PULITZER INC - 10-K Annual Report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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PULITZER INC.
(Exact name of registrant as specified in its charter)

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DELAWARE 43-1819711
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

900 NORTH TUCKER BOULEVARD,
ST. LOUIS, MISSOURI 63101
(Address of principal executive offices)

(314) 340-8000
(Registrant's telephone number, including area code)

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Securities registered pursuant to Section 12(b) of the Act: Common Stock,
par value $.01 per share -- New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None
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Indicate by check mark whether the registrant (1) has 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) has been subject to such
filing requirements for the past 90 days.
Yes X No ____

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The aggregate market value of the voting stock held by non-affiliates of
the registrant was approximately $483,177,952 as of the close of business on
March 18, 2002.

The number of shares of Common Stock, $.01 par value, outstanding as of
March 18, 2002 was 9,286,717.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive Proxy Statement to be used in
connection with its Annual Meeting of Stockholders to be held on May 14, 2002
are incorporated by reference into Part III of this Report.

The registrant's fiscal year ends on the last Sunday of December in each year.
For ease of presentation, the registrant has used December 31 as the fiscal
year-end in this Annual Report. The actual fiscal year-end dates for all periods
presented herein are: December 30, 2001; December 31, 2000; December 26, 1999;
December 27, 1998; and December 28, 1997.
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ITEM 1. BUSINESS.

INTRODUCTION

Pulitzer Inc. (the "Company") is a newspaper publishing company with
related Internet operations in 14 markets, the largest of which is St. Louis,
Missouri. For fiscal 2001, the Company's St. Louis operations contributed over
64 percent of total revenue including revenue associated with the Company's
operations in Tucson, Arizona.

Pulitzer Inc. is the successor to the company founded by the first Joseph
Pulitzer in 1878 to publish the original St. Louis Post-Dispatch (the
"Post-Dispatch"). The Company and its predecessors have operated continuously
since 1878 under the direction of the Pulitzer family. Michael E. Pulitzer, a
grandson of the founder, currently serves as Chairman of the Board of the
Company.

The Company is engaged in newspaper publishing and related "new media"
businesses. Its newspaper businesses include operations in St. Louis, Missouri,
where the Company publishes the Post-Dispatch, the only major daily newspaper
serving the greater St. Louis metropolitan area, and in Tucson, Arizona, where
the Company publishes the Arizona Daily Star (the "Star"). In Tucson, the
Company shares, on an equal basis, the combined results of the Star and the
Tucson Citizen, published by Gannett. Both daily newspapers have weekly "total
market coverage" sections that provide advertisers with market saturation, and
both offer alternative delivery systems that provide advertisers with either
targeted or total market coverage.

The Company owns and operates electronic news, information and
communication websites in each of its markets, including STLtoday.com, the
preeminent local Internet site in St. Louis, and, in partnership with Gannett,
azstarnet.com, one of Tucson's leading local Internet sites.

As a result of the May 1, 2000 transaction that created the St. Louis
Post-Dispatch LLC ("PD LLC"), the Company controls and manages the Post-Dispatch
and holds a 95 percent interest in the results of its operations. Prior to May
1, 2000, the Company shared the operating profits and losses of the
Post-Dispatch on a 50-50 basis with The Herald Company, Inc. ("Herald"). See
"-- Agency Agreements".

The Company was capitalized on March 18, 1999 with approximately $550
million in cash and all the other assets of Pulitzer Publishing Company ("Old
Pulitzer") (other than broadcasting assets) as a result of the Spin-off (as
defined below) and is now operating the principal newspaper publishing and
related "new media" businesses formerly operated by Old Pulitzer and certain
other newspapers acquired since the Broadcast Transaction (as defined below).
The Company was organized as a corporation in 1998 and, prior to the Spin-off,
was a wholly-owned subsidiary of Old Pulitzer. Prior to the Broadcast
Transaction, Old Pulitzer was engaged in newspaper publishing and television and
radio broadcasting.

Pursuant to an Amended and Restated Agreement and Plan of Merger, dated as
of May 25, 1998 (the "Merger Agreement"), by and among Old Pulitzer, the Company
and Hearst-Argyle Television, Inc. ("Hearst-Argyle") on March 18, 1999,
Hearst-Argyle acquired, through the merger (the "Merger") of Old Pulitzer with
and into Hearst-Argyle, Old Pulitzer's television and radio broadcasting
operations (collectively, the "Broadcasting Business") in exchange for the
issuance to Old Pulitzer's stockholders of 37,096,774 shares of Hearst-Argyle's
Series A common stock. Old Pulitzer's Broadcasting Business consisted of nine
network-affiliated television stations and five radio stations owned and
operated by Pulitzer Broadcasting Company and its wholly-owned subsidiaries.
Prior to the Merger, Old Pulitzer's newspaper publishing and related new media
businesses were contributed to the Company in a tax-free "spin-off" to Old
Pulitzer stockholders (the "Spin-off"). The Merger and Spin-off are collectively
referred to as the "Broadcast Transaction."

Old Pulitzer's historical basis in its newspaper publishing and related new
media assets and liabilities has been carried over to the Company. The Broadcast
Transaction represents a reverse-spin transaction and, accordingly, the
Company's results of operations for periods prior to the consummation of the
Broadcast Transaction are identical to the historical results previously
reported by Old Pulitzer. The results of the Broadcasting Business owned by Old
Pulitzer prior to the Merger are reported as discontinued operations in the
financial statements included in Item 8 of this Annual Report on Form 10-K.

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ITEM 1. BUSINESS -- CONTINUED

In addition to its two metropolitan dailies, the Company's wholly-owned
subsidiary, Pulitzer Newspapers, Inc. ("PNI"), publishes 12 dailies that serve
markets in the Midwest, Southwest and West, as well as a number of weekly and
bi-weekly publications (the "PNI Group"). In January of 2000, the PNI Group
acquired, in an asset purchase, its largest newspaper, The Pantagraph, that
serves the central Illinois cities of Bloomington and Normal. The PNI Group's 12
daily newspapers have a combined average daily circulation of approximately
191,000.

In January of 2001, the Company, through its PNI Group, acquired, in an
asset purchase, The Lompoc Record, a daily newspaper located in Lompoc,
California. In addition, during the second half of 2000 and the first nine
months of 2001, the PNI Group acquired several weekly newspapers (in separate
transactions) that complement its daily newspapers in several markets. These
acquisitions are collectively referred to as the "PNI Acquisitions." Also, in
2001, PNI sold its daily newspaper located in Troy, Ohio and its weekly
newspaper property in Petaluma, California (the "Sale Transactions"). The
operating results of the newspapers divested in the Sale Transaction are
presented as discontinued operations in the Company's consolidated financial
statements included in Item 8 of this Annual Report on Form 10-K.

In addition to the Post-Dispatch, the Company's St. Louis newspaper
operations include the Suburban Journals of Greater St. Louis (the "Suburban
Journals"), acquired in August of 2000. The Suburban Journals are a group of 37
weekly papers and various niche publications that focus on providing local news
and editorial content to the communities that they serve and have a combined
average weekly distribution of approximately 1,343,000.

The PD LLC transaction, the Pantagraph acquisition and the Suburban
Journals acquisition are collectively referred to as the "Newspaper
Transactions."

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ITEM 1. BUSINESS -- CONTINUED

The Company's revenues are derived primarily from advertising and
circulation, which have averaged approximately 98 percent of total revenue over
the last five years. Advertising rates and rate structures and resulting
revenues vary among publications based, among other things, on circulation, type
of advertising, local market conditions and competition. The following table
sets forth certain historical financial information regarding the Company's
continuing operations for the periods and at the dates indicated. The operating
revenue and income balances presented below exclude discontinued operations.

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(1) In 2000, the Company completed the Newspaper Transactions. In addition, the
year ended December 31, 2000 includes an extra week of operations resulting
from a 53-week year. All other years presented include 52 weeks of
operations.

(2) In 1999, Old Pulitzer recorded expense of $26.7 million representing the
cost of stock option cash-outs and bonuses paid to publishing employees in
connection with the Broadcast Transaction.

(3) See "Agency Agreements" for additional information on the St. Louis Agency
adjustment.

(4) Operating margins represent operating income compared to operating revenues.
Operating income used in margin calculations excludes the St. Louis Agency
adjustment (see "Agency Agreements.") and stock option cash-outs and bonuses
(both of which are recorded as operating expenses for financial reporting
purposes).

OPERATING STRATEGY

The Company's long-term operating strategy is to maximize each newspaper
property's growth and profitability at each of its operations through
maintenance of editorial excellence, leadership in locally responsive news, and
prudent control of costs. Management believes that editorial excellence and
leadership in locally responsive news will, over the long-term, allow the
Company to maximize its share of audience and advertising revenue in each of its
respective markets. In addition, providing a portfolio of products designed to

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ITEM 1. BUSINESS -- CONTINUED

serve each property's broader market area as well as niche audiences, and
including both print and new media delivery, is considered a key to maintaining
and strengthening the Company's local market franchises. Experienced local
managers implement the Company's strategy in each market, with centralized
management providing oversight and guidance in all areas of planning and
operations.

The Company is focused on increasing its share of the advertising placed by
local and regional retailers in each of its markets. The Company believes that
this strategy will produce a substantial growth element to its revenue base
while enhancing the value of its products with local advertisers.

The Company has developed "new media" operations that are designed to
enhance, complement and add value to its traditional newspaper publishing
businesses by providing consumer and advertiser services through electronic
dissemination of information via the Internet. At the center of the Company's
Internet strategy are the websites developed in conjunction with the Company's
newspaper properties. Each of the websites takes full advantage of the
newspapers' extensive knowledge about the communities they serve, strong
advertiser and newspaper reader relationships and substantial marketing
expertise to produce in-depth, relevant, and locally focused online
publications. The Company's objective in these operations is to attract a wider
audience to generate revenues in support of its publishing franchises.

The Company complements its internal growth strategies with a disciplined
and opportunistic acquisition strategy that is focused on acquiring publishing
properties that the Company believes are a good fit with its operating strategy,
possess attractive growth potential, generate strong cash flows and will offer
an attractive return on investment. Management believes generally that the
Company's reputation, financial position, cash flow and conservative capital
structure, among other factors, will assist the Company in pursuing
acquisitions.

The Company believes that cost controls are an important tool in the
management of media properties that are subject to significant fluctuations in
advertising volume. The Company believes that prudent control of costs will
permit it to respond quickly when positive operating conditions offer
opportunities to expand market share and profitability and, alternatively, when
deteriorating operating conditions require cost reductions to protect
profitability. The Company's disciplined budgeting process is one of the key
elements in controlling costs. The Company employs production technology in all
of its media operations in order to minimize production costs and produce an
attractive and timely news product for its readers.

The Company's operations are geographically diverse, placing the Company in
the Midwest, Southwest and Western regions of the United States. Due to the
close relationship between economic activity and advertising volume, the Company
believes that geographic diversity will provide the Company with valuable
protection from regional economic variances.

COMBINED ST. LOUIS OPERATIONS

The Company serves the greater St. Louis metropolitan area with the daily
Post-Dispatch and, as of August 10, 2000, the Suburban Journals' weekly
newspapers, as well as with its STLtoday.com and news and information Internet
websites. St. Louis is currently the 18th largest metropolitan statistical area
in the United

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ITEM 1. BUSINESS -- CONTINUED

States with a population of approximately 2.6 million. The following table sets
forth the operating revenues from continuing operations of the Company's
combined St. Louis operations for the past five years.

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(1) On August 10, 2000, the Company acquired the Suburban Journals. In addition,
the year ended December 31, 2000 includes an extra week of operations
resulting from a 53-week fiscal year. All other years presented include 52
weeks of operations.

(2) Advertising includes revenues from preprinted inserts.

ST. LOUIS POST-DISPATCH

Founded in 1878 by the first Joseph Pulitzer, the Post-Dispatch has a long
history of reporting and editorial excellence and innovation in newspaper
publishing under the direction of the Pulitzer family. The Post-Dispatch is a
morning daily and Sunday newspaper serving primarily the greater St. Louis
metropolitan area.

As a result of the PD LLC transaction on May 1, 2000, the Company holds a
95 percent interest in the results of operations of PD LLC and Herald holds a 5
percent interest. Prior to May 1, 2000, under the terms of the St. Louis Agency
Agreement, which had governed the operations of the Post-Dispatch since 1961,
the Company and Herald generally shared the Post-Dispatch's operating profits
and losses, as well as its capital expenditures, on a 50-50 basis. See
"-- Agency Agreements."

The following table sets forth for the past five years certain circulation
and advertising information for the Post-Dispatch.

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(1) Amounts for 2001 are based on internal records of the Company for the
twelve-month period ended September 30. Amounts for prior years are based on
ABC Audit Reports for the twelve-month periods ended September 30.

(2) Part run inches represent advertisements that are published in selected
copies (i.e., less than the full press run) of a daily edition of the
newspaper to specifically target certain geographic locations. The

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ITEM 1. BUSINESS -- CONTINUED

advertisements typically appear in a special news and advertising section
designed specifically for the targeted geographic locations.

The Post-Dispatch has consistently been a leader in technological
innovation in the newspaper industry. The Company's commitment to the ongoing
enhancement of its operating systems has enabled the Post-Dispatch to offer a
continually improving product to both readers and advertisers while also
realizing substantial savings in labor cost. The Company believes the
Post-Dispatch has adequate facilities to sustain up to at least a 35 percent
increase in daily circulation without incurring significant capital
expenditures.

The Post-Dispatch is distributed primarily through independent home
delivery carriers and single copy dealers. Home delivery accounted for
approximately 80 percent of circulation for the daily Post-Dispatch and
approximately 59 percent of circulation for the Sunday edition during 2001. In
order to build a stronger, more direct relationship with readers of the
Post-Dispatch, PD LLC has purchased a number of circulation routes from
independent carriers and dealers over the past two years and it may continue to
purchase additional routes from time to time in the future. As of December 31,
2001, PD LLC owned circulation routes covering more than 63 percent of the
Post-Dispatch's home delivery distribution.

SUBURBAN JOURNALS OF GREATER ST. LOUIS

With the addition of the Suburban Journals in August of 2000, the Company's
St. Louis newspaper operations now include a group of 37 weekly papers and
various niche publications that provide comprehensive community-oriented local
news packages to the communities that they serve. The publications primarily
represent controlled-distribution newspapers and, depending on the community
served, are published once, twice or three times per week. In December 2001, the
Suburban Journals had a combined average weekly distribution of approximately
1.3 million, delivered by independent carriers to homes and outlets.

The Suburban Journals' newspapers are organized by geographic area into
nine publication groups throughout the St. Louis metropolitan area. Each group
has a news and advertising staff based in its local community that is managed by
a local publisher. The groups are supported by centralized production
facilities, distribution systems and administrative services. In addition, a
centralized advertising department provides sales support for classified,
national and major/regional advertisers that wish to target readers across
several publication groups.

ST. LOUIS INTERNET OPERATIONS

The Company's STLtoday.com (www.STLtoday.com) and other local affiliated
websites provide the St. Louis metropolitan area with comprehensive news,
business, sports, entertainment and neighborhood information. The sites also
feature enhanced online advertiser services in the three major classified
advertising categories -- autos, real estate and jobs. In addition, the websites
offer St. Louis at Work -- a regional workforce initiative which brings together
a public-private partnership to attract, train and retain a multi-skilled talent
pool for the metro area. As a part of the initiative, stlouisatwork.com was
created to become the online career destination for regional employers and job
candidates. The following table sets forth some key statistics for the combined
St. Louis websites for the periods indicated.

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(1) A "page view" occurs when a web server provides a web page to a website
visitor.

(2) A "session" is a collection of "page views" seen by a particular visitor at
one time.

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ITEM 1. BUSINESS -- CONTINUED

TUCSON OPERATIONS

Founded in 1877, the Star is published in Tucson, Arizona, by the Company's
wholly-owned subsidiary, Star Publishing Company ("Star Publishing"). The Star,
a morning and Sunday newspaper, and the Tucson Citizen (the "Citizen"), an
afternoon newspaper owned by Gannett Co., Inc. ("Gannett"), are southern
Arizona's leading dailies. The Star and the Citizen are published through an
agency operation (the "Tucson Agency") pursuant to an Agency Agreement, dated
March 28, 1940, as amended and restated (the "Tucson Agency Agreement"), and in
2001 had a combined weekday circulation of approximately 139,000 and a Sunday
circulation of 172,000 delivered by independent carriers to homes and single
copy outlets. Tucson is currently the 58th largest metropolitan statistical area
in the United States with a population of approximately 844,000.

The Tucson Agency operates through TNI Partners, an agency partnership that
is owned half by the Company and half by Gannett. TNI Partners is responsible
for all aspects of the business of the two newspapers other than editorial
opinion and gathering and reporting news. Net income or net loss of TNI Partners
is allocated equally to the Star and the Citizen. The Company reports its 50
percent share of TNI Partners' operating results as a single component of
operating income in its consolidated statement of income.

As a result of the Tucson Agency, the financial performance of Star
Publishing is directly affected by the operations and performance of both the
Star and the Citizen.

The following table sets forth certain information concerning circulation
and combined advertising linage of the Star and the Citizen and operating
revenues of TNI Partners for the past five years.

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(1) Amounts for 2001 are based on the internal records of the Company. Amounts
for prior years are based on ABC Audit Reports for the 52-week period ended
December 31.

(2) Part run inches represent advertisements that are published in selected
copies (i.e., less than the full press run) of a daily edition of the
newspaper to specifically target certain geographic locations. The
advertisements typically appear in a special news and advertising section
designed specifically for the targeted geographic locations.

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ITEM 1. BUSINESS -- CONTINUED

The Star and the Citizen are printed at TNI Partners' modern, computerized
facility equipped with two, eight-unit Metro offset presses. The writing,
editing and composing functions have been computerized, increasing efficiency
and reducing workforce requirements.

"Starnet", Star Publishing's website on the Internet (www.azstarnet.com),
serves the Tucson metropolitan area with local news, sports and entertainment
content and enhanced online advertiser services featuring the three major
classified advertising categories -- automotive, real estate and help wanted. In
addition, Starnet also serves as a city portal, providing community information
and acting as a community center and marketplace, enabling businesses and
individuals to build relationships with each other and the Star. Starnet
generates revenue from online advertising and from service and transaction fees,
all of which are included in TNI Partners' other operating revenue.

The following table sets forth some key statistics for Starnet for the
periods indicated.

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(1) A "page view" occurs when a web server provides a web page to a web-site
visitor.

(2) A "session" is a collection of "page views" seen by a particular visitor at
one time.

PULITZER NEWSPAPERS, INC.

The PNI Group publishes 12 dailies that serve markets in the Midwest,
Southwest and Western regions of the United States, as well as a number of
weekly and bi-weekly publications. The PNI Group's daily newspapers publish
morning or afternoon editions during the week and, generally, morning editions
on the weekend. Home delivery through independent contract carriers accounts for
a significant portion of each newspaper's circulation. The 12 daily newspapers
in the PNI Group, ranked in order of daily circulation based on ABC Publisher's
Statements for the six-month period ended September 30, 2001 (except where
noted), are:

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(1) Amounts are based on the internal records of the Company.

In addition, the PNI Group also publishes more than 30 weekly newspapers
and various niche publications associated with its dailies. These include weekly
newspaper groups operated in conjunction with substantially all PNI properties.

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ITEM 1. BUSINESS -- CONTINUED

Collectively, the markets served by the PNI Group exceed U.S. averages in
such key measures as annual population and household growth rates, and average
retail spending per household. Further, these markets, which are often not
served by major metropolitan media, tend to be characterized by less media
competition, which gives the Company an opportunity to sustain and expand market
share. A strong focus on local reporting and editorial excellence is considered
a key to long-term success in these markets.

The following table sets forth the operating revenues from continuing
operations of the PNI Group for the past five years.

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(1) In January of 2000, the Company acquired The Pantagraph. In addition, the
year ended December 31, 2000 includes an extra week of operations resulting
from a 53-week year. All other years presented include 52 weeks of
operations.

ACQUISITION STRATEGY

One of the Company's primary growth strategies has been a disciplined and
opportunistic acquisition program. In evaluating acquisition opportunities, the
Company generally requires that candidates: (i) be in businesses related to the
Company's core publishing competencies; (ii) have strong cash flows; (iii)
possess good growth or economic characteristics and, where possible, offer a
clustering opportunity with respect to present or future properties; (iv)
provide an opportunity for its disciplined management approach to add value; and
(v) offer an attractive return on investment.

AGENCY AGREEMENTS

Newspapers in 12 cities operate under joint operating or agency agreements.
Agency agreements generally allow newspapers operating in the same market to
share certain printing and other facilities and to pool certain revenues and
expenses in order to decrease aggregate expenses and thereby allow the
continuing operation of multiple newspapers in the same market. The Newspaper
Preservation Act of 1970 permits joint operating agreements between newspapers
under certain circumstances without violation of the Federal antitrust laws.

St. Louis Agency. As a result of the May 1, 2000 PD LLC transaction, the
Company holds a 95 percent interest in the results of operations of PD LLC and
Herald holds a 5 percent interest. Prior to May 1, 2000, under the terms of the
St. Louis Agency Agreement, which had governed the operations of the
Post-Dispatch since 1961, the Company and Herald generally shared the
Post-Dispatch's operating profits and losses, as well as its capital
expenditures, on a 50-50 basis. Under the St. Louis Agency Agreement, for fiscal
2000 (for operating results through April 30, 2000), 1999, 1998 and 1997 the
Company paid Herald $9,363,000, $25,029,000, $20,729,000 and $19,450,000,
respectively, for Herald's share of the operating income of the St. Louis
Agency.

Tucson Agency. The Tucson Agency Agreement has, since 1940, governed the
joint operations of the Star and Citizen. TNI Partners, as agent for the Company
and Gannett, is responsible for advertising and circulation, printing and
delivery and collection of all revenues of the Star and the Citizen. The Board
of Directors of TNI Partners presently consists of three directors chosen by the
Company and three chosen by Gannett. Budgetary, personnel and other non-news and
editorial policy matters, such as advertising and

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ITEM 1. BUSINESS -- CONTINUED

circulation policies and rates or prices, are determined by the Board of
Directors of TNI Partners. Each newspaper is responsible for its own news and
editorial content. Revenues and expenses are recorded by TNI Partners, and the
resulting profit is generally split 50-50 between the Company and Gannett. The
Company reports its 50 percent share of TNI Partners' operating results as a
single component of operating income in its consolidated statement of income.
Both partners have certain administrative costs that are borne separately. As a
result of the Tucson Agency, the Star and the Citizen benefit from increases and
can be adversely affected by decreases in each other's circulation.

The Tucson Agency Agreement runs through June 1, 2015, and contains renewal
provisions for successive periods of 25 years each.

COMPETITION

The Company's publications compete for readership and advertising revenues
in varying degrees with other metropolitan, suburban, neighborhood and national
newspapers and other publications as well as with television, radio, cable,
Internet, online services and other new media technologies, direct mail, yellow
page directories, billboards and other news and advertising media. Competition
for advertising is based upon circulation levels, readership demographics, price
and advertiser results. Competition for circulation is generally based upon the
content, journalistic quality and price of the publication. In St. Louis and its
surrounding suburban communities, the Company's print competition for
circulation and advertising revenues includes paid suburban daily newspapers,
independently owned community newspapers and shoppers, yellow pages, and direct
mail advertisers. These community newspapers and shoppers and direct mail
companies target selected geographic markets throughout the St. Louis
metropolitan area.

Due to the agency relationship existing in Tucson, the Star and the Citizen
cannot be viewed as competitors for advertising or circulation revenues. The
Star and the Citizen compete primarily against other media and against
Phoenix-area and suburban, neighborhood and national newspapers and other
publications.

RAW MATERIALS

The primary raw material used in the Company's operations is newsprint,
representing 14.5 to 18.9 percent of operating expenses over the last five
years. For 2001, the Company's annual newsprint cost, including its 50 percent
share related to the operations of TNI Partners, reflected consumption of
approximately 109,000 metric tons. Based on the Company's current level of
newspaper operations, expected annual newsprint consumption for 2002 is
estimated to be in the range of 110,000 metric tons. Historically, newsprint has
been subject to significant price fluctuations from year to year, unrelated in
many cases to general economic conditions. In the last five years, the Company's
average annual cost per ton of newsprint has varied from its peak price by
approximately 25 percent. For every one-dollar change in the Company's average
annual cost per metric ton of newsprint, pre-tax income would change by
approximately $110,000, assuming annual newsprint consumption of 110,000 metric
tons. The Company attempts to obtain the best price available by combining
newsprint purchases for its different newspaper locations with those of other
newspaper publishing companies. The Company considers its relationship with
newsprint producers to be good. The Company does not enter into derivative
contracts for newsprint.

EMPLOYEES

At December 31, 2001, the Company had approximately 4,000 full-time
equivalent employees working at its operations, including TNI Partners. At the
Post-Dispatch in St. Louis, a majority of the approximately 1,200 full-time
employees is represented by unions. The Company considers its relationship with
its employees to be good.

The Post-Dispatch has contracts with substantially all of its production
unions, with expiration dates ranging from March 2002 through February 2010. In
addition, the Post-Dispatch has a multi-year contract

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ITEM 1. BUSINESS -- CONTINUED

with the St. Louis Newspaper Guild, covering newsroom, sales, and certain
administrative employees, that expires in January 2003. All of the
Post-Dispatch's labor contracts contain no strike provisions.

TNI Partners' contract with Tucson Graphic Communications Union Local No.
212, covering certain pressroom employees, expires on May 31, 2002. In each of
the last several years, this contract has been renegotiated for a one-year term.

ITEM 2. PROPERTIES

The corporate headquarters of the Company is located at 900 North Tucker
Boulevard, St. Louis, Missouri. The general character, location and approximate
size of the principal physical properties used by the Company for its newspaper
publishing and related new media businesses at December 31, 2001 are set forth
below. Leases on the properties indicated as leased by the Company expire at
various dates through June, 2007.

The Company believes that all of its owned and leased properties used in
connection with its operating activities are in good condition, well maintained
and generally adequate for its current and immediately foreseeable operating
needs. However, to consolidate production facilities and improve operating
efficiencies, the Post-Dispatch is currently expanding its main production
facility to add approximately 100,000 square feet of owned space in St. Louis.

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(1) Property is owned by and used in the operations of PD LLC.

(2) Property primarily includes locations operated by the Suburban Journals in
the greater St. Louis area.

(3) The 265,000 square foot facility in Tucson, Arizona is used in the
production of the Star and the Citizen and is jointly owned with Gannett
pursuant to the Tucson Agency.

ITEM 3. LEGAL AND REGULATORY PROCEEDINGS

In October 2001, the Internal Revenue Service ("IRS") formally proposed
that Old Pulitzer's taxable income for the tax year ended March 18, 1999 be
increased by approximately $80.4 million based on the assertion that Old
Pulitzer was required to recognize a taxable gain in that amount as a result of
the Spin-off. The Company is obligated under the Merger Agreement to indemnify
Hearst-Argyle against any tax liability

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ITEM 3. LEGAL AND REGULATORY PROCEEDINGS -- CONTINUED

attributable to the Spin-off and has the right to control any proceedings
relating to the determination of such tax liability.

The Company does not believe that Old Pulitzer realized any taxable gain in
connection with the Spin-off and has contested the IRS' proposed increase in a
formal written protest filed with the Appeals Office of the IRS in January 2002.
While there can be no assurance that the Company will completely prevail in its
position, it believes that the IRS' position is not supported by the facts or
applicable legal authorities and intends to vigorously contest the IRS'
determination. It thus has not accrued any liability in connection with this
matter. If the IRS were completely successful in its proposed adjustment, the
Company's indemnification obligation would be approximately $29.3 million, plus
applicable interest, and any indemnification payment would be recorded as an
adjustment to additional paid-in capital.

In February, 1998, a group of independent newspaper dealers engaged in the
business of reselling the Post-Dispatch in vending machines and to retail
establishments filed suit against the Company in the Missouri Circuit Court,
Twenty-Second Judicial Circuit (St. Louis City). The court has dismissed four of
the six counts in the suit. In the remaining counts, the plaintiffs allege that
the Company's actions have tortiously interfered with their business expectancy
of being able to sell their branches and constituted malicious trespass on their
intangible property by, among other things, allegedly reducing the value of
their routes. The plaintiffs seek punitive damages with respect to the tortious
interference count and statutory double damages if they should prevail on the
malicious interference count. The plaintiffs cite as harmful acts the Company's
purchase of various home delivery routes and branches, the Company's home
subscription pricing compared to its single copy pricing, and allegedly more
favorable rates, fees and allowances that the Company provides to its carriers
and other branch dealers. The Company has denied any liability, is vigorously
defending the suit and believes that it has meritorious defenses. While the
ultimate outcome of litigation cannot be predicted with certainty, management,
based on its understanding of the facts, does not believe the ultimate
resolution of these matters will have a materially adverse effect on the
Company's consolidated financial condition. However, depending upon the period
of resolution, such effects could be material to the financial results of an
individual period

The Company has been involved, from time to time, in various claims and
lawsuits incidental to the ordinary course of its business, including such
matters as libel, slander and defamation actions, complaints alleging
discrimination, and product distribution practices. While the ultimate outcome
of litigation cannot be predicted with certainty, management, based on its
understanding of the facts, does not believe the ultimate resolution of these
matters will have a materially adverse effect on the Company's consolidated
financial condition or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not Applicable.

13

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

The shares of the Company's common stock are listed on The New York Stock
Exchange, Inc. and trade under the symbol "PTZ". The shares of the Company's
Class B common stock do not trade in a public market.

At March 18, 2002, there were approximately 381 record holders of the
Company's common stock and 27 record holders of its Class B common stock.

The following table sets forth the range of high and low sales prices for
the Company's common stock and dividends paid for each quarterly period in the
past two years:

- ---------------
(1) In 2001, the Company declared and paid cash dividends of $0.68 per share of
common stock and Class B common stock.

(2) In 2000, the Company declared and paid cash dividends of $0.64 per share of
common stock and Class B common stock.

On January 3, 2002, the Board of Directors of the Company announced for the
first quarter of 2002 a 2.9 percent increase in the quarterly dividend on its
common stock and Class B common stock to $0.175 per share from $0.17 per share.
The cash dividend was paid on February 1, 2002. Future dividends will depend
upon, among other things, the Company's earnings, financial condition, cash
flows, capital requirements and other relevant considerations, including the
limitations under the Prudential Capital Group Loan, any credit agreement or
other agreement to which the Company may become a party in the future. See "Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources".

14

ITEM 6. SELECTED FINANCIAL DATA

15

ITEM 6. SELECTED FINANCIAL DATA -- CONTINUED

- ---------------

(1) The year ended December 31, 2000 includes an extra week of operations
resulting from a 53-week year. All other years presented include 52 weeks of
operations.

(2) In 1999, Old Pulitzer recorded expense of $26.7 million representing the
cost of stock option cash-outs and bonuses paid to publishing employees in
connection with the Broadcast Transaction.

(3) See Item 1. Business -- "Agency Agreements" for additional information on
the St. Louis Agency adjustment.

(4) Common stock equivalents not used to calculate loss per share because they
are anti-dilutive.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Statements in this Annual Report on Form 10-K concerning the Company's
business outlook or future economic performance, anticipated profitability,
revenues, expenses or other financial items, together with other statements that
are not historical facts, are "forward-looking statements" as that term is
defined under the Federal Securities Laws. Forward-looking statements are
subject to risks, uncertainties and other factors which could cause actual
results to differ materially from those stated in such statements. Such risks,
uncertainties and other factors include, but are not limited to, industry
cyclicality, the seasonal nature of the business, changes in pricing or other
actions by competitors or suppliers (including newsprint), capital or similar
requirements, and general economic conditions, any of which may impact
advertising and circulation revenues and various types of expenses,, as well as
other risks detailed in the Company's filings with the Securities and Exchange
Commission including this Annual Report on Form 10-K. Although the Company
believes that the expectations reflected in forward-looking statements are
reasonable, it cannot guarantee future results, levels of activity, performance
or achievements.

GENERAL

The Company was organized as a corporation in 1998 and is engaged in
newspaper publishing and related new media operations, operating the newspaper
properties operated by Pulitzer Publishing Company ("Old Pulitzer") prior to the
Spin-off (as defined below). Prior to the Spin-off, the Company was a
wholly-owned subsidiary of Old Pulitzer.

As of May 25, 1998, Old Pulitzer, the Company and Hearst-Argyle Television,
Inc. ("Hearst-Argyle") entered into an Amended and Restated Agreement and Plan
of Merger (the "Merger Agreement") pursuant to which Hearst-Argyle agreed to
acquire Old Pulitzer's television and radio broadcasting operations
(collectively, the "Broadcasting Business") in exchange for the issuance to Old
Pulitzer's stockholders of 37,096,774 shares of Hearst-Argyle's Series A common
stock. The Broadcasting Business consisted of nine network-affiliated television
stations and five radio stations owned and operated by Pulitzer Broadcasting
Company and its wholly-owned subsidiaries. On March 18, 1999, the Broadcasting
Business was acquired by Hearst-Argyle through the merger (the "Merger") of Old
Pulitzer into Hearst-Argyle. Prior to the Merger, Old Pulitzer's newspaper
publishing and related new media businesses were contributed to the Company in a
tax-free "spin-off" to Old Pulitzer stockholders (the "Spin-off"). The Merger
and Spin-off are collectively referred to as the "Broadcast Transaction."

Old Pulitzer's historical basis in its newspaper publishing and related new
media assets and liabilities has been carried over to the Company. The Broadcast
Transaction represents a reverse-spin transaction and, accordingly, the
Company's results of operations for periods prior to the consummation of the
Broadcast

16

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- CONTINUED

Transaction are identical to the historical results of operations previously
reported by Old Pulitzer. Results of the Company's newspaper publishing and
related new media businesses are reported as continuing operations, and the
results of the Broadcasting Business owned by Old Pulitzer prior to the Merger
are reported as a component of discontinued operations, in the consolidated
financial statements included in Item 8 of this Annual Report on Form 10-K.

The net liability balance of the Broadcasting Business as of March 18,
1999, including $700 million of Broadcast Debt, was contributed to "Additional
Paid-in Capital" of the Company at the time of the Merger.

The Company's operating revenues are significantly influenced by a number
of factors, including overall advertising expenditures, the appeal of newspapers
in comparison to other forms of advertising, the performance of the Company in
comparison to its competitors in specific markets, the strength of the national
economy and general economic conditions and population growth in the markets
served by the Company.

The Company's business tends to be seasonal, with peak revenues and profits
generally occurring in the fourth and, to a lesser extent, second quarters of
each year as a result of increased advertising activity during the Christmas and
spring holiday periods. The first quarter is historically the weakest quarter
for revenues and profits.

ACQUISITION AND DISPOSITION OF PROPERTIES

In 2001, the Company recorded a net pre-tax loss of $2.7 million related to
the sale of its daily newspaper located in Troy, Ohio, the sale of its St. Louis
Internet Access Provider (ISP) business and the sale of its newspaper property
in Petaluma, California (the "Sale Transactions"). These results are presented
as discontinued operations in the Company's consolidated financial statements
included in Item 8 of this Annual Report on Form 10-K.

On February 1, 2001, the Company, through its Pulitzer Newspapers, Inc.
("PNI") Group, acquired in an asset purchase The Lompoc Record, a daily
newspaper located in Lompoc, California. In addition, during the second half of
2000 and the first nine months of 2001, the PNI Group acquired several weekly
newspapers (in separate transactions) that complement its daily newspapers in
several markets. These acquisitions are collectively referred to as the "PNI
Acquisitions."

On August 10, 2000, the Company acquired the assets of the Suburban
Newspapers of Greater St. Louis, LLC and the stock of The Ladue News, Inc.
(collectively the "Suburban Journals"), a group of 37 weekly papers and various
niche publications (the "Journals Acquisition").

On May 1, 2000, the Company and The Herald Company, Inc. ("Herald")
completed the transfer of their respective interests in the assets and
operations of the St. Louis Post-Dispatch (the "Post-Dispatch") and certain
related businesses to a new joint venture, known as St. Louis Post-Dispatch LLC
("PD LLC"). Under the terms of the operating agreement governing PD LLC (the
"Operating Agreement"), the Company holds a 95 percent interest in the results
of operations of PD LLC and Herald holds a 5 percent interest. Previously, under
the terms of the St. Louis Agency Agreement, the Company and Herald generally
shared the Post-Dispatch's operating profits and losses, as well as its capital
expenditures, on a 50-50 basis. Also, under the terms of the Operating
Agreement, Herald received on May 1, 2000 a cash distribution of $306 million
from PD LLC. This distribution was financed by a $306 million borrowing by PD
LLC that is guaranteed by the Company pursuant to a Guaranty Agreement dated as
of May 1, 2000 ("Guaranty Agreement"). In turn, pursuant to an Indemnity
Agreement dated as of May 1, 2000 entered into between Herald and the Company,
Herald agreed to indemnify the Company for any payments that the Company may
make under the Guaranty Agreement.

On January 11, 2000, the Company acquired The Pantagraph, a daily and
Sunday newspaper that serves the central Illinois cities of Bloomington and
Normal.

17

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- CONTINUED

The PD LLC transaction, The Pantagraph acquisition and the Journals
Acquisition are collectively referred to as the "Newspaper Transactions".

CRITICAL ACCOUNTING POLICY

Management has identified the allowance for doubtful accounts associated
with trade accounts receivable as a critical accounting policy as a result of
the judgment involved in the use of estimates. The Company evaluates its
allowance for uncollectible trade accounts receivable based on customers' credit
history, payment trends, and other economic factors to the extent available.

It is possible that reported results could be different based upon changes
in economic conditions which could negatively impact the creditors ability to
pay. Additionally, because of the recent acquisition of circulation routes at
its St. Louis operations, historical payment data (prior to the acquisition) is
not available and, therefore, estimates are used by management to develop
payment trends and evaluate collectibility for certain circulation receivables.

2001 COMPARED WITH 2000

Income statement comparisons of 2001 results with 2000 are affected by an
extra week of operations in 2000. The Company's 2001 fiscal year contained 52
weeks, versus 53 weeks in the 2000 fiscal year.

REVENUE

Revenues from continuing operations for the year ended December 31, 2001
increased 4.1 percent, to $413.5 million from $397.2 million in 2000. The
increase reflected the current year contributions from the Suburban Journals and
the PNI Acquisitions. On a comparable basis, excluding the results of properties
acquired for both years for comparable non-ownership periods, and the extra week
from 2000, revenues for 2001 decreased 3.4 percent. The current year decline
reflected weak advertising demand at the Company's newspapers, principally in
classified help wanted advertising.

Advertising revenues, as reported, increased $13.0 million, or 4.2 percent,
in 2001. The current year increase reflected the addition of revenue from the
Suburban Journals and the PNI Acquisitions. On a comparable basis, as defined
above, advertising revenues for 2001 declined 4.9 percent due to weakness in the
retail and classified categories, which decreased by 5.5 percent and 10.1
percent, respectively. These declines were partially offset by gains in
national, up 12.5 percent, and strength in the preprint category, which
increased by 3.8 percent.

The decrease in comparable retail revenue can be attributable, in large
part, to reduced spending by major accounts resulting from the overall economic
slowdown in 2001 and the effects of September 11. These declines were partially
mitigated by the Company's strategy of increasing its resources focused on local
retail accounts.

In 2001, comparable help wanted revenue represented the largest decline in
the classified category, closing the year 23.8 percent under comparable prior
year results. The decline in comparable help wanted revenue reflects a slowing
economy in 2001, which saw overall U.S. civilian unemployment rates increase
from 4.2 percent at the start of the year to 5.8 percent at the close of 2001.
The most significant comparable employment revenue declines occurred at the
Post-Dispatch and at the combined newspaper operations in Tucson, where help
wanted revenues decreased by 25.7 percent and 26.1 percent, respectively.

Circulation revenues reported for 2001 increased $683,000 or 0.8 percent,
in 2001. The higher circulation revenues primarily reflected the addition of
circulation revenue from the PNI Acquisitions and increased revenue at the
Post-Dispatch, mitigated by the impact of the 53rd week in 2000. On a comparable
basis, as defined above, circulation revenue increased 2.7 percent.

18

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- CONTINUED

Other publishing revenues increased $2.6 million, or 34.2 percent, in 2001,
resulting primarily from the addition of commercial printing revenue from the
PNI Acquisitions and higher online revenues, mitigated by the impact of the 53rd
week in 2000. On a comparable basis, other publishing revenue increased 35.3
percent.

OPERATING EXPENSE

Operating expenses reported for 2001, excluding the St. Louis Agency
adjustment from the prior year, increased 10.8 percent to $387.6 million in 2001
from $349.9 million in 2000. On a comparable basis, excluding: (i) the results
of properties acquired for comparable non ownership periods from both years,
(ii) the extra week from 2000, (iii) employment termination costs from both
years, and (iv) incremental goodwill amortization in 2001 related to the
Company's increased interest in the results of the Post-Dispatch, expenses for
2001 increased $2.1 million or 0.6 percent.

The higher expenses on a comparable basis primarily reflected increased
employee benefit costs related to higher workers compensation claims and
increased medical insurance expense, increased bad debt expense related to the
Kmart bankruptcy, and the acquisition of circulation routes in St. Louis. These
increases were partially offset by lower newsprint and payroll costs. The
comparable newsprint reduction results from a consumption decrease of
approximately 4 percent, partially offset by a 3 percent increase in the cost
per metric ton. The decrease in comparable payroll expense reflects a reduction
of approximately 4 percent in staffing levels for comparable operations.

Total full time equivalent employees ("FTEs") decreased by 149 or 4.0
percent. The largest decreases were at the Post-Dispatch and TNI Partners, where
FTEs levels declined by 8.5 percent and 5.7 percent, respectively.

Equity in the earnings of the Tucson newspaper partnership for 2001
decreased 22.2 percent to $17.5 million from $22.5 million in the prior year.
The decrease primarily reflected weak demand in retail and classified
advertising, particularly help wanted, and the impact of the extra week of
operating income in the prior year.

OPERATING INCOME

For 2001, the Company reported operating income of $43.4 million compared
to $60.4 million in 2000. The decrease in operating income for 2001 primarily
reflected the decline in comparable advertising revenues, higher employee
benefit costs and incremental goodwill amortization related to the Company's
increased interest in the results of operations of the Post-Dispatch, which were
partially offset by the elimination of the St. Louis Agency adjustment in 2001.

NON-OPERATING ITEMS

Interest income for 2001 decreased to $7.6 million from $19.0 million in
2000. The decrease primarily reflected the lower average balance of invested
funds in the current year period due to the cash outflows of $41 million in 2001
in connection with the PNI Acquisitions and the purchase of newspaper routes,
and $686 million in 2000 (partially offset by $306 million of long-term debt
proceeds), in connection with the Newspaper Transactions, the purchase of
additional newspaper routes, and the repurchase of capital stock. In addition,
lower average interest rates also contributed to the current year decline in
interest income.

The Company reported interest expense of $24.6 million in 2001 compared to
$16.5 million in 2000. Interest expense for 2001 reflected a full twelve-month
period for which the $306 million PD LLC borrowing was outstanding compared with
eight months in 2000. See Note 8 to the consolidated financial statements
included in Item 8 of this Annual Report on Form 10-K.

The Company reported a loss on marketable securities and investments of
$3.8 million in 2001 compared with a loss of $2.2 million in 2000. The 2001 loss
resulted from the write-off of the Company's investment in

19

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- CONTINUED

KOZ of $2 million and the write down in the value of other Internet investments
of $2.4 million. These losses were partially offset by realized gains on the
sale of marketable securities of $600,000. The prior year loss resulted from
marketable security investment losses of $3.9 million and a $2.1 million
investment write-off that were partially offset by limited partnership gains of
$3.8 million.

The Company reported its equity in the losses of a joint venture investment
of $1.2 million in 2001 compared with $1.7 million in the prior year. As of
December 31, 2001, the Company had a remaining investment balance of
approximately $1.7 million in this joint venture.

The effective income tax rate from continuing operations for 2001 was 38
percent compared with a rate of 40 percent in 2000. The lower effective tax rate
in the current year primarily resulted from lower state income taxes.

INCOME FROM CONTINUING OPERATIONS

For 2001, the Company reported net income from continuing operations of
$12.3 million, or $0.58 per diluted share, compared to $34.6 million, or $1.59
per diluted share, in 2000. The decline in 2001 net income from continuing
operations primarily reflected the weak advertising demand, lower interest
income and higher interest expense in the current year. In addition, results
were affected by the impact of intangible amortization from the PD LLC venture
and Journals Acquisition that closed in the second and third quarters,
respectively, of the prior year.

DISCONTINUED OPERATIONS

The Company reported a loss from discontinued operations of $1.6 million,
or $0.08 per diluted share, in 2001 compared with income of $304,000, or $0.01
per diluted share, in the prior year. Discontinued operations in both years
include the operating results of properties sold during 2001 (newspapers located
in Troy, Ohio and Petaluma, California and the St. Louis Internet Access
Provider (ISP)). In addition, the 2001 amount also includes the net after-tax
loss of $1.2 million from the sale of these properties. The loss in the 2001
amount primarily reflected the loss from the sale of these properties and the
impact of only a partial year of operating results (through the dates of sale)
in 2001.

2000 COMPARED WITH 1999

Income statement comparisons of 2000 results with 1999 are affected by an
extra week of operations in 2000. The Company's 2000 fiscal year contained 53
weeks, versus 52 weeks in the 1999 fiscal year.

REVENUE

Operating revenues for the year ended December 31, 2000 increased 22.5
percent to $397.2 million from $324.3 million in 1999. The increase primarily
reflected higher advertising revenues and the contribution from The Pantagraph
acquired in January 2000, and the Suburban Journals, acquired in August 2000. In
addition, the revenue comparison was favorably affected by the extra week of
operations in 2000. On a comparable basis, excluding the results of properties
acquired for comparable non-ownership periods and the additional week in 2000,
revenues for the full year of 2000 increased 4.9 percent over 1999.

Newspaper advertising revenues increased $62.3 million, or 25.3 percent, in
2000. The increase in 2000 primarily reflected the addition of advertising
revenue from The Pantagraph and the Suburban Journals, the additional week of
operations, and higher revenue at the Post-Dispatch. At the Post-Dispatch, gains
were primarily driven by increases in national and classified advertising,
reflecting rate increases in January 2000 as well as a prior classified rate
increase in mid-1999. On a comparable basis, excluding the results of properties
acquired and the additional week in 2000, advertising revenues increased 6.1
percent in 2000, reflecting the Post-Dispatch gains as well as increases at many
of the PNI Group locations.

20

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- CONTINUED

Circulation revenues increased $6.8 million, or 9.2 percent, in 2000. The
higher circulation revenues reflected the addition of circulation revenue from
The Pantagraph.

Other publishing revenues increased $3.8 million, in 2000, primarily
reflecting higher revenues from the Company's "new media" operations and the
addition of revenue from properties acquired in 2000.

OPERATING EXPENSE

Operating expenses, excluding the St. Louis Agency adjustment, increased to
$349.9 million in 2000 from $303.1 million in 1999. 1999 operating expenses
included $26.7 million of stock option cash-outs and bonus payments to
publishing employees. Excluding these costs from 1999, the results of properties
acquired in 2000, the 53rd week of operations in 2000 and new goodwill
amortization in 2000 related to the Company's increased interest in the
Post-Dispatch, operating expenses increased 6.0 percent to $293.2 million in
2000 from $276.5 million in 1999. The increase on a comparable basis primarily
reflected higher payroll and benefit costs of $7.8 million, higher newsprint
costs of $3.2 million and higher depreciation and amortization expense of
approximately $3.2 million. A substantial portion of the increased expense was
related to investments in expanded sales staffs and online capabilities at many
of the Company's newspapers.

Equity in the earnings of the Tucson newspaper partnership increased 2.4
percent to $22.5 million in 2000 from $22.0 million in 1999. The increase in
2000 was primarily the result of the additional 53rd week of operations.

OPERATING INCOME

The Company reported operating income for fiscal 2000 of $60.4 million
compared to operating income of $18.1 million in 1999. Excluding the stock
option cash-outs and bonus payments of $26.7 million from the prior year,
operating income would have increased 34.9 percent to $60.4 million from $44.8
million. The significant increase in 2000 primarily reflected the impact of the
Company's increased interest in the results of operations of the Post-Dispatch
and contributions from The Pantagraph and the Suburban Journals to operating
income in 2000.

NON-OPERATING ITEMS

Interest income for 2000 decreased to $19.0 million from $25.4 million in
1999. The decrease reflected the lower average balance of invested funds in 2000
due to the outflow of approximately $180 million of combined cash and marketable
securities on January 11, 2000 in connection with the acquisition of The
Pantagraph and approximately $172 million on August 10, 2000 in connection with
the Journals Acquisition. The comparison also reflected the prior year inflow of
approximately $429 million of net cash in connection with the Broadcast
Transaction on March 18, 1999.

The Company reported interest expense of $16.5 million in 2000 resulting
from the $306 million borrowing by PD LLC on May 1, 2000 to fund the cash
distribution to Herald under the terms of the Operating Agreement.

The Company incurred a net realized loss on marketable securities and
investments of $2.2 million in 2000 compared with a net realized loss of
$111,000 in 1999. The 2000 loss resulted from marketable security investment
losses of $3.9 million and the $2.1 million write-down of the Company's
investment in iOwn that were partially offset by limited partnership gains of
$3.8 million. The 1999 loss resulted from marketable security investment losses
of $2.2 million, partially offset by limited partnership investment gains of
$2.1 million.

During 2000, the Company reported its equity in the losses of a new joint
venture investment of $1.7 million.

21

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- CONTINUED

The effective income tax rate from continuing operations for 2000 was 40
percent compared with a rate of 42 percent in 1999. The lower effective tax rate
in 2000 primarily resulted from lower state income taxes.

INCOME FROM CONTINUING OPERATIONS

The Company reported income from continuing operations of $34.6 million, or
$1.59 per diluted share, for the year ended December 31, 2000, compared with
$25.1 million, or $1.11 per diluted share, in 1999. The comparison is impacted
by the following items in 2000: (i) dilution from the Newspaper Transactions
that reduced 2000 earnings approximately $8.1 million, or $0.37 per diluted
share, (ii) an increase in non-operating investment losses that lowered 2000
earnings by approximately $1.2 million, or $0.06 per diluted share, and (iii)
the 53rd week that contributed approximately $900,000, or $0.04 per diluted
share, to 2000 earnings. In addition, the comparison between years is also
impacted by the 1999 stock option cash-out and bonus payments of $26.7 million
(pretax) that reduced 1999 earnings by $15.5 million, or $0.68 per diluted
share.

DISCONTINUED OPERATIONS

The Company reported income from discontinued operations of $304,000, or
$0.01 per diluted share, in 2000 compared with a loss of $23.6 million, or $1.04
per diluted share, in 1999. Discontinued operations in both 2000 and 1999
include the operating results of the publishing properties sold during 2001
(newspapers located in Troy, Ohio and Petaluma, California and the St. Louis
Internet Access Provider (ISP)) while 1999 also includes results from the
Broadcasting Business. The loss in 1999 resulted from a combination of $25.3
million of stock option cash-out and bonus payments to broadcasting employees at
the time of the Merger and a loss on extinguishment of debt of approximately $18
million (consisting of an approximately $17.2 million prepayment penalty and a
$750,000 write-off of deferred financing fees).

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2001, the Company had an unrestricted cash balance of
$193.7 million compared with a balance of unrestricted cash and marketable
securities of $194.3 million as of December 31, 2000.

At both December 31, 2001 and December 31, 2000, the Company had $306
million of outstanding debt pursuant to a loan agreement between PD LLC and a
group of institutional lenders led by Prudential Capital Group (the "Loan"). The
aggregate principal amount of the Loan is payable on April 28, 2009 and bears
interest at an annual rate of 8.05 percent.

In December 2001, the Company entered into an interest rate swap contract
to convert a portion of the Company's fixed rate debt to a variable rate. The
interest rate swap has a $50 million notional amount and matures on April 28,
2009. Under the terms of the agreement, the Company pays interest at a variable
rate based upon LIBOR plus 2.365 percent and receives interest at a fixed rate
of 8.05 percent. The floating interest rate re-prices semiannually . The impact
of the swap results in approximately 16.3 percent of the Company's long-term
debt being subject to variable interest rates. As of December 31, 2001, the fair
value of the interest rate swap represents an unrealized loss of $800,000, which
is offset by an unrealized gain of $800,000 on the related portion of the
long-term debt.

The agreements with respect to the Loan (the "Loan Agreements") contain
certain covenants and conditions including the maintenance of cash flow and
various other financial ratios, minimum net worth requirements and limitations
on the incurrence of other debt. In addition, the Loan Agreements and the
Operating Agreement require that PD LLC maintain a minimum reserve balance
consisting of cash and investments in U.S. government securities, totaling
approximately $24.8 million as of December 31, 2001. The Loan Agreements and the
Operating Agreement provide for a $3.75 million quarterly increase in the
minimum reserve balance through May 1, 2010 when the amount will total $150
million.

As of December 31, 2001, capital commitments for buildings and equipment
replacements were approximately $21.6 million. Capital expenditures for
buildings and equipment to be made by the Company in
22

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- CONTINUED

fiscal 2002 are estimated to be in the range of $25 to $30 million, which
includes an estimated $16 million for a Post-Dispatch plant expansion project.
The total cost of the Post-Dispatch plant expansion project, which is expected
to be completed in late 2002, is estimated to be approximately $17 million. In
addition, as of December 31, 2001, the Company had a capital contribution
commitment of approximately $10.8 million related to a limited partnership
investment.

In order to build a stronger, more direct relationship with the readers of
the Post-Dispatch, PD LLC has purchased a number of circulation routes from
independent carriers and dealers over the past two years and it may continue to
purchase additional routes from time to time in the future. As of December 31,
2001, PD LLC owned circulation routes covering approximately 63 percent of the
Post-Dispatch's home delivery distribution.

The Company's Board of Directors previously authorized the repurchase of up
to $100 million of the Company's outstanding capital stock. The Company's
repurchase program provides for the purchase of both common and Class B shares
in either the open market or in privately negotiated transactions. As of
December 31, 2001, the Company had repurchased under this authority 1,000,000
shares of Class B common stock and 529,004 shares of common stock for a combined
purchase price of approximately $62 million, leaving approximately $38 million
in remaining share repurchase authority.

The Company generally expects to generate sufficient cash from operations
to cover capital expenditures, working capital requirements and dividend
payments. Operating cash flows are dependent upon, among other things, the
continued acceptance of newspaper advertising at current or increased levels and
the availability of raw materials, principally newsprint.

MERGER AGREEMENT INDEMNIFICATION

Pursuant to the Merger Agreement, the Company is obligated to indemnify
Hearst-Argyle against losses related to: (i) on an after tax basis, certain tax
liabilities, including (A) any transfer tax liability attributable to the
Spin-off, (B) with certain exceptions, any tax liability of Old Pulitzer or any
subsidiary of Old Pulitzer attributable to any tax period (or portion thereof)
ending on or before the closing date of the Merger, including tax liabilities
resulting from the Spin-off, and (C) any tax liability of the Company or any
subsidiary of the Company; (ii) liabilities and obligations under any employee
benefit plans not assumed by Hearst-Argyle, and (iii) certain other matters as
set forth in the Merger Agreement.

In October 2001, the IRS formally proposed that Old Pulitzer's taxable
income for the tax year ended March 18, 1999 be increased by approximately $80.4
million based on the assertion that Old Pulitzer was required to recognize a
taxable gain in that amount as a result of the Spin-off.

Because the Company disagrees with the IRS' position and, in fact, believes
that Old Pulitzer did not realize any taxable gain in connection with the
Spin-off, the Company has contested the IRS' proposed increase in a formal
written protest filed with the Appeals Office of the IRS in January 2002. While
there can be no assurance that the Company will completely prevail in its
position, it believes that the IRS' position is not supported by the facts or
applicable legal authorities and intends to vigorously contest the IRS'
determination. It thus has not accrued any liability in connection with this
matter. If the IRS were completely successful in its proposed adjustment, the
Company's indemnification obligation would be approximately $29.3 million, plus
applicable interest, and any indemnification payment would be recorded as an
adjustment to additional paid-in capital.

PD LLC OPERATING AGREEMENT

During the first ten years of its term, PD LLC is restricted from making
distributions (except under specified circumstances), capital expenditures and
member loan repayments unless it has set aside out of its cash flow a reserve
equal to the product of $15,000,000 and the number of years since May 1, 2000,
but not in excess of $150,000,000. On May 1, 2010, Herald will have a one-time
right to require PD LLC to redeem
23

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- CONTINUED

Herald's interest in PD LLC, together with Herald's interest, if any, in another
limited liability company in which the Company is the managing member and which
is engaged in the business of delivering publications and products in the
greater St. Louis metropolitan area ("DS LLC"). The redemption price for
Herald's interest will be determined pursuant to a formula yielding an amount
which will result in the present value to May 1, 2000 of the after-tax cash
flows to Herald (based on certain assumptions) from PD LLC, including the
initial distribution and the special distribution described below, if any, and
from DS LLC, being equal to $275,000,000. In the event that PD LLC has an
increase in the tax basis of its assets as a result of Herald's recognizing
taxable income from certain transactions effected under the agreement governing
the contributions of the Company and Herald to PD LLC and the Operating
Agreement or from the transactions effected in connection with the organization
of DS LLC, Herald generally will be entitled to receive a special distribution
from PD LLC in an amount that corresponds, approximately, to the present value
after-tax benefit to the members of PD LLC of the tax basis increase. Upon the
termination of PD LLC and DS LLC, which will be on May 1, 2015 (unless Herald
exercises the redemption right described above), Herald will be entitled to the
liquidation value of its interest in PD LLC and DS LLC. The Company may purchase
Herald's interest at that time for an amount equal to what Herald would be
entitled to receive on liquidation of PD LLC and DS LLC. That amount will be
equal to the amount of its capital accounts, after allocating the gain or loss
that would result from a cash sale of PD LLC's and DS LLC's assets for their
fair market value at that time. Herald's share of such gain or loss generally
will be 5 percent, but will be reduced (but not below 1 percent) to the extent
that the present value to May 1, 2000 of the after-tax cash flows to Herald from
PD LLC and from DS LLC, including the initial distribution, the special
distribution described above, if any, and the liquidation amount (based on
certain assumptions), exceeds $325,000,000.

NEW ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 141, Business Combinations and SFAS
No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that all
business combinations be accounted for under the purchase method. The statement
further requires separate recognition of intangible assets that meet certain
criteria. The statement applies to all business combinations initiated after
June 30, 2001.

SFAS No. 142, which is effective for fiscal periods beginning after
December 15, 2001, requires that an intangible asset that is acquired shall be
initially recognized and measured based on its fair value. The statement also
provides that goodwill and other indefinite lived intangible assets should not
be amortized, but shall be tested for impairment annually, or more frequently if
circumstances indicate potential impairment, through a comparison of fair value
to its carrying amount.

The Company's preliminary evaluations indicate that no impairment reserves
will be necessary following the Company's adoption of SFAS No. 142, and that
$21.6 million of intangible asset amortization that negatively impacted 2001
earnings per diluted share from continuing operations by $0.69 will not be
present in 2002.

The Company has given early adoption to SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, in presenting the results and the
gain or loss from sale of properties sold during 2001, and, accordingly, has
reflected the results of operations and the associated gains or losses on sales
of properties in 2001 as a component of discontinued operations for all periods
presented.

In 2001, the Company recorded a pretax loss of $4.1 million related to the
sale of its daily newspaper located in Troy, Ohio and the sale of its St. Louis
Internet Service Provider (ISP) business and a pretax gain of $1.4 million
resulting from the sale of its weekly newspaper in Petaluma, California. The
operating results and related gain or loss on the sale of these properties in
2001 along with their operating results for 2000 and 1999 have been presented as
discontinued operations in accordance with SFAS No. 144 in the Company's
consolidated statements of income included in Item 8 of this Annual Report on
Form 10-K. Discontinued operations in 1999 also include the Broadcasting
Business owned by Old Pulitzer prior to the Merger,
24

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- CONTINUED

including the allocation of all long-term debt balances and related interest
expense amounts of Old Pulitzer prior to the Merger.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary raw material used in the Company's operations is newsprint,
representing 14.5 to 18.9 percent of operating expenses over the last five
years. For 2001, the Company's annual newsprint cost, including its 50 percent
share related to the operations of TNI Partners, reflected consumption of
approximately 109,000 metric tons. Based on the Company's current level of
newspaper operations, expected annual newsprint consumption for 2002 is
estimated to be in the range of 110,000 metric tons. Historically, newsprint has
been subject to significant price fluctuations from year to year, unrelated in
many cases to general economic conditions. In the last five years, the Company's
average annual cost per ton of newsprint has varied from its peak price by
approximately 25 percent. For every one-dollar change in the Company's average
annual cost per metric ton of newsprint, pre-tax income would change by
approximately $110,000, assuming annual newsprint consumption of 110,000 metric
tons. The Company attempts to obtain the best price available by combining
newsprint purchases for its different newspaper locations with those of other
newspaper companies. The Company considers its relationship with newsprint
producers to be good. The Company does not enter into derivative contracts for
newsprint.

At December 31, 2001, the Company had $306 million of outstanding debt
pursuant to the Loan. The Loan bears interest at a fixed annual rate of 8.05
percent. Consequently, if held to maturity, the Loan will not expose the Company
to market risks associated with general fluctuations in interest rates.

In December 2001, the Company entered into an interest rate swap contract
to convert a portion of the Company's fixed rate debt to a variable rate. The
interest rate swap has a $50 million notional amount and matures on April 28,
2009. Under the terms of the agreement, the Company pays interest at a variable
rate based upon LIBOR plus 2.365 percent and receives interest at a fixed rate
of 8.05 percent. The floating interest rate re-prices semiannually. The impact
of the swap results in approximately 16.3 percent of the Company's long-term
debt being subject to variable interest rates.

As of December 31, 2001, the fair value of the interest rate swap
represented an unrealized loss of $800,000, which is offset by an unrealized
gain of $800,000 on the related portion of the Company's long-term debt.

Changes in market interest rates may cause the Company to incur higher net
interest expense. For example, for every 1 percent increase in variable interest
rates beyond 8.05 percent, the Company would incur approximately $500,000 in
additional annual interest expense.

25

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following consolidated financial statements of Pulitzer Inc. and
Subsidiaries are filed as part of this Annual Report on Form 10-K. Supplementary
unaudited data with respect to the quarterly results of operations of the
Company are set forth in the Notes to Consolidated Financial Statements.

PULITZER INC. AND SUBSIDIARIES

Independent Auditors' Report

Consolidated Statements of Income for each of the Three Years in the Period
Ended December 31, 2001

Consolidated Statements of Financial Position at December 31, 2001 and
December 31, 2000

Consolidated Statements of Stockholders' Equity for each of the Three Years
in the Period Ended December 31, 2001

Consolidated Statements of Cash Flows for each of the Three Years in the
Period Ended December 31, 2001

Notes to Consolidated Financial Statements for the Three Years in the
Period Ended December 31, 2001

26

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Pulitzer Inc.:

We have audited the accompanying consolidated statements of financial
position of Pulitzer Inc. and subsidiaries (the "Company") as of December 31,
2001 and 2000, and the related consolidated statements of income, stockholders'
equity, and cash flows for each of the three years in the period ended December
31, 2001. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company at December 31,
2001 and 2000, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 2001 in conformity with
accounting principles generally accepted in the United States of America.

/s/ DELOITTE & TOUCHE LLP

Saint Louis, Missouri
February 1, 2002

27

PULITZER INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

See accompanying notes to consolidated financial statements.
28

PULITZER INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Continued)

29

PULITZER INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Concluded)

See accompanying notes to consolidated financial statements.
30

PULITZER INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Continued)
See accompanying notes to consolidated financial statements.
31

PULITZER INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Concluded)

See accompanying notes to consolidated financial statements.
32

PULITZER INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

33

PULITZER INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Concluded)

See accompanying notes to consolidated financial statements.
34

PULITZER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999

1. BASIS OF PRESENTATION

The consolidated financial statements reflect the results of Pulitzer
Inc.'s (the "Company") newspaper publishing and new media operations located in
14 markets in the United States.

On March 18, 1999, the spin-off of the newspaper publishing and related new
media businesses formerly operated by Pulitzer Publishing Company ("Old
Pulitzer") was completed with the Company commencing operations as an
independent publicly traded newspaper publishing and new media company (the
"Spin-off"). Following the Spin-off, Old Pulitzer with its remaining
broadcasting business ("Broadcasting Business") was merged with and into
Hearst-Argyle Television, Inc. ("Hearst-Argyle") in exchange for the issuance to
Old Pulitzer's stockholders of 37,096,774 shares of Hearst-Argyle's Series A
common stock (the "Merger"). The Merger and Spin-off are collectively referred
to as the "Broadcast Transaction."

As a result of the Broadcast Transaction, the Company is the continuing
entity for financial reporting purposes. Old Pulitzer's historical basis in its
newspaper publishing and related new media assets and liabilities has been
carried over to the Company. The distribution of the net liabilities of the
Broadcasting Business has been recorded as a capital contribution to the
Company. The Broadcast Transaction represents a reverse-spin transaction and,
accordingly, the Company's results of operations for periods prior to the
consummation of the Broadcast Transaction are identical to the historical
results previously reported by Old Pulitzer. Results of the Company's newspaper
publishing and related new media businesses are reported as continuing
operations in the consolidated statements of income. The results of the
Broadcasting Business prior to the Merger are reported as discontinued
operations. Additionally, sales of various properties in 2001 are also reported
as discontinued operations for all periods presented.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation -- The consolidated financial statements include the
accounts of the Company and its subsidiary companies, all of which are
wholly-owned except for the Company's 95 percent interest in the results of
operations of the St. Louis Post-Dispatch LLC. (see Note 3) All significant
intercompany transactions have been eliminated from the consolidated financial
statements.

Fiscal Year -- The Company's fiscal year ends on the last Sunday of the
calendar year, which in 2000 resulted in a 14 week fourth quarter and a 53-week
year. In 2001 and 1999, the fourth quarter was 13 weeks and the year was 52
weeks. For ease of presentation, the Company has used December 31 as the
year-end.

Cash Equivalents -- For purposes of reporting cash flows, the Company
considers all highly liquid investments purchased with an original maturity of
three months or less to be cash equivalents.

Marketable Securities -- Marketable securities consist of fixed income
securities, including, but not limited to, debt securities issued by the U.S.
government and related agencies, municipal securities, corporate securities and
various asset-backed securities. Marketable securities are recorded at fair
value with unrealized gains and losses reported, net of tax, as a component of
other comprehensive income. The basis of cost used in determining realized gains
and losses is specific identification. The fair value of all securities is
determined by quoted market prices. All of the Company's marketable securities
represent "available-for-sale" securities as defined by the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 115.

Accounts receivable -- The Company evaluates its allowances for
uncollectible trade accounts receivable based on customers' credit history,
payment trends, and other economic factors to the extent available.

Inventory Valuation -- Inventory, which consists primarily of newsprint, is
stated at the lower of cost (determined using the last-in, first-out method) or
market. If the first-in, first-out cost method had been used, inventory would
have been reduced by $75,000 at December 31, 2001 and inventory would have
increased by $726,000 at December 31, 2000. Ink and other miscellaneous supplies
are expensed as purchased.

35

PULITZER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999 -- (CONTINUED)

Property and Depreciation -- Property is recorded at cost. Depreciation is
computed using the straight-line method over the estimated useful lives of the
individual assets. Buildings are depreciated over 15 to 40 years and all other
property over lives ranging from 3 to 15 years.

Intangible Assets -- Goodwill is being amortized over a life of 40 years
while other intangible assets are being amortized over lives ranging from 4 to
23 years. In addition, the intangible asset relating to the Company's additional
minimum pension liability under SFAS No. 87 is adjusted annually, as necessary,
when a new determination of the amount of the additional minimum pension
liability is made.

Long-Lived Assets -- The Company considers the possible impairment of its
properties and intangible assets whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Management
periodically evaluates the recoverability of long-lived assets by reviewing the
current and projected cash flows of each of its properties. If a permanent
impairment were deemed to exist, any write-down would be charged to operations.
For the periods presented, there has been no impairment.

Employee Benefit Plans -- The Company and its subsidiaries have several
noncontributory defined benefit pension plans covering a significant portion of
their employees. Benefits under the plans are generally based on salary and
years of service. The Company's liability and related expense for benefits under
the plans are recorded over the service period of active employees based upon
annual actuarial calculations. Plan funding strategies are influenced by tax
regulations. Plan assets consist primarily of cash, government and corporate
bonds, and corporate equity securities.

The Company provides retiree medical and life insurance benefits under
varying postretirement plans at several of its operating locations. In addition,
the Company provides postemployment disability benefits to certain former
employee groups prior to retirement. The significant portion of these benefits
results from plans at the St. Louis Post-Dispatch (the "Post-Dispatch"). The
Company's liability and related expense for benefits under the postretirement
plans are recorded over the service period of active employees based upon annual
actuarial calculations. The Company accrues postemployment disability benefits
when it becomes probable that such benefits will be paid and when sufficient
information exists to make reasonable estimates of the amounts to be paid. All
of the Company's postretirement and postemployment benefits are principally
funded on a pay-as-you-go basis.

Income Taxes -- Deferred tax assets and liabilities are recorded for the
expected future tax consequences of events that have been included in either the
financial statements or tax returns of the Company. Under this asset and
liability approach, deferred tax assets and liabilities are determined based on
temporary differences between the financial statement and tax bases of assets
and liabilities by applying enacted statutory tax rates applicable to future
years in which the differences are expected to reverse.

Stock-Based Compensation Plans -- The Company applies the provisions of
Accounting Principles Board Opinion No. 25 ("APB 25"), Accounting for Stock
Issued to Employees, and related interpretations to account for its employee
stock option plans. As a consequence, compensation expense is not recorded by
the Company for the issuance of stock options or for shares purchased under the
employee stock purchase plans.

Earnings Per Share of Stock -- Basic earnings per share of stock is
computed using the weighted average number of common and Class B common shares
outstanding during the applicable period. Diluted earnings per share of stock is
computed using the weighted average number of common and Class B common shares
outstanding and common stock equivalents. (see Note 14)

Segment Information -- Prior to the Broadcast Transaction (see Note 1), the
Company's operations included both a publishing and broadcast segment. As a
result of the Broadcast Transaction, the broadcast segment has been presented as
discontinued operations in the consolidated financial statements. The

36

PULITZER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999 -- (CONTINUED)

Company's remaining reportable segment, publishing, aggregates its combined St.
Louis operations and Pulitzer Newspapers, Inc. operating segments.

Derivative Instruments and Hedging Activities -- In June 1998, the
Financial Accounting Standards Board issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, which after being amended by SFAS
Nos. 137 and 138, is effective for fiscal years beginning after June 15, 2000.
SFAS No. 133 establishes accounting and reporting standards for derivative
instruments including certain derivative instruments embedded in other contracts
and hedging activities. The Company recorded no transition adjustment upon
adoption of SFAS No. 133 on January 1, 2001.

In December 2001, the Company entered into an interest rate swap to convert
a portion of its fixed rate debt to a variable rate. The swap is designated as a
fair-value hedge, and the Company employs the shortcut method which results in
the offsetting of changes in the fair-value of the swap and related debt.

New Accounting Pronouncements -- In July 2001, The Financial Accounting
Standards Board issued SFAS No. 141, Business Combinations and SFAS No. 142,
Goodwill and Other Intangible Assets. SFAS No. 141 requires that all business
combinations be accounted for under the purchase method. The statement further
requires separate recognition of intangible assets that meet certain criteria.
The statement applies to all business combinations initiated after June 30,
2001.

SFAS No. 142, which is effective for fiscal periods beginning after
December 15, 2001, requires that an intangible asset that is acquired shall be
initially recognized and measured based on its fair value. The statement also
provides that goodwill and other indefinite lived intangible assets should not
be amortized, but shall be tested for impairment annually, or more frequently if
circumstances indicate potential impairment, through a comparison of fair value
to its carrying amount.

The Company's preliminary evaluations indicate that no impairment reserves
will be necessary upon implementation of SFAS No. 142 on December 31, 2001, and
that $21,600,000 of goodwill amortization that negatively impacted 2001 earnings
per diluted share from continuing operations by $0.69 will not be present in
2002.

The Company has early adopted SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets. In accordance with the provisions of SFAS No.
144, the operations and related gains and losses on properties sold in 2001 have
been presented as discontinued operations in the accompanying consolidated
statements of income.

Use of Estimates -- The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and reported amounts of
revenues and expenses during the reporting period. Actual results may differ
from those estimates. Significant estimates utilized in preparing the
accompanying consolidated financial statements include the Company's allowance
for doubtful accounts, reserves for self-insured benefit plans related to health
benefits, and pension liabilities.

Reclassifications -- Certain reclassifications have been made to the 2000
and 1999 consolidated financial statements to conform to the 2001 presentation.

3. AGENCY AGREEMENTS

On May 1, 2000, the Company and The Herald Company, Inc. ("Herald")
completed the transfer of their respective interests in the assets and
operations of the Post-Dispatch and certain related businesses to a new joint
venture (the "Venture"), known as St. Louis Post-Dispatch LLC ("PD LLC"). The
Company controls and manages PD LLC. Under the terms of the operating agreement
governing PD LLC (the
37

PULITZER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999 -- (CONTINUED)

"Operating Agreement"), the Company holds a 95 percent interest in the results
of operations of PD LLC and Herald holds a 5 percent interest. Herald's 5
percent interest is reported as "Minority Interest in Net Earnings of
Subsidiary" in the consolidated statements of income for 2001 and 2000. Also,
under the terms of the Operating Agreement, Herald received on May 1, 2000 a
cash distribution of $306,000,000 from PD LLC. This distribution was financed by
a $306,000,000 borrowing by PD LLC ("Loan") (see Note 8). The Company's entry
into the Venture was treated as a purchase for accounting purposes.

During the first ten years of its term, PD LLC is restricted from making
distributions (except under specified circumstances), capital expenditures and
member loan repayments unless it has set aside out of its cash flow a reserve
equal to the product of $15,000,000 and the number of years since May 1, 2000,
but not in excess of $150,000,000. On May 1, 2010, Herald will have a one-time
right to require PD LLC to redeem Herald's interest in PD LLC, together with
Herald's interest, if any, in another limited liability company in which the
Company is the managing member and which is engaged in the business of
delivering publications and products in the greater St. Louis metropolitan area
("DS LLC"). The redemption price for Herald's interest will be determined
pursuant to a formula yielding an amount which will result in the present value
to May 1, 2000 of the after-tax cash flows to Herald (based on certain
assumptions) from PD LLC, including the initial distribution and the special
distribution described below, if any, and from DS LLC, being equal to
$275,000,000. In the event that PD LLC has an increase in the tax basis of its
assets as a result of Herald's recognizing taxable income from certain
transactions effected under the agreement governing the contributions of the
Company and Herald to PD LLC and the Operating Agreement or from the
transactions effected in connection with the organization of DS LLC, Herald
generally will be entitled to receive a special distribution from PD LLC in an
amount that corresponds, approximately, to the present value after-tax benefit
to the members of PD LLC of the tax basis increase. Upon the termination of PD
LLC and DS LLC, which will be on May 1, 2015 (unless Herald exercises the
redemption right described above), Herald will be entitled to the liquidation
value of its interest in PD LLC and DS LLC. The Company may purchase Herald's
interest at that time for an amount equal to what Herald would be entitled to
receive on liquidation of PD LLC and DS LLC. That amount will be equal to the
amount of its capital accounts, after allocating the gain or loss that would
result from a cash sale of PD LLC's and DS LLC's assets for their fair market
value at that time. Herald's share of such gain or loss generally will be 5
percent, but will be reduced (but not below 1 percent) to the extent that the
present value to May 1, 2000 of the after-tax cash flows to Herald from PD LLC
and from DS LLC, including the initial distribution, the special distribution
described above, if any, and the liquidation amount (based on certain
assumptions), exceeds $325,000,000.

Prior to May 1, 2000, the operations of the Post-Dispatch and certain
related businesses, referred to as the "St. Louis Agency", were governed by the
St. Louis Agency Agreement dated March 1, 1961, as amended, between the Company
and Herald. Under that agreement, the Company and Herald generally shared
one-half of the operating profits and losses, as well as capital expenditures,
on a 50-50 basis. For operations prior to May 1, 2000, Herald's 50 percent share
of the St. Louis Agency profit is reported as an operating expense under the
caption "St. Louis Agency adjustment" in the accompanying consolidated
statements of income.

In Tucson, Arizona, a separate partnership, TNI Partners, ("TNI"), acting
as agent for the Arizona Daily Star (the "Star", a newspaper owned by the
Company) and the Tucson Citizen (the "Citizen", a newspaper owned by Gannett
Co., Inc.), is responsible for printing, delivery, advertising, and circulation
of the Star and the Citizen. TNI collects all of the receipts and income
relating to the Star and the Citizen and pays all operating expenses incident to
the partnership's operations and publication of the newspapers. Each newspaper
is solely responsible for its own news and editorial content. Net income or net
loss of TNI is allocated equally to the Star and the Citizen. The Company's 50
percent share of TNI's operating results is presented as a single component of
operating income in the accompanying consolidated statements of income.

38

PULITZER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999 -- (CONTINUED)

Summarized financial information for TNI is as follows:

4. DISCONTINUED OPERATIONS

In 2001, the Company recorded a pretax loss of approximately $4,100,000
related to the sale of its daily newspaper located in Troy, Ohio and the sale of
its St. Louis Internet Service Provider (ISP) business and a pretax gain of
approximately $1,400,000 resulting from the sale of its weekly newspaper in
Petaluma, California. The operating results and related gain or loss on the sale
of these properties in 2001 along with their operating results for 2000 and 1999
have been presented as discontinued operations in the accompanying consolidated
statements of income.

Discontinued operations in 1999 also include the Broadcasting Business
owned by Old Pulitzer prior to the Merger, including the allocation of all
long-term debt balances and related interest expense amounts of Old Pulitzer
prior to the Merger. The net liability balance of the Broadcasting Business as
of March 18, 1999, including the $700,000,000 of debt incurred as part of the
Broadcast Transaction, was contributed to "Additional Paid-in Capital" of the
Company at the time of the Merger.

The net income/(loss) from discontinued operations, without allocation of
any general corporate expense, is reflected in the consolidated statements of
income as "Income (Loss) from Discontinued Operations, Net of Tax" and is
summarized as follows:

39

PULITZER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999 -- (CONTINUED)

- ---------------

(a) The Company's results for 1999 reflect the operations of the Broadcast
Business only through March 18, 1999, the date of the Merger, and include
approximately $25,305,000 of stock option cash-outs and bonus payments to
employees of the broadcasting business in connection with the Merger on
March 18, 1999.

(b) On March 18, 1999, in connection with the Spin-off and Merger, Old Pulitzer
prepaid its existing long-term debt and incurred a prepayment penalty of
approximately $17,205,000. This prepayment penalty, along with the
write-off of deferred financing fees of approximately $750,000, has been
included in the results of discontinued operations for 1999.

5. ACQUISITION OF PROPERTIES

On February 1, 2001, the Company, through its Pulitzer Newspapers, Inc.
("PNI") Group, acquired in an asset purchase The Lompoc Record, a daily
newspaper located in Lompoc, California, and during the second half of 2000 and
in 2001, acquired several weekly newspapers (in separate transactions) that
complement its daily newspapers in several markets (collectively the "PNI
Acquisitions.").

On August 10, 2000, the Company acquired the assets of the Suburban
Newspapers of Greater St. Louis, LLC and the stock of The Ladue News, Inc.
(collectively the "Suburban Journals") for approximately $172,000,000, excluding
acquisition costs and a separate payment for working capital of approximately
$7,000,000 (the "Journals Acquisition"). The Suburban Journals are a group of
weekly papers and various niche publications that serve the greater St. Louis,
Missouri metropolitan area. The Company funded this acquisition with internal
cash generated from the sale of a portion of its marketable security
investments.

On January 11, 2000, the Company acquired in an asset purchase The
Pantagraph, a daily and Sunday newspaper that serves the central Illinois cities
of Bloomington and Normal, and a group of seven community newspapers known as
the Illinois Valley Press, from The Chronicle Publishing Company of San
Francisco for an aggregate of $180,000,000, excluding acquisition costs ("The
Pantagraph Acquisition"). The Company funded this acquisition with internal cash
generated from the sale of a portion of its marketable security investments.

In connection with The Pantagraph Acquisition, the Venture (See Note 3) and
the Journals Acquisition (collectively, the "Newspaper Transactions"), the
Company recorded goodwill of approximately $616,000,000.

The following supplemental unaudited pro forma information shows the
results of operations of the Company and its subsidiaries for fiscal 2000 and
1999 assuming the Newspaper Transactions and the Loan had been consummated at
the beginning of each year. The unaudited pro forma financial information is not
necessarily indicative either of results of operations that would have occurred
had the Newspaper Transactions

40

PULITZER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999 -- (CONTINUED)

and Loan occurred at the beginning of each year, or of future results of
operations (in thousands, except per share amounts).

The pro forma results of the 2001 PNI Acquisitions have not been reflected
in the above pro forma amounts because the impact was not significant to the
Company.

6. MARKETABLE SECURITIES

As of December 31, 2001, the Company had no investments classified as
available for sale securities. Investments classified as available for sale
securities at December 31, 2000 consisted of the following:

For the year ended December 31, 2001, proceeds from the sale of marketable
securities were $145,968,000 resulting in gross realized gains and losses of
$1,223,000 and $621,000, respectively. In addition, net unrealized losses of
$229,000, after tax, are included in other comprehensive income for the year
ended December 31, 2001.

For the year ended December 31, 2000, proceeds from sales of marketable
securities were $414,523,000, resulting in gross realized gains and losses of
$344,000 and $4,262,000, respectively. In addition, net unrealized gains of
$3,946,000, after tax, are included in other comprehensive income for the year
ended December 31, 2000.

41

PULITZER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999 -- (CONTINUED)

7. INTANGIBLE ASSETS

Intangible assets consist of the following:

8. FINANCING ARRANGEMENTS

In connection with the Venture (see Note 3), on May 1, 2000, PD LLC
borrowed $306,000,000 (the "Loan") from a group of institutional lenders (the
"Lenders") led by Prudential Capital Group, a division of The Prudential
Insurance Company of America. The aggregate principal amount of the Loan is
payable on April 28, 2009 and bears interest at an annual rate of 8.05 percent.
The Loan is guaranteed by the Company pursuant to a Guaranty Agreement dated as
of May 1, 2000 ("Guaranty Agreement") with the Lenders. In turn, pursuant to an
Indemnity Agreement dated as of May 1, 2000 ("Indemnity Agreement") entered into
between Herald and the Company, Herald agreed to indemnify the Company for any
payments that the Company may make under the Guaranty Agreement.

The terms of the Loan contain certain covenants and conditions including
the maintenance of cash flow and various other financial ratios, minimum net
worth requirements and limitations on the incurrence of other debt. In addition,
the Loan agreement requires that PD LLC maintain a minimum reserve balance
consisting of cash and investments in U.S. government securities, totaling
approximately $24,810,000 as of December 31, 2001. The Loan agreement provides
for a $3,750,000 quarterly increase in the minimum reserve balance until the
balance reserved reaches $150,000,000.

In December 2001, the Company entered into an interest rate swap contract
to convert a portion of the Company's fixed rate debt to a variable rate. The
interest swap has a $50,000,000 notional amount and matures on April 28, 2009.
Under the terms of the agreement, the Company pays interest at a variable rate
based upon LIBOR plus 2.365 percent and receives interest at a fixed rate of
8.05 percent. The floating interest rate re-prices quarterly. The impact of the
swap results in approximately 16.3 percent of the Company's long-term debt being
subject to variable interest rates.

As of December 31, 2001, the fair value of the interest rate swap
represented an unrealized loss of $800,000 which is offset by an unrealized gain
of $800,000 on the related portion of the long-term debt.

42

PULITZER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999 -- (CONTINUED)

9. PENSION PLANS

The pension cost components for the Company's pension plans are as follows:

The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for the pension plans with accumulated benefit obligations
in excess of plan assets were $135,103,000, $127,618,000

43

PULITZER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999 -- (CONTINUED)

and $99,829,000, respectively, at December 31, 2001 and $17,785,000, $17,573,000
and $0, respectively, at December 31, 2000.

The projected benefit obligation was determined using assumed discount
rates of 7.0, 7.5, and 7.75 percent at year-end 2001, 2000 and 1999,
respectively. The expected long-term rate of return on plan assets was 9.0
percent for 2001 and 8.5 percent for 2000 and 1999. For those plans that pay
benefits based on final compensation levels, the actuarial assumptions for
overall annual rate of increase in future salary levels was 4.0 percent for
2001, and 5.0 percent for 2000 and 1999.

Certain of the Company's employees participate in multi-employer retirement
plans sponsored by their respective unions. Amounts charged to operations,
representing the Company's required contributions to these plans in 2001, 2000
and 1999, were approximately $887,000, $952,000 and $963,000, respectively.
These amounts have been recognized as an operating expense.

The Company also sponsors an employee savings plan under Section 401(k) of
the Internal Revenue Code. This plan covers substantially all employees.
Contributions by the Company amounted to approximately $2,086,000, $1,919,000
and $1,687,000 for 2001, 2000 and 1999, respectively.

10. POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS

The net periodic postretirement benefit cost components related to
continuing operations are as follows:

The Company funds its postretirement benefit obligation on a pay-as-you-go
basis. For 2001, 2000, and 1999, the Company made payments of $5,326,000,
$4,560,000, and $4,110,000, respectively.

44

PULITZER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999 -- (CONTINUED)

For 2001 measurement purposes, health care cost trend rates of 8.5, 7.5 and
7.0 percent were assumed for indemnity plans, PPO plans and HMO plans,
respectively. For 2001, these rates were assumed to decrease gradually to 5.5
percent through the year 2011 and remain at that level thereafter. For 2000
measurement purposes, health care cost trend rates of 8.5, 7.5 and 7.0 percent
were assumed for indemnity plans, PPO plans and HMO plans, respectively. For
2000, the rates were assumed to decrease gradually to 5.5 percent through the
year 2010 and remain at that level thereafter.

Administrative costs related to indemnity plans were assumed to increase at
a constant annual rate of 6.0 percent for 2001, 2000 and 1999. The assumed
discount rate used in estimating the accumulated postretirement benefit
obligation was 7.0, 7.5 and 7.75 percent for 2001, 2000 and 1999, respectively.

Assumed health care cost trend rates have a significant effect on the
amounts reported for the postretirement health care plans. A
one-percentage-point change in assumed health care cost trend rates would have
the following effects on reported amounts for 2001:

The Company's postemployment benefit obligation, representing certain
disability benefits at the Post-Dispatch, was $3,543,000 at December 31, 2001
and $3,389,000 at December 31, 2000.

11. INCOME TAXES

Provisions for income taxes (benefits) consist of the following for
continuing operations:

45

PULITZER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999 -- (CONTINUED)

Factors causing effective tax rates to differ from the statutory Federal
income tax rate were:

In connection with the Venture (see Note 3) transaction in May 2000, the
Company recorded a net deferred tax asset of approximately $15,965,000. The
Company's deferred tax assets and liabilities, net, which have been included in
other assets in the statements of consolidated financial position, consisted of
the following:

The Company had no valuation allowance for deferred tax assets as of
year-end 2001, 2000 and 1999.

12. STOCKHOLDERS' EQUITY

Each share of the Company's common stock is entitled to one vote and each
share of Class B common stock is entitled to ten votes on all matters. As of
December 31, 2001, holders of outstanding shares of the Company's Class B common
stock represented 92.9 percent of the combined voting power of the Company, with
holders of the Company's common stock representing the balance of the voting
power. As of December 31, 2001, approximately 94.4 percent of the holders of
outstanding shares of the Company's Class B common stock representing 87.8
percent of the combined voting power have deposited their shares in a voting
trust (the "Voting Trust"). Each share of the Company's Class B common stock is
convertible into one share of the Company's common stock at the holder's option
subject to the limitations imposed by the Voting Trust on the shares of Class B
common stock deposited thereunder. The Voting Trust permits the conversion of
the Class B common stock deposited in the Voting Trust into common stock in
connection with certain permitted transfers, including, without limitation,
sales which are exempt from the registration requirements of the Securities Act
of 1933, as amended, sales which meet the volume and manner of sale requirements
of Rule 144 promulgated thereunder and sales which are made pursuant to
registered public offerings.

46

PULITZER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999 -- (CONTINUED)

The trustees generally hold all voting rights with respect to the shares of
Class B common stock subject to the Voting Trust; however, in connection with
certain matters, including any proposal for a merger, consolidation,
recapitalization or dissolution of the Company or disposition of all or
substantially all its assets, the calling of a special meeting of stockholders
and the removal of directors, the Trustees may not vote the shares deposited in
the Voting Trust except in accordance with written instructions from the holders
of the Voting Trust Certificates. The Voting Trust may be terminated with the
written consent of holders of two-thirds in interest of all outstanding Voting
Trust Certificates. Unless extended or terminated by the parties thereto, the
Voting Trust expires on March 18, 2009.

In 2001, the Company declared and paid cash dividends of $0.68 per share of
common stock and Class B common stock. In 2000, the Company declared and paid
cash dividends of $0.64 per share of common stock and Class B common stock. In
1999, the Company declared and paid cash dividends of $0.45 per share of common
stock and Class B common stock. A cash dividend of $0.15 per share of common
stock and Class B common stock was declared in December 1998 and paid to
stockholders in January 1999. This dividend represented the acceleration of the
Company's dividend historically declared in the first quarter of each fiscal
year.

On July 16, 1999, the Company's Board of Directors approved the repurchase
of up to $50,000,000 of its common stock in the open market. On May 1, 2000, the
Company announced that its Board of Directors had authorized the repurchase of
an additional $50,000,000 of its common stock. During the third quarter of 2000,
the Company's Board of Directors amended the Company's repurchase program to
provide for both the purchase of Class B shares and the purchase of shares in
privately negotiated transactions. On August 16, 2000, the Company purchased
1,000,000 shares of Class B common stock from Michael E. Pulitzer, the Company's
Chairman of the Board, for approximately $40,100,000. As of December 31, 2001,
the Company had repurchased 1,000,000 shares of Class B common stock and 529,004
shares of common stock for a combined purchase price of approximately
$62,000,000 leaving $38,000,000 in remaining stock repurchase authority. The
repurchased shares have been included in treasury stock of the Company.

13. COMMON STOCK PLANS

Since 1986, Old Pulitzer maintained employee stock option plans ("Prior
Option Plans") that provided for the issuance of incentive stock options to key
employees and outside directors. On March 18, 1999, immediately prior to the
Broadcast Transaction and pursuant to the Merger Agreement, Old Pulitzer
redeemed all outstanding stock options, whether or not vested, and terminated
the Prior Option Plans. Old Pulitzer redeemed the stock options at a cash-out
value ("Cash-Out Value") equal to the difference between the option exercise
price and the average daily closing price of Old Pulitzer common stock for the
10 trading days ending on March 16, 1999. The total Cash-Out Value amounted to
approximately $35,200,000, including $1,200,000 recorded as deferred
compensation in other long-term liabilities of Old Pulitzer. In addition to the
stock option cash-outs, bonus payments made at the time of the Broadcast
Transaction were also expensed in 1999. Total stock option cash-out and bonus
expense of approximately $52,000,000 was recorded in 1999, including
approximately $26,685,000 related to publishing employees recorded in continuing
operations and approximately $25,305,000 related to broadcasting employees
recorded in discontinued operations.

On May 12, 1999, the Company's stockholders approved the adoption of the
Pulitzer Inc. 1999 Stock Option Plan (the "Option Plan"). The Option Plan
provides for the issuance of stock options to key employees and outside
directors for the purchase of up to a maximum of 3,000,000 shares of common
stock. Under the Option Plan, options to purchase 3,000 shares of common stock
will be automatically granted to each non-employee director on the day following
each annual meeting of the Company's stockholders and will vest on the date of
the next annual meeting of the Company's stockholders. Total shares available
for issue to outside directors under this automatic grant feature are limited to
a maximum of 200,000. The issuance of all

47

PULITZER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999 -- (CONTINUED)

other options will be administered by a committee of the Board of Directors,
subject to the Option Plan's terms and conditions. Specifically, for incentive
stock option grants, the exercise price per share may not be less than the fair
market value of a share of common stock at the date of grant. In addition,
exercise periods may not exceed ten years and the minimum vesting period is
established at six months from the date of grant. Option awards to an individual
employee may not exceed 200,000 shares in a calendar year. In general, employee
option grants provide for an exercise term of ten years from the date of grant
and vest in equal installments over a three-year period.

Transactions under the 1999 Stock Option Plan are summarized as follows:

On May 12, 1999, the Company's stockholders approved the adoption of the
Pulitzer Inc. Key Employees' Restricted Stock Purchase Plan (the "Restricted
Plan"). The Restricted Plan provides that an employee may receive, at the
discretion of a committee of the Board of Directors, a grant or right to
purchase at a particular price, shares of common stock subject to restrictions
on transferability. Restricted stock vests in three or four years after the
grant date, depending upon which subsidiary the employee works for. A maximum of
500,000 shares of common stock may be granted and purchased by employees under
the Restricted Plan. Compensation expense equal to the fair market value of
common stock awards on the date of grant is

48

PULITZER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999 -- (CONTINUED)

recognized over the vesting period of the grants. Transactions under the
Restricted Plan are summarized as follows:

Additionally, under the 1999 Key Employee's Restricted Stock Purchase Plan,
the Company has granted restricted stock unit awards of 25,080, 25,000, and
28,000 for the years ended December 31, 2001, 2000, and 1999, at a price of
$48.22, $44.20 and $39.875, respectively. Compensation expense is recognized
ratably over the three-year vesting period.

As required by SFAS No. 123, Accounting for Stock Based Compensation, the
Company has estimated the fair value of its option grants by using the binomial
options pricing model with the following assumptions:

As discussed in Note 2, the Company applies the provisions of APB 25 to
account for its stock option plans. If compensation expense for the Company were
determined on the estimated fair value of the options granted consistent with
SFAS No. 123, the Company's net income and earnings per share would have been as
follows:

The Company maintains employee stock purchase plans (the "Purchase Plans")
that allow eligible employees to authorize payroll deductions for the periodic
purchase of the Company's common stock at a

49

PULITZER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999 -- (CONTINUED)

price generally equal to 85 percent of the common stock's then fair market
value. In general, all employees of the Company and its subsidiaries are
eligible to participate in the Purchase Plans following their hire date. Subject
to appropriate adjustment for stock splits and other capital changes, the
Company may sell a total of 600,000 shares of its common stock under the
Purchase Plans. Shares sold under the Purchase Plans may be either authorized
and unissued or held by the Company in its treasury. The Company sold and issued
14,080, 26,280 and 4,945 shares of common stock under the Purchase Plans for the
years ended 2001, 2000 and 1999, respectively.

14. EARNINGS PER SHARE

Weighted average shares of common and Class B common stock and common stock
equivalents used in the calculation of basic and diluted earnings per share are
summarized as follows:

Stock option equivalents included in the Diluted EPS calculation were
determined using the treasury stock method. Under the treasury stock method and
SFAS No. 128, Earnings per Share, outstanding stock options are dilutive when
the average market price of the Company's common stock exceeds the option price
during a period. In addition, proceeds from the assumed exercise of dilutive
options along with the related tax benefit are assumed to be used to repurchase
common shares at the average market price of such stock during the period.

15. COMMITMENTS AND CONTINGENCIES

At December 31, 2001, the Company and its subsidiaries had construction and
equipment commitments of approximately $21,600,000.

As of December 31, 2001, the Company had an unfunded capital contribution
commitment related to a limited partnership in which it is an investor of
approximately $10,800,000.

In October 2001, the Internal Revenue Service ("IRS") formally proposed
that Old Pulitzer's taxable income for the tax year ended March 18, 1999 be
increased by approximately $80.4 million based on the assertion that Old
Pulitzer was required to recognize a taxable gain in that amount as a result of
the Spin-off. The Company is obligated under the Merger Agreement to indemnify
Hearst-Argyle against any tax liability attributable to the Spin-off and has the
right to control any proceedings relating to the determination of such tax
liability.

The Company does not believe that Old Pulitzer realized any taxable gain in
connection with the Spin-off and has contested the IRS' proposed increase in a
formal written protest filed with the Appeals Office of the IRS in January 2002.
While there can be no assurance that the Company will completely prevail in its
position, it believes that the IRS' position is not supported by the facts or
applicable legal authorities and intends to vigorously contest the IRS'
determination. It thus has not accrued any liability in connection with this
matter. If the IRS were completely successful in its proposed adjustment, the
Company's indemnification obligation would be approximately $29.3 million, plus
applicable interest, and any indemnification payment would be recorded as an
adjustment to additional paid-in capital.

50

PULITZER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999 -- (CONTINUED)

In February, 1998, a group of independent newspaper dealers engaged in the
business of reselling the Post-Dispatch in vending machines and to retail
establishments filed suit against the Company in the Missouri Circuit Court,
Twenty-Second Judicial Circuit (St. Louis City). The court has dismissed four of
the six counts in the suit. In the remaining counts, the plaintiffs allege that
the Company's actions have tortiously interfered with their business expectancy
of being able to sell their branches and constituted malicious trespass on their
intangible property by, among other things, allegedly reducing the value of
their routes. The plaintiffs seek punitive damages with respect to the tortious
interference count and statutory double damages if they should prevail on the
malicious interference count. The plaintiffs cite as harmful acts the Company's
purchase of various home delivery routes and branches, the Company's home
subscription pricing compared to its single copy pricing, and allegedly more
favorable rates, fees and allowances that the Company provides to its carriers
and other branch dealers. The Company has denied any liability, is vigorously
defending the suit and believes that it has meritorious defenses. While the
ultimate outcome of litigation cannot be predicted with certainty, management,
based on its understanding of the facts, does not believe the ultimate
resolution of these matters will have a materially adverse effect on the
Company's consolidated financial condition. However, depending upon the period
of resolution, such effects could be material to the financial results of an
individual period.

The Company has been involved, from time to time, in various claims and
lawsuits incidental to the ordinary course of its business, including such
matters as libel, slander and defamation actions, complaints alleging
discrimination, and product distribution practices. While the ultimate outcome
of litigation cannot be predicted with certainty, management, based on its
understanding of the facts, does not believe the ultimate resolution of these
matters will have a materially adverse effect on the Company's consolidated
financial condition or results of operations.

16. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company has estimated the following fair value amounts for its
financial instruments using available market information and appropriate
valuation methodologies. However, considerable judgment is required in
interpreting market data to develop the estimates of fair value. Accordingly,
the estimates presented herein are not necessarily indicative of the amounts
that the Company could realize in a current market exchange. The use of
different market assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.

Cash and Cash Equivalents, Marketable Securities, Accounts Receivable and
Accounts Payable -- The carrying amounts of these items are a reasonable
estimate of their fair value.

Long-Term Debt and Interest Rate Swap -- Interest rates that are currently
available to the Company for issuance of debt with similar terms and remaining
maturities are used to estimate fair value for the Company's long-term debt. As
of December 31, 2001, the fair-values were:

The fair value estimates presented herein are based on pertinent
information available to management as of year-end 2001. Although management is
not aware of any facts that would significantly affect the estimated fair value
amounts, such amounts have not been comprehensively revalued for purposes of
these financial statements since that date, and current estimates of fair value
may differ from the amounts presented herein.

51

PULITZER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999 -- (CONTINUED)

17. NEWSPAPER PUBLISHING REVENUES

The Company's consolidated newspaper publishing revenues from continuing
operations consist of the following for the years ended:

18. QUARTERLY FINANCIAL DATA (UNAUDITED)

Operating results for the years ended December 31, 2001 and 2000 by
quarters are as follows:

52

PULITZER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999 -- (CONTINUED)

Earnings per share are computed independently for each of the quarters
presented. Therefore, the sum of the quarterly earnings per share may not equal
the total for the year.

* * * * * *

53

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Pulitzer Inc.:

We have audited the consolidated financial statements of Pulitzer Inc. and
its subsidiaries (the "Company") as of December 31, 2001 and 2000, and for each
of the three years in the period ended December 31, 2001, and have issued our
report thereon dated February 1, 2002; such report is included elsewhere in this
Form 10-K. Our audits also included the consolidated financial statement
schedule of Pulitzer Inc. and its subsidiaries, listed in the accompanying index
at Item 14(a)2.(ii). This financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion based on
our audits. In our opinion, such consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.

/s/ DELOITTE & TOUCHE LLP

Saint Louis, Missouri
February 1, 2002

54

SCHEDULE II
PULITZER INC. AND SUBSIDIARIES

SCHEDULE II -- VALUATION & QUALIFYING ACCOUNTS & RESERVES

FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 & 1999

- ---------------
(a) Accounts reinstated, cash recoveries.

(b) Accounts written off

(c) Amount represents:

(d) Amount includes transfer of liability to Pulitzer Inc.

(e) Amount includes a reduction of approximately $558,000 due to the Spin-off of
Broadcast operations.

55

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information set forth under the caption "Management" in the Company's
definitive Proxy Statement to be used in connection with the 2002 Annual Meeting
of Stockholders is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information set forth under the caption "Executive Compensation" in the
Company's definitive Proxy Statement to be used in connection with the 2002
Annual Meeting of Stockholders is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information set forth under the caption "Principal Stockholders" in the
Company's definitive Proxy Statement to be used in connection with the 2002
Annual Meeting of Stockholders is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information set forth under the caption "Compensation Committee
Interlocks and Insider Participation" in the Company's definitive Proxy
Statement to be used in connection with the 2002 Annual Meeting of Stockholders
is incorporated herein by reference.

56

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) DOCUMENT LIST

1. Financial Statements

The following financial statements are set forth in Part II, Item 8 of
this Annual Report.

PULITZER INC. AND SUBSIDIARIES:

(i) Independent Auditors' Report.

(ii) Consolidated Statements of Income for each of the Three Years in
the Period Ended December 31, 2001.

(iii) Consolidated Statements of Financial Position at December 31, 2001
and December 31, 2000.

(iv) Consolidated Statements of Stockholders' Equity for each of the
Three Years in the Period Ended December 31, 2001.

(v) Consolidated Statements of Cash Flows for each of the Three Years in
the Period Ended December 31, 2001.

(vi) Notes to Consolidated Financial Statements for the Three Years in
the Period Ended December 31, 2001.

2. Supplementary Data and Financial Statement Schedules

(i) Supplementary unaudited data with respect to quarterly results of
operations is set forth in Part II, Item 8 of this Annual Report.

(ii) Financial Statement Schedule II - Valuation and Qualifying Accounts
and Reserves and opinion thereon are set forth in Part II, Item 8
of this Annual Report.

All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and, therefore have
been omitted.

3. Exhibits Required by Securities and Exchange Commission Regulation S-K

(a) The following exhibits are filed as part of this Annual Report:

(b) The following exhibits are incorporated herein by reference:

- ---------------
(i) Incorporated by reference to Pulitzer Publishing Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1994.

(ii) Incorporated by reference to Pulitzer Publishing Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995.

(iii) Incorporated by reference to Pulitzer Publishing Company's Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 1996.

(iv) Incorporated by reference to Pulitzer Publishing Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996.

(v) Incorporated by reference to Pulitzer Publishing Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1997.

(vi) Incorporated by reference to Pulitzer Publishing Company's Current Report
on Form 8-K filed on January 22, 1999.

(vii) Incorporated by reference to Pulitzer Publishing Company's Registration
Statement (File No. 333-69701) on Form S-3.

(viii) Incorporated by reference to Pulitzer Inc.'s Report on Form 10 (File No.
1-14541), as amended.

(ix) Incorporated by reference to Pulitzer Publishing Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1998.

(x) Incorporated by reference to Pulitzer Inc.'s Annual Report on Form 10-K
for the fiscal year ended December 31, 1999.

(xi) Incorporated by reference to Pulitzer Inc.'s Current Report on Form 8-K
dated May 1, 2000 and filed on May 2, 2000.

(xii) Incorporated by reference to Pulitzer Inc.'s Quarterly Report on Form
10-Q for the quarterly period ended March 26, 2000.

(xiii) Incorporated by reference to Pulitzer Inc.'s Quarterly Report on Form
10-Q for the quarterly period ended June 25, 2000.

(xiv) Incorporated by reference to Pulitzer Inc.'s Annual Report on Form 10-K
for the fiscal year ended December 31, 2000.

(xv) Incorporated by reference to Pulitzer Inc.'s Quarterly Report on Form 10-Q
for the quarterly period ended July 1, 2001.

(xvi) Incorporated by reference to Pulitzer Inc.'s Quarterly Report on Form 10-Q
for the quarterly period ended September 30, 2001.

(b) REPORTS ON FORM 8-K.

The Company did not file any Current Reports on Form 8-K during the fourth
quarter of 2001.

60

SIGNATURES

Pursuant to the requirements of Section 13 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, on the 25th day of March, 2002.

PULITZER INC.

By: /s/ ROBERT C. WOODWORTH
------------------------------------
Robert C. Woodworth,
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the Registrant in
the capacities indicated on the dates indicated.

By: /s/ ALAN G. SILVERGLAT
------------------------------------
Alan G. Silverglat*
attorney-in-fact

61

PULITZER INC.

REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED

DECEMBER 31, 2001

EXHIBIT INDEX

10.40 Robert C. Woodworth Restricted Stock Unit Award dated as of
December 6, 2001

10.41 Split Dollar Life Insurance Agreement, dated as of January 24,
2002, by and between Pulitzer Inc. and Wesley R. Turner, as trustee
of The Robert C. Woodworth and Joyce A. Woodworth Survivorship
Insurance Trust.

21 Subsidiaries of Registrant

22 Independent Auditors' Consent

24 Power of Attorney