##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended: December 2, 2007
 Commission file number 333-134701
 
 NETWORK COMMUNICATIONS, INC.
 Formed under the laws of the State of Georgia  I.R.S. Employer Identification Number 58-1404355
 2305 Newpoint Parkway, Lawrenceville, GA 30043
Telephone Number: (770) 962-7220
 
  þ o
  o o þ
  o þ
  Class
    
    Outstanding at December 2, 2007Common Stock, $0.001 par value per share
    
    100 shares




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##### 



TABLE OF CONTENTS
 PagePART I: FINANCIAL INFORMATIONItem 1. Condensed Consolidated Financial Statements (Unaudited)Condensed Consolidated Balance Sheets as of December 2, 2007 and March 25, 2007
    
    2Condensed Consolidated Statements of Operations for the three periods ended December
2, 2007 and December 3, 2006
    
    3Condensed Consolidated Statements of Operations for the nine periods ended December
2, 2007 and December 3, 2006
    
    4Condensed Consolidated Statement of Stockholders Equity as of December 2, 2007
    
    5Condensed Consolidated Statements of Cash Flows for the nine periods ended December
2, 2007 and December 3, 2006
    
    6Notes to Condensed Consolidated Financial Statements
    
    7-12Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    13Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    24Item 4. Controls and Procedures
    
    24PART II: OTHER INFORMATIONItem 1. Legal Proceedings
    
    26Item 1A. Risk Factors
    
    26Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    26Item 3. Defaults upon Senior Securities
    
    26Item 4. Submission of Matters to a Vote of Security Holders
    
    26Item 5. Other Information
    
    26Item 6. Exhibits
    
    26SignaturesEX-31.1: Section 302 Certification of CEOEX-31.2: Section 302 Certification of CFOEX-32.1: Section 906 Certification of CEOEX-32.2: Section 906 Certification of CFO
  1




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Condensed Consolidated Financial Statements
 NETWORK COMMUNICATIONS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 December 2, 2007
    
    
    March 25, 2007ASSETSCurrent assetsCash and cash equivalents
    
    $
    4,268,954
    
    
    $
    9,338,083Accounts receivable, net of allowance for doubtful accounts of
$3,214,725 and $1,912,911, respectively
    
    
    24,454,407
    
    
    
    17,478,518Inventories
    
    
    4,087,902
    
    
    
    3,216,504Prepaid expenses and deferred charges
    
    
    1,820,029
    
    
    
    4,036,080Deferred tax assets
    
    
    1,179,796
    
    
    
    724,489Income tax receivable
    
    
    
    
    
    
    549,158Other current assets
    
    
    95,607
    
    
    
    15,100Total current assets
    
    
    35,906,695
    
    
    
    35,357,932Property, equipment and computer software, net
    
    
    23,887,033
    
    
    
    23,940,897Goodwill
    
    
    307,771,092
    
    
    
    291,723,947Deferred financing costs, net
    
    
    7,903,124
    
    
    
    12,300,765Intangible assets, net
    
    
    152,412,728
    
    
    
    144,902,357Other assets
    
    
    324,046
    
    
    
    324,142Total noncurrent assets
    
    
    492,298,023
    
    
    
    473,192,108Total assets
    
    $
    528,204,718
    
    
    $
    508,550,040LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    8,979,311
    
    
    $
    9,392,050Accrued compensation and related taxes
    
    
    5,191,697
    
    
    
    5,195,397Customer deposits
    
    
    2,566,137
    
    
    
    1,986,128Unearned revenue
    
    
    2,602,577
    
    
    
    2,446,870Accrued interest
    
    
    626,270
    
    
    
    6,613,204Income tax payable
    
    
    1,162,649
    
    
    
    Other current liabilities
    
    
    2,525,536
    
    
    
    1,344,467Current maturities of long-term debt
    
    
    766,359
    
    
    
    3,084,182Current maturities of capital lease obligations
    
    
    425,083
    
    
    
    423,925Total current liabilities
    
    
    24,845,619
    
    
    
    30,486,223Long-term debt, less current maturities
    
    
    287,368,281
    
    
    
    258,491,120Capital lease obligations, less current maturities
    
    
    393,040
    
    
    
    325,137Deferred tax liabilities
    
    
    39,916,537
    
    
    
    44,584,535Other long term liabilities
    
    
    2,539,332
    
    
    
    460,000Total liabilities
    
    
    355,062,809
    
    
    
    334,347,015Commitments and contingencies (Note 7)Stockholders EquityCommon stock, $0.001 par value; 100 shares authorized, issued
and outstanding
    
    
    
    
    
    
    Additional paid-in capital (including warrants of $533,583 at
December 2, 2007 and March 25, 2007)
    
    
    194,622,402
    
    
    
    194,622,402Accumulated deficit
    
    
    (21,516,754
    )
    
    
    (20,343,174
    )Accumulated other comprehensive income (loss)
    
    
    36,261
    
    
    
    (76,203
    )Total stockholders equity
    
    
    173,141,909
    
    
    
    174,203,025Total liabilities and stockholders equity
    
    $
    528,204,718
    
    
    $
    508,550,040
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NETWORK COMMUNICATIONS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 Three Periods EndedDecember 2, 2007
    
    
    December 3, 2006Sales
    
    $
    54,454,838
    
    
    $
    49,946,598Cost of sales (exclusive of production
depreciation and software amortization expense
shown separately below)
    
    
    35,121,576
    
    
    
    32,072,113Production depreciation and software amortization
    
    
    1,257,471
    
    
    
    2,569,820Gross profit
    
    
    18,075,791
    
    
    
    15,304,665Selling, general and administrative expenses
    
    
    5,570,229
    
    
    
    5,648,083Depreciation and software amortization
    
    
    441,816
    
    
    
    902,910Amortization of intangibles
    
    
    4,195,551
    
    
    
    3,589,475Operating income
    
    
    7,868,195
    
    
    
    5,164,197Other income (expense)Interest and dividend income
    
    
    94,409
    
    
    
    77,234Interest expense
    
    
    (7,191,964
    )
    
    
    (6,822,854
    )Other expense
    
    
    (20,434
    )
    
    
    (16,407
    )Total other expense
    
    
    (7,117,989
    )
    
    
    (6,762,027
    )Income
(loss) before expense (benefit) from income taxes
    
    
    750,206
    
    
    
    (1,597,830
    )Income tax expense (benefit)
    
    
    181,728
    
    
    
    (596,458
    )Net income (loss)
    
    $
    568,478
    
    
    $
    (1,001,372
    )
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NETWORK COMMUNICATIONS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 Nine Periods EndedDecember 2, 2007
    
    
    December 3, 2006Sales
    
    $
    163,965,722
    
    
    $
    146,180,928Cost of sales (exclusive of production depreciation and software
amortization expense shown separately below)
    
    
    107,026,607
    
    
    
    93,856,864Production depreciation and software amortization
    
    
    3,454,971
    
    
    
    7,552,231Gross profit
    
    
    53,484,144
    
    
    
    44,771,833Selling, general and administrative expenses
    
    
    17,553,001
    
    
    
    16,955,399Depreciation and software amortization
    
    
    1,213,909
    
    
    
    2,653,487Amortization of intangibles
    
    
    11,860,211
    
    
    
    10,588,308Operating income
    
    
    22,857,023
    
    
    
    14,574,639Other income (expense)Interest and dividend income
    
    
    293,341
    
    
    
    299,625Interest expense
    
    
    (24,772,625
    )
    
    
    (19,927,516
    )Other expense
    
    
    (37,564
    )
    
    
    (6,034
    )Total other expense
    
    
    (24,516,848
    )
    
    
    (19,633,925
    )Loss from continuing operations before benefit from income taxes
    
    
    (1,659,825
    )
    
    
    (5,059,286
    )Income tax benefit
    
    
    (486,245
    )
    
    
    (1,797,785
    )Net loss from continuing operations
    
    
    (1,173,580
    )
    
    
    (3,261,501
    )Discontinued operations (Note 5)Income from discontinued operations of $14,821 net of
applicable income tax expense of $6,077
    
    
    
    
    
    
    8,744Loss on disposal of discontinued operations of $205,216 net of
applicable income tax benefit of $84,139
    
    
    
    
    
    
    (121,077
    )Net loss
    
    $
    (1,173,580
    )
    
    $
    (3,373,834
    )
  4




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NETWORK COMMUNICATIONS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (UNAUDITED)
 AccumulatedAdditional
    
    
    
    
    
    
    OtherCommon Stock
    
    
    Paid-In
    
    
    Accumulated
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Income (loss)
    
    
    TotalBalance at March 25, 2007
    
    
    100
    
    
    $
    
    
    
    $
    194,622,402
    
    
    $
    (20,343,174
    )
    
    $
    (76,203
    )
    
    $
    174,203,025Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,173,580
    )
    
    
    
    
    
    
    (1,173,580
    )Foreign currency
translation
adjustments, net of
tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    112,464
    
    
    
    112,464Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,061,116
    )Balance at
December 2, 2007
    
    
    100
    
    
    $
    
    
    
    $
    194,622,402
    
    
    $
    (21,516,754
    )
    
    $
    36,261
    
    
    $
    173,141,909
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NETWORK COMMUNICATIONS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 Nine Periods EndedDecember 2, 2007
    
    
    December 3, 2006Cash flows from operating activitiesNet loss
    
    $
    (1,173,580
    )
    
    $
    (3,373,834
    )Adjustments to reconcile net loss to net cash used in operating activities:Deferred income taxes
    
    
    (5,123,305
    )
    
    
    (6,926,899
    )Other, net
    
    
    24,450,102
    
    
    
    25,110,369Changes in operating assets and liabilities, net of acquired businesses
    
    
    (10,432,266
    )
    
    
    (9,017,499
    )Net cash provided by operating activities
    
    
    7,720,951
    
    
    
    5,792,137Cash flows from investing activitiesPurchase of property, equipment and computer software
    
    
    (3,876,015
    )
    
    
    (5,627,796
    )Proceeds from the sale of assets
    
    
    5,352
    
    
    
    100,000Payments for businesses acquired, net of cash
    
    
    (31,643,145
    )
    
    
    (19,405,363
    )Net cash used in investing activities
    
    
    (35,513,808
    )
    
    
    (24,933,159
    )Cash flows from financing activitiesNet (payments) proceeds on revolving facility
    
    
    (3,500,000
    )
    
    
    7,000,000Proceeds from term loan facility
    
    
    30,000,000
    
    
    
    Payments on term loan facility
    
    
    (2,864,098
    )
    
    
    (375,000
    )Capitalization from parent
    
    
    
    
    
    
    147,374Payments on capital leases
    
    
    (393,942
    )
    
    
    (518,933
    )Payment of debt issuance costs
    
    
    (518,232
    )
    
    
    (386,741
    )Net cash provided by financing activities
    
    
    22,723,728
    
    
    
    5,866,700Net decrease in cash
    
    
    (5,069,129
    )
    
    
    (13,274,322
    )Cash at beginning of fiscal year
    
    
    9,338,083
    
    
    
    16,418,335Cash at end of period
    
    $
    4,268,954
    
    
    $
    3,144,013Supplemental disclosurePayments for businesses acquired:Fair value of assets acquired
    
    $
    31,672,711
    
    
    $
    19,441,457Less liabilities assumed
    
    
    317,156
    
    
    
    36,094Total purchase price
    
    
    31,355,555
    
    
    
    19,405,363Deferred purchase price
    
    
    287,590
    
    
    
    Cash paid for acquired businesses
    
    $
    31,643,145
    
    
    $
    19,405,363Noncash investing and financing activitiesAssets acquired through capital lease
    
    $
    463,003
    
    
    $
    176,368
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NETWORK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 1. Organization and Basis of Presentation
 The Real Estate Book (TREB) Apartment Finder, New Home Finder, Mature Living Choices, Unique Homes Magazine, Enclave Magazine,
Blacks Guide, Kansas City Homes and Gardens, Homes and Lifestyles
 2. Summary of Significant Accounting Policies
 Basis of Presentation
    7




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NETWORK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Recent Accounting Pronouncements
 Business Combinations
 The
Fair Value Option for Financial Assets and Financial Liabilities  Including an Amendment of FASB
Statement No. 115
 Accounting for
Uncertainty in Income Taxesan Interpretation of FASB Statement 109
 Fair Value Measurements
 3. Inventories
  December 2, 2007
    
    
    March 25, 2007Distribution products and marketing aids for resale
    
    $
    587,998
    
    
    $
    608,381Production, paper and ink
    
    
    2,782,485
    
    
    
    1,765,170Work-in-process
    
    
    717,419
    
    
    
    842,953$
    4,087,902
    
    
    $
    3,216,504
 4. Acquisitions
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NETWORK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  Allocation of purchase price
  New England Home
 Relocating in St. Louis
 The Greater Jacksonville Apartment Guide
   Apartment Rental Source
  9




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NETWORK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Fair Value at
    
    
    Weighted-Average(in thousands)
    
    Purchase Price
    
    
    Amortization PeriodTangible assetsCurrent assets
    
    $
    266Fixed assets
    
    
    229Total tangible assets
    
    
    495Intangible assetsAdvertiser lists
    
    
    12,960
    
    
    10 yearsDistribution network
    
    
    286
    
    
    10 yearsConsumer database
    
    
    780
    
    
    4 yearsTrade names
    
    
    2,958
    
    
    11 yearsSubscriber lists
    
    
    4
    
    
    4 yearsNon-compete
    
    
    2,382
    
    
    3 yearsGoodwill
    
    
    11,808Total intangible assets
    
    
    31,178Total assets acquired
    
    
    31,673Liabilities assumed
    
    
    317Total purchase price
    
    $
    31,356
  Unaudited Pro Forma Results of OperationsThree Periods Ended
    
    Nine Periods EndedDecember 2, 2007
    
    December 3, 2006
    
    December 2, 2007
    
    December 3, 2006(in thousands)
    
    (in thousands)Sales
    
    $
    54,583
    
    
    $
    53,889
    
    
    $
    167,950
    
    
    $
    163,262Income (loss)
before
expense/benefit
from income taxes
    
    
    768
    
    
    
    (1,567
    )
    
    
    (1,414
    )
    
    
    (5,159
    )Net income (loss)
    
    $
    580
    
    
    $
    (962
    )
    
    $
    (1,016
    )
    
    $
    (3,437
    )
  5. Discontinued Operations
 Corporate
Choices Accounting for the Impairment or Disposal of Long-lived Assets Corporate Choices
 6. Long-term Debt
  December 2, 2007
    
    
    March 25, 200710 3/4% Senior Notes, due December 1, 2013
    
    $
    175,000,000
    
    
    $
    175,000,000Term loan facility
    
    
    
    
    
    
    49,500,000New term loan facility
    
    
    76,635,902
    
    
    
    Revolving loan facility
    
    
    
    
    
    
    7,000,000New revolving loan facility
    
    
    3,500,000
    
    
    
    Senior subordinated note
    
    
    35,073,349
    
    
    
    32,395,232290,209,251
    
    
    
    263,895,232Less:Unamortized discount on noncurrent
Senior Notes
and Senior Subordinated Note
    
    
    (2,074,611
    )
    
    
    (2,319,930
    )Current maturities
    
    
    (766,359
    )
    
    
    (3,084,182
    )Long-term debt, less current maturities
    
    $
    287,368,281
    
    
    $
    258,491,120
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NETWORK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Note 12. Long-term Debt
 New Senior Credit Facility
        11




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NETWORK COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
   7. Commitments and Contingencies
 Operating Leases
  Employment Agreements
  Other
  8. Related Party Transactions
   9. Subsequent Events
 Fredericksburg
Apartment Finders Guide
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NETWORK COMMUNICATIONS, INC. AND SUBSIDIARIES
 PART I  FINANCIAL INFORMATION
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Cautionary Statement Regarding Forward-Looking Information
  Overview of Operations
    The Real Estate Book (TREB) Apartment Finder Blacks Guide Kansas
City Homes & Gardens Atlanta Homes & Lifestyles Colorado Homes & Lifestyles Mountain Living New England Home
  13




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
    
    advertising volume;
    
    expansion into other local real estate markets;
    
    strong brand recognition; and
    
    per unit cost to produce our publications.
 Business Trends
  
    
    Sales volume of existing homes and months of supply of unsold homes Indicators for the
resale and new home market remained weak during the September 2007 to November 2007
timeframe. Existing home sales experienced declines in September and October before
posting a small gain in November. In September, existing home sales dropped 8% which was
the largest single month decline since 1999. In October existing homes sales declined for
the eighth consecutive month and the annualized rate of sales fell to 4.98 million units,
the slowest sales pace since 1999. There was an increase of 0.4% in existing homes sales
in November with the annualized sales rate increasing to 5.0 million units. The median
home price declined 3.3% from the prior year. The total inventory of unsold existing homes
in November 2007 stood at 4.27 million units or 10.3 months of inventory at the current
sales pace. In the new home market, sales of new homes in November declined by 9% to a
seasonally adjusted annual rate of 647,000. This sales pace was the lowest since April
1995. During the twelve months ended November 2007, new home sales nationwide have
declined by 34.4%. Revenues for The Real Estate Book(TREB) and Unique Homes(UH)
brands have been adversely impacted by the deteriorating market conditions. Revenues for
the TREB and UH brands declined by 16.1% and 14.8%, respectively, in the fiscal third
quarter compared to prior year. The year-over-year declines in TREB revenue in the fiscal
year first and second quarters were 4.2% and 8.3%, respectively. Real estate is a local
business and we do benefit from TREBs geographic diversification, however, all regions of
the country are now experiencing the housing downturn to some extent. We expect the resale
home market to remain challenging given the increase in foreclosures and the disruption in
the mortgage finance industry. The Pending Homes Sales Index, which forecasts near-term
home sales, has remained relatively constant since August when it reached its lowest level
since 2001, when the index was started.
    
    The market tightness index The October 2007 market tightness declined from 55 in July
2007 to 46 in October 2007. A reading below 50 indicates that markets are experiencing
looser occupancy and rental rates. The apartment market has been impacted by the
dislocation in the credit markets as less equity and debt is available for acquisitions and
new development. A more recent positive trend indicates that the
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slowdown in the homes market and the tightening of credit standards for mortgages have
slowed the migration of apartment renters to homeowners. According to the October 2007
survey conducted by the National Multi Housing Council, 75% of respondents saw a decrease in
the number of renters leaving to purchase homes. The market dynamics remain favorable for
advertising as there is an ongoing inventory of unoccupied rental units that property
management companies need to market to prospective renters.
    
    Interest rates and the growth in consumer debt The interest rate environment remains
favorable especially with the recent interest rate cuts by the Federal Reserve. However,
the market for refinancing and home equity lines of credit continues to be adversely
impacted by the ongoing developments in the credit markets. There is less available credit
and tighter underwriting standards. To date we have not experienced a material impact on
our home design and home improvement magazines, which serve sixteen regional markets in the
United States. Although we have seen a slowdown in advertising demand in select markets,
in the aggregate the magazines have continued to experience growth in advertising pages.
 Revenue
 Accounting for Revenue Arrangements with
Multiple Deliverables, Revenue Recognition
 Costs
   Depreciation and Amortization
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Interest Income and Interest Expense
  Income Taxes
  Three Periods Ended
    
    Nine Periods EndedDecember 2, 2007
    
    December 3, 2006
    
    December 2, 2007
    
    December 3, 2006(in thousands)
    
    (in thousands)Income tax
expense/(benefit)
    
    $
    182
    
    
    $
    (596
    )
    
    $
    (486
    )
    
    $
    (1,876
    )Effective
interest rate
    
    
    24.2
    %
    
    
    37.3
    %
    
    
    29.3
    %
    
    
    35.7
    %
  Results of Operations
 TREB New Home Finder Unique Homes Enclave Apartment Finder Mature Living Choices Blacks
Guide
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Three Periods Ended
    
    
    Nine Periods EndedDecember 2, 2007
    
    
    December 3, 2006
    
    
    December 2, 2007
    
    
    December 3, 2006Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %(in thousands)
    
    
    
    
    
    
    
    
    
    
    (in thousands)Resale and new
sales
    
    $
    29,171
    
    
    
    53.6
    %
    
    $
    29,295
    
    
    
    58.7
    %
    
    $
    86,930
    
    
    
    53.0
    %
    
    $
    87,110
    
    
    
    59.6
    %Rental and
leasing
    
    
    18,294
    
    
    
    33.6
    %
    
    
    15,105
    
    
    
    30.2
    %
    
    
    53,228
    
    
    
    32.5
    %
    
    
    41,654
    
    
    
    28.5
    %Remodeling and home improvement
    
    
    6,990
    
    
    
    12.8
    %
    
    
    5,547
    
    
    
    11.1
    %
    
    
    23,808
    
    
    
    14.5
    %
    
    
    17,417
    
    
    
    11.9
    %Total
revenue
    
    
    54,455
    
    
    
    100.0
    %
    
    
    49,947
    
    
    
    100.0
    %
    
    
    163,966
    
    
    
    100.0
    %
    
    
    146,181
    
    
    
    100.0
    %Costs and expenses:Cost of sales
(including
production
depreciation and
software
amortization)
    
    
    36,379
    
    
    
    66.8
    %
    
    
    34,642
    
    
    
    69.4
    %
    
    
    110,482
    
    
    
    67.4
    %
    
    
    101,409
    
    
    
    69.4
    %Selling, general
and administrative
(including
non-production
depreciation and
software
amortization)
    
    
    6,012
    
    
    
    11.0
    %
    
    
    6,551
    
    
    
    13.1
    %
    
    
    18,767
    
    
    
    11.5
    %
    
    
    19,609
    
    
    
    13.4
    %Amortization of
intangibles
    
    
    4,196
    
    
    
    7.7
    %
    
    
    3,590
    
    
    
    7.2
    %
    
    
    11,860
    
    
    
    7.2
    %
    
    
    10,588
    
    
    
    7.2
    %Income from
operations
    
    $
    7,868
    
    
    
    14.5
    %
    
    $
    5,164
    
    
    
    10.3
    %
    
    $
    22,857
    
    
    
    13.9
    %
    
    $
    14,575
    
    
    
    10.0
    %
 Three Periods Ended December 2, 2007 Compared to Three Periods Ended December 3, 2006
 Revenue.
 TREB TREB TREB Unique Homes
 Apartment Finder Blacks Guide
 Kansas City Homes & Gardens, Accent
Home & Garden, At Home In Arkansas, Relocating in Las Vegas, New England Home, Relocating in St.
Louis, Homes & Lifestyles
 Cost of sales
 17




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##### Table of Contents



Production depreciation and software amortization expense.
 Selling, general and administrative expenses (SG&A)
 Non-production depreciation and software amortization expense.
 Amortization of intangibles
 Net interest expense
 Net income
 Nine Periods Ended December 2, 2007 Compared to Nine Periods Ended December 3, 2006
 Revenue.
 TREB TREB TREB Unique Homes
 18




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##### Table of Contents



Apartment Finder Blacks Guide
 Kansas City Homes & Gardens,
Accent Home & Garden, At Home In Arkansas, Relocating in Las Vegas, New England Home, Relocating in
St. Louis, Homes & Lifestyles
 Cost of sales
 Production depreciation and software amortization expense.
 Selling, general and administrative expenses (SG&A)
 Non-production depreciation and software amortization expense.
 19




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##### Table of Contents



Amortization of intangibles
 Net interest expense
 Net income
 Liquidity and Capital Resources
    Nine Periods Ended
    
    
    Nine Periods EndedDecember 2, 2007
    
    
    December 3, 2006(in thousands)Net cash provided by operating
activities
    
    $
    7,721
    
    
    $
    5,792Net cash used in investing
activities
    
    
    (35,514
    )
    
    
    (24,933
    )Net cash provided by financing
activities
    
    
    22,724
    
    
    
    5,867Net decrease in cash
    
    
    (5,069
    )
    
    
    (13,274
    )Cash at beginning of fiscal
year
    
    
    9,338
    
    
    
    16,418Cash at end of period
    
    $
    4,269
    
    
    $
    3,144
    Senior Notes and Credit Agreement
  20




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##### Table of Contents



New senior credit facility.
     Critical Accounting Policies and Estimates
  21




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##### Table of Contents



Principles of Consolidation and Fiscal Year End
  Revenue Recognition and Unearned Revenue
 Accounting for Revenue Arrangements with
Multiple Deliverables, Revenue
Recognition .
 Print
  Online
  Unearned revenue
  Trade Accounts Receivable
   22




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##### Table of Contents



Goodwill
 Goodwill
and Other Intangible Assets
  Impairment of Long Lived Assets
 Accounting for the Impairment or Disposal of
Long-Lived Assets Corporate Choices
 Intangible Assets
  Recent Accounting Pronouncements
 Business Combinations
 The
Fair Value Option for Financial Assets and Financial Liabilities  Including an Amendment of FASB
Statement No. 115
 Accounting for
Uncertainty in Income Taxesan Interpretation of FASB Statement 109
 23




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##### Table of Contents



Fair Value Measurements
 Off-Balance Sheet Arrangements
  Contractual Obligations
  Payments Due by PeriodLess Than
    
    
    1 to
    
    
    3 to
    
    
    More ThanTotal
    
    
    1 Year
    
    
    3 Years
    
    
    5 Years
    
    
    5 Years(Dollars in thousands)Long-term debt:Variable rate bank debt
    
    $
    80,136
    
    
    $
    766
    
    
    $
    1,533
    
    
    $
    77,837
    
    
    $
    Fixed rate Subordinated Note
    
    
    35,073
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,073Fixed rate Senior Notes
    
    
    175,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    175,000Future interest payments(1)
    
    
    173,791
    
    
    
    30,472
    
    
    
    60,613
    
    
    
    60,430
    
    
    
    22,276Capital lease obligations
    
    
    749
    
    
    
    424
    
    
    
    303
    
    
    
    21
    
    
    
    1Operating lease obligations
    
    
    14,343
    
    
    
    4,356
    
    
    
    6,083
    
    
    
    3,573
    
    
    
    331Total contractual obligations
    
    $
    479,092
    
    
    $
    36,018
    
    
    $
    68,532
    
    
    $
    141,861
    
    
    $
    232,681
 
 (1)
    
    This line item is comprised of fixed and variable interest rates on
the debt balances as of December 2, 2007. For the variable rate
portion, the company has assumed that the effective interest rate as
of December 2, 2007 will remain consistent over the remaining life of
the variable rate bank debt. 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Quantitative
and Qualitative Disclosures About Market Risk
 
 Item 4. Controls and Procedures
  24




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##### Table of Contents



25




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##### Table of Contents



NETWORK COMMUNICATIONS, INC. AND SUBSIDIARIES
 
 PART II
 Other
Information
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
 Item 1A.  Risk Factors
 
 Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
  26




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##### Table of Contents



SIGNATURES
  Network Communications, Inc.Date:  January 15, 2008
    By:
    /s/  Daniel R. McCarthyChairman and Chief Executive Officer(Principal Executive Officer)Date: January 15, 2008
    By:
    /s/  Gerard P. ParkerSenior Vice President and Chief Financial Officer(Principal Financial Officer)




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##### Table of Contents



NETWORK COMMUNICATION,INC. AND SUBSIDIARIES
 PART II
 Other Information
 Exhibit Index  (Exhibits Physically Filed Herewith)
 Number
    
    Title31.1
    
    Certification of the Chairman and Chief Executive
Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Senior Vice President and Chief
Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1*
    
    Certification of Chairman and Chief Executive
Officer pursuant to Title 18 of the United States
Code Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.32.2*
    
    Certification of Senior Vice President and Chief
Financial Officer pursuant to Title 18 of the United
States Code Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    This exhibit is hereby furnished to the SEC as an accompanying
document and is not to be deemed filed for purposes of Section 18 of
the Securities Exchange Act of 1934 or otherwise subject to the
liabilities of that Section, nor shall it be deemed incorporated by
reference into any filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934.