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 March 31, 2005
OR
[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number 033-75156

MEDIANEWS GROUP, INC.

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

      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. Item (1) Yes [X] No [   ] Item (2) Yes [   ] No [X]*

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [   ] No [X]

      The total number of shares of the registrant’s Class A Common Stock outstanding as of May 13, 2005 was 2,298,346.

*The registrant’s duty to file reports with the Securities and Exchange Commission has been suspended in respect of its fiscal year commencing July 1, 2004 pursuant to Section 15(d) of the Securities Exchange Act of 1934. It is filing this Quarterly Report on Form 10-Q on a voluntary basis.

INDEX TO MEDIANEWS GROUP, INC.
REPORT ON FORM 10-Q FOR THE QUARTER ENDED
MARCH 31, 2005

2

PART I — FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

      The information required by this item is filed as part of this report on Form 10-Q. See Index to Financial Information on page 6 of this report on 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 report on Form 10-Q. See Index to Financial Information on page 6 of this report on Form 10-Q.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK

      The information required by this item is filed as part of this report on Form 10-Q. See Index to Financial Information on page 6 of this report on Form 10-Q.

ITEM 4: CONTROLS AND PROCEDURES

      As of March 31, 2005, 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 Rule 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, the Chief Executive Officer, President, and Chief Financial Officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that material information regarding us and our subsidiaries 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. During the period covered by this quarterly report, there have been no changes in our internal control over financial reporting that 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. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. 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 report on Form 10-Q as Note 4 of the Notes to Condensed Consolidated Financial Statements. See Index to Financial Information on page 6 of this report on Form 10-Q.

ITEM 6: EXHIBITS

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

4

FORWARD-LOOKING STATEMENTS

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

5

MEDIANEWS GROUP, INC.
Index to Financial Information

6

MEDIANEWS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

See notes to condensed consolidated financial statements

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 STATEMENTS OF OPERATIONS
(UNAUDITED)

See notes to condensed consolidated financial statements

9

MEDIANEWS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

See notes to condensed consolidated financial statements

10

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 condensed 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 disclosures required by generally accepted accounting principles for complete consolidated financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in MediaNews Group, Inc.’s (“MediaNews” or the “Company”) Annual Report on Form 10-K for the year ended June 30, 2004. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended March 31, 2005 are not necessarily indicative of the results that may be expected for future interim periods or for the year ended June 30, 2005.

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 each of the individual newspapers that 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., Kearns-Tribune, LLC, and The Denver Post Corporation, participates in JOAs in York, Pennsylvania, Salt Lake City, Utah, and Denver, Colorado, respectively. The editorial and related expenses of The Denver Post and The Salt Lake Tribune are incurred by the Company outside the related JOA. The Company controls the York JOA prior and subsequent to its fiscal year 2004 restructuring and accordingly consolidates its results, as well as those of the York Dispatch. However, the editorial costs associated with the York Daily Record, the other newspaper in the York JOA, were not included in the Company’s results prior to the May 1, 2004 restructuring because, until then, the newspaper was not owned by MediaNews. The Company also owned a 50% interest in a JOA in Charleston, West Virginia through May 7, 2004. See Note 3: Joint Operating Agencies of the Company’s June 30, 2004 Annual Report on Form 10-K and Note 4: Contingent Matters of this Form 10-Q regarding the York and Charleston JOA restructurings.

      The Company’s unconsolidated JOAs (Denver, Salt Lake City and, through May 7, 2004, Charleston) 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 created by the original purchase by the Company of the JOAs’ interests as the subscriber lists are attributable to the Company’s earnings in the JOAs, and
	•	Editorial costs, miscellaneous revenue received outside of the JOA, 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 party to a JOA.

      Investments in unconsolidated JOAs are reported 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

11

MEDIANEWS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

guarantee existed prior 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 of its bank covenants, at which time the Company could be liable for its portion of the guarantee. At March 31, 2005, the Company’s share of the guarantee is approximately $4.1 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

      At the end of each interim period the Company makes its best estimate regarding the effective tax rate expected to be applicable for the full fiscal year. The rate so determined is used in providing for income taxes on a current year to date basis. Accordingly, the effective tax rates for the three-month and corresponding year to date periods presented in an interim report on Form 10-Q may vary significantly. 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.

NOTE 2: Comprehensive Income

      The Company’s comprehensive income consisted of the following:

12

MEDIANEWS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 3: Joint Operating Agencies

      The following tables present the summarized results of the Company’s unconsolidated JOAs on a combined basis. The Salt Lake City JOA data has been presented separately because, as of June 30, 2004, it was a significant investee of the Company determined in accordance with Rule 3-09 of Regulation S-X. Beginning in fiscal year 2005, the Denver JOA data is no longer combined with the Charleston JOA data as a result of the Charleston JOA restructuring in May 2004 (see Note 1: Significant Accounting Policies and Other Matters). The fiscal year 2004 data combines the Denver JOA and Charleston JOA data in the column “Other Unconsolidated JOAs.” The Salt Lake City JOA, Denver JOA 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, miscellaneous revenue received outside of the JOA, 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, through May 7, 2004, the Charleston Daily Mail, are included in the column “Associated Revenues and Expenses.” The 20% minority interest associated with The Denver Post Corporation has not been reflected in the tables below.

13

MEDIANEWS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

14

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 (the “Option Agreement”). For additional discussion on the litigation, please refer to Note 11: Commitments and Contingencies of the Company’s Annual Report on Form 10-K for the year ended June 30, 2004.

      One issue in dispute is the exercise price should SLTPC acquire the Tribune Assets (defined as all of the assets used, held for use or usable in connection with the operation and publication of The Salt Lake Tribune). The terms of the Option Agreement specify an appraisal process for determination of the fair market value of the Tribune Assets. In this appraisal process, each party engaged an appraisal firm to value the Tribune Assets at their fair market value. The Company’s appraisal valued the Tribune Assets at $380.0 million, whereas SLTPC’s appraisal valued the Tribune Assets at $218.0 million. Because the Company’s and SLTPC’s appraisals were more than 10% apart, the appraisers appointed by the Company and SLTPC were required to jointly select a third appraiser. Under the terms of the Option Agreement, the final option purchase price is based on the average of the third appraisal valuation with the closer of the first two appraisals. On June 11, 2003, the third appraiser issued its final report valuing the Tribune Assets at $331.0 million. Accordingly, the option exercise price is $355.5 million for the Tribune Assets. After the third appraiser’s final report was issued, SLTPC filed a lawsuit in the District Court on June 24, 2003 (the “appraisal lawsuit”), challenging the valuation performed by the third appraiser and seeking to set aside the third appraisal and the $355.5 million exercise price. The District Court ruled that the appraisal process constituted an arbitration under the Federal Arbitration Act (“FAA”) and that any challenge must therefore be made under the procedures set forth in the FAA. The District Court subsequently denied SLTPC’s motion under the FAA procedures seeking to set aside the appraisal, and, as a consequence of its arbitration rulings, also dismissed the appraisal lawsuit. SLTPC appealed those rulings to the Tenth Circuit, and on November 30, 2004, the Tenth Circuit reversed the District Court’s rulings. While taking no position on the merits of the dispute as to the finality of the third appraisal and the validity of the $355.5 million exercise price, the Tenth Circuit held that the Option Agreement’s appraisal procedure did not constitute arbitration within the meaning of the FAA. The Tenth Circuit accordingly reinstated SLTPC’s appraisal lawsuit, which the District Court had dismissed under the reasoning that the appraisal constituted arbitration.

      In the reinstated appraisal lawsuit, SLTPC has filed an amended complaint against MediaNews, Kearns-Tribune, LLC (“Kearns-Tribune”) and the third appraiser, Management Planning Inc. (“MPI”), seeking relief that includes (a) the setting aside of the third appraisal; (b) the setting aside of all three appraisals, so that an entirely new appraisal process must be conducted; or (c) alternatively, if the exercise price of $355.5 million is held to be final and binding, (i) monetary damages from the third appraiser for alleged breaches of contractual and fiduciary duties, and (ii) what SLTPC refers to as an “abatement” of the purchase price pursuant to allegations that the value of the Tribune Assets has decreased since SLTPC sought to exercise the option. MediaNews and Kearns-Tribune and MPI have filed separate motions to dismiss SLTPC’s amended complaint in the appraisal lawsuit. Briefing is ongoing.

      During the time in which the appraisal and exercise price issues were on appeal before the Tenth Circuit, SLTPC’s main action was stayed. In the main action, SLTPC’s pending claims against the Company and Kearns-Tribune include claims for damages for breach of contract and breach of contractual duties (in the event some or all of the Tribune Assets are not transferred to SLTPC) and for interference with contract (arising out of the amendment of the JOA in 2001). The Company and Kearns-Tribune have pending counterclaims against SLTPC, which include claims for damages for breaches of contract and interference with contract. Additionally, the Company and Kearns-Tribune have pending counterclaims for declaratory judgment, but no damage claims against Deseret News Publishing Company (“Deseret Publishing”). Deseret Publishing has pending claims against SLTPC for damages, and claims that do not seek damages against the Company and Kearns-Tribune as to the meaning and enforceability of the Option Agreement and related Management and Joint Operating Agreements. Additionally, depending on the outcome of the appraisal lawsuit, the main action may include claims by the parties concerning whether the Option expired when SLTPC did not exercise it on October 10, 2003 (as the Company has contended), or whether SLTPC still has the opportunity to exercise the Option regardless of whether or not the $355.5 million exercise price is found to be binding and conclusive (as SLTPC contends).

      Also pending before the District Court is the Company’s declaratory judgment action, which seeks a ruling that the defendants, including certain 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. The defendants have since filed counterclaims against the Company and Kearns-Tribune relating to their contention that they have rights as individuals (separate and apart from the corporate entity, SLTPC) to acquire the Tribune Assets. The defendants have also filed a third-party complaint naming as defendants various individuals and entities, including AT&T, Deseret Publishing, and Dirks Van Essen, one of the

15

MEDIANEWS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

three appraisers of the Tribune Assets. The Company and all of the third-party defendants have filed summary judgment motions, and briefing is ongoing.

      The Company is not in a position at this time to predict 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 $0.2 million and $0.6 million, respectively, was recorded in other (income) expense, net for the three and nine months ended March 31, 2005, related to the cost of defending these lawsuits. The cost of defending these lawsuits may continue to be substantial.

Other

      In May 2004, the Company restructured its interest in Charleston Newspapers (“Charleston JOA”). In exchange for $55.0 million (less a net adjustment for 50% of Charleston Newspapers’ net working capital, long-term employee benefits liabilities and long-term debt) and a limited partnership interest in a newly formed entity (Charleston Newspapers Holdings, L.P.), the Company contributed its general partnership interest in Charleston Newspapers and the masthead of the Charleston Daily Mail to Charleston Newspapers Holdings L.P. The Company’s former partner in Charleston Newspapers is the general partner in Charleston Newspapers Holdings L.P. In addition, in conjunction with the restructuring, the Company also agreed to continue to be responsible for the news and editorial content of the Charleston Daily Mail. Under the Company’s agreement with Charleston Newspapers Holdings L.P., the Company is reimbursed for the cost of providing the news and editorial content of the Charleston Daily Mail and paid a management fee. The Company’s limited partnership interest does not entitle it to any share of the profits or losses of the limited partnership.

      Also in May 2004, the Company restructured its interest in The York Newspaper Company (“York JOA”) through the exercise of its call option to acquire the remaining 42.5% interest in The York Newspaper Company and the masthead of the York Daily Record for approximately $38.3 million. After the option exercise and the restructuring of the York JOA, the Company became responsible for the news and editorial content of the York Daily Record and an affiliate of its former partner in The York Newspaper Company became responsible for providing the news and editorial content for The York Dispatch. Under the restructured York JOA, the Company reimburses the affiliate of its former partner for the cost of providing the news and editorial content of The York Dispatch, plus a management fee of $240,000 per year, indexed for inflation.

      The Company and the other participants in such restructurings have received civil investigative demands from the Department of Justice seeking information concerning the recent restructurings of the Charleston and York JOAs. In discussions with the Department of Justice, the Company has proposed potential amendments to the agreements governing the York JOA to clarify the rights and obligations of the parties to provide for additional performance based compensation to the manager of The York Dispatch under certain circumstances. The Company anticipates that any such amendments would not be material to its future operating results.

      The Company understands that the general partner in Charleston Newspapers Holdings L.P. is in discussions with the Department of Justice regarding amendments to the Charleston JOA. There can be no assurances as to the outcome of such discussions.

      MediaNews sent a notice terminating its newsprint swap agreement with Mirant Americas Energy Marketing, LP (“Mirant”) effective September 5, 2003. In March 2005, Mirant filed a lawsuit in the U.S. District Court for the Southern District of New York against the Company alleging breach of contract and seeking damages in connection with the swap termination in the amount of approximately $2.0 million, plus interest, costs and attorney’s fees. The Company is currently evaluating its legal options with respect to Mirant’s claims.

      There have been no other 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, 2004.

16

MEDIANEWS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

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 was eligible to receive an earnout of up to $6.0 million over two years dependent on future operating performance. On September 30, 2003, year one of the earnout, the seller earned and was paid $2.3 million of the earnout which was recorded as an adjustment to goodwill at September 30, 2003. Effective September 30, 2004, or year two of the agreement, the seller earned an additional $2.6 million of the earnout, which was paid in November 2004. This payment was recorded as an adjustment to goodwill at September 30, 2004 and reflects the final payment to be made under the earnout agreement. The seller continues to have a separate consulting agreement with the Company through September 2005.

NOTE 6: Long-Term Debt

      Long-term debt (excluding capital leases) consisted of the following:

17

MEDIANEWS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 

II.		In connection with various acquisitions, the Company’s subsidiaries have issued notes payable to prior owners and assumed certain debt obligations.
III.		In March 1999, Garden State, the predecessor issuer of MediaNews Group, Inc., issued $200.0 million of 8.625% Senior Subordinated Notes due 2011, or “8.625% Notes.” On July 1, 2004, the Company repurchased all outstanding 8.625% Notes using cash on hand and borrowings under its bank credit facility. The Company paid $8.6 million in premiums and related costs associated with the redemption of the 8.625% Notes which was charged to “other (income) expense, net” during the three months ended September 30, 2004.
IV.		On November 25, 2003, the Company completed the sale of $300.0 million of its 6.875% Senior Subordinated Notes due 2013 (or “6.875% Notes”). See Note 6: Long-Term Debt of the Company’s June 30, 2004 Annual Report on Form 10-K for further description.
V.		On January 26, 2004, the Company completed the sale of $150.0 million of its 6.375% Senior Subordinated Notes due 2014 (or “6.375% Notes”). The Company used the proceeds of the sale of $146.9 million to temporarily prepay all borrowings under the new bank credit facility. Such prepayment was reborrowed and used, along with cash on hand, to repurchase all of its outstanding $200.0 million 8.625% Notes on July 1, 2004. See Note 6: Long-Term Debt of the Company’s June 30, 2004 Annual Report on Form 10-K for further description.

      Maturities of long-term debt for the next five fiscal years ending June 30 and thereafter beginning with the fiscal year ended June 30, 2005 (except for June 30, 2005, which is only reflective of the three months remaining) are shown below (in thousands):

      The table above does not include capital lease obligations of $6.2 million.

      The fair market values of the 6.875% Notes and 6.375% Notes at March 31, 2005 were approximately $295.5 million and $142.9 million, respectively. The carrying value of the Company’s bank debt, which has interest rates tied to prime or the Eurodollar, approximates its fair value. Management cannot practicably estimate the fair value of the remaining long-term debt because of the lack of quoted market prices for these types of securities and its inability to estimate the fair value without incurring the excessive costs of obtaining an appraisal. The carrying amount represents the Company’s original issue price net of remaining original issue discounts, if applicable.

      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 currently exercise or put to the Company based on a predetermined formula. At March 31, 2005, the option repurchase price is valued at approximately $6.0 million and is recorded as a component of other long-term liabilities (at December 31, 2004 and June 30, 2004, the option repurchase price was valued at approximately $5.9 million and $11.4 million, respectively). The purchase price of the option can increase or decrease significantly each quarter based on the performance of the publication because a significant component of the option repurchase formula is the twenty-four month trailing cash flows of the publication. If the option is 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. The option expires in January 2010 at which time, if the option remains outstanding, the Company would be required to repurchase it.

18

MEDIANEWS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 7: Employee Benefit Plans

Components of Net Periodic Benefit Cost (Pension and Other Benefits)

Employer Contributions

      The Company expects to contribute between $2.0 million and $3.0 million to its pension plans in fiscal year 2005. Contributions of approximately $1.6 million have been made through March 31, 2005.

      Effective January 1, 2005, the Company will no longer provide post-retirement health care coverage for the majority of Kearns-Tribune, LLC employees retiring after that date. In conjunction with the partial freeze of this plan, the Company recognized a small curtailment loss in the second quarter of fiscal year 2005.

      Effective April 1, 2005, the Company will freeze the defined benefit pension plan benefits associated with the employees of one of the Company’s subsidiaries. In conjunction with the freeze of the accrual of benefits for these employees, the Company recognized a curtailment loss of approximately $0.4 million in the second quarter of fiscal year 2005.

NOTE 8: Acquisitions and Other Transactions

Purchase of The Park Record

      On January 4, 2005, the Company entered into a Stock Purchase Agreement, pursuant to which the Company purchased all of the outstanding common stock of Diversified Suburban Newspapers, Inc. (“Diversified”), the publisher of The Park Record, in Park City, Utah. The Singleton Family Revocable Trust owned 50% of the outstanding stock of Diversified at the time of purchase. The purchase price was approximately $8.0 million, subject to adjustment to reflect final working capital balances. The Company has preliminarily attributed the purchase price as follows: $0.8 million tangible assets (primarily fixed assets), $3.6 million identifiable intangible assets ($2.0 million, masthead; $0.4 million, subscriber list; $1.2 million,

19

MEDIANEWS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

advertiser list) and $3.6 million was recorded as goodwill. The Company received a fairness opinion on the purchase price. The transaction was unanimously approved by the disinterested directors of the Company.

      The Singleton Family Revocable Trust holds 254,858.99 shares of the Company’s Class A Common Stock, representing 11.09% of total shares of Class A Common Stock outstanding. W. Dean Singleton, Vice Chairman, Chief Executive Officer and a director of the Company, and Howell Begle, Assistant Secretary, General Counsel and a director of the Company, are trustees of The Singleton Family Revocable Trust. W. Dean Singleton is a beneficiary of The Singleton Family Revocable Trust.

Other

      Effective September 30, 2004, the Company elected not to extend the Joint Sales Agreement (or “JSA”) and purchase agreement between the Piedmont Television Holding LLC (or “Piedmont”) station, KTBY, and the Company’s Anchorage, Alaska affiliate, KTVA, and as a result, the agreements were terminated. The termination of the JSA is not expected to have any material impact on the operations or valuation of the Company’s television station, KTVA. For further discussion, see Note 5: Acquisitions, Dispositions and Other Transactions of the Company’s June 30, 2004 Annual Report on Form 10-K.

NOTE 9: Equity Investments (Non-JOA)

      The following table represents the summary financial data, on a combined basis, for the Company’s non-JOA equity investments (the entities represented in the table below are included at 100%). For a listing of the Company’s equity investments, see Note 2: Significant Accounting Policies and Other Matters — Investments of the Company’s June 30, 2004 Annual Report on Form 10-K.

NOTE 10: Commitments

The Denver Post Corporation Call Option

      The Company owns 80% and Media General, Inc. (“Media General”) owns 20% of The Denver Post Corporation. The Denver Post Shareholders’ Agreement provides the Company with a call option on Media General’s 20% interest in The Denver Post Corporation. The call option became exercisable on July 1, 2004 and expires June 30, 2005. In January 2005, the Company delivered notice to Media General exercising its call option. No amount has been recorded in the Company’s March 31, 2005 financial statements related to the exercise of the call option. The exercise price will be based on the fair market value of The Denver Post Corporation, less debt of The Denver Post Corporation, determined through an appraisal process specified in The Denver Post Shareholders’ Agreement. The terms of the appraisal process require the Company and Media General to each engage a qualified independent appraisal firm. If the two independent appraisals of The Denver Post Corporation are within 20% of each other, the average of the two appraisals will be used to determine the exercise price. However, if the two appraisals are not within 20% of each other, the two qualified independent appraisers will select a third qualified independent appraiser to determine the fair market value. The average of the two closest of the three appraisals or the middle appraisal if it is equidistant from the high and low of the three appraisals will be used to determine the exercise price. The Company and Media General have each completed their independent appraisals of The Denver Post Corporation. The difference between the two appraisals was greater than 20%. Accordingly, a third independent appraiser has been engaged and is currently conducting its appraisal. The Company anticipates that the purchase will occur in the fourth quarter of its fiscal year 2005.

20

MEDIANEWS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Other

      In December 2004, the Company entered into a contract with a newsprint vendor to purchase newsprint based on market price beginning January 1, 2005 (24,000 metric tons for calendar year 2005) and continuing through December 31, 2009 (36,000 metric tons per year for calendar years 2006-2009).

21

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 nine months ended March 31, 2005 and 2004, including the percentage change between periods.

22

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 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 distributions. We use pro-rata consolidation to internally evaluate our performance and present it here because our bank credit agreement and the indentures governing our senior subordinated notes define cash flows from operations for covenant purposes using pro-rata consolidation. We also believe financial analysts and investors use 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 The York Newspaper Company, Denver Newspaper Agency, and the Salt Lake City JOA for all periods presented, and Charleston Newspapers through May 7, 2004. See Notes 1 and 3 to the condensed consolidated financial statements for additional discussion and analysis of the GAAP accounting for our JOAs.

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

23

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

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; and 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 valuation 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, 2004 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, 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 sold and delivered to the customer or sold to home delivery independent contractors. Amounts received in advance of an advertising run date or newspaper delivery are deferred and recorded on the balance sheet as a current liability (“Unearned Income”) and recognized as revenue when earned.

      Our investments in unconsolidated JOAs (Denver, Salt Lake and through May 7, 2004, Charleston) are included in the condensed consolidated balance sheet under the line item “Investment in Unconsolidated JOAs.” 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 JOAs’ interests as the subscriber lists are attributable to our earnings in the JOAs, and
	•	Editorial costs, miscellaneous revenue received outside of the JOA, and other charges incurred by our consolidated subsidiaries directly attributable to providing editorial content and news for our newspapers party to a JOA.

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 our second fiscal quarter, is our strongest revenue quarter of the year. Due to generally poor weather and lack of holidays, the first calendar quarter, or our third fiscal quarter, is our weakest revenue quarter of the year.

Comparison of the Three and Nine Months Ended March 31, 2005 and 2004

      Certain transactions in fiscal years 2005 and 2004 had an impact on the comparisons of our results for the three and nine months ended March 31, 2005 and 2004. In January 2005, we purchased The Park Record, a biweekly newspaper in Park City, Utah. In fiscal year 2004, we restructured our interests in the Charleston JOA (effective May 7, 2004) and the York JOA (which included exercising our option to buy out the minority partner’s interest and purchasing the masthead of the York Daily Record effective April 30, 2004). In fiscal year 2004, we also purchased two weekly newspapers distributed in and around Long Beach, California: the Grunion Gazette and Downtown Gazette (January 2004).

Revenues

      On a same newspaper basis (after adjusting for the aforementioned fiscal year 2005 Park City and fiscal year 2004 Gazette transactions), the following changes occurred in our significant revenue categories for the three and nine month periods ended March 31, 2005 as compared to the same periods in prior year.

24

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

      Advertising Revenues. Advertising revenues increased by approximately 3.8% and 3.9% for the three and nine month periods ended March 31, 2005, respectively, as compared to the same periods in prior fiscal year. The increase in advertising revenue was due principally to increases in national, classified and preprint advertising categories, as well as increases in revenues from our Internet operations, offset in part by a small decrease in retail (ROP) advertising. For the three and nine month periods ended March 31, 2005, employment and real estate classified advertising increased at the majority of our newspapers. These gains, however, were somewhat offset by declines in classified automotive advertising.

      Circulation Revenues. Circulation revenues decreased by 3.3% and 2.6% for the three and nine month periods ended March 31, 2005 as compared to the same periods in prior fiscal year. The decrease was primarily due to competitive pricing pressures at most of our newspapers, as well as competition from other media sources, which resulted in our offering greater discounts to acquire new subscribers with long-term orders, as well as reducing our subscription rates in some instances to retain our current subscribers, in order to help in achieving our home delivery volume goals.

Income from Unconsolidated JOAs

      As noted in critical accounting policies, income from unconsolidated JOAs includes our proportionate share of net income from JOAs, the amortization of subscriber lists created by the original purchase by us of the JOAs’ interests, and editorial costs, miscellaneous revenue and other charges directly attributable to providing editorial content and news for our newspapers party to a JOA. The following discussion takes into consideration all the associated revenues and expenses described above. The aforementioned Charleston restructuring had the net impact of decreasing income from unconsolidated JOAs by $0.7 million and $2.3 million for the three and nine months ended March 31, 2005. Excluding the impact of the Charleston restructuring, the increase for the three months ended March 31, 2005 was due to improved net income at the Denver JOA, offset in part by a decline in net income at the Salt Lake JOA. The results for the Salt Lake JOA were negatively impacted by a charge of $1.6 million associated with the JOA’s pension and other post-retirement benefit plans. For the nine months ended March 31, 2005, both the Denver and Salt Lake JOAs experienced improvements in net income.

Cost of Sales

      The aforementioned purchase of The Park Record in fiscal year 2005 and the fiscal year 2004 York restructuring and weekly newspapers purchase had the net impact of increasing cost of sales by $1.1 million and $3.2 million for the three and nine month periods ended March 31, 2005, as compared to the same periods in prior fiscal year. Excluding these transactions, cost of sales for the three and nine month periods increased 0.8% and 1.6%, respectively. The current year increase in cost of sales was due in part to a 7.9% and 9.0% increase in our average price per metric ton of newsprint consumed for the three and nine month periods ended March 31, 2005, as compared to the same periods in prior year. Our average price was approximately $531 and $523 per metric ton for the three and nine month periods ended March 31, 2005, respectively, as compared to $492 and $480 per metric ton for the same periods in fiscal year 2004. Partially offsetting the impact of higher newsprint prices was a small decrease in our newsprint consumption.

Selling, General and Administrative

      The aforementioned purchase of The Park Record in fiscal year 2005 and the fiscal year 2004 York restructuring and weekly newspapers purchase had the net impact of increasing SG&A by $0.7 million and $2.1 million for the three and nine month periods ended March 31, 2005, as compared to the same periods in prior fiscal year. Excluding these transactions, SG&A increased 1.3% and 4.0%. The current year increase was primarily the result of increases in employee costs, including health care and retirement benefits, the curtailment of the pension plan at one of our subsidiaries, as well as increased costs directly associated with the growth in our advertising revenues and Internet operations. Expenses related to our Internet operations increased $0.5 million, or 13.8%, and $1.6 million, or 16.4%, respectively, for the three and nine months ended March 31, 2005.

25

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

Interest Expense

      The decrease in interest expense was the result of a decrease in average debt outstanding due to debt paydowns in fiscal year 2004 and continued paydowns in fiscal year 2005, as well as a reduction in the weighted average cost of debt in fiscal year 2005 compared to fiscal year 2004. For the three month period ended March 31, 2005, our average debt outstanding decreased $29.4 million, or 3.3%, and our weighted average interest rate decreased 45 basis points, as compared to the same period in prior year. For the nine month period ended March 31, 2005, our average debt outstanding decreased $41.4 million or 4.6%, and our weighted average interest rate decreased 52 basis points as compared to the same period in prior year. The lower weighted average cost of debt was a result of the November 2003 refinancing of our 8 3/4% Senior Subordinated Notes with our 6 7/8% Senior Subordinated Notes, the restructuring of our bank credit agreement (December 2003 and August 2004) and the July 2004 repurchase of our 8 5/8% Senior Subordinated Notes funded out of proceeds from our 6 3/8% Senior Subordinated Notes (issued in January 2004) and borrowings from our bank credit facility. These lower interest rates were offset in part by increases in LIBOR over the prior year (the average daily one month rate for LIBOR increased 154 and 101 basis points, respectively, for the three and nine month periods ended March 31, 2005 as compared to the same periods in prior year). The interest rates under our bank credit facility are based on LIBOR, plus a borrowing margin based on our leverage ratio. Interest expense was also favorably impacted in the prior year 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 $0.6 million and $2.4 million for the three and nine month periods ended March 31, 2004. We had no interest rate swap agreements during the three or nine month periods ended March 31, 2005. Excluding the impact of the interest rate swaps in the prior year, our weighted average interest rate decreased by approximately 68 and 85 basis points, respectively, for the three and nine months ended March 31, 2005.

Other (Income) Expense, Net

      We include in other (income) expense, net costs or income items that are not related to current operations.

      The charges incurred for the three month period ended March 31, 2005 relate to litigation expense of $0.2 million associated with the acquisition of Kearns-Tribune, LLC (Salt Lake City), $0.2 million related to hedging activities that did not qualify for hedge accounting under SFAS No. 133, and $1.5 million related to various other costs not related to ongoing operations.

      The charges incurred for the nine month period ended March 31, 2005 relate to litigation expense of $0.6 million associated with the acquisition of Kearns-Tribune, LLC (Salt Lake City), $(5.8) million change related to the periodic valuation of the estimated cost to repurchase an option held by a third party to acquire one of our newspapers, $9.2 million for the repurchase premiums and unamortized discounts associated with the early redemption of our 8 5/8% Notes, $0.6 million related to hedging activities that did not qualify for hedge accounting under SFAS No. 133, and $2.7 million related to various other costs not related to ongoing operations.

Liquidity and Capital Resources

Cash Flow Activity

      Our sources of liquidity are existing cash and other working capital, cash flows provided from operating activities, distributions from JOAs and partnerships 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 general, our receivables have been collected on a timely basis.

      The increase in net cash flows from operating activities of $14.8 million, for the nine months ended March 31, 2005, was largely attributable to an increase in distributions from unconsolidated JOAs and decreases in distributions paid to minority interest, offset in part by decreases associated with increased working capital, due principally to increases in other current assets related to timing of cash receipts, increases in newsprint inventory in anticipation of future price increases, and timing of payments of accounts payable and accrued liabilities.

26

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

      The net cash outflows related to investing activities increased by $7.1 million, primarily due to a $9.7 million increase in net capital expenditures for the nine months ended March 31, 2005 as compared to the corresponding period in the prior year. Approximately $20.8 million of the current year capital expenditures are related to our share of the cost of the new printing facility being constructed for the Salt Lake City JOA. The increase in cash outflow associated with capital expenditures was partially offset by a $2.0 million increase in cash distributions from our non-JOA equity investments.

      Net cash flows from financing activities for the nine months ended March 31, 2005 included using cash on hand and available borrowings under the revolver portion of our credit facility to repurchase all of our outstanding $200.0 million 8 5/8% Senior Subordinated Notes for $208.6 million (including $8.6 million of repurchase premiums). In addition, activity for the nine months ended March 31, 2005 included normal borrowings and paydowns on long-term debt. Prior year’s net paydown consisted of $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, as well as normal borrowings and paydowns on long-term debt. Total net paydowns on long-term debt were $42.6 million, net of refinancing costs and repurchase premiums, for the nine months ended March 31, 2005, as compared to $39.7 million for the same period in prior year.

Liquidity

      On August 30, 2004, we amended and restated our December 30, 2003 bank credit facility to take advantage of lower pricing available in the bank loan market. Our amended bank credit facility provides for borrowings of up to $598.8 million, consisting of a $350.0 million revolving credit facility, a $100.0 million term loan “A” and a $148.8 million term loan “C.” During the next twelve months we will make scheduled quarterly principal payments of $0.4 million under term loan “C,” which we intend to pay from operating cash flows. Any payments on the term loan cannot be reborrowed, regardless of whether such payments are scheduled or voluntary. At March 31, 2005, the balances outstanding under the revolving credit portion of our bank credit facility, term loan “A” and term loan “C” were $115.7 million, $100.0 million and $147.6 million, respectively. As of March 31, 2005, we had $225.7 million available for future borrowings under the revolver portion of our new bank credit facility, net of $8.6 million in outstanding letters of credit.

      In January 1998, we entered into an option agreement in association with the acquisition financing related to one of our newspapers. The option, which is currently exercisable or puttable based on a predetermined formula, entitles the holder to purchase the assets used in the publication of one of our daily newspapers. The option repurchase price at March 31, 2005 is valued at approximately $6.0 million and is recorded as a component of other long-term liabilities. If the option were put to us, the payment would be funded from unused commitments under 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.

      The Denver Post Shareholders’ Agreement provides us with a call option on Media General’s 20% interest in The Denver Post Corporation. Our call option became exercisable on July 1, 2004 and expires June 30, 2005. The exercise price is based on the appraised fair market value of The Denver Post Corporation, less debt of The Denver Post Corporation. No amounts are recorded in our March 31, 2005 financial statements related to the call option. In January 2005, we delivered to Media General a notice exercising our call option. The appraisal process is currently in progress. We anticipate that the closing will occur in the fourth quarter of fiscal year 2005. See Note 10: Commitments of our notes to condensed consolidated financial statements.

      Stephens Media Group (“SMG”), a 26.28% partner in the California Newspapers Partnership (“CNP”), has a right to require CNP to redeem its interest in CNP, at its fair market value (plus interest through closing), any time after January 1, 2005. If such right is exercised, SMG’s interest must be redeemed within two years of the determination of its fair market value. We are not currently aware of any intentions on the part of SMG to exercise its put. No amounts are recorded in our financial statements related to SMG’s put right.

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

27

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

      We estimate minimum contributions to our defined benefit pension plans in fiscal year 2005 will be approximately $2.0 million to $3.0 million, of which $1.6 million have been made through March 31, 2005. We also expect federal and state income tax payments to increase during fiscal year 2005 as compared to fiscal year 2004 related to the impact of alternative minimum taxes. We have paid approximately $5.0 million in federal and state income tax payments through March 31, 2005 and estimate we will pay an additional $0.5 million to $1.0 million through the end of our fiscal year 2005, as compared to $1.8 million in fiscal year 2004. The $5.0 million in tax payments were offset by a cash refund of $1.4 million received in April 2005.

Off-Balance Sheet Arrangements and Contractual Obligations

      Our various contractual obligations and funding commitments related to our long-term debt have changed since our Annual Report on Form 10-K for the year ended June 30, 2004 as more fully described above and in Note 6: Long-Term Debt and Note 10: Commitments of our notes to the condensed consolidated financial statements.

      Our other contractual obligations have not materially changed from the disclosure made in our Annual Report on Form 10-K for the year ended June 30, 2004, except for a purchase commitment we entered into with SP Newsprint Co. beginning January 1, 2005 (24,000 metric tons) for calendar year 2005 and continuing through December 31, 2009 (36,000 metric tons per year for calendar years 2006-2009). Tons purchased will be at market prices.

      Additionally, as discussed under “Liquidity,” in January 2005, the Company delivered notice to Media General of exercise of its call option to purchase Media General’s 20% interest in The Denver Post Corporation.

Capital Expenditures

Near Term Outlook

Newsprint Prices

      In December 2004, newsprint suppliers announced a price increase of $35 per metric ton to be effective March 1, 2005. The announced price increase has not been implemented in the market for large buyers. In May, newsprint suppliers announced a price increase of $35 per metric ton to be effective June 1, 2005. We are uncertain as to how much, if any, of the recently announced price increases will take hold in the market. The April 2005 RISI (“Resource Information Systems, Inc.”) price index for 30 pound newsprint was $584 per metric ton compared to $545 per metric ton in April 2004. As a large buyer of newsprint, our cost of newsprint continues to be below the RISI price index.

28

QUANTITATIVE AND QUALITATIVE
DISCLOSURE OF MARKET RISK

Debt

      We are exposed to market risk arising from changes in interest rates associated with our bank debt, which includes the bank term loans and the revolving credit portion of our bank credit facility.

      The following table provides information about our debt obligations that are sensitive to changes in interest rates. The table presents principal cash flows and related weighted-average interest rates by expected maturity dates. Weighted-average variable rates are based on implied forward rates as derived from appropriate annual spot rate observations as of March 31, 2005.

Interest Rate Sensitivity
Principal or Notional Amount by Expected Maturity
Average Interest Rate