MEDIANEWS GROUP INC - 10-Q Quarterly Report

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

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

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
SEPTEMBER 30, 2003


1		Financial Statements	3
2		Management's Discussion and Analysis of Financial Condition and Results of
		Operations	3
3		Quantitative and Qualitative Disclosure of Market Risk	3
4		Controls and Procedures	3
	PART II — OTHER INFORMATION
1		Legal Proceedings	4
2		Changes in Securities	4
3		Defaults Upon Senior Securities	4
4		Submission of Matters to a Vote of Security Holders	4
5		Other Information	4
6		Exhibits and Reports on Form 8-K	4

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

As of September 30, 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.

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 6 of this Form 10-Q.

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

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

There were no matters submitted to a vote of security holders during the quarter for which this report is filed.


31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.3		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

There were no reports on Form 8-K during the quarter for which this report is filed.

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.

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.


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Item 1: Financial Statements:


	Condensed Consolidated Balance Sheets		7
	Condensed Consolidated Statements of Operations		9
	Condensed Consolidated Statements of Cash Flows		10
	Notes to Condensed Consolidated Financial Statements		11



Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations			17



Item 3: Quantitative and Qualitative Disclosure of Market Risk			27


		(Unaudited)
		September 30,			June 30,
ASSETS		2003			2003

		(In thousands)
CURRENT ASSETS
	Cash and cash equivalents	$	6,714		$	3,343
	Accounts receivable, less allowance for doubtful accounts of $9,470 at September 30, 2003 and $9,393 at June 30, 2003		78,857			80,207
	Inventories of newsprint and supplies		14,575			14,314
	Prepaid expenses and other assets		8,493			9,122

	TOTAL CURRENT ASSETS		108,639			106,986

PROPERTY, PLANT AND EQUIPMENT
	Land		38,558			39,954
	Buildings and improvements		111,575			111,180
	Machinery and equipment		315,482			312,817
	Construction and progress		6,415			2,940

	TOTAL PROPERTY, PLANT AND EQUIPMENT		472,030			466,891
	Less accumulated depreciation and amortization		(171,649	)		(165,754	)

	NET PROPERTY, PLANT AND EQUIPMENT		300,381			301,137

OTHER ASSETS
	Investment in unconsolidated JOAs		219,013			221,640
	Equity investments		92,251			93,343
	Subscriber accounts, less accumulated amortization of $122,704 at September 30, 2003 and $118,572 at June 30, 2003		75,188			79,320
	Excess of cost over fair value of net assets acquired		383,642			381,199
	Newspaper mastheads		145,781			145,781
	Covenants not to compete and other identifiable intangible assets, less accumulated amortization of $30,018 at September 30, 2003 and $29,622 at June 30, 2003		4,150			4,547
	Other		13,119			14,132

	TOTAL OTHER ASSETS		933,144			939,962



	TOTAL ASSETS	$	1,342,164		$	1,348,085


			(Unaudited)
			September 30,			June 30,
LIABILITIES AND SHAREHOLDERS' EQUITY			2003			2003

			(In thousands, except share data)
CURRENT LIABILITIES
	Trade accounts payable		$	9,019		$	9,894
	Accrued liabilities			67,985			66,817
	Unearned income			20,279			20,032
	Current portion of long-term debt and obligations under capital leases			23,291			3,171

	TOTAL CURRENT LIABILITIES			120,574			99,914

LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL LEASES				868,440			901,383

OTHER LIABILITIES				32,803			33,947

DEFERRED INCOME TAXES, NET				80,724			77,845

MINORITY INTEREST				174,451			174,988

SHAREHOLDERS’ EQUITY
	Common stock, par value $0.001; 3,000,000 shares authorized:
		2,314,346 shares issued and 2,298,346 shares outstanding		2			2
	Additional paid-in capital			3,631			3,631
	Accumulated other comprehensive loss, net of taxes			(18,495	)		(19,351	)
	Retained earnings			82,034			77,726
	Common stock in treasury, at cost, 16,000 shares			(2,000	)		(2,000	)

	TOTAL SHAREHOLDERS’ EQUITY			65,172			60,008








	TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	1,342,164		$	1,348,085

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


		Three Months Ended September 30,

		2003			2002

		(In thousands, except share data)
REVENUES
	Advertising	$	137,780		$	134,819
	Circulation		33,471			34,662
	Other		13,826			9,838

	TOTAL REVENUES		185,077			179,319

INCOME FROM UNCONSOLIDATED JOAS			4,769			4,249

COSTS AND EXPENSES
	Cost of sales		58,204			53,101
	Selling, general and administrative		90,024			84,896
	Depreciation and amortization		10,225			10,076
	Interest expense		14,078			16,983
	Other (income) expense, net		4,134			(1,709	)

	TOTAL COSTS AND EXPENSES		176,665			163,347

EQUITY INVESTMENT INCOME, NET			2,172			244

MINORITY INTEREST			(8,161	)		(8,466	)


INCOME BEFORE INCOME TAXES			7,192			11,999

INCOME TAX EXPENSE			(2,884	)		(4,877	)


NET INCOME		$	4,308		$	7,122





NET INCOME PER COMMON SHARE:
	Net income per common share	$	1.87		$	3.10

	Weighted average number of shares outstanding		2,298,346			2,298,346

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


			Three Months Ended September 30,

			2003			2002

			(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income		$	4,308		$	7,122
	Adjustments to reconcile net income to net cash flows from operating activities:
		Depreciation and amortization		11,320			11,147
		Provision for losses on accounts receivable		2,269			2,451
		Amortization of debt discount		249			450
		Loss (gain) on sale of assets		84			(652	)
		Proportionate share of net income from unconsolidated JOAs		(16,182	)		(15,045	)
		Equity investment income, net		(2,172	)		(244	)
		Change in defined benefit plan assets, net of cash contributions		161			(68	)
		Deferred income tax expense		2,298			4,024
		Increase in estimated option repurchase price		(30	)		(569	)
		Minority interest		8,161			8,466
		Unrealized loss on hedging activities, reclassified to earnings from accumulated other comprehensive loss		565			327
		Unrealized loss (gain) on interest rate swaps		869			(2,413	)
	Change in operating assets and liabilities			(2,404	)		(5,501	)

	NET CASH FLOWS FROM OPERATING ACTIVITIES			9,496			9,495

CASH FLOWS FROM INVESTING ACTIVITIES:
	Distributions from unconsolidated JOAs			18,065			16,656
	Distributions from equity investments			3,314			441
	Investments in equity investments			(50	)		(500	)
	Business acquisitions			(193	)		—
	Capital expenditures			(5,776	)		(3,154	)
	Proceeds from the sale of assets			1,352			275

	NET CASH FLOWS FROM INVESTING ACTIVITIES			16,712			13,718

CASH FLOWS FROM FINANCING ACTIVITIES:
	Issuance of long-term debt			11,900			15,700
	Reduction of long-term debt and other liabilities			(26,038	)		(27,368	)
	Distributions paid to minority interest			(8,699	)		(7,006	)

	NET CASH FLOWS FROM FINANCING ACTIVITIES			(22,837	)		(18,674	)

INCREASE IN CASH AND CASH EQUIVALENTS				3,371			4,539

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD				3,343			2,029

CASH AND CASH EQUIVALENTS AT END OF PERIOD			$	6,714		$	6,568

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

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-month period ended September 30, 2003 are not necessarily indicative of the results that may be expected for future interim periods or for the year ended June 30, 2004.

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 our r


Delaware (State or other Jurisdiction of Incorporation or organization)		76-0425553 (I.R.S. Employer Identification Number)

1560 Broadway, Suite 2100 Denver, Colorado (Address of principal executive offices)		80202 (Zip Code)


PART I
	ITEM 1: FINANCIAL STATEMENTS
	ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK
	ITEM 4: CONTROLS AND PROCEDURES
PART II
	ITEM 1: LEGAL PROCEEDINGS
	ITEM 2: CHANGES IN SECURITIES
	ITEM 3: DEFAULTS UPON SENIOR SECURITIES
	ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 5: OTHER INFORMATION
	ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
EX-31.1 Certification Pursuant to Section 302
EX-31.2 Certification Pursuant to Section 302
EX-31.3 Certification Pursuant to Section 302
EX-32.1 Certification Pursuant to Section 906
EX-32.2 Certification Pursuant to Section 906


	MEDIANEWS GROUP, INC.

Dated: November 6, 2003		By:	/s/Ronald A. Mayo

			Ronald A. Mayo Vice President, Chief Financial Officer and Duly Authorized Officer of Registrant

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