UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the quarterly period ended December 31, 2003
OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the transition period from                     to

Commission File Number 033-75156

MEDIANEWS GROUP, INC.

Registrant’s telephone number, including area code: (303) 563-6360

Indicate by check mark whether a registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities and 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.

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

INDEX TO MEDIANEWS GROUP, INC.
REPORT ON FORM 10-Q FOR THE QUARTER ENDED
DECEMBER 31, 2003

2

PART I — FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

     The information required by this item is filed as part of this Form 10-Q. See Index to Financial Information on page 7 of this Form 10-Q.

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The information required by this item is filed as part of this Form 10-Q. See Index to Financial Information on page 7 of this Form 10-Q.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK

     The information required by this item is filed as part of this Form 10-Q. See Index to Financial Information on page 7 of this Form 10-Q.

ITEM 4: CONTROLS AND PROCEDURES

     As of December 31, 2003, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer, President, and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934. Based upon that evaluation, the Chief Executive Officer, President, and Chief Financial Officer concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms. There were no changes in our internal control over financial reporting during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

     The Company’s management, including the CEO, President, and CFO, does not expect that our disclosure controls or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons or by collusion of two or more people. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

3

PART II — OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

The information required by this item is filed as part of this Form 10-Q as Note 4 of the Notes to Condensed Consolidated Financial Statements. See Index to Financial Information on page 7 of this Form 10-Q.

ITEM 2: CHANGES IN SECURITIES

     There were no changes in the rights of security holders during the quarter for which this report is filed.

ITEM 3: DEFAULTS UPON SENIOR SECURITIES

     There were no defaults upon senior securities during the quarter for which this report is filed.

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

		As of October 1, 2003, the holders of 93.1% of all outstanding shares of our Class A Common Stock acted by written consent in lieu of an annual meeting to re-elect Richard B. Scudder, William Dean Singleton, Jean L. Scudder and Howell E. Begle to our board of directors. Following the effectiveness of that action, our board of directors consisted of Richard B. Scudder, William Dean Singleton, Jean L. Scudder and Howell E. Begle.
		We solicited the consents of holders of our 8 3/4% Senior Subordinated Notes, due 2009 (which are no longer outstanding) to the adoption of certain amendments to the indenture governing those notes between us and The Bank of New York, as trustee (the “8 3/4% Indenture”), eliminating substantially all of the restrictive covenants and events of default relating to such restrictive covenants from the 8 3/4% Indenture. The holders of approximately 79% of outstanding principal amount of our 8 3/4% Senior Subordinated Notes, due 2009, gave their consent. The remaining holders withheld their consent. November 19, 2003 was the last day on which consents could be given or revoked.

ITEM 5: OTHER INFORMATION

     None.

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

      Exhibits

      See Exhibit Index for list of exhibits filed with this report.

4

PART II — OTHER INFORMATION (continued)

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K (continued)

		Reports on Form 8-K
		On November 17, 2003, we filed a Form 8-K regarding the commencement of a private placement of $300.0 million of senior subordinated notes due 2013, and the related repurchase of our $300.0 million senior subordinated notes due 2009.

5

FORWARD-LOOKING STATEMENTS

     This Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements contained herein and elsewhere in this report are based on current expectations. Such statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The terms “expect,” “anticipate,” “intend,” “believe,” and “project” and similar words or expressions are intended to identify forward-looking statements. These statements speak only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results and events to differ materially from those anticipated and should be viewed with caution. Potential risks and uncertainties that could adversely affect our ability to obtain these results, and in most instances are beyond our control, include, without limitation, the following factors: (a) increased consolidation among major retailers, bankruptcy or other events that may adversely affect business operations of major customers and depress the level of local and national advertising, (b) an economic downturn in some or all of our principal newspaper markets that may lead to decreased circulation or decreased local or national advertising, (c) a decline in general newspaper readership patterns as a result of competitive alternative media or other factors, (d) increases in newsprint costs over the level anticipated, (e) labor disputes which may cause revenue declines or increased labor costs, (f) acquisitions of new businesses or dispositions of existing businesses, (g) costs or difficulties related to the integration of businesses acquired by us may be greater than expected, (h) increases in interest or financing costs, (i) rapid technological changes and frequent new product introductions prevalent in electronic publishing, including the ongoing evolution of the Internet and (j) other unanticipated events and conditions. It is not possible to foresee or identify all such factors. We make no commitment to update any forward-looking statement or to disclose any facts, events, or circumstances after the date hereof that may affect the accuracy of any forward-looking statements.

SIGNATURES

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

	MEDIANEWS GROUP, INC.
Dated: February 17, 2004	By:	/s/Ronald A. Mayo
		Ronald A. Mayo
		Vice President, Chief Financial Officer and Duly Authorized Officer of Registrant

6

MEDIANEWS GROUP, INC.
Index to Financial Information

7

MEDIANEWS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

See notes to condensed consolidated financial statements

8

MEDIANEWS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

See notes to condensed consolidated financial statements

9

MEDIANEWS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

See notes to condensed consolidated financial statements

10

MEDIANEWS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

See notes to condensed consolidated financial statements

11

MEDIANEWS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1: Significant Accounting Policies and Other Matters

Basis of Quarterly Financial Statements

     The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements and should be read in conjunction with the consolidated financial statements and footnotes thereto included in MediaNews Group, Inc.’s (“MediaNews” or the “Company”) Annual Report on Form 10-K for the year ended June 30, 2003. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended December 31, 2003 are not necessarily indicative of the results that may be expected for future interim periods or for the year ended June 30, 2004.

Joint Operating Agencies

     A joint operating agency (“JOA”) performs the production, sales, distribution and administrative functions for two or more newspapers in the same market under the terms of a joint operating agreement. Editorial control and news at the individual newspapers, which are party to a joint operating agreement continue to be separate and outside of the related JOA. The Company, through its subsidiaries, York Newspapers, Inc., Charleston Publishing Company, Kearns-Tribune, LLC, and The Denver Post Corporation, participates in JOAs in York, Pennsylvania, Charleston, West Virginia, Salt Lake City, Utah, and Denver, Colorado, respectively. The editorial and related expenses of The Denver Post, The Salt Lake Tribune and York Dispatch are incurred by the Company outside the related JOA. The Charleston JOA, on the other hand, accounts for and pays the editorial expenses for both newspapers within the JOA. The Company controls the York JOA and accordingly consolidates its results. However, the editorial costs associated with the York Daily Record, the other newspaper in the York JOA, which are the responsibility of the JOA’s minority partner, are not included in the Company’s results.

     In July 2000, the Emerging Issues Task Force (“EITF”) reached a consensus on Issue 00-1, Balance Sheet and Income Statement Display under the Equity Method of Investments in Certain Partnerships and Other Unincorporated Joint Ventures (“EITF 00-1”), effective for periods ending after June 15, 2000, which prohibits the use of pro-rata consolidation except in the extractive and construction industries. Prior to adoption of EITF 00-1, the Company accounted for all of its JOA operations using the pro-rata consolidation method. The Company discontinued pro-rata consolidation upon adoption of EITF 00-1, effective June 30, 2000. Currently, and for all periods presented, the operating results from the Company’s unconsolidated JOAs are reported as a single net amount in the accompanying financial statements in the line item “Income from Unconsolidated JOAs.” This line item includes:

	•		The Company’s proportionate share of net income from JOAs;
	•		The amortization of subscriber lists as the subscriber lists are attributable to the Company’s earnings in the JOAs; and
	•		Editorial costs, miscellaneous publishing revenue, and other charges incurred by the Company’s subsidiaries directly attributable to the JOAs in providing editorial content and news for the Company’s newspapers published by the JOAs.

     Investments in unconsolidated JOAs are included in the consolidated balance sheet under the line item “Investment in Unconsolidated JOAs,” for the JOAs the Company does not control. (See Note 3: Joint Operating Agencies for further discussion.)

Reclassifications

     For comparability, certain prior year balances have been reclassified to conform to current reporting classifications.

Guarantees

     Through its wholly-owned subsidiary, Kearns-Tribune, LLC, the Company owns a 6.0% interest in Ponderay Newsprint Company (“Ponderay”) and is also a guarantor, on a several basis, on 6.0% of up to $125.0 million of Ponderay’s credit facility, which is due April 12, 2006. In accordance with Financial Accounting Standard Board (“FASB”) Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (“FIN No. 45”), the Company has no amounts related to the guarantee recorded in its financial statements because the guarantee existed prior

12

MEDIANEWS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1: Significant Accounting Policies and Other Matters (continued)

to and has not been modified since December 31, 2002. The guarantee arose from Ponderay’s April 12, 2000 amended and restated credit agreement that replaced a previous credit facility which had been used to finance the construction of its newsprint mill. The guarantee could be triggered by Ponderay’s failure to meet any or all of its bank covenants, at which time the Company could be liable for its portion of the guarantee. At December 31, 2003, the Company’s share of the guarantee is $5.9 million. The debt is collateralized by a deed of trust on Ponderay’s real property and a mortgage on all of Ponderay’s other assets.

Income Taxes

     The effective income tax rate varies from the federal statutory rate because of state income taxes and the non-deductibility of certain expenses.

Seasonality

     Newspaper companies tend to follow a distinct and recurring seasonal pattern, with higher advertising revenues in months containing significant events or holidays. Accordingly, the fourth calendar quarter, or the Company’s second fiscal quarter, is the Company’s strongest revenue quarter of the year. Due to generally poor weather and lack of holidays, the first calendar quarter, or the Company’s third fiscal quarter, is the Company’s weakest revenue quarter of the year.

Recently Issued Accounting Standards

     In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”) was signed into law. The Act introduces a prescription drug benefit under Medicare (Medicare Part D) as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. Two of the Company’s subsidiaries have postretirement benefit plans which offer a prescription drug benefit and therefore under the Financial Accounting Standards Board Statement No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions (“SFAS No. 106”), the plans’ accumulated postretirement benefit obligations would be required to be remeasured as a result of the Act. However, on January 12, 2004, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position on SFAS No. 106 (“FSP-SFAS No. 106”) which permits sponsors to make a one-time election to defer accounting for the effects of the Act and the disclosures related to the plans required by FASB Statement No. 132 (revised 2003), Employers’ Disclosures about Pensions and Other Postretirement Benefits (see further discussion which follows), until authoritative guidance on the accounting for the federal subsidy is issued or until certain other events that would require remeasurement occur (for example, a plan amendment, settlement or curtailment, if such event occurs subsequent to January 31, 2004, but prior to the issuance of additional authoritative guidance) at which time accounting for the Act’s effects on the plans would be required. The Company has elected to defer accounting for the effects of the Act under FSP-SFAS No. 106, and therefore the accompanying financial statements do not reflect the effects of the Act on the plans’ accumulated postretirement benefit obligations. As previously discussed, authoritative guidance on the accounting for the federal subsidy is pending, and guidance, when issued, could require the Company to change previously reported information. The Company is in the process of evaluating the economic consequences of the Act, including determining whether plans would need to be amended, but does not expect that the effects will be material to the Company’s financial position or results of operations.

     In December 2003, the FASB issued revised Statement No. 132, Employers’ Disclosures about Pensions and Other Postretirement Benefits (“SFAS No. 132”). The revised SFAS No. 132 requires additional disclosures to those in the original Statement No. 132 about the assets, obligations, cash flows and net periodic benefit cost of defined benefit pension plans and other defined benefit postretirement plans. Interim disclosures are required by the revised pronouncement for interim periods beginning after December 15, 2003 and annual disclosures are required for fiscal years ending after December 15, 2003, which for the Company is March 31, 2004 and June 30, 2004, respectively. Adoption of the provisions of revised SFAS No. 132 impacts disclosures only and will not impact the Company’s financial position or results of operations.

     In December 2003, the FASB issued a revised Interpretation No. 46 Consolidation of Variable Interest Entities (“FIN No. 46”). FIN No. 46 clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements, to only certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at

13

MEDIANEWS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1: Significant Accounting Policies and Other Matters (continued)

risk for the entity to finance its activities without additional subordinated financial support from other parties. For variable interest entities that existed prior to December 31, 2003, the effective date of FIN No. 46 for non-public entities is the beginning of the first annual reporting period beginning after December 15, 2004, which for the Company is July 1, 2005. The Company’s preliminary assessment indicates that FIN No. 46 will not have a material impact on its financial position or results of operations; however, the Company is still in the process of evaluating the revised rules under FIN No. 46.

     Effective July 1, 2003, the Company adopted FASB Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (“SFAS No. 150”), except for the provisions regarding non-controlling interests in limited-life subsidiaries. The provisions of SFAS No. 150 related to non-controlling interests in limited-life subsidiaries have been deferred by FASB for an indefinite period. The Company will evaluate the impact of the provisions related to non-controlling interests in limited-life subsidiaries when the provisions are finalized. Adoption of the other provisions of SFAS No. 150 on July 1, 2003 did not materially impact the Company’s financial position or results of operations.

NOTE 2: Comprehensive Income

     The Company’s comprehensive income consisted of the following:

NOTE 3: Joint Operating Agencies

     On January 23, 2001, MediaNews Group and E.W. Scripps Company (“Scripps”), owner of the Rocky Mountain News, completed the formation of the Denver Newspaper Agency (“DNA” or the “Denver JOA”), a partnership, under the terms of a joint operating agreement. Upon formation of DNA, MediaNews and Scripps each contributed substantially all of their operating assets used in the publication of The Denver Post and the Rocky Mountain News to DNA, while each maintained editorial control and responsibility for news and editorial costs for each of their respective newspapers. In addition to the Company’s proportionate share of income from DNA, the editorial costs, publishing related revenues, depreciation of editorial assets owned outside of the JOA, and other direct costs of The Denver Post are included in the line item “Income from Unconsolidated JOAs.”

     MediaNews’ subsidiary, Kearns-Tribune, LLC, owns the masthead of The Salt Lake Tribune and a 50% ownership interest in the Newspaper Agency Corporation (“NAC” or the “Salt Lake JOA”). NAC is the managing entity of the JOA agreement between Kearns-Tribune, LLC and the Deseret News Publishing Company. Under the terms of this JOA agreement, NAC is responsible for performing all the business functions of The Salt Lake Tribune and the Deseret Morning News, including advertising and circulation sales, production and distribution; however, NAC does not own any of the fixed assets used in its operations. Instead, each partner owns the fixed assets used in the operations of NAC as tenants in common, outside of the JOA. Therefore, the related depreciation expense is also recorded outside of the JOA. News and editorial costs related to The Salt Lake Tribune are performed separately from NAC and are the sole responsibility of Kearns-Tribune, LLC. While Kearns-Tribune, LLC owns 50% of NAC, net income of NAC is distributed 58% to Kearns-Tribune, LLC and 42% to the Deseret News Publishing Company in part because The Salt Lake Tribune has greater circulation than the Deseret Morning News, and therefore is responsible for a greater portion of the operating cash flows generated by the Salt Lake JOA. The Company records its proportionate share of the results of NAC along with the direct costs associated with the Salt Lake JOA incurred by Kearns-Tribune, LLC, consisting principally of editorial costs, publishing related revenues, amortization of intangibles, depreciation of fixed assets, and other in the line item “Income from Unconsolidated JOAs.”

14

MEDIANEWS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 3: Joint Operating Agencies (continued)

     Charleston Publishing Company, a wholly-owned subsidiary of MediaNews, owns a 50% interest in Charleston Newspapers (the “Charleston JOA”), which publishes the Charleston Gazette (morning) and Charleston Daily Mail (evening) six days a week and the Sunday Gazette-Mail, under the terms of a JOA agreement. Charleston Publishing Company also owns the rights to the masthead of the Charleston Daily Mail. The managerial responsibility for the news and editorial functions is completely separate from the JOA; accordingly, the Company is responsible for the news and editorial content of the Charleston Daily Mail. However, related editorial expenses are incurred and paid within the Charleston JOA. As a result, all editorial expenses of the Charleston JOA publications are included in the Company’s proportionate share of income from Charleston Newspapers, which is included in “Income from Unconsolidated JOAs.” Amortization of intangibles and other direct costs associated with the JOA incurred by Charleston Publishing Company are also included in “Income from Unconsolidated JOAs.”

     York Newspapers, Inc. (“YNI”), a wholly-owned consolidated subsidiary of MediaNews, participates in a JOA, with the York Daily Record, Inc. (“YDR”), under which York Newspaper Company (“YNC”) is responsible for all newspaper publishing operations, other than news and editorial, including production, sales, distribution and administration. YNC publishes The York Dispatch, a daily evening newspaper, the York Daily Record, a daily morning newspaper, and the York Sunday News. YNI has a 57.5% interest in YNC and is the controlling partner. The operations of YNC are consolidated with those of the Company, with a minority interest reflected for YDR’s interest in YNC. The operating results of YNC do not include the editorial costs, incurred outside of the JOA, associated with the publication of the York Daily Record, which is not owned by the Company.

     The following tables present (in thousands) the summarized results of the Company’s unconsolidated JOAs, on a combined basis. NAC data has been presented separately because, as of June 30, 2003, it is a significant investee of the Company determined in accordance with Rule 3-09 of Regulation S-X. The NAC and Other Unconsolidated JOA information is presented at 100%, with the other partners’ share of income from the related JOAs subsequently eliminated. The editorial costs, publishing related revenues, depreciation, amortization, and other direct costs incurred outside of the JOAs by our consolidated subsidiaries associated with The Salt Lake Tribune, The Denver Post, and the Charleston Daily Mail are included in the line “Associated Revenues and Expenses.” The minority interest associated with The Denver Post has not been reflected in the tables below.

15

MEDIANEWS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 3: Joint Operating Agencies (continued)

16

MEDIANEWS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 4: Contingent Matters

     MediaNews and Salt Lake Tribune Publishing Company (“SLTPC”) continue to be involved in litigation over SLTPC’s option to acquire the assets used in connection with the operation and publication of The Salt Lake Tribune. Since our report on Form 10-K for the year ended June 30, 2003, there have been several developments in this litigation as follows:

	•		On October 2, 2003, the United States District Court for the District of Utah (“District Court”) denied SLTPC’s motion to set aside the appraisal process and the resulting option exercise price, and vacated a stay issued on the closing period in July 2003. The District Court set a closing date of October 10, 2003 for SLTPC to exercise its option.
	•		On October 9, 2003 counsel for SLTPC sent a letter to counsel for MediaNews notifying the Company that SLTPC would not pay the $355.5 million option exercise price, and raised additional objections to the proposed closing documentation. Accordingly, no closing occurred on October 10, 2003. MediaNews subsequently filed a summary judgment motion (which has not been fully briefed and has not been decided) on the grounds that the option expired without being exercised.
	•		In a stipulation filed on October 17, 2003, which remains subject to the approval of the District Court, MediaNews, Deseret News Publishing Company and SLTPC agreed to a stay and administrative closure of the main action, pending resolution of SLTPC’s appeals (discussed below) of various issues related to the appraisal process and the option exercise price. Prior to the filing of this stipulation, on October 14, 2003, the District Court had vacated the November 3, 2003 trial date in the main litigation in light of SLTPC’s plans to appeal the appraisal and price related issues. All parties’ claims may be reinstated subsequent to SLTPC’s appeal if the parties choose. At this point, a stay of the main litigation would not include the Company’s declaratory judgment action pending before the District Court, which seeks a ruling that the individuals who control SLTPC do not have any rights as individuals (separate from their corporate entity, SLTPC) to purchase or otherwise acquire the Tribune Assets (defined as all of the assets used, held for use or usable in connection with the operation or publication of The Salt Lake Tribune). In that case, the parties await the decision of the District Court as to motions to dismiss filed by the defendants. The defendants have also filed a motion for partial summary judgment seeking to preclude the Company from making certain arguments in support of its declaratory judgment action. The Company is opposing the motion for partial summary judgment, which has not yet been fully briefed. In this same pending declaratory judgment action, the defendants filed a motion asking the District Judge to make disclosures relating to his possible recusal. This motion followed similar motions in the underlying litigation, in which the District Judge made certain disclosures and declined to recuse himself. On November 5, 2003, the defendants filed a petition for a writ of mandamus in the Tenth Circuit Court of Appeals, directing the District Judge to make additional disclosures. The court ordered MediaNews and Kearns-Tribune, LLC (a wholly-owned subsidiary of MediaNews that holds certain assets used in connection with the operation and publication of The Salt Lake Tribune) to file a response, which has been filed. The petition awaits decision.
	•		SLTPC has filed two appeals with the United States Court of Appeals for the Tenth Circuit, which have been consolidated, seeking to overturn the District Court’s decisions that the appraisal process constituted an arbitration under the Federal Arbitration Act (“FAA”), that any challenge of the $355.5 million option exercise price must be made under the procedures set forth in the FAA, and that SLTPC had not stated sufficient grounds under the FAA to overturn the $355.5 million option exercise price. The appeals are fully briefed. No date for oral argument has been set by the Tenth Circuit.

     The Company is not in a position at this time to comment on the likely outcome of this litigation. However, the Company does not believe that the litigation will have a materially adverse impact on its financial condition, results of operations, or liquidity. Approximately $0.7 million and $1.7 million was recorded in other (income) expense, net for the three and six months ended December 31, 2003, respectively, related to the cost of defending these lawsuits. The cost of defending these lawsuits has been and may continue to be substantial; however, based on the current status of this litigation, the Company believes that the future legal fees relating to this litigation will be substantially lower than the Company’s historical costs.

Other

     MediaNews sent a notice terminating its newsprint swap agreement with Mirant Americas Energy Marketing, LP (“Mirant Corporation” or “Mirant”) effective September 5, 2003. In October 2003, Mirant filed a lawsuit in U.S. Bankruptcy Court for the Northern District of Texas against the Company seeking enforcement of an automatic stay prohibiting the Company from terminating its swap agreement, seeking to hold MediaNews in civil contempt of the automatic stay provision of the bankruptcy code, seeking to assess sanctions, and seeking declaratory relief. MediaNews does not agree with Mirant’s claims and intends to vigorously defend itself in this matter. MediaNews has not recorded any liability associated with the termination of this swap, except as required by SFAS No. 133.

17

MEDIANEWS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 4: Contingent Matters (continued)

     In December 2003, the Company agreed to settle its lawsuit with Enron North America Corp. regarding a newsprint swap. Settlement under the agreement did not have a material impact on the financial condition or results of operations of the Company.

     On December 31, 2003, the Company agreed to settle its lawsuit with a former newsprint vendor for $1.4 million and entered into a three year newsprint purchase agreement to purchase 60,000 metric tons of newsprint from this vendor (a minimum of 20,000 metric tons per year) at an agreed upon adjusted index price, as a part of the settlement. The $1.4 million settlement paid in January 2004 was charged against a $2.7 million accrual established in the Company’s third quarter of fiscal year 2003 for the initial jury verdict. The difference between the damages awarded by the initial jury verdict of $2.7 million and the $1.4 million cash settlement will be relieved proportionate (on a per metric ton basis) to the Company’s newsprint purchases under the new newsprint purchase agreement, as the Company is only relieved from its remaining obligation in respect of the settlement over time as it purchases newsprint from the vendor under the purchase agreement.

     Certain claims have been made against the Company related to payments it has received from a customer currently in bankruptcy proceedings. The Company believes resolution of this matter will not have a material impact on its results of operations or financial position.

     There have been no material changes in the other contingent matters discussed in Note 11: Commitments and Contingencies of the Company’s annual report on Form 10-K for the year ended June 30, 2003.

NOTE 5: Contingent Consideration — Purchase of Original Apartment Magazine

     In conjunction with the Company’s October 1, 2002 purchase of the Original Apartment Magazine, the seller is eligible to receive an earnout of up to $6.0 million dependent on future operating performance. Effective September 30, 2003, the seller earned $2.3 million of the earnout, which was paid in November 2003. The $2.3 million earnout payment has been recorded as an adjustment to goodwill.

NOTE 6: Long-Term Debt

     On November 25, 2003, the Company completed the sale of $300.0 million of 6 7/8% Senior Subordinated Notes due 2013 (or “6 7/8% Notes”) in a private placement. The Company applied the net proceeds of $291.9 million from the sale of the 6 7/8% Notes and other available funds to repurchase all of its outstanding $300.0 million 8 3/4% Senior Subordinated Notes due 2009 (“8 3/4% Notes”). The Company paid $9.4 million in premiums and related costs to repurchase the 8 3/4% Notes. The repurchase premiums, net of unamortized original issue premiums, are included in “other (income) expense, net.” Proceeds from the sale of the 6 7/8% Notes were reduced by an original issue discount of $2.6 million and debt issuance costs of $5.5 million. The Company has reduced the principal amount of the 6 7/8% Notes by the amount of the original issue discount and is amortizing the discount as a component of interest expense using the effective interest method. The debt issuance costs have been capitalized as a deferred charge, and are being amortized on a straight-line basis over the term of the 6 7/8% Notes as a component of amortization expense.

     On December 30, 2003, the Company refinanced its former bank credit facility, which at the time of its replacement had provided for borrowings of up to $485.0 million. The new bank credit facility provides for borrowings of up to $600.0 million, consisting of a $350.0 million revolving credit facility and a $250.0 million “term loan B” facility. The final maturity of the revolving credit facility is December 30, 2009, and the final maturity of the term loan B facility is December 30, 2010. The new bank credit facility is guaranteed by the Company’s subsidiaries (with certain exceptions). Borrowings under the new credit facility bear interest at rates based upon, at the Company’s option, Eurodollar or prime rates plus a spread based on the Company’s leverage ratio. On the revolver portion of the new credit facility, Eurodollar borrowing margins vary from 1.125% to 2.00% and prime borrowing margins vary from 0.125% to 1.00%. On the term loan B facility, Eurodollar borrowing margins vary from 1.75% to 2.00% and prime borrowing margins vary from 0.75% to 1.00%. At December 31, 2003, borrowing margins on the revolver portion of the new credit facility were set at 1.75% and 0.75% for the Eurodollar and prime borrowings, respectively; borrowing margins on the term loan B facility were set at 2.00% and 1.00%, respectively, for the Eurodollar and prime borrowings. In addition to interest, the Company pays an annual commitment fee of 0.25% to 0.375% on the unused portion of the commitment based on the Company’s leverage ratio. The annual commitment fee is currently set at 0.375%. Term loan “B” requires quarterly principal payments as follows: $0.6 million beginning in March 2004 through December 2009 and increases to $58.8 million beginning in March 2010 through December 2010. Availability under the

18

MEDIANEWS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 6: Long-Term Debt (continued)

revolving credit facility is permanently reduced by $100.0 million in December 2008. At December 31, 2003, the balance outstanding under the revolving credit portion of the bank credit agreement and term loan “B” was $123.2 million and $250.0 million, respectively. The Company incurred debt issuance costs of $3.8 million related to the $600.0 million new bank credit facility. These debt issuance costs have been capitalized as a deferred charge, and are being amortized on a straight-line basis over the term of the new bank credit facility as a component of amortization expense.

     In January 1998 the Company entered into an option agreement in association with the acquisition financing related to one of its newspapers. The option entitles the holder to purchase the assets used in the publication of one of the Company’s newspaper properties, which the option holder can exercise or put to the Company based on a predetermined formula anytime after January 31, 2003. The option repurchase price is currently valued at approximately $16.0 million, and is recorded as a component of other long-term liabilities. If the option were put to the Company, the Company expects to fund the payment with available borrowings from its bank credit facility. As a result, in accordance with SFAS No. 6, Classification of Short-Term Obligations Expected to be Refinanced, the option repurchase price remains classified in the Company’s balance sheet as long-term.

     Maturities of long-term debt as of December 31, 2003, for the five fiscal years ending June 30, 2008 (except for June 30, 2004 which is only for the six months ended) and thereafter are shown below (in thousands):

     The table above does not include capital leases obligations of $6.9 million.

NOTE 7: Subsequent Events

     In January 2004, the Company, through its subsidiary, West Coast MediaNews, LLC, purchased two weekly newspapers; the Grunion Gazette and Downtown Gazette, both published in Long Beach, California. The Company also owns and operates the Press-Telegram a daily newspaper published in Long Beach. The purchase was not material to the Company’s financial position or results of operations.

     On January 26, 2004, the Company completed the sale of $150.0 million of 6 3/8% Senior Subordinated Notes due 2014 (or “6 3/8% Notes”) in a private placement. The Company intends to use the net proceeds of the offering, together with cash on hand and borrowings under the new bank credit facility to repurchase (by tender offer, in the open market or otherwise), no later than August 1, 2004, all of its outstanding $200.0 million aggregate principal amount 8 5/8% Senior Subordinated Notes due 2011. Pending such use, the Company used the net proceeds of this offering to reduce borrowings under the revolving credit portion of the new bank credit facility to zero. (See Note 6 for further discussion of the Company’s new bank credit facility).

19

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Operating Results

     We have provided below certain summary historical financial data for the three and six months ended December 31, 2003 and 2002, including the percentage change between periods. For comparability, certain prior year balances have been reclassified to conform to current reporting classifications.

20

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Summary Supplemental Non-GAAP Financial Data

     Joint operating agencies, or JOAs, represent an operating structure that is unique to the newspaper industry. Prior to EITF 00-1, which eliminated the use of pro-rata consolidation except in the extractive and construction industries, we reported the results of our JOA interests on a pro-rata consolidated basis. Under this method, we consolidated, on a line-item basis, our proportionate share of the JOAs’ operations. Although pro-rata consolidation is no longer considered an acceptable method for our financial reporting under GAAP, we believe it provides a meaningful presentation of the results of our operations and the amount of operating cash flow available to the Company to meet debt service and capital expenditure requirements. Our JOA agreements do not restrict cash distributions to the owners and in general our JOAs make monthly or quarterly distributions. We use pro-rata consolidation to internally evaluate our performance and present it here because our Bank Credit Agreement and our publicly traded notes define cash flows (Adjusted EBITDA and Adjusted EBITDA Available to Company) from operations for covenant purposes using pro-rata consolidation. We also believe financial analysts and investors use the pro-rata consolidation and the resulting Adjusted EBITDA, combined with capital spending requirements, and leverage analysis to evaluate our performance. This information should be used in conjunction with GAAP performance measures in order to evaluate our overall prospects and performance. Net income determined using pro-rata consolidation is identical to net income determined under GAAP.

     In the table below, we have presented the results of operations of our JOAs using pro-rata consolidation. Our JOAs include York Newspaper Company, Charleston Newspapers, Denver Newspaper Agency, and the Newspaper Agency Corporation (Salt Lake City). See Notes 1 and 3 to the condensed consolidated financial statements for additional discussion of the GAAP accounting for our JOAs. For comparability, certain prior year balances have been reclassified to conform to current reporting classifications.

THE INFORMATION IN THE FOLLOWING TABLE IS NOT PRESENTED IN ACCORDANCE WITH
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND DOES NOT COMPLY WITH ARTICLE 11
OF REGULATION S-X FOR PRO FORMA FINANCIAL DATA

21

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION

Critical Accounting Policies

     The preparation of financial statements in accordance with generally accepted accounting principles at times requires the use of estimates and assumptions. We make our estimates, based on historical experience, actuarial studies and other assumptions, as appropriate, to assess the carrying values of assets and liabilities and disclosure of contingent matters. We re-evaluate our estimates on an ongoing basis. Actual results could differ from these estimates. Critical accounting policies for us include revenue recognition; accounts receivable allowances; recoverability of our long-lived assets, including goodwill and other intangible assets, which are based on such factors as estimated future cash flows and current fair value estimates; pension and retiree medical benefits, which require the use of various estimates concerning the work force, interest rates, plan investment return, and involve the use of advice from consulting actuaries. Our accounting for federal and state income taxes is sensitive to interpretation of various laws and regulations and the valuations of deferred tax assets. The notes to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended June 30, 2003 contain a more complete discussion of our significant accounting policies.

     Advertising revenue is earned and recognized when advertisements are published, inserted, aired or displayed and are net of provisions for estimated rebates, credit and rate adjustments and discounts. Circulation revenue includes home delivery subscription revenue, single copy and third party sales. Single copy revenue is earned and recognized based on the date the publication is delivered to the single copy outlet, net of provisions for returns. Home delivery subscription revenue is earned and recognized when the newspaper is delivered to the customer or sold to a third party. Amounts received in advance of an advertisement or newspaper delivery are deferred and recorded on the balance sheet as a current liability (“Unearned Income”) to be recognized into income when the revenue has been earned.

     Our investments in unconsolidated JOAs are included in the consolidated balance sheet under the line item “Investment in Unconsolidated JOAs,” for the JOAs we do not control. The operating results of our unconsolidated JOAs are reported as a single net amount, in the accompanying financial statements in the line item “Income from Unconsolidated JOAs.” This line item includes:

	•		Our proportionate share of net income from JOAs;
	•		The amortization of subscriber lists created by the original purchase by us of the JOA interest as the subscriber lists are attributable to our earnings in the JOAs; and
	•		Editorial costs, miscellaneous publishing revenue, and other charges incurred by our wholly-owned subsidiaries directly attributable to providing editorial content and news for our newspapers published by the JOAs.

Comparison of the Three and Six Months Ended December 31, 2003 and 2002

     Certain transactions in fiscal year 2003 had an impact on the comparisons of our results for the three and six months ended December 31, 2003 and 2002. Acquisition transactions that affect comparisons include the California Newspapers Partnership’s October 1, 2002 purchases of The Reporter in Vacaville, California and the Original Apartment Magazine in southern California and the January 31, 2003 purchase of the Paradise Post in Paradise, California. In addition to these acquisition transactions, comparisons between the periods ended December 31, 2003 and 2002 are also affected by the formation of the Texas-New Mexico Newspapers Partnership effective March 3, 2003, after which we no longer consolidate the results of the New Mexico newspaper properties that we contributed to the partnership. Our investment in the Texas-New Mexico Newspapers Partnership is accounted for under the equity method of accounting and the partnership’s results are included in “Equity Investment Income, Net.”

     Newspaper companies tend to follow a distinct and recurring seasonal pattern, with higher advertising revenues in months containing significant events or holidays. Accordingly, the fourth calendar quarter, or the Company’s second fiscal quarter, is the Company’s strongest revenue quarter of the year. Due to generally poor weather and lack of holidays, the first calendar quarter, or the Company’s third fiscal quarter, is the Company’s weakest revenue quarter of the year.

Revenues

     Revenues for the three and six month periods ended December 31, 2003 were $195.6 million and $380.7 million, respectively, as compared to $195.0 million and $374.3 million, respectively, for the same periods in the prior fiscal year. The change represents an increase of $0.6 million, or 0.3% and $6.4 million, or 1.7%, for the three and six month periods ending December 31, 2003, respectively, as compared to the same periods in the prior fiscal year. On a same newspaper basis (after adjusting for the

22

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION

Comparison of the Three and Six Months Ended December 31, 2003 and 2002 (continued)

aforementioned fiscal year 2003 transactions), the following changes occurred in our significant revenue categories between the three and six month periods ended December 31, 2003 and 2002.

     Advertising Revenues. Advertising revenues increased by approximately 1.0% and 0.8%, respectively, for the three and six month periods ended December 31, 2003, as compared to the same periods in prior fiscal year. The increase in advertising revenue was due principally to increases in national and preprint advertising, offset in part by a decrease in classified advertising. Classified employment advertising continues to experience declines at the majority of our newspapers, due to the economic slowdown that has been experienced throughout the United States. Our newspapers in the San Francisco Bay Area market have been particularly hard hit by losses in employment advertising. We also experienced small declines in classified automotive advertising.

     Circulation Revenues. Circulation revenues decreased by 2.2% and 2.0%, respectively, for the three and six month periods ended December 31, 2003, as compared to the same periods in prior fiscal year as we have continued to grow circulation in a slow economy by offering discounts to acquire new subscribers with long-term orders. The loss in revenue from discounting long-term orders is generally offset with cost savings from writing fewer new circulation orders as a result of this strategy.

     Other Revenues. Other revenues increased 22.9% and 19.4%, respectively, for the three and six month periods ended December 31, 2003, as compared to the same periods in prior fiscal year in part due to our obtaining new commercial printing contracts in northern California. Also contributing to the increase were revenues from our Internet operations, which increased 36.7% and 34.2%, or $1.2 million and $2.2 million, respectively, for the three and six month periods ended December 31, 2003 as compared to the same periods in prior fiscal year as a result of the continued strong market acceptance of the combined print and online packages that we offer to our advertisers and increases in our online employment revenue.

Income from Unconsolidated JOAs

     Income from unconsolidated JOAs represents (1) our share of the net income from our unconsolidated JOA operations, which includes Charleston Newspapers, the Denver Newspaper Agency (“DNA”), and the Newspaper Agency Corporation (“NAC”) in Salt Lake City; (2) the amortization of subscriber lists created by the original purchase by us; and (3) editorial costs, miscellaneous publishing revenue and other charges incurred by our subsidiaries that are directly attributable to providing editorial content and news for our newspapers published by the JOAs. Income from unconsolidated JOAs for the three and six month periods ended December 31, 2003 was $11.0 million and $15.7 million, respectively, as compared to $10.9 million and $15.1 million for the same periods in prior fiscal year. The increase was due primarily to the improved operating results at the Denver Newspaper Agency and the Newspaper Agency Corporation during the three and six month periods ended December 31, 2003, as compared to the same periods of the prior fiscal year. The Denver Newspaper Agency prior year results included a one-time non-operating gain of approximately $3.8 million related to the sale of its office building. The improved operating results at the Denver Newspaper Agency and the Newspaper Agency Corporation were partially offset by a small decline in results at Charleston Newspapers.

Cost of Sales

     Cost of sales for the three and six month periods ended December 31, 2003 were $59.0 million and $117.2 million, respectively, as compared to $56.5 million and $109.6 million for the same periods in prior fiscal year. The change represents an increase of $2.5 million, or 4.5%, and $7.6 million, or 7.0%, respectively. The aforementioned transactions in fiscal year 2003 had the net impact of increasing cost of sales by $0.2 million and $2.1 million for the three and six month periods ended December 31, 2003, as compared to the same periods in prior fiscal year. Excluding the aforementioned transactions, cost of sales increased 4.4% and 5.3%, respectively. The current year increase in cost of sales was due in part to a small increase in newsprint consumption of 0.1% and 2.8% for the three and six month periods ended December 31, 2003, respectively, as compared to the same periods in prior fiscal year. Also contributing to the increase was an 13.4% and 11.8% increase for the three and six month periods ended December 31, 2003, respectively, in our average price per metric ton of newsprint consumed as compared to the same periods in prior fiscal year. Our average price was approximately $482 and $475 per metric ton for the three and six months ended of fiscal year 2004, respectively, as compared to $425 for the same periods in fiscal year 2003.

23

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION

Comparison of the Three and Six Months Ended December 31, 2003 and 2002 (continued)

Selling, General and Administrative

     Selling, general and administrative (“SG&A”) expense for the three and six month periods ended December 31, 2003 was $88.4 million and $178.4 million, respectively, as compared to $87.1 million and $172.0 million for the same periods in prior fiscal year. The change represents an increase of $1.3 million, or 1.5% and $6.4 million or 3.7%, respectively. The aforementioned transactions in fiscal year 2003 had the net effect of impacting SG&A by ($0.4) million and $2.1 million for the three and six month periods ended December 31, 2003, as compared to the same periods in prior fiscal year. Excluding the aforementioned transactions, SG&A increased 1.9% and 2.6%, respectively. The current year increase is primarily the result of large increases in health care costs and retirement benefits which were offset in part by cost savings in other areas.

Interest Expense

     Interest expense for the three and six month periods ended December 31, 2003 was $14.0 million and $28.1 million, respectively, as compared to $16.5 million and $33.5 million, for the same periods in prior fiscal year. The change represents a decrease of $2.5 million, or 15.0%, and $5.4 million, or 16.1%, respectively. The decrease in interest expense was the result of a decrease in average debt outstanding due to debt paydowns, net of acquisitions, in fiscal year 2003, and continued paydowns in fiscal year 2004, as well as a reduction in the weighted average cost of debt in fiscal year 2004 compared to fiscal year 2003. The lower weighted average cost of debt was a result of lower short-term interest rates, the June 2003 refinancing of our 9.0% Subordinated Promissory Note with a bank term loan, and to a lesser extent the November 2003 refinancing of our 8 3/4% Senior Subordinated Notes due 2009 with our 6 7/8% Senior Subordinated Notes due 2013. For the three month period ended December 31, 2003, our average debt outstanding decreased $54.2 million, or 5.6%, and our weighted average interest rate decreased 73 basis points as compared to the same period in prior year. For the six month period ended December 31, 2003, our average debt outstanding decreased $62.7 million, or 6.5% and our weighted average interest rate decreased 74 basis points as compared to the same period in prior year. Interest expense was also impacted by net settlements related to our interest rate swap agreements. The net settlements of our interest rate swap agreements had the effect of decreasing interest expense by $0.9 million and $1.8 million for the three and six month periods ended December 31, 2003, respectively, as compared to the same periods in the prior year when our interest rate swaps decreased interest expense by $0.6 million and $1.0 million.

Other (Income) Expense, Net

     Other (income) expense, net for the three and six month periods ended December 31, 2003 was $10.1 million and $14.2 million, respectively, as compared to $3.4 million and $1.7 million for the same periods in prior fiscal year. We include in other (income) expense, net costs which are not related to ongoing operations. The charges incurred for the three and six month periods ended December 31, 2003, respectively, relate to a charge of $9.2 million (for both the three and six months periods) for the repurchase premiums, net of unamortized original issue premiums, associated with the early redemption of our 8 3/4% Senior Subordinated Notes due 2009, litigation expense of $0.7 million and $1.7 million associated with the acquisition of Kearns-Tribune, LLC (Salt Lake City), $1.0 million and $0.8 million related to the ongoing accretion of the cost to repurchase an option held by a third party to acquire one of our newspapers, $0.3 million and $1.0 million in costs associated with our unsuccessful bid for Freedom Communications, Inc., $(1.1) million and $0.8 million related to hedging activities, which did not qualify for hedge accounting under SFAS No. 133 and for the six months ended December 31, 2003, a net $0.7 million for various other costs not related to ongoing operations (for the three months ended, various other costs net to an immaterial amount and no amounts were individually significant).

Net Income

     We reported net income for the three and six month periods ended December 31, 2003 of $10.0 million and $14.3 million, respectively, as compared to net income of $12.2 million and $19.3 million for the same periods in prior fiscal year. In addition to the changes described above, net income was impacted by a $0.1 million and $0.4 million decrease in minority interest expense, respectively, for the three and six month periods ended December 31, 2003 as compared to the same periods in the prior fiscal year. Also impacting net income was a $1.0 million and $3.0 million decrease in income tax expense, respectively, for the three and six month periods ended December 31, 2003 as compared to the same periods in the prior fiscal year as a result of a decrease in income before taxes. Our effective tax rate was 40.5% and 40.4%, respectively, for the three and six months ended December 31, 2003, as compared to 39.0% and 39.6% for the same periods in the prior fiscal year.

24

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION

Liquidity and Capital Resources

     Our sources of liquidity are existing cash and other working capital, cash flows provided from operating activities, distributions from JOAs and the borrowing capacity under our bank credit facility. Our operations, consistent with the newspaper industry, require little investment in inventory, as less than 30 days of newsprint is generally maintained on hand. From time to time, we increase our newsprint inventories in anticipation of price increases. In the fourth quarter of our fiscal year 2003 and continuing into the first quarter of fiscal year 2004, we built newsprint inventories to delay the impact to us of an announced price increase. In general, our receivables have been collected on a timely basis.

     Net cash flows from operating activities were approximately $11.7 million and $18.2 million, respectively, for the six months ended December 31, 2003 and December 31, 2002, respectively. The decrease was primarily the result of the impact of the formation of the Texas-New Mexico Newspapers Partnership, whereby we discontinued consolidating our New Mexico operations (described earlier). Also, contributing to the change was a decrease in working capital, due to the changes described above in revenue, cost of sales and SG&A. These decreases were offset in part by the aforementioned fiscal year 2003 acquisitions.

     Net cash flows from investing activities were $17.9 million and $10.8 million, respectively, for the six months ended December 31, 2003 and 2002. The following items caused the majority of the change: a $5.2 million increase in distributions from equity investments, primarily related to distributions from the Texas-New Mexico Newspaper Partnership formed in March 2003; net cash used for business acquisitions for the six months ended December 31, 2003 was $19.4 million less than that of the corresponding period of the prior year; a $15.9 million increase in capital expenditures ($14.4 million of which was for the purchase of an airplane); and a $3.0 million decrease in distributions from unconsolidated JOAs due to prior year’s distribution from the Denver JOA including a distribution related to the sale of its office building.

     Net cash flows from financing activities were $(30.3) million and $(25.7) million for the six months ended December 31, 2003 and 2002, respectively. The activity for the six months ended December 31, 2003 includes $291.9 million of net proceeds from the issuance of $300.0 million of our 6 7/8% Senior Subordinated Notes due 2013, which were used along with available borrowings to repurchase all of our outstanding $300.0 million 8 3/4% Senior Subordinated Notes due 2009, for $309.4 million (including $9.4 million of repurchase premiums) and the refinancing of our bank credit facility. Prior year’s net paydown consisted primarily of normal borrowings and paydowns on long-term debt, as well as net borrowings to finance our second quarter fiscal year 2003 acquisitions in California. See “Liquidity” for further discussion of the issuance of the $300.0 million 6 7/8% Senior Subordinated Notes due 2013 and repurchase of our $300.0 million 8 3/4% Senior Subordinated Notes due 2009.

Liquidity

     On December 30, 2003, we refinanced our former bank credit facility, which at the time of its replacement had provided for borrowings of up to $485.0 million. Our new bank credit facility provides for borrowings of up to $600.0 million, consisting of a $350.0 million revolving credit facility and a $250.0 million “term loan B” facility. Availability under the revolving credit facility is permanently reduced by $100.0 million in December 2008. The final maturity of the revolving facility is December 30, 2009, and the final maturity of the term loan B facility is December 30, 2010. The new bank credit facility is guaranteed by the Company’s subsidiaries (with certain exceptions). Cash flows from operations for the next twelve months will be impacted by scheduled quarterly principal payments of $0.625 million under term loan “B” of our existing bank credit facility, which we intend to pay from operating cash flows. At December 31, 2003, the balance outstanding under the revolving credit portion of our credit agreement and term loan “B” was $123.2 million and $250.0 million, respectively. As of December 31, 2003, we had $221.1 million available for future borrowings under the revolver portion of our new bank credit facility, net of $5.7 million in outstanding letters of credit. See discussion of January 26, 2004 sale of 6 3/8% Senior Subordinated Notes below.

     On January 26, 2004, we completed the sale of $150.0 million of our 6 3/8% Senior Subordinated Notes due 2014 (or “6 3/8% Notes”) in a private placement. We intend to use the net proceeds of the offering together with cash on hand and borrowings under the new bank credit facility to purchase (by tender offer, in the open market or otherwise), no later than August 1, 2004, all of our outstanding $200.0 million aggregate principal amount 8 5/8% Senior Subordinated Notes due 2011 (“8 5/8% Notes”). Pending such repurchase, we used the net proceeds of this offering to reduce our borrowings under the revolving credit portion of our new bank credit facility to zero. As a result, we are currently accumulating cash. We expect to use the accumulated cash in the future to fund the repurchase of our 8 5/8% Notes, and for other general corporate purposes.

25

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION

Liquidity (continued)

     In January 1998, we entered into an option agreement in association with the acquisition financing related to one of our newspapers. The option entitles the holder to purchase the assets used in the publication of one of our newspaper properties, which the option holder can exercise or put to us based on a predetermined formula anytime after January 31, 2003. The option repurchase price is currently valued at approximately $16.0 million, and is recorded as a component of other long-term liabilities. If the option were put to us, we expect to fund the payment with available borrowings from our bank credit facility. As a result, in accordance with SFAS No. 6, Classification of Short-Term Obligations Expected to be Refinanced, the option repurchase price remains classified in our balance sheet as long-term.

     We are currently considering various strategic alternatives for our investment in Charleston Newspapers. Such strategic alternatives may include the sale of our interest in Charleston Newspapers, or other transactions that would increase or decrease our ownership interest in Charleston Newspapers.

     We have a call/put agreement under which our wholly-owned subsidiary York Newspapers, Inc. (“YNI”) can purchase our minority partner’s, York Daily Record Inc. (“YDR”), 42.5% interest in York Newspaper Company (“YNC”), or YDR can put its interest in YNC to YNI. The base call and put price is $32.0 million and $25.0 million, respectively, and is adjusted annually based on changes in the consumer price index (not to exceed 2.5%). The call option became exercisable on January 1, 2004 and expires on January 1, 2005. The put may be exercised at any time after the expiration of the call through June 30, 2008. We are currently evaluating our option to call YDR’s interest in YNC. No amounts are recorded in our financial statements related to this call/put agreement.

     The Denver Post Shareholder Agreement provides Media General and us with a put and a call option, respectively, on Media General’s 20% interest in The Denver Post Corporation. Media General’s put is currently exercisable and expires June 30, 2004. Our call option can be exercised beginning July 1, 2004 and expires June 30, 2005. The price of the put and call, if or when they are exercised, is based on the appraised fair market value of the Denver Post Corporation, less Permitted Debt of The Denver Post Corporation as defined in the Denver Post Shareholder Agreement. We have one year to close on the purchase from the date of any put notice. No amounts are recorded in our financial statements related to the put or call option. Media General has not exercised its put, and we are currently evaluating our option to call Media General’s 20% interest in The Denver Post Corporation once it becomes exercisable on July 1, 2004.

     Our ability to service our debt, fund planned capital expenditures, and repurchase or refinance our indebtedness will depend on our ability to generate operating cash flows in the future. Based on our current level of operations, we believe our cash flow from operations, available cash and available borrowings under our bank credit facility will be adequate to meet our future liquidity needs for at least the next twelve months.

Off-Balance Sheet Arrangements and Contractual Obligations

     Our various contractual obligations and funding commitments have changed as more fully described in Note 6: Long-Term Debt of our notes to the condensed consolidated financial statements. In addition, subsequent to December 31, 2003, we entered into an agreement to purchase 60,000 metric tons of newsprint over the next three years (a minimum of 20,000 metric tons per year) at an agreed upon adjusted index price in conjunction with the settlement of a lawsuit with one of our newsprint vendors (as more fully described in Note 4: Contingent Matters of our notes to the condensed consolidated financial statements).

     Our off-balance sheet arrangements have not materially changed from the disclosure made in our annual report on Form 10-K for the year ended June 30, 2003.

26

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION

Capital Expenditures

Near Term Outlook

     Newsprint Prices.

     In January 2004, newsprint suppliers announced a $50 per metric ton price increase to be effective February 1, 2004. The February 1 announced increase was the fourth during the last eighteen months. Of the first three announced increases, only $85 per metric ton of the proposed total of $150 per metric ton took hold. We are uncertain as to whether all or a portion of the January 2004 increase will be implemented; however, we are not currently paying any of the increase. North American newsprint suppliers continue to take downtime and close newsprint mills in an attempt to more closely match supply with the demand. The January 2004 RISI (Resource Information Systems, Inc.) price index for 30 pound newsprint was $515 per metric ton compared to $465 in January 2003.

Recently Issued Accounting Standards

     See Note 1: Recently Issued Accounting Standards of our notes to the condensed consolidated financial statements for further discussion.

27

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION

Reconciliation of GAAP and Non-GAAP Financial Information

     The following tables have been provided to reconcile the Non-GAAP financial information (Adjusted EBITDA and Pro-Rata Consolidation Income Statement Data) presented under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Operating Results” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary Supplemental Non-GAAP Financial Data” of this Form 10-Q to their most directly comparable GAAP measures (Cash Flows from Operating Activities and GAAP Income Statement Data).

     Reconciliation of Cash Flows from Operating Activities (GAAP measure) to Adjusted EBITDA (non-GAAP measure).

(a)		Non-GAAP Financial Data. Adjusted EBITDA and Adjusted EBITDA Available to Company are not measures of performance recognized under GAAP. However, we believe that they are indicators and measurements of our leverage capacity and debt service ability. Adjusted EBITDA and Adjusted EBITDA Available to Company should not be considered as an alternative to measure profitability, liquidity, or performance, nor should they be considered an alternative to net income, cash flows generated by operating, investing or financing activities, or other financial statement data presented in our condensed consolidated financial statements. Adjusted EBITDA is calculated by deducting cost of sales and SG&A expense from total revenues. Adjusted EBITDA Available to Company is calculated by: (i) reducing Adjusted EBITDA by the minorities’ interest in the Adjusted EBITDA generated from the California Newspapers Partnership, York Newspaper Company and The Denver Post Corporation, our less than 100% owned consolidated subsidiaries (“Minority Interest in Adjusted EBITDA”); (ii) increasing Adjusted EBITDA by our combined proportionate share of the Adjusted EBITDA generated by our unconsolidated JOAs in Denver, Salt Lake City and Charleston (“Combined Adjusted EBITDA of Unconsolidated JOAs”); and (iii) increasing Adjusted EBITDA by Distributions from the Texas-New Mexico Newspapers Partnership (see footnote b).
(b)		Texas-New Mexico Newspapers Partnership. The Texas-New Mexico Newspapers Partnership agreement, effective March 3, 2003, requires the partnership to make monthly distributions equal to the earnings of the partnership before depreciation and amortization (EBITDA). These distributions have been included in Adjusted EBITDA Available to Company, as they are an integral part of our cash flows from operations.
(c)		Not meaningful.
(d)		Direct Costs of the Unconsolidated JOAs Incurred Outside of the Unconsolidated JOA includes the editorial costs, publishing related revenues, depreciation, amortization, and other direct costs incurred outside of the JOAs by our consolidated subsidiaries associated with The Salt Lake Tribune, The Denver Post, and the Charleston Daily Mail. See Note 3: Joint Operating Agencies in the footnotes to our condensed consolidated financial statements for further description and analysis of this adjustment.

28

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION

Reconciliation of GAAP and Non-GAAP Financial Information (continued)

Reconciliation of Income Statement Data presented on a historical GAAP basis to Non-GAAP Income Statement Data presented on a pro-rata consolidation basis. Dollar amounts shown are in thousands. Footnotes are described on the following page.