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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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|x | Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------------

For the quarterly period ended September 30, 2006

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



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Morris Publishing Group, LLC

Morris Publishing Finance Co.*

(Exact name of Registrants as specified in their charters)



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|                        |  |                                         
|----------------------- |  | ----------------------------------------
|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)



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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 12-b2 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.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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MORRIS PUBLISHING GROUP, LLC

MORRIS PUBLISHING FINANCE CO.

QUARTERLY REPORT

FOR THE QUARTERLY
PERIOD ENDED SEPTEMBER 30, 2006

TABLE OF CONTENTS



|                                                                                                                             |  |     
|---------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                             |  | Page
|FORWARD LOOKING STATEMENTS                                                                                                   |  | 3   
|                                                                                                                             | 
|PART I.                                                                                                                      |  |     
|Item 1.    
Financial Statements:                                                                                            |  |     
|Unaudited condensed consolidated balance sheets as of September 30, 2006 and December 31, 2005                               |  | 4   
|Unaudited condensed consolidated statements of income for the three and nine month periods ended September 30, 2006 and 2005 |  | 5   
|Unaudited condensed consolidated statements of cash flows for the nine month periods ended September 30, 2006 and 2005       |  | 6   
|Notes to condensed consolidated financial statements                                                                         |  | 7   
|Item 2.    
Managements Discussion and Analysis of Financial Condition and Results of Operations                            |  | 15  
|Item 3.    
Quantitative and Qualitative Disclosures about Market Risk                                                       |  | 27  
|Item 4.    
Controls and Procedures                                                                                          |  | 27  
|                                                                                                                             | 
|PART II.                                                                                                                     |  |     
|Item 1.    
Legal Proceedings.                                                                                               |  | 28  
|Item 1A. 
Risk Factors                                                                                                       |  | 28  
|Item 2.    
Unregistered Sales of Equity Securities and Use of Proceeds.                                                     |  | 28  
|Item 3.    
Defaults Upon Senior Securities.                                                                                 |  | 28  
|Item 4.    
Submission of Matters to a Vote of Security Holders.                                                             |  | 28  
|Item 5.    
Other Information                                                                                                |  | 28  
|Item 6.    
Exhibits                                                                                                         |  | 28  

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 revenue. In this report, Morris Publishing, we, us and our refer to Morris Publishing Group, LLC
and its subsidiaries. Morris Communications and Parent refers to Morris Communications Company, LLC.



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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 2 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 revenue or on our business strategy;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | other risks and uncertainties.
| | - |  | ------------------------------



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PART I

ITEM 1. FINANCIAL STATEMENTS

Morris Publishing Group, LLC

Unaudited condensed consolidated balance sheets



|                                                                                                                                           |  |                   |          |   |                  |   |          |  
|------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------- | -------- | - | ---------------- | - | -------- | -
|(Dollars in thousands)                                                                                                                     |  | September 30,2006 |          |   | December 31,2005 |  
|ASSETS                                                                                                                                     |  |                   |          |   |                  |   |          |  
|CURRENT ASSETS:                                                                                                                            |  |                   |          |   |                  |   |          |  
|Cash and cash equivalents                                                                                                                  |  | $                 | 5,817    |   |                  | $ | 12,458   |  
|Accounts receivable, net of allowance for doubtful accounts of $2,500 at September 30, 2006 and $2,227 at December 31,
2005                |  |                   | 52,606   |   |                  |   | 54,660   |  
|Due from Morris Communications                                                                                                             |  |                   | 500      |   |                  |   | 1,387    |  
|Inventories                                                                                                                                |  |                   | 4,422    |   |                  |   | 4,773    |  
|Deferred income taxes, net                                                                                                                 |  |                   | 2,147    |   |                  |   | 2,632    |  
|Prepaid and other current assets                                                                                                           |  |                   | 1,353    |   |                  |   | 1,360    |  
|                                                                                                                                           |  |                   |          |   |                  |   |          |  
|Total current assets                                                                                                                       |  |                   | 66,845   |   |                  |   | 77,270   |  
|                                                                                                                                           |  |                   |          |   |                  |   |          |  
|NET PROPERTY AND EQUIPMENT                                                                                                                 |  |                   | 143,801  |   |                  |   | 149,811  |  
|                                                                                                                                           |  |                   |          |   |                  |   |          |  
|OTHER ASSETS:                                                                                                                              |  |                   |          |   |                  |   |          |  
|Restricted cash held in escrow                                                                                                             |  |                   |         |   |                  |   | 6,780    |  
|Goodwill                                                                                                                                   |  |                   | 188,394  |   |                  |   | 186,034  |  
|Intangible assets, net of accumulated amortization of $62,557 at September 30, 2006 and $58,386 at December 31, 2005                       |  |                   | 13,671   |   |                  |   | 15,451   |  
|Deferred loan costs and other assets, net of accumulated loan amortization of $4,270 at September 30, 2006 and $3,062 at
December 31, 2005 |  |                   | 11,695   |   |                  |   | 12,723   |  
|                                                                                                                                           |  |                   |          |   |                  |   |          |  
|Total other assets                                                                                                                         |  |                   | 213,760  |   |                  |   | 220,988  |  
|                                                                                                                                           |  |                   |          |   |                  |   |          |  
|Total assets                                                                                                                               |  | $                 | 424,406  |   |                  | $ | 448,069  |  
|                                                                                                                                           |  |                   |          |   |                  |   |          |  
|LIABILITIES AND MEMBERS DEFICIENCY IN ASSETS                                                                                              |  |                   |          |   |                  |   |          |  
|CURRENT LIABILITIES:                                                                                                                       |  |                   |          |   |                  |   |          |  
|Accounts payable                                                                                                                           |  | $                 | 11,664   |   |                  | $ | 12,359   |  
|Accrued interest                                                                                                                           |  |                   | 4,125    |   |                  |   | 9,368    |  
|Deferred revenues                                                                                                                          |  |                   | 17,743   |   |                  |   | 17,009   |  
|Accrued employee costs                                                                                                                     |  |                   | 10,938   |   |                  |   | 13,662   |  
|Other accrued liabilities                                                                                                                  |  |                   | 2,627    |   |                  |   | 1,517    |  
|                                                                                                                                           |  |                   |          |   |                  |   |          |  
|Total current liabilities                                                                                                                  |  |                   | 47,097   |   |                  |   | 53,915   |  
|LONG-TERM DEBT                                                                                                                             |  |                   | 526,000  |   |                  |   | 521,000  |  
|DEFERRED INCOME TAXES, less current portion                                                                                                |  |                   | 18,102   |   |                  |   | 21,056   |  
|POSTRETIREMENT BENEFITS DUE TO MORRIS COMMUNICATIONS                                                                                       |  |                   | 25,207   |   |                  |   | 23,939   |  
|OTHER LONG-TERM LIABILITIES                                                                                                                |  |                   | 3,557    |   |                  |   | 3,471    |  
|                                                                                                                                           |  |                   |          |   |                  |   |          |  
|Total liabilities                                                                                                                          |  |                   | 619,963  |   |                  |   | 623,381  |  
|COMMITMENTS AND CONTINGENCIES (NOTE 8)                                                                                                     |  |                   |          |   |                  |   |          |  
|MEMBERS DEFICIENCY IN ASSETS                                                                                                              |  |                   |          |   |                  |   |          |  
|Members deficit                                                                                                                           |  |                   | (180,691 | ) |                  |   | (159,657 | )
|Loan receivable from Morris Communications, net                                                                                            |  |                   | (14,866  | ) |                  |   | (15,655  | )
|                                                                                                                                           |  |                   |          |   |                  |   |          |  
|Total members deficiency in assets                                                                                                        |  |                   | (195,557 | ) |                  |   | (175,312 | )
|                                                                                                                                           |  |                   |          |   |                  |   |          |  
|Total liabilities and members deficiency in assets                                                                                        |  | $                 | 424,406  |   |                  | $ | 448,069  |  
|                                                                                                                                           |  |                   |          |   |                  |   |          |  

See notes to condensed consolidated financial statements.



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Morris Publishing Group, LLC

Unaudited Condensed Consolidated Statements of Income



|                                                                |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|--------------------------------------------------------------- |  | -------------------------------- | ------- | - | ------------------------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                |  | Three months ended September 30, |         |   | Nine months ended September 30, |  
|(Dollars in thousands)                                          |  | 2006                             |         |   | 2005                            |   |         | 2006 |  |   | 2005    |  
|NET OPERATING REVENUES:                                         |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|Advertising                                                     |  | $                                | 96,415  |   |                                 | $ | 92,349  |      |  | $ | 287,776 |   |  | $ | 278,814 |  
|Circulation                                                     |  |                                  | 17,310  |   |                                 |   | 17,551  |      |  |   | 52,113  |   |  |   | 53,074  |  
|Other                                                           |  |                                  | 3,722   |   |                                 |   | 3,871   |      |  |   | 11,750  |   |  |   | 12,212  |  
|                                                                |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|Total net operating revenues                                    |  |                                  | 117,447 |   |                                 |   | 113,771 |      |  |   | 351,639 |   |  |   | 344,100 |  
|                                                                |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|OPERATING EXPENSES:                                             |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|Labor and employee benefits                                     |  |                                  | 43,894  |   |                                 |   | 44,790  |      |  |   | 131,326 |   |  |   | 134,109 |  
|Newsprint, ink and supplements                                  |  |                                  | 14,813  |   |                                 |   | 13,938  |      |  |   | 44,502  |   |  |   | 42,387  |  
|Other operating costs (excluding depreciation and amortization) |  |                                  | 32,918  |   |                                 |   | 31,145  |      |  |   | 96,962  |   |  |   | 95,872  |  
|Depreciation and amortization                                   |  |                                  | 5,458   |   |                                 |   | 5,427   |      |  |   | 15,933  |   |  |   | 16,504  |  
|                                                                |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|Total operating expenses                                        |  |                                  | 97,083  |   |                                 |   | 95,300  |      |  |   | 288,723 |   |  |   | 288,872 |  
|                                                                |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|Net pre-tax gains on sale of fixed assets                       |  |                                  | (24     | ) |                                 |   | (5,337  | )    |  |   | (41     | ) |  |   | (5,335  | )
|                                                                |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|Total operating expenses, net of pre-tax gains                  |  |                                  | 97,059  |   |                                 |   | 89,963  |      |  |   | 288,682 |   |  |   | 283,537 |  
|                                                                |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|Operating income                                                |  |                                  | 20,388  |   |                                 |   | 23,808  |      |  |   | 62,957  |   |  |   | 60,563  |  
|                                                                |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|OTHER EXPENSE (INCOME):                                         |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|Interest expense, including amortization of debt issuance costs |  |                                  | 9,389   |   |                                 |   | 9,075   |      |  |   | 27,560  |   |  |   | 26,457  |  
|Interest income                                                 |  |                                  | (1      | ) |                                 |   | 604     |      |  |   | (69     | ) |  |   | (48     | )
|Other, net                                                      |  |                                  | (62     | ) |                                 |   | 1       |      |  |   | (119    | ) |  |   | 19      |  
|                                                                |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|Total other expenses, net                                       |  |                                  | 9,326   |   |                                 |   | 9,680   |      |  |   | 27,372  |   |  |   | 26,428  |  
|                                                                |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|INCOME BEFORE INCOME TAXES                                      |  |                                  | 11,062  |   |                                 |   | 14,128  |      |  |   | 35,585  |   |  |   | 34,135  |  
|PROVISION FOR INCOME TAXES                                      |  |                                  | 4,154   |   |                                 |   | 5,591   |      |  |   | 13,619  |   |  |   | 13,514  |  
|                                                                |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|NET INCOME                                                      |  | $                                | 6,908   |   |                                 | $ | 8,537   |      |  | $ | 21,966  |   |  | $ | 20,621  |  
|                                                                |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  

See notes to condensed consolidated financial statements.



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Morris Publishing Group, LLC

Unaudited condensed consolidated statements of cash flows



|                                                                                  |  |                                |         |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                                                                  |  | Nine Months EndedSeptember 30, |        
|(Dollars in thousands)                                                            |  | 2006                           |         |   | 2005 |  
|OPERATING ACTIVITIES:                                                             |  |                                |         |   |      |   |         |  
|Net income                                                                        |  | $                              | 21,966  |   |      | $ | 20,621  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                |         |   |      |   |         |  
|Depreciation and amortization                                                     |  |                                | 15,933  |   |      |   | 16,504  |  
|Deferred income taxes                                                             |  |                                | (2,469  | ) |      |   | (3,639  | )
|Amortization of debt issuance costs                                               |  |                                | 1,208   |   |      |   | 1,098   |  
|Gain on disposal of property and equipment, net                                   |  |                                | (41     | ) |      |   | (5,335  | )
|Changes in assets and liabilities, net of effects of acquisitions                 |  |                                |         |   |      |   |         |  
|Accounts receivable                                                               |  |                                | 2,304   |   |      |   | 5,411   |  
|Inventories                                                                       |  |                                | 371     |   |      |   | 1,374   |  
|Prepaids and other current assets                                                 |  |                                | 16      |   |      |   | 531     |  
|Other assets                                                                      |  |                                | (181    | ) |      |   | (12     | )
|Accounts payable                                                                  |  |                                | (700    | ) |      |   | 1,380   |  
|Due to Morris Communications                                                      |  |                                | 887     |   |      |   | 3,303   |  
|Accrued employee costs                                                            |  |                                | (2,764  | ) |      |   | (948    | )
|Accrued interest                                                                  |  |                                | (5,243  | ) |      |   | (5,230  | )
|Deferred revenues and other liabilities                                           |  |                                | 1,680   |   |      |   | 1,090   |  
|Postretirement obligations due to Morris Communications                           |  |                                | 1,268   |   |      |   | 2,161   |  
|Other long-term liabilities                                                       |  |                                | 87      |   |      |   | (167    | )
|                                                                                  |  |                                |         |   |      |   |         |  
|Net cash provided by operating activities                                         |  |                                | 34,322  |   |      |   | 38,142  |  
|INVESTING ACTIVITIES:                                                             |  |                                |         |   |      |   |         |  
|Capital expenditures                                                              |  |                                | (5,510  | ) |      |   | (10,490 | )
|Restricted cash released from (transferred to) escrow                             |  |                                | 6,780   |   |      |   | (7,173  | )
|Net proceeds from sale of property and equipment                                  |  |                                | 133     |   |      |   | 7,226   |  
|Acquisition of businesses, net of cash acquired                                   |  |                                | (5,155  | ) |      |   |        |  
|                                                                                  |  |                                |         |   |      |   |         |  
|Net cash used in investing activities                                             |  |                                | (3,752  | ) |      |   | (10,437 | )
|FINANCING ACTIVITIES:                                                             |  |                                |         |   |      |   |         |  
|Proceeds from revolving credit facility                                           |  |                                | 43,000  |   |      |   |        |  
|Repayments on revolving credit facility                                           |  |                                | (38,000 | ) |      |   |        |  
|Repayments on long-term debt                                                      |  |                                |        |   |      |   | (4,875  | )
|Advances on loan receivable from Morris Communications, net                       |  |                                | (42,211 | ) |      |   | (24,443 | )
|                                                                                  |  |                                |         |   |      |   |         |  
|Net cash used in financing activities                                             |  |                                | (37,211 | ) |      |   | (29,318 | )
|NET DECREASE IN CASH AND CASH EQUIVALENTS                                         |  |                                | (6,641  | ) |      |   | (1,613  | )
|                                                                                  |  |                                |         |   |      |   |         |  
|CASH AND CASH EQUIVALENTS, beginning of period                                    |  |                                | 12,458  |   |      |   | 20,098  |  
|                                                                                  |  |                                |         |   |      |   |         |  
|CASH AND CASH EQUIVALENTS, end of period                                          |  | $                              | 5,817   |   |      | $ | 18,485  |  
|                                                                                  |  |                                |         |   |      |   |         |  
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                |  |                                |         |   |      |   |         |  
|Interest paid                                                                     |  | $                              | 31,594  |   |      | $ | 30,497  |  
|Dividend applied against loan receivable from Morris Communications               |  | $                              | 43,000  |   |      | $ |        |  
|Income taxes paid to Morris Communications                                        |  | $                              | 16,088  |   |      | $ | 17,152  |  

See notes to condensed consolidated financial statements.



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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 nine month interim periods in 2006 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, 2005. The accounting policies that are employed are the same as those shown in Note 1 to the consolidated financial statements as of December 31, 2005 and 2004 and for each
of three years ended December 31, 2005.

Reclassification of loan receivable from Morris Communications  Prior to the third
quarter ended September 30, 2005, the Company had reported the loan receivable from Morris Communications (See Note 2) as a long-term asset on the Companys balance sheet and had reported interest income related to the loan receivable in
the statement of income. Based on the historical practice of the Company and Morris Communications in settling a significant portion of the outstanding loan receivable balance with dividends, the Company concluded that the arrangement should be
considered in substance a capital distribution transaction and classified as contra-equity within members deficiency in assets. In addition, interest accrued on this loan receivable has been reported as contra-equity within members
deficiency in assets for the quarterly periods and annual period reported on or after September 30, 2005.

As a result of this conclusion, the Company
has classified the outstanding $14,866 and $15,655 loan receivable balances, which are net of the $3,134 and $1,484 in accumulated interest accrued on these receivables, as of September 30, 2006 and December 31, 2005, respectively, as
contra-equity within members deficiency in assets. Interest accrued on these loan receivables as contra-equity was $638 and $410 for the three month periods ended September 30, 2006, and 2005, respectively, and $1,649 and $1,057 for the
nine month periods ended September 30, 2006 and 2005, respectively.

During the third quarter ended September 30, 2005, the Company reclassified
the $647 reported as interest income during the first six months of 2005 as contra-equity.

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 $4,698 and $4,551 for the three months ended September 30, 2006 and 2005, respectively, and $14,066 and $13,764 for the nine months ended September 30, 2006 and 2005,
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 $2,936 and $2,844 for the three months ended September 30, 2006 and 2005, respectively, and $8,791 and $8,602 for the nine months ended September 30, 2006 and 2005, respectively. The Company has recorded this
management fee within other operating costs in the accompanying financial statements.



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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 $1,043 and $1,014
for the three months ended September, 2006 and 2005, respectively, and $3,203 and $3,119 for the nine months ended September, 2006 and 2005, 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, 2005.

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 $423 and $720 for the three months ended September 30, 2006 and 2005, respectively, and $1,268 and $2,160 for
the nine months ended September 30, 2006 and 2005, 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 $25,207 and $23,929 as of September 30, 2006 and December 31, 2005, respectively.

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 will provide a federal subsidy beginning in 2006 to postretirement medical plans that provide prescription drug benefits to retirees. The
subsidy will provide 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, would have the effect of decreasing liabilities and costs reported under the current accounting guidance for
plans that are at least actuarially equivalent to the Medicare Part D benefit.

The Companys actuary has determined that the Companys plan is
at least actuarially equivalent to Medicare D and estimated the financial impact of the subsidy to be $544. 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 2006:



|                                       |  |      |        |  
|-------------------------------------- |  | ---- | ------ | -
|                                       |  | 2006 |       
|Service cost                           |  | $    | 580    |  
|Interest cost                          |  |      | 1,757  |  
|Unrecognized gain from earlier periods |  |      | 351    |  
|                                       |  |      |        |  
|Net periodic benefit cost              |  |      | 2,688  |  
|Less: employee portion                 |  |      | (1,000 | )
|                                       |  |      |        |  
|Estimated net benefit expense          |  | $    | 1,688  |  
|                                       |  |      |        |  

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 $2,313 and $3,438 for the three months ended September 30, 2006 and 2005, respectively, and $8,345 and $10,478 for the nine months ended September 30, 2006 and 2005, respectively.



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The Company was also allocated its portion of the health and disability obligation. The amounts allocated to the Company,
based on total headcount, were $3,344 and $3,108 as of September 30, 2006 and December 31, 2005, 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 $761 and $699 for the three months ended September 30, 2006 and 2005, respectively, and $2,300 and $2,279 for the nine months ended September 30, 2006 and 2005, respectively.

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 and nine month periods ended September 30, 2006,
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. (See Note 1)

During the third quarter ended September 30, 2005, the Company concluded that the arrangement should be considered in substance a capital distribution transaction and classified as contra-equity within members deficit, given the
historical practice of Morris Publishing and Morris Communications settling a significant portion of the outstanding loan receivable balance with a dividend. In addition, interest accrued on this loan receivable has been reported as contra-equity
within members deficiency in assets for the quarterly periods and annual period reported on or after September 30, 2005. (See Note 1)

As a
result of this conclusion, the Company has classified the outstanding $14,866 and $15,655 loan receivable balances, net of the $3,134 and $1,484 in accumulated interest accrued on these receivables, as of September 30, 2006 and
December 31, 2005, respectively, as part of members deficiency in assets.

During the three and nine month periods ended September 30,
2006, the Company reported the $638 and $1,649, respectively, in accrued loan receivable interest as contra-equity. The average interest rate for the three and nine month periods ended September 30, 2006 was 6.3958% and 6.0069%, respectively,
on average loan receivable balances of $39,078 and $36,109, respectively.

During the three and nine month periods ended September 30, 2005, the
Company reported the $410 and $1,057, respectively, in accrued loan receivable interest as contra-equity. The average interest rate for the three and nine month periods ended September 30, 2005 was 6.0625% and 5.4444%, respectively, on average
loan receivable balances of $26,458 and $22,521, respectively.

During the third quarter ended September 30, 2005, the Company reversed the $647
reported as interest income for the six month period ended June 30, 2005 and reclassified the amount as contra-equity.

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 March 31, 2006 and September 30, 2006, the Company declared and recorded $15 million and $28 million in dividends, respectively, to Morris



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Communications, in effect, reducing the loan receivable from Morris Communications by the dividend amounts. (See Note 1)
At September 30, 2006, the Company had approximately $82 million available for future restricted payments under the credit indenture.

Restricted cash held in escrow  Cash held in escrow was comprised of proceeds from the 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 expiration date for the tax-deferred exchange.

3. Recently Issued Accounting Standards

In July 2006,
the Financial Accounting Standards Board (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. Management is
in the process of studying the impact of this interpretation on the Companys financial accounting and reporting.

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 defined benefit 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. The measurement date for the Companys defined benefit pension and postretirement plan assets and obligations is currently the Companys fiscal year-end. SFAS
No. 158 is expected to have an effect on the Companys financial accounting and reporting and the Company is in the process of evaluating the impact.

In September 2006, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements(SAB No. 108), effective for fiscal years beginning after November 15, 2006. This bulletin addresses the diversity in practice in quantifying financial misstatements and the potential under current practice
for the build up of improper amounts on the balance sheet. SAB No. 108 is not expected to have any effect on the Companys financial accounting and reporting.

4. Acquisitions and Purchases of Assets

In July 2006, the Company entered into two license agreements and a
non-compete agreement with Netlook, Inc. for Car Paper and Career Paperin order to allow the Company to publish the two free distribution publications and include content on its Jacksonville based newspaper Web site,
Jacksonville.com. Both licenses expire on June 30, 2013 and the non-compete agreement expires in July 2008. The Company paid a total of $750, all in cash, for the assets.

In July 2006, the Company also acquired certain assets and assumed certain liabilities of four weekly newspapers in Georgia and South Carolina from Community Newspapers,
Inc. The newspapers acquired were The Barnwell (S.C.) People-Sentinel, The Hampton County (S.C.) Guardian, The Edgefield (S.C.) Citizen News and the Sylvania (Ga.) Telephone, all of which will
enhance the Companys presence in the Augusta market area. The acquisition was accounted for as a purchase and had an aggregate purchase price, including closing costs, of approximately $4,405. The Company paid cash for the acquisition.



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The purchase price of the acquisition was allocated to the estimated fair values of assets and liabilities acquired. The
excess purchase price over the fair value of the tangible and intangible net assets was allocated to goodwill.

The following is a summary of the estimated
fair values of assets acquired, net of cash, as of the dates of acquisition:



|                                     |  |                     |      
|------------------------------------ |  | ------------------- | -----
|                                     |  | CommunityNewspapers
|Intangible assets:                   |  |                     |      
|Mastheads                            |  | $                   | 220  
|Subcribers list                      |  |                     | 1,421
|Goodwill                             |  |                     | 2,360
|                                     |  |                     |      
|                                     |  |                     | 4,001
|Tangible assets/liabilities:         |  |                     |      
|Property and equipment               |  |                     | 334  
|Net working capital                  |  |                     | 70   
|                                     |  |                     |      
|                                     |  |                     | 404  
|                                     |  |                     |      
|Purchase pricesnet of cash acquired |  | $                   | 4,405
|                                     |  |                     |      

The subscriber lists are being amortized over a 15-year life, the permits are being amortized over 7 years and the
non-compete agreement is being amortized over 2 years. The mastheads, which are considered an indefinite-lived intangible asset and goodwill are not being amortized in accordance with SFAS No. 142.

There were no basis adjustments for income tax purposes and the goodwill is expected to be deductible for tax purposes.

The results of operations have been recorded in the consolidated statements of income from the date of acquisition. The pro forma effect on net income had the
acquisition been reflected as of the beginning of the year acquired and the previously reported year would not have been material.

5. Gain From Sale of
Fixed Assets

During the third quarter of 2006, the Company sold additional miscellaneous fixed assets for $98 resulting in a pre-tax gain of $41.

On September 28, 2005, the Company sold Savannahs former production facility to a third party. At closing, the Company received proceeds, net
of closing costs, of $7,170. This, net of $327 in clean up costs, gave the Company net proceeds from the sale of $6,843 resulting in a pre-tax gain of $5,018.

During the third quarter 2005, the Company sold additional miscellaneous fixed assets for $383 resulting in a pre-tax gain of $317.

6.
Long-Term Debt

On December 14, 2005, the Company, as borrower, entered into a Credit Agreement for $350 million of senior secured term and
revolving credit facilities. The refinancing terminated and replaced the $400 million credit facilities. The credit facility consisted of $100 million in Tranche A Term Loans, $150 million in Tranche C Term loans and a Revolving Credit Commitment of
$150 million. The existing $350 million credit facility consists of a $175 million Revolving Credit Facility and a $175 million Tranche A Term Loan.

The
refinancing of the Tranche A and C Term Loans resulted in an exchange of debt instruments with substantially different terms, since the present value of the cash flows under the terms of the new debt instrument were greater



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than 10% different from the present value of the remaining cash flows under the terms of the original debt instruments.
Therefore, the transaction was accounted for as a debt extinguishment in accordance with the guidance outlined in EITF Issue No. 96-19, Debtors Accounting for a Modification or Exchange of Debt Instrument , and the unamortized costs
associated with the prior Tranche A and C term loans were included in loss on extinguishment of debt on the consolidated statement of income.

The
refinancing of the existing $150 million Revolving Credit Commitment resulted in an increase in borrowing capacity and was accounted for in accordance with EITF Issue No. 98-14, Debtors Accounting for Changes in Line of Credit or
Revolving Debt Arrangements . Accordingly, unamortized deferred costs from the prior arrangement and the fees paid for the new credit facility were associated with the new arrangement and capitalized.

The $2,046 in fees incurred for the new credit facility were paid to different third parties and were not related to fees paid or received to extinguish the original
debt instruments.

The $300 million in senior subordinated notes is subordinated to the rights of the lenders under the existing and future senior credit
facilities. In the event of a liquidation, dissolution, bankruptcy, insolvency or similar event of the company, the lenders of the senior debt must be paid in full for all obligations under the 2005 Credit Agreement (including interest accruing
after the commencement of a bankruptcy proceeding), before any payment can be made to holders of the notes. The covenants of the Companys 2005 Credit Agreement prevent voluntary payment or prepayment of the senior subordinated notes, except
for regularly scheduled payments or prepayments of principal and interest. In addition, the covenants of the 2005 Credit Agreement require that all payments, including regularly scheduled interest payments, on the senior subordinated notes must be
suspended in the event of a payment default on the senior credit facilities, or in the event the trustee of the notes indenture receives a Payment Blockage Notice following any other default that would permit the senior lenders to
accelerate the maturity of the senior debt.

Total debt was $526 million and $521 million at September 30, 2006 and December 31, 2005,
respectively. Total amounts outstanding on the $175 million revolving credit facility was $51 million and $46 million at September 30, 2006 and December 31, 2005, respectively.

At September 30, 2006, the interest rate on the Tranche A term loan outstanding was 6.4375% and the weighted average interest rate on the revolver was 6.375%. The average interest rate on the debt outstanding was
approximately 6.752% and 6.353% at September 30, 2006 and December 31, 2005, respectively. The commitment fee on the unborrowed funds available under the revolver was 0.375% at September 30, 2006 and December 31, 2005.

At September 30, 2006, the Company could borrow and use for general corporate purposes approximately $124 million under the Companys most
restrictive covenants which was from the senior bank credit facility and the Company was in compliance with all covenants under its debt arrangements.

7. 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 FAS No. 142, Goodwill and Other Intangible Assets. The estimated value of the reporting unit to which goodwill is allocated is determined using the greater of the net present value of
future cash flows and the market multiple approach. The carrying value of goodwill is considered impaired when the estimated value of the reporting unit is less than its carrying value.

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. The fair value of the mastheads and domain names is determined using an income or market multiple approach. The asset is considered impaired when the fair value of the intangible asset is less than its carrying
value.



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The development of market multiples and cash flow projections used in the analyses requires the use of assumptions,
including assumptions regarding revenue growth. The analyses use discount rates based on specific economic factors in the publishing industry. These assumptions are the Companys best estimates, but these items involve inherent uncertainties
based on market conditions generally outside the Companys control.

During December 2005, the Company performed the required impairment tests of
goodwill and the indefinite-lived intangible assets, which resulted in no impairments.

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).

Amortization expense of other intangible
assets for the three and nine month periods ended September 30, 2006 was $1,390 and $4,171, respectively.

Changes in the carrying amounts of goodwill
and other intangible assets of the Company for the nine months ended September 30, 2006 were as follows:



|                              |  |          |         |                       |   |        |  
|----------------------------- |  | -------- | ------- | --------------------- | - | ------ | -
|                              |  | Goodwill |         | Otherintangibleassets |  
|Balance at December 31, 2005  |  | $        | 186,034 |                       | $ | 15,451 |  
|Additions                     |  |          | 2,360   |                       |   | 2,391  |  
|Amortization expense          |  |          |        |                       |   | (4,171 | )
|                              |  |          |         |                       |   |        |  
|Balance at September 30, 2006 |  | $        | 188,394 |                       | $ | 13,671 |  



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Other finite-lived and indefinite-lived intangible assets at September 30, 2006 and December 31, 2005 were as
follows:



|                                         |  |      |        |                         |   |          |  |   |       
|---------------------------------------- |  | ---- | ------ | ----------------------- | - | -------- |  | - | ------
|                                         |  | Cost |        | Accumulatedamortization |   | Net cost
|September 30, 2006:                      |  |      |        |                         |   |          |  |   |       
|                                         |  |      |       
|Finite-lived intangible assets           |  |      |        |                         |   |          |  |   |       
|Subscriber lists                         |  | $    | 70,579 |                         | $ | 61,632   |  | $ | 8,947 
|Non-compete agreements and other assets  |  |      | 61     |                         |   | 34       |  |   | 27    
|                                         |  |      |        |                         |   |          |  |   |       
|Total finite-lived intangible assets     |  |      | 70,640 |                         |   | 61,666   |  |   | 8,974 
|                                         |  |      |       
|Indefinite-lived intangible assets       |  |      |        |                         |   |          |  |   |       
|Newspaper mastheads                      |  |      | 5,530  |                         |   | 874      |  |   | 4,656 
|Domain names                             |  |      | 58     |                         |   | 17       |  |   | 41    
|                                         |  |      |        |                         |   |          |  |   |       
|Total Indefinite-lived intangible assets |  |      | 5,588  |                         |   | 891      |  |   | 4,697 
|                                         |  |      |        |                         |   |          |  |   |       
|Total other intangible assets            |  | $    | 76,228 |                         | $ | 62,557   |  | $ | 13,671
|                                         |  |      |        |                         |   |          |  |   |       
|December 31, 2005:                       |  |      |        |                         |   |          |  |   |       
|                                         |  |      |       
|Finite-lived intangible assets           |  |      |        |                         |   |          |  |   |       
|Subscriber lists                         |  | $    | 68,409 |                         | $ | 57,470   |  | $ | 10,939
|Non-compete agreements and other assets  |  |      | 60     |                         |   | 25       |  |   | 35    
|                                         |  |      |        |                         |   |          |  |   |       
|Total finite-lived intangible assets     |  |      | 68,469 |                         |   | 57,495   |  |   | 10,974
|                                         |  |      |       
|Indefinite-lived intangible assets       |  |      |        |                         |   |          |  |   |       
|Newspaper mastheads                      |  |      | 5,310  |                         |   | 874      |  |   | 4,436 
|Domain names                             |  |      | 58     |                         |   | 17       |  |   | 41    
|                                         |  |      |        |                         |   |          |  |   |       
|Total Indefinite-lived intangible assets |  |      | 5,368  |                         |   | 891      |  |   | 4,477 
|                                         |  |      |        |                         |   |          |  |   |       
|Total other intangible assets            |  | $    | 73,837 |                         | $ | 58,386   |  | $ | 15,451
|                                         |  |      |        |                         |   |          |  |   |       

The remaining expense for the last three months of 2006 and for the four succeeding years for the existing
definite-lived intangible assets is as follows:



|     |  |   |      
|---- |  | - | -----
|2006 |  | $ | 1,385
|2007 |  |   | 2,221
|2008 |  |   | 569  
|2009 |  |   | 550  
|2010 |  |   | 533  

8. 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.



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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 month periods and nine month periods ended September 30, 2006 and 2005 and with our consolidated financial statements for the
year ended December 31, 2005 filed on Form 10-K.

Overview

Morris Publishing is a wholly owned subsidiary of Morris Communications, a privately held media company based in Augusta, Ga. 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 revenue 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, 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.

For the quarter ended September 30, 2006, advertising and circulation revenue represented 82.1% and 14.7%, respectively, of our total
operating revenue. Retail, classified and national advertising revenue represented 49.5%, 44.6%, and 5.9%, respectively, of total advertising revenue.

Employee and newsprint costs are the primary costs at each newspaper. Our operating performance is affected by newsprint prices. 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.

From time to time, each individual newspaper may perform better or worse than our newspaper segment as a whole,
our only reporting segment, due to certain local conditions, particularly within the retail, auto, housing and labor markets. However, we be believe that the long-term economic characteristics of our newspapers are substantially similar.

Our primary operating strategy is to grow our market share and to operate efficiently in all markets. Our initiatives have been directed at improving our local news
and information content, enhancing our online formats to complement our daily newspapers, creating cost saving synergies through our weekly and other niche publications, and investing in technology that enables us to account for, print, produce and
deliver our products more efficiently. Since declines in circulation and readership of daily newspapers have resulted in a loss of advertising market share in our industry, we continue to focus on circulation retention efforts through lengthened
subscriptions periods, enhanced payment methods, and increased service levels.

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.



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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 our 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 FAS No. 142, Goodwill and Other Intangible Assets . The estimated value of the reporting unit to which goodwill is allocated is determined using the greater of the net present value of future cash flows and the market
multiple approach. The carrying value of goodwill is considered impaired when the estimated value of the reporting unit is less than its carrying value.

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. The fair value of the mastheads and domain names is determined using an income or market multiple approach. The asset is considered impaired when the fair value of the intangible asset is less than its carrying value.

The development of market multiples and cash flow projections used in the analyses requires the use of assumptions, including assumptions regarding revenue growth. The
analyses use discount rates based on specific economic factors in the publishing industry. These assumptions are our best estimates, but these items involve inherent uncertainties based on market conditions generally outside our control.

We believe there have been no significant changes during the quarter ended September 30, 2006 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, 2005 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 September 30, 2006 compared to
September 30, 2005

Third quarter operating income was $20.4 million, down $3.4 million, or 14.4%, from $23.8 million last year. Total net
operating revenue was $117.4 million, up $3.7 million, or 3.2%, and total operating costs were $97.1 million, up $1.8 million, or 1.9%, excluding the net pre-tax gain on sales of fixed assets which were down $5.3 million.

During the third quarter 2005, we sold Savannahs former production facility to a third party for $7.2 million, net of closing costs. This sale, net of $0.4 million
in clean up costs, gave us $6.8 million in net proceeds, resulting in a pre-tax gain of $5.0 million. Excluding this unusual gain, operating income was up $1.6 million, or 8.6%.

Net income for the third quarter of 2006 was $6.9 million, down $1.6 million from $8.5 million last year.

Advertising
revenue for the quarter was $96.4 million, an increase of $4.1 million, or 4.4%, from last year. While national advertising revenue was consistent with the same quarter last year, retail and classified advertising revenue were up 3.1% and 6.5%,
respectively. Online advertising from our Web sites contributed 63.3% of our net advertising revenue growth.

Online advertising revenue, included in all
advertising categories above, was $8.5 million, up $2.6 million, or 43.2%, due to the strength in the classified and retail advertising categories. Page views, a key measure of interest in our Web sites, continue to grow and were 14.0% higher than
the same period last year.

The $3.0 million, or 10.2%, gain in advertising revenue in Jacksonville and the $0.9 million, or 3.9%, gain in net advertising
revenue from many of our smaller daily newspapers, together, contributed to most of our net increase.



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Jacksonvilles strength was driven by the retail, and the classified employment categories. The gains in advertising
revenue from St. Augustine, Bluffton, Juneau, Grand Island, and Ardmore were offset somewhat by the decline in Athens.

Total advertising revenue from our
non-daily publications, which complement the revenue from our daily newspapers, was unchanged from the same quarter last year.

The material variances in
the advertising categories at our newspapers listed above are discussed in more detail in our results of operations summary, which follows.

During the
third quarter of 2006, circulation revenue was $17.3 million, down $0.2 million, or 1.4%, from the same period last year.

Other income was $
3.7 million, down $0.1 million, or 3.8%.

Total labor and employee benefit costs were down $0.9 million, or 2.0%, newsprint ink and supplements costs
were up $0.9 million, or 6.3%, and other operating costs were up $1.8 million, or 5.7%. Depreciation and amortization expense was even with last year. Net pre-tax gain on the sale of fixed assets was down $5.3 million.

Our total operating costs were impacted by the 3.0% increase in the average price per ton of newsprint, the 2.7% increase in newsprint consumption, and the significant
increase in our other advertising, circulation, and distribution costs. These increases were partially offset by reductions in our other production costs, and the decrease in employee benefit costs resulting from the reduction in healthcare
insurance claims paid, lower head counts, and the Medicare prescription drug subsidy.

Interest and loan amortization expense increased by $0.3 million, or
3.5%, due to short-term interest rate increases.

On September 30, 2006, we declared and recorded a $28 million dividend to Morris Communications, in
effect, reducing the loan receivable from Morris Communications by the dividend amount.

Our effective tax rate was 37.6 % for third quarter of 2006,
compared to 39.6% for the same quarter last year, benefiting from a favorable tax deduction recorded this year.

Results of operations for the three
months ended September 30, 2006 compared to September 30, 2005

Operating revenues. The table below presents operating revenue for the
three months ended September 30, 2006 compared to the three months ended September 30, 2005:



|                         |  |      |         |      |   |                               |  |   |                                         |   |  |      |   
|------------------------ |  | ---- | ------- | ---- | - | ----------------------------- |  | - | --------------------------------------- | - |  | ---- | --
|(Dollars in thousands)   |  | 2006 |         | 2005 |   | Change oversame period in2005 |  |   | PercentageChange oversame period in2005 |  
|Operating revenues:      |  |      |         |      |   |                               |  |   |                                         |   |  |      |   
|Advertising              |  |      |         |      |   |                               |  |   |                                         |   |  |      |   
|Retail                   |  | $    | 47,733  |      | $ | 46,295                        |  | $ | 1,438                                   |   |  | 3.1  | % 
|Classified               |  |      | 43,024  |      |   | 40,408                        |  |   | 2,616                                   |   |  | 6.5  | % 
|National                 |  |      | 5,658   |      |   | 5,646                         |  |   | 12                                      |   |  | 0.2  | % 
|                         |  |      |         |      |   |                               |  |   |                                         |   |  |      |   
|Total                    |  |      | 96,415  |      |   | 92,349                        |  |   | 4,066                                   |   |  | 4.4  | % 
|Circulation              |  |      | 17,310  |      |   | 17,551                        |  |   | (241                                    | ) |  | (1.4 | )%
|Other                    |  |      | 3,722   |      |   | 3,871                         |  |   | (149                                    | ) |  | (3.8 | )%
|                         |  |      |         |      |   |                               |  |   |                                         |   |  |      |   
|Total operating revenues |  | $    | 117,447 |      | $ | 113,771                       |  | $ | 3,676                                   |   |  | 3.2  | % 

Retail advertising revenue:

Total retail advertising revenue was $47.7 million, up $1.4 million, or 3.1%, from the third quarter last year.

Our
results reflect the industrys shift from run of press (ROP) retail advertising to preprint and online advertising. During the quarter, preprint retail revenue was $15.4 million, up $0.9 million, or 6.1%, while ROP retail
advertising



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##### Table of Contents

revenue was $27.4 million, down $1.0 million, or 3.4% from the third quarter last year. Retail advertising revenue from
specialty products printed by us, but not a part of main newspaper product, was $2.7 million, up $0.4 million, or 16.7%.

Retail online revenue was $2.2
million, up approximately $0.9 million, or 76%, from the same period last year.

Retail advertising revenue from our six largest daily newspapers was up
$1.4 million, or 4.8%. Jacksonvilles total retail advertising revenue was up $1.4 million, or 13.1%, with strength from home improvement, department and discount stores and from the growth in its St. Johns county market.

Lubbock was up 1.0%, with the gains from furniture, grocery, discount and department stores, offset by the declines from banks and hospitals. Topeka was up 4.1%,
compared to its 14.2% decline for the same period last year. Amarillo and Augusta were down 2.1% and 1.7%, respectively.

Savannah was unchanged, compared
to its 11.3% decline for the same period last year. The declines from grocery, home improvement, and general merchandise stores, banks, and the auto aftermarket were offset by increases from furniture and department stores.

Total retail advertising revenue from our 21 smaller daily newspapers was up $0.2 million, or 1.5%, from the same quarter last year, with Kenai, St. Augustine, and
Bluffton reporting strong gains. Retail advertising revenue from the newly acquired Barnwell, Sylvania, Edgefield and Hampton County newspapers was $0.2 million.

Retail advertising revenue from our non-daily publications was down $0.2 million, or 3.1%. Skirt!magazines, our free distribution womens magazine, was up $0.1 million or 5.3%.

Classified advertising revenue:

Total classified advertising
revenue was $43.0 million, up $2.6 million, or 6.5%, from the third quarter last year.

During the third quarter of 2006, online classified advertising
revenue was $6.2 million, up approximately $1.6 million, or 33.5%, accounting for 61.5% of this category net increase. All of the classified online gain was from the employment category.

Classified advertising revenue from our six largest daily newspapers was up $1.7 million, or 5.6%. Jacksonvilles total classified advertising revenue was up $1.4 million, or 9.5%. Savannah, Lubbock, and Amarillo
were up 2.9%, 6.0%, and 2.3%, respectively. The gains from the online employment and ROP real estate categories were offset somewhat by the declines from the automotive and ROP employment categories.

Augusta was unchanged with last year, continuing its trend. Topeka was down 3.4%, compared to a 5.3% increase for the same period last year.

Classified advertising revenue at our other 21 smaller daily newspapers was up $0.7 million, or 6.9%, with St. Augustine, Juneau, Kenai, Grand Island, Holland, and
Shawnee reporting strong gains.

Our non-daily publications classified advertising revenue was up $0.2 million, or 30.1%.

National advertising revenue:

Total national advertising
revenue was $5.7 million, consistent with the third quarter last year, with most of our newspapers being adversely affected by lower corporate rates for a national preprint advertiser.

The gains in Jacksonville, Juneau and Kenai, were offset by the significant decline in Savannah. Topeka was up slightly from last year.

Jacksonville was up $0.2 million, or 4.4%, while Savannah was down $0.2 million, or 53.0%, relating to Medicare advertising last year not repeating this year.



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##### Table of Contents

National advertising revenue from our two Alaska daily newspapers totaled $0.4 million, up $0.2 million from the same
period last year, driven by increases in environmental lobbying advertising.

Circulation revenue:

During the third quarter of 2006, circulation revenue was $17.3 million, down $0.2 million, or 1.4% from last year, continuing the trend at most of our newspapers.

Operating expenses- The table below presents operating costs for newspaper operations for the three months ended September 30, 2006 compared
to the three months ended September 30, 2005:



|                                              |  |      |        |   |      |   |        |                               |  |   |                                          |   |  |       |   
|--------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ----------------------------- |  | - | ---------------------------------------- | - |  | ----- | --
|(Dollars in thousands)                        |  | 2006 |        |   | 2005 |   |        | Change oversame period in2005 |  |   | Percentagechange over sameperiod in 2005 |  
|Operating expenses:                           |  |      |        |   |      |   |        |                               |  |   |                                          |   |  |       |   
|Labor and employee benefits                   |  | $    | 43,894 |   |      | $ | 44,790 |                               |  | $ | (896                                     | ) |  | (2.0  | )%
|Newsprint, ink and supplements                |  |      | 14,813 |   |      |   | 13,938 |                               |  |   | 875                                      |   |  | 6.3   | % 
|Other operating costs                         |  |      | 32,918 |   |      |   | 31,145 |                               |  |   | 1,773                                    |   |  | 5.7   | % 
|Depreciation and amortization                 |  |      | 5,458  |   |      |   | 5,427  |                               |  |   | 31                                       |   |  | 0.6   | % 
|                                              |  |      |        |   |      |   |        |                               |  |   |                                          |   |  |       |   
|Total operating expenses                      |  |      | 97,083 |   |      |   | 95,300 |                               |  |   | 1,783                                    |   |  | 1.9   | % 
|                                              |  |      |        |   |      |   |        |                               |  |   |                                          |   |  |       |   
|Net pre-tax gain from sales of fixed assets   |  |      | (24    | ) |      |   | (5,337 | )                             |  |   | 5,313                                    |   |  | (99.6 | )%
|                                              |  |      |        |   |      |   |        |                               |  |   |                                          |   |  |       |   
|Total operating expense, net of pre-tax gains |  | $    | 97,059 |   |      | $ | 89,963 |                               |  | $ | 7,096                                    |   |  | 7.9   | % 
|                                              |  |      |        |   |      |   |        |                               |  |   |                                          |   |  |       |   

Labor and employee benefits:

During the third quarter of 2006, labor and employee benefits cost was $43.9 million, down $0.9 million, or 2.0%.

Total
salaries and wages were $31.3 million, up $0.1 million, or 0.5%, from the same quarter last year. FTEs (or full time equivalent employees) were down by 3.6%, with significant reductions in the newsroom, advertising, circulation and production
departments.

Commissions and bonuses were $5.9 million, up $0.2 million, or 4.0%, from the third quarter last year.

During the third quarter of 2006, employee medical insurance cost was $2.3 million, down 1.1 million, or 32.7%, from same period last year, due to our decrease in
claims experience and lower headcount.

Compared to the same quarter last year, post retirement benefit cost was $0.4 million, down $0.3 million, or 41.3%,
due to the continued decrease in the total eligible participants of the plan and the Medicare prescription drug subsidy.

Newsprint, ink and
supplements cost:

During the third quarter of 2006, newsprint, ink and supplements cost was $14.8 million, up $0.9 million, or 6.3%.

Total newsprint expense was $12.6 million, up $0.7 million, or 5.8%, from the same quarter last year. The average price per ton of newsprint and newsprint consumption
was up 3.0% and 2.7%, respectively.

Supplements expense increased 9.7%, to $1.5 million, while ink expense increased 7.9% to $0.7 million, primarily due
to the increase in the consumption of color ink.

Other operating costs:

Other operating costs were $32.9 million, up $1.8 million, or 5.7%, from the same quarter last year, with other distribution costs up $0.5 million, or 8.2%, other advertising costs up $0.4 million, or 18.2%, bad debt
expense up $0.2 million, or 37.2%, and other general and administrative costs up $0.5 million, or 5.3%.



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The combined technology and shared services fee from our parent and management fee charged by our parent under the
management agreement totaled $7.6 million, up $0.2 million, or 2.9%.

Financial summary for the nine months ended September 30, 2006 compared to
September 30, 2005

Total operating income was $63.0 million, up $2.4 million, or 4.0%, from $60.6 million last year. Total net operating revenue
was $351.6 million, up $7.5 million, or 2.2%, and total operating costs were $288.7 million, down $0.1 million, or 0.1%, excluding the net pre-tax gain on sales of fixed assets which was down $5.3 million.

During the third quarter 2005, we sold Savannahs former production facility resulting in a pre-tax gain of $5.0 million. Excluding this unusual gain, operating
income was up $7.4 million, or 13.4%.

Net income for the first nine months of 2006 was $22.0 million, up $1.3 million from $20.6 million the same period
last year.

For the nine month period ended September 30, 2006, advertising and circulation revenue represented 81.8% and 14.8% of our total operating
revenue, respectively.

Advertising revenue was $287.8 million, an increase of $9.0 million, or 3.2%, from the same period last year.

Retail, classified and national advertising revenue represented 49.4%, 44.4%, and 6.2%, respectively, of total advertising revenue.

While national advertising revenue was down 1.8% from the same period last year, retail and classified advertising revenue were up 0.4% and 7.3%, respectively.

Online advertising revenue, included in all advertising categories above, was $23.6 million, up $7.2 million, or 44.3%, from the same period last year.
The majority of such revenue was recorded within the classified employment advertising category, which accounted for 80.5% of the total net increase in online advertising revenue. Page views, a key measure of interest in our Web sites, continue to
grow and were 17.6% higher than the same period last year.

The gains in advertising revenue from Jacksonville and Lubbock, and the net gains in
advertising revenue from many of our 21 smaller daily newspapers, were offset somewhat by the significant decline in advertising revenue from Savannah.

Jacksonvilles advertising revenue was up $4.9 million, or 5.3%, and Lubbock was up $0.6 million, or 2.8%. During the first quarter 2005, we estimated that Jacksonville realized $1.1 million in additional advertising revenue directly
attributed to the Super Bowl.

Savannah was down $0.7 million, or 3.0%, with significant declines in the retail and national categories. Topeka, Augusta
and Amarillo were all slightly down versus last year.

Total advertising revenue from our 21 other smaller daily newspapers was up $3.6 million, or 5.4%,
with the strong gains in St. Augustine, Bluffton, Juneau, Kenai, Shawnee, Winter Haven, and Ardmore, being offset somewhat by the decline in Athens. Advertising revenue for Bluffton Today, our free daily newspaper launched in the second
quarter last year, was up $1.1 million, or 87.4%, from last year. St. Augustine was up $0.8 million, or 11.5%, continuing its trend.

Total advertising
revenue from our non-daily publications, which complement the revenue from our daily newspapers, was up $0.8 million, or 5.0%, from last year, with Skirt! magazines up $0.3 million, or 12.3%.

The material variances in the advertising categories at the newspapers listed above are discussed in more detail in our results of operations summary, which follows.

During the first nine months of 2006, circulation revenue was $52.1 million, down $1.0 million, or 1.8%, from the same period last year.



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Other income was $11.7 million, down $0.5 million, or 3.8%.

Total labor and employee benefit costs were down $2.8 million, or 2.1%, newsprint ink and supplements costs were up $2.1 million, or 5.0% and other operating costs were
up $1.1 million, or 1.1%. Depreciation and amortization expense was down $0.6 million, or 3.5%.

Our total operating costs for the first nine months of
2005 were unusually affected by the estimated $1.1 million in costs directly related to Jacksonville hosting the Super Bowl in 2005, our accrual of $0.8 million in potential bankruptcy losses from a large advertiser and our $5.3 million net pre-tax
gain on sales of fixed assets. Excluding these costs, total operating costs were up $1.8 million, or 0.6%, from the same period last year.

In addition,
our total operating costs were impacted by the 8.8% increase in the average price per ton of newsprint, the significant increase in our other advertising, circulation, and distribution costs, offset somewhat by the aggressive management of our other
production and miscellaneous operating costs, and the decrease in employee benefit costs resulting from the reduction in healthcare insurance claims paid, lower head counts, and the Medicare prescription drug subsidy.

Interest and loan amortization expense increased by $1.1 million, or 4.2%, due to short-term interest rate increases.

On March 31, 2006 and September 30, 2006, we declared and recorded $15 million and $28 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 38.3 % for the first nine months of 2006,
compared to 39.6% last year, benefiting from a favorable tax deduction this year.

Results of operations for the nine months ended September 30,
2006 compared to September 30, 2005

Operating revenues- The table below presents operating revenue for newspaper operations for the nine
months ended September 30, 2006 compared to the nine months ended September 30, 2005:



|                         |  |      |         |      |   |                               |  |   |                                          |   |  |      |   
|------------------------ |  | ---- | ------- | ---- | - | ----------------------------- |  | - | ---------------------------------------- | - |  | ---- | --
|(Dollars in thousands)   |  | 2006 |         | 2005 |   | Change oversame period in2005 |  |   | Percentagechange over sameperiod in 2005 |  
|Operating revenues:      |  |      |         |      |   |                               |  |   |                                          |   |  |      |   
|Advertising              |  |      |         |      |   |                               |  |   |                                          |   |  |      |   
|Retail                   |  | $    | 142,195 |      | $ | 141,573                       |  | $ | 622                                      |   |  | 0.4  | % 
|Classified               |  |      | 127,633 |      |   | 118,962                       |  |   | 8,671                                    |   |  | 7.3  | % 
|National                 |  |      | 17,948  |      |   | 18,279                        |  |   | (331                                     | ) |  | (1.8 | )%
|                         |  |      |         |      |   |                               |  |   |                                          |   |  |      |   
|Total                    |  |      | 287,776 |      |   | 278,814                       |  |   | 8,962                                    |   |  | 3.2  | % 
|Circulation              |  |      | 52,113  |      |   | 53,074                        |  |   | (961                                     | ) |  | (1.8 | )%
|Other                    |  |      | 11,750  |      |   | 12,212                        |  |   | (462                                     | ) |  | (3.8 | )%
|                         |  |      |         |      |   |                               |  |   |                                          |   |  |      |   
|Total operating revenues |  | $    | 351,639 |      | $ | 344,100                       |  | $ | 7,539                                    |   |  | 2.2  | % 

Retail advertising revenue:

Total retail advertising revenue was $142.2 million, up $0.6 million, or 0.4%, from last year.

Our results reflect the
industrys shift from ROP retail advertising to preprint and online advertising. For the first nine months of 2006, preprint retail revenue was $45.4 million, up $1.8 million, or 4.2%, while ROP retail advertising revenue was $82.4 million,
down $5.8 million, or 6.6% from the same period last year. Retail advertising revenue from specialty products printed by us, but not a part of main newspaper product, was $8.7 million, up $2.1 million, or 31.3%.

Retail online revenue was $5.7 million, up approximately $2.6 million, or 81.8%, from the same period last year.



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##### Table of Contents

Retail advertising revenue from our six largest daily newspapers was unchanged from last year. Jacksonville was up $1.6
million, or 4.7%, from last year. Excluding the $0.8 million in nonrecurring retail advertising revenue directly related to Jacksonvilles hosting of the NFLs Super Bowl last year, Jacksonville was up 7.2%.

Savannah and Amarillo were down $0.7 million, or 6.3%, and $0.6 million, or 6.1%, respectively, due to reductions from grocery and department stores, banks,
telecommunications, or losses from major retailers going out of business.

Topeka was down 0.9%, compared to the 13.1% decrease during the same period last
year.

Augusta and Lubbock were both down less than 1%, primarily due to unfavorable comparisons to the same period last year.

Retail advertising revenue from our 21 smaller daily newspapers was up $0.1 million, or 0.4%, from last year, with St. Augustine and Winter Haven continuing to show
strength. Bluffton Today, which was launched in the second quarter last year, was up $0.6 million, or 110.3%. However, Holland and Juneau were down 11.8% and 34.9%, respectively.

Retail advertising revenue from our non-daily publications increased $0.3 million, or 2.3%, with Skirt! magazines contributing all of the net increase.

Classified advertising revenue:

Total classified advertising
revenue was $127.6 million, up $8.7 million, or 7.3%, from the first nine months last year, due to the continued strength in the real estate and employment categories at most of our daily newspapers.

Online classified adverting revenue was $17.6 million, up approximately $4.8 million, or 37.0%, with most of the increase driven by the employment and real estate
categories. Classified ROP advertising revenue was $108.4 million, up $3.5 million, or 3.3%.

Classified advertising revenue at our six largest daily
newspapers was up $5.3 million, or 5.9%, with Jacksonville, Lubbock, Amarillo and Savannah up 7.9%, 9.3%, 5.4%, and 4.2%, respectively. Augusta and Topeka were flat due to unfavorable comparisons with the same period last year.

Classified advertising revenue at our 21 smaller daily newspapers was up $2.8 million, or 10.6%, with significant gains in St. Augustine, Juneau, Bluffton, Kenai and
Shawnee.

Our non-daily publications classified advertising revenue was up $0.5 million, or 23.9%.

National advertising revenue:

Total national advertising
revenue was $17.9 million, down $0.3 million, or 1.8%, from the first nine months last year, with most of our newspapers being adversely affected by lower corporate rates for a national preprint advertiser.

The $0.9 million, or 5.9%, net decline in national advertising revenue from our six largest newspapers was partially offset by the $0.6 million, or 26.9%, net gain from
our other 21 smaller newspapers.

Jacksonvilles and Savannahs national advertising revenue was down 3.4%, and 35.8%, respectively, due to
continued losses from the telecommunication, entertainment, automotive and airline industries and due to unfavorable comparisons to last year. Lubbocks national advertising revenue was down 10.2%, continuing its trend.

Juneaus and Kenais national advertising revenue totaled $1.2 million, up $0.7 million from the same period last year, driven by increases in environmental
advocacy advertising.

Circulation revenue:

During the first nine months of 2006, circulation revenue was $52.1 million, down $1.0 million, or 1.8% from last year, continuing the trend at most of our newspapers.



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Average daily single copy and home delivery remained soft, down approximately 3.6% and 2.6%, respectively. Sunday
circulation continued its trend down, with average single copy and home delivery down approximately 3.7% and 1.4%, respectively.

Other revenue:

Commercial printing revenue was $7.6 million, down $0.8 million, or 9.6%, and other online revenue was $0.9 million, down $0.5 million, or 35.5%,
from the first nine months last year.

During the first quarter of 2006, we reached an agreement with the Atlanta Journal-Constitution (AJC) to
license Skirt! magazine for the Atlanta market. We received a one-time fee during the first quarter of 2006 and will continue to receive royalty fees based upon the agreement.

For the first nine months of 2006, other miscellaneous revenue, including the AJC license and royalty fees, totaled $3.3 million, up $0.9 million, or 35.4%, from the same period last year.

Operating expenses- The table below presents operating costs for newspaper operations for the nine months ended September 30, 2006 compared to the nine
months ended September 30, 2005:



|                                              |  |      |         |   |      |   |         |                               |  |   |                                          |   |  |       |   
|--------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ----------------------------- |  | - | ---------------------------------------- | - |  | ----- | --
|(Dollars in thousands)                        |  | 2006 |         |   | 2005 |   |         | Change oversame period in2005 |  |   | Percentagechange over sameperiod in 2005 |  
|Operating expenses:                           |  |      |         |   |      |   |         |                               |  |   |                                          |   |  |       |   
|Labor and employee benefits                   |  | $    | 131,326 |   |      | $ | 134,109 |                               |  | $ | (2,783                                   | ) |  | (2.1  | )%
|Newsprint, ink and supplements                |  |      | 44,502  |   |      |   | 42,387  |                               |  |   | 2,115                                    |   |  | 5.0   | % 
|Other operating costs                         |  |      | 96,962  |   |      |   | 95,872  |                               |  |   | 1,090                                    |   |  | 1.1   | % 
|Depreciation and amortization                 |  |      | 15,933  |   |      |   | 16,504  |                               |  |   | (571                                     | ) |  | (3.5  | )%
|                                              |  |      |         |   |      |   |         |                               |  |   |                                          |   |  |       |   
|Total operating expenses                      |  |      | 288,723 |   |      |   | 288,872 |                               |  |   | (149                                     | ) |  | (0.1  | )%
|                                              |  |      |         |   |      |   |         |                               |  |   |                                          |   |  |       |   
|Net pre-tax gain from sales of fixed assets   |  |      | (41     | ) |      |   | (5,335  | )                             |  |   | 5,294                                    |   |  | (99.2 | )%
|                                              |  |      |         |   |      |   |         |                               |  |   |                                          |   |  |       |   
|Total operating expense, net of pre-tax gains |  | $    | 288,682 |   |      | $ | 283,537 |                               |  | $ | 5,145                                    |   |  | 1.8   | % 
|                                              |  |      |         |   |      |   |         |                               |  |   |                                          |   |  |       |   

Labor and employee benefits:

During the first nine months of 2006, labor and employee benefits cost was $131.3 million, down $2.8 million, or 2.1%.

Compared to the first nine months of last year, salaries and wages were $91.5 million, down $0.3 million, or 0.4%. FTEs (or full time equivalent employees) were down by 4.0%, with significant reductions in the newsroom, advertising,
circulation, and production departments.

Commissions and bonuses were $18.0 million, up $0.7 million, or 3.9%, from the last year.

Employee medical insurance cost was $8.3 million, down 2.1 million, or 20.3%, due to the decrease in claims experience and lower headcount.

Compared to the first nine months last year, post retirement benefit cost was $1.3 million, down $0.9 million, or 41.3%, due to the continued decrease in the total
eligible participants of the plan and the Medicare prescription drug subsidy.

Newsprint, ink and supplements cost:

During the first nine months of 2006, newsprint, ink and supplements cost was $44.5 million, up $2.1 million, or 5.0%.



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##### Table of Contents

Compared to the first nine months of 2005, total newsprint expense was $37.7 million, up $2.0 million, or 5.5%. The 8.8%
increase in the average price per ton of newsprint was offset by a 3.0% decrease in newsprint consumption.

Ink expense increased 4.8% to $2.2 million,
primarily due to the increase in the consumption of color. Supplements expense increased 1.1% to $4.6 million.

Other operating costs:

Total other operating costs were $97.0 million, up $1.1 million, or 1.1%, from the same period last year, with other distribution costs up $0.7
million, or 7.9%, other advertising costs up $0.6 million, or 7.9%, other production costs up $1.1 million, or 7.8%, offset by a $0.6 million, or 26.0%, decrease in bad debt expense and a $1.2 million decrease in other general and administrative
costs.

The combined technology and shared services fee from our parent and management fee charged by our parent under the management agreement totaled
$22.9 million for the first nine months of 2006, up $0.5 million, or 2.2%, from the same period last year.

During the first quarter 2005, we had accrued a
$0.8 million reserve for a potential loss from an advertisers bankruptcy filing and incurred $0.8 million in other operating costs directly related to Jacksonvilles hosting the 2005 NFL Super Bowl. Excluding these costs, total other
operating costs were up $2.7 million, or 2.9%, compared to last year.

Excluding the $0.8 million accrual during the first quarter 2005 for the potential
bankruptcy loss, bad debt expense was up $0.2 million, or 15.6%, from the nine month period last year.

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 $5.8 million at September 30, 2006, down $6.7 million from $12.5 million at December 31, 2005.

Operating activities. Net cash provided by operations was $34.3 million for the first nine months in 2006, down $3.8 million from $38.1 million for the same period in 2005.

Current assets were $66.8 million and current liabilities were $47.1 million as of September 30, 2006 as compared to current assets of $77.3 million and current
liabilities of $53.9 million as of December 31, 2005. 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 $3.8 million for the first nine months in 2006,
down $6.7 million from $10.4 million for the same period in 2005.

For the first nine months in 2006, we spent $5.5 million on property, plant and
equipment, down from $10.5 million during the same period last year. We anticipate capital expenditures for 2006 to total between $8 million and $12 million.

In July 2006, the we entered into two license agreements and a non-compete agreement with Netlook, Inc. for Car Paperand Career Paper in order to allow us to publish the two free distribution publications and include content
on our Jacksonville based newspaper Web site, Jacksonville.com. Both licenses expire on June 30, 2013 and the non-compete agreement expires in July 2008. We paid a total of $0.8 million, all in cash, for the assets.



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Also in July, we acquired certain assets and assumed certain liabilities of four weekly newspapers in Georgia and South
Carolina from Community Newspapers, Inc. The newspapers acquired were The Barnwell (S.C.) People-Sentinel, The Hampton County (S.C.) Guardian, The Edgefield (S.C.) Citizen News and the Sylvania (Ga.)
Telephone, all of which will enhance our presence in our Augusta market area. The acquisition was accounted for as a purchase and had an aggregate purchase price, including closing costs, of approximately $4.4 million. We paid cash for the
acquisition.

The purchase price of the acquisition was allocated to the estimated fair values of assets and liabilities acquired. The excess purchase
price over the fair value of the tangible and intangible net assets was allocated to goodwill.

During the third quarter 2005, we sold Savannahs
former production facility to a third party for $7.2 million, net of closing costs, 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 of 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.

Financing activities.Net cash used in financing activities was $37.2 million for the first nine months in 2006, up $7.9 million from $29.3 million for the same
period in 2005.

Period end debt summary:

Total debt was $526 million at September 30, 2006, up from $521 million at December 31, 2005. We had $51 million outstanding on our new revolving credit facility, up $5 million from $46 million at December 31, 2005.

As of September 30, 2006, our annualized cost of debt outstanding was approximately 6.7523%, up from 6.3376% at the end of the same quarter last
year.

At September 30, 2006, we could borrow and use for general corporate purposes approximately $124 million under the most restrictive covenants
of our debt arrangements.

For the first nine months of 2005, we paid a total of $4.9 million in scheduled principal payments on our original Tranche A and
Tranche C term loans. As of September 30, 2005, our total debt was $545.1 million with no loans outstanding under our $150 million revolving credit facility.

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 outstanding at September 30, 2006 was $14.9 million, a $0.8 million decrease from $15.7 million at December 31, 2005.

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) + 1.00%). 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.

Prior to the third quarter ended September 30,
2005, we had reported the loan receivable from Morris Communications as a long-term asset on our balance sheet and had reported interest income related to the loan receivable in our statement of income. Based on the historical practice of Morris
Publishing and Morris Communications in settling a significant portion of the outstanding loan receivable balance with dividends, we concluded that the arrangement should be considered in substance a capital distribution transaction and classified
as contra-equity within members deficiency in assets. As a result of this conclusion, we have classified the outstanding loan receivable balances, which are net of the $3.1 million and $1.5 million in accumulated interest accrued on these
receivables, as of September 30, 2006 and December 31, 2005, respectively, as contra-equity within members deficiency in assets. Interest accrued on this loan receivable has been reported as a contra-equity for the quarterly periods
and annual period reported on or after September 30, 2005.



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We reported $0.6 million and $1.6 million in interest income from such loan receivables for the three and nine month
periods ended September 30, 2006, respectively, as contra-equity. The average interest rate for the three and nine month periods ended September 30, 2006 was 6.3958% and 6.0069%, respectively, on average loan receivable balances of $39.1
million and $36.1 million, respectively.

We reported $0.4 million and $1.0 million in interest income from such loan receivables for the three and nine
month periods ended September 30, 2005, respectively, as contra-equity. The average interest rate for the three and nine month periods ended September 30, 2005 was 6.0625% and 5.444%, respectively, on average loan receivable balances of
$26.5 million and $22.5 million, respectively.

During the third quarter ended September 30, 2005, we reversed the $0.6 million reported as interest
income during the first six months of 2005 and reclassified the amount as contra-equity.

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. On March 30, 2006 and September 30, 2006, we declared and recorded $15 million and $28 million in dividends, respectively, to Morris Communications, in effect, reducing the loan receivable from Morris Communications by the
dividend amounts. At September 30, 2006, we had an additional $82 million available for future restricted payments under the notes indenture.

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.



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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes regarding the
registrants critical accounting policies from the critical accounting policies discussed under the registrants market risk position from the information provided in our annual report dated December 31, 2005 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 and Note 6 to the our unaudited condensed consolidated financial statements as of and for the three and nine month periods ending
September 30, 2006 regarding long-term debt).

Based on our $226 million of variable rate debt at September 30, 2006, a 1.0% increase or decrease
in interest rates on this variable-rate debt would decrease or increase interest expense by $2.3 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 September 30, 2006. 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 September 30, 2006, that has materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.



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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.



|              |  |                              
|------------- |  | -----------------------------
|ExhibitNumber |  | Exhibit Description          
|31.1          |  | Rule 13a-14(a) Certifications
|              | 
|31.2          |  | Rule 13a-14(a) Certifications
|              | 
|32.1          |  | Section 1350 Certifications  



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                        |  |                              |  |                                                                      
|----------------------- |  | ---------------------------- |  | ---------------------------------------------------------------------
|                        |  | MORRIS PUBLISHING GROUP, LLC
|                        |  |                             
|Date: November 13, 2006 |  | By:                          |  | /s/ Steve K. Stone                                                   
|                        |  |                              |  | Steve K. Stone                                                       
|                        |  |                              |  | Chief Financial Officer                                              
|                        |  |                              |  | (On behalf of the Registrant, and as its principal financial officer)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                        |  |                               |  |                                                                      
|----------------------- |  | ----------------------------- |  | ---------------------------------------------------------------------
|                        |  | MORRIS PUBLISHING FINANCE CO.
|                        |  |                              
|Date: November 13, 2006 |  | By:                           |  | /s/ Steve K. Stone                                                   
|                        |  |                               |  | Steve K. Stone                                                       
|                        |  |                               |  | Chief Financial Officer                                              
|                        |  |                               |  | (On behalf of the Registrant, and as its principal financial officer)



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