was
        down $0.2 million, or 3.2%.
 
 Classified
        advertising revenue:
 
 Classified
        advertising revenue was $39.0 million, down $4.7 million, or 10.7%, from
        the
        same period last year.
 
 Online
        classified advertising revenue was $6.8 million, up $0.9 million, or 15.2%,
        with
        most of the increase driven by the employment category. During the second
        quarter of 2007, classified print advertising revenue was $31.7 million,
        down
        $5.5 million, or 14.8%, and classified insert advertising revenue was $0.3
        million, down $0.1 million, or 27.0%.
 
 Our
        Jacksonville newspaper’s classified advertising revenue was down $4.6 million,
        or 26.5%, with large declines in the employment and real estate print
        category.
 
 As
        for
        our other Florida newspapers, St. Augustine was down $0.1 million, or 4.6%,
        and
        Winter Haven was down $0.1 million, or 22.2%, primarily from the employment
        category.
 
 The
        real
        estate and employment classified advertising in our Florida markets, which
        have
        had large gains during the last several years, have declined to the 2004
        to 2005
        levels.
 
 In
        Savannah, our newspaper’s classified advertising revenue was down $0.4 million,
        or 10.0%; all from the auto and employment print category. Savannah’s print real
        estate category was up $0.2 million, or 25.2%.
 
 Bluffton’s
        classified advertising revenue was up less than $0.1 million, or
        10.6%.
 In
        addition, classified advertising revenue from our Athens and Topeka newspapers
        was down 16.9% and 3.0%, respectively, or, together, down $0.4 million, with
        declines in all print categories.
 
 Augusta,
        Amarillo and Lubbock were up 3.8%, 2.2% and 3.5%, respectively, or, together,
        up
        $0.3 million from the second quarter last year, with all gains from the online
        categories.
 
 Total
        classified advertising revenue from our other 17 daily newspapers was up
        $0.3
        million, or 5.1%, with strength in Conway and Independence.
 
 Excluding
        the $0.3 million in classified advertising revenue from our recently acquired
        or
        introduced publications, classified advertising for the non-daily publications
        was down $0.1 million, or 6.7%.
 
 National
        advertising revenue:
 
 Total
        national advertising revenue was $4.8 million, down $1.8 million, or 26.8%,
        from
        the second quarter last year, with Jacksonville contributing 50% of the
        decline.
 
 Jacksonville
        down $0.9 million, or 24.7%, due to consolidations in the wireless industry
        and
        the termination of large programs by an insurance company and a HVAC
        manufacturer.
 
 Lubbock
        and Amarillo were down 49.7% and 46.8%, respectively, or, together, down
        $0.3
        million, primarily due to non-recurring Medicare advertising in the prior
        year.
 
 Savannah
        was down $0.1 million, or 20.8%, due to a decline in the auto sector. Augusta
        was down $0.2 million, or 22.7%.
 
 Juneau
        was down $0.2 million, or 67.0%, due to the non-recurring environmental lobbying
        advertising last year.
 
 -17-
 ***Table
            of Contents***
 
  Circulation
        revenue:
 
 Circulation
        revenue was $17.0 million, down $0.3 million, or 1.6%, from the same period
        last
        year.
 
 Jacksonville
        was down $0.3 million, or 5.8% and Amarillo was down $0.1 million, or 6.3%.
        Savannah was up $0.1 million, or 4.7%., benefiting from route
        conversions.
 
 Circulation
        revenue from our non-daily publications acquired or introduced since the
        second
        quarter of last year was $0.1 million.
 
 Other
        revenue:
 
 Other
        revenue was $3.9 million, down $0.1 million, or 1.3%, from the same period
        last
        year. Other revenue from our non-daily publications acquired or introduced
        since
        the second quarter of last year was $0.1 million.
 
 Including
        all publications, commercial printing revenue was $2.4 million, down $0.1
        million, or 5.6%. Other online revenue was $0.2 million, down $0.2 million,
        or
        48.4%. Other miscellaneous operating revenues were $1.4 million, up $0.3
        million, or 22.8%.
 
 ***Net
        operating expense****.* The table below presents the total
        operating expenses and related statistics for the newspaper operations for
        the
        three month periods ended June 30, 2007 and 2006:
 
 **(Dollars
                  in thousands)**
              
              **Three
                  months ended June 30,**
              
              
              **Percentage
                  change****2007**
              
              
              **2006**
              
              
              **2007
                  vs. 2006****Operating
                  expenses**Labor
                  and employee benefits
              
              $
              45,192
              
              
              $
              43,400
              
              
              
              4.1
              %Newsprint,
                  ink and supplements
              
              
              11,886
              
              
              
              14,925
              
              
              
              (20.4
              %)Other
                  operating costs
              
              
              33,229
              
              
              
              32,019
              
              
              
              3.8
              %Depreciation
                  and amortization
              
              
              4,960
              
              
              
              5,193
              
              
              
              (4.5
              %)Total
                  operating expenses
              
              $
              95,267
              
              
              $
              95,537
              
              
              
              (0.3
              %)
  Labor
        and employee benefits:
 
 Salaries
        and wages were $31.2 million, up $0.8 million, or 2.6%, primarily due to
        a 3.3%
        average pay increase, employee severance payments, offset by a 1.2%
        decrease in average FTE’s (or full time equivalent employees). Jacksonville’s
        average FTE’s were down 4.1%.
 
 Excluding
        the employees from our recently acquired or introduced publications, our
        total
        salaries and wages were up $0.3 million, or 1.0%, with our total average
        FTE’s
        for the quarter down by 3.1%.
 
 Commissions
        and bonuses were $5.9 million, down $0.1 million, or 2.0%, from the same
        period
        last year, due to the decrease in advertising sales.
 
 Employee
        medical insurance cost was $4.0 million, up $1.1 million, or 40.1%, due to
        the
        increase in claims experience and a slight increase in plan
        participants.
 
 Compared
        to the second quarter last year, postretirement benefit cost was $0.3 million,
        down $0.1 million, or 28.4%.
   -18-
 ***Table
            of Contents***
   Newsprint,
        ink and supplements cost:
 
 During
        the second quarter of 2007, newsprint, ink and supplements cost was $11.9
        million, down $3.0 million, or 20.4%.
 
 Compared
        to the second quarter of 2006, total newsprint expense was $10.2 million,
        down
        $2.4 million, or 19.1%, due to the 5.2% decrease in newsprint consumption
        and
        the 14.9% decrease in the average cost per tonne of newsprint.
 Ink
        expense decreased 3.0% to $0.7 million due to a decrease in volume, and
        supplements expense decreased 38.4% to $1.0 million, due to a switch from
        purchasing our Sunday comics to printing them in house.
 
 Other
        operating costs:
 
 Excluding
        the $0.4 million in other operating costs from our publications either acquired
        or introduced since the second quarter of last year, total other operating
        costs, excluding depreciation and amortization, were $32.8 million, up $0.8
        million, or 2.6%.
 
 The
        combined technology and shared services fee and management fee charged by
        our
        parent under the management agreement totaled $7.3 million for the second
        quarter, down $0.4 million, or 5.6%, from the second quarter last year, due
        to
        the decrease in total operating revenues.
 
 **Financial
        summary for the six months ended June 30, 2007 compared to June 30,
        2006**
 
 Compared
        to the first six months last year, operating income was $28.4 million, down
        $14.2 million, or 33.3%, with total operating revenue of $220.6 million,
        down
        $13.6 million, or 5.8%, and total operating costs of $192.2 million, up $0.6
        million, or 0.3%.
 
 Advertising
        revenue for the first six months was $178.8 million, a decrease of $12.6
        million, or 6.6%, from last year. Retail, national and classified advertising
        revenue were down 2.2%, 13.7%, and 10.4%, respectively.
 
 Since
        the
        second quarter of last year, we have acquired or introduced several non-daily
        publications in five of our existing markets to better serve changing reader
        and
        advertising needs. Excluding the $1.9 million in advertising revenue from
        these
        publications, our total advertising revenue was down $14.5 million, or 7.6%,
        with retail and classified advertising down 3.7% and 11.0%,
        respectively.
 
 Compared
        to the first six months last year, print advertising was $120.3 million,
        down
        $16.0 million, or 11.8%, and insert advertising was $32.7 million, down $0.9
        million, or 2.7%.
 
 Online
        advertising revenue, included in all advertising categories above, was $18.6
        million, up $3.6 million, or 23.6%, due to the strength in the classified
        employment and retail advertising categories. Compared to the first six months
        of last year, total page views, a key measure of interest in our Web sites,
        were
        up 12.5%; with traffic from new visitors up 25.3%.
 
 Our
        total
        advertising revenue results continued to be impacted by the weak advertising
        environment in Florida and poor performances from Savannah, Athens and some
        of
        our other daily newspapers and non-daily publications. In response to these
        challenges, we are continuing to look at every part of our business, identifying
        and implementing initiatives to further reduce our cost of operations. In
        addition, we are reviewing additional revenue opportunities in each of our
        metro
        markets, focusing on achieving very specific targets to increase
        revenue.
 
 During
        the first six months of 2007, our Florida daily newspapers, which account
        for
        approximately 34% our total advertising revenue, contributed 92.0% of our
        net
        decline in total advertising revenue.
   -19-
 ***Table
            of Contents***
  
 Advertising
        revenue in Jacksonville, our largest newspaper, was down $10.9 million, or
        16.7%, with a decline in all categories.
 
 As
        for
        our other Florida newspapers, Winter Haven was down $0.7 million, or 29.0%,
        due
        to the decline in the retail category, and St. Augustine was down $0.2 million,
        or 4.3%, due to weakness in the retail print and the classified employment
        print
        categories.
 
 In
        Savannah, our newspaper’s advertising revenue was down $1.2 million, or 8.2%,
        with weakness in the retail and classified auto and employment
        categories.
  Our
        Athens newspaper’s advertising revenue was down $0.6 million, or 9.2%, with
        significant losses in the retail and classified categories.
 
 In
        addition, advertising revenue from our Lubbock and Amarillo newspapers was
        down
        1.5% and 2.7%, respectively, or, together, down $0.5 million, due to the
        weakness in the national and retail categories. Topeka was down $0.1 million,
        or
        1.5%, with weakness in all categories.
 
 Augusta’s
        advertising revenue was up $0.2 million, or 1.4%, with the strength in the
        retail online and classified employment online categories.
 
 Advertising
        revenue for *Bluffton Today*, our free distribution daily newspaper, was
        up $0.2 million, or 13.4%, with significant gains in the retail specialty
        publications printed by Bluffton, but not a part of the main
        newspaper.
 
 Total
        combined advertising revenue from our other 17 daily newspapers was down
        $0.2
        million, or 0.7%, with the gains in Ardmore offset by the declines in
        Independence and Holland.
 
 Advertising
        revenue from all of our non-daily publications, excluding the Jacksonville
        *Sun*weeklies, was up $1.5 million, or 12.9%, primarily due to the
        acquisition or introduction since the second quarter of last year of
        publications in five of our existing markets. Excluding our recently acquired
        or
        introduced publications, advertising revenue from our non-dailies was down
        $0.4
        million, or 3.4%.
 
 During
        the first six months of 2007, circulation revenue was $33.8 million, down
        $1.0
        million, or 2.9%, from the same period last year, with the decline in
        Jacksonville contributing $0.8 million of the net decrease.
 
 Other
        income was $8.1 million, up less than $0.1 million, or 0.4%.
 
 Total
        labor and employee benefit costs were up $2.8 million, or 3.2%, newsprint,
        ink
        and supplements costs were down $4.8 million, or 16.3%, and other operating
        costs, excluding depreciation and amortization, were up $2.9 million, or
        4.5%.
        Depreciation and amortization expense was down $0.2 million, or 1.8%, from
        the
        same period last year.
 
 Excluding
        the $2.2 million in total operating costs from our recently introduced or
        acquired publications, total operating costs were down $1.6 million, or 0.8%,
        with labor and employee benefit costs up 1.7%, newsprint, ink and supplements
        costs down 16.9%, and other operating costs, excluding depreciation and
        amortization, up 3.3%.
 
 Interest
        and loan amortization expense increased by $0.6 million, or 3.2%, due to
        short-term interest rate increases.
 
 On
        June
        30, 2007 and March 31, 2006, we declared and recorded $40 million and $15
        million in dividends, respectively, to Morris Communications, in effect,
        reducing the loan receivable from Morris Communications by the dividend
        amounts.
 
 Our
        effective tax rate was 41.2% for the first six months of 2007, compared to
        38.6%
        for the same period last year.
 
 Net
        income for the first six months of 2007 was $5.7 million, down $9.4 million
        from
        $15.1 million during the same period last year.
   -20-
 ***Table
            of Contents***
   **Results
        of operations for the six months ended June 30, 2007 compared to June 30,
        2006**
 
 *Net
        operating revenue.*The table below presents the total net operating revenue
        and related statistics for the six month periods ended June 30, 2007 and
        2006:
 
 **(Dollars
                  in thousands)**
              
              **Six
                  months ended June 30,**
              
              
              **Percentage
                  change****2007**
              
              
              **2006**
              
              
              **2007
                  vs. 2006****Net
                  operating revenues**AdvertisingRetail
              
              $
              92,383
              
              
              $
              94,462
              
              
              
              (2.2
              %)National
              
              
              10,609
              
              
              
              12,291
              
              
              
              (13.7
              %)Classified
              
              
              75,771
              
              
              
              84,608
              
              
              
              (10.4
              %)Total
                  advertising revenues
              
              
              178,763
              
              
              
              191,361
              
              
              
              (6.6
              %)Circulation
              
              
              33,801
              
              
              
              34,803
              
              
              
              (2.9
              %)Other
              
              
              8,063
              
              
              
              8,027
              
              
              
              0.4
              %Total
                  net operating revenues
              
              $
              220,627
              
              
              $
              234,191
              
              
              
              (5.8
              %)
 
 Retail
        advertising revenue:
 
 Retail
        advertising revenue was $92.4 million, down $2.1 million, or 2.2%, from the
        first six months last year.
 
 Insert
        retail revenue was $29.5 million, down $0.5 million, or 1.6%; while retail
        print
        advertising revenue was $51.2 million, down $3.9 million, or 7.1%, from the
        same
        period last year. Retail advertising revenue from specialty products printed
        by
        us, but not a part of main newspaper product, was $6.6 million, up $0.8 million,
        or 12.8%.
 
 Retail
        online revenue was $5.1 million, up $1.6 million, or 44.8%, from the first
        six
        months last year.
 
 Our
        Jacksonville newspaper’s retail advertising revenue was down $1.6 million, or
        7.0%, with declines in the print, insert and online categories.
 
 As
        for
        our other Florida newspapers, Winter Haven was down $0.5 million, or 35.3%,
        primarily due to the decline in the insert category, and St. Augustine was
        down
        $0.1 million, or 5.3%, with a decline in the print category.
 
 In
        Savannah, our newspaper’s retail advertising revenue was down $0.4 million, or
        6.4%; with gains in the retail online category offset by the declines in
        the
        print and insert categories.
 
 Athens’
        retail advertising revenue was down $0.1 million, or 3.7%.
 
 In
        addition, retail advertising revenue from our Lubbock, Amarillo and Topeka
        newspapers was down 0.4%, 2.4% and 2.0%, respectively, or, together, down
        $0.3
        million. Augusta’s retail advertising was flat with last year.
 
 *Bluffton
        Today*, our free distribution daily newspaper, was up $0.2 million, or
        19.8%, with gains in the retail specialty products category.
 
 Total
        retail advertising revenue from our other 17 daily newspapers was down $0.1
        million, or 0.7%, with the solid gains in Juneau, Ardmore and Newton offset
        by
        the declines in Grand Island, Independence and Holland.
 
 -21-
 ***Table
            of Contents***
   Excluding
        the $1.4 million in retail advertising revenue from our recently acquired
        or
        introduced publications, retail advertising for the non-daily publications
        was
        down $0.4 million, or 4.2%.
 
 Classified
        advertising revenue:
 
 Classified
        advertising revenue was $75.8 million, down $8.8 million, or 10.4%, from
        the
        first six months last year.
 
 Online
        classified advertising revenue was $13.1 million, up $1.7 million, or 14.9%,
        with most of the increase driven by the employment category. During the first
        six months of 2007, classified print advertising revenue was $61.8 million,
        down
        $10.3 million, or 14.3%, and classified insert advertising revenue was $0.6
        million, down $0.3 million, or 34.0%.
 
 Our
        Jacksonville newspaper’s classified advertising revenue was down $8.4 million,
        or 24.6%, with large declines in the employment and real estate print
        category.
 
 As
        for
        our other Florida newspapers, St. Augustine was down $0.1 million, or 4.7%,
        and
        Winter Haven was down $0.2 million, or 18.0%.
 
 In
        Savannah, our newspaper’s classified advertising revenue was down $0.8 million,
        or 10.7%; all from the auto and employment print category.
 
 Our
        Athens newspaper was down $0.5 million, or 15.5%.
 
 In
        addition, Augusta, Bluffton and Amarillo were up 2.8%, 9.5% and 1.3%,
        respectively, or, together, up $0.4 million. Topeka and Lubbock’s classified
        advertising revenue was relatively flat with last year.
 
 Total
        classified advertising revenue from our other 17 daily newspapers was up
        $0.4
        million, or 3.5%.
 
 Excluding
        the $0.5 million in classified advertising revenue from our recently acquired
        or
        introduced publications, classified advertising for the non-daily publications
        was down less than $0.1 million, or 2.0%.
 
 National
        advertising revenue:
 
 Total
        national advertising revenue was $10.6 million, down $1.7 million, or 13.7%,
        from the first six months last year.
 
 Jacksonville
        was down $0.8 million, or 10.9%; Juneau was down $0.4 million or 67.4%; Lubbock
        was down $0.2 million, or 37.5%, and Amarillo was down $0.2 million, or
        44.7%.
 
 Augusta
        was up $0.1 million, or 6.4%, while Topeka was flat with last year.
 
 Circulation
        revenue:
 
 Circulation
        revenue was $33.8 million, down $1.0 million, or 2.9%, from the first six
        months
        last year.
 
 Circulation
        revenue from our non-daily publications acquired or introduced since the
        second
        quarter of last year was $0.2 million.
 
 Including
        all publications, average daily single copies and home delivery copies remained
        soft, down approximately 4.3% and 1.2%, respectively.
   -22-
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Sunday
        circulation continued its trend down, with average single copy and home delivery
        down approximately 4.7% and 1.2%, respectively. Jacksonville contributed
        most of
        this decline, experiencing steep declines in single copy and third party
        sales,
        due to cut backs on last year’s aggressive third party sales
        programs.
 
 Other
        revenue:
 
 Other
        revenue was $8.1 million, up slightly less than $0.1 million, or 0.4%, from
        the
        first six months last year. Other revenue from our non-daily publications
        acquired or introduced since the second quarter of last year was $0.1
        million.
 
 Including
        all publications, commercial printing revenue was $4.9 million, down $0.3
        million, or 5.3%. Other online revenue was $0.3 million, down $0.3 million,
        or
        45.7%.
 
 During
        the first quarter of 2006 and 2007, we licensed *Skirt!* magazine for the
        Atlanta and Knoxville (Tn) markets, respectively. Under each license agreement,
        we have or will receive a one-time fee and will continue to receive royalty
        fees
        based upon the agreement. The combined license and royalty fees received
        from
        these license agreements were $0.2 million and $0.2 million for the first
        six
        months of 2007 and 2006, respectively.
  ***Net
        operating expense****.* The table below presents the total
        operating expenses and related statistics for the newspaper operations for
        the
        six month periods ended June 30, 2007 and 2006:
 
 **(Dollars
                  in thousands)**
              
              **Six
                  months ended June 30,**
              
              
              **Percentage
                  change****2007**
              
              
              **2006**
              
              
              **2007
                  vs. 2006****Operating
                  expenses**Labor
                  and employee benefits
              
              $
              90,194
              
              
              $
              87,432
              
              
              
              3.2
              %Newsprint,
                  ink and supplements
              
              
              24,841
              
              
              
              29,689
              
              
              
              (16.3
              %)Other
                  operating costs
              
              
              66,925
              
              
              
              64,027
              
              
              
              4.5
              %Depreciation
                  and amortization
              
              
              10,282
              
              
              
              10,474
              
              
              
              (1.8
              %)Total
                  operating expenses
              
              $
              192,242
              
              
              $
              191,622
              
              
              
              0.3
              %
 Labor
        and employee benefits:
 
 Salaries
        and wages were $62.3 million, up $2.0 million, or 3.4%, primarily due to
        a 3.0%
        average pay increase, employee severance payments, and a 0.1% increase in
        average FTE’s (or full time equivalent employees).  Jacksonville’s
        average FTE’s were down 1.3%.
 
 Excluding
        the employees from our recently acquired or introduced publications, our
        total
        salaries and wages were up $1.0 million, or 1.6%, with our total average
        FTE’s
        for the quarter down by 1.7%.
 
 Commissions
        and bonuses were $11.3 million, down $0.7 million, or 5.9%, from the same
        period
        last year, due to the decrease in advertising sales.
 
 Employee
        medical insurance cost was $7.6 million, up $1.6 million, or 26.8%, due to
        the
        increase in claims experience and slight increase in plan
        participants.
 
 Compared
        to the first six months last year, postretirement benefit cost was $0.6 million,
        down $0.2 million, or 28.3%.
   -23-
 ***Table
            of Contents***






Newsprint,
      ink and supplements cost:





During
      the first six months of 2007, newsprint, ink and supplements cost was $24.8
      million, down $4.8 million, or 16.3%.





Compared
      to the first six months of 2006, total newsprint expense was $21.3 million,
      down
      $3.7 million, or 14.9%, due to the 3.9% decrease in newsprint consumption and
      the 11.4% decrease in the average cost per tonne of newsprint.





Ink
      expense decreased 2.7% to $1.4 million due to a decrease in volume, and
      supplements expense decreased 34.0% to $2.1 million, due to a switch from
      purchasing our Sunday comics to printing them in house.





Other
      operating costs:





Excluding
      the $0.8 million in other operating costs from our publications either acquired
      or introduced since the second quarter of last year, total other operating
      costs, excluding depreciation and amortization, were $66.2 million, up $2.1
      million, or 3.3%, with increases in the production costs, product distribution
      costs, bad debt expense and other miscellaneous costs. Bad debt expense was
      up
      $0.6 million, or 63.9%.





The
      combined technology and shared services fee and management fee charged by our
      parent under the management agreement totaled $14.4 million for the first six
      months of 2007, down $0.9 million, or 5.7%, from the same period last year,
      due
      to the decrease in total operating revenues.





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 ***Table
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**Liquidity
      and capital resources**





We
      believe that our principal sources of liquidity, which are existing cash and
      cash equivalents, cash flows provided from operating activities, and the
      borrowing capacity under revolving credit facilities, will be sufficient to
      meet
      our ongoing operating needs. Cash flow generated from operations is our primary
      source of liquidity.





Our
      primary needs for cash are funding operating expense, debt service on our bank
      credit facilities and the senior subordinated notes, capital expenditures,
      income taxes, dividends and loans to affiliates, acquisitions and working
      capital. We have pursued, and will continue to pursue, a business strategy
      that
      includes selective acquisitions and new product development.





Cash
      was
      $7.8 million at June 30, 2007, up $0.8 million from $7.0 million at December
      31,
      2006.





***Operating
      activities.***Net cash provided by operations was $23.5 million for
      the first six months of 2007, down $7.0 million from $30.5 million for the
      same
      period in 2006.





Current
      assets were $64.8 million and current liabilities were $57.8 million as of
      June
      30, 2007 as compared to current assets of $71.2 million and current liabilities
      of $53.1 million as of December 31, 2006. We manage our working capital through
      the utilization of our revolving credit facility. The outstanding balance on
      the
      revolving credit facility is classified as a long-term liability, in accordance
      with its terms.





***Investment
      activities.*** Net cash used in investing activities was $6.7 million
      for the first six months of 2007 compared to $4.5 million provided by investing
      activities for the same period in 2006.





For
      the
      first six months of 2007, we spent $6.7 million on property, plant and
      equipment, of which, $2.1 million was spent on Savannah's new printing press.
      The remaining $1.8 million commitment on the printing press is scheduled to
      be
      paid by the end of 2007. Our total capital expenditures for the first six months
      last year was $2.4 million.





For
      2007,
      we expect our total capital expenditures to be between $13 million and $18
      million.





During
      the third quarter 2005, we sold Savannah’s former production facility to a third
      party and elected to have the net proceeds deposited into an escrow account
      in
      order to potentially fund other acquisitions by ourselves or our parent through
      a tax-deferred Section 1031 exchange. Our parent identified and acquired $5.3
      million in qualified replacement property during the first quarter 2006, with
      the reductions in the restricted escrow account being offset by an increase
      in
      loan receivable from Morris Communications. The remaining $1.5 million in escrow
      became unrestricted cash at March 27, 2006, the expiration date for the
      tax-deferred exchange.





During
      the first six months of 2007 and 2006, we received $0.1 million and $0.1 million
      in net proceeds from the sale of miscellaneous property and
      equipment.





During
      the second quarter of 2007, we acquired the domain name for the *Skirt!*magazines’ Web site for $0.1 million.





-25-
 ***Table
          of Contents***






***Financing
      activities.***Net cash used in financing activities was $16.0
      million for the first six months of 2007 compared to $23.9 million used in
      financing activities for the same period in 2006.





*Period
      end debt summary:*





Total
      debt was $522 million at June 30, 2007, down from $524 million at December
      31,
      2006. We had $47 million outstanding on our $175 million revolving credit
      facility, down $2 million from $49 million at December 31, 2006.





As
      of
      June 30, 2006, our total debt was $518 million with $43 million outstanding
      under our $175 million revolving credit facility.





As
      of
      June 30, 2007, our annualized cost of debt outstanding was approximately 6.734%,
      up from 6.725% at the end of the same quarter last year.





At
      June
      30, 2007, we could borrow and use for general corporate purposes approximately
      $85. 5 million under the most restrictive covenants of our debt
      arrangements.





*Financial
      covenants:*





On
      July
      3, 2007, we, as borrower, entered into an Amendment No. 1 under the Credit
      Agreement dated as of December 14, 2005 (the “Credit Agreement”). The Credit
      Agreement contains financial covenants requiring us to meet certain financial
      tests on an on-going basis, including minimum interest coverage ratio, minimum
      fixed charge coverage ratio, and
      maximum cash flow ratios, based upon consolidated financial results of Morris
      Communications and substantially all of its subsidiaries (including us). The
      amendment relaxes these financial tests for an 18 month period from and
      including June 30, 2007 through but excluding December 31, 2008.





Without
      either an improvement in the Morris Communications consolidated financial
      results in 2008 or a reduction of our indebtedness, we are at risk of failing
      to
      meet one or more of our financial covenants as of December 31, 2008, in which
      event we would be unable to borrow on the revolver and may be required to prepay
      the entire principal due under the Credit Agreement.  We intend to
      carefully monitor the consolidated financial results and to take any necessary
      steps to avoid default, which steps may include (i) further amendments or
      refinancing of the Credit Agreement, which could increase our cost of capital,
      or (ii) the sale or transfer of a portion of the assets within the Morris
      Communications consolidated group to third parties or to affiliates with the
      sales proceeds being used to reduce our indebtedness.





*Loan
      receivable from  Morris Communications:*





Our
      indenture, with certain restrictions described in Note 2 of our financial
      statements, allows us to make loans to Morris Communications. The total loan
      (payable)/receivable outstanding at June 30, 2007 was $(2.8) million, down
      $26.0
      million from $23.2 million at December 31, 2006.





The
      interest-bearing portion of all loans from us to our parent bear the same rate
      as the borrowings under the Credit Agreement (currently, this rate is LIBOR
      (adjusted to the nearest 1/16th) + 1.0%). We distinguish between intercompany
      transactions incurred in the ordinary course of business and settled on a
      monthly basis (which do not bear interest) and those of a more long-term nature
      that are subject to an interest accrual. Interest is accrued on the average
      outstanding long-term balance each month.





Given
      the
      historical practice of us and our parent settling a significant portion of
      the
      outstanding loan receivable balance with a dividend, this arrangement is
      considered in substance a capital distribution transaction and is classified
      as
      contra-equity within member’s deficit. In addition, interest accrued on this
      loan receivable is reported as contra-equity within member’s deficiency in
      assets for the periods presented. (See Note 2)




-26-
 ***Table
          of Contents***






We
      have
      classified the outstanding loan receivable balances, net of the $4.8 million
      and
      $3.6 million in accumulated interest accrued on these receivables as of June
      30,
      2007 and December 31, 2006, respectively, as part of member’s deficiency in
      assets.





During
      the six month periods ended June 30, 2007 and 2006, we reported the $1.3 million
      and $1.0 million, respectively, in accrued loan receivable interest as
      contra-equity. The average interest rate for the six month periods ended June
      30, 2007 and 2006 was 6.271% and 5.81%, respectively, on average loan receivable
      balances of $38.9 million and $34.6 million, respectively.





*Dividends:*





We,
      with
      certain restrictions under our indenture, may make dividend payments to our
      parent to fund its cash needs for general business purposes, capital
      expenditures and acquisitions. At June 30, 2007, we had an additional $70.5
      million available for future restricted payments under the notes
      indenture.





On
      June
      30, 2007 and March 31, 2006, we declared and recorded $40 million and $15
      million, respectively, in dividends to Morris Communications that, in turn,
      utilized the distribution to reduce its debt to us.





**Morris
      Publishing Finance Co. overview**





Morris
      Publishing Finance Co., a wholly-owned subsidiary of Morris Publishing Group,
      LLC, was incorporated in 2003 for the sole purpose of serving as a co-issuer
      of
      our senior subordinated notes in order to facilitate the offering. Morris
      Publishing Finance Co. does not have any operations or assets of any kind and
      will not have any revenue.





-27-
 ***Table
          of Contents***


**ITEM
      3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
      MARKET RISK**





There
      have been no material changes regarding the registrants’ market risk position
      from the information provided in our annual report dated December 31, 2006
      filed
      with the Securities and Exchange Commission on Form 10-K.





Although
      some of the our outstanding debt is at a fixed rate, increases in the interest
      rates applicable to borrowings under our bank credit facilities would result
      in
      increased interest expense and a reduction in our net income.  (See
      the quantitative and qualitative disclosures about market risk are discussed
      under the caption “Market Risk” in Management’s Discussion and Analysis of
      Financial Condition and Results of Operations in said annual report regarding
      long-term debt).





Based
      on
      our $222.0 million of variable rate debt at June 30, 2007, a 1.0% increase
      or
      decrease in interest rates on this variable-rate debt would decrease or increase
      our annual interest expense by $2.2 million and net income by $1.4
      million.








**ITEM
      4.  CONTROLS AND PROCEDURES**





Our
      management carried out an evaluation, with the participation of our chief
      executive officer and chief financial officer, of the effectiveness of our
      disclosure controls and procedures as of June 30, 2007. Based upon that
      evaluation, our chief executive officer and chief financial officer concluded
      that our disclosure controls and procedures were effective to ensure that
      information required to be disclosed by us in reports that we file or submit
      under the Securities Exchange Act of 1934 is recorded, processed, summarized
      and
      reported within the time periods specified in the rules and forms of the
      Securities and Exchange Commission.





There
      has
      not been any change in our internal control over financial reporting in
      connection with the evaluation required by Rule 13A-15(d) under the Exchange
      Act
      that occurred during the three month period ended June 30, 2007, that has
      materially affected, or is reasonably likely to materially affect, our internal
      control over financial reporting.






-28-
 ***Table
          of Contents***





**PART
      II**





**Item
      1. Legal Proceedings.**





None.





**Item
      1A. Risk Factors.**





None.





**Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds.**





None.





**Item
      3. Defaults Upon Senior Securities.**





None.





**Item
      4. Submission of Matters to a Vote of Security Holders.**





None.





**Item
      5. Other Information.**





None.





**Item
      6. Exhibits.**





**Exhibit**
              **Number**
            
            **Exhibit
                Description**31.1
            
            Rule
                13a-14(a)
                Certifications31.2
            
            Rule
                13a-14(a)
                Certifications32.1
            
            Section
                1350
                Certifications




-29-